FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission File Number: 1-8122
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GRUBB & ELLIS COMPANY
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(exact name of registrant as specified in its charter)
Delaware 94-1424307
- - ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Montgomery Street, Telesis Tower,
San Francisco, CA 94104
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(Address of principal executive offices)
(Zip Code)
(415) 956-1990
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
8,718,469
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(Number of shares outstanding of the registrant's
common stock at November 1, 1994)
1
PART I
FINANCIAL INFORMATION
2
ITEM 1. FINANCIAL STATEMENTS
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts and shares)
(unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
Revenue:
Real estate brokerage $ 38,682 $ 41,197 $ 103,891 $ 115,450
commissions
Real estate service fees 8,322 8,865 22,937 27,345
Other income 151 790 1,113 1,086
Less: Commissions (22,511) (25,541) (59,252) (71,241)
------------ ----------- ------------- -----------
Gross profit 24,644 25,311 68,689 72,640
------------ ----------- ------------- -----------
Expenses and other:
Selling, general and
administrative 12,210 14,036 36,019 40,315
Salaries and wages 11,003 10,658 32,729 33,243
Interest expense 15 49 40 143
Interest expense to related parties 694 568 1,966 1,829
Special charges and unusual items (519) -- (827) --
Depreciation and amortization 575 538 1,511 1,683
Other, net (18) -- (89) --
------------ ----------- ------------- -----------
Total expenses and other 23,960 25,849 71,349 77,213
------------ ----------- ------------- -----------
Income (loss) before
income taxes 685 (538) (2,660) (4,573)
Provision for income taxes 101 100 297 275
------------ ----------- ------------- -----------
Net income (loss) $ 584 $ (638) $ (2,957) $ (4,848)
------------ ----------- ------------- -----------
Undeclared dividends (accretion
of liquidation preference) on $ 658 $ 599 $ 1,953 $ 1,597
preferred stock
Net income (loss) applicable to
common stock $ (74) $ (1,237) $ (4,910) $ (6,445)
Net income (loss) per common share
and equivalents $ (.02) $ (.30) $ (1.18) $ (1.61)
Weighted average common
shares 4,261,351 4,060,268 4,146,011 4,006,156
See notes to condensed consolidated financial statements.
3
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
ASSETS
September 30, December 31, September 30,
1994 1993 1993
----------- ------------ --------------
(unaudited) (unaudited)
Current Assets
Cash and cash
equivalents $ 10,745 $ 22,364 $ 14,042
Real estate brokerage
commissions receivable 2,401 493 4,973
Real estate services
fees and other commissions
receivable 3,375 2,312 2,525
Other receivables 2,824 4,865 4,941
Prepaid and other current assets 2,764 2,628 563
--------- --------- ---------
Total current assets 22,109 32,662 27,044
Noncurrent Assets
Real estate brokerage
commissions receivable 457 1,155 1,084
Real estate investments held for
sale and real estate owned 915 1,305 1,503
Equipment and leasehold
improvements, net 5,160 5,063 4,726
Excess of cost over net
assets of acquired
companies, net -- -- 10,156
Other assets 2,631 2,000 974
--------- --------- ---------
Total assets $ 31,272 $ 42,185 $ 45,487
--------- --------- ---------
--------- --------- ---------
See notes to condensed consolidated financial statements.
4
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, continued
(in thousands, except per share amounts and shares)
September 30, December 31, September 30,
1994 1993 1993
------ ------ ------
(unaudited) (unaudited)
LIABILITIES
Current Liabilities
Notes payable and current portion
of long-term debt $ 506 $ 506 $ 324
Current portion of notes payable and long-term
debt to related parties 6,000 8,830 1,830
Accounts payable 1,079 1,873 1,749
Compensation and employee benefits payable 8,321 11,817 7,615
Deferred commissions payable 540 2,814 497
Accrued severance obligations 1,237 2,883 1,002
Accrued office closure costs 2,553 3,043 2,211
Accrued claims and settlements 3,715 10,375 3,457
Other accrued expenses 6,665 8,363 5,761
--------- --------- -------
Total current liabilities 30,616 50,504 24,446
Long-Term Liabilities
Notes payable and long-term debt,
net of current portion 702 900 947
Notes payable and long-term debt
to related party, net of current portion 24,678 15,237 22,195
Accrued claims and settlements 13,068 9,678 17,982
Accrued severance obligations 287 555 638
Accrued office closure costs 2,496 4,043 2,764
Other 265 235 2,042
--------- --------- -------
Total liabilities 72,112 81,152 71,014
Commitments and contingencies (Note 4) -- -- --
--------- --------- -------
REDEEMABLE PREFERRED STOCK
12% Senior convertible preferred stock, $100.00 per
share redemption value: 137,160 shares outstanding 15,875 14,365 14,013
5% Junior convertible preferred stock, $100.00 per
share redemption value: 150,000 shares outstanding 16,147 15,535 15,357
Total redeemable preferred stock 32,022 29,900 29,370
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value:
1,000,000 shares authorized; 287,160 shares issued as
redeemable preferred stock
Common stock, $.01 par value: 25,000,000 shares authorized;
4,434,232, 4,060,271 and 4,060,268 shares issued and
outstanding at September 30, 1994, December 31, 1993 and
September 30, 1993, respectively. 45 41 41
Additional paid-in capital 47,028 48,070 48,680
Retained earnings (deficit) (119,935) (116,978) (103,618)
--------- --------- -------
Total stockholders' deficit (72,862) (68,867) (54,897)
--------- --------- -------
Total liabilities and stockholders' deficit $ 31,272 $ 42,185 $ 45,487
--------- --------- -------
--------- --------- -------
See notes to condensed consolidated financial statements.
