SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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GRUBB & ELLIS COMPANY
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[GRUBB & ELLIS LETTERHEAD]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Grubb & Ellis Stockholder:
You are invited to attend the Annual Meeting of Stockholders of Grubb & Ellis
Company (the "Company") to be held at 10:00 a.m., local time, on Friday,
November 16, 2001 in the Broadway Room of the Drake Swiss Hotel, 440 Park Avenue
at 56th Street, New York, New York.
Stockholders of record at the close of business on September 24, 2001 may vote
at the Annual Meeting, and will receive this Notice and the proxy statement,
which are first being mailed on or about October 12, 2001.
A list of the stockholders who are entitled to vote at the meeting will be
available for inspection by any stockholder for any purpose related to the
meeting, during ordinary business hours, for ten days prior to the Annual
Meeting, at the Company's global executive offices, located at 55 East 59th
Street, 12th Floor, New York, New York.
The purposes of the meeting are:
1. To elect seven (7) 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 Grubb & Ellis Employee Stock Purchase
Plan to increase the number of shares authorized for issuance from
750,000 shares to 1,750,000 shares; and
3. To transact any other business properly brought before the meeting.
The meeting will also provide an opportunity to review with you the business of
the Company during the 2001 fiscal year and give you a chance to meet your
directors.
YOUR VOTE IS IMPORTANT TO THE COMPANY. TO BE SURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING, WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT AS SOON AS POSSIBLE IN THE
ENCLOSED REPLY 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,
/s/ Barry M. Barovick
Barry M. Barovick
President and Chief Executive Officer
October 12, 2001
GRUBB & ELLIS COMPANY
2215 SANDERS ROAD, SUITE 400
NORTHBROOK, ILLINOIS 60062
PROXY STATEMENT
TABLE OF CONTENTS
TOPIC PAGE
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QUESTIONS AND ANSWERS ABOUT VOTING 2
ELECTION OF DIRECTORS 5
A. Information About the Board and its Compensation 5
B. Audit Committee Report 6
C. Information About the Nominees for Director 8
APPROVAL OF AN AMENDMENT TO THE GRUBB & ELLIS
EMPLOYEE STOCK PURCHASE PLAN 10
A. The Proposal 10
B. Description of the Plan 10
C. Tax Information 11
STOCK OWNERSHIP INFORMATION 13
A. Stock Ownership Table 13
B. Section 16(a) Beneficial Ownership Reporting Compliance 14
EXECUTIVE OFFICERS 15
A. Information About Executive Officers 15
B. Executive Compensation 16
C. Employment Contracts, and Termination of Employment and
Change-in-Control Arrangements 19
D. Compensation Committee Interlocks and Insider Participation 21
E. Compensation Committee Report on Executive Compensation 21
F. Grubb & Ellis Stock Performance 22
RELATED PARTY TRANSACTIONS 24
APPENDICES 26
Appendix A: Grubb & Ellis Company Audit Committee Charter,
as revised March 20, 2001 26
Appendix B: Amendment No. 1 to the Grubb & Ellis Employee Stock
Purchase Plan, as amended and restated as of
January 1, 1999 30
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QUESTIONS AND ANSWERS ABOUT VOTING
1. Q: WHAT WILL I BE VOTING ON?
A: (1) the election of seven directors;
(2) an amendment to the Grubb & Ellis Employee Stock Purchase Plan; and
(3) any other business properly before the meeting.
2. Q: HOW ARE DIRECTORS NOMINATED?
A: Our Bylaws provide that nominations for director are made by written
notice to the Secretary of Grubb & Ellis Company (the "Company") at
least 14 days before the stockholders' meeting at which directors are to
be elected. The Board of Directors (the "Board") nominated the
candidates listed in this proxy statement at a regular Board meeting,
and submitted the required notice. The Board has no reason to believe
that any nominee will be unable to serve as a director of the Company.
If someone is nominated and becomes unable to serve, then your signed
proxy card will authorize Robert J. Walner and Ian Y. Bress, officers of
the Company who are the proxy holders, to nominate someone else.
3. Q: WHAT OTHER BUSINESS WILL BE ACTED UPON AT THE ANNUAL MEETING?
A: We know of no other business for the meeting. Your signed proxy card
will authorize the proxy holders to vote on your behalf in their
discretion on any other business that may properly be brought before the
meeting.
4. Q: WHO IS SOLICITING MY VOTE AND HOW MUCH DOES IT COST THE COMPANY?
A: Our Board of Directors is asking you to vote in favor of the nominees
for director who were selected by the Board and identified in this proxy
statement, and to vote in favor of the proposed amendment to the Grubb &
Ellis Employee Stock Purchase Plan. Morrow & Co., Inc. was engaged to
assist in distribution of the proxy materials to holders of stock
brokerage accounts, at a fee of $2,000 plus expenses estimated at
$2,000. Also, our employees and directors may solicit proxies as part of
their assigned duties, at no extra compensation. The Company will pay
the expenses related to this proxy solicitation.
5. Q: WHAT INFORMATION WILL I RECEIVE WITH THIS SOLICITATION?
A: You should have received with this proxy statement our Annual Report to
Stockholders for the 2001 fiscal year. Stockholders may request another
copy of the Annual Report from Investor Relations, Grubb & Ellis
Company, 2215 Sanders Road, Suite 400, Northbrook, IL 60062. In
addition, you may download the Annual Report from the Company's website
on the Internet at www.grubb-ellis.com.
6. Q: WHO HAS THE RIGHT TO VOTE?
A: Stockholders as of the close of business on September 24, 2001 (the
"Record Date") have the right to vote. On that date, there were
13,517,380 outstanding shares of common stock of the Company. Each share
is entitled to one vote. A majority of the outstanding shares is a
quorum. NOTE: references to "shares," "common stock" or "stock"
elsewhere in this proxy statement mean shares of common stock of the
Company.
7. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: You should vote on each proxy card you receive. If you have an account
"on record" with Computershare Investor Services, L.L.C., our stock
registrar and transfer agent ("Computershare"), or if you hold Grubb &
Ellis shares in your 401(k) plan account, you
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will receive a proxy card with a reply envelope addressed to
Computershare. For any accounts held in different ways, such as jointly
with another person or in trust, you will receive separate proxy cards.
If you have more than one account at Computershare and wish to
consolidate the accounts, or if you share the same address as other
Grubb & Ellis stockholders and wish to receive only one set of
stockholder materials, such as proxy statements and annual reports to
stockholders for your household, please call Shareholder Services at
Computershare: Ph. (312) 360-5100. If you hold shares in a stock
brokerage account, you will receive a proxy card or information about
other methods of voting from your broker, and you must send your vote to
your broker according to the broker's instructions. If you hold shares
in our Employee Stock Purchase Plan, you will receive voting materials
directly from E*TRADE, and you must send your vote back to E*TRADE (as
you would for any stock brokerage account). If you do not vote your
401(k) plan shares, the plan trustee, Fidelity Management Trust Company,
will not vote your shares.
8. Q: HOW DO I VOTE?
A: If you are a record stockholder having an account at Computershare, or
if you have Grubb & Ellis shares in your 401(k) plan account, you can
vote any of these ways:
(a) RETURN THE PROXY CARD: Mark the boxes that show how you want to
vote, sign and date each proxy card you receive and return it in the
prepaid envelope. If you return your signed proxy card but do not
mark the boxes showing how you wish to vote, your shares will be
voted FOR the nominees listed on the card and FOR the amendment to
the Grubb & Ellis Employee Stock Purchase Plan.
(b) BY TELEPHONE: Call toll-free 1-877-265-9598 in the United States or
Canada any time prior to 12:00 midnight, Central Time, on November
15, 2001 from a touchtone telephone. Enter the 6-digit control
number from your proxy card, then follow the instructions to cast
your vote. Do not mail back your proxy card.
(c) ON THE INTERNET: Go to the following website prior to 12:00
midnight, Central Time, on November 15, 2001:
www.computershare.com/us/proxy. Enter the information requested on
your computer screen, including your 6-digit control number from
your proxy card, then follow the instructions on your screen to cast
your vote. Do not mail back your proxy card.
CANCELING YOUR VOTE: You can cancel your vote by mailing another proxy
card with a later date, telephoning to re-vote, or logging onto the
Internet and re-voting. You can also:
(1) attend the meeting and vote by ballot; or
(2) send written notice to the Secretary of the Company canceling
your vote.
If you hold shares in a brokerage account, you must follow the
instructions you received with this proxy statement for voting and/or
cancelling your vote.
9. Q: WHO WILL COUNT THE VOTES?
A: Computershare will act as inspector of election and tabulate the votes.
10. Q: WHAT VOTE IS NEEDED TO ELECT A DIRECTOR?
A: A vote in favor of a nominee by a plurality of the shares voting at the
meeting is needed to elect a director. Cumulative voting is not
permitted. Where a proxy card has been voted "abstain," "withhold
authority," or "broker non-vote," the shares are counted for quorum
purposes, but are not considered cast for voting on a proposal or an
election.
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"Broker non-vote" means that shares are held by a broker or in nominee
name and the broker or nominee has signed and returned a proxy card to
us, but for which the broker has no authority to vote because no
instructions have been received from its customer.
