SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
CB RICHARD ELLIS SERVICES, INC.
------------------------------------------
(Name of Issuer)
Common Stock, $0.01 par value
------------------------------------------
(Title of Class of Securities)
12489L108
------------------------------------------
(CUSIP Number)
Murray A. Indick
BLUM Capital Partners, L.P.
909 Montgomery Street, Suite 400
San Francisco, CA 94133
(415) 434-1111
------------------------------------------
(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>
CUSIP No. 12489L108 13D Page 2 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
RCBA STRATEGIC PARTNERS, L.P.
94-3303833
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) /__/
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
WC, 00
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419**
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
8,564,419**
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,564,419**
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
PN
*See Instructions Before Filling Out!
**See Item 5 below
-2-
<PAGE>
CUSIP No. 12489L108 13D Page 3 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
RCBA GP, L.L.C.
94-3303831
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) /__/
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
See Item 3
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419**
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
8,564,419**
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,564,419**
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
OO (Limited Liability Company)
*See Instructions Before Filling Out!
**See Item 5 below
-3-
<PAGE>
CUSIP No. 12489L108 13D Page 4 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
BLUM CAPITAL PARTNERS, L.P.
94-3205364
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) /__/
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
See Item 3
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
California
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419**
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
8,564,419**
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,564,419**
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
PN, IA
*See Instructions Before Filling Out!
**See Item 5 below
-4-
<PAGE>
CUSIP No. 12489L108 13D Page 5 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
RICHARD C. BLUM & ASSOCIATES, INC.
94-2967812
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) /__/
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
See Item 3
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
California
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419**
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
8,564,419**
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,564,419**
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
CO
*See Instructions Before Filling Out!
**See Item 5 below
-5-
<PAGE>
CUSIP No. 12489L108 13D Page 6 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
RICHARD C. BLUM
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) / X /
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
See Item 3
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
U.S.A.
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY 15,205**
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419**
9. SOLE DISPOSITIVE POWER
15,205**
10. SHARED DISPOSITIVE POWER
8,564,419**
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,579,624**
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/__/
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
16.2%**
14. TYPE OF REPORTING PERSON
IN
*See Instructions Before Filling Out!
**See Item 5 below
-6-
<PAGE>
CUSIP No. 12489L108 13D Page 7 of 60
1. NAME OR REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON (ENTITIES ONLY)
BLUM CB CORP.
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / X /
(b) /__/
3. SEC USE ONLY
4. SOURCE OF FUNDS*:
See Item 3
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/__/
6. CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware.
NUMBER OF 7. SOLE VOTING POWER
SHARES
BENEFICIALLY -0-
OWNED BY
EACH
REPORTING
PERSON
WITH
8. SHARED VOTING POWER
8,564,419
9. SOLE DISPOSITIVE POWER
-0-
10. SHARED DISPOSITIVE POWER
8,564,419
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,564,419
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/__/
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
0%
14. TYPE OF REPORTING PERSON
CO
*See Instructions Before Filling Out!
-7-
<PAGE>
CUSIP No. 12489L108 13D Page 8 of 60
This Amendment No. 2 amends the Statement on Schedule 13D
filed with the Securities and Exchange Commission (the "Commission") with
respect to CB Richard Ellis Services, Inc. (the "Issuer") on November 18, 1999
and Amendment No. 1 as filed with the Commission on January 13, 2000 (as
amended, the "Schedule 13D") by BLUM Capital Partners, L.P., a California
limited partnership; Richard C. Blum & Associates, Inc., a California
corporation; RCBA Strategic Partners, L.P., a Delaware limited partnership;
RCBA GP, L.L.C., a Delaware limited liability company; and Richard C. Blum.
Unless otherwise defined herein, all capitalized terms shall have the meanings
ascribed to them in the Schedule 13D.
Items 2, 3, 4, 5, 6 and 7 of the Schedule 13D are hereby
amended and supplemented as follows:
Item 2. Identity and Background.