5
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
For the Nine Months
Ended September 30,
---------------------------
1994 1993
------ ------
Cash Flows from Operating Activities:
Net loss $ (2,957) $ (4,848)
Adjustments to reconcile net loss to net
net cash used in operating activities (13,318) (7,224)
-------- -------
Net cash used in operating activities (16,275) (12,072)
-------- -------
Cash Flows from Investing Activities:
Dispositions of real estate investments held for sale
and real estate owned 344 1,494
Disposition of other assets -- 3,350
Purchases of equipment and leasehold
improvements (1,526) (1,991)
-------- -------
Net cash provided by (used in) investing activities (1,182) 2,853
-------- -------
Cash Flows from Financing Activities:
Proceeds from borrowing 6,000 8,000
Repayment of notes payable (199) (10,290)
Proceeds from issuance of preferred stock -- 13,750
Offering costs related to issuance of preferred stock -- (1,197)
Proceeds from issuance of common stock 37 61
-------- -------
Net cash provided by financing activities 5,838 10,324
-------- -------
Net increase (decrease) in cash and cash equivalents (11,619) 1,105
Cash and cash equivalents at beginning of period 22,364 12,937
-------- -------
Cash and cash equivalents at end of period $10,745 $14,042
-------- -------
-------- -------
---------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $1,281 $1,474
Income taxes 351 487
See notes to condensed consolidated financial statements.
6
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. INTERIM PERIOD REPORTING
The accompanying unaudited condensed consolidated financial statements
include the accounts of Grubb & Ellis Company, its wholly and majority
owned and controlled subsidiaries and partnerships (the "Company"), and are
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements, and therefore, should be read
in conjunction with the Company's Annual Report and footnotes thereto on
Form 10-K/A (Amendment No. 3) for the year ended December 31, 1993.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Certain amounts in prior periods have been reclassified to
conform to the current presentation.
Operating results for the three-and nine-month periods ended September 30,
1994 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1994. Any adjustments to reserves provided in
prior periods in connection with offices which management determined in
1993 to close in 1994 are reflected as "Special charges and unusual items".
2. INCOME TAXES
The Company's tax provision is attributed to current state tax liabilities.
3. NET INCOME (LOSS) PER COMMON SHARE AND EQUIVALENTS
Net income (loss) per common share and equivalents computations are based
on the weighted average number of common shares outstanding after giving
effect to potential dilution from common stock options and warrants.
The calculation of net income (loss) per share of common stock includes net
income (loss), less amounts applicable to the Senior and Junior Preferred
Stock for undeclared dividends (accretion of liquidation preference) earned
in the amounts of approximately $461,000 and $197,000, respectively, for
the quarter ended September 30, 1994, and $411,000 and $188,000,
respectively, for the quarter ended September 30, 1993. As of September
30, 1994, cumulative undeclared dividends applicable to the Senior and
Junior Preferred Stocks were $2,875,000 and $1,275,000, respectively.
7
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
4. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed the contingent liabilities of one of its wholly-
owned subsidiaries with respect to two limited partnerships in which the
subsidiary formerly acted as general partner, in the aggregate amount of $4
million.
The Company previously disclosed in the Form 10-Q for the quarter ended
June 30, 1994 the details of a complaint, Johsz et al. v. Koll Company et
al., and the proposed exclusion from contracting services by the Resolution
Trust Corporation and the Federal Deposit Insurance Corporation of the
Company and its subsidiary, Grubb & Ellis Asset Services Company. There
has been no material change with respect to these matters.
The Company is involved in various other claims and lawsuits arising in the
ordinary course of business, as well as in connection with its
participation in various joint ventures, partnerships and a trust.
In the opinion of management, upon the advice of counsel, the eventual
outcome of the above claims and lawsuits will not have a material adverse
effect on the Company's financial position or results of operations.
5. LONG-TERM DEBT MODIFICATIONS AND RIGHTS OFFERING
On November 1, 1994, the Company, Warburg, Pincus Investors, L.P.
("Warburg") and The Prudential Insurance Company of America ("Prudential")
completed certain financing transactions pursuant to agreements (the
"Agreements") providing for, among other things, (1) the Company to seek
additional equity capital through a rights offering, (2) amendment of debt
agreements with Prudential,(3) issuance of additional warrants to purchase
common stock of the Company and (4) amendments to the existing Convertible
Preferred Stock and warrants held by Warburg and Prudential. The
Agreements were approved by the Company's stockholders on September 12,
1994.
