AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 2002
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRUBB & ELLIS COMPANY
---------------------
(Exact name of Registrant as specified in its charter)
---------------------
2215 SANDERS ROAD, SUITE 400, NORTHBROOK, IL 60062,
DELAWARE (847) 753-7500 94-1424307
- --------------- ------------------------------------ ----------------
(State or other (Address, including zip code, (I.R.S. Employer
jurisdiction of and telephone number, Identification
incorporation or including area code, of Registrant's Number)
organization) principal executive offices)
----------
IAN Y. BRESS
CHIEF FINANCIAL OFFICER
GRUBB & ELLIS COMPANY
55 EAST 59TH STREET, NEW YORK, NY 10022
(212) 759-9700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
COPIES TO:
JEFFREY D. ZUKERMAN, ESQ.
ZUKERMAN GORE & BRANDEIS, LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
PHONE: (212) 223-6700
FAX: (212) 223-6433
Approximate date of commencement of proposed sale to the public: As soon as
practicable after effective date of the registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount of
of Securities Amount to be Price Offering Registration
to be Registered Registered Per Share Price Fee
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Common Stock, par value
$.01 per share 3,728,815(1) $2.95(1) $11,000,000 1,012(2)
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Rights to Purchase
Common Stock 1,000,000(1) N/A N/A (3)
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Total $1,012
======
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(1) Solely for purposes of computing the filing fee.
(2) Calculated pursuant to Rule 457(c) and 457(o).
(3) Pursuant to Rule 457, no registration fee is payable with respect to the
rights to purchase common stock since the rights are being registered in
the same registration statement as the securities to be offered pursuant
thereto.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. Grubb &
Ellis Company may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION JANUARY 29, 2002
PRELIMINARY PROSPECTUS
Subscription Rights
to Purchase
Up to_________ Shares of Common Stock
of
GRUBB & ELLIS COMPANY [LOGO]
We are distributing rights to purchase up to ____ shares of our common
stock to persons who owned our common stock as of the close of business on
February 25, 2002, the record date. You will have ______ of a right for each
share of our common stock that you own as of the record date. Each full right
will entitle you to subscribe for one share of our common stock at a
subscription price of $_____ per share. We presently anticipate that the
subscription price will be the market price of our common stock on the effective
date of this offering.
You will not have the right to purchase
any fractional shares. If all rights are exercised, we will issue ________
shares of common stock in the offering.
If you do not properly exercise your rights before 5:00 p.m., Eastern
Standard Time, on __________ [ ], 2002, your rights will expire.
Our shares are listed for trading on the New York Stock Exchange under the
symbol "GBE." On January 28, 2001, the last reported sale price for our common
stock on the New York Stock Exchange was $2.95 per share. The rights will not be
transferable, and will not be listed or quoted on a formal exchange.
A group consisting of our largest stockholder and certain members of
executive management have entered into an agreement with the Company to purchase
all of the shares offered under the rights offering that are not purchased by
the other stockholders of the Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Per Share Total(1)
Subscription Price.................. $ $11,000,000
Proceeds, before expenses,
to Grubb & Ellis Company.......... $ $11,000,000
----------
(1) Before deducting expenses payable by us, estimated to be
approximately $200,000.
Prospectus dated ____________, 2002
We have not authorized anyone to provide you with information different
from that contained in this prospectus. You must not rely on any unauthorized
information or representations. This prospectus is not an offer to sell or a
solicitation of an offer to buy any securities in any state or other
jurisdiction in which the offer or solicitation is not permitted.
In this prospectus, "Grubb & Ellis," "Company," "company," "we," "us" and
"our" refer to Grubb & Ellis Company and our subsidiaries, unless the context
specifically indicates otherwise. Our global executive offices are located at 55
East 59th Street, New York, New York 10022, phone number (212) 759-9700. Our
principal operations offices are located at 2215 Sanders Road, Suite 400,
Northbrook, Illinois 60062, phone number (847) 753-7500.
PROSPECTUS SUMMARY
This summary highlights some of the information provided elsewhere in this
prospectus. This summary is not complete and may not provide all information you
should consider before deciding whether or not to exercise the rights. You
should read the entire prospectus carefully. Portions of this prospectus, such
as the Risk Factors section starting on page 10, are not summarized below.
We also encourage you to review the financial statements and other
information provided in the reports and other documents we file under the
Securities Exchange Act of 1934, as described in the "Where You Can Find More
Information" section in this prospectus at page 31.
THE RIGHTS OFFERING
Securities offered................ Rights to purchase up to ______ shares of
our common stock. To each record holder of
common stock on February 25, 2002, Grubb &
Ellis is granting ______ of a right for each
share of common stock held on that date.
Subscription price................ The subscription price for each full right
is $____ per share, payable in cash. We
presently anticipate that the subscription
price will be the market price of our common
stock on the effective date of this rights
offering. Payment by personal check must
clear payment on or before the expiration
date, which may require five or more
business days from the date that we receive
your personal check. As a result, we
recommend that stockholders pay the
subscription price by certified or cashier's
check drawn on a U.S. bank, U.S. postal
money order or wire transfer of funds.
The subscription price will be approved by
those members of our Board of Directors that
are not affiliated with members of the
standby group. See "Standby purchase
commitment" below.
Record date....................... February 25, 2002
Expiration date and time.......... The rights expire at 5:00 p.m., Eastern
Standard Time, on _________, 2002, unless we
decide in our sole discretion to extend the
rights offering until some later time.
Over-Subscription privilege....... Each holder, other than a member of the
standby group, who elects to exercise
his/her rights in full may also
oversubscribe for additional shares of
common stock at the same subscription price
per share in an amount up to the greater of
(A) 50% of the number of full rights
received or (B) 100 shares. The number of
additional shares available for the
over-subscription privilege will depend on
how many holders exercise their rights. If
there are not enough of our shares available
to fully satisfy all of the
over-subscription requests, the available
shares will be distributed among rights
holders who exercised their
over-subscription privilege. The allocation
will be made first to holders of less than
___ rights so that those holders may
subscribe for 100 shares (or the next higher
multiple of 10 shares) and thereafter pro
rata among all holders exercising the
over-subscription privilege. In the event
you choose to exercise the over-subscription
privilege, but receive a prorated amount,
you will receive a refund, without interest
or deduction, for the subscription price of
any shares you do not receive promptly after
the expiration of the rights offering.
Standby purchase commitment...... A group consisting of our largest
stockholder, Warburg, Pincus Investors, L.P.
("Warburg"), and certain members of
executive management have entered into an
agreement with the Company to purchase all
of the shares offered under the rights
offering that are not purchased by the other
stockholders of the Company. Members of the
standby group are not entitled to
participate in the over-subscription
privilege.
Shares of common stock
outstanding prior to
this offering ................... 14,897,763 outstanding on January 28, 2002.
Shares of common stock
outstanding after this offering
(assuming full exercise
of rights)....................... ________. Unless expressly stated to the
contrary, the share information in this
prospectus excludes, as of January 28, 2002:
o an aggregate of 2,534,738 shares issuable
upon the exercise of outstanding options
granted pursuant to our 1990 Amended and
Restated Stock Option Plan, our 1993
Stock Option Plan for Outside Directors,
our 1998 Stock Option Plan and our 2000
Stock Option Plan.
o an aggregate of 937,827 shares of
common stock issuable upon the exercise
of warrants held by Joe
2
F. Hanauer and Aegon USA Realty Advisors,
Inc.
Non-Transferability of rights.... The rights are not transferable.
Fractional shares................ We will not issue fractional shares. If your
rights would allow you to purchase a
fractional share, you may exercise your
rights only by rounding down to and paying
for the nearest whole share, or paying for
any lesser number of whole shares.
No revocation.................... Once you submit the form of subscription
certificate to exercise any rights, you are
not allowed to revoke, or change the
exercise or request a refund of monies paid.
Reasons for the rights
offering; use of proceeds........ To fund the implementation of certain
strategic initiatives, to finance certain
strategic acquisitions, and for additional
working capital.
No board or committee
recommendation................... Our Board of Directors will not make any
recommendation to stockholders regarding the
exercise of rights under this offering.
Stockholders who do exercise their rights
risk losing the new money they invest. We
cannot assure you that the subscription
price will be below the market price for the
common stock, or that anyone purchasing
shares at the subscription price will be
able to sell those shares in the future at a
higher price. See "Risk Factors" below.
Conditions to the rights
offering......................... The obligation of the Company to consummate
the rights offering is subject to certain
conditions described under "The Rights
Offering -- Conditions Relating to the
Rights Offering." The Company has the right
to terminate the rights offering. If the
rights offering is terminated, we will
refund without interest to those persons who
subscribed for shares in the rights offering
all payments received from those
subscribers.
Subscription Agent............... Computershare Trust Company of New York
Procedure for exercising rights.. To exercise rights, you must complete the
subscription certificate and deliver it to
Computershare Trust
3
Company of New York, our Subscription Agent
for the rights offering, with full payment
under the subscription privilege. You must
deliver one full right for each share of
common stock you would like to purchase.
