SCHEDULE 14A INFORMATION
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Section 240.14a-12
Grubb & Ellis Company
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Grubb & Ellis
Property Solutions Worldwide
2215 Sanders Road, Suite 400
Northbrook, IL 60062
October 9, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Grubb & Ellis Company (the "Company") to be held at 9:00 a.m. on November 20,
1997 in the Willow Room of the Northbrook Hilton Hotel, 2855 North Milwaukee
Avenue, Northbrook, Illinois.
For your consideration at the meeting are the election of ten directors to
the Company's Board of Directors, an amendment to the Company's Restated
Certificate of Incorporation, approval of an employee stock purchase plan and
approval of amendments to a stock option plan. The meeting will also provide an
opportunity to review with you the business of the Company during the 1997
fiscal year and give you a chance to meet your directors.
Your vote is important to the Company. Whether or not you plan to attend
the meeting, please return a completed proxy card in the enclosed envelope. If
you do attend the meeting and wish to vote in person, you may withdraw your
proxy and vote your shares personally.
We look forward to seeing you at the meeting.
Sincerely,
Neil Young
Chairman & Chief Executive Officer
GRUBB & ELLIS COMPANY
2215 Sanders Road, Suite 400
Northbrook, Illinois 60062
____________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1997
The Annual Meeting of Stockholders of Grubb & Ellis Company (the "Company")
will be held in the Willow Room of the Northbrook Hilton Hotel, 2855 North
Milwaukee Avenue, Northbrook, Illinois, on November 20, 1997 at 9:00 a.m. local
time, for the following purposes:
1. To elect ten (10) directors to the Board of Directors to serve for
one year and until their successors are elected and qualified;
2. To act upon an amendment to the Company's Restated Certificate of
Incorporation;
3. To act upon the Grubb & Ellis Employee Stock Purchase Plan;
4. To act upon amendments to the Company's 1990 Amended and Restated Stock
Option Plan; and
5. To transact such other business as may properly come before the meeting
and any adjournment or postponement thereof.
Stockholders of record at the close of business on September 24, 1997 will
receive this Notice and are entitled to vote at the Annual Meeting. PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Robert J. Walner
October 9, 1997 Corporate Secretary
GRUBB & ELLIS COMPANY
PROXY STATEMENT
SOLICITATION AND REVOCATION OF PROXIES
GENERAL INFORMATION
The Board of Directors (the "Board") of Grubb & Ellis Company (the
"Company") is soliciting your proxy for the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on Thursday, November 20, 1997.
Information in this proxy statement about the Company's directors or
executive officers is provided only for the periods during which they held such
positions.
RECORD DATE; VOTING RIGHTS
This proxy statement and the enclosed proxy card are being mailed on or
about October 9, 1997 to holders of record of the Company's common stock, $.01
par value per share (the "Common Stock"), at the close of business on September
24, 1997 (the "Record Date"). Holders of the Common Stock on the Record Date
are entitled to notice of and to vote at the Annual Meeting. On such date,
there were ______________ outstanding shares of Common Stock. Each stockholder
is entitled to one vote for each share of Common Stock held. The presence, in
person or by proxy, of a majority of the shares entitled to vote will constitute
a quorum.
PROXIES; REVOCATION OF PROXIES
When you have signed, dated and delivered the enclosed proxy card prior to
the date of the Annual Meeting, your shares will be voted by the persons named
as proxy holders according to your directions. If you return a properly signed
and dated proxy card but do not mark a choice on one or more items, your shares
will be voted in accordance with the recommendations of the Board as set forth
in this proxy statement. You may revoke your proxy at any time prior to voting
at the Annual Meeting by delivering written notice to the Secretary of the
Company, by submitting a subsequently dated proxy card or by attending the
meeting and voting by ballot before the polls are closed.
The Board is not aware of any matters to be presented at the Annual Meeting
other than the items set forth in the above Notice of Annual Meeting of
Stockholders. If any other matters are properly presented, the persons named to
act as proxy holders may vote on such matters in accordance with their
discretion.
The cost of the solicitation of proxies will be borne by the Company. The
Company has engaged Morrow & Co., Inc. to solicit proxies for a fee of
approximately $2,000 plus reasonable out-of-pocket expenses, estimated to be
approximately $3,000. Banks, brokers and other nominees will be reimbursed for
customary expenses incurred in connection with forwarding of the Company's proxy
solicitation materials to beneficial holders. In addition, proxies may be
solicited, without additional compensation, by directors, officers and other
regular employees of the Company by telephone, mail or in person.
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VOTING PROCEDURES AND REQUIRED VOTE
Shares represented by proxies that reflect abstentions, withheld authority
or "broker non-votes" (i.e., shares held by a broker or nominee which are
represented at the Annual Meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal or proposals) will be
counted as shares that are present and entitled to vote in order to determine
the presence of a quorum, but are not considered as votes "cast" for the purpose
of determining the outcome of a proposal.
The election of each nominee for director will require the affirmative vote
of a plurality of the shares of Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting. Cumulative voting for the election of
directors is not permitted. Unless authority to vote for any director is
withheld in the proxy, votes will be cast in favor of election of all of the
nominees.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting will be required to adopt
the proposed amendment to the Company's Certificate of Incorporation.
The affirmative vote of the holders of a majority of the shares of Common
Stock, present in person or by proxy and entitled to vote at the Annual Meeting,
is required to ratify the adoption of the Grubb & Ellis Employee Stock Purchase
Plan and to ratify the amendments to the 1990 Amended and Restated Stock Option
Plan.
1. ELECTION OF DIRECTORS
INFORMATION ABOUT THE BOARD
The Board of Directors currently consists of ten directors. C. Michael
Kojaian, Todd A. Williams and Sidney J. Lapidus were elected by the Board as
additional directors in December 1996, January 1997 and February 1997,
respectively. The Board held ten meetings during the fiscal year ended June 30,
1997. Each director attended at least 75% of the meetings of the Board and any
Board committees on which he served, except that John D. Santoleri attended 70%
of such meetings. The Board has standing Audit and Compensation Committees,
which are described below, and does not have a Nominating Committee.
AUDIT COMMITTEE. The Audit Committee recommends the appointment of
auditors to the Board; approves the scope of the annual audit; reviews the audit
results and compliance with the auditors' recommendations; reviews financial
reports to stockholders; monitors the Company's accounting and the effectiveness
of internal controls; and monitors compliance with certain aspects of the
Company's conflicts-of-interest policy. The current members of the Audit
Committee are R. David Anacker, Chairman, Lawrence S. Bacow and Robert J.
McLaughlin. The Audit Committee met four times during the 1997 fiscal year.
COMPENSATION COMMITTEE. The functions of the Compensation Committee are
the approval of compensation arrangements for the executive officers of the
Company; recommending to the Board the adoption of equity compensation plans, in
which directors and officers are eligible to participate and the award of equity
incentives; and administration of the unaffiliated directors' stock option plan.
The
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current members of the Compensation Committee are Reuben S. Leibowitz,
Chairman, and Lawrence S. Bacow. During the 1997 fiscal year, the Compensation
Committee met four times.
INFORMATION ABOUT THE NOMINEES FOR DIRECTOR
The names of the persons who have been nominated by the Board for election
as directors at the Annual Meeting are set forth below. There are no other
nominees. Nominations for director are made by written notice to the Secretary
of the Company, generally at least 14 days prior to the stockholders' meeting at
which directors are to be elected. All nominees have consented to serve as
directors if elected.
If any nominee becomes unable to serve as a director, the proxies will be
voted by the proxy holders for a substitute person nominated by the Board, and
authority to do so is included in the proxy. The Board has no reason to believe
that any of the nominees will be unable to serve as a director of the Company.
VOTING AGREEMENT. Pursuant to an agreement ("Voting Agreement") dated
January 24, 1997, entered into among Warburg, Pincus Investors, L.P.
("Warburg"); C. Michael Kojaian, a director of the Company, Mike Kojaian and
Kenneth J. Kojaian (collectively, the "Kojaian Investors"); and Archon Group,
L.P., a Delaware limited partnership ("Archon"), in connection with certain
financing transactions of the Company which were consummated in 1996 and 1997
(together, the "1997 Financing"), the parties agreed to vote all their shares
of Common Stock in favor of the election to the Board of one nominee
designated by a majority of the Kojaian Investors ("Kojaian Nominee"), one
nominee designated by Archon ("Archon Nominee"), and all nominees designated
by Warburg ("Warburg Nominees"). The Voting Agreement provides that the
Kojaian Nominee must be a Kojaian Investor or an officer or partner of a firm
affiliated with the Kojaian Investors; each Warburg Nominee must be an
officer of Warburg or one of its venture banking affiliates; and the Archon
Nominee must be an employee of Archon, Goldman, Sachs & Co., or an affiliate
of either firm. The right to designate nominees under the Voting Agreement
is conditioned upon beneficial ownership of the following minimum numbers of
shares of Common Stock: the Kojaian Investors or a controlled transferee
(1,250,000); Warburg (5,509,169); and Archon (1,250,000). With respect to
the 1997 election of directors, Sidney J. Lapidus, Reuben S. Leibowitz and
John D. Santoleri have been designated as Warburg Nominees, C. Michael
Kojaian has been designated as the Kojaian Nominee, and Todd A. Williams has
been designated as the Archon Nominee. See also "Security Ownership of
Certain Beneficial Owners and Management."
On December 9, 1996, in connection with the 1997 Financing, described
below under "Compensation Committee Interlocks and Insider Participation--
1997 Financing," Warburg agreed that Warburg representatives on the Board
would nominate Mr. Hanauer for election as a director of the Company at the
1997 and 1998 annual meetings of stockholders, and further agreed to vote all
of its shares of Common Stock in favor of Mr. Hanauer's election as a
director.
To the Company's knowledge, Warburg, the Kojaian Investors, Archon and all
of the directors and executive officers of the Company intend to vote all of
their shares of Common Stock in favor of all nominees for director. Together,
they have the power, without the vote of other stockholders, to elect all
nominees to the Board.
The term of office of each nominee who is elected extends until the annual
stockholders' meeting in 1998 and until his successor is elected and qualified.
NEIL YOUNG, 48, has served as President, Chief Executive Officer, and a
director of the Company since February 1996. He was elected Chairman of the
Board in April 1997. He has also served as a director and/or officer of certain
subsidiaries of the Company, including serving as a director of Grubb & Ellis
Management Services, Inc. ("GEMS"), the subsidiary engaged in property and
facilities management, formerly named Axiom Real Estate Management, Inc., since
September 1994, and as Executive Vice President since May 1997. Other positions
with the Company previously held include President of Commercial Brokerage
Operations (December 1995 to February 1996), President of the
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Eastern Region (March 1994 to December 1995), President of the Midwest/Texas
Region (January 1993 to January 1995), and Senior Vice President (January
1992 to February 1996). He served prior to 1993 as an Executive Vice
President, Regional Manager, District Manager and Sales Manager of the
commercial brokerage division in the Midwest Region. Mr. Young has been
with the Company since 1984.
R. DAVID ANACKER, 62, has been Vice Chairman of Veriflo Corporation, an
industrial equipment manufacturing firm located in Richmond, California, since
November 1991. From November 1959 to November 1991, he was associated with ABM
Industries, Inc. ("ABMI"), a property maintenance service firm located in San
Francisco, California, serving as director from 1979 and as President and Chief
Executive Officer from March 1984 through October 1991. He has also served as a
consultant to ABMI. He served as a director of GEMS from August 1992 to July
1994. Mr. Anacker has served as a director of the Company since May 1994.
LAWRENCE S. BACOW, 46, is a professor at the Massachusetts Institute of
Technology ("M.I.T.") Center for Real Estate and the M.I.T. Department of Urban
Studies and Planning. He served as Chairman of the M.I.T. Faculty from June
1995 through June 1997. He joined the M.I.T. Faculty in 1977 and the M.I.T.
Center for Real Estate in 1983, serving as the director of the Center for Real
Estate from 1990 until 1992. Professor Bacow is also a director of La Salle
Street Fund, a real estate investment trust. From December 1987 to June 1990,
he was also a principal of Artel Associates, a company which provided investment
banking services to real estate companies. Professor Bacow has served as a
director of the Company since January 1993.
JOE F. HANAUER, 60, has been a general partner of Combined Investments,
L.P., an investment management business located in Laguna Beach, California
whose investments include real estate, since December 1988. He served as
Chairman of the Board of the Company from January 1993 to April 1997, as
Executive Chairman from June 1994 to September 1994 and as Chief Executive
Officer from July 1994 to December 1995. Mr. Hanauer served as a director of
GEMS from June 1993 until April 1997, and served as a director and/or officer of
certain other subsidiaries of the Company from February 1993 to December 1995.
From February 1993 until July 1994, Mr. Hanauer, through Combined Investments,
L.P., also provided operational and management services to the Company. From
1977 to December 1988, Mr. Hanauer was associated with Coldwell Banker
Residential Group, Inc., serving as Chairman and Chief Executive Officer from
1984. He is also a director of MAF Bancorp, Real Select, Inc. and Regit, Inc.
Mr. Hanauer has served as a director of the Company since January 1993.
C. MICHAEL KOJAIAN, 35, the Kojaian Nominee, is President, a director and
a shareholder of the Kojaian Companies, a real estate investment firm
headquartered in Southfield, Michigan. He has also been a director, shareholder
and Executive Vice President and Treasurer of Kojaian Management Corporation, a
real estate investment and property management firm affiliated with the Kojaian
Companies, since January 1988. He is also a director of Flagstar Bancorp,
Inc. Mr. Kojaian was first elected as a director of the Company in December 1996
as a representative of the Kojaian Investors.
SIDNEY J. LAPIDUS, 59, a Warburg Nominee, is a Managing Director and member
of E.M. Warburg, Pincus & Co., LLC (and predecessor) ("Warburg Pincus"), a
venture banking firm located in New York City. Warburg Pincus manages Warburg,
the Company's principal stockholder. Mr. Lapidus is also a general partner of
Warburg, Pincus & Co. ("WP"), a firm which acts as general partner of Warburg.