The Rights Offering expired October 31, 1994. Common stockholders, other
than Warburg and Prudential, committed to purchase 84,542 shares of common
stock at the subscription price of $2.375 per share for total expected
proceeds of approximately $201,000.
8
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
5. LONG-TERM DEBT MODIFICATIONS AND RIGHTS OFFERING, (CONTINUED)
Pursuant to a Standby Agreement, Warburg purchased 4,277,433 shares (at
$2.375 per share) for total proceeds of approximately $10.2 million. As
provided for in the Agreements, Warburg paid for its shares through
cancellation of $6,158,904 of indebtedness outstanding under an interim
financing loan, including accrued interest of $158,904, and $4,000,000 in
cash. Warburg had made the interim financing loan pursuant to an
agreement entered into in March 1994, which agreement was terminated in
connection with the consummation of the financing transactions.
AMENDMENT TO PRUDENTIAL DEBT AGREEMENTS
Pursuant to the Agreements, the $15 million principal amount of the Senior
Notes, the PIK Notes and the revolving credit facility which would have
been due from 1994 through 1996 have been deferred and no principal
payments will be required until November 1, 1997, and thereafter (1) the
revolving credit facility will mature November 1, 1999, (2) principal on
the Senior Notes will be payable in two equal installments on November 1,
1997 and 1998, and (3) principal on the PIK Notes will be payable in two
approximately equal installments on November 1, 2000 and 2001. The
interest rate on the PIK Notes will increase from 10.65% to 11.65% per
annum on January 1, 1996. In addition, certain covenants of the debt
agreements remain in place, but will not be in effect until April 1, 1997.
The debt agreements, as amended, provide for supplemental principal
payments commencing July 1, 1998 if the Company meets certain financial
tests.
OTHER AMENDMENTS AND PROVISIONS
Pursuant to the financing transactions, certain provisions of the Company's
outstanding Senior Convertible Preferred Stock and Junior Convertible
Preferred Stock were amended. Among other things, the amendments eliminate
the mandatory redemption provisions, eliminate certain anti-dilution
provisions and increase the dividend rate commencing in 2002. As a result
of the application of the anti-dilution provisions previously
9
GRUBB & ELLIS COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
5. LONG-TERM DEBT MODIFICATIONS AND RIGHTS OFFERING (CONTINUED)
existing in the Senior Preferred Stock, the numbers of shares issuable upon
conversion of the Senior Preferred Stock have increased from approximately
4.6 million shares to approximately 5.1 million shares. Also pursuant to
the financing transactions, the Company's existing warrants to purchase
common stock held by Warburg and Prudential were amended. Among other
things, the amendments reduce the exercise price to $3.50 per share,
eliminate the anti-dilution provisions, and, in the case of the warrants
held by Prudential, extend the expiration date from January 1998 until
December 1998. Prudential waived the anti-dilution provisions of its
existing warrants in connection with the financing transactions. As a
result of the application of the anti-dilution provisions previously
existing in the warrants held primarily by Warburg, the number of shares
issuable upon conversion of such warrants increased from approximately
726,000 shares to approximately 1,035,000 shares. Warrants held by Warburg
to acquire approximately 374,000 shares under certain circumstances were
canceled.
As consideration for acquiring shares of stock in the Rights Offering in
connection with the Standby Agreement, and agreeing to the other
transactions contemplated by the Rights Offering, the Company will issue
Warburg warrants to purchase 325,000 shares at an exercise price of $2.375
per share. As consideration for modifying the debt agreement with
Prudential, waiving noncompliance with certain covenants and agreeing to
other financing transactions, the Company will issue Prudential warrants to
purchase 150,000 shares at an exercise price of $2.375 per share. Any or
all of the newly issued warrants described above may be exercised at any
time until five years after the date of issuance.
6. SPECIAL CHARGES AND UNUSUAL ITEMS
Special charges and unusual items were adjusted by $519,000 in the third
quarter of 1994. The adjustment relates to changes in estimates and
reduction of reserves associated with the closure of certain offices which
were accomplished more efficiently than had been estimated when reserves
were initially established at December 31, 1993.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUE
The Company has typically experienced its lowest quarterly revenue in the first
quarter of each year with historically higher and more consistent revenue in the
second and third quarters. The fourth quarter has historically provided the
highest quarterly revenue due to increased activity caused by the desire of
clients to complete transactions by year-end. Over the last three years,
revenue in any given quarter, as a percentage of total annual revenue, ranged
from a high of 29.2% to a low of 19.8%.
In connection with business operating plans established at the end of 1993, the
Company closed several unprofitable appraisal and consulting offices in February
1994 and modified its organizational structure to increase operating
efficiencies and reduce costs. The modifications included the integration of
management of commercial brokerage operations with the appraisal, consulting and
commercial mortgage brokerage operations, on a regional basis. The integration
also included those property management operations which the Company has
resumed, independent of Axiom Real Estate Management, Inc. ("Axiom"), a majority
owned subsidiary of the Company which provides property and facilities
management. Axiom closed certain offices pursuant to its strategic objective to
focus on those markets where it has a larger number of properties which will
enable it to provide more efficient, cost-effective service.
