-----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, Nc77Oi02vChZ29JkZqTDqm3u/266f23/fMVSEFty0FJYxplzev+P0rWs50LyRpS7 MaJwIuUNBt/r5xZkOubD+Q== 0000912057-96-009832.txt : 19960517 0000912057-96-009832.hdr.sgml : 19960517 ACCESSION NUMBER: 0000912057-96-009832 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20541 FILM NUMBER: 96565921 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY ST STE 3100 STREET 2: TELESIS TWR 9TH FLR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 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 10-Q 1 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to ___________________ Commission File Number: 1-8122 -------- GRUBB & ELLIS COMPANY ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Delaware 94-1424307 - ------------------------------ ------------------ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) One Montgomery Street, Telesis Tower, San Francisco, CA 94104 -------------------------------------- (Address of Principal Executive Offices) (Zip Code) (415) 956-1990 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) No Change ----------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ 8,894,688 ------------------------------------------------- (Number of Shares Outstanding of the Registrant's Common Stock at May 1, 1996) 1 PART I FINANCIAL INFORMATION 2 ITEM 1. FINANCIAL STATEMENTS GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations (in thousands, except per share amounts and shares) (unaudited)
For the Three Months Ended March 31, ----------------------- 1996 1995 ---------- ---------- Revenue: Commercial real estate brokerage commissions $ 28,615 $ 29,880 Real estate services fees, commissions and other 8,318 8,193 ---------- ---------- Total Revenue 36,933 38,073 ---------- ---------- Costs and Expenses: Real estate brokerage and other commissions 17,467 17,555 Selling, general and administrative 11,761 12,181 Salaries and wages 11,715 11,385 Depreciation and amortization 674 437 Special charges and unusual items (110) (119) ---------- ---------- Total costs and expenses 41,507 41,439 ---------- ---------- Total operating loss (4,574) (3,366) Other income and expenses: Interest income 226 288 Other income, net 15 (28) Interest expense to related parties (777) (739) ---------- ---------- Loss before income taxes (5,110) (3,845) Provision for income taxes 6 66 ---------- ---------- Net loss $ (5,116) $ (3,911) ---------- ---------- ---------- ---------- Net loss applicable to common stockholders, net of undeclared dividends earned on preferred stock $ (5,887) $ (4,612) Net loss per common share and equivalents $ (.66) $ (.52) Weighted average common shares outstanding 8,883,970 8,797,377
See notes to condensed consolidated financial statements. 3 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (unaudited - in thousands) ASSETS
March 31, December 31, March 31, 1996 1995 1995 ----------- ----------- ----------- (unaudited) (unaudited) Current Assets: Cash and cash equivalents $ 9,189 $26,611 $12,462 Real estate brokerage commissions receivable 3,229 3,313 2,715 Real estate services fees and other commissions receivable 3,265 3,669 3,030 Other receivables 3,640 3,923 2,768 Prepaids and other current assets 667 1,295 1,184 ----------- ----------- ----------- Total current assets 19,990 38,811 22,159 Noncurrent Assets: Real estate brokerage commissions receivable 224 272 352 Real estate investments held for sale and real estate owned 534 579 1,037 Equipment and leasehold improvements, net 5,374 5,563 5,251 Other assets 1,652 951 1,945 ----------- ----------- ----------- Total assets $27,774 $46,176 $30,744 ----------- ----------- ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 4 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets, continued (in thousands, except per share amounts and shares)
March 31, December 31, March 31, 1996 1995 1995 ----------- ----------- ----------- (unaudited) (unaudited) LIABILITIES Current Liabilities: Notes payable and current portion of long-term debt $ 676 $ 276 $ 446 Accounts payable 1,075 1,498 2,102 Compensation and employee benefits payable 4,986 9,552 5,330 Deferred commissions payable 48 7,451 125 Accrued severance obligations 713 776 709 Accrued office closure costs 767 867 1,236 Accrued claims and settlements 1,824 2,132 2,264 Other accrued expenses 5,074 6,377 6,346 ----------- ----------- ----------- Total current liabilities 15,163 28,929 18,558 Long-Term Liabilities: Long-term debt, net of current portion 346 351 387 Long-term debt to related party, net of current portion 27,450 26,698 25,674 Accrued claims and settlements 12,683 12,802 13,274 Accrued severance obligations -- 16 202 Accrued office closure costs 982 1,099 1,910 Other -- -- 130 ----------- ----------- ----------- Total liabilities 56,624 69,895 60,135 ----------- ----------- ----------- Commitments and contingencies (Note 4) -- -- -- ----------- ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIT) Preferred stock, $.01 par value: 1,000,000 shares authorized; 137,160 shares of 12% Senior Convertible Preferred Stock and 150,000 shares of 5% Junior Convertible Preferred Stock outstanding 32,143 32,143 32,143 Common stock, $.01 par value: 25,000,000 shares authorized; 8,894,688, 8,883,970 and 8,800,633 shares issued and outstanding at March 31, 1996, December 31, 1995 and March 31, 1995, respectively 90 90 89 Additional paid-in capital 57,068 57,084 56,923 Retained earnings (deficit) (118,151) (113,036) (118,546) ----------- ----------- ----------- Total stockholders' equity (deficit) (28,850) (23,719) (29,391) ----------- ----------- ----------- Total liabilities and stockholders' equity (deficit) $27,774 $ 46,176 $ 30,744 ----------- ----------- ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 5 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited - in thousands)