11. Q: WHAT VOTE IS NEEDED TO APPROVE THE AMENDMENT TO THE GRUBB & ELLIS
EMPLOYEE STOCK PURCHASE PLAN?
A: A vote in favor of the proposal by a majority of the outstanding shares
is needed to adopt the amendment.
12. Q: DO ANY STOCKHOLDERS HAVE AGREEMENTS ABOUT HOW THEY WILL VOTE THEIR
SHARES?
A: Yes. Here is some information about two voting agreements involving
certain principal stockholders and directors of the Company.
There is an agreement ("1997 Voting Agreement") dated January 24, 1997,
among Warburg, Pincus Investors, L.P. ("Warburg"); C. Michael Kojaian, a
director of the Company, and Mike Kojaian (collectively, the "Kojaian
Investors"); and The Goldman Sachs Group, Inc. ("GS Group"), which was
entered into in connection with certain financing transactions of the
Company in 1996 and 1997. Under this agreement, the parties agreed to
vote all of their shares of common stock for one director nominee
designated by the Kojaian Investors ("Kojaian Nominee"), one director
nominee designated by GS Group ("Goldman Nominee"), and all director
nominees designated by Warburg ("Warburg Nominees"). The 1997 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 Goldman Nominee must be an
employee of Archon Group, L.P. or Goldman, Sachs & Co. ("Goldman
Sachs"), or an affiliate of either firm. In order for the parties to
this agreement to have the right to designate nominees, they must
beneficially own the following minimum amounts of common stock: the
Kojaian Investors or a controlled transferee (1,250,000 shares); Warburg
(5,509,169 shares); and GS Group (1,250,000 shares). For the 2001
election of directors, Reuben S. Leibowitz and Ian C. Morgan 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
Goldman Nominee.
A voting agreement entered into between Warburg and the Company in
December 1997 ("Warburg Voting Agreement") provides that any time a
matter is brought to a vote of our stockholders and Warburg holds more
than 50% of the voting power of our common stock entitled to vote on the
matter, then Warburg will vote its shares up to 50% of such voting power
(the "Limit") in its discretion, subject to the 1997 Voting Agreement,
and any shares in excess of the Limit will be voted in the same
proportion as the other stockholders vote their shares.
See also "Stock Ownership Information."
To our knowledge, Warburg, the Kojaian Investors and GS Group intend to
vote all of their shares of common stock in favor of all nominees for
director listed in this proxy statement, and in favor of the amendment
to the Grubb & Ellis Employee Stock Purchase Plan. Together, they have
the power, without the vote of other stockholders, to elect all nominees
to the Board and to approve the amendment.
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13. Q: HOW CAN I AS A STOCKHOLDER ARRANGE FOR A PROPOSAL TO BE INCLUDED IN NEXT
YEAR'S COMPANY PROXY STATEMENT?
A: For your proposal to be considered for inclusion in NEXT YEAR's proxy
statement, you can submit a proposal in writing to our Corporate
Secretary at our headquarters by June 14, 2002. If you are eligible to
submit the proposal, and if it is an appropriate proposal under proxy
rules of the Securities and Exchange Commission ("SEC") and our Bylaws,
it will be included.
14. Q: WILL MY PROXY CONFER DISCRETIONARY AUTHORITY TO VOTE ON SHAREHOLDER
PROPOSALS NEXT YEAR?
A: If we receive notice of a stockholder proposal after June 14, 2002 and
before August 28, 2002, then the proposal does not need to be included
in next year's proxy statement and the proxy holders would have
discretionary authority to vote on the matter only under certain
circumstances, and only if the matter is included in the proxy
statement. If we receive notice of a stockholder proposal after August
28, 2002, then the proxy holders CAN vote on such a proposal in their
discretion based upon the signed proxy cards which have been returned to
us, but the matter will not be discussed in the proxy statement and will
not be listed on the proxy card (because the submission deadline will
have been missed).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A. INFORMATION ABOUT THE BOARD AND ITS COMPENSATION
The Board held twelve meetings during the fiscal year ended June 30, 2001. Each
incumbent director attended at least 75% of the meetings of the Board and any
Board committees on which he served. Robert J. McLaughlin resigned as a member
of the Board effective March 31, 2001. Barry M. Barovick was elected as a
director by the Board effective May 15, 2001, in connection with his election as
President and Chief Executive Officer of the Company. The Board has standing
Audit and Compensation Committees, which are described below, and does not have
a Nominating Committee.
COMPENSATION OF DIRECTORS. Only outside directors (who are unaffiliated with the
Company as officers or representatives of principal stockholders) receive
compensation for serving on the Board and on its committees. Such compensation
currently consists of an annual retainer fee of $20,000, a fee of $1,500 for
each Audit Committee meeting attended, and a fee of $1,000 for each Board or
other committee meeting attended. These fees are set by the Board. 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, and an option to purchase 8,000 shares of common stock upon
successive fourth-year anniversaries of service. The exercise prices of the
options are equal to market value on such dates. Directors other than members of
the Compensation Committee are also eligible to receive stock options under the
1990 Amended and Restated Stock Option Plan.
COMPENSATION COMMITTEE. The functions of the Compensation Committee are the
approval of compensation arrangements for our executive officers, administration
of certain stock option and other compensation plans, making recommendations to
the Board regarding the adoption of equity compensation plans in which directors
and officers are eligible to participate and the
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award of equity incentives to our officers. The current member of the
Compensation Committee is Reuben S. Leibowitz. Mr. McLaughlin, who resigned as a
director, was also a member of this Committee. During the 2001 fiscal year, the
Compensation Committee met four times.
B. AUDIT COMMITTEE REPORT
THE FOLLOWING AUDIT COMMITTEE REPORT IS NOT TO BE DEEMED TO BE "SOLICITING
MATERIAL" OR TO BE "FILED" WITH THE SEC OR SUBJECT TO REGULATION 14A OR 14C OR
TO THE LIABILITIES OF SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT") EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
REQUESTS THAT SUCH INFORMATION BE TREATED AS SOLICITING MATERIAL OR SPECIFICALLY
INCORPORATES IT BY REFERENCE INTO ANY FILING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT") OR THE EXCHANGE ACT.
COMPOSITION OF THE COMMITTEE. The Audit Committee of the Board is composed of at
least three independent directors. The current members of the Audit Committee
are R. David Anacker, Chairman and Joe F. Hanauer. Mr. McLaughlin, who resigned
as a director, was also a member of this Committee. The Company intends to fill
this vacancy as soon as practicable. The Board has determined that the members
of the Audit Committee are independent, financially literate and have financial
management expertise under the listed company standards of the New York Stock
Exchange ("NYSE"), on which the Company's common stock is listed. Because the
NYSE requires that each listed company have an Audit Committee composed of at
least three independent directors, the Company's Audit Committee is not
currently in compliance with those standards.
CHARTER AND RESPONSIBILITIES OF THE COMMITTEE. The Audit Committee operates
under a written charter adopted by the Board of Directors. The charter of the
Audit Committee was revised effective March 20, 2001 and is included in this
proxy statement as Appendix A.
The primary function of the Committee is to provide assistance to the Board in
fulfilling its oversight responsibility to the stockholders and others relating
to the corporate accounting functions, the systems of internal controls, and the
quality and integrity of the financial reports of the Company. The
responsibilities of the Committee include recommending to the Board the
appointment of independent accountants as auditors; approval of the scope of the
annual audit; and review of: a) the independence and performance of the
auditors; b) the audit results and compliance with the auditors'
recommendations; and c) financial reports to stockholders. In addition, the
Committee approves the selection of any vendor utilized for internal auditing;
and monitors the Company's internal audit function, its corporate accounting
function and the effectiveness of internal controls, and compliance with certain
aspects of the Company's conflicts-of-interest policy.
The independent accountants are responsible for performing an independent audit
of the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. Management is
responsible for the Company's internal controls and the financial reporting
process. The Audit Committee is responsible for monitoring these processes.
BUSINESS OF THE COMMITTEE FOR THE 2001 FISCAL YEAR. The Audit Committee met four
times during the 2001 fiscal year. The meetings were designed to facilitate
communications between the Audit Committee, management, the internal auditors,
and the Company's independent public accountants, Ernst & Young LLP. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles in the United States. The Audit Committee believes that management
maintains an
6
effective system of internal controls that results in fairly presented
consolidated financial statements. The Audit Committee reviewed and discussed
the audited consolidated financial statements for the 2001 fiscal year with
management and the independent accountants.
The Audit Committee also discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended.
The Audit Committee has received and reviewed the written disclosures and the
letter from the independent accountants, Ernst & Young LLP, as required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees. Additionally, the Audit Committee has discussed with Ernst & Young
LLP the issue of its independence from the Company, and considered the
compatibility of the non-audit services with the auditors' independence.
In reliance on the reviews and the discussions referred to above, the Audit
Committee recommended to the Board of Directors and the Board approved the
inclusion of the audited consolidated financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2001 which was
filed with the SEC.