The Company's revenue is derived principally from commercial brokerage
operations. For the first nine months of 1994, total revenues of $127.9 million
declined by $15.9 million or 11.1% compared to the same period in 1993.
Excluding revenue from the Northern California residential brokerage operations
sold during 1993 and certain other offices which at the end of 1993 were closed
or were expected to be closed, as well as government contracting business
conducted during the first quarter of 1993 which was not repeated in 1994,
revenue increased approximately $11.9 million or 10.2% in the first nine months
of 1994 compared to the same period of 1993.
Revenue of $47.2 million for the third quarter of 1994 declined by $3.7 million
or 7.3% from revenue of $50.9 million for the third quarter of 1993. However,
excluding revenue from the Northern California residential brokerage and other
offices and government contracting business as described above, revenue from
continuing operations of $47.2 million in the third quarter 1994 increased by
11
REVENUE, (CONTINUED)
$4.1 million or 9.4% compared to the third quarter 1993 revenue from continuing
operations of $43.1 million.
COSTS AND EXPENSES
Real estate brokerage commissions expense (salespersons' participation) is the
Company's major expense and is contingent upon gross brokerage commission
revenue levels. As a percentage of total revenue, salespersons' participation
expense for the first nine months of 1994 decreased to 46.3% from 49.5% for the
same period in 1993. Salespersons' participation expense for the third quarter
of 1994 decreased to 47.7% from 50.2% for the same period in 1993. Lower
salespersons' participation rates in 1994 are primarily attributable to the sale
of the Northern California residential brokerage operations and closure or
expected closure of certain other offices in 1993 which had higher salespersons'
participation rates.
Operating expenses from continuing operations, other than real estate brokerage
commissions expense, increased by $4.7 million to $71.3 million for the first
nine months of 1994 as compared to the same period in 1993. Operating expenses
from continuing operations in the third quarter of 1994 increased by $1.0
million or 4.4% from $23.0 million in the third quarter of 1993. These increases
were primarily a result of several key management positions being filled in the
latter part of 1993 and additional investments in training, computer systems,
and other resources anticipated to improve future profits. Special charges and
unusual items were adjusted by $519,000 in the third quarter of 1994. The
adjustment relates to changes in estimates and reduction of reserves associated
with the closure of certain offices which were accomplished more efficiently
than initially estimated at the end of 1993.
NET INCOME (LOSS)
Net loss of $3.0 million or $1.18 per common share for the first nine months of
1994 compares favorably to the net loss of $4.8 million or $1.61 per common
share for the same period in 1993. Net income for the third quarter of 1994 was
$584,000 as compared to a net loss of $638,000 for the third quarter of 1993,
primarily a result of management focusing on its core businesses and the
12
NET INCOME (LOSS), (CONTINUED)
closing of unprofitable offices. Management of the Company continues to evaluate
its plans to close and/or pursue the sale of unprofitable operations, most of
which were fully reserved for at the end of 1993. Management believes current
reserves are adequate and therefore does not anticipate an adverse impact on
the Company's earnings. It is expected that cash flows related to office
closures and severance payments will approximate reserves established, however,
the eventual impact will be dependent upon the outcome of negotiations with
respect to potential dispositions. Net loss per common share was $.02 for the
third quarter of 1994, calculated as described in Note 3 to the Condensed
Consolidated Financial Statements. This compares to a net loss of $.30 per
common share for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $11.6 million from December 31, 1993 to
September 30, 1994. The decrease was mainly attributable to cash used by
operations of $16.3 million, which included $5.4 million for 1993 salespersons'
and managers' incentive compensation, $2.3 million for deferred salespersons'
commission payments, $3.1 million related to nonrecurring legal settlements and
an interest payment of $1.0 million on the Prudential Senior Note. These cash
outflows were offset by cash received of $6 million from the Warburg interim
financing loan (see Note 5 to the Condensed Consolidated Financial Statements).
Working capital improved by $9.3 million during the first nine months of 1994
reflecting a deficit of $8.5 million at September 30, 1994. The improvement was
primarily related to an $8.8 million reclassification of debt (Prudential
Revolving Credit Note and Prudential Senior Notes) from current to noncurrent, a
$3.0 million reclassification of accrued claims and settlements from current to
noncurrent, $3.1 million of actual claims settlements, offset by $6.0 million in
borrowings on the Warburg interim financing loan.
The Company believes that its short-term and long-term cash requirements will be
met by operating cash flow, seasonal use of the Prudential $5 million Revolving
Credit Note and proceeds from the sale of common stock in the financing
transaction (see Note 5 to the Condensed Consolidated Financial Statements). The
Company's 1994 operating plan provides for positive operating cash flow and
reflects improvements in the third and fourth quarters consistent with
historical operating trends. The Company generated $2.1 million of operating
cash flow in the third quarter of 1994
13
LIQUIDITY AND CAPITAL RESOURCES, (CONTINUED)
excluding $1.9 million of claims settlements, office closure and severance costs
for which reserves were provided at the end of 1993. If the 1994 operating plan
is not substantially achieved because of adverse economic conditions or other
unfavorable events, the Company may find it necessary to further reduce expense
levels, or undertake other actions as may be appropriate.
