-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RVxVl54o62LyUiS16wOk9now+8V5sKd3r0BmZ2qt02rqinp40ORjdsOTPi2Og3x9 PR8awnrgFkHj/WriuO+WxA== 0000950150-94-000453.txt : 20040504 0000950150-94-000453.hdr.sgml : 20040504 19940401172300 ACCESSION NUMBER: 0000950150-94-000453 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19940401 DATE AS OF CHANGE: 19990831 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GRUBB & ELLIS CO CENTRAL INDEX KEY: 0000216039 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 941424307 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32339 FILM NUMBER: 94520128 BUSINESS ADDRESS: STREET 1: 2215 SANDERS RD STREET 2: STE 400 CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 4159561990 MAIL ADDRESS: STREET 1: ONE MONTGOMERY ST STE 3100 STREET 2: TELESIS TWR 9TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS INVESTORS L P ET AL CENTRAL INDEX KEY: 0000909032 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133549187 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128780600 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Amendment No. 4) Under the Securities Exchange Act of 1934 GRUBB & ELLIS COMPANY --------------------- (Name of Issuer) Common Stock, par value $.01 per share -------------------------------------- (Title of Class of Securities) 40009-52-0 -------------- (CUSIP Number) Reuben S. Leibowitz E.M. Warburg, Pincus & Company 466 Lexington Avenue New York, New York 10017 (212) 878-0600 ------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 30, 1994 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ] Check the following box if a fee is being paid with the statement: [ ] 2 SCHEDULE 13D CUSIP No. 40009-51-0 Page 2 of ____ Pages 1. Name of Reporting Person Warburg, Pincus Investors, L.P. 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds WC 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6. Citizenship or Place of Organization Delaware 7. Sole Voting Power -0- shares of Common Stock (See Item 5) Number of Shares 8. Shared Voting Power Beneficially Owned By 5,067,425 shares of Common Stock (See Item 5) Each Reporting 9. Sole Dispositive Power Person With -0- shares of Common Stock (See Item 5) 10. Shared Dispositive Power 5,067,425 shares of Common Stock (See Item 5) 11. Aggregate Amount Beneficially Owned by Each Reporting Person See Item 5 below 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) See Item 5 below 14. Type of Reporting Person PN 3 SCHEDULE 13D CUSIP No. 40009-51-0 Page 2 of ____ Pages 1. Name of Reporting Person E.M. Warburg, Pincus & Company 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6. Citizenship or Place of Organization New York 7. Sole Voting Power -0- shares of Common Stock (See Item 5) Number of Shares 8. Shared Voting Power Beneficially Owned By 5,067,425 shares of Common Stock (See Item 5) Each Reporting 9. Sole Dispositive Power Person With -0- shares of Common Stock (See Item 5) 10. Shared Dispositive Power 5,067,425 shares of Common Stock (See Item 5) 11. Aggregate Amount Beneficially Owned by Each Reporting Person See Item 5 below 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) See Item 5 below 14. Type of Reporting Person PN 4 SCHEDULE 13D CUSIP No. 40009-51-0 Page 2 of ____ Pages 1. Name of Reporting Person Warburg, Pincus & Co. 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6. Citizenship or Place of Organization New York 7. Sole Voting Power -0- shares of Common Stock (See Item 5) Number of Shares 8. Shared Voting Power Beneficially Owned By 5,067,425 shares of Common Stock (See Item 5) Each Reporting 9. Sole Dispositive Power Person With -0- shares of Common Stock (See Item 5) 10. Shared Dispositive Power 5,067,425 shares of Common Stock (See Item 5) 11. Aggregate Amount Beneficially Owned by Each Reporting Person See Item 5 below 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) See Item 5 below 14. Type of Reporting Person PN 5 SCHEDULE 13D CUSIP No. 40009-51-0 Page 2 of ____ Pages 1. Name of Reporting Person E.M. Warburg, Pincus & Co., Inc. 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [X] 3. SEC Use Only 4. Source of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] 6. Citizenship or Place of Organization Delaware 7. Sole Voting Power -0- shares of Common Stock (See Item 5) Number of Shares 8. Shared Voting Power Beneficially Owned By 5,067,425 shares of Common Stock (See Item 5) Each Reporting 9. Sole Dispositive Power Person With -0- shares of Common Stock (See Item 5) 10. Shared Dispositive Power 5,067,425 shares of Common Stock (See Item 5) 11. Aggregate Amount Beneficially Owned by Each Reporting Person See Item 5 below 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] 13. Percent of Class Represented by Amount in Row (11) See Item 5 below 14. Type of Reporting Person CO 6 This Amendment No. 4 to Schedule 13D restates and amends the Statement on Schedule 13D dated November 11, 1992 and all amendments thereto (the "Schedule 13D"), filed by (i) Warburg, Pincus Investors, L.P., a Delaware limited partnership ("WPI"), (ii) Warburg, Pincus & Co., a New York general partnership ("WPC"), (iii) E.M.Warburg, Pincus & Company, a New York general partnership ("EMW"), and (iv) E.M. Warburg, Pincus & Co., Inc. a Delaware corporation ("E.M. Warburg"), relating to the Common Stock, par value $.01 per share (the "Common Stock"), issued by Grubb & Ellis Company, a Delaware corporation (the "Company"). This Schedule 13D is subject to the provisions of Rule 101(a)(2) of Regulation S-T under the Securities Exchange Act of 1934, as amended, relating to the Securities and Exchange Commission's recently adopted electronic filing requirements. Pursuant to Rule 101(a)(2), since this amendment is the first amendment which the Reporting Persons are filing electronically, the Reporting Persons are required to restate the entire Schedule 13D. Item 1. Security and Issuer. This statement relates to the Common Stock, issued by the Company, whose principal executive offices are at One Montgomery Street, San Francisco, California 94104. Item 2. Identity and Background. (a) This statement is filed by WPI, WPC, EMW, and E.M. Warburg. The sole general partner of WPI is WPC. Lionel I. Pincus is the managing partner of WPC and EMW and may be deemed to control them. EMW, which has the same general partners as WPC, manages WPI. WPC has a 20% interest in the profits of WPI and, through its wholly-owned subsidiary, E.M. Warburg, owns 1.13% of the limited partnership interests in WPI. WPI, WPC, EMW and E.M. Warburg are hereinafter collectively referred to as the "Reporting Entities." The general partners of WPC and EMW and the directors and executive officers of E.M. Warburg are described in Schedule I hereto. (b) The address of the principal business and principal office of each of the Reporting Persons is 466 Lexington Avenue, New York, New York 10017. (c) The principal business of WPI is that of a partnership engaged in making venture capital and related investments. The principal business of WPC is acting as general partner of WPI, Warburg, Pincus Capital Company, L.P., Warburg, Pincus Capital Partners, L.P. and Warburg, Pincus Associates, L.P., and as a holding company for its ownership of securities of E.M. Warburg, Pincus & Co., Inc. The principal business of EMW is acting as manager of WPI. The principal business of E.M. Warburg is providing specialized financial advisory and investment counseling services. (d) None of the Reporting Entities, nor, to the best of their knowledge, any of the persons referred to in paragraph (a) above has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). 5 7 (e) None of the Reporting Entities, nor, to the best of their knowledge, any of the persons referred to in paragraph (a) above has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Except as otherwise indicated on Schedule I hereto, each of the individuals referred to in paragraph (a) above is a United States citizen. Item 3. Source and Amount of Funds or Other Consideration. On January 29, 1993, WPI purchased the Securities (as defined below) for $12,850,000, which was furnished from WPI's investment capital. On July 1, 1993, WPI sold 1,116 shares of Senior Preferred Stock (as defined below), $5.00 Warrants (as defined below) to purchase 2,958 shares of Common Stock, $5.50 Warrants (as defined below) to purchase 1,235 shares of Common Stock and Contingent Warrants (as defined below) to purchase 3,252 shares of Common Stock, for a total purchase price of $111,803.50. On March 29, 1993, WPI agreed to loan the Company up to $10 million, which will be furnished from WPI's investment capital. Item 4. Purpose of Transaction. A. Restructuring. Warburg and Hanauer. On January 29, 1993, WPI, Joe F. Hanauer ("Hanauer"), Prudential and the Company consummated the Restructuring (the "Closing"), pursuant to which, among other things, WPI (for a purchase price of $12,850,000) and Hanauer (for a purchase price of $900,000) purchased (i) 128,266 and 8,894 shares, respectively, of a newly created series of Senior Convertible Preferred Stock of the Company (the "Senior Convertible Preferred Stock"), (ii) five-year warrants initially to purchase 340,000 and 160,000 shares of Common Stock, respectively, at an exercise price of $5.00 per share (the "$5.00 Warrants"), (iii) five-year warrants initially to purchase 142,000 and 58,000 shares of Common Stock, respectively, at an exercise price of $5.50 per share (the "$5.50 Warrants", and together with the $5.00 Warrants, the "Warrants"), and (iv) five-year warrants initially to purchase 373,818 and 26,182 shares of Common Stock, respectively, at an exercise price of $5.00 per share only in the event that the Company incurs a defined liability in excess of $1,500,000 (the "Contingent Warrants"). The Senior Convertible Preferred Stock, the Warrants and the Contingent Warrants are sometimes collectively referred to herein as the "Securities". A one-for-five reverse stock split was effected on January 29, 1993 prior to the issuance of the Securities. Prudential. At the Closing, the Company and Prudential restructured certain existing Company indebtedness held by Prudential and the Company issued Prudential (i) the $5 million Revolving Credit Note, (ii) $10 million of the Company's New Senior Notes and (iii) $10 million of the Company's Payment-in-Kind Notes (the "PIK Notes"). Also, Prudential purchased (x) 150,000 shares of a newly created series of Junior Convertible Preferred Stock of the 6 8 Company (the "Junior Convertible Preferred Stock"), (y) purchased five-year warrants initially to purchase 200,000 shares of Common Stock at an exercise price of $5.50 per share (the "Prudential $5.50 Warrants") and (z) exercised existing warrants to purchase 397,549 shares of Common Sock. The Senior Convertible Preferred Stock and the Junior Convertible Preferred Stock are sometimes collectively referred to herein as the "Preferred Stock". Stockholders' Agreement. As contemplated by the Restructuring, the Company, WPI, Hanauer and Prudential entered the Stockholders' Agreement (as defined below). The Stockholders' Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. The Stockholders' Agreement contains an agreement between WPI and Prudential with respect to voting for the election of directors and grants WPI, Hanauer and Prudential certain registration rights with respect to certain of the securities held by them. Information in Item 6 concerning the Stockholders' Agreement is incorporated herein by reference. B. Certificate Amendments. Certificate Amendments. Prior to the Closing, amendments to the Company's Certificate of Incorporation (the "Certificate Amendments") were filed following approval of the transactions by the Company's stockholders. The Certificate Amendments (i) reduced the par value of the Common Stock from $1.00 to $.01, (ii) effected a one-for-five reverse stock split of the Common Stock, (iii) authorized 250,000 of the Senior Convertible Preferred Stock and (iv) authorized 200,000 of the Junior Convertible Preferred Stock. The Certificate Amendments are referenced on Exhibit 3 hereto. The information contained in Item 6 and referenced on Exhibit 3 hereto is incorporated herein by reference. Certificate and Bylaw Amendments. On May 28, 1993, the Board of Directors of the Company unanimously approved amendments to the Company's Certificate of Incorporation (the "Certificate") which amendments were approved at the Annual Meeting of Stockholders of the Company on August 9, 1993. The amendments, among other things, (a) eliminate the three classes of directors, (b) eliminate cumulative voting in the election of directors, (c) allow for the removal of members of the Board, with or without cause, by the affirmative vote of a majority of the outstanding shares, (d) provide that the Bylaws may be amended by the affirmative vote of a majority of the outstanding shares of capital stock, (e) provide that amendments to the Certificate which have been approved by the Board require approval of a majority, and not a supermajority, of the outstanding shares, (f) eliminate the supermajority vote requirement for certain business combinations and (g) permit holders of a majority of the outstanding shares of capital stock to call a special meeting of stockholders. Removal of the limitations contained in these provisions would allow the WPI, Hanauer and Prudential, acting together, to take certain actions as stockholders that periodically were not permitted. Following approval of the amendments to the Certificate by the stockholders, the Board approved certain conforming amendments to the Bylaws of the Company. C. Board of Directors. Election of Directors. On January 29, 1993, the Company's stockholders approved the Restructuring and elected nine members to the Board of Directors of the Company, including (i) three directors nominated by WPI: Douglas M. Karp and Reuben S. Leibowitz, each of whom 7 9 is a partner of each of WPC and EMW and a Managing Director of E.M. Warburg and John D. Santoleri, a Vice President of Warburg, Pincus Ventures, Inc., which is an affiliate of WPI; (ii) two directors nominated by Prudential: Wilbert F. Schwartz, Managing Director of Prudential Investment Corp., an affiliate of Prudential, and John P. Mullman, Vice President -- Corporate Finance of Prudential; and (iii) Hanauer as Chairman of the Board. Three existing directors also were elected to the Board at the special meeting. Subsequently, Douglas M. Karp and John P. Mullman resigned, and Wilbert F. Schwartz has become the Company's Chief Executive Officer. The current Board of Directors has six