THE AUDIT COMMITTEE
R. David Anacker, Chairman
Joe F. Hanauer
THE COMPANY'S AUDITORS. Ernst & Young LLP ("Ernst & Young"), independent public
accountants, served as our auditors for the 2001 and 2000 fiscal years. It is
anticipated that Ernst & Young will be appointed by the Board as our auditors
for the 2002 fiscal year as well. Representatives of Ernst & Young are expected
to attend the Annual Meeting and will be available to answer questions. They
will have an opportunity to make a statement if they wish. Ernst & Young billed
the Company the fees set forth below for services rendered during the fiscal
year ended June 30, 2001.
Audit Fees $233,175
Financial Information Systems Design
and Implementation Fees $ 0
All Other Fees:
Audit Related Services $ 62,475(1)
Non-Audit Related Services $160,904(2) $223,379
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Total: $456,554
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(1) Audit related services generally include services in connection with
pension plan audits, registration statements filed with the SEC and other
transactions with respect to the Company's securities, business
acquisitions and accounting consultations.
(2) These services were tax-related services.
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C. 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. 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 nominee will be unable to serve as a director of the Company.
The term of office of each nominee who is elected extends until the annual
stockholders' meeting in 2002 and until his successor is elected and qualified.
R. DAVID ANACKER 66, 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 Grubb & Ellis Management Services, Inc.
("Management Services"), a subsidiary of the Company,
from August 1992 to July 1994. Mr. Anacker has served as
a director of the Company since May 1994.
BARRY M. BAROVICK 52, has served as President, Chief Executive Officer and
a director of the Company since May 2001. Prior to
joining the Company, Mr. Barovick was responsible for
managing business development, new services and product
development with the Real Estate Advisory Services Group
of Ernst & Young, where he served as Partner from
October 1993 to May 2001 and Senior Manager from October
1991 to September 1993. Prior to joining Ernst & Young,
Mr. Barovick was a principal at Barovick and Associates,
a privately held real estate consulting firm located in
Fair Lawn, New Jersey, responsible for corporate real
estate strategic services from 1983 to 1991. Mr.
Barovick also served as director of the Corporate
Geographic Service Group at Landauer Associates, Inc.
("Landauer"), a real estate consulting firm located in
New York City, from 1981 to 1982. The Company purchased
certain assets of Landauer in July 1999.
JOE F. HANAUER 64, 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
Management Services 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
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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, homestore.com, Inc., and
LoopNet, Inc. Mr. Hanauer has served as a director of
the Company since January 1993.
C. MICHAEL KOJAIAN 39, the Kojaian Nominee, has been Executive Vice
President, a director and a shareholder of Kojaian
Management Corporation, a real estate investment firm
headquartered in Bloomfield Hills, Michigan, since
January 1988. He is also a director of Flagstar Bancorp,
Inc. and JPE, Inc., d/b/a ASCET, Inc. Mr. Kojaian has
served as a director of the Company since he was first
elected in December 1996 as a representative of the
Kojaian Investors.
REUBEN S. LEIBOWITZ 54, a Warburg Nominee, has served as Chairman of the
Board of Directors of the Company since May 2000. He is
also a Managing Director and member of Warburg Pincus
LLC ("Warburg Pincus"), a private equity investment firm
located in New York City. Warburg Pincus manages
Warburg, the Company's principal stockholder. Mr.
Leibowitz is also a general partner of Warburg, Pincus &
Co. ("WP"), a firm which acts as general partner of
Warburg. He has been associated with Warburg Pincus
since 1984. He is also a director of Chelsea GCA Realty,
Inc., Price Legacy Inc. and a number of private
companies. Mr. Leibowitz has served as a director of the
Company since he was first elected in January 1993 as a
representative of Warburg.
IAN C. MORGAN 30, a Warburg Nominee, has been an Associate at Warburg
Pincus since May 2000. He also serves as a director of
WP Storage Mart, a Warburg Pincus portfolio company
which invests in and develops self-storage facilities,
and as Vice President of WP Storage Inc., a real estate
investment trust sponsored by an affiliate of Warburg
Pincus. From July 1999 to May 2000, Mr. Morgan was an
Associate in the Finance Group of Lend Lease Real Estate
Investments in New York City. During the summer of 1998,
he was a Summer Associate in the Principal Transaction
group of Credit Suisse First Boston, in New York. From
January 1994 through December 1997, he served as a
Supervisor in the Corporate Financial Services division
of Coopers & Lybrand in Riga, Latvia. Mr. Morgan has
served as a director of the Company since he was first
elected in November 2000 as a representative of Warburg.
TODD A. WILLIAMS 41, the Goldman Nominee, has been a Managing Director
since December 1997 within the Real Estate Principalling
Investment Area ("REPIA") of Goldman Sachs & Co., an
investment banking firm located in New York City which
is an affiliate of a principal stockholder of the
Company ("Goldman Sachs"), and a Vice President prior to
that time. He is responsible for portfolio management,
development/redevelopment and disposition of investments
of Whitehall Street Real Estate Funds, a series of funds
sponsored by Goldman Sachs ("Whitehall"), and the
Goldman Sachs Emerging Markets
9
Fund. Prior to the formation of REPIA in 1991, Mr.
Williams served as an associate of the Real Estate
Investment Banking Group of Goldman Sachs, in New York
and Los Angeles. Mr. Williams serves on the Whitehall
Investment Committee and as a director of Archon Group,
L.P., Wellsford Commercial Properties Trust, Troon Golf
Corp., and Bangkok Capital Alliance Co., Ltd. Mr.
Williams has served as a director of the Company since
he was first elected in January 1997 as a representative
of Goldman Sachs.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ELECTION OF ALL NOMINEES TO THE BOARD OF DIRECTORS.
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE GRUBB & ELLIS
EMPLOYEE STOCK PURCHASE PLAN
A. THE PROPOSAL
Our Board of Directors has recommended that the stockholders adopt an amendment
to the Grubb & Ellis Employee Stock Purchase Plan (the "Stock Plan") that
increases the number of shares authorized for issuance under the Stock Plan from
750,000 shares to 1,750,000 shares (the "Amendment").
The Stock Plan was adopted by our stockholders effective August 1, 1997. It was
amended effective July 1, 1998 to include bonuses, in addition to base pay and
commissions, in the definition of "compensation" that can be used to purchase
stock. The Stock Plan was further amended and restated effective January 1, 1999
to clarify the definition of "compensation" so that stock could be purchased
from gross compensation paid instead of based upon the "rate of pay" of a
participating employee. The Stock Plan provides for the purchase of shares of
common stock of the Company by employees of the Company at a discount from
market price. The stock is paid for by direct payroll deductions.
Since its adoption, 701,986 shares have been purchased under the Stock Plan. Our
Board believes that having an employee stock purchase plan is an important
element in attracting and retaining high-quality employees for us. Having such a
plan is also a significant way to motivate our employees to perform in the best
interests of the Company and our stockholders, because it aligns employees'
interests with those of the stockholders and gives employees a stake in the
success of the Company.
B. DESCRIPTION OF THE PLAN
The following summary of the Stock Plan is qualified in its entirety by the
complete text of the plan, a copy of which has been filed with the SEC and which
may also be obtained from us by any stockholder. In addition, the Amendment is
attached to this proxy statement as Appendix B.
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").
10
The Stock Plan is administered by the Benefits Committee of the Company, which
is composed of members of management. Purchases of shares are made pursuant to
sequential, three-month offering periods ("Offering Periods"), beginning on the
first day of each of our fiscal quarters.
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 compensation. An
employee may withdraw from participation at any time. In order to withdraw
during an Offering Period, an employee must give notice to the Company by the
15th day of the last month of such Offering Period. No employee may purchase
shares having a value of more than $25,000 in any year, and no employee may
purchase shares under the Stock Plan if, after giving effect to the purchase,
the employee would own 5% or more of the outstanding common stock. Also, there
is a limit of 5,000 shares purchasable by each participant during each Offering
Period. Shares are purchased automatically on the last day of each Offering
Period, for a price set 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 our
common stock on the NYSE Composite Tape for the five preceding trading days.
If any right to purchase shares under the Stock Plan expires or is terminated
for any reason, the shares allocated for that purchase will return to the pool
of shares available for 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. If a participant terminates
participation or withdraws from the Stock Plan, the payments credited to his or
her account are returned to the participant (or his or her personal
representative), and the participant's rights under the Stock Plan 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 eligibility provisions, or c) change the plan
in a way to disqualify it under Section 423(b) of the Code, must be approved by
stockholders.
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 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.
C. TAX INFORMATION
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 ("ERISA"). The following summary is for general information only and is
limited to the federal income tax consequences of participation in the Stock
Plan, 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 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 within two years from the date of grant and one year from the date of
exercise (the "holding period"), the lesser of (1) the excess of the fair market
value of the shares
11
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 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 20, 2001, approximately 3,600 employees, including all of the
Company's executive officers, were eligible to participate in the Stock Plan.
Non-employee directors may not participate in the Stock Plan. No executive
officers participated in the Stock Plan during the Offering Period which ended
September 30, 2001, or elected to participate in the current Offering Period
which began October 1, 2001. Because the price of the shares to be purchased is
not established until the end of each 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
participants upon approval of the Amendment are not determinable at the date of
this proxy statement. The closing market price of the common stock on the NYSE
Composite Tape on October 5, 2001 was $3.25 per share.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE PROPOSED AMENDMENT TO THE GRUBB & ELLIS EMPLOYEE STOCK PURCHASE PLAN.