Mr. Lapidus was first elected as a director of the Company in February 1997 as a
representative of Warburg.
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REUBEN S. LEIBOWITZ, 50, a Warburg Nominee, is a Managing Director and
member of Warburg Pincus, located in New York City. Mr. Leibowitz is also a
general partner of WP. He has been associated with Warburg Pincus since 1984.
He is also a director of Chelsea GCA Realty, Inc. and Pacific Greystone
Corporation. Mr. Leibowitz was first elected as a director of the Company in
January 1993 as a representative of Warburg.
ROBERT J. MCLAUGHLIN, 64, is President of The Sutter Group, a management
consulting firm located in Larkspur, California which he founded in 1982.
Mr. McLaughlin has served as a director of the Company since September 1994.
JOHN D. SANTOLERI, 34, a Warburg Nominee, has been a Managing Director
and member of Warburg Pincus, located in New York City, since January 1996,
and served as Vice President of Warburg Pincus from January 1995 to January
1996. He has also been a general partner of WP since January 1996. From
January 1992 to January 1995, Mr. Santoleri served as a Vice President of
Warburg Pincus Ventures, Inc., the venture banking subsidiary of Warburg
Pincus. He has been associated with Warburg Pincus since June 1989. From
June 1985 to June 1989, he was associated with The Harlan Company, a New
York-based real estate consulting firm, serving as Vice President from
September 1988 to June 1989. Mr. Santoleri also serves as a director of
Pacific Greystone Corporation. Mr. Santoleri was first elected as a director
of the Company in January 1993 as a representative of Warburg.
TODD A. WILLIAMS, 37, the Archon Nominee, has been Director of Portfolio
Management for Goldman, Sachs & Co. ("GS&Co."), an investment banking firm
located in New York City, since January 1993, and Vice President of GS&Co. since
May 1993. From June 1989 until January 1993, Mr. Williams served as an
associate of the Real Estate Investment Banking Group of GS&Co. He also has
served as a director of Archon, a real estate investment firm located in Irving,
Texas and a principal stockholder of the Company, since September 1996. In
addition, he has served as Vice President, Assistant Treasurer and Assistant
Secretary of Archon Gen-Par, Inc., the general partner of Archon, since
September 1996. In addition to his role with Archon, Mr. Williams also serves on
the Investment Committee of the Whitehall Street Real Estate Funds, a series of
commingled funds sponsored by GS&Co. Mr. Williams was elected as a director of
the Company in January 1997 as a representative of Archon.
INFORMATION CONCERNING EXECUTIVE OFFICERS
In addition to Mr. Young, the following are executive officers of the
Company:
DOUGLAS P. FRYE, 37, has served as President, Institutional Services of the
Company since July 1997. From March 1995 to July 1997 he served as Director of
the Institutional Services Group. He served as an investment broker in the
Rosemont, Illinois commercial office of the Company from April 1991 to March
1995. From February 1989 to April 1991, he served as Vice President of
Acquisitions for The Shidler Group, a real estate services firm located in
Chicago, Illinois. From September 1984 to February 1989, he served as
Investment Specialist in the Chicago commercial brokerage office of the Company.
MICHAEL P. MCKIERNAN, 42, has served as President, Transaction Services for
the Central Region of the Company, since July 1997. From October 1996 to July
1997, he served as President of the Eastern Region of the commercial brokerage
division of the Company. Mr. McKiernan joined the Company in January 1989,
serving as Sales Manager of the Rosemont, Illinois commercial office from
January 1993
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to October 1996, and as a broker prior to that time. He also serves as an
officer of certain subsidiaries of the Company.
DONALD D. MORROW, 49, has served as President, Transaction Services for the
Western Region (and predecessor division) of the Company since October 1996. He
also serves as an officer of certain subsidiaries of the Company. Mr. Morrow
has been associated with the Company since May 1977, serving as Sales Manager of
the Phoenix commercial office of the Company from June 1994 to October 1996, as
District Manager of the San Diego commercial office from June 1990 to June
1994, and as an investment broker in the Phoenix commercial office prior to that
time. He also served as director of the National Investment Council of the
Company from August 1994 to October 1996.
JOHN G. ORRICO, 41, has served as President, Transaction Services for the
Eastern Region of the Company since July 1997. From July 1994 through June
1997, he served as Senior Vice President and District Manager of the central and
northern New Jersey commercial offices of the Company. From May 1990 through
May 1994, Mr. Orrico served as President of the Commercial Real Estate Division
of K. Hovnanian Investment Properties, Inc., a real estate development firm
located in Red Bank, New Jersey, and from September 1982 to May 1990 he served
as Executive Vice President of National Realty & Development Corp., a real
estate development firm located in Purchase, New York.
BRIAN D. PARKER, 46, has been Senior Vice President and Chief Financial
Officer of the Company since October 1996. He also serves as a director and/or
officer of certain subsidiaries of the Company. From March 1986 to October
1996, Mr. Parker was associated with The Balcor Company, the real estate
subsidiary of American Express Company, serving as Chief Financial Officer and
Senior Vice President from April 1995 to October 1996, and serving in various
other financial management positions prior to that time. During his association
with The Balcor Company, he also served as director of several of its
subsidiaries.
STEVEN F. POPE, 48, has been a Senior Vice President of the Company since
June 1994. He has also served as President of Grubb & Ellis Affiliates, Inc.,
the Company subsidiary which promotes the affiliation of real estate brokerage
firms with the Company, since December 1996. He was associated with the
Commercial Investment Real Estate Institute, a real estate professional society
and training firm located in Chicago, Illinois, serving as Executive Vice
President from November 1984 to June 1994.
STEVEN D. SCRUGGS, 51, has been President of the Corporate and
Institutional Services Group of the Company since October 1996. From
January 1989 to October 1996, he was associated with Jones Lang Wootton USA
("JLW"), a multi-national real estate services firm located in New York City,
serving as Managing Director and Chairman of the Corporate and Advisory Services
division of JLW from April 1994 to October 1996. He also served as President
of JLW Capital Corp., a broker-dealer subsidiary of JLW, from March 1992 to
October 1996. From October 1985 to December 1988, Mr. Scruggs served as Senior
Vice President of the consulting division of the Edward S. Gordon Company, Inc.,
a real estate services firm located in New York City. From August 1981 to
October 1985, he served as Vice President of La Salle Partners, Inc., a real
estate services firm located in New York City.
ROBERT J. WALNER, 50, has been Senior Vice President, General Counsel and
Corporate Secretary of the Company since January 1994. He also serves as a
director and/or officer of certain subsidiaries of the Company, including
serving as a director of GEMS since May 1997 and as Vice President of GEMS since
January 1996. From August 1992 to January 1994, Mr. Walner was engaged in a
private law and consulting practice, and was of counsel to Lawrence Walner &
Associates, Ltd. in Chicago, Illinois, a law firm specializing in state and
federal class action litigation on a national basis. From November 1979 to
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August 1992, he was Senior Vice President, General Counsel and Corporate
Secretary of The Balcor Company, the real estate subsidiary of American Express
Company.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF
ALL NOMINEES TO THE BOARD OF DIRECTORS.
2. APPROVAL OF AN AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION
THE PROPOSAL
At the Annual Meeting a vote will be taken on a proposal to authorize an
amendment (the "Amendment") to the Company's Restated Certificate of
Incorporation (the "Charter") to increase the number of shares authorized for
issuance thereunder from 25 million authorized shares of Common Stock to 50
million authorized shares of Common Stock, and to eliminate the existing
designation of preferences on the authorized Preferred Stock, $.01 par value
(the "Preferred Stock").
Preemptive rights will not attach to any of the newly authorized shares of
Common Stock following approval of this proposal.
The text of the proposed Amendment, which restates Article IV of the
Charter, is as follows:
The total number of shares of capital stock which the Corporation
shall have authority to issue is fifty-one million (51,000,000)
shares, of which fifty million (50,000,000) shares with a par value of
$0.01 per share shall be designated Common Stock, and of which one
million (1,000,000) shares with a par value of $0.01 per share shall
be designated Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly vested with
authority to fix by resolution or resolutions the designations and the
powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof (including, without limitation, the voting powers, if any, the
dividend rate, conversion rights, redemption price, or liquidation
preference), of any wholly unissued series of Preferred Stock, to fix
the number of shares constituting any such series, and to increase or
decrease the number of shares of any such series (but not below the
number of shares thereof then outstanding). In case the number of
shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status which they had
prior to the adoption of the resolution or resolutions originally
fixing the number of shares of such series.
7
BACKGROUND FOR THE PROPOSAL
INCREASE IN AUTHORIZED COMMON STOCK
The authorized capital of the Company currently consists of 25 million
shares of Common Stock and one million shares of Preferred Stock. At the
close of business on September 30, 1997, there were ________________
outstanding shares of Common Stock and no outstanding shares of Preferred
Stock. In addition to its outstanding shares, at such date, the Company had
reserved 1,685,899 shares of Common Stock for issuance upon exercise of
outstanding warrants, ______________ shares of Common Stock for issuance upon
exercise of options granted under its stock option plans, and 135,762 shares
for issuance under the Company's 401(k) plan. The Company has submitted for
stockholder ratification at the Annual Meeting a new employee stock purchase
plan under which 750,000 shares of Common Stock are to be authorized for
purchase, and amendments to a stock option plan increasing its authorized
shares by 500,000 shares. As a result, assuming approval of such proposals,
the Company currently has available for issuance, on a fully-diluted basis,
approximately only ______________ shares of authorized Common Stock. The
Company has not increased the number of shares of authorized capital stock
since 1986.
The Board believes that the current authorized number of common shares is
inadequate for the Company's purposes. The Board believes that it would be
advantageous for the Company to have an increased number of common shares
available in order to raise additional working capital from time to time, to
enhance the Company's ability to attract and retain high-quality employees of
the Company who are in a position to contribute to its success by the issuance
of equity incentives to such employees, and to support the Company's ability to
consummate potential future acquisitions by the use of Common Stock as
consideration for the acquisitions. Other than as set forth above regarding
employee plans, the Board has no present plan or agreement to issue additional
common shares for a specific purpose.
ELIMINATION OF PREFERENCES ON PREFERRED STOCK
In 1993, the Company issued Preferred Stock to Warburg, Mr. Hanauer, and
The Prudential Insurance Company of America, in connection with certain
financing transactions entered into with the Company (the "1993 Financing").
The Charter was amended following stockholder approval of the 1993 Financing to
provide for the designation of preferences on the Preferred Stock issued at that
time. Prior to the 1993 amendment, the Board was authorized to designate
preferences, rights and other features of the Preferred Stock issued from time
to time.
In connection with the 1997 Financing, all outstanding shares of Preferred
Stock were retired following their conversion to Common Stock or acquisition by
the Company. The Board believes that it is in the best interests of the Company
and its stockholders to eliminate the existing designation of preferences in the
Charter and restore the Board's authority to designate the preferences, rights
and other features of any Preferred Stock to be issued in the future. At the
date of this proxy statement, the Board does not anticipate, and has no plans
to, issue any Preferred Stock. Eliminating the existing preferences will
maximize the Board's flexibility in the issuance of Preferred Stock should such
issuance be advantageous for the Company.
POTENTIAL DILUTION; OTHER EFFECTS
There are certain potential adverse effects which may result from
increasing the Company's authorized capital as proposed.
8
The issuance of additional shares of Common Stock would result in dilution
of the voting power of the existing stockholders.
Once the Company's authorized capital is increased, the Company's
stockholders will have a very limited ability to vote upon either the manner in
which the additional shares of Common Stock are issued or sold, or to whom those
shares are sold or exchanged, unless stockholder consent is required under
Delaware law (e.g., certain merger transactions) or other regulatory
requirements, or sought by the Board at its discretion.
While the proposed Amendment is not intended to deter or prevent a change
in control of the Company, having a large pool of Common Stock available for
issuance at the discretion of the Board following approval of the Amendment
may render more difficult or discourage (i) an attempt to take control of the
Company through a merger, tender offer, proxy contest or other means, (ii) the
assumption of control by a new holder of a large block of the Company's shares,
or (iii) the removal of incumbent management. The Board's actual or threatened
issuance of large blocks of Common Stock to the Board, its affiliates or
persons "friendly" to the Board could defeat such efforts.
These factors should be considered by the stockholders in voting on the
proposed Amendment.
EFFECTIVE DATE OF THE AMENDMENT
If the Amendment is approved by the stockholders at the Annual Meeting, it
will be promptly filed with the Delaware Secretary of State and will become
effective as of the date of filing.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE CHARTER.
3. RATIFICATION OF THE GRUBB & ELLIS EMPLOYEE
STOCK PURCHASE PLAN
THE PROPOSAL
A new Grubb & Ellis Employee Stock Purchase Plan (the "Stock Plan") was
adopted by the Board of Directors, subject to stockholder approval, on June 20,
1997. The Stock Plan provides for the purchase of up to 750,000 shares of the
Common Stock ("Shares"), by employees of the Company at a discount from market
price. The Stock Plan provides for payments for the stock to be made through
direct payroll deductions.
BACKGROUND FOR THE PROPOSAL
The Company sponsored an employee stock purchase plan from 1987 until June
30, 1997, when the plan expired. Approximately 550,000 shares were purchased
under the plan. The Board believes that having an employee stock purchase plan
is an important element in attracting and retaining high-quality employees for
the Company. Having such a plan is also a significant way to motivate employees
to perform in the best interests of the Company and its stockholders, because it
aligns employees' interests with those of the stockholders and gives employees a
stake in the success of the Company.
9
DESCRIPTION OF THE STOCK PLAN
The following summary of the Stock Plan is qualified in its entirety by the
complete text of the plan, copies of which have been filed with the Securities
and Exchange Commission and which may also be obtained from the Company by any
stockholder.
All regular employees of the Company and its subsidiaries who work at least
20 hours per week are eligible to participate in the Stock Plan. The Stock Plan
is intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code").