members. D. Financing Transactions. During March 1994, the Company substantially completed negotiations to amend its debt agreements with Prudential to modify certain financial covenants and defer principal payments. The agreements also provide a financing commitment from WPI for a $10 million interim loan which is expected to be retired in connection with a proposed sale of rights to acquire common stock of the Company. The agreements are described in Item 6 below and such description is incorporated herein by reference. E. Future Actions. The Reporting Entities may, from time to time, acquire additional securities of the Company in open market or privately negotiated transactions, depending on existing market conditions and other considerations which the Reporting Entities may deem relevant. The Reporting Entities intend to review their investment in the Company on a continuing basis and, depending upon the price and availability of the Common Stock, subsequent developments affecting the Company, the Company's business and prospects, other investment and business opportunities available to the Reporting Entities, general stock market and economic conditions, tax considerations and other factors deemed relevant, may decide to increase or decrease the size of their investment in the Company. Except as described herein, neither the Reporting Entities nor, to the best of their knowledge, any person listed in Schedule I hereto, has any plans or proposals which relate to, or could result in, any of the matters referred to in paragraphs (b) through (j), inclusive, of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a) By reason of the provisions of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Act"), WPI, Hanauer and Prudential may be deemed to be a "group." By reason of the provisions of Rule 13d-5 under the Act, the group consisting of these entities may be deemed to own all shares of Common Stock beneficially owned by WPI, Prudential and Hanauer. WPI does not affirm the existence of such a group and disclaims beneficial ownership of shares of Common Stock beneficially owned by Prudential and Hanauer. As of the date of this Report, WPI is the beneficial owner of 5,067,425 shares of Common Stock through its direct ownership of (i) 127,150 shares of Senior Preferred Stock which are convertible into an aggregate of 4,219,052 shares of Common Stock, (ii) currently exercisable Warrants to purchase an aggregate of 477,807 shares of Common Stock, and (iii) Contingent Warrants to purchase 370,566 shares of Common Stock. Such shares of Senior Preferred Stock and Warrants, upon conversion and exercise, represent approximately 55.5% of the shares of Common Stock calculated in accordance with Rule 13d-3(d)(1)(i) in the manner described below. By reason of the provisions of Rule 13d-5 under the Act, WPC, EMW and E.M. Warburg may be 8 10 deemed to own beneficially the shares of Common Stock beneficially owned by WPI. The shares of Senior Preferred Stock held by WPI represent 37.4% of the outstanding voting power of the Company. As of the date of this Report, Hanauer is the beneficial owner of 555,773 shares of Common Stock through ownership of (i) 21,153 shares of Common Stock, (ii) 8,817 shares of Senior Preferred Stock which are convertible into an aggregate of 292,563 shares of Common Stock, (iii) currently exercisable Warrants to purchase an aggregate of 216,103 shares of Common Stock and (iv) Contingent Warrants to purchase 25,954 shares of Common Stock. In addition, in June 1993, Hanauer received an option to purchase 135,000 shares of Common Stock pursuant to the 1990 Amended and Restated Stock Option Plan; the shares underlying such option have been excluded from Hanauer's beneficial holdings reported on this Schedule 13D as such option will not be exercisable within 60 days of the date hereof. The shares of Senior Preferred Stock and Warrants, upon conversion and exercise, when combined with the shares of Common Stock currently held by Hanauer, represent approximately 12.1% of the shares of Common Stock calculated in accordance with Rule 13d-3(d)(1)(i) in the manner described below. The shares of Senior Preferred Stock and the shares of Common Stock held by Hanauer represent 2.8% of the outstanding voting power of the Company. As of the date of this Report, Prudential is the beneficial owner of 3,272,061 shares of Common Stock through its direct ownership of (i) 397,549 shares of Common Stock, (ii) 150,000 shares of Junior Preferred Stock which are convertible into an aggregate of 2,674,512 shares of Common Stock, and (iii) currently exercisable Warrants to purchase an aggregate of 200,000 shares of Common Stock. Such shares of Junior Preferred Stock and Warrants, upon conversion and exercise, when combined with the shares of Common Stock currently held by Prudential, represent approximately 47.2% of the shares of Common Stock calculated in accordance with Rule 13d-3(d)(1)(i) in the manner described below. The shares of Junior Preferred Stock and the shares of Common Stock held by Prudential represent 27.2% of the outstanding voting power of the Company. The percentages used in this paragraph 5(a) are calculated based upon the 4,060,628 shares of Common Stock issued and outstanding at the close of business on March 1, 1994. Such information has been provided to the Reporting Entities by the Company. The number of shares beneficially owned by Prudential as of the date hereof is as reported in the Schedule 13D, as amended, of Prudential filed with the Securities and Exchange Commission by Prudential. Pursuant to Rule 13d-3(d)(1)(i), shares of Common Stock which are not outstanding which are subject to convertible securities are deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the shares of Common Stock owned by the person holding such convertible securities, but are not deemed to be outstanding for purposes of computing the percentage of such shares owned by any other person. (b) The Reporting Entities share the power to vote or to direct the vote, and share the power to dispose or to direct the disposition of the shares of Senior Convertible Preferred Stock and Warrants held by WPI, but neither have nor share such powers with respect to any shares beneficially owned by Hanauer or Prudential. (c) Except in connection with the transactions described herein, none of the Reporting Entities nor, to the best of their knowledge, any person listed in Schedule I hereto, has effected any transactions in the Common Stock during the preceding 60 days. 9 11 (d) Except as set forth in this Item 5, no person other than each respective record owner referred to herein of securities is known to have the right to receive or the power to direct the receipt of dividends from or the proceeds of sale of such securities. (e) Not applicable. Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to Securities of the Issuer. A. Restructuring. Purchase Agreement. WPI, Hanauer and the Company entered into a Securities Purchase Agreement dated November 2, 1992 (the "Purchase Agreement"). The Purchase Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. Information in Item 4 concerning the Restructuring is incorporated herein by reference. Prudential Purchase Agreement. Prudential and the Company entered into a Purchase Agreement dated November 2, 1992 (the "Prudential Purchase Agreement"). The form of Prudential Purchase Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. Information in Item 4 concerning the Restructuring is incorporated herein by reference. Prudential New Note Agreement. Prudential and the Company entered into a Senior Note, Subordinated Note and Revolving Credit Note Agreement dated November 2, 1992 (the "Prudential Purchase Agreement"). The form of New Note Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. Information in Item 4 concerning the Restructuring is incorporated herein by reference. B. The Warrants. Warrants. Each Warrant, Prudential $5.50 Warrant and Contingent Warrant entitles the holder thereof to purchase one fully paid and nonassessable share of Common Stock at their respective initial exercise prices, subject to adjustment as provided below. Warrants to purchase 500,000 shares of Common Stock have an initial exercise price of $5.00 per share, Warrants to purchase 200,000 shares of Common Stock have an initial exercise price of $5.50 per share, the Prudential $5.50 Warrants have an initial exercise price of $5.50 per share and the Contingent Warrants have an initial exercise price of $5.00 per share. Payment of the aggregate exercise price may be made in cash or, except with respect to the Contingent Warrants, at the election of the holder, by delivering warrants, the value of which will be deemed to be equal to the difference between the current market price per share (as defined) and the then current exercise price. Payment of the aggregate price of the Prudential $5.50 Warrants and the New Prudential Warrants may also be made by the cancellation by Prudential and the delivery to the Company of New Senior Notes, PIK Notes, the New Revolving Credit Note or Converted Revolving Note (as defined in the New Note Agreement) or by cancellation of accrued and unpaid interest thereon. 10 12 The Contingent Warrants become exercisable for a period of 90 days in the event that WPI and Hanauer are notified that the Company or any subsidiary pays a liability or becomes obligated to pay a liability which exceeds $1,500,000 and (ii) (A) arises out of a single event, occurrence or proceeding (or a series of events, occurrences or proceedings which arise out of or present the same factual issues) and (B) relates to any partnership liability of any partnership or joint venture in which the Company or any subsidiary owns or owned, directly or indirectly, any partnership or other equity interest, or of which the Company or any subsidiary is or was a general partners, other than indebtedness for borrowed money, which partnership liability is identified on the Disclosure Schedule to the Purchase Agreement. WPI and Hanauer have the right to exercise all or a portion of their respective Contingent Warrants up to an aggregate exercise price equal to the lesser of (x) the amount by which such liability exceeds $500,000 and (y) the aggregate exercise price of the Contingent Warrants. If WPI owns Contingent Warrants and Hanauer determines not to exercise his Contingent Warrants, Hanauer is required to offer to sell his Contingent Warrants to WPI for aggregate consideration of $1.00. The exercise price and the number of shares of Common Stock issuable upon exercise of each warrant issued in connection with the Restructuring are subject to adjustment from time to time upon the occurrence of certain stock dividends or distributions, stock splits, reverse stock splits or stock reclassifications, certain issuances of rights, options, warrants or securities directly or indirectly convertible into Common Stock to all holders of Common Stock entitling them to purchase shares of Common Stock at a price per share less than the greater of the current market price or the exercise price per share on the date of such issue, certain extraordinary dividends or distributions to all holders of Common Stock, and certain issuances of Common Stock for a consideration per share less than the greater of the current market price or conversion price per share on the date of such issue. C. Stockholders' Agreement. Stockholders' Agreement. The Company, Warburg, Hanauer and Prudential entered into the Stockholders' Agreement dated January 29, 1993 (the "Stockholders' Agreement"). The Stockholders' Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. Voting Agreement. Pursuant to the Stockholders' Agreement, each Stockholder (as defined below) agrees that at any special or annual meeting of stockholders at which Directors are to be elected or in connection with a solicitation of consents through which Directors are to be elected, it shall vote (or give a written consent with respect to) all of its shares of capital stock in favor of: (i) the election to the Board of Directors of the Company of two nominees designated by Prudential (the "Prudential Nominees") and three nominees designated by WPI (the "WPI Nominees"); and (ii) the election to the Board of Directors of such other nominees, not running in opposition to the Prudential Nominees or to the WPI Nominees, who shall have been selected or approved as such by a majority of the whole Board, provided that Prudential and WPI will not be obligated to comply with the foregoing provisions if the Board has failed, in the case of Prudential, to nominate for election to the Board two Prudential Nominees after being requested to do so by Prudential, or has failed, in the case of WPI, to nominate for election to the Board three WPI Nominees after being requested to do so by WPI. "Stockholder" as defined in the Stockholders' Agreement, means WPI, Prudential and any other person (except Hanauer) who agrees to be bound by the terms of the Stockholders' Agreement, provided that no person shall be a Stockholder if such person ceases to beneficially own (x) at least 51% of the Securities 11 13 issued pursuant to the Purchase Agreement and all issued WPI Registrable Securities (as defined below) or (y) at least 75% of the Junior Convertible Preferred Stock, New Prudential Warrants and Prudential $5.50 Warrants issued pursuant to the Prudential Purchase Agreement and all issued Prudential Registrable Securities (as defined below). Pursuant to the Stockholders' Agreement, each Stockholder also agreed that (i) it shall vote against removal of the other party's nominees (unless requested by such party to vote for removal in which case it will do so), (ii) it shall exercise its best efforts to cause its nominees on the Board to vote in favor of a nominee of the other party to fill any vacancy on the Board created by the resignation, removal or death of such party's nominee if the effect of failing to so fill such vacancy would be that there would be less than two Prudential Nominees or three WPI Nominees remaining on the Board, (iii) it shall not elect cumulative voting for the election of Directors and, in the event that any other stockholder elects such cumulative voting, it shall vote its shares of capital stock in the manner necessary to effect the election of the three WPI Nominees and the two Prudential Nominees, and (iv) at any special or annual meeting of stockholders prior to the Company's 1995 annual meeting it shall vote (or give a written consent with respect to) all of its shares of capital stock in favor of electing Hanauer as a