Computershare Trust Company of New York must
receive the proper forms and payments in
good funds on or before the expiration date.
You may deliver the documents and payments
by mail or commercial courier. If regular
mail is used for this purpose, we recommend
using insured, registered mail. You may use
an alternative, the "Notice of Guaranteed
Delivery," if you are unable to deliver the
subscription certificate before the
expiration date, subject to the requirements
of this procedure described under "The
Rights Offering--Special Procedure" under
"Notice of Guaranteed Delivery."
Payment adjustments.............. If you send a payment that is insufficient
to purchase the number of shares requested,
or if the number of shares requested is not
specified in the subscription certificate,
the payment received will be applied to
exercise the subscription privilege to the
extent of the payment. If the payment
exceeds the subscription price for the full
exercise of the subscription privilege, the
excess will be refunded to you as soon as it
is practicable, without interest.
Nominee accounts................. If you wish to purchase shares in this
offering and your shares are held by a
securities broker, bank, trust company or
other nominee, including any shares held in
the Company's Employee Stock Purchase Plan
or the Company's 401(k) Plan, you should
promptly contact your record holder(s) and
request that they exercise rights on your
behalf. You may also contact the nominee and
request that the nominee send a separate
subscription certificate to you. If you are
a record holder who wishes an institution
such as a broker or bank to exercise your
rights for you, you should contact that
institution promptly to arrange the method
of exercise. If you are a nominee who
desires subscription certificates re-issued
in smaller denominations, you must act
promptly under special procedures described
under "The Rights Offering--Exercise of Less
Than All Rights."
You are responsible for the payment of any
fees that brokers or other persons holding
your shares may charge.
You are not responsible for any fees payable
to the
4
Subscription Agent.
Exercise by foreign and certain
other stockholders............... Computershare Trust Company of New York will
hold subscription certificates for
stockholders having addresses outside the
United States. In order to exercise rights,
holders with addresses outside the United
States must notify Computershare Trust
Company of New York and timely follow other
procedures on or before the expiration date
of the rights.
U.S. income tax consequences..... For United States federal income tax
purposes, we believe that a stockholder will
not recognize taxable income as a result of
the distribution of the rights. See "Federal
Income Tax Consequences" below. Each
stockholder should, and is urged to, consult
their own tax adviser concerning the tax
consequences of this offering under the
holder's own tax situation. This prospectus
does not summarize tax consequences arising
under state tax laws, non-U.S. tax laws, or
any tax laws relating to special tax
circumstances or particular types of
taxpayers.
Stock certificates............... We will deliver stock certificates
representing common stock purchased by the
exercise of rights to the nominees or other
record holders as soon as practicable after
the expiration date of this rights offering.
We may amend or extend the rights offering.
Amendment, extension and
termination...................... We reserve the right to withdraw the rights
offering at any time prior to the expiration
date for any reason, in which event all
funds received in the rights offering will
be returned without interest to those
persons who subscribed for shares in
the rights offering.
5
INFORMATION INCORPORATED BY REFERENCE
We have filed the following documents with the Securities and Exchange
Commission pursuant to the Exchange Act, and all of them are incorporated by
reference in this Prospectus:
(1) our Annual Report on Form 10-K for the year ended June 30, 2001;
(2) our Quarterly Report on Form 10-Q for the quarter ended September 30,
2001;
(3) description of our common stock is contained in our Form 8-A
Registration statement used to register our Common stock and filed
with the Securities and Exchange Commission, which was declared
effective by the Securities and Exchange Commission on April 15, 1981,
except that our authorized shares of capital stock and common stock
have been increased to 51,000,000 and 50,000,000, respectively; and
(4) all other documents subsequently filed by us pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of this Prospectus and before the termination
of the offering, which shall be deemed to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person (including any beneficial
owner) to whom this prospectus is delivered, upon request, copies of any
documents incorporated into this prospectus by reference (other than exhibits
incorporated by reference into such document). Requests for documents should be
submitted to the Corporate Secretary, Grubb & Ellis Company, 2215 Sanders Road,
Suite 400, Northbrook, Illinois 60062 (telephone 847/753-7500). The information
relating to Grubb & Ellis contained in this prospectus does not purport to be
comprehensive and should be read together with the information contained in the
documents incorporated or deemed to be incorporated by reference herein.
6
BUSINESS
HISTORY AND BACKGROUND
From our inception in 1958, we have evolved into a full service commercial
real estate company. In early 1981, Grubb & Ellis merged its commercial and
residential real estate business with GMR Properties, a Florida-based real
estate concern, and shortly thereafter we became a public company. Upon becoming
a public company, we embarked upon an aggressive acquisition strategy to grow
our then emerging commercial brokerage and property management business,
targeting well-established regional real estate service companies throughout the
United States. In the mid-1990's, we underwent a restructuring to focus our
business around our two core business units, commercial brokerage and property
and facilities management, and in doing so we divested ourselves of our
residential brokerage operations. Concurrent with this operational
restructuring, we also underwent significant financial and ownership changes as
well. Warburg, which originally invested in us in 1993, increased its ownership
interest in the Company over the next four years, and during that time also
assisted the Company in retiring the debt that the Company had accumulated
during its acquisition campaign of the mid-1980's. In addition, on January 23,
2002 Warburg exercised warrants to acquire an additional 1,337,358 shares of our
common stock for an aggregate purchase price of $4,158,431.25, which is a
weighted average price of approximately $3.11 per share.
During the late 1990's, we expanded our geographical presence in the United
States by spending an aggregate of approximately $45 million, all from
internally generated funds, to effect 10 acquisitions, all within our core
business lines. During this time, we also created a national affiliate program
which led to formal alliances with leading commercial real estate companies in
secondary and tertiary markets. In early 2000, in order to provide global reach
for our multi-national clients, we formed a strategic alliance with Knight
Frank, one of the leading real estate service companies in Europe and Asia.
We now have approximately 1,000 transactional professionals in 42 owned
offices, and also associate with over 400 transactional professionals in our 50
affiliate offices. We believe that this provides us with one of the largest and
deepest brokerage networks in the United States. Including our affiliates, we
manage over 200 million square feet of commercial property, principally in the
United States, which we believe makes us one of the leading independent property
managers in the United States. Today, Grubb & Ellis, with our U.S. affiliates
and Knight Frank alliance, is an organization that has the collective resources
of over 8,000 individuals in 200 offices in 29 countries around the world.
OVERVIEW AND STRATEGY
Through our U.S. offices and affiliates, and through our alliance with
Knight Frank, we offer the full range of real estate services: representing
buyers, sellers, landlords, tenants and others in connection with traditional
real estate transactions, property and facilities management, and consulting
services.
Our professionals in our transactional services division typically
represent the interests of tenants, owners, buyers, sellers and others in
connection with the acquisition, disposition or leasing of commercial
properties. These properties are usually industrial, retail and office
buildings, but also include multi-family properties and commercial land. As part
of our transactional business operations, we also provide advisory services,
such as assisting with site selection, and providing feasibility studies, exit
strategies, market forecasts, appraisals and demographics and research services.
Historically, transactional and advisory services have represented the largest
portion of our operations, and in fiscal year 2001 they represented
approximately 85% of our total revenue.
We provide comprehensive property management and related services for
properties owned primarily by institutional investors, along with facilities
management services for corporate users. Related
7
services include construction management, business services and engineering
services. In fiscal 2001, approximately 15% of our total revenue was generated
by our management services business unit.
In the second and third quarters of 2001, we hired a new executive
management team to set a new direction for the Company. Our goal is to add to
our current core strengths, effecting transactions and managing properties, and
to be able to provide comprehensive strategic consultancy on all aspects of the
various real estate issues that confront our clients. To do so, we will seek to
position Grubb & Ellis as a business advisor to the executive management of our
clients, using our comprehensive real estate services as the means by which we
will seek to obtain access to these executives. Moreover, we believe that if we
can successfully establish our consulting practice, it will provide our other
core business lines with greater visibility, not only with our existing clients,
but within the marketplace as well, and enhance our ability to maximize revenues
from our traditional business lines. In order to accelerate the growth of our
consulting practice, we presently intend to seek to effect some strategic
acquisitions. On January 29, 2002, we entered into a definitive agreement to
acquire substantially all of the assets of the Wadley-Donovan Group, Inc., a
professional real estate services firm located in Northern New Jersey.
Wadley-Donovan Group, Inc. specializes in site selection and providing economic
development strategies primarily for Fortune 100 companies and state, local and
regional government agencies and municipalities. This transaction represents our
initial acquisition designed to foster the growth of our consulting practice,
and is scheduled to close by the end of February 2002. Closing of the
acquisition is subject only to typical closing conditions of transactions of
this type, and is not subject to financing.