12
STOCK OWNERSHIP INFORMATION
A. STOCK OWNERSHIP TABLE
The following table shows the share ownership as of August 20, 2001 by persons
known by us to be beneficial holders of more than 5% of our outstanding common
stock, directors, named executive officers, and all current directors and
executive officers as a group. Unless otherwise noted, the persons listed have
sole voting and disposition powers over the shares held in their names, subject
to community property laws if applicable.
AMOUNT AND PERCENT PERCENT OF
NATURE OF BENEFICIAL OF VOTING
OWNERSHIP CLASS(1) POWER(2)
--------------------------------------------------------------------------------
PRINCIPAL STOCKHOLDERS:
--------------------------------------------------------------------------------
Warburg, Pincus Investors, L.P. 7,199,260(3) 48.5% 43.4%
The Goldman Sachs Group, Inc. 1,609,355(4) 11.9% 11.9%
C. Michael Kojaian (also a director) 850,842(5)(10) 6.3% 6.3%
Mike Kojaian 850,844(5) 6.3% 6.3%
J.P. Morgan Chase & Co. 1,086,409(6) 8.0% 8.0%
--------------------------------------------------------------------------------
DIRECTORS:
--------------------------------------------------------------------------------
R. David Anacker 12,000(7) * *
Barry M. Barovick (also CEO) 125,000 * *
Joe F. Hanauer 678,744(7)(8) 4.9% 2.3%
Reuben S. Leibowitz 4,508(3)(9)(10) * *
Ian C. Morgan 0(10) -- --
Todd A. Williams 0(4)(10) -- --
--------------------------------------------------------------------------------
EXECUTIVE OFFICERS NAMED IN THE
SUMMARY COMPENSATION TABLE:
Maureen A. Ehrenberg 107,318(7) * *
Robert J. Walner 114,837(7) * *
John G. Orrico 119,141(7) * *
Brian D. Parker 7,050 * *
Blake W. Harbaugh 22,228(7) * *
Douglas P. Frye 22,325 * *
--------------------------------------------------------------------------------
ALL CURRENT DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (11 PERSONS): 1,893,249(7)(9)(10) 13.5% 9.9%
--------------------------------------------------------------------------------
----------
* Does not exceed 1.0%.
(1) The percentage of shares of Company common stock shown for each person in
this column assumes that such person, and no one else, has exercised any
currently outstanding warrants or options held by him or her.
(2) The percentage of voting power means the amount of common stock actually
held by each person on August 20, 2001, in relation to the total number of
shares of common stock held by all stockholders on that date. In this
method, no options or warrants are counted either for that person or
others. The Record Date for purposes of voting at the 2001 Annual Meeting
is September 24, 2001, and therefore, the voting power may be different on
that date.
(3) Warburg, Pincus Investors, L.P., 466 Lexington Avenue, New York, NY 10017.
At August 20, 2001, Warburg beneficially owned 7,199,260 shares of common
stock through its ownership of 5,861,902
13
shares of common stock and 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").
Warburg Pincus LLC, a New York limited liability company ("Warburg
Pincus"), manages Warburg. Lionel I. Pincus is the managing partner of WP
and the managing member of Warburg Pincus and may be deemed to control both
of them. Mr. Leibowitz, a director of the Company, is a Managing Director
and member of Warburg Pincus and a general partner of WP. As such, he may
be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 under the Exchange Act) in an indeterminate portion of the
shares of common stock beneficially owned by Warburg. Mr. Leibowitz
disclaims beneficial ownership of these shares.
(4) The Goldman Sachs Group, Inc., 85 Broad Street, New York, NY 10004. Shares
reported for GS Group include 112,655 shares of common stock held by Archon
Group, L.P. ("Archon"). Archon is a majority-owned subsidiary of GS Group.
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 Goldman
Sachs, an officer of AGP, and a director of Archon, disclaims beneficial
ownership of shares beneficially owned by GS Group.
(5) Michael Kojaian and Mike Kojaian, c/o the Kojaian Companies, 39400 Woodward
Avenue, Suite 250, Bloomfield Hills, MI 48304. Pursuant to the rules
established under the Exchange Act, the Kojaian Investors may be deemed to
be a "group," as defined in Section 13(d) of such Act. Each of the Kojaian
Investors does not affirm the existence of such a group and disclaims
beneficial ownership of shares of common stock solely owned by the other
Kojaian Investor.
(6) J.P. Morgan Chase & Co., 270 Park Avenue, 39th Floor, New York, NY 10017.
The number of shares are the shares reported as beneficially owned as of
June 30, 2001 pursuant to the quarterly Form 13F filing of J.P. Morgan
Chase & Co. J.P. Morgan Chase & Co. beneficially owns the shares reported
on behalf of itself and its wholly owned subsidiaries, Morgan Guaranty
Trust Co. of New York, Robert Fleming, Inc., and Robert Fleming Holdings
Ltd.
(7) Includes options under our stock option plans which were exercisable at
August 20, 2001 or within sixty days thereafter, for the following numbers
of shares: Mr. Anacker - 4,000; Mr. Hanauer - 18,085; Ms. Ehrenberg -
103,272; Mr. Walner - 80,877; Mr. Orrico - 114,500; Mr. Harbaugh - 21,937;
and all current directors and executive officers as a group - 206,234.
(8) At August 20, 2001, Mr. Hanauer beneficially owned 678,644 shares of common
stock, which consisted of the following: his direct ownership of 255,579
shares of common stock and an option granted under a Company stock option
plan which is exercisable for 18,085 shares; and his indirect ownership of
a) currently exercisable warrants to purchase an aggregate of 348,541
shares of common stock held in a trust of which Mr. Hanauer is the trustee
and he, his wife and children are beneficiaries; and b) 56,539 shares held
by a charitable remainder trust of which Mr. Hanauer and his wife are
beneficiaries during their lives, and his daughter is a trustee. Mr.
Hanauer disclaims beneficial ownership of the 56,539 shares held in the
charitable remainder trust, except to the extent of his pecuniary interest
in them.
(9) Includes 1,288 shares owned by Mr. Leibowitz' mother-in law and wife, and
3,220 shares owned by a trust in which the same relatives are trustees. Mr.
Leibowitz disclaims beneficial ownership of all 4,508 shares.
(10) Excludes shares beneficially owned by: a) Warburg as to which Messrs.
Leibowitz and Morgan disclaim beneficial ownership; b) GS Group as to which
Mr. Williams disclaims beneficial ownership; and c) Mike Kojaian, as to
which Mr. C. Michael Kojaian disclaims beneficial ownership; as described
above.
B. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers,
the chief accounting officer and 10+% stockholders ("Insiders") to file with the
SEC and the NYSE reports showing their ownership and changes in ownership of
Company securities, and to send copies of
14
these filings to us. To our knowledge, based upon review of copies of such
reports we have received and based upon written representations that no other
reports were required, during the year ended June 30, 2001, the Insiders
complied with all Section 16(a) filing requirements applicable to them, except
that Reuben Leibowitz filed an amended Form 4 to report two transactions that
should have been reported on the original Form 4; and Joe F. Hanauer filed a
Form 5 to report a stock option exercise that should have been reported a month
earlier on Form 4.
EXECUTIVE OFFICERS
A. INFORMATION ABOUT CURRENT EXECUTIVE OFFICERS
In addition to Mr. Barovick, the following are the executive officers of
the Company:
IAN Y. BRESS 45, has served as Chief Financial Officer of the Company
since June 2001. From October 2000 to June 2001, Mr.
Bress served as Chief Financial Officer of Wall Street
Strategies, a publicly held financial services firm
specializing in providing equity research to subscribers
which is located in New York City. From January 1999 to
October 2000, Mr. Bress was President of East Coast
operations for HealthFusion.com, a web-based healthcare
firm located in California. In 1984, Mr. Bress
co-founded a New York based CPA and consulting firm, in
which he served as Senior Managing Partner from 1984 to
1998.
MARK R. COSTELLO 41, has served as Chief Operating Officer of the Company
since July 2001. From July 1997 to July 2001, he served
as the East Coast Director for Ernst & Young's Real
Estate Advisory Services Group. Mr. Costello was
executive managing director of the New York Tri-State
Region of CB Richard Ellis Services, Inc., headquartered
in Los Angeles, California, from June 1995 to July 1997.
From June 1988 to June 1995, Mr. Costello was Regional
Vice President with Louis Dreyfus Property Group, a real
estate development firm located in New York City.
MAUREEN A. EHRENBERG 42, has served as Executive Vice President of the
Company since November 2000, and as Senior Vice
President of the Company from May 1998 to November 2000.
She has also served as President of Grubb & Ellis
Management Services, Inc., a wholly owned subsidiary of
the Company, since February 1998. From May 2000 to May
2001, she served as a member of the Office of the
President of the Company. She also serves as a director
and/or officer of certain subsidiaries of the Company.