Director or against removal of Hanauer as a Director. Registration Rights. The Stockholders' Agreement provides that, at any time after the Closing Date each of (i) the holders of at least 30% of the aggregate number (on the date of the Stockholders' Agreement) of shares of Common Stock issued or issuable upon conversion of any Senior Convertible Preferred Stock and all shares of Common Stock issued of issuable upon exercise of any Warrants and Contingent Warrants (collectively, the "WPI Registrable Securities") may make three written requests to the Company for registration under the Securities Act of 1933, as amended (the "Securities Act"), of all or part of such securities; provided, however, that WPI may make any of such three requests for registration regardless of the percentage of WPI Registrable Securities held by it, and (ii) the holders of at lease 30% of the aggregate number (on the date of the Stockholders' Agreement) of shares of Common Stock issued upon conversion of the Old Prudential Warrants, all shares of Common Stock issued or issuable upon conversion of any Junior Convertible Preferred Stock and all shares of Common Stock issued or issuable upon exercise of any New Prudential Warrants or Prudential $5.50 Warrants (collectively, the "Prudential Registrable Securities") may make three written requests to the Company for registration under the Securities Act of all or part of such securities; provided, however, that Prudential may make any of such three requests for registration regardless of the percentage of Prudential Registrable Securities held by it. The Stockholders' Agreement also provides that in the event a holder of WPI Registrable Securities requests a registration pursuant to the foregoing provisions, Hanauer may elect to include a proportionate share of WPI Registrable Securities held by him in which case he will be permitted to sell such WPI Registrable Securities on the same terms as the holder of the WPI Registrable Securities requesting such registration. Pursuant to the Stockholders' Agreement, holders of WPI Registrable Securities and Prudential Registrable Securities will also have certain "piggyback" registration rights to include their securities, subject to certain limitations, in any other registration statements filed by the Company for its own account or pursuant to any of the foregoing requests, or otherwise. Whenever the Company effects a registration pursuant to the registration rights provisions of the Stockholders' Agreement, the Company will be required to pay the costs of such registration of securities, except that each selling stockholder will bear its pro rata share of customary 12 14 underwriting discounts and commissions, the customary fees and expenses of its counsel and applicable transfer taxes. The Stockholders' Agreement contains customary indemnification and contribution provisions relating to the exercise by the holders of registrable securities of their registration rights thereunder. Termination. The provisions of the Stockholders' Agreement pertaining to voting by Stockholders will terminate at such time as there is one Stockholder. In any event, the provisions of the Stockholders' Agreement with respect to voting arrangements and restrictions will terminate no later than ten years from the date of the Stockholders' Agreement in accordance with applicable law, subject to extension by the agreement of the remaining parties to the Stockholders' Agreement. Amendment to the Stockholders' Agreement. As of July 1, 1993, the Company, WPI, Hanauer and Prudential entered into an Amendment to the Stockholders' Agreement (the "Amendment"). The Amendment to the Stockholders' Agreement was previously filed as an Exhibit to this Schedule 13D and is incorporated herein by reference. D. Consulting Agreement. Hanauer Consulting Agreement. The Company entered into a consulting agreement with Hanauer after the Closing pursuant to which the Company pays Hanauer $15,000 per month plus expenses for his services. The consulting agreement is terminable by either party at any time. E. Description of Preferred Stock. Senior Convertible Preferred Stock. The Senior Convertible Preferred Stock, with respect to dividend rights and rights on redemption and/or liquidation, winding up and dissolution, ranks prior to any other equity securities of the Company, including any other series of Preferred Stock. Holders of Senior Convertible Preferred Stock are entitled to receive, out of any funds legally available therefor, cumulative dividends payable in cash, at a rate of 12% of the Senior Stated Value (as defined below) per annum. Accrued but unpaid dividends increase at a compounding rate equal to 12% of the Senior Stated Value per annum compounded annually. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the shares of Senior Convertible Preferred Stock are entitled to be first paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to $100.00 per share (the "Senior Stated Value") plus an amount equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution, before any payment shall be made or any assets distributed to the holders of any other equity security of the Company. The Senior Convertible Preferred Stock is convertible into shares of Common Stock, at the option of the holder, at any time. The initial conversion price was set at the Closing, such that conversion of the aggregate 137,160 shares of Senior Convertible Preferred Stock issued to WPI and Hanauer resulted in such persons holding approximately 40% of the Company's equity on a fully diluted basis, but before exercise of any warrants issued in connection with the Restructuring. The Senior Convertible Preferred Stock is subject to mandatory conversion in the event that (i) at all times during a two-year period the ratio of consolidated debt to net income before taxes, excluding extraordinary items, and income or loss from discontinued operations plus total interest expense and depreciation and amortization has not 13 15 exceeded 3.0:1.0, (ii) on each trading day during a six-month period the price of the Common Stock has exceeded $1.75 per share, and (iii) the Company is in full compliance with the terms and conditions of all agreements pursuant to which the Company has incurred indebtedness for borrowed money. On November 1, 2000, up to 50% of the shares of Senior Convertible Preferred Stock issued at any time will be subject to mandatory redemption, with the remaining shares subject to mandatory redemption on November 1, 2001, in each case at the Senior Stated Value plus accrued and unpaid dividends and to the extent the Company has the funds legally available therefor. The conversion price is subject to adjustment from time to time upon the occurrence of certain stock dividends or distributions, stock splits, reverse stock splits or stock reclassifications, certain issuances of rights, options, warrants or securities directly or indirectly convertible into Common Stock to all holders of Common Stock entitling them to purchase shares of Common Stock at a price per share less than the greater of the current market price or the or the conversion price per share on the date of such issue, certain extraordinary dividends or distributions to all holders of Common Stock, and certain issuances of Common Stock for a consideration per share less than the greater of the current market price or the conversion price per share on the date of such issue. Junior Convertible Preferred Stock. The Junior Convertible Preferred Stock, with respect to dividend rights and rights on redemption and on liquidation, winding up or dissolution ranks prior to any other equity securities of the Company, excluding the Senior Convertible Preferred Stock. Holders of Junior Convertible Preferred Stock are entitled to receive, out of any funds legally available therefor, cumulative dividends payable in cash at a rate of 5% of the Junior Stated Value (as defined below) per annum. Accrued but unpaid dividends increase at a compounding rate equal to 5% of the Junior Stated Value per annum compounded annually. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, if assets are remaining after the payment in full of the liquidation preference of the Senior Convertible Preferred Stock, the holders of the shares of Junior Convertible Preferred Stock then outstanding are entitled to be first paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to $100.00 per share (the "Junior Stated Value") plus an amount equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution, before any payment shall be made or any assets distributed to the holders of any equity security of the Company. The Junior Convertible Preferred Stock is convertible into shares of Common Stock, at the option of the holder, at any time. The initial conversion price will be set at the Closing, such that conversion of the 150,000 shares of Junior Convertible Preferred Stock issued to Prudential plus the shares of Common Stock issued upon exercise of the Old Prudential Warrants would result in Prudential holding approximately 27% of the Company's equity on a fully diluted basis, but before exercise of any warrants issued in connection with the Restructuring. The Junior Convertible Preferred Stock is subject to mandatory conversion in the event that (i) at all times during a two-year period the ratio of consolidated debt to net income before taxes, excluding extraordinary items, and income or loss from discontinued operations plus total interest expense and depreciation and amortization has not exceeded 3.0:1.0, (ii) on each trading day during a six-month period the price of the Common Stock has exceeded $1.75 per share, and (iii) the Company is in full compliance with the terms and conditions of all agreements pursuant to which the Company has incurred indebtedness for borrowed money. Assuming full satisfaction of the Company's mandatory redemption obligation with respect to the Senior Convertible Preferred Stock, on November 1, 2000, 2001, 2002, and 2003, the Company will be required to redeem 16.67%, 16.67%, 33.34% and all remaining shares, respectively, of the Junior Convertible Preferred Stock, in each case at the Junior Stated Value plus accrued and unpaid dividends and 14 16 to the extent the Company has the funds legally available therefor. The conversion price is subject to adjustment from time to time upon the occurrence of certain stock dividends or distributions, stock splits, reverse stock splits or stock reclassifications, certain issuances of rights, options, warrants or securities directly or indirectly convertible into Common Stock to all holders of Common Stock entitling them to purchase shares of Common Stock at a price per share less than the greater of the current market price or the conversion price per share on the date of such issue, certain extraordinary dividends or distributions to all holders of Common Stock, and certain issuances of Common Stock for a consideration per share less than the greater of the current market price or the conversion price per share on the date of such issue. Voting Rights. The Preferred Stock is entitled to vote on all matters submitted to a vote of the stockholders of the corporation on an as-converted-to Common Stock basis. Without the consent of two-thirds of the issued and outstanding shares of both the Senior Convertible Preferred Stock and the Junior Convertible Preferred Stock, each voting separately as a class, the Company may not (i) authorize or issue any class of shares, (ii) increase the authorized shares of, or issue such shares (except in payment of dividends) of either such security, (iii) amend, alter, waive the application of or repeal certain provisions of the Certificate of Incorporation, or enter in any agreement or take any other action which in any manner would alter, change or otherwise adversely affect the powers, rights or preferences of either such security, (iv) effect a reorganization, recapitalization, liquidation, dissolution, winding up, sale of substantially all of the Company's assets or a merger, or (v) take any action which would cause a dividend to be deemed received as either such security for certain purposes unless actually received. The amendment to the Certificate of Incorporation denies voting rights to the holders of Common Stock with respect to matters described in clauses (ii), (iii) and (v) above except as otherwise required by Delaware law. Rights Plan. The Board of Directors has amended the definition of "Acquiring Person" under the Company's Stockholders' Rights Agreement (the "Rights Plan") so that the consummation of the Restructuring would not make WPI, Hanauer or Prudential an "Acquiring Person" as originally defined in the Rights Plan. At the Closing of the Restructuring, the Rights issued under the Rights Plan (the "Rights") were redeemed for $.01 per share of Common Stock, payable in shares of Common Stock, which shares are listed on the New York Stock Exchange and the Pacific Stock Exchange. The Common Stock was valued for purposes of such redemption on the basis of the current market price as defined in the Rights Plan. The whole and fractional shares of Common Stock received pursuant to the redemption were aggregated with the shares of Common Stock already held by each stockholder for the purpose of calculating the shares of Common Stock to be received by such stockholder after the reverse stock split. F. Financing Transactions. During March 1994, the Company substantially completed negotiations to amend its debt agreements with Prudential to modify certain financial covenants and defer principal payments. The agreements also provide a financing commitment from WPI for a $10 million interim loan which is expected to be retired in connection with a proposed sale of rights to acquire common stock of the Company. The agreements are described in the Acknowledgment Summary of Terms of Proposed Bridge Loan and Rights Offering, which is filed hereto as Exhibit 7 and incorporated herein by reference. Prudential Agreements. The Company, WPI and Prudential have entered into an agreement in principle (the "Agreement") pursuant to which the existing Prudential debt 15 17 agreements were amended to provide that the Company will not be required to make principal payments on any of the Prudential debt prior to November 1, 1997. Thereafter, the revolving credit facility will mature on November 1, 1999, principal on the Senior Note will be payable in two equal installments on November 1, 1997 and 1998, and principal on the PIK Notes will be payable in two approximately equal installments on November 1, 2000 and 