So as to enable us to effectively maximize the revenue potential for all of
our business lines and deliver the full range of real estate services to our
clients, it is our intention to integrate our consulting division with both our
transactional and property management businesses. We believe that integrating
our three business lines will make us more efficient and help us maximize our
business development potential. In addition, providing consulting services is
typically a higher profit margin business than providing transactional and
property management services. Further, by adding the more profitable consulting
services unit to our existing business lines, we may be able to mitigate the
earnings volatility that has traditionally impacted the real estate industry in
general, including our Company. Consequently, we believe that having an
established consulting services business line may not only enhance the Company's
ability to increase revenues and profitability, but may also reduce the cyclical
volatility of our business as well.
In order to help facilitate the integration of our consulting practice with
our other two core business lines, we have also re-aligned the Company
internally. Commencing in January 2002, internal budgets were established
whereby profitability will be determined on a geographic basis rather than
according to business lines. This is intended to encourage our professionals in
a designated office or locale to work together to maximize revenues and
profitability; as performance will not be measured by how well a particular
business line performs, but rather, by the overall performance of all of the
business lines working together in a specified locale.
The Knight Frank strategic alliance is the centerpiece of Grubb & Ellis'
business strategy outside of the United States. With market presence in Europe,
Africa, India and the Pacific Rim, we believe that Knight Frank is positioned to
be an effective alliance partner that complements our strengths and gives us the
capability to deliver real estate services to global enterprises, which, we
believe, is of increasing importance as the trend towards globalization
continues. Domestically, we have broadened our national affiliate program
through alliances with 39 real estate services firms. This has enabled us to
enter markets where we previously did not have a formal presence, as well as to
better serve the multi-market needs of existing national clients.
To support both our international and domestic efforts, we have invested in
technology systems designed to provide a scalable platform for growth and to
efficiently deliver and share data with clients.
8
Among them is what we believe to be a state-of-the-art, company-wide information
sharing and research network that enables our professional staff across all
offices to work more efficiently, access the latest market intelligence, and
more fully address clients' needs.
Our goal in the national and global marketplace is to become the premier
provider of comprehensive real estate services. We plan to continue to leverage
our forty-plus years of experience, our professional talent, our institutional
and local market knowledge, and capitalize on our nationally recognized real
estate research to differentiate ourselves in the marketplace in order to
implement our business strategy and seek to achieve our vision.
9
RISK FACTORS
You should carefully consider the risks described below and other
information contained, and incorporated by reference, in this prospectus before
deciding to exercise your rights to purchase our shares. Many factors, including
the risks described below, and others that we have not recognized, could cause
our operating results to be different from our expectations and plans.
THE COST TO EXERCISE YOUR RIGHTS MAY EXCEED THE MARKET PRICE OF OUR COMMON
STOCK. We cannot assure you that the subscription price set by the rights
offering will be below the trading price for our stock, or that the trading
price for our stock will not decline during or after the rights offering.
YOU WILL EXPERIENCE DILUTION IN YOUR OWNERSHIP INTEREST IN GRUBB & ELLIS IF
YOU DO NOT EXERCISE YOUR RIGHTS. In the event that the rights offering is
completed and you do not exercise all of the rights that have been issued to you
in the rights offering, your percentage ownership of Grubb & Ellis will decline
because those who do exercise rights, including members of the standby group,
will receive additional shares of common stock of Grubb & Ellis. As a result,
your voting power would be diluted.
IF YOU DO EXERCISE YOUR RIGHTS, YOU WILL EXPERIENCE DILUTION IN THE NET
TANGIBLE BOOK VALUE OF YOUR NEW SHARES. The exercise price of the rights being
issued significantly exceeds the net tangible book value of our stock as of
September 30, 2001, after giving effect to the completion of this rights
offering. Based on an exercise price of $____ per share, those common
stockholders who exercise their rights will have experienced an immediate
dilution in the net tangible value of their shares of $____ per share.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE. An
aggregate of 10,837,808 shares of our common stock are "restricted securities"
as that term is defined by Rule 144 of the Securities Act of 1933, and may be
sold only in compliance with Rule 144 of the Securities Act. Ordinarily, under
Rule 144, a person who is an "affiliate" (as that term is defined in Rule 144)
of ours and has beneficially owned restricted securities for a period of one
year may, every three months, sell in brokerage transactions an amount that does
not exceed the greater of (1) one percent of the outstanding class of such
securities, or (2) the average weekly trading volume in such securities on all
national exchanges and/or reported through the automated quotation system of a
registered securities association during the four weeks prior to the filing of a
notice of sale by a securities holder. A person who is not an affiliate of ours
who beneficially owns restricted securities is also subject to the foregoing
volume limitations but may, after the expiration of two years, sell unlimited
amounts of such securities under certain circumstances. Possible or actual sales
of our outstanding common stock by our stockholders under Rule 144 could have a
depressive effect on the price of our common stock. There are currently
9,373,473 shares of our common stock eligible for sale pursuant to Rule 144,
virtually all of which are owned by current affiliates. In addition, we
currently have 3,472,565 shares of common stock issuable upon the exercise of
outstanding options and warrants. The market price of our common stock could
drop due to sales of a large number of shares of our common stock or the
perception that these sales might occur. These factors could also make it more
difficult to raise funds through future offerings of common stock or other
equity.
IN ALL LIKELIHOOD, WARBURG WILL OWN OVER 50% OF GRUBB & ELLIS AFTER THE
COMPLETION OF THE OFFERING; ITS INTERESTS MAY BE DIFFERENT FROM AND CONFLICT
WITH YOURS. Upon the completion of the rights offering, even if every
stockholder fully subscribes for all of their rights, Warburg, which is our
largest stockholder, will still continue to own approximately 48% of our common
stock without giving effect to Warburg's participation in the standby group. By
virtue of Warburg's agreement to participate in the standby group, Warburg will,
in all likelihood, own over 50% of our outstanding shares of common stock upon
completion of the rights offering. As a result, Warburg will own a sufficient
number of shares of the outstanding capital stock of Grubb & Ellis to elect the
directors of Grubb & Ellis, of which it currently has designated two, approve
corporate actions and transactions on behalf of Grubb & Ellis, and
10
otherwise control the business and operations of Grubb & Ellis. This may be
mitigated somewhat, however, by the fact that Warburg has entered into a voting
agreement with the Company which provides that in the event that Warburg owns in
excess of 50% of our voting securities, Warburg will vote those shares of common
stock that are in excess of the 50% in the same proportion as the other
stockholders of the Company vote their shares. Even if Warburg's interest in
Grubb & Ellis does not exceed 50% upon completion of the rights offering, it
will still own a substantial amount of our voting equity which would give
Warburg the ability to significantly influence the Company's affairs and
policies. Warburg is also a party to a stockholders' agreement among C. Michael
Kojaian, Mike Kojaian, and the Goldman Sachs Group, Inc. These parties, other
than Warburg, own an aggregate of approximately 24% of our common stock.
Warburg, along with the other parties to the agreement, have agreed to vote
their shares for each of the Board nominees who are designated by the parties to
this voting agreement. Warburg's and the other principal stockholders' interests
could conflict with yours.
WE ARE SUBJECT TO GENERAL REAL ESTATE MARKET CONDITIONS THAT ARE NOT WITHIN
OUR CONTROL. Our business is highly dependent on the commercial real estate
markets, which in turn are impacted by such factors as the general economy,
interest rates and demand for real estate in local markets. Changes in one or
more of these factors could either favorably or unfavorably impact the volume of
transactions and prices or lease terms for real estate. Consequently, our
revenue from transactional and advisory services and property management fees,
as well as operating results, cash flow and financial condition could be
materially and adversely impacted by changes in these factors.
RECESSIONARY PRESSURES TRADITIONALLY IMPACT REAL ESTATE MARKETS. The United
States economy, in general, is presently experiencing a recession. During
recessionary periods, there tends to be a corresponding decline in demand for
real estate, both generally and regionally, which adversely affects certain
segments of our business. Such adverse effects, typically, are a general decline
in rents and sales prices, a decline in leasing activity, a decline in the level
of investments in, and the value of real estate, and an increase in defaults by
tenants under their respective leases. All of these, in turn, adversely affect
revenues for fees and brokerage commissions, which are derived from property
sales, and annual rental payments and property management fees. We have no way
of determining how long or how extensive the current recession will be, and
accordingly, cannot determine the nature or extent of the adverse effect of the
recession on us.
OUR SIGNIFICANT CORPORATE INDEBTEDNESS COULD AFFECT OUR FINANCIAL HEALTH.
We currently have approximately $32 million in total long term and short term
bank debt outstanding pursuant to a five year bank loan provided by a syndicate
led by Bank of America, N.A. We obtained this loan (which had an initial
principal amount of $40 million) last year in connection with the self-tender
offer of our common stock pursuant to which we purchased approximately 7 million
of our shares for $7.00 per share, a substantial portion of which were purchased
from Warburg. The loan requires annual fixed principal payments and bears
interest pursuant to a formula that is approximately 6.5% per annum at the
present time. Some of the risks associated with our corporate indebtedness
include:
o The amount of money currently due with respect to the loan is large
relative to our current market capitalization, and as a result, our
ability to raise additional capital, if needed, in the near future may
be limited.
o A significant portion of our cash flow is needed to pay interest and
principal on our debt when due.
o Our ability to pay principal and interest when it becomes due or to
refinance our debt depends on our future operating performance and cash
flows, which are subject to factors beyond our control, such as
prevailing economic conditions, prevailing interest rate levels and
financial, competitive, business and other factors.