14
PART II
OTHER INFORMATION
(Items 3 and 5 are not applicable
for the quarter ended September 30, 1994)
15
ITEM 1. LEGAL PROCEEDINGS
The Company previously disclosed in the Form 10-Q for the quarter ended
June 30, 1994 the details of certain legal proceedings with respect to which
there was no material change during the quarter ended September 30, 1994.
ITEM 2. CHANGES IN SECURITIES
The general effect of the amendments to the Company's Certificate of
Incorporation, as referenced below, on the rights of the holders of Common Stock
are to reduce further dilution in the voting power of the holders of the Common
Stock by elimination, under most circumstances, of anti-dilution protection
provisions of the Preferred Stock. In addition, the increase in the dividend
rate to the Junior Convertible Preferred Stock will reduce the ability of the
Company to pay dividends on the Common Stock. There are other existing
restrictions on the Company's ability to pay dividends. The information set
forth in Item 4 below and in Note 5 to the Condensed Consolidated Financial
Statements in this Form 10-Q is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1994 annual meeting of stockholders of the Company was held on
September 12, 1994. The Company submitted to a vote of stockholders, through
the solicitation of a proxy, the following proposals and the election of six
directors -- representing the entire Board of Directors.
The first proposal (the "Financing Transactions") consisted of a rights
offering to the Company's stockholders to purchase approximately 4.4 million
shares of Common Stock at a price of $2.375 per share, accompanied by a standby
commitment from Warburg, Pincus Investors, L.P. ("Warburg"), a principal
stockholder of the Company, to purchase shares not purchased in such rights
offering, up to certain limits. Warburg's proposed investment of approximately
$10.2 million pursuant to the standby commitment would be paid to the Company by
cancellation of indebtedness of the Company to Warburg in the approximate amount
of $6.2 million and the remainder would be paid in cash. The proposal also
included amendments to debt agreements between the Company and The Prudential
Insurance Company of America ("Prudential"), certain amendments to outstanding
warrants held by Warburg and Prudential, and the issuance of new warrants to
such parties.
The second proposal consisted of an amendment to the Certificate of
Incorporation of the Company relating to the terms of outstanding Senior and
Junior Convertible Preferred Stock, to eliminate mandatory redemption provisions
except in certain limited circumstances, to eliminate anti-dilution provisions,
to increase the dividend rate on the Junior Convertible Preferred Stock, and on
the Senior Convertible Preferred Stock in certain circumstances, and certain
changes to the conversion provisions related to the Junior
16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS, CONTINUED
Convertible Preferred Stock. The votes cast for, against, votes abstaining,
broker nonvotes with respect to each proposal and votes cast for or withheld
with respect to nominees for election as director were as follows:
BROKER
FOR AGAINST ABSTAIN NONVOTES
1. PROPOSAL TO APPROVE THE FINANCING TRANSACTIONS:
8,732,674 397,883 188,411 1,487,565
2. PROPOSAL TO AMEND THE PROVISIONS OF THE COMPANY'S CERTIFICATE
OF INCORPORATION WITH RESPECT TO THE PREFERRED STOCK:
Common 1,920,332 104,526 37,994 1,517,969
Senior Preferred Stock 4,551,201 0 0 0
Junior Preferred Stock 2,674,511 0 0 0
3. ELECTION OF DIRECTORS:
FOR WITHHOLD AUTHORITY
JOE F. HANAUER 10,692,795 113,738
R. DAVID ANACKER 10,695,615 110,918
LAWRENCE S. BACOW 10,695,615 110,918
REUBEN S. LEIBOWITZ 10,717,449 89,084
ROBERT J. MCLAUGHLIN 10,695,615 110,918
JOHN D. SANTOLERI 10,694,989 111,544
ITEM 6(A). EXHIBITS
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1 Senior Note, Subordinated Note and Revolving Credit Note Agreement
between The Prudential Insurance Company of America and the Registrant
dated as of November 2, 1992, incorporated herein by reference to
Exhibit 4.6 to the Registrant's Current Report on Form 8-K filed on
February 8, 1993 (Commission File No. 1-8122).
4.2 Letter agreement between The Prudential Insurance Company of America
and the Registrant dated March 26, 1993, incorporated herein by
reference to Exhibit 4.10 to the Registrant's Quarterly Report on Form
10-Q filed on May 15, 1993 (Commission File No. 1-8122).
17
ITEM 6(A). EXHIBITS, CONTINUED
4.3 Letter agreement between The Prudential Insurance Company of America
and the Registrant dated April 19, 1993, incorporated herein by
reference to Exhibit 4.11 to the Registrant's Quarterly Report on Form
10-Q filed on May 15, 1993 (Commission File No. 1-8122).
4.4 Letter agreement between The Prudential Insurance Company of America
and the Registrant dated October 26, 1993, incorporated herein by
reference to Exhibit 4.21 to the Registrant's registration statement
on Form S-8 filed on November 12, 1993 (Registration No. 33-71484).