2001. The interest rate on the PIK Notes will increase from 10.65% to 11.65% per annum on January 1, 1996. In addition, certain covenants of the debt agreements remain in place, but will not be in effect until April 1, 1997. The debt agreements, as amended, provide for supplemental principal payments commencing July 1, 1998 if the Company meets certain financial tests. WPI Loan. WPI has agreed to loan the Company up to $10 million at an initial interest rate of 5% per annum with a maturity date of April 28, 1995. The interest rate will increase to 10% per annum in the event that stockholder approval of certain of the transactions contemplated by the Agreement is not obtained. Interest on the loan will be due upon maturity or upon refinancing, whichever occurs first. The loan will be secured by the Company's commercial brokerage revenues through a cash collateral account. Prudential also will have a lien on the cash collateral account which will be subordinated to WPI's loan. WPI's loan was made pursuant to the Loan and Security Agreement and form of Promissory Note, which are filed herewith as Exhibit 8 and are incorporated herein by reference. WPI and Prudential have entered into an Intercreditor Agreement dated March 28, 1994, which is filed herewith as Exhibit 9 and is incorporated herein by reference. Possible Rights Offering. The Agreement also provides for the Company to seek additional equity capital through a rights offering, and contemplates that the Company would issue to holders of the Company's common stock, for each share of common stock, a non-transferable right to acquire one share of Company common stock at an exercise price tentatively set at $2.375 per share. Subject to certain conditions, stockholders also would have certain rights to oversubscribe to the extent that other stockholders do not subscribe. WPI has agreed to acquire the rights not acquired by the holders of common stock in the rights offering through the conversion of its loan up to an amount not exceeding $10 million plus accrued interest on the loan. Pursuant to the Agreement, the rights offering would occur after the Company obtains the approval of the transactions contemplated by the Agreement from the holders of a majority of the shares of the Company's voting stock, other than WPI and Prudential. Accordingly, there can be no assurance that such approval will be obtained. Amendments to Preferred Stock. The Agreement also contemplates certain amendments to the existing Senior Convertible Preferred Stock held by WPI and the Junior Convertible Preferred Stock held by Prudential. Both series of preferred stock would be amended to be nonredeemable. As of the date of the rights offering, the exercise prices on the outstanding warrants held by Prudential and WPI would be reduced to $3.50 per share pursuant to the terms of such warrants, except that the exercise price on the contingent warrants to purchase 370,566 shares held by WPI, which are exercisable only under specified circumstances, would be reduced to the same price per share as the rights offering. As it relates to the rights offering, WPI will retain certain anti-dilution rights with respect to the preferred stock which it currently holds. Thereafter, the preferred stock and warrants held by WPI would be amended to eliminate the anti-dilution provisions with respect to the issuance of common stock and common stock equivalents at less than the conversion price or exercise price. The preferred stock and the outstanding warrants held by Prudential would be amended to eliminate the anti-dilution provisions with respect to the issuance of common stock 16 18 and common stock equivalents at less than the conversion price or exercise price. The Junior Convertible Preferred Stock also would be amended to increase the dividend rate to 10% per annum effective January 1, 2002, with further increases of 1% per year effective January 1, 2003 and January 1, 2004 and 2% per year effective January 1, 2005 and each January 1 thereafter. The Senior Convertible Preferred Stock would be amended to provide that at such time as the dividend rate on the Junior Convertible Preferred Stock would increase above 12%, the dividend rate on the Senior Convertible Preferred Stock would increase by the same amount as the dividend rate on the Junior Convertible Preferred Stock. The Junior Convertible Preferred Stock also would be amended to provide that under certain circumstances following the conversion of the Senior Convertible Preferred Stock holders of the Junior Convertible Preferred Stock will be obligated to convert such preferred stock. Prudential Holdings. Pursuant to the Agreement, Prudential has agreed to work with the Company in a good faith effort to take certain actions which would facilitate the ability of a subsidiary of the Company to conduct certain government contracting business. Prudential's actions could result in Prudential waiving, but not relinquishing, its right to appoint Company directors or other rights under the Stockholders' Agreement or limiting its voting rights. Except as described above, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 hereof or between such persons and any other person with respect to any securities of the Company, including but not limited to transfer or voting of any other securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, divisions of profits or loss, or the giving or withholding of proxies. Item 7. Material to be Filed as Exhibits. Exhibit 1. Agreement relating to the filing of joint acquisition statements as required by Rule 13d-1(f)(1) under the Act. Exhibit 2. Securities Purchase Agreement dated as of November 2, 1992, by and among the Company, WPI and Hanauer, including the form of Warrant Certificate, form of Certificate Amendments, form of Prudential Purchase Agreement, form of New Note Agreement and form of Stockholders' Agreement (previously filed as Exhibit 2 to Schedule 13D dated November 2, 1992). Exhibit 3. Stockholders' Agreement dated as of January 29, 1993, by and among the Company, WPI, Hanauer and Prudential (previously filed as Exhibit 2 to Amendment No. 1 to Schedule 13D dated January 29, 1993). Exhibit 4. Amendment to Stockholders' Agreement dated as of July 1, 1993, by and among the Company, WPI, Hanauer and Prudential (previously filed as Exhibit 2 to Amendment No. 2 to Schedule 13D dated July 1, 1993). Exhibit 5. Securities Purchase Agreement dated as of July 1, 1993, by and among WPI, Hanauer and Schwartz (previously filed as Exhibit 3 to Amendment No. 2 to Schedule 13D dated July 1, 1993). 17 19 Exhibit 6. Proposed Amendments to Certificate of Incorporation of the Company (previously filed as Exhibit 4 to Amendment No. 2 to Schedule 13D dated July 1, 1993). Exhibit 7. Acknowledgement of Summary of Terms of Proposed Bridge Loan and Rights Offering executed by WPI, Prudential and the Company dated as of March 28, 1994. Exhibit 8. Loan and Security Agreement between WPI and the Company dated as of March 29, 1994, including form of Promissory Note in the amount of $10,000,000 dated as of March 29, 1994 executed by the Company in favor of WPI. Exhibit 9. Intercreditor Agreement between WPI and Prudential dated as of March 28, 1994. 18 20 SIGNATURES After reasonable inquiry and to the best of our knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Dated: April 1, 1994 WARBURG, PINCUS INVESTORS, L.P. Warburg, Pincus & Co., General Partner By: /s/ Stephen Distler ----------------------------------- Title: Partner WARBURG, PINCUS & CO. By: /s/ Stephen Distler ----------------------------------- Title: Partner E.M. WARBURG, PINCUS & COMPANY By: /s/ Stephen Distler ----------------------------------- Title: Partner E.M WARBURG, PINCUS & CO., INC. By: /s/ Stephen Distler ----------------------------------- Title: Partner 19 21 1/93 SCHEDULE I Set forth below is the name, position and present principal occupation of each of the directors and executive officers of E.M. Warburg, Pincus & Co., Inc. ("E.M. Warburg") and of each of the general partners of Warburg, Pincus & Co. ("WPC") and E.M. Warburg, Pincus & Company ("EMW"). The sole general partner of Warburg, Pincus Investors, L.P. ("WPI") is WPC. E.M. Warburg, WPC, EMW and WPI are hereinafter collectively referred to as the "Reporting Entities." Except as otherwise indicated, the business address of each of such persons is 466 Lexington Avenue, New York, New York 10017, and each of such persons is a citizen of the United States. Directors and Executive Officers of E. M. Warburg -------------------------
Present Principal Occupation in Addition to Position with E.M. Warburg, if any, and Positions with the Name and Position Reporting Entities ----------------- ------------------------------- Lionel I. Pincus, Chairman of the Board and Managing Partner, WPC and EMW; Managing Chief Executive Officer Partner, Pincus & Co. (See Partners of WPC.) John L. Vogelstein, Vice Chairman of the Board Partner, WPC and EMW. John L. Furth, Vice Chairman of the Board Partner, WPC and EMW. Harold Brown, Senior Managing Director Partner, WPC and EMW. Rodman W. Moorhead III, Senior Managing Director Partner, WPC and EMW. Susan Black, Managing Director Partner, WPC and EMW. Christopher W. Brody, Managing Director Partner, WPC and EMW. Dale C. Christensen*, Managing Director Errol M. Cook, Managing Director Partner, WPC and EMW. Elizabeth B. Dater, Managing Director Partner, WPC and EMW. Stephen Distler, Managing Director and Controller Partner, WPC and EMW.
__________________________________ * Citizen of Canada. 20 22 Stuart M. Goode, Managing Directors Partner, WPC and EMW. Stewart K. Gross, Managing Director Partner, WPC and EMW. Patrick T. Hackett, Managing Director Partner, WPC and EMW. Jeffrey A. Harris, Managing Director Partner, WPC and EMW. Robert S. Hillas, Managing Director Partner, WPC and EMW A. Michael Hoffman, Managing Director Partner, WPC and EMW. William H. Janeway, Managing Director Partner, WPC and EMW. Charles R. Kage, Managing Director Partner, WPC and EMW Douglas M. Karp, Managing Director Partner, WPC and EMW. Richard H. King*, Managing Director Henry Kressel, Managing Director Partner, WPC and EMW. Joseph P. Landy, Managing Director Partner, WPC and EMW Sidney Lapidus, Managing Director Partner, WPC and EMW. Edwin F. LeGard, Jr., Managing Director Partner, WPC and EMW. Reuben S. Leibowitz, Managing Director Partner, WPC and EMW. Spencer S. Marsh III, Managing Director Partner, WPC and EMW. Andrew H. Massie, Jr., Managing Director Partner, WPC and EMW. Edward J. McKinley, Managing Director Partner, WPC and EMW. Howard H. Newman, Managing Director Partner, WPC and EMW. Anthony G. Orphanos, Managing Director Partner, WPC and EMW. Judhvir Parmar**, Managing Director Partner, EMW Ernest H. Pomerantz, Managing Director Partner, WPC and EMW. Arnold M. Reichman, Managing Director Partner, WPC and EMW. Roger Reinlieb, Managing Director Partner, WPC and EMW. Sheila N. Scott, Managing Director Partner, WPC and EMW. Dominic H. Shorthouse***, Managing Director Peter Stalker III, Managing Director Partner, WPC and EMW.
__________________________________ * Citizen of United Kingdom. ** Citizen of India *** Citizen of United Kingdom. 21 23 David A. Tanner, Managing Director Partner, WPC and EMW. James E. Thomas, Managing Director Partner, WPC and EMW Joanne R. Wenig, Managing Director Partner, WPC and EMW.
22 24 General Partners of WPC and EMW ----------------
Present Principal Occupation in Addition to Position with WPC and E.M. Warburg and Positions with the Name Reporting Entities ---- --------------------------------------- Susan Black (See Directors and Executive Officers of E.M. Warburg.) Christopher W. Brody (See Directors and Executive Officers of E.M. Warburg.) Harold Brown (See Directors and Executive Officers of E.M. Warburg.) Errol M. Cook (See Directors and Executive Officers of E.M. Warburg.) Elizabeth B. Dater (See Directors and Executive Officers of E.M. Warburg.) Stephen Distler (See Directors and Executive Officers of E.M. Warburg.) John L. Furth (See Directors and Executive Officers of E.M. Warburg.) Stuart M. Goode (See Directors and Executive Officers of E.M. Warburg.) Stewart K. Gross (See Directors and Executive Officers of E.M. Warburg.) Patrick T. Hackett (See Directors and Executive Officers of E.M. Warburg.) Jeffrey A. Harris (See Directors and Executive Officers of E.M. Warburg.) Robert S. Hillas (See Directors and Executive Officers of E.M. Warburg.) A. Michael Hoffman (See Directors and Executive Officers of E.M. Warburg.) William H. Janeway (See Directors and Executive Officers of E.M. Warburg.) Douglas M. Karp (See Directors and Executive Officers of E.M. Warburg.) Charles R. Kage (See Directors and Executive Officers of E.M. Warburg.)
23 25 Henry Kressel (See Directors and Executive Officers of E.M. Warburg.) Joseph P. Landy (See Directors and Executive Officers of E.M. Warburg.) Sidney Lapidus (See Directors and Executive Officers of E.M. Warburg.) Edwin F. LeGard, Jr. (See Directors and Executive Officers of E.M. Warburg.) Reuben S. Leibowitz (See Directors and Executive Officers of E.M. Warburg.) Spencer S. Marsh III (See Directors and Executive Officers of E.M. Warburg.) Andrew H. Massie, Jr. (See Directors and Executive Officers of E.M. Warburg.) Edward J. McKinley (See Directors and Executive Officers of E.M. Warburg.) Rodman W. Moorhead III (See Directors and Executive Officers of E.M. Warburg.) Howard H. Newman (See Directors and Executive Officers of E.M. Warburg.) Anthony G. Orphanos (See Directors and Executive Officers of E.M. Warburg.) Lionel I. Pincus (See Directors and Executive Officers of E.M. Warburg.) Ernest H. Pomerantz (See Directors and Executive Officers of E.M. Warburg.) Arnold M. Reichman (See Directors and Executive Officers of E.M. Warburg.) Roger Reinlieb (See Directors and Executive Officers of E.M. Warburg.) Sheila N. Scott (See Directors and Executive Officers of E.M. Warburg.) Peter Stalker III (See Directors and Executive Officers of E.M. Warburg.) David A. Tanner (See Directors and Executive Officers of E.M. Warburg.) James E. Thomas (See Directors and Executive Officers of E.M. Warburg.)
24 26 John L. Vogelstein (See Directors and Executive Officers of E.M. Warburg.) Joanne R. Wenig (See Directors and Executive Officers of E.M. Warburg.) Pincus & Co.* NL & Co.*
__________________________________ * New York limited partnership; primary activity is ownership of partnership interests in WPC and EMW. 25 27 General Partner of Warburg, Pincus Investors, L.P. ------------------------------- Warburg, Pincus & Co. (See General Partners of WPC.)