11
o If we do not have enough cash flow to make principal and interest
payments on our debt obligations when they become due, or satisfy
certain financial covenants, the banks have the right to accelerate the
loan and require that it all immediately become due and payable on
demand, which could have a material adverse effect on us.
WE ARE CURRENTLY IN COVENANT DEFAULT WITH RESPECT TO OUR BANK DEBT. On
December 31, 2001 we failed to satisfy certain financial covenants with respect
to our $32 million bank loan. As a consequence, at the present time the bank
syndicate has the right to accelerate our loan and declare the entire amount
immediately due and payable. We are currently working with the bank syndicate to
cure this covenant default, but there can be no assurances that we will be able
to do so. In the event that we are unable to come to an agreement with the bank
syndicate, and the bank syndicate accelerates the loan at any time in the
foreseeable future, it would have material adverse effect on us, as we do not
presently have the liquidity to pay the entire $32 million on demand.
CONTINUED NEW YORK STOCK EXCHANGE LISTING. We currently do not comply with
the NYSE listing requirement that we have a minimum market capitalization of $50
million and stockholders' equity of $50 million. We were advised, however, on
January 22, 2002 that the NYSE had accepted our proposed business plan to attain
compliance with the NYSE's listing standards on or before July 4, 2003. As a
result, the Company's common stock will continue to be traded on the NYSE,
subject to our continuing to satisfy the objectives set forth in the business
plan, which is subject to periodic review by the NYSE. We submitted this
business plan after we received notification of non-compliance with the NYSE's
listing standards on January 4, 2002. Although management presently anticipates
that it will be able to implement its business plan and come into compliance
with NYSE listing standards on or before July 4, 2003, in the event that we are
unable to do so, our common stock would, in all likelihood, be delisted from the
NYSE. In such event, if we are unable to have our shares listed or quoted on a
market or exchange that provides the holders of our securities with comparable
liquidity, it could materially adversely affect both us and you in your capacity
as a stockholder of our Company.
ALTHOUGH OUR REVENUES ARE SEASONAL DURING THE COURSE OF OUR FISCAL YEAR,
MANY OF OUR EXPENSES ARE CONSTANT THROUGHOUT THE YEAR. Historically, the
majority of our revenues have been, and for the foreseeable future will be,
derived from the transactional services that we provide. Such services are
typically subject to seasonal fluctuations. We typically experience our lowest
quarterly revenue in the quarter ending March 31 of each year with higher and
more consistent revenue in the quarters ending June 30 and September 30. The
quarter ending December 31 has historically provided the highest quarterly level
of revenue due to increased activity caused by the desire of clients to complete
transactions by calendar year-end. However, our non-variable operating expenses,
which are treated as expenses when incurred during the year, are relatively
constant in total dollars on a quarterly basis.
INCREASED COSTS AS A RESULT OF IMPLEMENTATION OF STRATEGIC INITIATIVES; NO
ASSURANCE OF SUCCESS. We have commenced the process, and are currently
continuing to institute a number of strategic alternatives, including
development of a new consulting business unit, integration of the Company's
business units, internal re-alignment of our reporting lines, and possibly
strategic acquisitions. There can be no assurance that any or all of these
various strategic initiatives will be effective. Further, even if we are
successful in some or all of our strategic initiatives, there can be no
assurance that it will result in a substantial increase in revenues,
profitability or profit margins, or that we will be any less immune to the
cyclical nature of the real estate business. In the event that after making the
intended expenditures with respect to various strategic initiatives, we do not
experience the efficiencies and increased profitability that we are seeking to
achieve, the institution of these initiatives, and their attendant costs, could
have a material adverse effect on the Company.
INCREASED INSURANCE RISK AS A RESULT OF RECENT EVENTS. Due in large part to
the terrorist activities of September 11, 2001, we believe that insurance
companies are re-examining many aspects of their
12
business, and may consider taking certain actions in light of the heightened
sense of risk in the wake of these terrorist activities. Among such actions
which insurance companies may take, among others, are increasing premiums,
mandating higher self-insured retentions and deductibles, reducing limits,
restricting coverages, imposing exclusions (such as sabotage and terrorism) and
refusing to underwrite certain risks and classes of business. Underwriters are
also requiring increased security precautions to be implemented due to the
recent terrorist activities and are analyzing the potential concentration of
employees within a given building. Further, insurance companies experiencing
large losses associated with September 11, 2001 terrorist activities and other
events are discovering some difficulty in obtaining or maintaining reinsurance.
Any increased cost, mandated exclusions, and/or change in limits, coverages,
terms and conditions are passed onto the policyholders to assume, and could
adversely affect our ability to obtain appropriate insurance coverages at
reasonable costs, which could have a material adverse affect on our business.
Additionally, in our property management business we rely in many cases on
insurance coverage obtained by our clients to protect us as well, and the
inability of our clients to obtain adequate insurance coverage could have a
material adverse affect on the Company.
OUR SUCCESS MAY DEPEND ON KEY PERSONNEL WHO HAVE RECENTLY JOINED GRUBB &
ELLIS. Three of our current executive officers were hired by Grubb & Ellis
during 2001 to revitalize the Company and to implement the Company's new
strategic initiatives, including the creation, expansion and integration of a
real estate consulting practice. Consequently, there is no assurance that the
individuals will be successful in implementing their business plan, and in
addition, the loss of one or more of these individuals could have a material
adverse effect on the business of the Company.
AS A SERVICE ORIENTED COMPANY, OUR ABILITY TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL IS CRITICAL. The growth of the Company's business will always depend
upon our ability to attract and retain qualified personnel in all of our areas.
In the event that we are unable to attract or retain qualified personnel, we may
be required to limit our growth and our business operating units could suffer as
a result.
WE ARE IN A HIGHLY COMPETITIVE BUSINESS. We compete in a variety of service
businesses within the commercial real estate industry, each of which is highly
competitive on a national as well as local level. We face competition not only
from other real estate service providers, but also from accounting and appraisal
firms and self-managed real estate investment trusts. Although many of our
competitors are local or regional firms that are substantially smaller than us
as a whole, some of these firms are substantially larger than us in the local or
regional area in which we actually compete with these firms. In general, there
can be no assurance that we will be able to continue to compete effectively, to
maintain current fee levels or margins, or maintain or increase our market
share.
ENVIRONMENTAL REGULATION AND ISSUES, CERTAIN OF WHICH WE MAY HAVE NO
CONTROL, MAY ADVERSELY IMPACT OUR BUSINESS. Federal, state and local laws and
regulations impose environmental controls, disclosure rules and zoning
restrictions which have impacted the management, development, use, and/or sale
of real estate. Such laws and regulations tend to discourage sales and leasing
activities and mortgage lending with respect to some properties, and may
therefore adversely affect us specifically, and the real estate industry in
general. Failure by us to disclose environmental issues in connection with a
real estate transaction may subject us to liability to a buyer or lessee of
property. Applicable laws and contractual obligations to property owners could
also subject us to environmental liabilities through the provision of management
services. Environmental laws and regulations impose liability on current or
previous real property owners or operators for the cost of investigating,
cleaning up or removing contamination caused by hazardous or toxic substances at
the property. We may be held liable as an operator for such costs in our role as
an on-site property manager. Liability can be imposed even if the original
actions were legal and we had no knowledge of, or were not responsible for, the
presence of the hazardous or toxic substances. Further, we may also be held
responsible for the entire payment of the liability if we are subject to joint
and several liability and the other responsible parties are unable to pay.
13
We may also be liable under common law to third parties for damages and injuries
resulting from environmental contamination emanating from the site, including
the presence of asbestos containing materials. Insurance for such matters may
not be available. Additionally, new or modified environmental regulations could
develop in a manner which could adversely affect our transactional and
management services.
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FORWARD-LOOKING STATEMENTS
This prospectus and documents incorporated by reference in this prospectus
contain certain forward-looking statements, which, we believe, are within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Our statements of plans, intentions, objectives
and future economic or operating performance contained in this prospectus are
forward-looking statements. Forward-looking statements include but are not
limited to statements containing terms such as "believes," "does not believe,"
"no reason to believe," "expects," "plans," "intends," "estimates," "will,"
"would," "anticipated" or "anticipates."
Forward-looking statements involve known and unknown risks and
uncertainties which may cause our actual results in future periods to differ
materially from results anticipated in the forward-looking statements. Many of
the risks and factors that will determine these results are beyond the Company's
ability to control or predict. These statements are necessarily based upon
various assumptions involving judgment with respect to the future. We make
cautionary statements in certain sections of this prospectus, including in the
Risk Factors beginning on page 10. You should read these cautionary statements
as being applicable to all related forward-looking statements wherever they
appear in this prospectus and in the materials referred to in this prospectus.