The Stock Plan is administered by the Benefits Committee of the Company
(the "Committee"), which is composed of members of management. The Stock Plan
is implemented by sequential offering periods of three months' duration (each of
which is referred to herein as an "Offering Period"), commencing on the first
day of each of the Company's fiscal quarters; except that the first Offering
Period commenced August 1, 1997 and will extend until December 31, 1997. If the
Stock Plan is not ratified, the employees' contributions to the purchase of
stock will be refunded, and no stock will be purchased on December 31, 1997.
At the beginning of each Offering Period, employees may elect to
participate in the Stock Plan by authorizing payments of up to 15% of their base
pay and commissions. An employee may withdraw from participation at any time.
Withdrawal during an Offering Period is effected by giving notice to the
Company by the 15th day of the last month of such Offering Period. No employee
is entitled to purchase in any year shares of Common Stock having a value of
more than $25,000, and no employee may purchase Shares under the Stock Plan if,
after giving effect to such purchase, such employee would own 5% or more of the
outstanding Common Stock. Shares will be purchased automatically on the last
day of each Offering Period, at 85% of the lower of the fair market value of
such Shares at the first day or the last day of each Offering Period. The fair
market value, as defined in the Stock Plan, is the average of the closing prices
of the Company's Common Stock on the New York Stock Exchange Composite Tape for
the five preceding trading days.
In the event that any right to purchase Shares outstanding under the Stock
Plan expires or is terminated for any reason, the Shares allocated for purchase
under such right will return to the pool of Shares available for purchase under
the Stock Plan. Termination of a participant's employment for any reason,
including retirement, death or disability, terminates the participant's
participation in the Stock Plan. In such event, or in the event that a
participant withdraws from the Stock Plan, the payments credited to the
participant's account will be returned to the participant (or the participant's
personal representative), and the participant's rights under the Stock Plan will
terminate.
The Stock Plan will continue until all shares allocated for the plan have
been issued, or until the earlier termination by the Board. The Board may
amend the Stock Plan, except that any amendment which would a) change the number
of Shares issuable under the plan, b) change the designation of corporations
whose employees may be offered participation in the Stock Plan, or c) change the
plan in a way to disqualify it under Section 423(b) of the Code, must be
approved by stockholders.
ADJUSTMENTS TO THE SHARES SUBJECT TO THE STOCK PLAN
If any change is made in the Common Stock (through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination of
shares, exchange of shares, change in corporate
10
structure or otherwise), appropriate adjustments will be made as to the
maximum number of Shares subject to the Stock Plan and the number of Shares
and price per Share to be purchased at the end of the Offering Period then in
effect.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK PLAN
The Stock Plan is neither a qualified pension, profit sharing or stock
bonus plan under Section 401(a) of the Code, nor an "employee benefit plan"
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended. The following summary is for general information only and is
limited to a discussion of federal income tax consequences of participation in
the Stock Plan as described, based upon the Code, regulations thereunder,
rulings and decisions now in effect, all of which are subject to change. The
summary does not discuss all aspects of income taxation that may be relevant to
a particular participant in light of his or her personal circumstances.
No taxable income results to a participant at the time of the "grant of a
plan option" (the beginning of an Offering Period in which an employee is
participating in the Stock Plan) or at the time of purchase of the Shares at the
end of the Offering Period (the "date of exercise"). If the Shares purchased
are not sold during the prescribed holding period (two years from the date of
grant and one year from the date of exercise), the lesser of (1) the excess of
the fair market value of the Shares at the time of sale over the purchase price
or (2) the excess of the fair market value of the Shares at the time the plan
option was granted over the purchase price will be reportable as ordinary income
in the year of sale. This amount of ordinary income is to be added to a
participant's purchase price for the purpose of determining any additional
long-term capital gain on sale. No capital loss will be realized unless the
stock is sold for less than the purchase price. There will be no corresponding
tax deduction to the Company.
If the Shares are sold before the end of the prescribed holding period (a
"disqualifying disposition"), the employee must report as ordinary income in the
year of sale, and the Company may deduct as a business expense, the excess of
the fair market value of the Shares on the date of exercise over the option
price. This amount of ordinary income is to be added to a participant's
purchase price for the purpose of determining any additional capital gain or
loss. The gain or loss will be short-term or long-term, depending on whether
the twelve-month holding period for long-term capital gain or loss is satisfied.
Upon a disqualifying disposition, it is possible for an employee to have both
ordinary income and capital loss. The Code differentiates between ordinary
income tax rates and the tax rates on capital gains and losses.
OTHER INFORMATION
As of August 12, 1997, approximately 2,900 employees, including all of the
Company's executive officers, were eligible to participate in the Stock Plan,
and 214 employees signed up to participate. Non-employee directors may not
participate in the Stock Plan. Three executive officers have elected to
participate in the Stock Plan commencing with the first Offering Period,
including Mr. Walner. Because the price of the shares to be purchased will not
be established until the end of the Offering Period, and because benefits to be
received depend upon employees' decisions to participate throughout the Offering
Periods, the benefits to be received under the Stock Plan by the foregoing
persons is not determinable at the date of this proxy statement. The closing
market price of the Common Stock on the New York Stock Exchange Composite Tape
on September 30, 1997 was $_______ per share.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF
THE
11
GRUBB & ELLIS EMPLOYEE STOCK PURCHASE PLAN.
4. RATIFICATION OF AMENDMENTS TO THE 1990 AMENDED AND RESTATED
STOCK OPTION PLAN
THE PROPOSAL
The Board has approved and is recommending that stockholders ratify two
amendments to the Company's 1990 Amended and Restated Stock Option Plan (the
"Plan") which would increase the number of shares of Common Stock authorized for
the grant of options.
The amendments to the Plan increase the authorized shares of Common Stock
for issuance under the Plan from 1,500,000 to 2,000,000 shares. The Board
approved one amendment effective February 1, 1997 increasing the authorized
shares for the Plan by 300,000 shares, and the second amendment, effective
June 20, 1997, increasing such shares by an additional 200,000 shares (the
"Amendments").
BACKGROUND FOR THE PROPOSAL
The Board believes that stock options provide an important incentive in
attracting and retaining key employees and associates of the Company. Under the
Plan, as of August 12, 1997, options to purchase 42,106 shares had been
exercised, and, subject to stockholder ratification of the Amendments, there
were outstanding options to purchase 1,794,820 shares and 163,074 shares
remained available for the grant of options. The Board believes that the
recipients of options granted under the Plan which are subject to stockholder
ratification of the Amendments are individuals in positions to make significant
contributions to the Company. In addition, the Company believes that the
balance of shares available for the Plan will be an important recruitment tool
for the Company.
DESCRIPTION OF THE PLAN
The following summary of the Plan and the Amendments is qualified in its
entirety by the complete text of the Plan and Amendments, copies of which have
been filed with the Securities and Exchange Commission and which may also be
obtained from the Company by any stockholder.
Under the Plan, "incentive stock options," as defined in the Code, or
non-qualified options, which do not qualify for treatment as incentive stock
options, may be granted to key employees, including executive officers, and
non-management directors who are not members of the Compensation Committee.
The Plan provides that the Company may extend eligibility to independent
contractors associated with the Company who are not directors under certain
conditions, but the Company has not yet done so. The Plan is administered by
the Board, which can delegate administration to a committee of the Board but
has not done so. The Board is authorized, among other powers, to determine
the persons to whom options will be granted, the number of option shares to
be granted, and the exercise price, term and vesting requirements of options,
subject to the terms of the Plan. Each option has a term no longer than ten
years from the date of grant, except that no incentive stock option granted
to an optionee who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company ("Ten-Percent Holder") at
the date of grant may be exercisable more than five years after the date of
grant. The exercise price of each incentive stock option granted must be
100%, and of each non-qualified option may be from
12
50% to 100%, of the fair market value per share of the Common Stock on the
date of grant, as set by the Board, subject to the requirement that the
exercise price of incentive stock options granted to a Ten-Percent Holder
must not be less than 110% of the fair market value per share at the date of
grant. The aggregate exercise price is payable in cash, by delivery of
Common Stock, or by a combination of both. Vesting accelerates upon certain
conditions related to changes of control of the Company or at the discretion
of the Board. No incentive stock options may be granted after May 16, 2000
under the Plan. No option granted under the Plan may be assigned or
transferred by the optionee except upon death. During the lifetime of the
optionee, the option may be exercised only by him or her. The Plan will
terminate upon issuance of all shares reserved for the Plan or earlier upon
termination by the Board.
ADJUSTMENTS TO THE SHARES SUBJECT TO THE PLAN
The Plan provides for appropriate adjustments in the number and kind of
shares subject to the Plan and to outstanding options in the event of a stock
split, stock dividend or certain other types of recapitalizations.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The Plan is neither a qualified pension, profit sharing or stock bonus plan
under Section 401(a) of the Code, nor an "employee benefit plan" subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
The following summary is for general information only and is limited to a
discussion of federal income tax consequences of the grant, and exercise by cash
payment, of options granted under the Plan and the sale of shares upon option
exercise, based upon the Code, regulations thereunder, rulings and decisions now
in effect, all of which are subject to change. The summary does not discuss all
aspects of income taxation that may be relevant to a particular participant in
light of his or her personal circumstances.
INCENTIVE STOCK OPTIONS. There is no taxable event to either the Company
or the optionee at the date of grant or exercise of an incentive stock option;
however, the amount by which the fair market value of the shares at the time of
exercise exceeds the option price will be an "item of tax preference" for the
optionee for purposes of alternative minimum tax. The amount realized by an
optionee upon the sale of stock issued on exercise of an incentive stock option
over the aggregate exercise price of the shares is taxable as long-term capital
gain, and no deduction is available to the Company, provided that the sale
occurs at least two years from the date of grant and at least one year from the
date of exercise of the option ("Holding Period"). If an optionee sells the
shares acquired through exercise of the option prior to the end of the Holding
Period, ("disqualifying disposition"), then the optionee will recognize ordinary
income to the extent that the lower of the fair market value of the shares at
the date of exercise or the sales price exceeds the exercise price, and the
Company has a corresponding tax deduction. The Company will be required to
withhold taxes on such ordinary income realized by an optionee who is an
employee in order to be entitled to the tax deduction. Any additional gain
realized upon sale would be taxable as capital gain.
NON-QUALIFIED STOCK OPTIONS. With respect to non-qualified options, there
is no taxable event to either the Company or the optionee at the date of grant.
Upon exercise of an option under the Plan, the optionee will realize ordinary
income based upon the difference between the fair market value of the underlying
Common Stock at the date of exercise and the exercise price, and the Company
will have a corresponding tax deduction. The Company will be required to
withhold taxes on the ordinary income realized by an optionee who is an employee
upon exercise of non-qualified stock options in order to be entitled to a
deduction. An optionee's basis for the stock for purposes of determining his
gain or loss on
13
the subsequent disposition of the shares generally will be the fair market
value of the underlying Common Stock on the date of the exercise of the
option. Such gain or loss upon sale will be treated as short- or long-term
capital gain or loss depending upon the holding period.
The Code differentiates between ordinary income tax rates and the tax rates
on capital gains and losses.
OTHER INFORMATION
Approximately 100 persons would be considered "key employees," including
all of the executive officers of the Company, and therefore eligible for the
grant of options under the Plan, along with seven eligible non-employee
directors. The closing market price of the Common Stock on the New York Stock
Exchange Composite Tape on September 30, 1997 was $__________ per share.
NEW PLAN BENEFITS TABLE
The following table shows the determinable benefits that will be received
by each of the designated persons or groups under the Plan if the proposed
Amendments to the Plan set forth in this proxy statement are approved.
NEW PLAN BENEFITS
1990 AMENDED AND RESTATED STOCK OPTION PLAN
-------------------------------------------
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF UNITS
- ------------------------------------------------ ------------------ ---------------
Neil Young
Chairman and Chief Executive Officer $ -- 0
Michael McKiernan
President, Transaction Services, Central Region -- 0
Donald D. Morrow
President, Transaction Services, Western Region -- 0
Steven Scruggs
President, Corporate and Institutional Services -- 0
Robert J. Walner
Senior Vice President, General Counsel
and Corporate Secretary -- 0
Executive Group $________ 50,000(2)
Non-Executive Director Group -- --
Non-Executive Officer Employee Group $________ 296,546(3)
- -----------------------
(1) Based on the closing price per share of the Common Stock on
September 30, 1997 of $__________ per share.
(2) On June 20, 1997, an executive officer was granted an option to purchase
50,000 shares of Common Stock at an exercise price of $13.50 per share,
subject to stockholder ratification of the Amendments. The exercise price
represents fair market value of the Common Stock at the date of grant. The
option vests in five, equal, annual installments and expires in eight years
from the date of grant.
14
(3) Options to purchase 325,000 shares of Common Stock were granted to
non-executive employees of the Company during 1997, of which options to
purchase 296,546 shares are subject to stockholder ratification of the
Amendments, due to exhaustion of the previously authorized shares for the
Plan. The dates of grant and exercise prices of the options are as
follows: February 12, 1997 - 100,000 shares at $6.50 per share;
June 20, 1997 - 185,000 shares at $13.50 per share;
June 30, 1997 - 15,000 shares at $15.25 per share; and July 7,
1997 - 25,000 shares at $16.438 per share. The exercise price of each
option granted represents fair market value of the Common Stock at the
date of grant. Each option vests in five, equal, annual installments and
expires eight years from the date of grant, except that options to purchase
15,000 shares granted on June 20, 1997 vest in three, equal annual
installments and expire five years from the date of grant.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENTS TO THE 1990 AMENDED AND RESTATED STOCK OPTION PLAN.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information as of August 12, 1997,
concerning beneficial ownership of Common Stock by known beneficial holders of
more than 5% of the outstanding Common Stock, directors, named executive
officers, and all current directors and executive officers as a group. Unless
otherwise noted, the listed persons have sole voting and dispositive powers with
respect to the shares held in their names, subject to community property laws if
applicable.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
---------------------- --------------------
Warburg, Pincus Investors, L.P.