Item 2 of the Schedule 13D is hereby amended by deleting the
first paragraph thereof in its entirety and replacing it with the following
paragraphs:
This Amendment 2 to Schedule 13D is being filed jointly by
(i) BLUM Capital Partners, L.P., a California limited partnership
("BLUM LP"); (ii) Richard C. Blum & Associates, Inc., a California
corporation ("RCBA Inc."); (iii) RCBA Strategic Partners, L.P., a
Delaware limited partnership ("Strategic"); (iv) RCBA GP, L.L.C., a
Delaware limited liability company ("RCBA GP"); (v) Richard C. Blum,
the Chairman and a substantial shareholder of RCBA Inc. and a
managing member of RCBA GP (collectively with the foregoing clauses
(i) through (iv), the "Original Reporting Persons"); and (vi) BLUM CB
Corp., a Delaware corporation ("Newco," and collectively with the
Original Reporting Persons the "Reporting Persons").
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.
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CUSIP No. 12489L108 13D Page 9 of 60
Item 2 of the Schedule 13D is hereby amended by deleting the
last paragraph thereof and replacing it with the following paragraphs:
To the best knowledge of the Reporting Persons, none of the
entities or persons identified in the previous paragraphs of this
Item 2 has, during the past five years, 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, 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, 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"), Frederic V. Malek ("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 B),
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 Persons, together with FSEP, 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 ("Simmons"), John M. Roth ("Roth"), Charles P. Rullman, Jr.
-9-
<PAGE>
CUSIP No. 12489L108 13D Page 10 of 60
("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, Malek and Koll Holding (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 Persons have 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
-10-
<PAGE>
CUSIP No. 12489L108 13D Page 11 of 60
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 Persons have 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.
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.
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.
The FS Parties and the Other Parties have advised the
Reporting Persons that, during the last five years, to the best
knowledge of the FS Parties and the Other Parties, respectively, none
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<PAGE>
CUSIP No. 12489L108 13D Page 12 of 60
of 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.
Item 3 of the Schedule 13D is hereby amended and
supplemented by adding the following paragraphs after the first paragraph
thereof:
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.
None of the Reporting Persons has 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 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
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<PAGE>
CUSIP No. 12489L108 13D Page 13 of 60
defined in Item 4 below). 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 B), which is expressly
incorporated herein by reference.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby deleted in its entirety
and replaced with the following paragraphs:
As described in a letter, dated November 10, 2000, from
Newco to the Issuer (the "Proposal Letter") (attached hereto as
Exhibit B), 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 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
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
Persons currently do 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). In addition, Strategic will be entitled to designate
one additional director at any time.
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<PAGE>
CUSIP No. 12489L108 13D Page 14 of 60
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.
Newco's proposal contained in the Proposal Letter expires by
its terms at 5:00 p.m. Pacific Standard Time on December 1, 2000.
The Reporting Persons expect 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. Accordingly, the Reporting Persons reserve the right to
change their plans and intentions at any time, as they deem
appropriate, and may or may not submit a revised proposal or extend
the expiration date of the proposal contained in the Proposal Letter
and reserve the right to terminate, modify or withdraw the proposal
contained in the Proposal Letter. In particular, the Reporting
Persons may at any time and from time to time acquire shares of
Common Stock or securities convertible or exchangeable for Common
Stock or 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.
Richard C. Blum serves on the Issuer's Board of Directors.
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<PAGE>
CUSIP No. 12489L108 13D Page 15 of 60
The Reporting Persons have 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 Persons have 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,
none of the Reporting Persons have, and the Reporting Persons have
been advised by the FS Parties and the Other Parties that none of the
FS Parties or the Other Parties, respectively, have, any plans or
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<PAGE>
CUSIP No. 12489L108 13D Page 16 of 60
proposals which relate to or would result in any of the matters
described in 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 B) and the Proposal Letter (attached
hereto as Exhibit C), each of which is expressly incorporated herein
by reference.
Item 5. Interest in Securities of the Issuer.
Item 5 of the Schedule 13D is hereby deleted in its entirety
and replaced with the following paragraphs:
(a), (b) The Filing Persons believe that there are currently
21,213,928 shares of Common Stock outstanding. Based on such number
of outstanding shares, the Reporting Persons report the following
direct holdings of the Common Stock and corresponding percentage
interest of total shares outstanding: (i) Strategic reports direct
holdings of 2,345,900 shares of the Common Stock (11.1%); (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 client accounts.