No forward-looking statement is a guarantee or promise of future performance. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
15
THE RIGHTS OFFERING
BASIC SUBSCRIPTION PRIVILEGE
As soon as practicable after the date of this prospectus, Grubb & Ellis is
distributing, at no charge, to holders of our common stock on the record date,
February 25, 2002 rights to purchase up to an additional _____ shares of its
common stock. We are distributing ________ of a right for each share of common
stock held on the record date. Each full right will be exercisable for one share
of common stock at a subscription price of approximately $____ per share. We
presently anticipate that the subscription price will be the market price of our
common stock on the effective date of this offering. We have reserved a total of
__________ shares of common stock for the exercise of the rights.
We are sending a subscription certificate and related instructions to each
record holder along with this prospectus to evidence the rights. In order to
exercise rights, you must fill out and sign the appropriate subscription
certificate and timely deliver it with full payment for the shares to be
purchased. There is no minimum number of shares which you must subscribe for in
order to participate in the rights offering.
A depository bank, trust company or securities broker or dealer which is a
record holder for more than one beneficial owner of shares may divide or
consolidate subscription certificates to represent shares held on the record
date by their beneficial owners, upon proper showing to Computershare Trust
Company of New York, the Subscription Agent.
OVER-SUBSCRIPTION PRIVILEGE
Provided that you are not a member of the standby group, you may exercise
your over-subscription privilege only if you exercise your rights in full. To
determine if you have fully exercised your rights, we will consider only the
rights held by you in your individual capacity. For example, you may be granted
rights with respect to the shares of common stock which you own individually and
shares of common stock which you own jointly with your spouse. If you wish to
exercise your over-subscription privilege with respect to the rights you own
individually, but not with respect to the rights you own collectively with your
spouse, you only need to fully exercise those rights that you own individually.
When you complete the portion of your subscription certificate to exercise
your over-subscription privilege, you will be representing and certifying that
you have fully exercised your subscription privileges as to shares of our common
stock which you hold in that capacity. You must exercise your over-subscription
privilege at the same time you exercise your rights in full.
To exercise your over-subscription privilege, you may subscribe for
additional shares of our common stock, upon delivery of the required documents
and payment of the subscription price of $___ per share, before the expiration
of the rights offering. The amount of additional shares for which you may
oversubscribe is the greater of (A) 50% of the number of full rights you
receive, or (B) 100 shares.
If there are more shares of our common stock available than the number of
over-subscription requests, all over-subscription requests will be filled in
full. If there are more over-subscription requests than available shares, we
will allocate the available shares among those holders exercising the
over-subscription privilege. The allocation will be made first to holders of
less than ___ rights so that those holders may subscribe for [___] shares (or
the next higher multiple of 10 shares) and thereafter pro rata among all holders
exercising the over-subscription privilege.
If you exercised your over-subscription privilege and are allocated less
than all of the shares for which you wished to subscribe, your excess payment
for shares that were not allocated to you will be returned by mail without
interest or deduction as soon as practicable after the expiration date. We will
16
deliver to you certificates representing the shares you purchased as soon as
practicable after the expiration date and after all pro rata allocations and
adjustments have been completed.
Members of the standby group are not entitled to participate in the
over-subscription privilege.
FRACTIONAL SHARES
We will not issue any fractional shares. If your rights would allow you to
purchase a fractional share, you may exercise your rights only by rounding down
to and paying for the nearest whole share, or paying for any lesser number of
whole shares. We will accept any inadvertent subscription indicating a purchase
of fractional shares by rounding downward to the nearest number of whole shares
and refunding without interest any payment received for a fractional share as
soon as practicable.
EXPIRATION TIME AND DATE
The subscription privilege expires at 5:00 p.m., Eastern Standard Time, on
_______, 2002, provided that we reserve the right to extend the rights offering
in our sole discretion to some later time. After the expiration date, including
any extensions, rights will no longer be exercisable by anyone.
In order to exercise rights in a timely manner, you must assure that
Computershare Trust Company of New York actually receives, prior to expiration
of the rights, the properly executed and completed subscription certificate, or
form of "Notice of Guaranteed Delivery," together with full payment in good
funds for all shares you wish to purchase.
REASONS FOR THE RIGHTS OFFERING
We are offering the rights to fund the implementation of certain strategic
alternatives, to finance certain strategic acquisitions and for additional
working capital. See "Use of Proceeds."
NO BOARD INVESTMENT RECOMMENDATION TO STOCKHOLDERS
Our Board of Directors does not make any recommendation to you about
whether you should exercise any rights. If you do not exercise all of your
rights, you will maintain your ownership interest in the Company, but you will
own a smaller percentage of the total outstanding common stock after completion
of the rights offering. If you exercise rights, you risk investment loss on new
money invested. We cannot assure you that the subscription price will be below
the market price for the common stock during the rights offering, or that anyone
purchasing shares will be able to sell those shares in the future at a higher
price.
GENERAL TERMS AND ASSUMPTIONS
Only holders of record of common stock at the close of business on the
record date, February 25, 2002 or those to whom rights have been validly
transferred, may exercise rights. You are a record holder for this purpose only
if your name is registered as a stockholder with our transfer agent,
Computershare Investor Services, LLC, as of the record date.
o The text below generally assumes that you are a record holder of
shares, unless otherwise noted. If you own shares held in a brokerage,
bank or other custodial or nominee account, such as shares held in the
Company's Employee Stock Purchase Plan or 401(k) Plan, you should
promptly send the proper instruction form to your broker or other
person holding your shares, in order to exercise rights. Your broker or
other person holding your shares is the record holder and will have to
act in order for you to exercise rights. We have asked the securities
brokers and other nominee holders of our stock to contact you to obtain
your
17
instructions concerning rights you are entitled to exercise. All
commissions, fees and other expenses, such as transfer taxes, incurred
in connection with your exercise of rights through one of these
accounts will be your responsibility.
o No interest will be paid on your funds delivered to exercise rights,
regardless of whether the funds are applied to the purchase of shares
or returned for any reason.
COMPUTERSHARE TRUST COMPANY OF NEW YORK
Computershare Trust Company of New York is acting as the Subscription Agent
for the rights offering under an agreement with us.
FEES AND EXPENSES
We will pay the fees and expenses of Computershare Trust Company of New
York, except applicable brokerage commissions, taxes and other expenses relating
to the sale of rights for your account by Computershare Trust Company of New
York. We have also agreed to indemnify Computershare Trust Company of New York
against certain liabilities in connection with the rights offering.
You will be responsible for paying any commissions, fees and other
expenses, including brokerage commissions and transfer taxes, that you may incur
in the purchase of shares pursuant to the exercise of your rights. Neither Grubb
& Ellis nor Computershare Trust Company of New York will be responsible for such
charges or expenses.
SOLICITATION AGENT
We have not engaged the services of any person or entity to act as a
solicitation agent in connection with the rights offering.
STANDBY PURCHASE
Pursuant to a standby purchase agreement, our largest stockholder, Warburg,
and certain of our executive officers have agreed to stand by to purchase all of
the shares that are offered by this prospectus that are not purchased by the
other stockholders who have failed to exercise their rights, either pursuant to
their basic subscription right or pursuant to their over-subscription privilege.
Members of the standby group do not have the right to participate in the
over-subscription privilege.
CONDITIONS RELATING TO THE RIGHTS OFFERING
The Company has reserved the right at its sole discretion to terminate the
rights offering in its entirety. If the rights offering is terminated for any
reason, we will instruct Computershare Trust Company of New York to refund
without interest to those persons who subscribed for shares in the rights
offering all payments received by Computershare Trust Company of New York.
The material conditions to consummation of the rights offering include the
following, which must be satisfied or waived as of the date and time the rights
expire:
o the Securities and Exchange Commission must not have issued a stop
order relating to the registration statement filed with the Securities
and Exchange Commission relating to this prospectus;
o representations made by the parties in the standby agreement must be
materially true and correct; and
18
o the rights offering must have been completed in the manner described in
this prospectus.
METHOD OF EXERCISE OF RIGHTS
All subscription certificates with respect to your basic subscription
rights and the over-subscription privileges, payments of the subscription price,
nominee holder certifications and notices of guaranteed delivery, to the extent
applicable to your exercise of rights, must be delivered to Computershare Trust
Company of New York .
Please do not send subscription certificates or related forms to Grubb &
Ellis.
You should read carefully the subscription certificates and related
instructions and forms which accompany this prospectus. You should call
____________ at Computershare Trust Company of New York, 212-701-7636, promptly
with any questions you may have.