4.5 Letter agreement between The Prudential Insurance Company of America
and the Registrant dated March 28, 1994, incorporated by reference to
Exhibit 4.5 to the Registrant's Annual Report on Form 10-K filed on
March 31, 1994 (Commission File No. 1-8122).
4.6 Modification to Note and Security Agreement between the Registrant and
The Prudential Insurance Company of America dated as of March 28,
1994, incorporated by reference to Exhibit 4.17 to the Registrant's
Amendment to its Annual Report on Form 10-K/A filed on April 29, 1994
(Commission File No. 1-8122).
4.7 Amendment dated July 20, 1994 to the Senior Note, Subordinated Note
and Revolving Credit Note Agreement between the Registrant and The
Prudential Insurance Company of America, incorporated herein by
reference to Exhibit 10.2 to the Registrant's registration statement
on Form S-3 filed on July 22, 1994 (Registration No. 33-54707).
4.8 Securities Purchase Agreement between The Prudential Insurance
Company of America and the Registrant, dated
as of November 2, 1992, incorporated herein by reference to Exhibit
28.4 to the Registrant's Current Report on
Form 8-K filed on November 12, 1992 (Commission File No. 1-8122).
4.9 Securities Purchase Agreement among Warburg, Pincus Investors, L.P.,
Joe F. Hanauer and the Registrant, dated as of November 2, 1992,
incorporated herein by reference to Exhibit 28.3 to the Registrant's
Current Report on Form 8-K filed on November 12, 1992 (Commission File
No. 1-8122).
4.10 Specimen of stock subscription warrant No. 8 issued to the Joe F.
Hanauer Trust, dated as of January 29, 1993, exercisable for 158,608
shares of the Registrant's Common Stock, incorporated herein by
reference to
18
ITEM 6(A). EXHIBITS, CONTINUED
Exhibit 4.12 to the Registrant's registration statement on Form S-8
filed on November 12, 1993 (Registration No. 33-71484).
4.11 Specimen of stock subscription warrant No. S-4 issued to
the Joe F. Hanauer Trust, dated January 29, 1993,
exercisable for 25,954 shares of the Registrant's Common Stock,
incorporated herein by reference to Exhibit 4.18 to the Registrant's
registration statement on Form S-8 filed on November 12, 1993
(Registration No. 33-71484).
4.12 Summary of terms of proposed bridge loan and rights offering executed
by Warburg, Pincus Investors, L.P., The Prudential Insurance Company
of America and the Registrant as of March 28, 1994, incorporated
herein by reference to Exhibit 4.11 to the Registrant's Annual Report
on Form 10-K filed on March 31, 1994 (Commission File No. 1-8122).
4.13 Cash Collateral Account Agreement between Bank of America, N.T.&S.A.
and the Registrant dated as of March 29, 1994, incorporated herein by
reference to Exhibit 4.12 to the Registrant's Annual Report on Form
10-K filed on March 31, 1994 (Commission File No. 1-8122).
4.14 Intercreditor Agreement between Warburg, Pincus Investors, L.P. and
The Prudential Insurance Company of America dated as of March 28,
1994, incorporated herein by reference to Exhibit 4.13 to the
Registrant's Annual Report on Form 10-K filed on March 31, 1994
(Commission File No. 1-8122).
4.15 Promissory Note in the amount of up to $10 million dated as of March
29, 1994, executed by the Registrant in favor of Warburg, Pincus
Investors, L.P., Incorporated herein by reference to Exhibit 4.15 to
the Registrant's Amendment to its Annual Report on Form 10-K/A filed
on April 29, 1994 (Commission File No. 1-8122).
4.16 Loan and Security Agreement among the Registrant, Warburg, Pincus
Investors, L.P. and The Prudential Insurance Company of America dated
as of March 29, 1994; incorporated herein by reference to Exhibit 4.16
to the Registrant's Amendment to its Annual Report on Form 10-K/A
filed on April 29, 1994 (Commission File No. 1-8122).
4.17 Promissory Note in the amount of $250,000 dated as of January 8, 1990
executed by the Registrant in favor of DW Limited Partnership,
incorporated herein by reference to Exhibit 4.14 to the Registrant's
Annual Report on
19
ITEM 6(A). EXHIBITS, CONTINUED
Form 10-K filed on March 31, 1994 (Commission File No. 1-8122).
4.18 Amendment to the Certificate of Incorporation of the Registrant,
effective November 1, 1994.
4.19 Certificate of Incorporation of the Company, as restated effective
December 8, 1993, incorporated herein by reference to Exhibit 4.1 to
the Registrant's registration statement on Form S-3 filed on July 22,
1994 (Registration No. 33-54707).
4.20 Amendment to the Bylaws of the Registrant, effective June 1, 1994.
4.21 Bylaws of the Registrant, as amended as of June 1, 1994.
4.22 Form of Rights Certificate in connection with 1994 Rights Offering of
the Registrant, incorporated herein by reference to Exhibit 4.3 to the
Registrant's registration statement on Form S-3 filed on July 22,
1994 (Registration No. 33-54707).
4.23 Specimen of Stock Subscription Warrant No. 16 issued to The Prudential
Insurance Company of America, restated as of November 1, 1994,
exercisable for 200,000 shares of the Registrant's Common Stock.