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 any of the Reporting Persons, and
disclaims beneficial ownership of any shares held by the Reporting
Persons.
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<PAGE>
CUSIP No. 12489L108 13D Page 17 of 60
Voting and investment power concerning the above shares are
held solely by BLUM LP and RCBA GP. The Reporting Persons therefore
may be deemed to be members in a group, in which case each Reporting
Person 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 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.
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. Although Mr. Blum is joining in this Schedule as
a Reporting Person, the filing of this Schedule shall not be
construed as an admission that he, or any of the other stockholders,
directors or executive officers of RCBA Inc., or managing members and
members of RCBA GP, is, for any purpose, the beneficial owner of any
of the securities that are beneficially owned by RCBA Inc. or RCBA
GP, except to the extent of any pecuniary interest therein. None of
the beneficial ownership information in this paragraph includes any
Common Stock beneficially owned by the FS Parties or the Other
Parties.
As a result of the matters described in Items 2, 3 and 4
above, Newco, which was formed by Strategic, together with the
Original Reporting Persons may be deemed to constitute a group within
the meaning of Section 13(d)(3) of the Exchange Act and Newco may be
deemed to have acquired beneficial ownership of the shares of Common
Stock owned or deemed to be beneficially owned by the Original
Reporting Persons.
As a result of the matters described in Items 2, 3 and 4
above, the Reporting Persons together with the FS Parties and the
Other Parties may be deemed to constitute a group within the meaning
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CUSIP No. 12489L108 13D Page 18 of 60
of Section 13(d)(3) of the Exchange Act and the Reporting Persons may
be deemed to have acquired beneficial ownership of the shares of
Common Stock owned or deemed to be beneficially owned by the FS
Parties and the Other Parties.
The Reporting Persons have 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 3,402,463 shares (16.0%) of the
Common Stock, (ii) FSEP, FS Capital and FS Holdings each is deemed to
beneficially own 3,278,448 shares (15.5%) of the Common Stock, and
(iii) FSEP International, FS&Co. International and International
Holdings each is deemed to beneficially own 124,015 shares (less than
1%) of Common Stock. The Reporting Persons have 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 Persons have 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
3.1% of the Common Stock.
The Reporting Persons have 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 Persons have been advised that each of Koll
Holding, Koll Co., Koll Trust and Koll beneficially owns 1,132,886
shares of Common Stock (the "Koll Shares"), which includes 398,596
shares of Common Stock underlying stock options and warrants which
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CUSIP No. 12489L108 13D Page 19 of 60
are currently exercisable or which become exercisable within 60 days
after November 8, 2000. Under the option agreement, Koll Holding
presently has no right to dispose of the shares subject to the option,
although it retains voting power over the shares. Koll Holding is
wholly owned by Koll Co., which is wholly owned by the Koll Trust, of
which Koll is the sole trustee. As such, each of Koll Holding,
Koll Co., Koll Trust and Koll is deemed to beneficially own all
of the Koll Shares. These holdings constitute approximately 5.3%
percent of the Common Stock.
The Reporting Persons have been advised that Malek
beneficially owns 409,984 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. These holdings constitute approximately 1.9%
percent of the Common Stock.
The Reporting Persons have 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 Persons have
been advised by the FS Parties and the Other Parties that, as of
November 8, 2000, none of the FS Parties or the Other Parties,
respectively, beneficially owns any shares of any class of capital
stock of the Issuer.
(c) None of the Reporting Persons 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.
The Reporting Persons have been advised by the FS Parties
and the Other Parties that none of 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 Persons 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 Persons as described in Item 5. The
Reporting Persons have been advised that no person other than the FS
Parties and the Other Parties has the right to receive or the power
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CUSIP No. 12489L108 13D Page 20 of 60
to direct the receipt of dividends from, or the proceeds from the
sale of, the shares of Common Stock beneficially owned by the FS
Parties or the Other Parties, respectively, as described above.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
Item 6 of the Schedule 13D is hereby deleted in its entirety
and replaced with the following paragraphs:
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) 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
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CUSIP No. 12489L108 13D Page 21 of 60
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 and the Proposal
Letter contained in this Schedule 13D are qualified in their entirety
by reference, respectively, to the Letter Agreement (attached hereto
as Exhibit A) and the Proposal Letter (attached hereto as Exhibit B).