You may exercise your rights by delivering to Computershare Trust Company
of New York, at the address specified below, at or prior to expiration of the
rights:
o the properly completed and executed subscription certificate(s) which
evidence the rights that you wish to exercise, and
o payment in full in good funds of the subscription price for each share
you wish to purchase under the subscription privilege.
if by mail:
Computershare Trust Company of New York
Wall Street Station
P.O. Box 1010
New York, NY 10268-1010
if by hand, overnight delivery or express mail:
Computershare Trust Company of New York
Wall Street Plaza
88 Pine Street, 19th Floor
New York, NY 10005
REQUIRED FORMS OF PAYMENT FOR EXERCISE
o If you exercise any rights, you must deliver full payment in the form
of:
o a check or bank draft drawn upon a U.S. bank, or U.S. postal money
order, payable to Computershare Trust Company of New York, as
Subscription Agent, or by wire transfer of funds to the account
maintained by Computershare Trust Company of New York, Subscription
Agent, for this rights offering at Harris Trust & Savings Bank, ABA No.
0710000288, Acct. No. ________, Attention: Mr./Ms.__________.
In order for you to timely exercise your basic subscription rights and the
over-subscription privilege, Computershare Trust Company of New York must
actually receive the subscription price before expiration of the rights in the
form of:
o a personal check which must have timely cleared payment, or
19
o a certified or cashier's check or bank draft drawn upon a U.S. bank or
a U.S. postal money order, or collected funds in Computershare Trust
Company of New York's account designated above.
Funds paid by uncertified personal check may take at least five business
days to clear. Accordingly, if you pay the subscription price by means of
uncertified personal check, you should make payment sufficiently in advance of
the expiration time to ensure that your check actually clears and the payment is
received before that time. We are not responsible for any delay in payment by
you and suggest that you consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
SPECIAL PROCEDURE UNDER "NOTICE OF GUARANTEED DELIVERY" FORM
If you wish to exercise your basic subscription rights and the
over-subscription privilege but cannot ensure that Computershare Trust Company
of New York will actually receive the executed subscription certificate before
the expiration of the rights, you may alternatively exercise these rights by
causing all of the following to occur within the time prescribed:
o Computershare Trust Company of New York must receive full payment prior
to the expiration time for all shares you desire to purchase under the
basic subscription privilege and the over-subscription privilege.
o Computershare Trust Company of New York must receive a properly
executed "Notice of Guaranteed Delivery" substantially in the form
distributed by us with your subscription certificate at or prior to the
expiration time.
o The "Notice of Guaranteed Delivery" must be executed by both you and
one of the following: a member firm of a registered national securities
exchange, an NASD member, a commercial bank or trust company having an
office or correspondent in the United States, or other eligible
guarantor institution qualified under a guarantee program acceptable to
Computershare Trust Company of New York. The cosigning institution must
guarantee in the Notice of Guaranteed Delivery that the subscription
certificate will be delivered to Computershare Trust Company of New
York within three NYSE trading days after the date of the form. You
must also provide in that form other relevant details concerning the
intended exercise of rights.
o Computershare Trust Company of New York must receive the properly
completed subscription certificate(s) with any required signature
guarantee within three NYSE trading days following the date of the
related Notice of Guaranteed Delivery.
o If you are a nominee holder of rights, the "Nominee Holder
Certification" must also accompany the Notice of Guaranteed Delivery.
A Notice of Guaranteed Delivery may be delivered to Computershare Trust
Company of New York in the same manner as subscription certificates at the
address set forth above under "The Rights Offering - Computershare Trust Company
of New York," or may be delivered by telegram or facsimile transmission
(telecopier no. 212-701-7624).
Additional copies of the form of Notice of Guaranteed Delivery are
available upon request from Computershare Trust Company of New York.
20
INCOMPLETE FORMS; INSUFFICIENT OR EXCESS PAYMENT
If you do not indicate the number of rights being exercised, or do not
forward sufficient payment for the number of rights that you indicate are being
exercised, then we are entitled to accept the subscription forms and payment for
the maximum number of rights that may be exercised based on the actual payment
delivered. If your forms are incomplete, we are also entitled to reject them.
If your payment exceeds the amount required to pay for the shares you
indicate in your subscription certificate, then we will return any payment not
applied to the purchase of shares under the rights offering procedures without
interest to those who made these payments as soon as practicable by mail.
EXERCISE OF LESS THAN ALL RIGHTS
If you subscribe for fewer than all of the shares represented by your
subscription certificate, you will receive from Computershare Trust Company of
New York a new subscription certificate representing the unused rights only if
Computershare Trust Company of New York receives a properly endorsed
subscription certificate from you no later than 5:00 p.m., Eastern Standard
time, on the fifth (5th) business day prior to the expiration date. It will not
issue new subscription certificates for partially exercised or sold rights
submitted after that time and date. If you do submit a partial exercise or sale
after that time and date, you will not be able to exercise the unexercised or
unsold rights.
Unless you make other arrangements with Computershare Trust Company of New
York, a new subscription certificate issued after 5:00 p.m., Eastern Standard
time, on the fifth (5th) business day before the expiration date will be held
for pick-up by you at Computershare Trust Company of New York.
If you request a reissuance of a subscription certificate, the delivery of
that document will be at your risk.
INSTRUCTIONS TO NOMINEE HOLDERS
If you are a broker, trustee or depository for securities or other nominee
holder of common stock for beneficial owners of our stock, we are requesting
that you contact the beneficial owners as soon as possible to obtain
instructions and related certifications concerning their rights. Our request to
you is further explained in the suggested form of letter of instructions from
nominee holders to beneficial owners accompanying this prospectus.
To the extent so instructed, nominee holders should complete appropriate
subscription certificates on behalf of beneficial owners and submit them on a
timely basis to Computershare Trust Company of New York with the proper payment.
RISK OF LOSS ON DELIVERY OF SUBSCRIPTION CERTIFICATE FORMS AND PAYMENTS
Each holder of rights bears all risk of the method of delivery to
Computershare Trust Company of New York of subscription certificates and
payments of the subscription price.
If subscription certificates and payments are sent by mail, you are urged
to send these by registered mail, properly insured, with return receipt
requested, and to allow a sufficient number of days to ensure delivery to
Computershare Trust Company of New York and clearance of payment prior to the
expiration time.
21
Because uncertified personal checks may take at least five (5) business
days to clear, you are strongly urged to pay, or arrange for payment, by means
of certified or cashier's check, money order or wire transfer of funds.
HOW PROCEDURAL AND OTHER QUESTIONS ARE RESOLVED
We are entitled to and will decide all questions concerning the timeliness,
validity, form and eligibility of any exercise of rights. Any such determination
will be final and binding. Grubb & Ellis, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise or any
right because of any defect or irregularity.
Subscription certificates will not be considered received or accepted until
all irregularities have been waived or cured within such time as we determine,
in our sole discretion. Neither Grubb & Ellis nor Computershare Trust Company of
New York have any duty to give notification of any defect or irregularity in
connection with the submission of subscription certificates or any other
required document, and they will not incur any liability for failure to give
such notification.
Grubb Ellis reserves the right to reject any exercise of rights if the
exercise does not comply with the terms of the rights offering or is not in
proper form or if the exercise of rights would be unlawful or materially
burdensome. See "The Rights Offering-Right to Refuse Exercise Due to Regulatory
Issues" below.
QUESTIONS AND ASSISTANCE CONCERNING THE RIGHTS
You should direct any questions or requests for assistance concerning the
method of exercising rights or requests for additional copies of this
prospectus, forms of instructions or the Notice of Guaranteed Delivery to
Computershare Trust Company of New York, to _____________.
NO REVOCATION
Once you have exercised the subscription privilege, you may not revoke or
change your exercise.
NON-TRANSFERABILITY OF RIGHTS
The rights are not transferable.
FOREIGN AND UNKNOWN ADDRESSES
Grubb & Ellis is not mailing subscription certificates to stockholders
whose addresses are outside the United States or who have an APO or FPO address.
In those cases, the subscription certificates will be held by Computershare
Trust Company of New York for those stockholders. To exercise their rights,
these stockholders must notify Computershare Trust Company of New York prior to
11:00 a.m., Eastern Standard time, on _____________, 2002. At that time, if a
foreign holder has not exercised its rights, the rights will expire.
RIGHT TO REFUSE EXERCISE DUE TO REGULATORY ISSUES
We reserve the right to refuse the exercise of any basic subscription
rights or over-subscription privileges by any holder of rights who would, in our
opinion, be required to obtain prior clearance or approval from any state,
federal or foreign regulatory authorities for the exercise of rights or
ownership of additional shares if, at the expiration date, this clearance or
approval has not been obtained. We are not undertaking to pay for any expenses
incurred in seeking that clearance or approval.
22
We are not offering or selling, or soliciting any purchase of, rights or
underlying shares in any state or other jurisdiction in which this is not
permitted. We reserve the right to delay the commencement of the rights offering
in certain states or other jurisdictions if necessary to comply with local laws.
However, we may elect not to offer rights to residents of any state or other
jurisdiction whose law would require a change in the rights offering in order to
carry out the rights offering in that state or jurisdiction.