26 28 EXHIBIT INDEX Exhibit 1. Agreement relating to the filing of joint acquisition statements as required by Rule 13d-1(f)(1) under the Act. Exhibit 2. Securities Purchase Agreement dated as of November 2, 1992, by and among the Company, WPI and Hanauer, including the form of Warrant Certificate, form of Certificate Amendments, form of Prudential Purchase Agreement, form of New Note Agreement and form of Stockholders' Agreement (previously filed as Exhibit 2 to Schedule 13D dated November 2, 1992). Exhibit 3. Stockholders' Agreement dated as of January 29, 1993, by and among the Company, WPI, Hanauer and Prudential (previously filed as Exhibit 2 to Amendment No. 1 to Schedule 13D dated January 29, 1993). Exhibit 4. Amendment to Stockholders' Agreement dated as of July 1, 1993, by and among the Company, WPI, Hanauer and Prudential (previously filed as Exhibit 2 to Amendment No. 2 to Schedule 13D dated July 1, 1993). Exhibit 5. Securities Purchase Agreement dated as of July 1, 1993, by and among WPI, Hanauer and Schwartz (previously filed as Exhibit 3 to Amendment No. 2 to Schedule 13D dated July 1, 1993). Exhibit 6. Proposed Amendments to Certificate of Incorporation of the Company (previously filed as Exhibit 4 to Amendment No. 2 to Schedule 13D dated July 1, 1993). Exhibit 7. Acknowledgement of Summary of Terms of Proposed Bridge Loan and Rights Offering executed by WPI, Prudential and the Company dated as of March 28, 1994. Exhibit 8. Loan and Security Agreement between WPI and the Company dated as of March 29, 1994, including form of Promissory Note in the amount of $10,000,000 dated as of March 29, 1994 executed by the Company in favor of WPI. Exhibit 9. Intercreditor Agreement between WPI and Prudential dated as of March 28, 1994. 27 EX-1 2 AGREEMENT OF JOINT ACQUISITION STATEMENTS 1 EXHIBIT 1 JOINT ACQUISITION STATEMENT PURSUANT TO RULE 13d-1(f)(1) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that he or it knows or has reason to believe that such information is inaccurate. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the 1st day of April, 1994. Dated: April 1, 1994 WARBURG, PINCUS INVESTORS, L.P. By: Warburg, Pincus & Co., General Partner By: /s/ Stephen Distler ----------------------------------- Title: Partner WARBURG, PINCUS & CO. By: /s/ Stephen Distler ----------------------------------- Title: Partner E.M. WARBURG, PINCUS & COMPANY By: /s/ Stephen Distler ----------------------------------- Title: Partner E.M WARBURG, PINCUS & CO., INC. By: /s/ Stephen Distler ----------------------------------- Title: Partner EX-7 3 SUMMARY OF TERMS OF PROSPOSED BRIDGE LOAN & RIGHTS 1 EXHIBIT 7 GRUBB & ELLIS COMPANY March 28, 1994 Warburg, Pincus Investors, L.P c/o E.M. Warburg, Pincus & Co., Inc. 466 Lexington Avenue, 10th Floor New York, New York 10017 The Prudential Insurance Company of America c/o The Prudential Corporate Finance Group Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102 Re: Grubb & Ellis Company Bridge Financing and Equity Offering Acknowledgment Ladies and Gentlemen: In connection with the proposed Grubb & Ellis Company (the "Company") bridge financing and equity offering, attached is the Grubb & Ellis Bridge Loan and Rights Offering Term Sheet, dated the date hereof (the "Term Sheet"). The Term Sheet sets forth certain terms and conditions for (i) a 13-month bridge facility to be provided by Warburg, Pincus Investors, L.P. ("Warburg"), (ii) a rights offering and subscription warrant conversion, and (iii) modification to certain credit facilities provided by The Prudential Insurance Company of America ("Prudential"). Although the Term Sheet does not specify all of the terms and conditions which would be necessary to consummate the contemplated transactions, it does reflect material provisions negotiated and, we believe, finalized among Warburg, Prudential and the Company, and outlines certain key points of business understanding around which legal documentation can be structured. By signing where indicated below, the parties acknowledge that, with respect to the terms and conditions set forth in the Term Sheet, the Term Sheet provisions are final, and the parties consent to and agree to be bound by such provisions, subject to: 1. Execution and delivery of definitive documents contemplated by or reasonably requested with respect to the Term Sheet, satisfactory in form and substance to each of Warburg, Prudential and the Company, and each of their respective counsel; and 2 2. Obtainment of any necessary or reasonably requested third party consents to the transactions contemplated by the Term Sheet, including, without limitation, majority consent of the shareholders of the Company. This Acknowledgement shall be binding only upon the execution and delivery of the Acknowledgement by each of the parties hereto. If the foregoing is acceptable, please sign all three enclosed copies. One executed copy should be sent to me by telecopy and all three executed original copies should then be sent to my attention by hand delivery or by overnight courier. Grubb & Ellis Company By: /s/ Wilbert F. Schwartz -------------------------- Name: Wilbert F. Schwartz Title: President and Chief Executive Officer ACKNOWLEDGED AND CONSENTED TO AS OF THE DATE FIRST ABOVE WRITTEN: Warburg, Pincus Investors, L.P By: Warburg, Pincus & Co., General Partner By: /s/ Reuben S. Leibowitz --------------------------- Name: Reuben S. Leibowitz Partner The Prudential Insurance Company of America By: /s/ Authorized Signature -------------------------------- Name: Title: 3 GRUBB & ELLIS COMPANY PROPOSED BRIDGE LOAN & RIGHTS OFFERING March 28, 1994 Grubb & Ellis Company ("G&E") proposes to raise additional equity capital, initially through a bridge loan which is to be refinanced from the proceeds of the subsequent sale of rights (the "Rights Offering") to acquire common stock in the Company. The Rights Offering will occur after the Company obtains the approval of the amendments (the "Charter Amendments") of the Company's Certificate of Incorporation necessary and/or appropriate to consummate the Rights Offering and the other transactions discussed herein from the holders of a majority of the shares of the Company's voting stock including a majority of the holders of the shares of the Company's common shares other than Warburg, Pincus L.P. ("Warburg") and The Prudential Insurance Company of America ("Prudential") while the short term financial needs of the Company are met through the bridge financing. BRIDGE FINANCING o The Company proposes to enter into a bridge loan agreement with Warburg which would mature 13 months from initial advance. o The loan would be secured by a cash collateral account pursuant to a cash collateral account agreement under which substantially all of the Company's commercial real estate brokerage revenues would flow through the collateral account. Prudential will also have a lien on this collateral subordinated to Warburg's lien as will be set forth in an intercreditor agreement between Prudential and Warburg. o The interest on the outstanding loans under this agreement would be 5%, provided, however, that in the event that shareholder approval of the Charter Amendments was not obtained the interest rate would retroactively increase to 10%. Interest computed without compounding, will be due on maturity of the note or refinancing, whichever occurs first. 4 Proposed Bridge Financing & Rights Offering 03/28/94 Page #2 - - ------------------------- o The proceeds of the Rights Offering will be used to (1) cover transaction costs associated with these transactions, (2) retire the bridge financing, and (3) meet the Company's operational needs. o Warburg will convert its redeemable preferred stock into equivalent non redeemable preferred stock and will relinquish the anti-dilution provision of its preferred stock and warrants with respect to issuance of common stock and common stock equivalents at less than the conversion or exercise price; however, pre-existing warrant exercise prices will be reduced to $3.50 effective as of the date of the Rights Offering. At such time as the coupon on Prudential's preferred stock would increase above the rate of Warburg's preferred, then Warburg's coupon will increase by the same amount. o The Company will not be required to represent and warrant that it is in compliance with the terms of its financing agreement with Prudential. RIGHTS OFFERING AND SUBSCRIPTION WARRANT CONVERSION o The Company will offer the rights for sale to the holders of all of G&Es common stock. o Each common shareholder will be entitled to acquire one right for each share of common stock owned. o Common shareholders may in addition to their own existing rights to subscribe to additional shares, oversubscribe to the extent that unsubscribed shares are available from other shareholders; however, shareholder or affiliated group oversubscriptions will be limited to an amount equal to the existing holding. o Warburg will stand behind the offering and acquire any of the rights which have not ultimately been acquired by the public shareholders up to an amount not exceeding $10 Million, plus any accrued interest on the bridge loan. o The rights price will be $2.375. 5 Proposed Bridge Financing & Rights Offering 03/28/94 Page #3 - - ------------------------- o The rights will not be tradeable. o Notwithstanding the foregoing, for this transaction only, Warburg will retain certain antidilution provisions in the warrants and preferred stock currently held by Warburg and the exercise price of the contingent warrants currently held by Warburg will be repriced at $2.375. o As consideration for providing the bridge loan and standing behind the Rights Offering the Company will grant Warburg approximately 325,000 warrants which will result in fully diluted ownership of approximately 52.70%, if none of the common stockholders acquire their shares. These warrants would have an exercise price of $2.375. PRUDENTIAL MODIFICATIONS As part of this proposal certain modifications in Prudential's financing will be completed. The following is subject to documentation satisfactory to all parties. These are: o It is agreed that no amortization of the Senior Notes, Revolver or PIK Notes will occur prior to November 1, 1997. Thereafter amortization will occur as follows. The $5 Million revolver will mature November 1, 1999. The $10 Million Senior Note will amortize in two equal installments on November 1, 1997 and 1998. The Subordinated PIK Notes will amortize in two approximately equal installments on November 1, 2000 and 2001. o The interest rate on the revolver and the senior notes will remain unchanged. The interest rate on the PIK notes will increase from 10.65% to 11.65% on January 1, 1996 and remains constant thereafter until maturity. o Effective at the time of the initial funding of the Warburg loan, Sections 6(a), 6(d), 6(e) and 6(g) of the Senior Note, Subordinated Note and Revolving Credit Note Agreement dated as of November 2, 1992 covering working capital, cumulative operating losses, capital expenditure and clean down requirements shall remain in force, but 6 Proposed Bridge Financing & Rights Offering 03/28/94 Page #4 - - ------------------------- the effectiveness of these sections will be suspended until April 1, 1997. Prudential agrees to waive certain covenants in the Note Agreement as set forth in the Note Agreement Waiver attached hereto. In addition, the specific prohibition of a sale of Axiom will be eliminated and, in the event such sale does occur, it will be captured under the existing asset sale provision. As of April 1, 1997 and quarterly thereafter the Company will be required to meet an interest coverage ratio of 2:1 the test of which will be EBITDA, as defined below, to total interest expense on a rolling 12 months basis. o Commencing January 1, 1998, in addition to the debt payments in the above schedule, the Company will make supplemental debt amortization payments in each year (50% on July 1 and 50% on October 1), if it meets the following test. If in the preceding year, Adjusted Cash Inflow exceeds $5 Million, then the Company will pay to Prudential 75% of such excess as a supplemental debt amortization payment which will be applied to the PIK debt in reverse order of maturity. Adjusted Cash Inflow is defined as earnings before interest, taxes, depreciation and amortization ("EBITDA") less the sum of (a) Axiom Pre-tax Earnings net of any debt repayments or dividend payments from Axiom; (b) interest paid in cash; (c) taxes paid in cash; (d) the above amortization paid in the year; and (e) any supplemental debt payment paid in the year o Prudential will convert its redeemable preferred stock into equivalent non-redeemable preferred stock with a coupon rate increase effective January 1, 2002 to 10% with further increases of 1% per year effective January 1, 2003 and January 1, 2004 and 2% per year effective January 1, 2005 and each January 1 thereafter. o Prudential will work with the Company in a good faith effort to permit the Company's subsidiary, Grubb & Ellis Asset Services Corporation, to re-enter the government contracting business with the RTC and the FDIC. Prudential's support in this effort may include, but not be limited to the following so long as it is a disqualified person: (1) to waive, but not relinquish, its right to appoint Company Directors and (2) to waive, but not relinquish all rights other than registration rights under the shareholders agreement and (3) to the extent that its stock entitles Prudential to cast more than 24.9% of the votes which all stockholders are eligible to cast on any matter, to grant a proxy to the board of directors to vote the excess shares (but only the excess shares) 7 Proposed Bridge Financing & Rights Offering 03/28/94 Page #5 - - ------------------------- on such matter in proportion to the vote thereon of all stockholders other than Prudential. o In the event that Warburg converts its preferred stock and the Company's investment bankers advise the Company that they deem it necessary to retire Prudential's preferred stock in order to complete a public offering of the Company's common stock on the most favorable terms, Prudential will be obligated to convert its preferred stock, provided, that, if Prudential is required to convert its preferred stock at a time when the common stock would have a value less than the accreted value of the preferred stock which is the sum of the par value of the preferred stock plus accreted dividends, then at the option of Prudential, the preferred stock may be redeemed at such accreted value or Prudential may convert its preferred stock into common stock. o Prudential will relinquish the anti-dilution provisions of its preferred stock and its warrants with respect to issuances of common stock and common stock equivalents at less than the conversion exercise price; however, pre-existing warrant exercise prices will be reduced to $3.50 effective as of the date of the Rights Offering. o Prudential will grant such waivers as described in the Note Agreement Waiver of even date herewith relative to the end of 1993 and the end of the First Quarter, 1994 to permit the Company to be in compliance with the provisions of its agreements with Prudential. o In the event that the Company elects to make a public offering subsequent to this financing none of the proceeds of such financing will be required to pay down debt. o As a consideration for modifying its loan agreement with the Company, Prudential would be granted 150,000 warrants to purchase the Company's common stock which will result in fully diluted ownership of approximately 18.24%, but not less than 18%. The warrants will have an exercise price of $2.375. o Upon funding under the Warburg Bridge Loan Agreement the Company will pay Prudential the interest payment due