The Reporting Persons have 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.
None of the Reporting Persons or, to the best knowledge of
the Reporting Persons, the other persons named in Item 2 other than
the FS Parties or the Other Parties, 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 (i) as previously disclosed, or (ii) as noted above,
BLUM LP has voting and investment power of the shares held by it for
the benefit of the Common Fund.
The Reporting Persons have been advised that none of the FS
Parties or the Other Parties 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
Item 7 of the Schedule 13D is hereby amended by adding the
following paragraphs after the first paragraph thereof:
A Letter agreement dated November 10, 2000 among
Strategic, FSEP, FSEP International and the Other Parties.
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CUSIP No. 12489L108 13D Page 22 of 60
B Proposal Letter dated November 10, 2000.
C Joint Filing Agreement dated November 13, 2000 among
the Reporting Persons.
D Power of Attorney dated August 26, 1997
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CUSIP No. 12489L108 13D Page 23 of 60
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: November 13, 2000
RCBA GP, L.L.C. RCBA STRATEGIC PARTNERS, L.P.
By: RCBA GP, L.L.C.
its general partner
By: /s/ Murray A. Indick By: /s/ Murray A. Indick
--------------------------- ---------------------------
Murray A. Indick, Member Murray A. Indick, Member
RICHARD C. BLUM & ASSOCIATES, INC. BLUM CAPITAL PARTNERS, L.P.
By: Richard C. Blum & Associates, Inc.
its general partner
By: /s/ Murray A. Indick By: /s/ Murray A. Indick
--------------------------- ---------------------------
Murray A. Indick Murray A. Indick
Partner, General Counsel Partner, General Counsel
and Secretary and Secretary
/s/ Murray A. Indick BLUM CB CORP.
---------------------------
RICHARD C. BLUM
By: Murray A. Indick, By: /s/ Murray A. Indick
Attorney-in-Fact ---------------------------
Murray A. Indick
Vice President, Secretary
and Assistant Treasurer
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CUSIP No. 12489L108 13D Page 24 of 60
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
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CUSIP No. 12489L108 13D Page 25 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 1
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).
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
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CUSIP No. 12489L108 13D Page 26 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 2
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.
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.
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CUSIP No. 12489L108 13D Page 27 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 3
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
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CUSIP No. 12489L108 13D Page 28 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 4
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.
(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
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CUSIP No. 12489L108 13D Page 29 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 5
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.
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.
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CUSIP No. 12489L108 13D Page 30 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 6
(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
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CUSIP No. 12489L108 13D Page 31 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 7
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]
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:
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CUSIP No. 12489L108 13D Page 32 of 60
FS Equity Partners III, L.P.
FS Equity Partners International, L.P.
November 10, 2000
Page 8
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:
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
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<PAGE>
CUSIP No. 12489L108 13D Page 33 of 60
SCHEDULE I
Total Shares of Total Shares of
Outstanding Common Common Stock
Stock Owned Beneficially Owned<F1>
------------------ ------------------
BLUM and its 3,423,886 3,439,091
affiliates
FS and its affiliates 3,402,463 3,402,463
Raymond E. Wirta 35,000 647,526<F2>
W. Brett White 58,600 125,200
Frederic V. Malek 397,874 409,984
Donald M. Koll 734,290 555,3602
<F1> 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.
<F2> 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.
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<PAGE>
CUSIP No. 12489L108 13D Page 34 of 60
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.
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CUSIP No. 12489L108 13D Page 35 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 36 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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.
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CUSIP No. 12489L108 13D Page 37 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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:
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<PAGE>
CUSIP No. 12489L108 13D Page 38 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
- 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.
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<PAGE>
CUSIP No. 12489L108 13D Page 39 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
- 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.
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 40 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
* * *
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
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<PAGE>
CUSIP No. 12489L108 13D Page 41 of 60
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 42 of 60
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).
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 43 of 60
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.
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.
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CUSIP No. 12489L108 13D Page 44 of 60
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.
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CUSIP No. 12489L108 13D Page 45 of 60
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.