NO ADJUSTMENT TO OUTSTANDING STOCK OPTIONS OR OTHER STOCK AWARDS
Grubb & Ellis will not, solely as a result of the rights offering, adjust
the number of shares of common stock reserved for issuance under our stock
option or benefit plans for employees and other eligible participants, or the
number of shares subject to outstanding warrants or awards or stock options.
AMENDMENT, EXTENSION AND WITHDRAWAL
We may terminate the rights offering in its entirety and, if we do, we will
refund all funds received for the exercise of rights, as described under "The
Rights Offering - Conditions Relating to the Rights Offering."
We may also in our sole discretion, amend the rights offering and/or extend
the time to exercise rights beyond _____, 2002, which is the current expiration
date of the rights offering.
We also reserve the right to withdraw the rights offering at any time prior
to the expiration date for any reason, in which event all funds received in the
rights offering will be returned to those persons who subscribed for shares in
the rights offering.
ISSUANCE OF STOCK CERTIFICATES
Stock certificates for shares purchased in the rights offering will be
issued to you as soon as practicable after the expiration date. Computershare
Trust Company of New York will deliver subscription payments to Grubb & Ellis
only after consummation of the rights offering and the issuance of stock
certificates to those exercising rights.
If you exercise rights, you will have no rights as a stockholder until
certificates representing shares you purchased are issued. Unless otherwise
instructed in your subscription certificate form, shares purchased by the
exercise of rights will be registered in the name of the person exercising the
rights.
23
USE OF PROCEEDS
Since the standby group has agreed to exercise all of the rights that are
not otherwise exercised by the other stockholders of the Company, the aggregate
net proceeds to Grubb & Ellis from this offering will be approximately
$10,800,000, after deducting fees and estimated expenses of approximately
$200,000. We currently anticipate that over the next twelve months we will use
approximately $2,000,000 of the net cash proceeds from the rights offering in
connection with implementing our various strategic alternatives, up to
approximately $2,500,000 of the net cash proceeds to finance strategic
acquisitions, and the balance of the net cash proceeds, or approximately
$6,300,000, for additional working capital purposes.
24
DILUTION
Our net tangible book value, as of September 30, 2001, was approximately
$11,500,000 or $(0.85) per share of common stock. Net tangible book value per
share represents the amount of total tangible assets less total liabilities
divided by the number of shares of common stock outstanding at September 30,
2001.
After giving effect to (i) our sale of the ___________ shares of common
stock in this rights offering, including giving effect to the standby agreement,
at an assumed offering price of $____ per share, (ii) the issuance of an
aggregate of 41,048 shares of our common stock on October 20, 2001 at a price of
$3.4255 per share pursuant to our Employee Stock Purchase Plan and (iii)
Warburg's recent acquisition of 1,337,358 shares of our common stock upon the
exercise of warrants for an aggregate purchase price of $4,158,431.25 (which is
a weighted average price of $3.11 per share), (iv) the recent acquisition of
1,977 shares of our common stock upon the exercise, on a cashless basis, of
10,714 warrants by Joe F. Hanauer , one of our directors, and (v) after
deducting estimated expenses related to this rights offering, our pro forma net
tangible book value as of September 30, 2001, would have been $_________, or
$_____ per share. This represents an immediate increase in pro forma net
tangible book value of $______ per share to existing shares, and an immediate
dilution of $______ per share to new shares.
The following table illustrates this per share dilution:
Assumed offering price per share $_____
Net tangible book value per share at September 30, 2001 $(0.85)
Increase per share attributable to new shares $_____
Pro forma net tangible book value per share after
the offering $_____
Dilution per share to new shares(1) $_____
(1) Dilution is determined by subtracting the pro forma net tangible book
value per share from the offering price paid by a stockholder for a share of
common stock.
The foregoing discussion and tables assume no other stock issuance by the
Company or any other exercise of any outstanding stock options or warrants other
than as expressly set forth in the discussion above with respect to the October,
2001 share issuance pursuant to our Employee Stock Purchase Plan and the recent
warrant exercises by Warburg and Joe F. Hanauer. As of September 30, 2001 there
were outstanding options to purchase an aggregate of 2,615,330 shares of common
stock at a weighted average exercise price of $7.16 per share.
25
CAPITALIZATION
The following table shows, in the column labeled "Actual," our
capitalization as of September 30, 2001. The table also shows, in the column
labeled "As Adjusted," our capitalization as adjusted for (i) the issuance of an
aggregate of 41,048 shares of our common stock on October 20, 2001 at a price of
$3.4255 per share pursuant to our Employee Stock Purchase Plan, (ii) Warburg's
recent acquisition of 1,337,358 shares of our common stock upon the exercise of
warrants for an aggregate purchase price of $4,158,431.25 (which is a weighted
average price of approximately $3.11 per share), (iii) the recent acquisition of
1,977 shares of our common stock upon the exercise, on a cashless basis, of
10,714 warrants by Joe F. Hanauer, one of our directors, (iv) a $3,000,000
principal payment made by the Company on December 31, 2001 with respect to its
long term bank loan provided by a syndicate led by Bank of America, N.A. and,
(v) for the completion of the rights offering, including giving effect to the
standby agreement, at an assumed subscription price of $_____ per share, and the
presently anticipated application of the net cash proceeds therefrom.
You should read this table in conjunction with the consolidated financial
statements and the notes to those statements which are incorporated by reference
in this prospectus.
Actual As Adjusted
-------- ----------
Long-term debt $ 27,000 $
Stockholders' equity:
Preferred stock, $0.01 par value per share;
1,000,000 shares authorized;
none issued -- --
Common stock, $0.01 par value per share;
50,000,000 shares authorized; 13,517,380
and 14,897,763 - shares issued and
outstanding respectively 135 ____
Capital in excess of par 67,513 ____
Accumulated other comprehensive loss (337)
Accumulated deficit (52,874)
Total Stockholders' equity 14,437 ____
Total capitalization $ 41,437 $
======== ========
26
DIVIDENDS
The Company intends to retain any future earnings for use in our business
and therefore we do not anticipate paying any cash dividends in the foreseeable
future. In addition, the Company's credit agreement arranged by Bank of America,
N.A. prohibits the payment of cash dividends.
27
PLAN OF DISTRIBUTION
We are offering up to ____ shares of the common stock in the rights
offering directly to holders of our common stock.
As soon as practicable after the date of this prospectus, we will
distribute the rights and copies of this prospectus to individuals who owned
shares of common stock on February 25, 2002, the record date.
A group comprised of our largest stockholder and certain of our executive
officers has agreed to exercise all of the rights not otherwise exercised by the
other stockholders of the Company.
We will pay the fees and expenses of Computershare Trust Company of New
York, as Subscription Agent in the rights offering. We have also have agreed to
indemnify the Subscription Agent from any liability which it may incur in
connection with the rights offering, including liabilities under the Securities
Act of 1933.
We will not engage the services of any third party as a solicitation agent
or information agent with respect to the rights offering.
28
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
This section discusses the material federal income tax consequences of the
rights offering to (1) beneficial owners of our common stock upon distribution
of the rights, and (2) holders of rights upon the exercise and disposition of
the rights. The discussion is based on the Internal Revenue Code of 1986, the
Treasury regulations thereunder, judicial authority, and current administrative
rulings and practice, all of which are subject to change prospectively or
retroactively. The discussion is limited to U.S. taxpayers who hold our common
stock, who will receive rights pursuant to the rights offering and any shares
acquired upon the exercise of rights. This discussion does not include any tax
consequences under state, local and foreign law. Financial institutions,
broker-dealers, nominee holders of our common stock or rights or common stock
purchase warrants, life insurance companies, tax-exempt organizations and
possibly other types of taxpayers may be subject to special provisions of the
tax law or subject to other tax considerations not discussed below.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THEIR OWN
RESPECTIVE TAX SITUATIONS OR SPECIAL TAX CONSIDERATIONS THAT MAY APPLY TO THEM,
INCLUDING WITHOUT LIMITATION FOREIGN, STATE AND LOCAL LAWS THAT MAY APPLY.
TAX CONSEQUENCES OF RIGHTS
DISTRIBUTION OF RIGHTS
Owners of our common stock will not recognize taxable income as a result of
receiving the rights.
BASIS AND HOLDING PERIOD OF THE RIGHTS
The tax basis of the rights received by an owner of our common stock will
be zero, unless the stockholder elects to allocate a portion of the tax basis of
the common stock to the rights received in proportion to their respective fair
market values. The election to allocate a portion of the tax basis to the rights
must be made on the holders federal income tax return for the taxable year in
which the rights are received.
The holding period of a stockholder with respect to the rights received as
a distribution on such stockholder's common stock will include the stockholder's
holding period for the common stock with respect to which the rights were
distributed.
LAPSE OF THE RIGHTS
If rights expire prior to their exercise, the holders of those rights will
not recognize any gain or loss, assuming the holder did not elect to allocate
tax basis to the rights upon the initial distribution; therefore, no adjustment
will be made to the tax basis of our common stock, if any, owned by such
holders.