466 Lexington Avenue 10,443,339(2)(7) 50.1%
New York, NY 10017
Archon Group, L.P. 2,505,200(3) 12.8 %
600 Las Colinas Blvd., Suite 1980
Irving, TX 75039
Neil Young 141,798(4) *
R. David Anacker 18,000(4) *
Lawrence S. Bacow 10,800(4)(5) *
Joe F. Hanauer 974,040(4)(5)(6)(7) 4.9%
C. Michael Kojaian 883,333(8) 4.5%
Sidney J. Lapidus 0(2) --
Reuben S. Leibowitz 0(2) --
Michael P. McKiernan 11,533(4) *
Robert J. McLaughlin 13,000(4) *
Donald D. Morrow 11,636(4) *
John D. Santoleri 0(2) --
Steven D. Scruggs 1,000(5) *
Robert J. Walner 85,819(4)(5) *
Todd A. Williams 0(3) *
All current directors and executive
officers as a group (18 persons) 3,868,487 (4)(5) 19.1%
*Does not exceed 1.0%.
- -------------------------
(1) Percentages total more than 100% due to the requirement to count derivative
securities for certain purposes. The percentage of shares of Common Stock
beneficially owned by each designated person assumes that no other person
exercises currently outstanding warrants, options or convertible securities.
(2) At August 12, 1997, Warburg beneficially owned 10,443,339 shares of Common
Stock through its ownership of (i) 9,105,981 shares of Common Stock, and
(ii) currently exercisable warrants to purchase an aggregate of 1,337,358
shares of Common Stock. The sole general partner of Warburg is Warburg,
Pincus & Co., a New York general partnership ("WP"). E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company whose members are
substantially the same as the general partners of WP ("Warburg Pincus"),
manages Warburg. Lionel I. Pincus is the managing
16
partner of WP and the managing member of Warburg Pincus and may be deemed
to control both of them. WP, as the sole general partner of Warburg, has
a 20% interest in the profits of Warburg. Each of Messrs. Lapidus,
Leibowitz and Santoleri, directors of the Company, is a Managing Director
and member of Warburg Pincus and a general partner of WP. As such, they
may each be deemed to have an indirect pecuniary interest (within the
meaning of Rule 16a-1 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) in an indeterminate portion of the shares
of Common Stock beneficially owned by Warburg and WP. Messrs. Lapidus,
Leibowitz and Santoleri disclaim beneficial ownership in these shares.
(3) Shares reported for Archon include 5,200 shares of Common Stock held by
GS&Co. The Goldman Sachs Group, L.P. ("GS Group") is a general partner of,
and owns a 99% interest in, GS&Co. GS Group also owns a 94% interest in
Archon. The general partner of Archon is Archon Gen Par, Inc. ("AGP"),
which is a wholly owned subsidiary of GS Group. Mr. Williams, an officer
of GS&Co., an officer of AGP, and a director of Archon, disclaims
beneficial ownership of shares of Common Stock beneficially owned by Archon.
5,000 shares of Common Stock held in discretionary client accounts by GS&Co.
are excluded.
(4) Includes options under the Company's stock option plans which are currently
or by October 11, 1997 will be exercisable for the following numbers of
shares: Mr. Young -128,000; Mr. Hanauer - 203,567; Mr. Anacker - 10,000;
Professor Bacow - 10,000; Mr. McKiernan - 10,700; Mr. McLaughlin - 10,000;
Mr. Morrow - 10,700; Mr. Walner - 36,000; and all current directors and
executive officers as a group - 436,967.
(5) Includes 1,000 shares held by an immediate family member of Mr. Scruggs.
Includes shares held in trust for the benefit of immediate family members as
follows: Professor Bacow - 800; Mr. Hanauer - 407,435;
Mr. Walner - 35,000.
(6) At August 12, 1997, Mr. Hanauer beneficially owned 974,040 shares of Common
Stock, through his direct ownership of 14,497 shares of Common Stock and an
option granted under a Company stock option plan which is exercisable for
203,567 shares; and through his ownership of the following securities held
in a trust of which Mr. Hanauer is the trustee and he, his wife and children
are beneficiaries: (i) 407,435 shares of Common Stock and (ii) currently
exercisable warrants to purchase an aggregate of 348,541 shares of Common
Stock.
(7) Pursuant to the rules promulgated under the Exchange Act, Warburg and
Mr. Hanauer may be deemed to be a "group," as defined in Section 13(d)
of such Act. Warburg and Mr. Hanauer do not affirm the existence of such a
group and disclaim beneficial ownership of shares of Common stock
beneficially owned by any other party.
(8) C. Michael Kojaian's stock ownership includes 50,000 shares of Common Stock
owned jointly by himself, Mike Kojaian - his father, and Kenneth J. Kojaian-
his brother (together, the "Kojaian Investors"). Mike Kojaian also owns
833,334 shares of Common Stock, and Kenneth J. Kojaian owns 833,333 shares
of Common stock. Mike Kojaian is the President and Kenneth J. Kojaian is
the Executive Vice President and Secretary of Kojaian Management
Corporation. Pursuant to the rules promulgated under the Exchange Act, the
Kojaian Investors may be deemed to be a "group," as defined in Section 13(d)
of such Act. Each Kojaian Investor does not affirm the existence of such a
group and disclaims beneficial ownership of shares of Common Stock solely
owned by any other party.
17
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers, chief accounting officer and persons who beneficially own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission and the New York Stock
Exchange reports of ownership and changes in ownership of Common Stock and other
equity securities of the Company. Such persons are required to furnish the
Company with copies of all such forms they file. To the Company's knowledge,
based solely upon review of copies of such reports furnished to the Company and
written representations that no other reports were required, during the year
ended June 30, 1997, such persons complied with all Section 16(a) filing
requirements applicable to them, except that Mr. Young filed a late Form 5 to
report one transaction not filed on a Form 4.
18
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for all persons who served as Chief
Executive Officer in the 1997 fiscal year and for each of the other four most
highly-compensated executive officers of the Company as of June 30, 1997,
compensation earned, including deferred compensation, for services in all
capacities with the Company and its subsidiaries for the fiscal years ended
June 30, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
UNDERLYING ALL OTHER
NAME AND SALARY BONUS OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#)(1) ($)
- ------------------ ---- ------- ------- ------------ ------------
Neil Young 1997 400,000 400,000 0 _____(3)
President and Chief Executive Officer(2) 1996 260,000 0 500,000 _____ (3)
1995 171,000 17,000 40,000 _____(3)
Michael P. McKiernan 1997 177,000 130,000 50,000 _____ (3)
President, Transaction Services, Central Region(4) 1996 52,000 229,000 0 _____(3)
1995 45,000 124,000 1,750 _____(3)
Donald D. Morrow 1997 163,000 92,000 50,000 _____(3)
President, Transaction Services, West. Region(5) 1996 54,000 172,000 0 _____(3)
1995 101,000 37,000 1,750 _____(3)
Steven D. Scruggs 1997 146,000 83,000 100,000 100,000(6)
President, Corporate & Institutional Services(6) 1996 -- -- -- --
1995 -- -- -- --
Robert J. Walner 1997 159,000 78,000 40,000 _____(3)
Senior Vice President, General Counsel 1996 140,000 50,000 0 _____(3)
and Corporate Secretary 1995 140,000 50,000 40,000 _____(3)
- ----------------------
(1) The amounts represent options to purchase the designated numbers of shares
of Common Stock.
(2) Mr. Young was appointed President and Chief Executive Officer in February
1996 and was elected Chairman of the Board in April 1997. He served as
President of Commercial Brokerage Operations of the Company from December
1995 to February 1996, and prior to that time as Senior Vice President and
President of the Eastern Region of the Company.
(3) Represents Company contributions to the 401(k) plan accounts of the
designated individuals.
19
(4) Mr. McKiernan was appointed President, Transaction Services, Central
Region, in July 1997. From October 1996 to July 1997 he served as President
of the Eastern Region of the commercial brokerage division of the Company.
Prior to that time, he served as Sales Manager of a branch office of the
Company.
(5) Mr. Morrow has served as President, Transaction Services, Western Region
(and predecessor division) of the Company since October 1996. Prior to that
time, he served as Sales Manager of a branch office of the Company.
(6) Mr. Scruggs became employed with the Company in October 1996. "All Other
Compensation" refers to a signing bonus he received when hired.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
- ----------------------------------------------------------------------------- ------------------------------
NUMBER OF PERCENT
SECURITIES OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE
GRANTED(2) EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)
- ------------------- ----------- ------------- -------- -------------- ---------- ---------
Neil Young 0 -- -- -- -- --
Michael P. McKiernan(3) 50,000 6.25% $4.00 Oct. 9, 2004 $ 95,491 $228,718
Donald D. Morrow(3) 50,000 6.25% $4.00 Oct. 9, 2004 $ 95,491 $228,718
Steven D. Scruggs(3) 100,000 12.50% $4.25 Oct. 20, 2004 $ 202,919 $486,025
Robert J. Walner (3) 40,000 5.00% $3.375 July 25, 2004 $ 64,456 $154,384
- -----------------
(1) The potential realizable value is calculated from the market price per
share on the date of grant, assuming the Common Stock appreciates in value
at the stated percentage rate from the date of grant of an option to the
expiration date. The exercise prices of the options set forth in the table
were equal to the market prices on the dates of grant. Actual gains, if
any, are dependent on the future market price of the Common Stock. The
closing market price of the Common Stock on the New York Stock Exchange
Composite Tape on September 30, 1997 was $__________ per share.
(2) The amounts represent options to purchase the designated numbers of shares
of Common Stock granted, at exercise prices based upon the fair market
value on the dates of grant, under the Plan. Each of the options vests in
five equal, annual installments from the dates of grant, and expires eight
years from the date of grant. Vesting accelerates upon certain conditions
related to changes of control of the Company or at the discretion of the
Board.
(3) The options of Messrs. McKiernan and Morrow were granted on
October 10, 1996, Mr. Scruggs' option was granted on October 21, 1996 and
Mr. Walner's option was granted on July 26, 1996.
20
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS AT
EXERCISE OPTIONS/SARS AT FY-END(#) FY-END($)
NAME (#) VALUE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------- -------- ---------------- -------------------------- -----------------------------
Neil Young -- -- 125,000/430,000 $1,604,125/$5,547,750
Michael P. McKiernan -- -- 700/51,050 $9,013/$576,019
Donald D. Morrow -- -- 700/51,050 $9,013/$576,019
Steven D. Scruggs -- -- 0/100,000 $0/$1,100,000
Robert J. Walner -- -- 28,000/72,000 $359,500/$893,000
- -----------------------
(1) The value of the in-the-money options at fiscal year-end was calculated
based on the closing price of the Common Stock as reported on the New
York Stock Exchange on June 30, 1997 ($15.25 per share).
COMPENSATION OF DIRECTORS
Only directors who are not employees of the Company and who are neither
holders of five percent or more of the Common Stock of the Company
("Five-Percent Holders") nor employees or affiliates of entities which are
Five-Percent Holders ("Outside Directors"), receive compensation for serving
on the Board and on its committees. Such compensation currently consists of
an annual retainer fee of $15,000 and a fee of $1,000 for each Board or
committee meeting attended. These fees are set by the Board.
In addition, under the 1993 Stock Option Plan for Outside Directors,
Outside Directors each receive an option to purchase 10,000 shares of Common
Stock upon the date of first election to the Board, with an exercise price equal
to market value on such date. Directors other than members of the Compensation
Committee are also eligible to receive stock options under the 1990 Amended and
Restated Stock Option Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In connection with the appointment of Neil Young as President and Chief
Executive Officer of the Company on February 22, 1996, the Company entered into
an employment agreement with Mr. Young providing for his service in such
capacities for a term expiring in June 1999, with an option to extend the term
for an additional year. Pursuant to the agreement, Mr. Young received an
annual salary of $400,000 through June 30, 1997, which salary thereafter
increased to $425,000 per year. He is eligible to receive incentive
compensation for fiscal years 1997, 1998 and 1999 equal to 50% of his annual
salary, based upon achievement of certain levels of net income of the Company
("Formula"), which incentive compensation may be increased in the discretion of
the Compensation Committee based upon such factors as the Compensation Committee
determines are relevant. Under the agreement, Mr. Young was awarded an
incentive payment of $400,000 for the 1997 fiscal year, one-half of which was
based upon the Formula and one-half of which was based upon the Compensation
Committee's recognition of Mr. Young's contribution to the Company, including
the increase in stockholder value. He also received, under the agreement, a
non-qualified option to purchase 450,000 shares of Common Stock at an exercise
21
price of $2.375 per share, expiring in ten years and vesting in five, equal
annual installments, with the first installment vesting on December 31, 1996;
provided, that upon termination of Mr. Young's employment a) after June 29,
2000, or b) upon a material reduction in his responsibilities following an
event which results in a stockholder other than Warburg or its affiliates owning
more than 25% of the outstanding Common Stock, the vesting of any unvested
portion of such option will be accelerated. The agreement also provides that in
the event that the Company terminates the employment of Mr. Young prior to
expiration of the agreement for any reason, he will receive the equivalent of
one year's salary and benefits and a pro-rata share of the incentive
compensation.
Mr. Walner, Senior Vice President, General Counsel and Corporate Secretary,
is entitled to receive severance compensation in an amount equal to up to nine
months' salary and reimbursement of certain out-of-pocket expenses under certain
circumstances relating to the location required for performance of his services,
in the event that he resigns from employment with the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Reuben S. Leibowitz
(Chairman) and Lawrence S. Bacow. Neither of the members of the Compensation
Committee has served as an officer or employee of the Company.
Mr. Leibowitz is a Managing Director and member of Warburg Pincus, and a
general partner of WP, each of which are affiliates of Warburg. See also,
"Information About the Nominees for Director" and "Security Ownership of Certain
Beneficial Owners and Management " above. Warburg, the principal stockholder
of the Company, entered into a number of transactions with the Company related
to the 1997 Financing which are described below.