February 1, 1994 together with interest at the overdue interest rate and will pay 8 Proposed Bridge Financing & Rights Offering 03/28/94 Page #6 - - ------------------------- Prudential all of its legal costs and out of pocket expenditures incurred in connection with the waivers and modifications referenced herein. NOTE All share amounts and percentages do not reflect any adjustments for shares to be tendered as a result of the reverse stock split which have not been received; however, these adjustments should be modest. EX-8 4 LOAN AND SECURITY AGREEMENT 1 EXHIBIT 8 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (as it may be amended, supplemented or otherwise modified from time to time, this "Agreement") is entered into as of March 29, 1994, by and between GRUBB & ELLIS COMPANY, a Delaware corporation ("Borrower"), and WARBURG, PINCUS INVESTORS, L.P., a Delaware limited partnership ("Lender"). RECITAL Borrower has requested from Lender the credit accommodations described below, and Lender has agreed to provide such credit accommodations to Borrower on the terms and subject to the conditions contained herein. AGREEMENT NOW, THEREFORE, Lender and Borrower hereby agree as follows: ARTICLE I THE LOAN; SECURITY; CASH COLLATERAL ACCOUNT; SUBORDINATION SECTION 1.1. ADVANCES; REPAYMENT. (A) ADVANCES. Subject to the terms and conditions of this Agreement, Lender hereby agrees to make advances (all such advances at any time outstanding, collectively, the "Loan") to Borrower from time to time up to but not including the Maturity Date (as defined below), in an aggregate principal amount for all such advances outstanding not to exceed Ten Million Dollars ($10,000,000) at any time. The Loan may be repaid and reborrowed at any time prior to the Maturity Date. Proceeds of the Loan shall be used for general corporate purposes of Borrower other than Prohibited Uses (as defined below), subject to the terms hereof and subject to the terms of the Cash Collateral Documents (as defined below). Borrower's obligation to repay the Loan shall be evidenced by a promissory note substantially in the form of Exhibit A attached hereto (as it may be amended, the "Note"), all terms of which are incorporated herein by this reference. (B) ADVANCE MECHANICS. When Borrower desires to borrow, it shall deliver to Lender a notice of borrowing no later than 1:00 p.m. (Pacific Standard Time) at least three Business Days (as defined below) in advance of the proposed funding date. The notice of borrowing shall specify the proposed funding date (which shall be a Business Day) and the amount of the requested advance. Each requested advance shall be for a minimum amount of $2,000,000. In lieu of delivering a notice of borrowing, Borrower may give Lender telephonic notice by the required time of the proposed borrowing; provided that such notice shall be promptly, and in any event by 9:00 a.m. (Pacific Standard Time) on the proposed funding day, confirmed in writing by delivery of a notice of borrowing to Lender. Each such advance to Borrower shall, by 12:00 p.m. (Pacific Standard Time) on the funding date, be deposited in immediately available funds in the Cash Collateral Account (as defined below), 2 at Bank of America NT & SA, ABA No. 121000358, Global Escrow Depository Services #3960, Account Number 90098-83980, Reference Escrow Number 2337, Attention: Betty Deichler, or at such other location as Borrower has notified Lender in writing. "Business Day" shall mean any day which is not a Saturday, Sunday or a generally observed holiday for banks in San Francisco, California, or New York, New York. (C) REPAYMENT. The outstanding principal amount of the Loan, together with any accrued and unpaid interest thereon and any other amounts due hereunder, shall be due and payable in full on the last Business Day of the thirteenth month after the date hereof (the "Maturity Date"). All Loan repayments or prepayments made by Borrower to Lender shall be made to the following account: Warburg, Pincus Investors, L.P., Chemical Bank, 277 Park Avenue, New York, New York, Account Number 144045515, ABA Number 021000128, or to such other account requested by Lender upon five Business Days' advance written notice. (D) PREPAYMENT. Borrower may prepay all or any portion of the Loan at any time, in any amount and without penalty. SECTION 1.2. INTEREST. (A) INTEREST. Subject to Section 1.2(b), the outstanding principal amount of the Loan shall bear interest at a rate per annum equal to five percent (5%); provided, however, that if Borrower does not obtain stockholder approval for additional financing, such as a rights offering to its stockholders, by December 31, 1994, then the outstanding principal amount of the Loan shall bear interest at a rate per annum equal to ten percent (10%) retroactive to the date of the first advance hereunder. It is the intention of Lender and Borrower that this Agreement and the Note be expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the Loan or otherwise, shall the interest payable on the Loan exceed the maximum rate permitted by applicable law. Accordingly, anything to the contrary in this Agreement notwithstanding, Lender and Borrower hereby agree that the amount of interest (as defined by applicable law) due in respect of the Loan shall not exceed the maximum rate permitted by applicable law (the "Permitted Rate") and in the event that any payments hereunder or under the Note are made in excess of the Permitted Rate as finally determined by a court of competent jurisdiction, the amount received by Lender in excess of the Permitted Rate shall be applied by Lender to reduce the principal amount of the Loan. (B) DEFAULT INTEREST. After an Event of Default has occurred and is continuing, the outstanding principal amount of the Loan shall bear interest at a rate per annum equal to one percent (1%) above the interest rate then in effect (the "Default Rate"). In addition, to the extent permitted by applicable law, any interest payments, fees or other amounts owed hereunder and not paid when due, in each case whether at stated maturity, by notice of prepayment, by acceleration or otherwise, shall bear interest at the Default Rate. Payment or acceptance of the Default Rate is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Lender. (C) COMPUTATION AND PAYMENT. Interest on the outstanding principal amount of the Loan shall be computed on the basis of a 365 or 366 (as applicable) day year, actual days elapsed and shall be payable on the Maturity Date. -2- 3 SECTION 1.3. COLLATERAL; GRANT OF SECURITY INTEREST. As security for all indebtedness and other obligations of Borrower to Lender pursuant to this Agreement and the other Loan Documents (as defined below), Borrower hereby grants to Lender (to secure all such indebtedness and other obligations hereunder and under the other Loan Documents) a security interest of first priority (except as otherwise provided in any of the Loan Documents) in all of Borrower's right, title and interest in and to, in each case whether now existing or hereafter acquired and wherever located, all of the following (the "Collateral): (i) all rights to payment in respect of all commercial real estate fees and commissions due to Borrower or any of its subsidiaries in connection with the commercial real estate brokerage operations of Borrower and its subsidiaries ("Brokerage Commissions"), (ii) Escrow No. 2337 (the "Existing Cash Collateral Account") maintained by Borrower at Bank of America NT & SA ("BofA") and any other Cash Collateral Account and all monies, instruments and amounts at any time on deposit in the Cash Collateral Account, and (iii) all proceeds of any of the foregoing. SECTION 1.4. LOCKBOX; CASH COLLATERAL ACCOUNT. Borrower has or shall have established and shall maintain with BofA (or such other financial institution or institutions as may be acceptable to Lender, the "Depository Bank"), in the State of California, a lockbox (together with any successor, replacement or substitute lockbox, the "Lockbox") and one or more deposit accounts (collectively, including the Existing Cash Collateral Account and any successor, replacement or substitute account, the "Cash Collateral Account"). Borrower shall instruct each of its Brokers (as defined below) to deposit directly to the Lockbox all Brokerage Commissions. "Brokers" shall mean Company's brokers of record, whether employees of Company or any of its subsidiaries, independent contractors or otherwise; provided, however, that with respect to Brokerage Commissions generated in connection with the services or operations of Grubb & Ellis Asset Services Corporation, the broker of record shall be the President of Grubb & Ellis Asset Services Corporation. Pursuant to a lockbox service agreement, the Depository Bank shall deposit once each Business Day (as defined below) all Brokerage Commissions delivered into the Lockbox to the Cash Collateral Account (in the same form as received, with any necessary endorsements). In addition, Borrower shall promptly deposit all Brokerage Commissions received directly by Borrower or any of its subsidiaries (in the same form as received, with any necessary endorsements) to either the Lockbox or the Cash Collateral Account (amounts on deposit in the Cash Collateral Account are referred to herein as "Collateral Account Proceeds"). The Cash Collateral Account shall be established pursuant to documentation in form and substance satisfactory to Lender (as such documentation may be in effect from time to time, the "Cash Collateral Documents"). The Cash Collateral Documents shall provide, among other things, that (1) subject to the following clause (2), Borrower may make withdrawals from the Cash Collateral Account for any general corporate purpose other than Prohibited Uses, and (2) during the existence of any Event of Default, Lender may, by written notice to the Depository Banks with which Cash Collateral Accounts are maintained, terminate the right of Borrower to make any withdrawal from the Cash Collateral Account. SECTION 1.5. FURTHER ASSURANCES. Borrower agrees that from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Lender may request, in order to perfect, protect and maintain or establish the priority of any security interest granted or purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. In addition, Borrower shall (a) notify Lender of any change in Borrower's name, identity or corporate structure at least 15 days prior to any such change, and (b) -3- 4 not relocate Borrower's chief executive office from the location therefor specified in Section 2.4 without less than 60 days' prior written notice to Lender. SECTION 1.6. SUBORDINATION. Lender and Borrower agree, upon the delivery of a Notice of Blockage (as defined in the Cash Collateral Account Agreement, dated as of the date hereof, among Lender, Borrower, The Prudential Insurance Company of America ("Prudential"), and BofA (as amended, the "Cash Collateral Account Agreement")) or at such time as Lender exercises any other remedies with respect to the Cash Collateral Account, that the Loan and all other indebtedness evidenced by the Note shall be subordinated in right of payment to the extent of any proceeds within the Cash Collateral Account, as and in the manner provided herein, to the prior payment in full of all Broker Fees (as defined below), and that the subordination is for the benefit of Borrower. "Broker Fees" shall mean (i) the fees, commissions and other amounts to be paid to Brokers as compensation for the commercial real estate brokerage operations that gave rise to the Broker Commissions, and (ii) reimbursement to any banks that advanced such fees, commissions and other amounts from Borrower accounts pursuant to Borrower's transfer instructions. During the effectiveness of this subordination, Borrower shall provide to Lender Broker Fee notices no earlier than two Business Days prior to a proposed Broker Fee payment date. Each such notice shall identify each Broker owed a Broker Fee or each bank that is to be reimbursed for an advanced Broker Fee, the transaction giving rise to the Broker Fee, the transaction date, the amount of the Broker Fee, the proposed Broker Fee payment date and payment instructions. During the effectiveness of this subordination, to the extent Lender may withdraw funds from the Cash Collateral Account, Lender shall hold such funds in trust for the Brokers or banks who are to receive a Broker Fee, until such time as Lender pays such fees on behalf of Borrower, which payments shall be made, notwithstanding any Event of Default, to the extent of the funds in the Cash Collateral Account. If no Broker Fees are outstanding, Lender may apply or disburse any additional funds in the Cash Collateral Account pursuant to the Loan Documents. If there are insufficient funds in the Cash Collateral Account to make the payments pursuant to a Broker Fee notice, Lender shall immediately notify Borrower, and Borrower shall modify the notice accordingly. ARTICLE II __________ REPRESENTATIONS AND WARRANTIES ______________________________ Borrower makes the following representations and warranties to Lender, which representations and warranties shall be true and correct immediately before and at the time of entering into this Agreement and at the time of each request for an advance. SECTION 2.1. LEGAL STATUS. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business, and is in good standing as a foreign corporation, if applicable, in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the term "Material Adverse Effect" means a material adverse effect upon the business, operations, properties, assets or condition (financial or otherwise) of Borrower and its wholly owned subsidiaries, taken as a whole. SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Note, and each other document, contract and instrument required by or at any time delivered to Lender in -4- 5 connection with this Agreement (with all of the foregoing, including, without limitation, the Cash Collateral Documents, referred to herein collectively as the "Loan Documents") to which Borrower is a party have been (or, with respect to any of the foregoing executed and delivered after the date hereof, will have been at the time of such execution and delivery) duly authorized by Borrower, and upon such execution and delivery will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms. SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents to which it is a party do not violate any provision of any law or regulation, or contravene any provision of Borrower's Certificate of Incorporation or By-Laws, or result in a breach of or constitute a default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower or any of its properties may be bound except for any such breach or default which has been duly waived or consented to by all necessary parties. SECTION 2.4. CHIEF EXECUTIVE OFFICE; FEIN NUMBER. The chief executive office and the office where Borrower keeps its records regarding the Collateral is located at One Montgomery Street, Telesis Tower, San Francisco, California 94104. Borrower's Federal Employer Identification Number is 94-1424307. SECTION 2.5. SECURITY INTEREST. Upon the execution and delivery of this Agreement and the Cash Collateral Account Agreement, Lender shall have a valid and continuing security interest in the Cash Collateral Account, and all action necessary to perfect such security interest shall have been taken. Lender's security interest in the Cash Collateral Account is, and will continue to be, a first priority security interest which is free and clear of all liens, claims, security interest and encumbrances, except with respect to any liens, claims, security interest and encumbrances of the Depository Bank granted by statute or pursuant to the Cash Collateral Account