From July 1997 to February 1998 Ms. Ehrenberg served as
Central Regional President of Management Services. From
September 1991 to June 1997, she was associated with
PREMISYS Real Estate Service Inc. ("PREMISYS"), a
property management firm headquartered in Houston,
Texas, serving as Regional Vice President for the
Midwest from June 1992, and as District Vice President
prior to that time. PREMISYS was acquired by Cushman &
Wakefield in September 1997. From January 1989 to
September 1991, Ms. Ehrenberg served as Regional Vice
President
15
of the Midwest and West Regions of First Office
Management, a subsidiary of The Equity Group located in
Chicago, Illinois. From July 1986 to January 1989, she
served as Vice President Asset Management for Rubloff
Inc. in Chicago, and from December 1983 to June 1986 she
was associated with The Balcor Company, the real estate
investment subsidiary of American Express Company
located in Skokie, Illinois, serving, from latest to
earliest, as Director of Financial Training, District
Manager Trainee and Commercial Financial Analyst.
ROBERT J. WALNER 54, has served as Chief Administrator Officer of the
Company since July 2001. He has also served as Senior
Vice President, Chief Legal Officer 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 Management
Services, serving as a director since May 1997 and as a
Senior Vice President since October 1996. From August
1992 to January 1994, Mr. Walner was engaged in a
private law and consulting practice, and was of counsel
to a Chicago-based law firm specializing in state and
federal class action litigation on a national basis.
From November 1979 to August 1992, he was Senior Vice
President, General Counsel and Corporate Secretary of
The Balcor Company, the real estate investment
subsidiary of American Express Company located in
Skokie, Illinois.
B. EXECUTIVE COMPENSATION
The table below shows compensation earned, including deferred compensation, for
services in all capacities with the Company and its subsidiaries for the fiscal
years ended June 30, 2001, 2000 and 1999 by the following executives:
(a) the persons who served as Chief Executive Officer or in a similar
capacity for the 2001 fiscal year;
(b) each of the four most highly-compensated executive officers of the
Company who were serving as executive officers at June 30, 2001, other
than the Chief Executive Officer; and
(c) two other persons who served as executive officers during the 2001
fiscal year and for whom information would have been provided had they
been serving as executive officers at the end of the fiscal year
(Messrs. Parker and Frye).
16
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ------------
Securities
Underlying All Other
Salary Bonus Options/SARs Compensation
Name and Principal Position(1) Year ($) ($)(2) (#)(3) ($)(4)
--------------------------------------- ---- -------- -------- ------------ ------------
Barry M. Barovick 2001 125,000 250,000 500,000 0
President and Chief Executive 2000 -- -- -- --
Officer(5) 1999 -- -- -- --
Maureen A. Ehrenberg 2001 308,000 435,000 0 3,000
Executive Vice President, and 2000 288,000 185,000 112,000 3,000
President, Management Services 1999 263,000 150,000 12,000 3,000
Robert J. Walner 2001 205,000 145,000 0 3,000
Chief Administrative Officer 2000 200,000 74,000 15,000 3,000
and Chief Legal Officer 1999 183,000 83,000 15,000 3,000
Douglas P. Frye 2001 176,000 210,000 0 3,000
Former President, 2000 275,000 137,000 50,000 3,000
Financial Services Group 1999 225,000 135,000 25,000 3,000
Blake W. Harbaugh 2001 167,500 127,000 0 312,000(6)
Former Senior Vice President 2000 148,000 45,000 40,000 3,000
and former Chief Financial Officer 1999 119,000 30,000 10,000 2,000
John G. Orrico 2001 338,000 565,000 0 482,000(7)
Former President, Real Estate 2000 313,000 185,000 112,000 2,000
Advisory Services 1999 275,000 150,000 12,000 3,000
Brian D. Parker 2001 257,000 350,000 0 396,000(8)
Former Executive Vice President 2000 213,000 148,000 50,000 3,000
1999 188,000 100,000 25,000 3,000
----------
(1) Mr. Barovick was elected a director and appointed President and Chief
Executive Officer as of May 15, 2001. Messrs. Orrico and Parker and Ms.
Ehrenberg were appointed by the Board as members of the Office of the
President on May 31, 2000 and served in that capacity until Mr. Barovick's
appointment. Ms. Ehrenberg was appointed Executive Vice President of the
Company in November 2000 and President, Management Services in February
1998. Prior to that time, she served as Central Regional President of
Management Services. Mr. Orrico was appointed President, Real Estate
Advisory Services in February 1998. He served as President, Transaction
Services, Eastern Region from July 1997 to February 1998. The resignation
dates of Messrs. Orrico and Parker are August 31, 2001 and June 8, 2001,
respectively. Mr. Harbaugh resigned as Chief Financial Officer effective
June 18, 2001 and as Senior Vice President effective September 22, 2001
when his employment with the Company terminated. He was designated an
executive officer through August 4, 2001. Mr. Frye resigned effective
January 31, 2001.
(2) Except for Mr. Barovick, and except as set forth in this footnote, the
bonus compensation was paid in the fiscal year indicated for services
rendered during the previous calendar year. The following executive
officers also received bonuses in September 2000 as consideration for
remaining in the employ of the Company through August 31, 2000, which
represented 20% of their respective annual base salaries, under the
Executive Incentive Bonus and Severance Plan ("Executive Plan"), which is
described below: Ms. Ehrenberg ($60,000); Mr. Walner ($40,000); Mr. Orrico
($65,000); Mr. Parker ($50,000); Mr. Harbaugh ($32,000); and Mr. Frye
($60,000).
17
(3) The amounts represent options to purchase the numbers of shares of common
stock indicated.
(4) The amounts represent Company contributions made during each calendar year
following the 2000, 1999, and 1998 plan years (calendar years) to the
401(k) plan accounts of the designated individuals, plus additional amounts
indicated in these footnotes for Messrs. Harbaugh, Orrico and Parker.
Please also see "Employment Contracts, and Termination of Employment and
Change-in-Control Arrangements" below, for more information.
(5) Pursuant to his employment agreement, entered into with the Company as of
May 15, 2001, Mr. Barovick received a signing bonus of $250,000. He also
received an option to purchase 500,000 shares of common stock, and was
granted the right to purchase 125,000 shares of common stock of the Company
on August 13, 2001, at a discount of $.50 per share from fair market value
as of the purchase date. The 125,000 shares are subject to certain
repurchase rights of the Company which lapse ratably over a three-year
period. Mr. Barovick purchased the 125,000 shares for a purchase price of
$4.11 per share.
(6) Pursuant to Mr. Harbaugh's separation agreement, he received certain
benefits under the Executive Plan in the approximate amount of $309,000,
equivalent to one-year's base salary, benefits and perquisites, his target
bonus for the 2001 calendar year pro-rated to the date of his termination,
and relocation and outplacement services up to $25,000 in the aggregate.
(7) Pursuant to Mr. Orrico's separation agreement, he received certain benefits
under the Company's Executive Plan in the approximate amount of $479,000,
equivalent to one-year's base salary, benefits and perquisites, his target
bonus for the 2001 calendar year pro-rated to the date of his termination,
and relocation expenses of up to $25,000.
(8) Pursuant to Mr. Parker's separation agreement, he received certain benefits
under the Executive Plan in the approximate amount of $393,000, equivalent
to one-year's base salary, benefits and perquisites, and his target bonus
for the 2001 calendar year pro-rated to the date of his termination. In
addition, he received approximately $23,000 in return for cancellation of
his outstanding options to purchase common stock of the Company.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants For Option Term(1)
-------------------------------------------------------------------------------- ---------------------------
Number of Percent of
Securities Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Granted(2) Employees in Price Expiration
Name (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
-------------------- ------------ ------------ --------- ---------- ---------- ----------
Barry M. Barovick 500,000 80.65% $4.80 05/14/11 $1,508,825 $3,823,357
Maureen A. Ehrenberg 0 -- -- -- -- --
Robert J. Walner 0 -- -- -- -- --
Douglas P. Frye 0 -- -- -- -- --
Blake W. Harbaugh 0 -- -- -- -- --
John G. Orrico 0 -- -- -- -- --
Brian D. Parker 0 -- -- -- -- --
----------
(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 price of the option set forth in the table
was equal to the market prices on the trading day next preceding the date
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 NYSE
Composite Tape on October 5, 2001 was $3.25 per share.
18
(2) The amount represents an option to purchase shares of common stock granted
under the Company's 2000 Stock Option Plan. Mr. Barovick's option was
granted on May 15, 2001, and vests 20% the first year, an additional 20%
the second year and the remaining 60% the third year, and expires ten years
from the date of grant. Vesting accelerates upon certain conditions related
to termination of employment under the terms of Mr. Barovick's employment
agreement, upon changes of control of the Company or at the discretion of
the Board.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs In-the-Money Options/SARs
Acquired on Value at FY-End(#) at FY-End($)
Exercise Realized ------------------------- ---------------------------
Name # ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---------------------- -------- -------- ------------------------- ---------------------------
Barry M. Barovick 0 -- 0/500,000 $0/$350,000
Maureen A. Ehrenberg 9,978 $ 11,849 95,272/118,750 $0/$0
Robert J. Walner 34,123 $149,880 69,127/26,750 $161,804/$17,000
Douglas P. Frye 18,710 $ 44,436 0/0 $0/$0
Blake W. Harbaugh 3,563 $ 4,231 19,437/37,000 $0/$0
John G. Orrico 0 -- 111,500/112,500 $0/$0
Brian D. Parker 18,709(2) $ 51,450 46,291/60,000 $26,614/$12,500
----------
(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 NYSE
Composite Tape on June 30, 2001 ($5.50 per share).