4.24 Specimen of Stock Subscription Warrant No. 17 issued to The Prudential
Insurance Company of America, as of November 1, 1994, exercisable for
150,000 shares of the Registrant's Common Stock.
4.25 Specimen of Stock Subscription Warrant No. 18 issued to Warburg,
Pincus Investors, L.P., restated as of November 1, 1994, exercisable
for 687,358 shares of the Registrant's Common Stock.
4.26 Specimen of Stock Subscription Warrant No. 19 issued to Warburg,
Pincus Investors, L.P., as of November 1, 1994, exercisable for
325,000 shares of the Registrant's Common Stock.
4.27 Amended Senior Note executed by the Registrant in favor of The
Prudential Insurance Company of America in the amount of $6,500,000,
dated as of November 1, 1994.
4.28 Amended Senior Note executed by the Registrant in favor of The
Prudential Insurance Company of America in the amount of $3,500,000,
dated as of November 1, 1994.
20
ITEM 6(A). EXHIBITS, CONTINUED
4.29 Amended Payment-In-Kind Note executed by the Registrant in favor of
The Prudential Insurance Company of America in the amount of
$10,900,834.33, dated as of November 1, 1994.
4.30 Amended Revolving Credit Note executed by the Registrant in favor of
The Prudential Insurance Company of America in the amount of
$5,000,000, dated as of November 1, 1994.
On an individual basis, instruments other than Exhibits 4.1 through
4.30 listed above defining the rights of holders of long-term debt of
the Registrant and its consolidated subsidiaries and partnerships do
not exceed ten percent of total consolidated assets and are,
therefore, omitted; however, the Registrant will furnish
supplementally to the Commission any such omitted instrument upon
request.
(10) MATERIAL CONTRACTS
10.1 Grubb & Ellis Company 1990 Amended and Restated Stock
Option Plan, as amended as of May 28, 1993, incorporated
herein by reference to Exhibit 4.1 to the Registrant's
registration statement on Form S-8 filed on November 12, 1993
(Registration No. 33-71580).
10.2 Agreement between HSM Inc. and David Donosky dated January 15,
1988, regarding exchange of indebtedness, incorporated
herein by reference to Exhibit 10.23 to the Registrant's
Annual Report on Form 10-K filed on March 30, 1988
(Commission File No. 1-8122).
10.3 Loan Agreement between David Donosky and the Registrant dated
October 20, 1989, incorporated herein by reference to Exhibit
10.21 to the Registrant's registration statement on Form S-2
filed on January 12, 1990 (Registration No. 33-32979).
10.4 Description of Grubb & Ellis Company Senior Management
Compensation Plan, incorporated herein by reference to Exhibit
10.17 to the Registrant's Annual Report on Form 10-K filed on
March 30, 1992 (Commission File No. 1-8122).
10.5 Stock Purchase and Stockholder Agreement dated May 6, 1992, among
GE New Corp., the Registrant and International Business Machines
Corporation, incorporated herein by reference to Exhibit 28.2 to
the Registrant's Quarterly Report on Form 10-Q filed on May 15,
1992 (Commission File No. 1-8122).
21
(10) MATERIAL CONTRACTS, CONTINUED
10.6 Master Management Agreement dated May 6, 1992 between International
Business Machines Corporation and GE New Corp., incorporated herein by
reference to Exhibit 28.2 to the Registrant's Quarterly Report on
Form 10-Q filed on May 15, 1992 (Commission File No. 1-8122).
10.7 Master Financing Agreement dated August 5, 1992 between IBM Credit
Corporation and Axiom Real Estate Management, Inc., incorporated
herein by reference to Exhibit 28.4 to the Registrant's Quarterly
Report on Form 10-Q filed on August 13, 1992 (Commission File No. 1-
8122).
10.8 Credit Agreement dated as of August 31, 1992, between Axiom Real
Estate Management, Inc. and the Registrant, incorporated herein by
reference to Exhibit 28.6 to the Registrant's Quarterly Report on
Form 10-Q filed on November 16, 1992 (Commission File No. 1-8122).
10.9 Purchase Agreement dated March 4, 1993 between the Registrant and Fox
and Carskadon/Better Homes and Gardens, incorporated herein by
reference to Exhibit 10.21 to the Registrant's Quarterly Report on
Form 10-Q filed May 15, 1993 (Commission File No. 1-1822).
10.10 Stockholders' Agreement among Warburg, Pincus Investors, L.P., The
Prudential Insurance Company of America, Joe F. Hanauer and the
Registrant dated January 29, 1993, incorporated herein by reference
to Exhibit 28.1 to the Registrant's Current Report on Form 8-K filed
on February 8, 1993 (Commission File No. 1-8122).
10.11 Amendment to Stockholders' Agreement among Warburg, Pincus Investors,
L.P., The Prudential Insurance Company of America, Joe F. Hanauer and
the Registrant, dated as of July 1, 1993, incorporated herein by
reference to Exhibit 10.15 to the Registrant's Quarterly Report on
Form 10-Q filed on August 16, 1993 (Commission File No. 1-8122).