Agreement or any other Loan Document. ARTICLE III ___________ CONDITIONS PRECEDENT ____________________ SECTION 3.1. CONDITIONS OF INITIAL LOAN. The obligation of Lender to make any advances hereunder is subject to the fulfillment to Lender's satisfaction of all of the following conditions: (A) DOCUMENTATION. Lender shall have received, in form and substance satisfactory to Lender, each of the following (in each case, duly executed by Borrower and/or each other party, as applicable): (i) This Agreement; (ii) The Note; (iii) The Cash Collateral Account Agreement; -5- 6 (iv) Intercreditor Agreement dated as of the date hereof, by and between Lender and Prudential, and acknowledged by Borrower; (v) Prudential Waiver dated as of the date hereof with respect to any and all events of default which have occurred and are continuing under the Senior Note, Subordinated Note and Revolving Credit Note Agreement dated as of November 2, 1992, by and between Borrower and Prudential, as amended by that certain Modification to Note and Security Agreement dated as of the date hereof (collectively, the "Prudential Credit Facility"); and (vi) Written Consent dated as of the date hereof by Company, Lender and Prudential to certain terms and conditions for the transactions contemplated herein and a proposed stockholder rights offering. (B) CASH COLLATERAL ACCOUNT. The Cash Collateral Account shall have been established in a manner satisfactory to Lender in its sole discretion and Lender shall be satisfied that all steps shall have been taken necessary to create and perfect in favor of Lender (to secure all obligations of Borrower under the Loan Documents) a first priority security interest in the Cash Collateral Account and all other Collateral described and subject to the terms set forth in Sections 1.3 and 1.4. SECTION 3.2. CONDITIONS OF EACH ADVANCE. The obligation of Lender to make each advance hereunder shall be subject to the fulfillment to Lender's satisfaction of each of the following conditions: (A) COMPLIANCE. The representations and warranties contained herein shall be true, correct and complete (and shall be deemed made) on and as of the date of the signing of this Agreement and on the date of each advance hereunder, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist. Each request by Borrower for an advance hereunder shall constitute a certification of Borrower that the conditions of this Section 3.2(a) are satisfied as of the date of such advance. (B) DOCUMENTATION. Lender shall have received all additional documents which may be required in connection with such extension of credit. ARTICLE IV __________ AFFIRMATIVE COVENANTS _____________________ Borrower covenants that so long as the Loan (or any portion thereof) remains outstanding or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall: SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay the interest and principal on each of the Loan Documents requiring any such payments at the times and place and in the manner -6- 7 specified therein, and any fees or other liabilities due under any of the Loan Documents at the times and place and in The manner specified therein. SECTION 4.2. COMPLIANCE. Comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower or its business. SECTION 4.3. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal and including federal and state income taxes, which in the aggregate the nonpayment of would have a Material Adverse Effect, except such as Borrower may in good faith contest or as to which a bona fide dispute may arise, so long as provision is made to the satisfaction of Lender for eventual payment thereof in the event that it is found that the same is an obligation of Borrower. SECTION 4.4. NOTICES TO LENDER. Promptly (but in no event more than ten Business Days after one or more senior executive officers of Borrower have actual knowledge of the occurrence of each such event or matter) give written notice to Lender in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; or (b) the commencement, or threatened commencement in which Borrower has received written notice, of any litigation, arbitration or other proceeding against Borrower involving a reasonably potential liability in excess of $3,000,000 (after giving effect to reasonably probable insurance contribution or other reimbursement rights). ARTICLE V _________ NEGATIVE COVENANTS __________________ Borrower further covenants that so long as the Loan (or any portion thereof) remains outstanding or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Lender under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without the prior written consent of Lender: SECTION 5.1. USE OF FUNDS. Use any of the proceeds of the Loan or any Collateral Account Proceeds for any of the following purposes (each, a "Prohibited Use"): (a) the satisfaction of any judgment or other award of damages of any type rendered against Borrower or any of its affiliates pursuant to legal process or otherwise which judgment, award or damages in any one case or group of consolidated and related cases exceeds $1,000,000; provided that this subsection (a) will not apply to use of the proceeds of the Loan to pay any judgment or award of damages or settlement payments in Anderson, et al. v. Grubb & Ellis Company or Aguilar v. Grubb & Ellis Company, which cases are now a consolidated class action related to a limited partnership formed to purchase an official retail building at 222 Sutton (the "Sutton Litigation"); (b) any capital expenditure during any fiscal year of Borrower which, when aggregated with all other capital expenditures by Borrower and its subsidiaries during such fiscal year, would -7- 8 cause the aggregate amount of all such capital expenditures to exceed the greater of (i) $5,000,000, and (ii) two times the amount set forth opposite the heading "Total Assets" on the then most current audited consolidated balance sheet of Borrower and its subsidiaries; (c) "golden handcuff" or similar payments to any one officer or other employee of Borrower or any of its subsidiaries which would cause the aggregate amount of all such payments to such officer or employee to exceed $1,000,000; or (d) payments in respect of any lease of real property entered into after the date hereof if the aggregate rent required under such lease during its term (including any mandatory or optional extensions thereof) exceeds $5,000,000. SECTION 5.2. GUARANTIES. Any new guarantee or new liability or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity. ARTICLE VI __________ EVENTS OF DEFAULT _________________ SECTION 6.1. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents. (b) Any certificate furnished to Lender in connection with any Loan Document or any representation or warranty made or deemed made by Borrower hereunder shall prove to be false, incorrect or incomplete in any material respect when furnished, made or deemed made. (c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in the other Loan Documents (other than those referred to in Sections 6.1(a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of thirty (30) days from its occurrence. (d) Except as existing and disclosed to Lender prior to the date hereof, any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower or any of its subsidiaries has incurred any debt or other liability to any person or entity, including Lender, in each case beyond the end of any period prior to which the obligee thereunder is prohibited from accelerating payment thereunder, and which default shall have a Material Adverse Effect. (e) Any defined event of default under any of the Loan Documents other than this Agreement. -8- 9 (f) Any money judgment, writ or warrant of attachment, or similar process (other than a judgment in the Sutton Litigation) involving (i) in any individual case an amount in excess of $1,000,000, or (ii) in the aggregate at any time in an amount in excess of $3,000,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) shall be entered or filed against Borrower or any of its subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than five days prior to the date of any proposed sale thereunder. (g) Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seek reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time or any successor statute (the "Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower, or Borrower shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors. (h) There shall occur a material adverse change in the condition (financial or otherwise), operations, properties or performance of Borrower or any other event or condition which, in Lender's opinion, Lender reasonably and in good faith believes impairs, or is substantially likely to impair either (i) the prospect of payment or performance by Borrower of its obligations under any of the Loan Documents, or (ii) the rights and remedies of Lender under any Loan Document. (i) Lender shall cease for any reason to have a valid and perfected first priority security interest in the Collateral (except as otherwise provided in the Loan Documents) securing payment in full of all obligations of Borrower hereunder. (j) The Cash Collateral Documents shall be modified without the consent of Lender, except with respect to fees charged by the Depository Bank or other administrative changes required by the Depository Bank that do not adversely affect Lender's security interest in the Cash Collateral Account. (k) An Event of Default (as defined therein) has occurred and is continuing under the Prudential Credit Facility and Prudential has delivered a Notice of Blockage to the Depository Bank. SECTION 6.2. REMEDIES. (a) If an Event of Default shall occur, (i) any indebtedness of Borrower under any of the Loan Documents, any term thereof to the contrary notwithstanding, shall (automatically and without further action, in the case of an Event of Default under Section 6.1(g) and, in all other cases, at Lender's option and without notice) become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (ii) the obligation, if any, of Lender to make further advances hereunder shall immediately cease and terminate; and (iii) Lender shall have all rights, powers and remedies -9- 10 available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all of the Collateral or any other security for any of the obligations of Borrower hereunder and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Lender in connection with each of the Loan Documents may be exercised at any time by Lender and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. (b) If any Event of Default shall have occurred and be continuing, Lender may exercise in respect of the Collateral, (a) all the rights and remedies of a secured party on default under the Uniform Commercial Code of the State of California (the "Code") (whether or not the Code applies to the affected Collateral), (b) all of the rights and remedies provided for in this Agreement, the Cash Collateral Documents and any other agreement between Borrower and Lender, and (c) such other rights and remedies as may be provided by law or otherwise (such rights and remedies of Lender to be cumulative and non-exclusive). Borrower hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Borrower agrees that at least ten days' notice to Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. ARTICLE VII ___________ MISCELLANEOUS _____________ SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Lender in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Lender of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent expressly set forth in such writing. SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following addresses: BORROWER: Grubb & Ellis Company One Montgomery Street Telesis Tower San Francisco, California 94104 Telephone Number: (415) 956-4699 Telecopier Number: (415) 274-9700 Attn: General Counsel -10- 11 LENDER: Warburg, Pincus Investors, L.P. c/o E.M. Warburg, Pincus & Co., Inc. 466 Lexington Avenue 10th Floor New York, New York 10017 Telephone Number: (212) 878-0653 Telecopier Number: (212) 878-9200 Attn: Reuben S. Leibowitz or to such other address as any party may designate by written notice to each other party. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery or courier service, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; or (c) if sent by telecopy, upon receipt. SECTION 7.3. INDEMNITY, COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall indemnify Lender against, hold Lender harmless from, and pay to Lender immediately upon demand, the full amount of all costs and expenses, including reasonable attorneys' fees, incurred by Lender in connection with (a) Lender's administration of this Agreement and each of the other Loan Documents (including, without limitation, the subordination provisions in Section 1.6 and any costs or other expenses incurred in establishing or maintaining the Cash Collateral Account), and the preparation of this Agreement and the other Loan Documents and any amendments and waivers hereto and thereto, (b) the enforcement of Lender's rights and/or the collection of any amounts which become due to Lender under any of the Loan Documents (including in connection with any bankruptcy, reorganization, "work-out" or similar circumstance or proceeding), and (c) the prosecution or defense of any claim or action in any way arising out of or related to any of the Loan Documents or the transactions contemplated thereby, including without limitation any action for declaratory relief. SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding on and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest or obligations hereunder without the prior written consent of Lender. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender's rights and benefits under this Agreement, the Notes and each of the other Loan Documents. SECTION 7.5. ENTIRE AGREEMENT; COUNTERPARTS; AMENDMENT. This Agreement and each of the other Loan Documents constitute the entire agreement between Borrower and Lender with respect to the Loan and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be executed in any number of counterparts and may be amended or modified only by a written instrument executed by each party hereto. SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party. -11- 12 SECTION 7.7. TIME IS OF THE ESSENCE. Time is of the essence of each and every provision of this Agreement and each of the other Loan Documents. SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement. SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California. -12- 13 IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement to be executed as of the day and year first written above. WARBURG, PINCUS INVESTORS, L.P., By: Warburg, Pincus & Co., General Partner By: /s/ Reuben S. Leibowitz ---------------------------- Name: Reuben S. Leibowitz Partner GRUBB & ELLIS COMPANY By: /s/ Authorized Signature ---------------------------- Name: Title: 14 EXHIBIT A _________ FORM OF NOTE PROMISSORY NOTE San Francisco, California $10,000,000.00 March 29, 1994 FOR VALUE RECEIVED, GRUBB & ELLIS COMPANY, A DELAWARE CORPORATION (the "Company"), promises to pay to the order of Warburg, Pincus Investors, L.P., a Delaware limited partnership, or order (collectively, "Payee"), on or before the Maturity Date (as defined in the Loan Agreement defined below), the lesser of (i) Ten Million Dollars ($10,000,000.00) and (ii) the unpaid principal amount of all advances made by Payee as the Loan under the Loan Agreement. The Company also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid in full at the rates and at the times which shall be determined in accordance with the provisions of that certain Loan Agreement dated as of the date hereof, by and between the Company and Warburg, Pincus Investors, L.P., a Delaware limited partnership (such agreement, as it may be amended, modified or supplemented from time to time, the "Loan Agreement"). Capitalized terms used herein without definition shall have the meanings set forth in the Loan Agreement. This Note is issued pursuant to and entitled to the benefits of the Loan Agreement to which reference is hereby made for a more complete statement of the terms and conditions under which the advances evidenced hereby were made and are to be repaid. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds to the following account: Warburg, Pincus Investors, L.P., Chemical Bank, 277 Park Avenue, New York, New York, Account Number 144045515, ABA Number 021000128, or at such other place as shall be designated in writing for such purpose in accordance with the notice provisions of the Loan Agreement. Whenever any payment on this Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding business day and such extension of time shall be included in the computation of the payment of interest on this Note. This Note is subject to repayment and mandatory prepayment as, and to the extent, provided in the Loan Agreement and prepayment at the option of the Company as provided in the Loan Agreement. This Note is secured pursuant to the terms of the Loan Agreement and the Cash Collateral Agreement. THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS. A-1 15 Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note and all other obligations of the Company under the Loan Agreement, together with all accrued but unpaid interest thereon, may automatically become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Loan Agreement. The terms of this Note are subject to amendment only in the manner provided in the Loan Agreement. The obligation of the Company to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed is absolute and unconditional. The Company promises to pay all costs and expenses, including all attorneys' fees and expenses, all as provided in the Loan Agreement, actually incurred in the collection and enforcement of this Note, including any such costs, expenses or fees actually incurred in any appeal in connection with the collection and enforcement of this Note. The Company and endorsers of this Note hereby consent to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waive diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. IN WITNESS WHEREOF, the Company has caused this Note to be executed and delivered by its duly authorized officer, as of the day and year and at the place first above written. GRUBB & ELLIS COMPANY By: ______________________ Name: ________________ Title:________________ A-2 EX-9 5 INTERCREDITOR AGREEMENT 1 EXHIBIT 9 INTERCREDITOR AGREEMENT _______________________ This Intercreditor Agreement, dated as of March 28, 1994 (this "Agreement"), is made by and between Warburg, Pincus Investors, L.P., a Delaware limited partnership ("Warburg") and The Prudential Insurance Company of America, a New Jersey corporation ("Prudential"). RECITALS A. Pursuant to a certain Senior Note, Subordinated Note, and Revolving Credit Note Agreement, dated as of November 2, 1992 (the "Prudential Note Agreement"), as modified by a certain Modification to Note and Security Agreement, dated as of March 28, 1994, by and between Grubb & Ellis Company (the "Company") and Prudential (collectively, the "Prudential Security Agreement"), Company became indebted to Prudential, among other things, in an amount as set forth in and more fully defined as the "Senior Debt" in the Prudential Note Agreement (the "Senior Debt"). B. Pursuant to a certain Loan and Security Agreement entered into as of March 28, 1994 by and between Company and Warburg (the "Warburg Loan Agreement"), Company became indebted, or will become indebted to Warburg in an amount or amounts equal to the lesser of (i) Ten Million Dollars, and (ii) the unpaid principal amount of all advances made by Warburg as the Loan under, and as defined in, the Warburg Loan Agreement (the "Warburg Debt"). C. Company's obligations under each of the Prudential Note Agreement and the Warburg Loan Agreement (collectively the "Loan Agreements" or singular, a "Loan Agreement") are secured by a security interest in all of Company's right, title, and interest in and to certain personal property (as defined in the Prudential Security Agreement and the Warburg Loan Agreement as the "Collateral"), including a certain Cash Collateral Account, all as set forth in and defined under the Prudential Security Agreement and the Warburg Loan Agreement. D. In connection with the grant of a security interest by Company in favor of Warburg and Prudential, respectively, the parties have established a Cash Collateral Account pursuant to a certain Cash Collateral Account Agreement, dated as of March 28, 1994, among such parties and Bank of America NT&SA (the "Bank.") E. Prudential and Warburg (the "Lenders") wish to set forth their agreement with respect to the Collateral, each Lender's respective rights in and to the Collateral, and the allocation of the Collateral between each Lender; Now, therefore, Prudential and Warburg agree as follows: 2 AGREEMENT Section I. Defined terms. Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Cash Collateral Account Agreement. Section II. Sharing of Security. 2.1 Right to Payment. Prior to the issuance of a Notice of Blockage, as defined in the Cash Collateral Account Agreement, from a Notifying Lender, Warburg may receive repayments or prepayments pursuant to the terms of the Warburg Loan Agreement, and Prudential specifically consents that such repayments and prepayments may be made from the Collateral until such time as an Event of Default shall have occurred and be continuing under the Warburg Loan Agreement or the Prudential Security Agreement. From on and after the issuance of a Notice of Blockage, withdrawal of funds from the Cash Collateral Account shall be made in accordance with the allocation formula set forth in Section 3.2, below. 2.2 Interest in Collateral. Each Lender shall share an undivided interest in the Collateral and all proceeds thereof as defined in Section 3, below, provided, however, that Prudential's interest in the Collateral shall be, and is junior to Warburg's interest in the Collateral. 2.3 Shared Benefit of Liens. Each Lender hereby acknowledges and agrees that it holds its lien upon and security interest in the Collateral and may exercise its rights and remedies with respect to the Collateral only as set forth herein. 2.4 Liens Governed by Intercreditor Agreement. The provisions of this Agreement shall govern each Lender's rights and interests in and to the Collateral and all proceeds thereof. Section III. Enforcement of Remedies. 3.1 Title. Upon the occurrence of an Event of Default under the Prudential Security Agreement or the Warburg Loan Agreement, each Lender shall be entitled to enforce its rights and remedies under its respective Loan Agreement, including, without limitation, its recourse to the Collateral and the issuance of a Notice of Blockage with respect to the Collateral held by the Bank, only in a manner consistent with this Agreement, as follows: (a) Warburg. Warburg may issue a Notice of Blockage with respect to the Collateral held by the Bank, and otherwise enforce its rights and remedies under the Warburg Loan Agreement at any time upon the occurrence of an Event of Default under the Warburg Loan Agreement; 2 3 (b) Prudential. Prudential shall be entitled to issue a Notice of Blockage upon the occurrence of an Event of Default under the Prudential Security Agreement only after three Business Days notice to Warburg of Prudential's intention to issue a Notice a Blockage to the Bank, provided, however, that if the Event of Default upon which Prudential intends to issue the Notice of Blockage arises solely as a result of the occurrence of an Event of Default under the Warburg Loan Agreement, and within such three Business Days, Warburg notifies Prudential in writing that Warburg has waived the relevant Event of Default, Prudential shall withdraw its Notice of Blockage. (c) Warburg shall take possession of the Collateral after issuance of a Notice of Blockage pursuant to the Cash Collateral Account Agreement whether Prudential or Warburg is the Notifying Lender. 3.2 Allocation of Receipts. During the term of this Agreement, from, on and after the date of the occurrence of an Event of Default under either the Warburg Loan Agreement or the Prudential Security Agreement, and upon the issuance of a Notice of Blockage to the Bank by a Lender (the "Notifying Lender") under the Cash Collateral Account Agreement, the Collateral shall be applied by Warburg, as follows: (a) First: to the payment in full of all Broker Fees (as defined in the Loan Agreements) pursuant to the terms of the applicable Loan Agreements; (b) Second: to Warburg, but only as long as the Warburg Debt and other obligations by Company under the Warburg Loan Agreement, as entered on March 28, 1994, remain outstanding. (c) Third: to Prudential, upon and on the date of the termination of the Warburg Loan Agreement either by (i) the Company's full repayment of the Warburg Debt, or (ii) the conversion of the Warburg Debt to shares of either common or preferred stock in Company, in an amount equal to the unpaid, outstanding Senior Debt owed by Company under the Prudential Note Agreement. (d) Fourth: upon Company's repayment in full of the Senior Debt owing to Prudential under the Prudential Security Agreement, the remainder, if any, of monies remaining in the Cash Collateral Account shall be returned to Company. 3.3 Receipt of Collateral and Proceeds. To the extent any Lender receives any distribution hereunder in excess of the amounts then due such Lender, such Lender shall hold the excess in trust for the other Lender and Company and such receiving Lender shall, as soon as practicable, distribute such excess receipts to the other Lender or Company, as applicable, in such amounts as will be required to satisfy the payment priority distribution set 3 4 forth in Section 3.2 above. Section IV. Exercise of Remedies. 4.1 General. (a) The rights and remedies of each Lender to collect and enforce Company's obligations to such Lender under the applicable Loan Agreement shall be exercised only in a manner consistent with the terms of the applicable Loan Agreements, the Cash Collateral Account Agreement and this Agreement. 4.2 Foreclosure. Subject to the provisions of this Agreement, each Lender may exercise all of its respective remedies under its Loan or Security Agreement, including foreclosure permitted thereunder, at any time following the occurrence and continuance of any Event of Default under the applicable Loan Agreement, provided, however, that, upon foreclosing against the Cash Collateral Account, Warburg shall instruct the Bank pursuant to the Cash Collateral Account Agreement, to distribute available funds in the Cash Collateral Account to each of the Lenders as set forth in this Agreement. 4.3 Notices of Default. Any notice required to be given by a Lender to Company under either of the Loan Agreements in respect of defaults, notices of default, or enforcement of remedies shall likewise be given by such Lender to the other Lender contemporaneously with the issuance of such notice to Company. Section V. Miscellaneous. 5.1 Termination. This Agreement shall terminate upon the first to occur of the date on which the Company's obligations to Warburg under the Warburg Loan Agreement or the Company's obligations to Prudential under the Prudential Note Agreement shall have been paid in full, or the Warburg Debt or the Senior Debt, as applicable, shall have been terminated. 5.2 Notices. Except as expressly provided herein all notices demands or other communications hereunder to any of the parties hereto shall be in writing and shall become effective when delivered by hand or by air courier or when received by telex, telecopier, telegram or cable in each case sent to the parties at the addresses as stated below or at such other address as any party hereto may hereafter notify the other parties in writing as aforesaid; 4 5 Lender: Warburg Pincus Investors, L.P. c/o E.M. Warburg, Pincus and Co. Inc. 466 Lexington Avenue, Tenth Floor New York, New York 10017 Telephone: (212) 878-0653 Telecopier: (212) 878-9200 Atten.: Reuben S. Leibowitz Lender: The Prudential Insurance Company of America c/o The Prudential Corporate Finance Group Four Gateway Center 100 Mulberry Street Newark, New Jersey 07102-4069 Telephone: (201) 802-7500 Telecopier: (201) 802-2662 Atten.: Senior Managing Director Company: Grubb & Ellis Company One Montgomery Street Telesis Tower San Francisco, California 94104 Telephone: (415) 956-4699 Telecopier: (415) 274-9700 Atten.: General Counsel 5.3 Governing Law. This Intercreditor Agreement shall be governed by and construed in an accordance with the laws of the State of California (without giving effect to principals of conflicts of law). 5.4 Jurisdiction. The parties hereto hereby irrevocably submit to the jurisdiction of the Courts of the State of California and the United States District Court for the Northern District of California in any action, suit, or proceeding related to or in connection with this Agreement and the parties hereto consent to the service of all process, notices and papers by first class mail at the addresses set forth herein in any such action, suit, or proceeding. 5.5 Execution In Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. 5.6 Amendments etc. No amendment or waiver of any provision of this Agreement nor consent to any departure therefrom, shall in any event be effective unless the 5 6 same shall be in writing and signed by the parties hereto, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 5.7 Integration. This Intercreditor Agreement, together with the Loan Agreements and the Cash Collateral Account Agreement, constitute the sole agreement of the parties with respect to the subject matter hereof and supersedes all oral negotiations and prior writings with respect to the subject matter hereof. 5.8 Severability. Any provisions hereof prohibited by, or unlawful or unenforceable under, any applicable law of any jurisdiction shall as to such jurisdiction be ineffective without modifying the remaining provisions of this Agreement or its applicability to any other Agreement and any such prohibition or unenforceability in any jurisdiction shall not of its self invalidate or render such provision unenforceable in any other jurisdiction. Where, however, the provisions of such applicable law may be waived they are hereby waived by the parties hereto to the full extent permitted by law, to the end that this Agreement shall be a valid and binding Agreement enforceable in accordance with its terms. 5.9 Attorney's Fees. If a Lender hereto fails to perform any of its obligations under this Agreement or if any dispute arises between or among the Lenders concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorney's fees and disbursements incurred in the dispute, in enforcing any judgement thereon and in any appeal. 6 7 IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed by their authorized officers, as of the date and year first above written. WARBURG, PINCUS INVESTORS LP By: /s/ Reuben S. Leibowitz ------------------------------------- Title: Partner --------------------------------- THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ John Mullman ------------------------------------ Title: Vice President ---------------------------------- Grubb & Ellis hereby acknowledges and consents to the terms hereof: GRUBB & ELLIS COMPANY By: /s/ Authorized Signature ----------------------------------------- Title: ----------------------------------------- 7 -----END PRIVACY-ENHANCED MESSAGE-----