(2) In addition to the options exercised by Mr. Parker, in connection with his
separation agreement with the Company, he received approximately $23,000 in
July 2001, for repurchase of remaining outstanding options held by him at
the time of termination of his employment with the Company.
C. EMPLOYMENT CONTRACTS, AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
CEO EMPLOYMENT AGREEMENT. Barry M. Barovick, our President, Chief Executive
Officer and a director of the Company, entered into an employment agreement with
the Company effective May 15, 2001. The agreement provides for a term beginning
May 15, 2001 and ending June 30, 2004, with provisions for an extension of the
agreement through June 30, 2007 with the consent of both parties. The agreement
also provides for an annual salary of $1,000,000, a signing bonus of $250,000, a
first-year guaranteed bonus of $450,000, and an annual cash incentive program
with a target bonus of 50% of salary, up to a maximum of 100% of salary. The
performance factors which will be applied to determine bonuses have not yet been
determined by the Company. Pursuant to the agreement, Mr. Barovick received, on
May 15, 2001, an option to purchase 500,000 shares of common stock at an
exercise price of $4.80, which was the fair market value as of the date of grant
(the "Option"); and the right to purchase on August 13, 2001, 125,000 shares of
common stock, at a purchase price per share which was $ .50 less than fair
market value on the date of purchase (the "Restricted Shares"). Mr. Barovick
purchased the Restricted Shares at a price of $4.11 per share. If Mr. Barovick's
employment with us is terminated prior to the third anniversary of the purchase,
we will have the right to repurchase the Restricted Shares at the purchase price
paid by Mr. Barovick. This right expires as to one-third of the shares on each
anniversary of the purchase date, so long as Mr. Barovick remains employed with
us. Also, pursuant to the employment agreement, Mr. Barovick received a loan in
the amount of $1,500,000, at an interest rate of 4.25% per annum, which matures
in
19
three years (the "Loan"). Mr. Barovick has a retention bonus program which will
provide annual bonuses while he continues in employment as Chief Executive
Officer, sufficient to repay the Loan and the employment taxes payable in
connection with the bonuses.
EXECUTIVE CHANGE OF CONTROL PLAN. Pursuant to a plan approved by our Board of
Directors effective May 10, 1999, and as amended effective February 10 and June
1, 2000, our executive officers, the Vice President/Human Resources and the Vice
President/Chief Information Officer are eligible to receive certain compensation
and benefits if their employment with the Company is affected by a "Change of
Control" of the Company ("COC Plan"). A "Change of Control," for purposes of the
plan, includes the acquisition of 25% or more of our outstanding common stock, a
change of a majority of directors on the Board, a merger, a sale or liquidation
of the Company, subject to certain exceptions related to current principal
stockholders and directors; or a reduction in the ownership by current principal
stockholders to under 45%. If a Change of Control occurs, we have committed to
employ each covered executive for two years, or otherwise to compensate the
executive if his or her employment is terminated without cause during that
period. The plan gives each executive officer the opportunity to terminate
employment during a 30-day window period after six months have elapsed from a
Change of Control, and receive benefits under the plan. During the two-year
employment period, each covered executive is to receive compensation and
benefits commensurate with levels existing before the Change of Control. Upon
termination of employment within the two-year period, other than for cause, the
executive will receive compensation equal to two years' salary and two years of
the highest previous bonus, (as defined in the plan); provided that if an
executive resigns during the 30-day window period without his or her employment
having been adversely affected as a result of the Change of Control, then he or
she will receive the two years' salary and one year's bonus. In addition,
standard benefits and perquisites or their equivalents are to be provided for
two years if the executive's employment is terminated during the two-year
period. The plan is effective for three years, and will generally be
automatically renewed for consecutive three-year periods. The plan can only be
terminated with respect to an affected executive by mutual agreement of the
executive and the Company.
EXECUTIVE INCENTIVE BONUS AND SEVERANCE PLAN. Effective June 1, 2000, our Board
of Directors also approved an Executive Bonus and Severance Plan, pursuant to
which the executive officers and the Vice President/Human Resources of the
Company ("participants") received incentive compensation equal to 20% of their
respective annual salaries on September 15, 2000, provided they each continued
in the employ of the Company through that date or were otherwise terminated
without cause. In addition, the plan provided for payments equal to the greater
of 80% of the participant's 2000 calendar year target bonus or the bonus
actually earned by the participant for the 2000 calendar year, without taking
into account non-recurring charges of the Company.
If a participant is terminated without cause or if his or her position is
reduced or otherwise adversely affected, then the participant will be entitled
to the following ("Severance Pay"): a) base salary and earned bonus pro-rated to
the date of termination; b) one year's base pay; c) continuation of benefits and
perquisites or their equivalent for one year; and d) with respect to vested
options held by the participant at termination -- one of the following
alternatives to be elected by the Company, or if not elected, then chosen by the
participant: 1) repurchase by the Company of the vested options at a cash price
per share equal to the spread between the average closing price on the NYSE for
the five days prior to termination and the exercise price(s) of the options; 2)
we will attempt to facilitate a purchase of the shares exercised; or 3) we will
extend the expiration date of the options to twelve months after termination of
employment and permit payment of the exercise price of the options by deduction
of a sufficient number of the shares exercised to cover the purchase price. If
the participant becomes entitled to
20
benefits under the COC Plan, the participant will not be entitled to this
Severance Pay. The following executive officers received severance benefits
under this plan since the beginning of the 2001 fiscal year: Messrs. Harbaugh,
Orrico, Parker and one other former executive officer.
D. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The sole member of the Compensation Committee is Reuben S. Leibowitz (Chairman).
He has not 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 is an affiliate of Warburg. See also, "Information
About the Nominees for Director" and "Stock Ownership Information" above.
Warburg is the principal stockholder of the Company. Warburg currently owns
5,861,902 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.
Pursuant to the 1997 Voting Agreement described above in "Questions and Answers
About Voting," Warburg, the Kojaian Investors and GS Group have agreed to vote
all their shares of common stock in favor of the election to the Board of one
nominee designated by the Kojaian Investors, one nominee designated by GS Group,
and all nominees designated by Warburg. Messrs. Leibowitz and Morgan have been
designated as Warburg Nominees with respect to the 2001 election of directors.
E. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
THE FOLLOWING COMPENSATION COMMITTEE REPORT AND THE SECTION ENTITLED, "GRUBB &
ELLIS STOCK PERFORMANCE" ARE NOT TO BE DEEMED TO BE "SOLICITING MATERIAL" OR TO
BE "FILED" WITH THE SEC OR SUBJECT TO REGULATION 14A OR 14C OR TO THE
LIABILITIES OF SECTION 18 OF THE EXCHANGE ACT, EXCEPT TO THE EXTENT THAT THE
COMPANY SPECIFICALLY REQUESTS THAT SUCH INFORMATION BE TREATED AS SOLICITING
MATERIAL OR SPECIFICALLY INCORPORATES IT BY REFERENCE INTO ANY FILING UNDER THE
1933 ACT OR THE EXCHANGE ACT.
The committee has developed and implemented compensation policies, plans and
programs which seek to reward achievement of positive financial results for the
Company, and in doing so enhance stockholder value.
In order to attract and retain outstanding executives with the potential to
contribute significantly to the success of the Company, our policies have sought
to compensate executives commensurate with executives of equivalent-sized firms
in terms of revenues and with similar responsibilities, but not necessarily the
Peer Group companies referred to below under "Grubb & Ellis Stock Performance."
Section 162(m) of the Internal Revenue Code generally imposes a limit of $1
million per taxable year on deducting from taxable income of a company the
compensation paid to each of the chief executive officer and the other four most
highly compensated executive officers. We monitor the compensation levels
potentially payable under our compensation programs in light of the provisions
of Section 162(m), but retain the flexibility necessary to provide total
compensation in line with competitive practices, the Company's compensation
philosophy and the Company's best interests.
The compensation program of Mr. Barovick, President, Chief Executive Officer and
a director, pursuant to his employment agreement, is described in "Employment
Contracts, and Termination of Employment and Change-in-Control Arrangements"
above. A stock option
21
granted to him is described in "Option/SAR Grants in the Last Fiscal Year"
above. In approving the compensation terms of his employment agreement, we took
into consideration our knowledge of competitive compensation programs for chief
executive officers and Mr. Barovick's level of responsibility and expectations
of future performance.
During the 2001 fiscal year, executive officers other than Mr. Barovick were
eligible to receive compensation consisting of three components: base salary,
bonus and long-term equity incentives. The programs for these executives were
based on a calendar year. Base salaries were approved based on the
recommendations of the Human Resources Department, and on our knowledge of
competitive salaries as described above and our judgment about the executives'
individual past performance, expectations of future performance, and most
importantly, level of responsibilities. Bonuses were calculated as a designated
percentage of salary for each executive, and earned upon achievement of annual
targeted levels of Company-wide, and applicable business unit, revenue, EBITDA
margin and net income, and performance to unit budgets. No one factor was a
prerequisite to receiving a bonus.