10.12 Employment Agreement, effective May 20, 1992, between the Registrant
and Alvin L. Swanson, Jr., incorporated herein by reference to
Exhibit 10.29 to the Registrant's Annual Report on Form 10-K filed on
April 15, 1993 (Commission File No. 1-8122).
10.13 First Amendment to Employment Agreement, effective as of May 20,
1992, between the Registrant and Alvin L. Swanson, Jr., incorporated
herein by reference to Exhibit 10.30 to the Registrant's Annual
Report on Form 10-K filed on April 15, 1993 (Commission File No. 1-
8122).
22
(10) MATERIAL CONTRACTS, CONTINUED
10.14 Third Amendment to Employment Agreement, effective as of February 24,
1993, between the Registrant and Alvin L. Swanson, Jr., incorporated
herein by reference to Exhibit 10.31 to the Registrant's Quarterly
Report on Form 10-Q filed on May 15, 1993 (Commission File No. 1-
8122).
10.15 Separation Agreement dated August 1, 1994 between the Registrant and
Gordon M. Hess.
10.16 1993 Stock Option Plan for Outside Directors, incorporated herein by
reference to Exhibit 4.1 to the Registrant's registration statement
on Form S-8 filed on November 12, 1993 (Registration No. 33-71484).
10.17 Separation Agreement between the Registrant and Wilbert F. Schwartz
dated as of April 25, 1994, incorporated herein by reference to
Exhibit 10.23 to the Registrant's Amendment to its Annual Report on
Form 10-K/A filed on April 29, 1994 (Commission File No. 1-8122).
10.18 Standby Agreement dated July 21, 1994 between the Registrant and
Warburg, Pincus Investors, L.P., incorporated by reference to Exhibit
10.1 to the Registrant's registration statement on Form S-3 filed on
July 22, 1994 (Registration No. 33-5470).
10.19 Second Amendment to the Stockholders' Agreement dated November 1,
1994, among the Registrant, Warburg, Pincus Investors, L.P., The
Prudential Insurance Company of America, and Joe F. Hanauer.
(11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(27) FINANCIAL DATA SCHEDULE
ITEM 6(B) REPORTS ON FORM 8-K
A current report on Form 8-K dated September 12, 1994 was filed by the
Registrant, reporting under Item 5 OTHER EVENTS the approval of
certain financing transactions including a rights offering by the
Registrant's stockholders at the 1994 annual meeting of
stockholders.
23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRUBB & ELLIS COMPANY
(Registrant)
Date: November 10, 1994 /s/ James E. Klescewski
---------------------------------
James E. Klescewski
Vice President and Controller
24
Grubb & Ellis Company and Subsidiaries
EXHIBIT INDEX (A)
for the quarter ended September 30, 1994
----------------------------------------
EXHIBIT
- - -------
4.18 Amendment to the Certificate of Incorporation of the Registrant,
effective November 1, 1994.
4.20 Amendment to the Bylaws of the Registrant, effective June 1, 1994.
4.21 Bylaws of the Registrant, as amended as of June 1, 1994.
4.23 Specimen of Stock Subscription Warrant No. 16 issued to The
Prudential Insurance Company of America, restated as of November 1,
1994, exercisable for 200,000 shares of the Registrant's Common Stock.
4.24 Specimen of Stock Subscription Warrant No. 17 issued to The
Prudential Insurance Company of America, as of November 1, 1994,
exercisable for 150,000 shares of the Registrant's Common Stock.
4.25 Specimen of Stock Subscription Warrant No. 18 issued to Warburg,
Pincus Investors, L.P., restated as of November 1, 1994, exercisable
for 687,358 shares of the Registrant's Common Stock.
4.26 Specimen of Stock Subscription Warrant No. 19 issued to Warburg,
Pincus Investors, L.P., as of November 1,1994, exercisable for 325,000
shares of the Registrant's Common Stock.
4.27 Amended Senior Note executed by the Registrant in favor of The
Prudential Insurance Company of America in the amount of $6,500,000,
dated as of November 1,1994.
4.28 Amended Senior Note executed by the Registrant in favor of The
Prudential Insurance Company of America in the amount of $3,500,000,
dated as of November 1,1994
4.29 Amended Payment-In-Kind Note executed by the Registrant in favor of
The Prudential Insurance Company of America in the amount of
$10,900,834.33, dated as of November 1, 1994.
25
Grubb & Ellis Company and Subsidiaries
EXHIBIT INDEX (continued) (A)
for the quarter ended September 30, 1994
----------------------------------------
EXHIBIT
4.30 Amended Revolving Credit Note executed by the Registrant in favor of
The Prudential Insurance Company of America in the amount of
$5,000,000, dated as of November 1, 1994.
10.15 Separation Agreement dated August 1, 1994 between the Registrant and
Gordon M. Hess.
10.19 Second Amendment to the Stockholders' Agreement dated November 1,
1994, among the Registrant, Warburg, Pincus Investors, L.P., The
Prudential Insurance Company of America, and Joe F. Hanauer.
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
(A) Exhibits incorporated by reference are listed in Item 6(a) of this report.
26