1997 FINANCING.
In October 1996, Warburg purchased from The Prudential Insurance Company of
America ("Prudential") all of the outstanding promissory notes, 130,233 shares
of Junior Convertible Preferred Stock, $.01 par value ("Junior Preferred Stock")
convertible into 2,322,067 shares of Common Stock, and warrants to purchase
350,000 shares of Common Stock which had been issued by the Company to
Prudential (the "Prudential Securities"), for $23 million plus accrued and
unpaid interest on the notes. The notes consisted of a) $10 million principal
amount of 9.90% Senior Notes (the "Senior Notes"); b) $10.9 million principal
amount of "payment-in-kind" notes ("PIK Notes"), at an interest rate of
10.65% per annum; c) $2.2 million principal amount of PIK Notes at an interest
rate of 11.65% per annum; and d) a $5 million revolving credit note with an
interest rate per annum of 2.5% above LIBOR ("Revolving Note"). Prudential
retained 397,549 shares of Common Stock, and 19,767 shares of Junior Preferred
Stock, and agreed to convert its Junior Preferred Stock to Common Stock in the
event that Warburg converted shares of Senior Convertible Preferred Stock, $.01
par value ("Senior Preferred Stock") to Common Stock.
Concurrently with the sale to Warburg, Warburg granted to the Company an
option, expiring in April 1997, to purchase the Prudential Securities from
Warburg at Warburg's cost, plus interest of 10% per annum, increasing to 12% per
annum in February 1997 ("First Option"). In consideration of the grant of the
First Option, the Company agreed to extend the expiration dates of warrants to
purchase an aggregate of 1,012,358 shares of Common Stock, then held by Warburg
from January 29, 1998 to January 29, 2002.
22
In December 1996, the Company sold 2.5 million shares of Common Stock to
the Kojaian Investors for a purchase price of $10 million. The proceeds were
used by the Company to purchase from Warburg and then retire the PIK Notes
and the 130,233 shares of Junior Preferred Stock held by Warburg for a price
of $10 million plus accrued interest of approximately $69,000. Warburg and
Mr. Hanauer thereupon converted all Senior Preferred Stock held by them to
4,828,548 shares and 339,629 shares of Common Stock, respectively.
Prudential converted its Junior Preferred Stock to 352,447 shares of Common
Stock. In connection with these transactions, Warburg retained warrants to
purchase an aggregate of 325,000 shares of Common Stock, and Warburg
transferred to Mr. Hanauer warrants to purchase an aggregate of 25,000
shares of Common Stock, which Warburg had received from Prudential. In
addition, contingent warrants to purchase an aggregate of 38,410 shares of
Common Stock held by Mr. Hanauer's family trust were cancelled, and warrants
to purchase an aggregate of 323,541 shares of Common Stock held by Mr.
Hanauer's family trust were amended to extend the expiration date to January
29, 2002, and to conform to the anti-dilution provisions in the other
outstanding warrants. Warburg granted to the Company a second option,
expiring in April 1997 (subject, under certain circumstances, to extension to
June 1997), to purchase the Senior Notes and the Revolving Note for a
purchase price of $13 million plus interest at the same rate as the First
Option.
In January 1997, the Company sold 2.5 million shares of Common Stock to
Archon for a purchase price of $11.25 million. The proceeds were used, along
with additional cash, to purchase from Warburg and then retire the remaining
Senior Notes and Revolving Note at a price of $13 million, plus accrued interest
of approximately $96,000.
The largest aggregate indebtedness of the Company to Warburg during the
1997 fiscal year was approximately $28.6 million of principal, which was retired
upon the Company's purchase of the Prudential Securities from Warburg as
described above.
WARBURG'S CURRENT OWNERSHIP OF SECURITIES OF THE COMPANY. Warburg
currently owns 9,105,981 shares of Common Stock. Warburg also owns warrants to
purchase an aggregate of 873,072 shares of Common Stock at an exercise price of
$3.50 per share, and warrants to purchase an aggregate of 464,286 shares of
Common Stock at an exercise price of $2.375 per share.
VOTING AGREEMENT. Pursuant to the Voting Agreement described above in
"Information About the Nominees for Director," Warburg, the Kojaian Investors
and Archon agreed to vote all their shares of Common Stock in favor of the
election to the Board of one nominee designated by a majority of the Kojaian
Investors, one nominee designated by Archon, and all nominees designated by
Warburg. Messrs. Lapidus, Leibowitz and Santoleri have been designated as
Warburg Nominees with respect to the 1997 election of directors.
23
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE ACT, THAT
MIGHT INCORPORATE OTHER FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN
PART, THE FOLLOWING COMPENSATION COMMITTEE REPORT AND THE SECTION ENTITLED,
"STOCK PRICE PERFORMANCE" SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILINGS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on executive
compensation:
The Compensation Committee has developed and implemented compensation
policies, plans and programs which seek to reward achievement of positive
financial results for the Company, and thus enhance stockholder value.
Providing longer-term equity incentives has been an important additional method
of aligning closely the financial interests of the Company's senior officers
with those of its stockholders.
In order to attract and retain outstanding executives with the potential to
contribute significantly to the success of the Company, the Compensation
Committee's policies have sought to compensate executives commensurate with
executives of equivalent-sized firms in terms of revenues and with similar
responsibilities, but not necessarily with reference to companies in the Peer
Group of companies referred to below under "Stock Price Performance."
The Compensation Committee's policies include the objective of assuring, to
the extent deemed appropriate in each case, qualification of each executive's
compensation for deductibility under Section 162(m) of the Internal Revenue
Code, which section generally imposes a $1 million limit on deductibility for
any taxable year of the compensation for each of the chief executive officer and
the other four most highly compensated executive officers.
The compensation of Mr. Young, Chairman of the Board and Chief Executive
Officer, during the 1997 fiscal year, pursuant to his employment agreement,
consisted of an annual base salary of $400,000 and eligibility for additional
cash incentive compensation equal to 50% of his annual salary, based upon
achievement of certain levels of net income of the Company ("Formula"), which
incentive compensation may be increased in the discretion of the Compensation
Committee based upon such factors as the Compensation Committee determines are
relevant. In approving the compensation terms of his employment agreement at
the time of his appointment, the Compensation Committee took into consideration
its knowledge of competitive compensation programs for chief executive officers
and Mr. Young's level of responsibility and expectations of future performance.
Mr. Young was awarded an incentive payment of $400,000 for the 1997 fiscal year,
one-half of which was based upon the Formula and one-half of which was based
upon the Compensation Committee's recognition of Mr. Young's contribution to the
Company, including the increase in stockholder value.
During the 1997 fiscal year, executive officers other than Mr. Young were
eligible to receive compensation consisting of three components: base salary,
cash incentive compensation and longer-term equity incentives. The Compensation
Committee reviewed with Mr. Young the compensation of all such executive
officers. Base salaries were approved on the basis of the Compensation
Committee members' knowledge of competitive salaries as described above and
judgments about the executives' individual past performance, level of
responsibilities and expectations of future performance. In setting base
salaries, the level of an executive's responsibilities was given the greatest
consideration. The eligibility to receive cash incentive compensation was based
upon achievement of targeted levels of total Company-wide, and applicable
regional, revenue and profitability of the Company and attainment of individual
performance
24
goals related to productivity. No one factor was a prerequisite to
receiving incentive compensation. The cash incentive compensation paid was
based upon attainment of annual goals and was earned as a percentage of
salary.
Stock options are designed to align the interests of executives with those
of stockholders, and further the growth, development and financial success of
the Company. The Compensation Committee believes that granting equity
incentives to the Company's management helps retain and motivate management.
In recommending grants of stock options by the Board, the Compensation Committee
takes into account the respective scope of responsibility and the anticipated
performance requirements and contributions to the Company of each proposed
optionee. In addition, stock options are awarded from time to time in
connection with hiring or promoting executives. The Compensation Committee's
decision to recommend the award of equity incentives at the time of hiring or
promotion is based upon the circumstances of a particular hiring or promotion,
including the level of responsibility of the executive. Six executive officers
who held office during the 1997 fiscal year received options to purchase Common
Stock of the Company, with exercise prices set at fair market value at the dates
of grant, vesting over five-year periods. The recommended number of shares
underlying the equity incentives provided to each executive was determined by
the Compensation Committee, primarily based upon the executive's level of
responsibility.
THE COMPENSATION COMMITTEE
Lawrence S. Bacow
Reuben S. Leibowitz
STOCK PRICE PERFORMANCE
The following graph shows a five-year comparison of cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return on the S&P 500 Stock Index and a peer group of the Company ("Peer
Group"). The comparison assumes $100 was invested on June 30, 1992 in each of
the foregoing and that all dividends, if any, were reinvested.
METHOD OF SELECTION OF PEER GROUP. To the best knowledge of the Company,
its most significant competitors are privately held commercial real estate
brokerage firms and, therefore, the Company was unable to construct a peer group
containing companies whose sources of revenue and business are substantially
similar to those of the Company. The Peer Group was formed by selecting those
public companies with the same company-level Standard Industrial Classification
("SIC") Code as the Company as reported by Media General Financial Services as
of June 30, 1997, excluding firms whose primary business activity involves
ownership of real estate investments -- either real estate investment trusts
("REIT's") or other entities (collectively, "real estate investment companies").
The Company's company-level SIC Code is 6531, which relates to real estate
agents and managers. The Company believes that the stock price performance of a
real estate investment company will be typically quite different than that of a
real estate services company like the Company, because the sources of income,
nature of assets (i.e., interests in real property) and other factors are
dissimilar. In addition, a REIT must meet specific requirements regarding
organizational structure and ownership, distributions and other items, and is
exempt from regular federal corporate income taxes. The Peer Group companies so
selected, in addition to the Company, are: CB Commercial Real Estate Services
Group, Inc. ("CB
25
Commercial"); The DeWolfe Companies, Inc.; Kennedy-Wilson, Inc.; NHP
Incorporated ("NHP"); Vacation Break U.S.A., Inc. ("Vacation Break"); and
Westmark Group Holdings, Inc. The initial public offerings of the following
firms were consummated on the dates indicated: CB Commercial -November 1996;
NHP - August 1995; and Vacation Break - December 1995. Prime Management
Group, Inc., included in the peer group presentation in the 1996 proxy
statement, ceased public trading in its stock in April 1996, and therefore
was not reported by Media General at June 30, 1997.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
GRUBB & ELLIS COMPANY, S&P 500 AND PEER GROUP
(PERFORMANCE RESULTS THROUGH JUNE 30, 1997)
[STOCK PERFORMANCE GRAPH]
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
------- -------- --------- -------- -------- --------
Grubb & Ellis $100.00 $ 54.55 $ 34.55 $ 30.91 $ 61.82 $249.09
S&P 500 $100.00 $113.65 $ 115.25 $ 145.30 $ 183.08 $246.61
Peer Group $100.00 $ 61.41 $ 32.21 $ 21.53 $ 33.36 $ 44.32
*Total return assumes reinvestment of dividends on a quarterly basis.
RELATED PARTY TRANSACTIONS
The following are descriptions of certain transactions and business
relationships between the Company and its directors, executive officers, and
principal stockholders. The Company believes that the fees and commissions
paid to the Company as described below were comparable to those which would
have been paid to unaffiliated third parties. See also "Information About
the Nominees for Director" regarding the Voting Agreement and "Compensation
Committee Interlocks and Insider Participation" above.
Archon, a principal stockholder of the Company, which is affiliated with
Mr. Williams, a director of the Company, is engaged in the business of managing
real estate assets held by partnerships sponsored by affiliates of Archon.
During the 1997 fiscal year, Archon and its affiliates paid the Company and its
subsidiaries approximately $82,000 for management of its portfolio properties,
and approximately $330,000 for leasing and other real estate commissions.
In addition, the Whitehall Street Real Estate Limited Partnerships
("Whitehall"), whose assets are primarily managed by Archon, has engaged the
Company from time to time to perform real estate services with respect to its
portfolio properties in the ordinary course of business. During the 1997 fiscal
year, Whitehall paid the Company and its subsidiaries approximately $73,000 for
real estate commissions.
The Kojaian Companies, Kojaian Management Corporation and their
affiliates (collectively, "KMC") are controlled by the Kojaian Investors.
C. Michael Kojaian, a director of the Company, is a director, shareholder
26
and the President of the Kojaian Companies; and a director, shareholder, and
an Executive Vice President and the Treasurer of Kojaian Management
Corporation. KMC is engaged in the business of investing in and managing
real property both for its own account and for third parties. During the
1997 fiscal year, KMC paid the Company and its subsidiaries approximately
$694,000 for management of its portfolio properties, including leasing
commissions.
AUDITORS
The firm of Ernst & Young LLP, certified public accountants, served as
auditors of the Company for the 1997 and 1996 fiscal years. Although no
auditors have been appointed for the 1998 fiscal year, it is anticipated that
Ernst & Young LLP will be so selected. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting and to be available to respond to
appropriate questions. They will have an opportunity to make a statement if
they desire to do so.
SUBMISSION OF STOCKHOLDER PROPOSALS
The proxy rules adopted by the Securities and Exchange Commission provide
that certain stockholder proposals must be included in the proxy statement for
the Company's annual meeting. The Company anticipates that the proxy statement
for next year's annual meeting will be mailed in October 1998 and that the
annual meeting will be held in November 1998. Therefore, in order for a
stockholder proposal to be considered for inclusion in next year's proxy
statement, it must be received by the Company no later than June 11, 1998.
REPORT TO STOCKHOLDERS
The Company's 1997 Annual Report to Stockholders, containing audited
financial statements for the fiscal year ended June 30, 1997, is being mailed to
Stockholders with this Proxy Statement. STOCKHOLDERS MAY REQUEST A COPY OF THE
ANNUAL REPORT FROM INVESTOR RELATIONS, GRUBB & ELLIS COMPANY, 2215 SANDERS ROAD,
SUITE 400, NORTHBROOK, ILLINOIS 60062.
BY ORDER OF THE BOARD
OF DIRECTORS
Robert J. Walner
Corporate Secretary
27
Appendix A
GRUBB & ELLIS
EMPLOYEE STOCK PURCHASE PLAN
Grubb & Ellis Company, a corporation organized under the laws of the
State of Delaware (the "Company"), hereby adopts the Grubb & Ellis Employee
Stock Purchase Plan (the "Plan"). The purposes of the Plan are as follows:
(1) To assist employees of the Company and its Subsidiary
Corporations (as defined below) in acquiring a stock ownership interest in the
Company pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423(b) of the Internal Revenue Code
of 1986, as amended.