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 committee believes that granting equity incentives to our
management helps retain and motivate management. In recommending grants of stock
options by the Board, we take into account the scope of responsibility, the
performance requirements and anticipated 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. Our 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. In addition to Mr. Barovick, one former
executive officer received options during the 2001 fiscal year; however, each
executive officer holds outstanding stock options, with exercise prices set at
fair market value at the dates of grant, which represent ongoing incentives to
contribute to the Company. The options vest over three-to-four years. We
determined the recommended number of shares for the options given to each
executive, primarily based upon the executive's level of responsibility and the
number and price of options then held by the executive.
THE COMPENSATION COMMITTEE
Reuben S. Leibowitz
F. GRUBB & ELLIS STOCK PERFORMANCE
The following graph shows a five-year comparison of cumulative total stockholder
return on our 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, 1996 in each of the foregoing and that all
dividends, if any, were reinvested.
METHOD OF SELECTION OF PEER GROUP. We believe that the following commercial real
estate firms have been our primary, nationwide competitors having
publicly-traded stock: CB Richard Ellis Services, Inc. ("CB"); Insignia
Financial Group, Inc.; Jones Lang LaSalle Incorporated ("LaSalle"); and Trammell
Crow Company. CB ceased having publicly traded securities effective July 2001.
None of these firms has been public long enough to have a five-year stock price
history. The dates on which they began public trading of their stock are
November 26, 1996, September 21, 1998, July 17, 1997 and November 25, 1997,
respectively. Therefore, the Peer Group we have used consists of the public
companies with the same company-level Standard
22
Industrial Classification ("SIC") Code as the Company, as reported by Primark
Corporation as of June 30, 2001. Our company-level SIC Code is 6531-- real
estate agents and managers. We have excluded from the Peer Group those firms
whose primary business is not real estate transactional, referral or management
business, such as firms whose business is primarily real estate investment
(e.g., real estate investment trusts). The Peer Group firms are, in addition to
the Company: CB; The DeWolfe Companies, Inc.; Homelife, Inc.; HomeServices.com
Inc.; Kennedy-Wilson, Inc.; LaSalle; MarketU Inc., Pacific Northwest Development
Corporation, ResortQuest International, Inc.; Southern Realty Co.; Trammell Crow
Company; Trendwest Resorts, Inc.; and Why USA Financial Group, Inc. Some of
these companies do not have a five-year stock history.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
GRUBB & ELLIS COMPANY, S&P 500 AND A PEER GROUP
(PERFORMANCE RESULTS THROUGH JUNE 30, 2001)
[The table below represents a line chart in the printed piece.]
6/30/96 6/30/97 6/30/98 6/30/99 6/30/00 6/30/01
------- ------- ------- ------- ------- -------
Grubb & Ellis Company $100.00 $403.00 $335.00 $119.00 $138.00 $129.00
S&P 500 $100.00 $135.00 $175.00 $215.00 $231.00 $197.00
Peer Group $100.00 $266.00 $274.00 $183.00 $102.00 $137.00
----------
* Total return assumes reinvestment of dividends on a quarterly basis. The
figures are rounded to the nearest dollar. The comparisons in this table
are not intended to forecast or to be indicative of possible future
performance of our common stock.
23
RELATED PARTY TRANSACTIONS
The following are descriptions of certain transactions and business
relationships between the Company and our directors, executive officers, and
principal stockholders. On a quarterly basis, the Audit Committee reviews
information about transactions involving Archon Group, L.P. ("Archon") and its
affiliates and the Kojaian Companies and their affiliates, as described below,
compared to transactions with other parties, and makes an independent
recommendation to the Board as to the benefit to stockholders from such
transactions. We believe that the fees and commissions paid to the Company as
described below were comparable to those that would have been paid to
unaffiliated third parties. See also "Questions and Answers About Voting"
regarding the 1997 Voting Agreement and "Compensation Committee Interlocks and
Insider Participation" above.
Archon, an affiliate of GS Group, a principal stockholder of the Company, is
engaged in the asset management business, and performs asset management services
for various parties. Mr. Williams, a director of the Company, is also a director
of Archon and an officer of Archon Gen-Par, Inc., the general partner of Archon.
During the 2001 fiscal year, Archon, its affiliates and portfolio property
owners paid the Company and its subsidiaries the following approximate amounts
in connection with real estate services rendered to Archon and its portfolio
properties: $2,611,000 in management fees, $9,716,000 in real estate sale and
leasing commissions and $843,000 in fees for other real estate and business
services. In addition, Archon, its affiliates and portfolio companies were
involved in transactions as purchasers or lessees during the 2001 fiscal year,
for which the Company received approximately $851,000 in real estate commissions
from the property owners and sellers.
The Kojaian Companies, Kojaian Management Corporation and their affiliates
(collectively, "KMC") are controlled by the Kojaian Investors. C. Michael
Kojaian, a director and principal stockholder of the Company, is a director,
shareholder and an Executive Vice President of Kojaian Management Corporation.
Mike Kojaian, his father, and also a principal stockholder of the Company, is
also a director, shareholder and officer of the 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 2001 fiscal year, KMC and
its portfolio companies paid the Company and its subsidiaries the following
approximate amounts in connection with real estate services rendered: $3,002,000
for management of its portfolio properties, $1,648,000 in real estate sale and
leasing commissions and $80,000 for other real estate and business services. In
addition, KMC and its portfolio companies were involved in two transactions as
purchasers during the 2001 fiscal year, for which the Company received real
estate commissions of approximately $328,000 from the sellers.
homestore.com, Inc., for which Mr. Hanauer, a director of the Company, serves as
a director and is a shareholder, leased office space during the 2001 fiscal
year, for which the Company was paid a real estate commission of approximately
$587,000 by a landlord.
Mr. Barovick received a loan of $1,500,000 in connection with his commencement
of employment as our President and Chief Executive Officer on May 15, 2001. The
loan, which was still outstanding at August 20, 2001, bears interest of 4.25%
per annum and is amortized over three years from his start date. It will be
repaid through receipt of incentive compensation from the Company so long as Mr.
Barovick continues employment with us. He has owed the Company no other debt
since the beginning of the Company's last fiscal year.
Mr. Costello received a loan of $300,000 in connection with his commencement of
employment as our Chief Operating Officer on July 23, 2001. The loan, which was
still outstanding at August
24
20, 2001, bears interest of 4.07% per annum and is amortized over three years
from his start date. It will be repaid through receipt of incentive compensation
from the Company so long as Mr. Costello continues employment with us. He has
owed the Company no other debt since the beginning of the Company's last fiscal
year.
----------
This concludes our proxy statement. We hope that you found it informative and
look forward to seeing you at our Annual Meeting.
BY ORDER OF THE BOARD
OF DIRECTORS
/s/ Robert J. Walner
Robert J. Walner
Corporate Secretary
25
APPENDIX A
GRUBB & ELLIS COMPANY
AUDIT COMMITTEE CHARTER
AS REVISED MARCH 20, 2001
There shall be a committee of the board directors of Grubb & Ellis Company (the
"Company") to be known as the Audit Committee.
COMPOSITION AND QUALIFICATION OF COMMITTEE. The Audit Committee shall be
comprised of at least three directors who are independent of the management of
the Company and are free of any relationship that, in the opinion of the board
of directors, would interfere with their exercise of independent judgment as
committee members. Directors who are affiliates of the Company or officers or
employees of the Company or its subsidiaries would not be qualified for Audit
Committee membership. In addition, the members of the Committee shall qualify
under the regulations of any exchange or other market on which the Company's
securities are then traded, as such regulations may be amended from time to
time. All members of the Committee shall have a working familiarity with basic
finance and accounting practices and shall be able to read and understand
fundamental financial statements, including a balance sheet, income statement
and cash flows statement. At least one member of the Audit Committee shall have
accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant. Audit
Committee members, including the Chairman of the Audit Committee, shall be
appointed by the board of directors and serve at the pleasure of the board of
directors.
PRIMARY FUNCTION. The Audit Committee shall provide assistance to the Company's
directors in fulfilling their oversight responsibility to the stockholders and
others, relating to the corporate accounting functions, the systems of internal
controls, and the quality and integrity of the financial reports of the Company.
SCOPE OF RESPONSIBILITIES. In meeting its responsibilities, the Audit Committee
shall:
INDEPENDENT AUDITORS AND AUDIT
1. Review and recommend to the board of directors the appointment of the
independent auditors to audit the books of the Company, its divisions and
subsidiaries for the ensuing year, which firm is ultimately accountable to the
Audit Committee and the Board, and the extent, scope and terms of its
engagement. On at least an annual basis, the Audit Committee will require the
independent auditors to provide a formal, written statement, and such other
reports periodically as it deems appropriate, delineating all relationships
between the auditors and the Company. The Committee will review and discuss with
the independent auditors the disclosures made by the auditors in relation to any
impact on the independence of the auditors, and shall make any recommendations
for action by the board of directors with respect to such relationships.
2. Review the performance of the independent auditors, and recommend to
the board of directors the dismissal/replacement of the independent auditors
when circumstances warrant.