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CUSIP No. 12489L108 13D Page 46 of 60
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
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CUSIP No. 12489L108 13D Page 47 of 60
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
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<PAGE>
CUSIP No. 12489L108 13D Page 48 of 60
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 49 of 60
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.
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<PAGE>
CUSIP No. 12489L108 13D Page 50 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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
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<PAGE>
CUSIP No. 12489L108 13D Page 51 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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
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CUSIP No. 12489L108 13D Page 52 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
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CUSIP No. 12489L108 13D Page 53 of 60
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.
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CUSIP No. 12489L108 13D Page 54 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
- 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.
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
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CUSIP No. 12489L108 13D Page 55 of 60
CB Richard Ellis Services, Inc.
November 10, 2000
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.
* * *
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.
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CUSIP No. 12489L108 13D Page 56 of 60
CB Richard Ellis Services, Inc.
November 10, 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
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CUSIP No. 12489L108 13D Page 57 of 60
EXHIBIT A
[See Exhibit A of Schedule 13D]
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CUSIP No. 12489L108 13D Page 58 of 60
Exhibit C
JOINT FILING AGREEMENT
The undersigned, being duly authorized thereunto, hereby execute this
agreement as an exhibit to this Schedule 13D to evidence the agreement of the
below-named parties, in accordance with the rules promulgated pursuant to the
Securities Exchange Act of 1934, to file this Schedule, and any amendments or
supplements thereto, jointly on behalf of each such party.
Dated: November 13, 2000
RCBA GP, L.L.C. RCBA STRATEGIC PARTNERS, L.P.
By: RCBA GP, L.L.C.
its general partner
By: /s/ Murray A. Indick By: /s/ Murray A. Indick
------------------------- -------------------------
Murray A. Indick Murray A. Indick
Member Member
RICHARD C. BLUM & ASSOCIATES, INC. BLUM CAPITAL PARTNERS, L.P.
By: Richard C. Blum & Associates,
Inc., its general partner
By: /s/ Murray A. Indick By: /s/ Murray A. Indick
------------------------- -------------------------
Murray A. Indick Murray A. Indick
Partner, General Counsel Partner, General Counsel
and Secretary and Secretary
BLUM CB CORP.
/s/ Murray A. Indick By: /s/ Murray A. Indick
------------------------- -------------------------
RICHARD C. BLUM Murray A. Indick
Vice President, Secretary
By: Murray A. Indick, and Assistant Treasurer
Attorney-in-Fact
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CUSIP No. 12489L108 13D Page 59 of 60
Exhibit D
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby
constitutes and appoints Murray A. Indick, his true and lawful attorney-in-
fact, to: (1) execute on behalf of the undersigned all forms and other
documents to be filed with the Securities and Exchange Commission ("SEC"),
any stock exchange, and any other similar authority, including but not
limited to Forms 3, 4, 5, 13D, 13G and 144; (2) do and perform any and all
acts for and on behalf of the undersigned which may be necessary or desirable
to complete and execute any such form or document and timely file such forms
and documents with the SEC, any stock exchange and any other similar
authority; and (3) take any action of any type whatsoever in connection with
the foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required by, the undersigned,
it being understood that the documents executed by such attorney-in-fact on
behalf of the undersigned pursuant to this Power of Attorney shall be in such
form and shall contain such terms and conditions as such attorney-in-fact may
approve in such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary or proper to be granted, as fully to all intents and purposes as
the undersigned might or could do if personally present, with full power of
substitution or revocation, hereby ratifying and confirming all that such
attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall
lawfully do or cause to be done by virtue of this power of attorney and the
rights and powers herein granted. The undersigned acknowledges that such
attorney-in-fact is serving in such capacity at the request of the
undersigned and is not assuming any of the undersigned's responsibilities to
comply with applicable requirements of law.
This Power of Attorney shall remain in full force and effect until
revoked by the undersigned in a signed writing delivered to the foregoing
attorney-in-fact.
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CUSIP No. 12489L108 13D Page 60 of 60
In Witness Whereof, the undersigned has caused this Power of Attorney
to be executed on this 26th day of August, 1997.
/s/ Richard C. Blum
---------------------------------
Richard C. Blum
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