(2) To help employees provide for their future security and to
encourage them to remain in the employment of the Company and its Subsidiary
Corporations.
1. DEFINITIONS
Whenever any of the following terms is used in the Plan with the first
letter or letters capitalized, it shall have the following meaning unless
context clearly indicates to the contrary (such definitions to be equally
applicable to both the singular and the plural forms of the terms defined):
(a) "Authorization" has the meaning set forth in Section 3(b) hereof.
(b) "Bargaining Unit" means a bargaining unit covered by a collective
bargaining agreement with the Company or a Subsidiary Corporation if the
collective bargaining agent of such bargaining unit has elected, by written
notice to the Company or a Subsidiary Corporation, to exclude the employees
in such bargaining unit from participation in the Plan. A collective
bargaining agent may revoke an election to exclude the employees in the
bargaining unit from participation in the Plan by written notice to the
Company or the Subsidiary Corporation. Prior to August 1, 1997, the
Company shall present a copy of the Plan to the collective bargaining agent
for each bargaining unit of the Company and Subsidiary Corporations. The
Company shall present a copy of the Plan to the collective bargaining agent
of each bargaining unit covered by a collective bargaining agreement
entered into by the Company or a Subsidiary Corporation after August 1,
1997. Each collective bargaining agent shall have an opportunity to review
the Plan and decide whether or not the employees in the bargaining unit
should participate in the Plan. Each collective bargaining agent shall be
allowed the choice to exclude the employees in the bargaining unit from the
Plan without regard to the provisions of the existing collective bargaining
agreement or other relevant agreement. A collective bargaining agent shall
provide written notice of the agent's election to exclude the employees in
the bargaining unit, or the agent's revocation of a prior election to
exclude the employees in the bargaining unit, not less than 10 days prior
1
to the first day of the Offering Period with respect to which such
election, or revocation, is to be effective.
(c) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(d) "Broker Employee" means an employee of the Company or any Subsidiary
Corporation all or part of whose compensation consists of brokerage
commissions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the committee appointed to administer the Plan
pursuant to Section 13 hereof.
(g) "Company" means Grubb & Ellis Company, a Delaware corporation.
(h) "Date of Exercise" means, with respect to any Option, the last day of
the Offering Period for which the Option was granted.
(i) "Date of Grant" means, with respect to any Option, the date upon which
the Option is granted, as set forth in Section 3(a) hereof.
(j) "Eligible Compensation" means an Eligible Employee's rate of base pay
and commissions paid during the applicable period. Eligible Compensation
does not include bonuses, overtime, or deferred compensation and is
determined before contributions to any employee plan.
(k) "Eligible Employee" means an employee of the Company or any Subsidiary
Corporation who (1) would not, immediately after the Option is granted, own
stock possessing five percent or more of the total combined voting power or
value of all classes of stock of the Company, a Parent Corporation or a
Subsidiary Corporation, (2) whose customary employment is for more than 20
hours per week and (3) whose customary employment is for more than five
months in any calendar year, including salaried and hourly employees and
Broker Employees; provided that employees who are employed in a Bargaining
Unit shall not be Eligible Employees. For purposes of paragraph (k), the
rules of Section 424(d) of the Code with regard to the attribution of stock
ownership shall apply in determining the stock ownership of an individual,
and stock which an employee may purchase under outstanding options shall be
treated as stock owned by the employee. During a leave of absence meeting
the requirements of Treasury Regulation 1.421-7(h)(2), an individual shall
be treated as an employee of the Company or Subsidiary Corporation
employing such individual immediately prior to such leave. "Eligible
Employee" shall not include any director of the Company or any Subsidiary
Corporation, or any other person, who does not render services to the
Company in the status of an employee within the meaning of Section 3401(c)
of the Code.
(l) "Offering Period" shall mean the three month period commencing on the
first calendar day of each fiscal quarter of the Company and ending on the
last calendar day of each such fiscal quarter of the Company; provided,
however, that the first Offering Period
2
under the Plan shall commence on August 1, 1997 and end on December 31,
1997. Options shall be granted on the Date of Grant and exercised on the
Date of Exercise as provided in Sections 3(a) and 4(a) hereof.
(m) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of the Company's Stock.
(n) "Option Period" means, with respect to any Option, the period
beginning upon the Date of Grant and ending upon the Date of Exercise.
(o) "Option Price" has the meaning set forth in Section 4(b) hereof.
(p) "Parent Corporation" means any corporation, other than the Company, in
an unbroken chain of corporations ending with the Company if, at the time
of the granting of the Option, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(q) "Participant" means an Eligible Employee who has complied with the
provisions of Section 3(b) hereof.
(r) "Payday" means a day on which the Company pays Eligible Compensation
to Eligible Employees and which is designated by the Committee as the day
on which payroll deductions are to be withheld under the Plan.
(s) "Plan" means the Grubb & Ellis Employee Stock Purchase Plan.
(t) "Plan Year" means the calendar year.
(u) "Stock" means the shares of the Company's Common Stock, $0.01 par
value.
(v) "Subsidiary Corporation" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company
if, at the time of the granting of the Option, each of the corporations
other than the last corporation in an unbroken chain owns stock possessing
50% or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
(w) "Termination Election" has the meaning set forth in Section 5(a).
2. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 9 hereof (relating to adjustments
upon changes in the Stock) and Section 11 hereof (relating to amendments of the
Plan), the Stock which may be sold pursuant to Options granted under the Plan
shall not exceed in the aggregate 750,000 shares, and may be unissued shares or
treasury shares or shares bought on the market for purposes of the Plan.
3
3. GRANT OF OPTIONS
(a) GENERAL STATEMENT. The Company shall offer Options under the
Plan to all Eligible Employees in successive Offering Periods until the earlier
of: (i) the date when the number of shares of Stock available under the Plan
have been sold; or (ii) the date the Plan is terminated. Except as otherwise
provided, the Date of Grant of an Option shall be the first date of the Offering
Period of such Option. Each Option shall expire on the Date of Exercise
immediately after the automatic exercise of the Option pursuant to Section 4(a)
hereof. The number of shares of Stock subject to each Option shall equal the
payroll deductions authorized by each Participant in accordance with subsection
(b) hereof for the Option Period, divided by the Option Price, except as
provided in Section 3(c); provided, however, that the maximum number of shares
of Stock subject to any Option shall not exceed 5,000.
(b) ELECTION TO PARTICIPATE; PAYROLL DEDUCTION AUTHORIZATION. An
Eligible Employee shall participate in the Plan only by means of payroll
deduction. Each Eligible Employee who elects to participate in the Plan shall
deliver to the Company prior to such Date of Grant, a completed and executed
written payroll deduction authorization and such other documents as may be
required by the Committee (the "Authorization"), within such time periods and
according to such procedures as the Committee shall specify. An Eligible
Employee's Authorization shall give notice of such Eligible Employee's election
to participate in the Plan for the next following Offering Period and subsequent
Offering Periods and shall designate a stated dollar amount or a stated whole
percentage amount of Eligible Compensation to be withheld. The Company shall
withhold amounts on each Payday in accordance with the Authorization. The
amount withheld shall not be less than $5.00 each Payday and the amount shall
not exceed 15% of Eligible Compensation. The cash compensation payable to a
Participant for an Offering Period shall be reduced through a payroll deduction
in an amount equal to the stated amount or percentage specified in the
Authorization, and such amount shall be credited to the Participant's account
under the Plan. Any Authorization shall remain in effect until the Eligible
Employee amends the same pursuant to procedures specified by the Committee, the
Eligible Employee terminates participation in the Plan pursuant to Section 5
hereof, or the Eligible Employee ceases to participate in the Plan upon
termination of employment pursuant to Section 6 hereof.
(c) $25,000 LIMITATION. No Eligible Employee shall be granted an
Option under the Plan which permits his rights to purchase stock under the Plan
and under all other employee stock purchase plans of the Company, any Parent
Corporation or any Subsidiary Corporation subject to Section 423 of the Code to
accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined at the time the Option is granted) for each calendar year in which
the option is outstanding at any time. For purpose of the limitation imposed by
this subsection, the right to purchase stock under an option accrues when the
option (or any portion thereof) first becomes exercisable during the calendar
year, the right to purchase stock under an option accrues at the rate provided
in the option, but in no case may such rate exceed $25,000 of the fair market
value of such stock (determined at the time such option is granted) for any one
calendar year, and a right to purchase stock which has accrued under an option
may not be carried over to any other option.
4
4. EXERCISE OF OPTIONS; OPTION PRICE
(a) GENERAL STATEMENT. Each Participant automatically and without
any act on such Participant's part shall be deemed to have exercised such
Participant's Option on the Date of Exercise to the extent that the balance then
in the Participant's account under the Plan is sufficient to purchase, at the
Option Price, shares of Stock subject to the Option, unless the Option has been
previously terminated pursuant to Section 5 or Section 6 hereof.
(b) OPTION PRICE DEFINED. The option price per share of Stock (the
"Option Price") to be paid by a Participant upon the exercise of the
Participant's Option shall be equal to 85% of the lesser of the fair market
value of a share of Stock on the Date of Exercise or the fair market value of a
share of Stock on the Date of Grant. The fair market value of a share of Stock
as of a given date shall be the average of the closing prices on the New York
Stock Exchange-Composite Tape for the five preceding trading days.
(c) ISSUANCE OF SHARES. The Company may, at the discretion of the
Committee, use an uncertificated program to issue shares of Stock to
Participants or the Company may issue certificated shares of Stock to
Participants.
(i) CERTIFICATED PROGRAM. The following provisions shall apply
if certificated shares of Stock are issued under the Plan. A Participant's
Option shall be exercised to the extent the amount credited to the
Participant's account will purchase whole shares of Stock. The Company
shall deliver to the Participant or his or her nominee, as soon as
practicable after the exercise of any Option, a certificate representing
the whole shares of Stock purchased by the Participant from funds credited
to the Participant's account under the Plan. Any amount credited to the
Participant's account after the purchase of whole shares of Stock upon
exercise of an Option shall be carried forward in such account to the
following Offering Period and shall be applied toward the purchase of
shares of Stock pursuant to the Option, if any, granted to such Participant
for such Offering Period. In the event the Company is required to obtain
authority from any commission or agency to issue any such certificate, the
Company shall seek to obtain such authority.
(ii) UNCERTIFICATED PROGRAM. The following provisions shall
apply if certificated shares of Stock are not issued under the Plan. A
Participant's Option shall be exercised to the extent the amount credited
to the Participant's account will purchase whole or fractional shares of
Stock. The Company shall deliver to an agent designated by the Company, as
soon as practicable after the exercise of any Option, the whole or
fractional shares of Stock purchased by the Participant from funds credited
to the Participant's account under the Plan. Such shares of Stock shall be
held on behalf of the Participant by the agent. The Participant may
transfer or sell such shares of Stock by providing directions to the agent
in accordance with procedures specified by the Committee.
(iii) INABILITY TO ISSUE SHARES. The inability of the Company
to obtain authority from any such commission or agency which the Committee
in its absolute
5
discretion deems necessary for the lawful issuance of shares of Stock
under the Plan shall relieve the Company from liability to any
Participant's account following the remittance to such Participant of the
outstanding amount in cash in one lump sum without any interest thereon
which was credited to such Participant's account under the Plan and for
which shares were not issued.
(d) PRO RATA ALLOCATIONS. If the total number of shares of Stock
for which Options are to be exercised on any Date of Exercise exceeds the
number of shares of Stock remaining unsold under the Plan (after deduction of
all shares for which Options have theretofore been exercised), the Committee
shall make a pro rata allocation of the available remaining shares in as
nearly a uniform manner as shall be practicable and the balances of payroll
deductions credited to the accounts of Participants which have not been
applied to the purchase of shares of Stock shall be paid to such Participants
in cash in one lump sum within sixty (60) days after the Date of Exercise,
without any interest thereon. The Committee shall give written notice of such
allocation to each Participant affected thereby.
5. TERMINATION OF PARTICIPATION IN THE PLAN
(a) GENERAL STATEMENT. Any Participant may terminate participation
under the Plan at any time except that no Participant may terminate
participation after the 15th day of the last month of any Offering Period. A
Participant who wishes to terminate from the Plan must deliver to the Company a
notice of termination in a form prepared by the Company (the "Termination
Election"). Upon receipt of a Participant's Termination Election, the Company
shall pay to the Participant the amount of the balance in the Participant's
account under the Plan in cash in one lump sum within sixty (60) days, without
any interest thereon. Upon receipt of a Participant's Termination Election by
the Company, the Participant shall cease to participate in the Plan and the
Participant's Option shall terminate.
(b) ELIGIBILITY FOLLOWING TERMINATION. A Participant who terminates
participation in the Plan and who is still an Eligible Employee shall be
eligible to participate again in the Plan as of any subsequent Date of Grant by
delivering to the Company an Authorization pursuant to Section 3(b) hereof.
6. TERMINATION OF EMPLOYMENT
If the employment of a Participant with the Company and the Subsidiary
Corporations terminates for any reason, including death or retirement, the
Participant's participation in the Plan automatically and without any act on the
Participant's part shall terminate as of the date of the termination of the
Participant's employment. As soon as practicable after such a termination of
employment, the Company shall pay to the Participant (or the Participant's
estate, in the event of the Participant's death) the amount of the balance in
the Participant's account under the Plan without any interest thereon. Upon a
Participant's termination of employment, the Participant's Authorization,
interest in the Plan and Option under the Plan shall terminate.
6
7. RESTRICTION UPON ASSIGNMENT
An Option granted under the Plan shall not be transferable other than
by will or the laws of descent and distribution, and is exercisable during the
Participant's lifetime only by the Participant. The Company shall not recognize
and shall be under no duty to recognize any assignment or alienation of the
Participant's interest in the Plan, the Participant's Option or any rights under
the Participant's Option.