3. Review and approve the non-audit services performed by the independent
auditors and the extent and terms of its engagement, with due consideration of
the possible effect on its independence.
26
4. Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit for the current year and the
audit procedures to be utilized, and at the conclusion thereof review such audit
and discuss with the independent auditors any comments or recommendations of the
independent auditors. Also review management's responses to and compliance with
the independent auditors' comments or recommendations.
5. Review with the independent auditors, the internal auditor, and with
the Company's financial and accounting personnel the adequacy and effectiveness
of the internal auditing, accounting and financial controls of the Company,
including among other things, the computerized information controls and security
and elicit any recommendations that they may have for the improvement of such
internal control procedures or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given to the
adequacy of such internal controls to expose any payments, transactions or
procedures which might be deemed illegal or otherwise improper.
6. Review the interim financial statements with management and the
independent auditors prior to the filing of the Company's Quarterly Report on
Form 10-Q. Also, the Committee shall discuss the results of the quarterly review
and any other matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing standards. The Chairman
of the Committee may represent the entire Committee for the purposes of this
review.
7. Review with management and the independent auditors the financial
statements to be included in the Company's Annual Report on Form 10-K (or the
annual report to shareholders if distributed prior to the filing of Form 10-K).
Also, the Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards.
INTERNAL AUDITOR AND AUDIT
1. Review the internal audit function of the Company, including the
proposed programs for the coming year and the coordination of such programs with
the independent auditors, with particular attention to maintaining balance
between independent and internal auditing resources.
2. Review and approve the selection of any outsource vendor for the
internal audit function for the ensuing year, and the extent, scope and terms of
its engagement.
3. Review the performance of the internal auditors and direct
dismissal/replacement of the internal auditor when circumstances warrant.
4. Review and approve the non-audit services performed by any outsource
vendor performing the internal audit function and the extent and terms of its
engagement, with due consideration of the possible effect on its objectivity.
5. Prior to each Audit Committee meeting, but no less than quarterly, the
Audit Committee shall be provided a summary of findings from completed internal
audits and a progress report on the proposed internal audit plan with
explanations for any deviations from the original plan.
GENERAL RESPONSIBILITIES
1. Fulfill its responsibilities as specified in the Company's conflicts
of interest policy, including among other things, the review of related party
transactions. A quarterly report of the
27
Company's related party transactions shall be provided to the Audit Committee in
advance of its regularly scheduled Audit Committee meeting.
2. Review, with the Company's counsel, any legal matters that could have
a significant impact on the Company's financial statements.
3. Review and inquire into compliance with policies established by the
Compensation Committee regarding executive officers' expenses and perquisites,
including use of Company assets.
4. Review and approve minutes of all meetings of the Audit Committee
which shall be submitted to the board of directors of the Company.
5. The Audit Committee may cause to be made an investigation into any
matter brought to its attention within the scope of its duties, with the power
to retain outside counsel, accountants or others for this purpose.
6. Review the findings of any examinations by regulatory agencies, such
as the Securities and Exchange Commission, to the extent related to Company
matters subject to Committee review.
7. Review and provide input regarding the appointment, replacement,
reassignment or dismissal of the Chief Financial Officer.
8. Inquire of the Chief Financial Officer, other members of management,
the internal auditor, and the independent auditors about significant risks or
exposure to the Company and assess the steps management has taken to minimize
such risks to the Company.
9. Review Company compliance, together with Counsel, with the Foreign
Corrupt Practices Act.
10. Perform other oversight functions as may be appropriate under the law
or as requested by the board of directors from time to time.
11. Review and reassess this Charter at least annually and obtain the
approval of the Company's board of directors of any amendments.
12. Prepare the Committee's annual report for disclosure in the Company's
proxy statement in connection with the annual shareholders' meeting.
COMMITTEE MEETINGS.
1. SCHEDULE OF MEETINGS. Regular meetings of the Audit Committee are
expected to be scheduled four times per year to coincide with regularly
scheduled board meetings. Special meetings of the Audit Committee may be called
at the direction or upon the request of any two members of the Audit Committee
upon notice as required for special meetings of the board in Section 3.10 of the
Company's Bylaws.
2. QUORUM; MANNER OF ACTING. A quorum for conducting the business of the
Audit Committee shall be two members thereof, and all matters shall be decided
by the affirmative vote of at least two members of the Committee, either at a
meeting or by written consent. Committee members may participate in committee
meetings by telephone conference call. The Audit Committee may request members
of management or others to provide information to the Committee and to attend
its meetings from time to time.
28
3. PRIVATE SESSIONS. At all meetings of the Audit Committee, sufficient
opportunity should be made available for the independent auditors, the internal
auditors or others to meet privately with the members of the Audit Committee.
Among the items to be discussed in these meetings are the independent auditors'
evaluation of the Company's financial, accounting and auditing personnel, the
cooperation which the independent auditors received during the course of their
audit, and the internal auditor's evaluation of the Company's internal controls.
FLEXIBILITY
In carrying out its responsibilities, the Audit Committee expects to provide an
open avenue of communication between the internal auditor, the independent
auditor and the board of directors. The Audit Committee's policies and
procedures should remain flexible in order that it can best react to changing
conditions and environments and to assure the directors and stockholders that
the Company's accounting and reporting practices are in accordance with all
requirements and are of the highest quality.
29
APPENDIX B
AMENDMENT NO. 1
TO THE
GRUBB & ELLIS EMPLOYEE STOCK PURCHASE PLAN
AS AMENDED AND RESTATED AS OF JANUARY 1, 1999
Grubb & Ellis Company (the "Company"), a corporation organized under the laws of
the State of Delaware, upon approval of the Company's stockholders, has adopted
this Amendment to the Grubb & Ellis Employee Stock Purchase Plan (the "Plan")
pursuant to Section 11 of the Plan, effective as of November 16, 2001:
1. Paragraph 2 of the Plan is hereby amended to read in its entirety as
follows:
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
1,750,000 shares, and may be unissued shares or treasury shares or
shares bought on the market for purposes of the Plan.
----------
I hereby certify that the foregoing Amendment to the Plan was duly adopted by
the stockholders of the Company as of November 16, 2001.
Executed on this ____ day of ______, 2001.
----------------------------------------
[Name]
[Title]
30
[This Page Intentionally Left Blank]
[This Page Intentionally Left Blank]
PROXY GRUBB & ELLIS COMPANY PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS - NOVEMBER 16, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I am a stockholder of Grubb & Ellis Company (the "Company") and I have received
the Notice of Annual Meeting of Stockholders dated October 12, 2001 and the
accompanying Proxy Statement. I appoint Robert J. Walner and Ian Y. Bress 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 I may be entitled to
vote at the Annual Meeting of Stockholders to be held in the Broadway Room of
the Drake Swiss Hotel, 440 Park Avenue, at 56th Street, New York, New York on
Friday, November 16, 2001 at 10:00 a.m. or at any and all adjournments thereof,
with all powers which I would have if I were personally present at the meeting.
The shares represented by this Proxy will be voted in the way that I direct. 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, and "FOR" the amendment to the Employee Stock Purchase Plan as
described in the accompanying proxy statement. If any of the nominees listed
becomes unavailable to serve as a director prior to the Annual Meeting, the
Proxy will be voted for any substitute nominee(s) designated by the Board of
Directors. I ratify and confirm all that the above Proxy Holders may legally do
in relation to this Proxy.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
GRUBB & ELLIS COMPANY
PLEASE MARK VOTE IN THE OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR AND FOR
THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.
1. ELECTION OF DIRECTORS--
NOMINEES: 01-R. David Anacker, 02-Barry M. For Withhold For
Barovick, 03-Joe F. Hanauer, 04-C. Michael All All Except*
Kojaian, 05-Reuben S. Leibowitz, 06-Ian C. [_] [_] [_]
Morgan and 07-Todd A. Williams
---------------------------------------------
* Except nominee(s) written above
2. APPROVAL OF THE AMEND-
MENT TO THE EMPLOYEE For Against Abstain
STOCK PURCHASE PLAN. [_] [_] [_]
3. 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: [_]
Date: _______________________________________________________________
Signature(s) ________________________________________________________
______________________________________________________________________
Please date and sign exactly as your name appears on this Proxy Card.
Joint owners should each sign. The full title or capacity of any
person signing for a corporation, partnership, trust or estate should
be indicated.
--------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED POSTMARKED ENVELOPE.
OR
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR THE INTERNET!
AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
--------------------------------------------------------------------------------
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immediately confirmed and posted. immediately confirmed and posted.
Just follow these easy steps: Just follow these easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement Statement
2. Call toll free 1-877-265-9598 in 2. Go to the following website prior
the United States or Canada any to 12:00 midnight, Central Time,
time prior to 12:00 midnight, November 15, 2001:
Central Time, November 15, 2001 on www.computershare/us/proxy
a touch tone telephone. There is
NO CHARGE to you for the call. 3. Enter the information requested on
your computer screen, including
3. Enter your 6-digit CONTROL NUMBER the 6-digit CONTROL NUMBER located
located above. above.
4. Follow the simple recorded 4. Follow the simple instructions on
instructions. the screen.
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