EXERCISE OF THE RIGHTS AND BASIS AND HOLDING PERIOD OF THE COMMON STOCK
Holders of rights will not recognize any gain or loss upon the exercise of
rights. The tax basis of our common stock acquired through exercise of the
rights will be equal to the subscription price.
The holding period for our common stock acquired through exercise of the
rights will begin on the date the rights are exercised.
29
SALE OF COMMON STOCK
A stockholder will recognize gain or loss upon the sale of our common stock
acquired by exercise of rights in an amount equal to the difference between the
amount realized and the stockholder's tax basis in the shares. The gain or loss
so recognized will be long-term or short-term capital gain or loss, depending on
whether the shares have been held for more than one year.
30
LEGAL MATTERS
The validity of the common stock and the rights in this offering will be
passed upon for Grubb & Ellis by Zukerman Gore & Brandeis, LLP of New York, New
York.
EXPERTS
The consolidated financial statements of Grubb & Ellis appearing in our
Annual Report (Form 10-K) for the year ended June 30, 2001 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the Securities and Exchange Commission (the "SEC"). You may read and copy any
document we file at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. You may call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our recent SEC filings also
are available to you at the SEC's web site at www.sec.gov. Our web site is
www.grubb-ellis.com.
This prospectus, which constitutes a part of a registration statement on
Form S-3 filed by us with the Securities and Exchange Commission under the
Securities Act of 1933, omits certain of the information set forth in the
registration statement. Accordingly, for further information, you should refer
to the registration statement and its exhibits on file with the Securities and
Exchange Commission. Furthermore, statements contained in this prospectus
concerning any document filed as an exhibit are not necessarily complete and, in
each instance, we refer you to the copy of such document filed as an exhibit to
the registration statement.
31
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE RIGHTS
OR THE COMMON STOCK TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS OR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE PROSPECTUS INFORMATION CONTAINED
BY REFERENCE HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
---------------------------
PAGE
Prospectus Summary ......................................................... 1
Information Incorporated by Reference ...................................... 6
Business ................................................................... 7
Risk Factors ............................................................... 10
Forward Looking Statements ................................................. 15
The Rights Offering ........................................................ 16
Use of Proceeds ............................................................ 24
Dilution ................................................................... 25
Capitalization ............................................................. 26
Dividends .................................................................. 27
Plan of Distribution ....................................................... 28
Federal Income Tax Consequences ............................................ 29
Sale of Common Stock ....................................................... 30
Legal Matters .............................................................. 31
Experts .................................................................... 31
Where You Can Find More Information ........................................ 31
==
================================================================================
GRUBB & ELLIS COMPANY
UP TO ______ RIGHTS TO PURCHASE
COMMON STOCK
------------------
PROSPECTUS
------------------
_______________, 2002
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Company in connection with the distribution
of the securities being registered are as set forth in the following table:
Securities and Exchange Commission Fee .......................... $ 1,012
*Legal Fees and Expenses (including blue sky fees
and expenses) ................................................ $100,000
*Accounting Fees and Expenses ................................... 7,500
*Printing Expenses .............................................. 10,000
*Subscription Agent Fees and Expenses ........................... $ 15,000
*Transfer Agent Fees & Expenses ................................. $ 5,000
*NYSE Listing Fees .............................................. $ 51,000
--------
*Miscellaneous .................................................. 10,488
--------
*Total .................................................. $200,000
========
- ----------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company is a Delaware corporation. Subsection (b)(7) of Section 102 of
the Delaware General Corporation Law ("DGCL"), enables a corporation in its
original certificate of incorporation or an amendment thereto to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions) or
(iv) for any transaction from which a director derived an improper personal
benefit.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any present or former director, officer, employee or agent of the
corporation, or any individual serving at the Company's request as a director,
officer or employee of another organization, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding provided that such director, officer, employee or agent acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, provided further that such director, officer, employee or agent had
no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
present or former director, officer, employee or agent who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director, officer, employee or agent acted in good faith
II-1
and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification may be made in
respect to any claim, issue or matter as to which such director, officer,
employee or agent shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all of the circumstances of the
case, such director, officer, employer or agent is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys fees) actually and reasonably incurred by him in connection
therewith; that indemnification and advancement of expenses provided for, by, or
granted pursuant to Section 145 shall not be deemed exclusive of any other
rights to which the indemnified party may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of a present or former
director, officer, employee or agent of the corporation, or any individual
serving at the Company's request as a director, officer or employee of another
organization, against any liability asserted against him or incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
Article X of the Company's Certificate of Incorporation provides that the
Company shall, to the fullest extent permitted by applicable law, including,
without limitation, the DGCL indemnify each director and officer, present or
former, of the Company whom it may indemnify pursuant to such applicable law,
including certain liabilities under the Securities Act. In addition, Article X
of the Certificate of Incorporation provides that a director of the Company
shall not be liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) in respect of certain unlawful dividend payments
or stock redemptions or repurchases, and (iv) for any transaction from which the
director derives an improper personal benefit. The effect of the provision of
the Certificate of Incorporation is to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek nonmonetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
Furthermore, Section 7.01 of the Company's Bylaws states that the Company will,
to the fullest extent permitted by the DGCL, as amended from time to time,
indemnify each person who is made a party to or is involved in any proceeding by
reason of acting in the capacity of director, officer, employee or certain other
capacities with the Company against certain liabilities, including certain
liabilities under the Securities Act of 1933 (the "Securities Act").
The Company has entered into indemnification agreements with each of its
directors and executive officers, which also provide indemnification against
certain liabilities, including certain liabilities under the Securities Act. The
Company currently maintains directors' and officers' liability insurance in the
form of policies which provide for coverage of liabilities up to a maximum
amount of $15 million per policy year (subject to certain minimum initial
payments by the Company in some circumstances). The policies insure directors
and officers for liabilities incurred in connection with or on behalf of the
Company, except for losses incurred on account of certain specified liabilities.
II-2
ITEM 16. EXHIBITS
4.1 Form of Subscription Certificate
4.2 Form of Standby Agreement*
5 Opinion of Zukerman Gore & Brandeis, LLP*
23.1 Consent of Ernst & Young LLP
23.2 Consent of Zukerman Gore & Brandeis, LLP (included in Exhibit 5)*
24 Powers of Attorney (contained on signature page of this Registration
Statement)
99.1 Form of Subscription Agent Agreement
99.2 Form of Stockholder of Record Letter
99.3 Form of Notice of Guaranteed Delivery
99.4 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies
and Other Nominees
99.5 Form of Letter from Brokers or Other Nominees to Beneficial Owners
99.6 Form of Instructions by Beneficial Owners to Brokers or Other Nominees
================================================================================
* To be filed by Amendment
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
II-3
PROVIDED, HOWEVER, that the information required to be included in a
post-effective amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above may be
contained in periodic reports filed by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 and (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on January 29, 2002.
GRUBB & ELLIS COMPANY
By: /s/ Barry M. Barovick
----------------------------------
Barry M. Barovick
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below does hereby constitute and appoint Barry M. Barovick and Ian Y.
Bress, and each of them, with full power of substitution and full power to act
without the other, his true and lawful attorney-in-fact and agent to act for him
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file this Registration Statement, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in order to effectuate the same as fully, to all intents
and purposes, as they or he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 29, 2002.
SIGNATURE TITLE
- ------------------------------------- -----------------------------------------
PRINCIPAL EXECUTIVE OFFICER:
/s/ Barry Barovick
- ------------------------------------- President and Chief Executive Officer
Barry M. Barovick
President and Chief Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
/s/ Ian Y. Bress
- ------------------------------------- Chief Financial Officer
Ian Y. Bress
DIRECTORS
/s/ R. David Anacker
- ------------------------------------- Director
R. David Anacker
/s/ Barry M. Barovick
- ------------------------------------- Director
Barry M. Barovick
II-5
/s/ Joe F. Hanauer
- ------------------------------------- Director
Joe F. Hanauer
/s/ C. Michael Kojaian
- ------------------------------------- Director
C. Michael Kojaian
/s/ Reuben S. Leibowitz
- ------------------------------------- Director
Reuben S. Leibowitz
/s/ Ian C. Morgan
- ------------------------------------- Director
Ian C. Morgan
/s/ Todd A. Williams
- ------------------------------------- Director
Todd A. Williams
II-6
EXHIBIT INDEX
4.1 Form of Subscription Certificate
4.2 Form of Standby Agreement*
5 Opinion of Zukerman Gore & Brandeis, LLP*
23.1 Consent of Ernst & Young LLP
23.2 Consent of Zukerman Gore & Brandeis, LLP (included in Exhibit 5)*
24 Powers of Attorney (contained on signature page of this Registration
Statement)
99.1 Form of Subscription Agent Agreement
99.2 Form of Stockholder of Record Letter
99.3 Form of Notice of Guaranteed Delivery
99.4 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies
and Other Nominees
99.5 Form of Letter from Brokers or Other Nominees to Beneficial Owners
99.6 Form of Instructions by Beneficial Owners to Brokers or Other Nominees
================================================================================
* To be filed by Amendment
II-7