8. NO RIGHTS OF STOCKHOLDERS UNTIL SHARES ISSUED
With respect to shares of Stock subject to an Option, a Participant
shall not be deemed to be a stockholder of the Company, and the Participant
shall not have any of the rights or privileges of a stockholder, until such
shares have been issued to the Participant or his or her nominee or the agent
designated by the Company on the Participant's behalf following exercise of the
Participant's Option. No adjustments shall be made for dividends (ordinary or
extraordinary, whether in cash securities, or other property) or distributions
or other rights for which the record date occurs prior to the date of such
issuance, except as otherwise expressly provided herein.
9. CHANGES IN THE STOCK; ADJUSTMENTS OF AN OPTION
Whenever any change is made in the Stock or to Options outstanding
under the Plan, by reason of a stock split, stock dividend, recapitalization or
other subdivision, combination, or reclassification of shares, appropriate
action shall be taken by the Committee to adjust accordingly the number of
shares of Stock subject to the Plan and the number and the Option Price of
shares of Stock subject to the Options outstanding under the Plan to preserve,
but not increase, the rights of Participants hereunder.
10. USE OF FUNDS; NO INTEREST PAID
All funds received or held by the Company under the Plan shall be
included in the general funds of the Company free of any trust or other
restriction and may be used for any corporate purpose. No interest will be paid
to any Participant or credited to any Participant's account under the Plan with
respect to such funds.
11. AMENDMENT OF THE PLAN
The Board of Directors may amend, suspend, or terminate the Plan at
any time and from time to time, provided that approval by a vote of the holders
of more than 50% of the outstanding shares of the Company's capital stock
entitled to vote shall be required to amend the Plan: (i) to change the number
of shares of Stock reserved for sale pursuant to Options under the Plan, (ii) to
alter the employers whose employees are eligible to participate in the Plan or
requirements for eligibility to participate in the Plan, or (iii) in any manner
that would cause the Plan to no longer be an "employee stock purchase plan"
within the meaning of Section 423(b) of the Code. If the Plan is suspended or
terminated during an Offering Period, each Participant's participation shall
automatically terminate as of the date of such suspension, and as soon as
7
practicable the Company shall pay to each Participant the amount of the balance
of the Participant's account under the Plan without any interest thereon.
12. TERM; APPROVAL BY STOCKHOLDERS
No Option may be granted during any period of suspension of the Plan
or after termination of the Plan. The Plan shall be submitted for the approval
of the Company's stockholders within 12 months after the date of the Board of
Directors' adoption of the Plan. Options may be granted prior to such
stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders; and
provided, further, that if such approval has not been obtained by the end of
said 12-month period, all Options previously granted under the Plan shall
thereupon expire.
13. ADMINISTRATION BY COMMITTEE; RULES AND REGULATIONS
(a) APPOINTMENT OF COMMITTEE. The Plan shall be administered by the
Committee, which shall be composed of not less than two individuals each of whom
is an employee of the Company or a Subsidiary Corporation and/or a member of the
Board of Directors. Each member of the Committee shall serve for a term
commencing on a date specified by the Board of Directors and continuing until
the member dies or resigns or is removed from office by the Board of Directors.
The Committee at its option may utilize the services of an agent to assist in
the administration of the Plan including establishing and maintaining an
individual securities account under the Plan for each Participant.
(b) DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
the provisions of the Plan. The Committee shall have the power to interpret the
Plan and the terms of the Options and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. In its absolute
discretion, the Board of Directors may at any time and from time to time
exercise any and all rights and duties of the Committee under the Plan. Nothing
contained herein shall empower the Committee to take any actions that requires
shareholder approval pursuant to Section 11.
(c) MAJORITY RULE. The Committee shall act by a majority of its
members in office. The Committee may act either by vote at a meeting or by a
memorandum or other written instrument signed by a majority of the Committee.
(d) COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. All
expenses and liabilities incurred by members of the Committee in connection with
the administration of the Plan shall be borne by the Company. The Committee
may, with the approval of the Board of Directors, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Company
and its officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with
8
respect to the Plan or the Options, and all members of the Committee shall be
fully protected by the Company in respect to any such action, determination,
or interpretation.
14. NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan shall be construed to give any person (including
any Eligible Employee or Participant) the right to remain in the employ of the
Company, a Parent Corporation or a Subsidiary Corporation or to affect the right
of the Company, any Parent Corporation or any Subsidiary Corporation to
terminate the employment of any person (including any Eligible Employee or
Participant) at any time, with or without cause.
15. MERGER, ACQUISITION OR LIQUIDATION OF THE COMPANY
In the event of the merger or consolidation of the Company into
another corporation, the acquisition by another corporation of all or
substantially all of the Company's assets or 50% or more of the Company's then
outstanding voting stock, the liquidation or dissolution of the Company or any
other reorganization of the Company, the Date of Exercise with respect to
outstanding Options shall be the business day immediately preceding the
effective date of such merger, consolidation, acquisition, liquidation,
dissolution, or reorganization unless the Committee shall, in its sole
discretion, provide for the assumption or substitution of such Options in a
manner complying with Section 424(a) of the Code.
16. EFFECT UPON OTHER PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary Corporation. Nothing in this Plan shall be construed to limit the
right of the Company, any Parent Corporation or any Subsidiary Corporation (a)
to establish any other forms of incentives or compensation for employees of the
Company, any Parent Corporation or any Subsidiary Corporation or (b) to grant or
assume options otherwise than under this Plan in connection with any proper
corporate purpose, including, but not limited to, the grant or assumption of
options in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of any corporation,
firm or association.
17. CONDITIONS TO ISSUANCE OF STOCK
The Company shall not be required to issue uncertificated shares or
issue or deliver any certificate or certificates for shares of Stock purchased
upon the exercise of Option prior to fulfillment of all the following
conditions:
(a) The admission of such shares of Stock to listing on all stock
exchanges, if any, on which is then listed; and
(b) The completion of any registration or other qualification of such
shares under the state or federal law or under the rulings or regulations of the
Securities and Exchange
9
commission or any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment of the Company of all amounts which it is required to
withhold under federal, state or local law upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
18. NOTIFICATION OF DISPOSITION
Each Participant shall give prompt notice to the Company of any
disposition or other transfer of any shares of Stock purchased upon exercise of
an Option if such disposition or transfer is made (a) within two (2) years from
the Date of Grant of the Option or (b) within one (1) year after the transfer of
such shares to such Participant upon exercise of such Option. Such notice shall
specify the date of such disposition or other transfer and the amount realized,
in cash, other property, assumption of indebtedness or other consideration, by
the Participant in such disposition or other transfer.
19. NOTICES
Any notice to be given under the terms of the Plan to the Company
shall be addressed to the Company in care of its Vice President, Human Resources
or his or her designee and any notice to be given to any Eligible Employee or
Participant shall be addressed to such Employee at such Employee's last address
as reflected in the Company's records. By a notice given pursuant to this
Section, either party may designate a different address for notices to be given
to it, him or her. Any notice which is required to be given to an Eligible
Employee or a Participant shall, if the Eligible Employee or Participant is then
deceased, be given to the Eligible Employee's or Participant's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section. Any notice shall have
been deemed duly given if enclosed in a properly sealed envelope or wrapper
addressed as aforesaid at the time it is deposited (with postage prepaid) in a
post office or branch post office regularly maintained by the United States
Postal Service.
20. HEADINGS
Headings are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
* * * * * * *
10
I hereby certify that the foregoing Plan was adopted by the Board of
Directors of Grubb & Ellis Company, on June 20, 1997.
Executed as of this ____ day of _______, 199_.
____________________________________
Name:
Title:
* * * * * * *
I hereby certify that the foregoing Plan was approved by the
stockholders of Grubb & Ellis Company on _______ __, 199_.
Executed at _______, _______ on this ___ day of ____, 199_.
____________________________________
11
Appendix B
GRUBB & ELLIS COMPANY
1990 AMENDED AND RESTATED STOCK OPTION PLAN
AS AMENDED EFFECTIVE AS OF SEPTEMBER 25, 1996
1. PURPOSE. The purpose of the 1990 Amended and Restated Stock
Option Plan (the "Plan") is to promote the interests of Grubb & Ellis Company
(the "Company"), its subsidiaries and its stockholders, in retaining and
attracting key persons associated with the Company and its subsidiaries who are
in a position to contribute significantly to the success of the Company and its
subsidiaries, by granting options ("Options") to such persons to purchase shares
of its Common Stock, $0.01 Par Value ("Shares"). This Plan is an amendment and
restatement of the Company's 1981, 1982, 1983, 1984 and 1985 Stock Option Plans
(Amended) ("Plans"), and includes the Second Amendment to the Plan effective as
of November 21, 1995 and the Third Amendment to the Plan effective as of
September 25, 1996.
2. EFFECTIVE DATE OF THE PLAN; TERM. Subject to approval by the
holders of a majority of the outstanding shares of Common Stock of the Company
voting on or before May 16, 1991, this Plan shall be effective as of May 16,
1990 ("Effective Date"). Upon becoming effective, this Plan shall continue in
effect until such date as the Board of Directors of the Company discontinues the
Plan; provided, however, that no "incentive stock Options" shall be granted
under the Plan after May 16, 2000. Any such termination of the Plan shall not
affect Options previously granted and such Options shall remain in full force
and effect as if this Plan had not been terminated. On and after the Effective
Date, all outstanding options under the previous Plans shall continue to be
effective under this Plan upon the terms and conditions of the options as
granted and amended prior to the Effective Date.
3. ADMINISTRATION. This Plan shall be administered by the Board of
Directors of the Company or by such committee of directors (in either case, the
"Board/Committee") as may be established by the Board of Directors in accordance
with Rule 16b-3 of the Securities Exchange Act of 1934, as amended. No member
of the Compensation Committee of the Board of Directors (the "Compensation
Committee") shall be eligible to participate in this Plan while serving as a
member of the Compensation Committee, nor shall any such member have been so
eligible for one year prior to becoming a member of the Compensation Committee.
Subject to the provisions of this Plan, the Board/Committee shall have sole
authority, in its absolute discretion, to determine which eligible persons shall
receive Options (the "Optionees"), the dates when Options shall be granted, the
terms of such Options (which may differ from one another), the number of Shares
to be optioned, and the exercise price of such Options, and shall have authority
to do everything necessary or appropriate to administer this Plan, including,
without limitation, interpreting this Plan. All decisions, determinations and
interpretations of the Board/Committee shall be final and binding on all
persons, including the Company and its subsidiaries, and all Optionees.
4. ELIGIBILITY. The Board/Committee may grant Options to any key
employee of the Company or of any of its subsidiaries, whether presently in
existence or hereinafter organized
1
or acquired, and to any director of the Company, whether or not such director
is an employee; provided, however, that directors who are members of the
Compensation Committee are not eligible to receive Options under the Plan.
On and after such date when securities issuable under the Plan to independent
contractors are registrable on a Form S-8 or similar registration statement,
or otherwise when securities compliance becomes similarly simplified, in the
judgment of the appropriate corporate officers of the Company, upon written
notification to the Board/Committee, the Board/Committee may grant
"non-qualified" Options (see below) to any key independent contractor
associated with the Company or any of its subsidiaries, subject to the above
limitation on members of the Compensation Committee. As of the Effective
Date, independent contractors are not eligible to be granted Options under
the Plan. A key employee or key independent contractor associated with the
Company is one whose duties and/or authority are such that, in the judgment
of the Board/Committee, he or she is in a position to contribute
significantly to the success of the Company or any of its subsidiaries.
5. STOCK TO BE OPTIONED. The maximum number of Shares of authorized,
but unissued, or reacquired Common Stock of the Company, which may be optioned
and sold under this Plan is 1,500,000 Shares. Outstanding Options under the
previous Plans will be subject to and authorized by this Plan. On and after the
Effective Date, Shares subject to expired or cancelled Options will be available
for regrant of Options. The Shares authorized will be available for the grant of
either "incentive stock Options" (see below) or non-qualified Options. Except
as set forth in this paragraph, as of the Effective Date, the authorization of
Shares under the previous Plans shall be cancelled.
6. GRANTING OF OPTIONS.
(a) Options may be granted pursuant to this Plan at any time during
its term. Options granted may be either incentive stock Options ("ISOs")
meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or "non-qualified Options" which do not meet such
requirements; provided, however, that ISOs shall be granted only to eligible
employees. Each Option grant shall be consistent with the terms of this Plan.
No Option granted pursuant to this Plan shall be exercisable more than ten years
after the date of grant, unless the Board/Committee determines otherwise with
respect to individual Option grants or for all Options or Optionees; provided,
however, that no ISO granted to an Optionee who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company at
the date of grant shall be exercisable more than five years after the date of
grant.
(b) DOLLAR LIMITATION ON ISOs GRANTED BEFORE JANUARY 1, 1987. The
aggregate fair market value (determined as of the date the Option is granted) of
the Shares for which any employee may be granted ISOs in any calendar year under
this Plan and under any other plan of the Company, its subsidiaries and/or any
parent corporation before January 1, 1987, shall not exceed $100,000 plus any
"unused limit carryover" to such year. If $100,000 exceeds the aggregate fair
market value (determined as of the date the Option is granted) of the Shares for
which an employee was granted ISOs in any calendar year after 1980, under any
ISO plan of his or her employer corporation and its parent and subsidiary
corporations, then one-half of such
2
excess shall be "unused limit carryover" to each of the three succeeding
calendar years. The amount of the unused limit carryover for any calendar
year which may be taken into account in any succeeding calendar year shall be
the amount of such carryover reduced by the amount of such carryover which
was used in prior calendar years. For purposes of the foregoing sentence,
the amount of ISOs granted during any calendar year shall be treated as first
using up the $100,000 limitation of the first sentence of this Section 6(b),
and then shall be treated as using up unused limit carryovers to such year in
the order of the calendar years in which the carryovers arose.
(c) DOLLAR LIMITATION ON ISOs GRANTED AFTER DECEMBER 31, 1986. For
ISOs granted after December 31, 1986, the aggregate fair market value
(determined as of the respective date or dates of grant) of the Shares with
respect to which ISOs may first be exercisable under the Plan (or any other plan
of the Optionee's employer corporation or its parent or subsidiary corporation)
during any one calendar year shall not exceed the sum of $100,000.
7. OPTION PRICE. The Option price for each Share purchasable upon
exercise of Options granted pursuant to this Plan either shall be its fair
market value or, in the case of non-qualified Options only, may be such other
price as the Board/Committee shall determine which shall be at least 50% of the
fair market value of such Share, at the date of grant of the Option; provided,
however, that the exercise price of ISOs granted to an Optionee who owns stock
possessing more than 10% of the total combined voting power of all classes of
the Company at the date of grant shall be set at not less than 110% of the fair
market value per Share at the date of grant. The fair market value of the
Shares on any given date shall be determined by reference to the closing market
price per Share on the New York Stock Exchange Composite Reporting System (or on
such other major trading market or exchange on which the Company's Common Stock
is then traded) on the trading date next preceding such date.
8. VESTING OF OPTIONS.
(a) The vesting period of each Option granted shall be as determined
by the Board/Committee; provided, that if a vesting period is not specified by
the Board/Committee, the number of Shares granted to an Optionee shall be
divided into three, equal installments. The first such installment shall vest,
and the Option shall be exercisable with respect to the Shares included in such
installment, on the date one year after the grant of the Option, and each
succeeding installment shall vest, and the Option shall be exercisable with
respect to the Shares included therein, annually thereafter.
(b) Notwithstanding the foregoing, Options granted pursuant to this
Plan shall vest immediately upon the occurrence of any of the following events
(hereafter referred to as "Acceleration"): (i) at the election of the
Board/Committee with respect to Options specifically designated; (ii) the
merger or combination of the Company with another corporation, when as a result
thereof the shareholders of the Company immediately preceding such merger or
combination shall immediately thereafter own less than 50% of the outstanding
shares of the surviving corporation which at the time shall have, by the terms
thereof, the ordinary voting power to elect the directors of such corporation;
(iii) a tender offer or single transaction (other
3
than a merger or combination of the Company with another corporation) which
in either case results in a change in ownership of 33-1/3% or more of the
outstanding shares of Common Stock of the Company; (iv) a sale to an
unrelated party of substantially all of the assets of the Company; or (v) a
substantial partial or complete liquidation of the Company.
9. EXERCISE OF OPTIONS.
(a) An Option may be exercised when installments vest and at any time
from time to time thereafter during the specified term of the Option with
respect to all or a portion of the Shares covered by such vested installments;
provided, that not less than ten Shares may be purchased at any one time unless
the number purchased is the total number at the time purchasable under such
Option and only whole Shares may be purchased; and further subject to the
restrictions contained in this Section 9.
(b) An ISO granted before January 1, 1987 shall not be exercisable
while there is "outstanding" any ISO which was granted before the granting of
such Option to such Optionee to purchase stock in the Company or in a
corporation which (at the date such Option is granted) is a parent or subsidiary
corporation of the Company, or in a predecessor corporation of any of such
corporations. For purposes of the foregoing sentence, any ISO shall be treated
as "outstanding" until such Option is exercised in full or expires by reason of
lapse of time.
(c) An Option may be exercised by delivery of written notice of such
exercise to the Company at its principal business office by the Optionee,
together with one of the following:
1) full cash payment for the Shares with respect to which the Option
is exercised, in the form of a check payable to the Company in the amount of the
aggregate purchase price;
2) full payment for the Shares with respect to which the Option is
exercised in the form of shares of Common Stock of the Company already owned by
the Optionee having a fair market value (determined in accordance with Paragraph
7) equal to the aggregate purchase price of the Shares;
3) full payment for the Shares with respect to which the Option is
exercised in the form of a combination of cash and already-owned shares;
4) in the discretion of the Board/Committee, payment on an
installment basis by making an initial payment and thereafter paying the balance
of the exercise price within a term not to exceed ten years from the date of
exercise (or sooner upon termination of employment for any reason other than
incapacity, retirement or death);
5) if offered by the Board/Committee, an executed subscription
agreement and promissory note upon such terms and conditions as the Company may
require, which shall evidence the Optionee's irrevocable agreement to purchase
the Shares within one year of such notice.
4
Until the issuance of the stock certificate, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to optioned Shares notwithstanding the exercise of the Option. No adjustment
will be made for any dividend or distribution in respect of the Shares for which
the record date is prior to the date the stock certificate is issued except as
provided in Section 13.
(d) Except as otherwise provided in the option agreement or form of
grant with respect to an Option, an Option may be exercised by the Optionee
either while he or she is, and has continually been since the date of the grant
of the Option, an employee of the Company, its subsidiaries, its parent or its
successor companies, or a director of the Company, or within three months after
termination of such status, except that if his or her continuous employment or
service as a director terminates by reason of his or her death, to the extent
that installments have vested and remain unexercised on the date of the
Optionee's death, such Option of the deceased Optionee may be exercised within
one year after the death of such Optionee, by (and only by) the person or
persons to whom his or her rights under such Option shall have passed by will or
by the laws of descent and distribution.
(e) A non-qualified Option granted to an Optionee while associated
with the Company or its subsidiaries as an independent contractor may be
exercised under the same conditions as that of an employee Optionee described in
Paragraph 9(d) above, except that "associate" and "association" shall be
substituted for "employee" and "employment," respectively.
10. OPTIONS NOT TRANSFERABLE. Options granted under this Plan may
not be sold, pledged, assigned, or transferred in any manner otherwise than by
will or the laws of descent or distribution, and may be exercised during the
lifetime of an Optionee only by such Optionee.
11. CANCELLATION AND NEW GRANT OF OPTIONS. The Board/Committee shall
have the authority to effect, at any time and from time to time, with the
consent of the affected Optionees, the cancellation of any or all outstanding
Options under the Plan and to grant in substitution therefor new Options under
the Plan covering the same or a different number and class of shares of stock
and having an Option price per share on the new grant date set according to
Paragraph 7 above, and a new vesting schedule commencing on such date.
12. AMENDMENT OR TERMINATION OF THE PLAN.
(a) The Board of Directors of the Company may amend this Plan from
time to time in such respects as it may deem advisable; provided, however, that
without stockholder approval, the Board of Directors may not amend the Plan to
effect an increase in the number of Shares authorized for the grant of Options
to a number greater than is authorized hereunder.
(b) The Board of Directors of the Company may at any time terminate
this Plan. Any such termination of this Plan shall not affect Options
previously granted and such Options shall remain in full force and effect as if
this Plan had not been terminated.
5
(c) The Board/Committee may amend or modify outstanding Options
issued under the Plan in any or all aspects whatsoever not inconsistent with
terms of the Plan; provided, however, that no such amendment or modification
shall adversely affect the rights of an Optionee with respect to Options at the
time outstanding under the Plan unless the Optionee consents to such amendment.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If all or any
portion of an Option is exercised subsequent to any of the following kinds of
changes in the outstanding Common Stock of the Company: a stock dividend,
stock-split, recapitalization, combination or exchange of shares, merger,
consolidation, acquisition of property for stock, corporate separation,
reorganization or liquidation; and if as a result shares of any class shall be
issued in respect of outstanding shares of Common Stock or shares of Common
Stock shall be changed into the same or a different number of shares of the same
or another class or classes; then the Optionee, upon exercising such an Option,
shall receive, for the aggregate price paid, the aggregate number and class of
Shares which he or she would have been holding following any and all such
changes in the outstanding Common Stock of the Company as if Shares (as
authorized at the date of the granting of such Option) had been purchased by him
or her at the date of granting of such Option for the same aggregate price (on
the basis of the price per Share provided in such Option) and had not been
disposed of; provided, however, that no fractional Share shall be issued upon
any such exercise, and the aggregate price paid shall be appropriately reduced
on account of any fractional Share not issued. In the event of any such change
in the outstanding Common Stock of the Company, the aggregate number and class
of Shares remaining available under this Plan shall be that number and class
which a person, to whom an Option had been granted for all of the available
Shares under this Plan on the date preceding such change, would be entitled to
receive as provided in the first sentence of this Section 13.
14. AGREEMENT AND REPRESENTATIONS OF OPTIONEE. As a condition to the
exercise of any portion of an Option, the Company may require the Optionee of
such Option to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any present intention
to sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required under the Securities Act of 1933, as amended,
or any other applicable law, regulation or rule of any governmental agency.
15. RESERVATION OF SHARES OF COMMON STOCK. The Company during the
term of this Plan, will at all times reserve and keep available, and will seek
or obtain from any regulatory body having jurisdiction any requisite authority,
in order to issue and sell such number of Shares of its Common Stock as shall
be sufficient to satisfy the requirements of this Plan. Inability of the
Company to obtain from any regulatory body having jurisdiction authority deemed
by the Company's counsel to be necessary for the lawful issuance and sale of any
Shares of its Common Stock hereunder shall relieve the Company of any liability
in respect to the non-issuance or sale of such stock as to which such requisite
authority shall not have been obtained.
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16. MISCELLANEOUS.
(a) No person shall have any claim or right to be granted an Option
under this Plan. The grant of an Option under this Plan shall not confer any
right on the Optionee to continue in the employ of or association with the
Company or limit in any way the right of the Company to terminate such
employment or association.
(b) The Company shall have the right to condition exercise of Options
granted pursuant to this Plan upon satisfactory arrangements to assure that, to
the extent the exercise of such Options shall result in realization by the
person exercising such Options of income subject to a requirement that taxes be
withheld with respect to such income, the amount of such taxes shall be provided
by the Optionee at the time of exercise of the Options or the number of Shares
issuable upon such exercise shall be reduced and withheld to satisfy such tax
obligations.
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GRUBB & ELLIS COMPANY
Fourth Amendment to the
1990 Amended and Restated Stock Option Plan
Grubb & Ellis Company (the "Company"), by resolution of its Board of
Directors and approval of its stockholders, has adopted this Fourth Amendment to
the Company's 1990 Amended and Restated Stock Option Plan, as amended (the
"Plan") pursuant to Section 12(a) of the Plan, effective as of February 1, 1997.
1. The first sentence of Section 5 of the Plan is hereby amended to
read as follows:
"The maximum number of Shares of authorized, but unissued, or
reacquired Common Stock of the Company which may be optioned
and sold under this Plan is 1,800,000 shares."
I hereby certify that the foregoing Fourth Amendment to the Plan was
duly adopted by the Company's Board of Directors on February 27, 1997 and duly
approved by the Company's stockholders on November 20, 1997.
____________________________________
Carol Vanairsdale
Assistant Secretary
GRUBB & ELLIS COMPANY
FIFTH AMENDMENT TO THE
1990 AMENDED AND RESTATED STOCK OPTION PLAN
Grubb & Ellis Company (the "Company"), by resolution of its Board of
Directors and approval of its stockholders, has adopted this Fifth Amendment to
the 1990 Amended and Restated Stock Option Plan, as amended (the "Plan")
pursuant to Section 12(a) of the Plan, effective as of June 20, 1997.
1. The first sentence of Section 5 of the Plan is hereby amended to
read as follows:
"The maximum number of Shares of authorized, but unissued, or
reacquired Common Stock of the Company which may be optioned
and sold under this Plan is 2,000,000 shares."
I hereby certify that the foregoing Fifth Amendment to the Plan was
duly adopted by the Company's Board of Directors on June 20, 1997 and duly
approved by the Company's stockholders on November 20, 1997.
____________________________________
Carol Vanairsdale
Assistant Secretary
PROXY GRUBB & ELLIS COMPANY PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 20, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, being a stockholder of Grubb & Ellis Company (the
"Company") and having received the Notice of Annual Meeting of Stockholders
dated October 9, 1997 and the accompanying Proxy Statement, appoints Robert J.
Walner and Blake W. Harbaugh and each or any of them as Proxy Holders, with full
power of substitution, to represent and vote all the shares of Common Stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held at the Northbrook Hilton Hotel, 2855 North Milwaukee
Avenue, Northbrook Illinois, in the Willow Room on Thursday, November 20, 1997
at 9:00 a.m. or at any and all adjournments thereof, with all powers which the
undersigned would possess if personally present.
The shares represented by this Proxy will be voted in the manner directed
herein by the undersigned. If no direction is made, the Proxy will be voted
"FOR" all nominees listed under the "Election of Directors," all of whom have
been nominated by the Board of Directors, "FOR" the amendment to the Restated
Certificate of Incorporation, "FOR" the employee stock purchase
plan, and "FOR" the amendments to the stock option plan as more fully described
in the Notice of Annual Meeting of Stockholders and the accompanying Proxy
Statement. If any of the nominees listed should become unavailable prior to the
Annual Meeting, the Proxy will be voted for any substitute nominee or nominees
designated by the Board of Directors. The undersigned ratifies and confirms all
that said Proxy Holders or their substitutes may lawfully do by virtue hereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENVELOPE
PROVIDED.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
GRUBB & ELLIS COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors recommends a vote FOR all nominees for Directors and FOR
Proposals 2 and 3.
1. ELECTION OF DIRECTORS - FOR WITHHOLD FOR ALL (Except Nominees
NOMINEES: Neil Young, R. David Anacker, written below)
Lawrence S. Bacow, Joe F. Hanauer, ________________________
C. Michael Kojaian, Sidney J. Lapidus,
Reuben S. Leibowitz, Robert J. McLaughlin,
John D. Santoleri, and Todd A. Williams
2. APPROVAL OF THE AMENDMENT TO THE RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION
3. RATIFICATION OF THE GRUBB & ELLIS EMPLOYEE FOR AGAINST ABSTAIN
STOCK PURCHASE PLAN
4. RATIFICATION OF AMENDMENTS TO THE 1990
AMENDED AND RESTATED STOCK OPTION PLAN FOR AGAINST ABSTAIN
5 . In accordance with the judgments of the
Proxy Holders, upon such other business as
may properly come before the meeting and at any
and all adjournments thereof.
[ ] Mark here for address change and indicate.
Signature:________________________Date:_________
Signature:________________________Date:_________
Please date and sign exactly as your name appears hereon. Joint owners
should each sign. The full title or capacity of any person signing for a
corporation, partnership, trust or estate should be indicated.