For the Three Months Ended March 31, ----------------------- 1996 1995 ---------- ---------- Cash Flows from Operating Activities: Net loss $ (5,116) $ (3,911) Adjustments to reconcile net loss to net cash used in operating activities (12,440) (6,431) ---------- ---------- Net cash used in operating activities (17,556) (10,342) ---------- ---------- Cash Flows from Investing Activities: Proceeds from disposition and distribution from real estate joint ventures and real estate owned 39 -- Purchases of equipment and leasehold improvements (301) (501) ---------- ---------- Net cash used in investing activities (262) (501) ---------- ---------- Cash Flows from Financing Activities: Proceeds from borrowing 400 -- Repayment of notes payable (4) (66) ---------- ---------- Net cash used in financing activities 396 (66) ---------- ---------- Net decrease in cash and cash equivalents (17,422) (10,909) Cash and cash equivalents at beginning of period 26,611 23,371 ---------- ---------- Cash and cash equivalents at end of period $ 9,189 $ 12,462 ---------- ---------- ---------- ---------- -------------------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 603 $ 603 Income taxes 398 487
See notes to condensed consolidated financial statements. 6 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 1. INTERIM PERIOD REPORTING The accompanying unaudited condensed consolidated financial statements include the accounts of Grubb & Ellis Company, its wholly and majority owned and controlled subsidiaries and controlled partnerships (the "Company"), and are prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and therefore, should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and footnotes thereto. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain amounts in prior periods have been reclassified to conform to the current presentation. Operating results for the quarter ended March 31, 1996 are not necessarily indicative of the results that may be expected for future periods. Any adjustments to reserves provided in prior periods in connection with offices which management determined in 1993 to close in 1994 are reflected as "Special charges and unusual items". On January 24, 1996, the Board of Directors of the Company determined to change the Company's fiscal year from a calendar year to a fiscal year ending June 30 commencing in 1996. This change is intended to enable management to improve the Company's planning capability related to its natural business cycle, as well as enable it to adjust operations earlier in the fiscal year based on the cash flows generated during its typically strongest revenue quarter which ends December 31. 2. INCOME TAXES The Company's tax provision is attributable to federal, state and local income taxes assessed on profitable subsidiaries of the Company. 3. EARNINGS (LOSS) PER COMMON SHARE AND EQUIVALENTS Earnings (loss) per common share and equivalents computations are based on the weighted average number of common shares outstanding. Common equivalent shares from stock options and 7 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements warrants are excluded from the computation if their effect is anti- dilutive. The calculation of earnings (loss) per common share includes net income (loss), adjusted for amounts applicable to the Senior and Junior Convertible Preferred Stock related to undeclared dividends earned as follows (in thousands): 1996 1995 ------ ----- Senior Convertible Preferred Stock $ 557 $ 498 Junior Convertible Preferred Stock 214 203 ------ ----- $ 771 $ 701 ------ ----- ------ ----- 4. COMMITMENTS AND CONTINGENCIES The Company has guaranteed, in the aggregate amount of $4 million, the contingent liabilities of one of its wholly-owned subsidiaries with respect to two limited partnerships in which the subsidiary formerly acted as general partner. The Company is involved in various claims and lawsuits arising out of the conduct of its business, as well as in connection with its participation in various joint ventures, partnerships, and a trust, many of which may not be covered by the Company's insurance policies. In the opinion of management, the eventual outcome of such claims and lawsuits is not expected to have a material adverse effect on the Company's financial position or results of operations. The Company previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 1995 the information concerning a lawsuit entitled JOHSZ ET AL. V. KOLL COMPANY, ET AL., and a related lawsuit entitled YOUNKIN, MAIONA, ET AL. V. KOLL COMPANY, ET AL. and a purported class action lawsuit, JOHN W. MATTHEWS, ET AL. V. KIDDER, PEABODY & CO., ET AL. AND HSM INC., ET AL. There has been no material change with respect to these matters. 8 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 5. PURCHASE OF AXIOM REAL ESTATE MANAGEMENT, INC. MINORITY INTEREST On January 24, 1996, the Company completed the purchase of the common stock held by International Business Machines Corporation ("IBM") in Axiom Real Estate Management, Inc. ("Axiom") for a purchase price of $600,000. The Company paid $150,000 cash upon closing and will pay three additional $150,000 annual installments beginning January 1997. As a result of this transaction, the Company owns 100% of the outstanding common stock of Axiom. The excess of the purchase price over the underlying proportionate value of the net assets acquired of approximately $450,000 has been recorded related to the purchase and will be amortized over five years. Since its inception in 1992, Axiom has provided facilities management to IBM pursuant to a facilities management agreement (the "Managed Service Agreement"). In connection with the purchase transaction, the Managed Service Agreement was modified effective January 1, 1996 providing for the extension of its term until December 31, 2000, with the option for IBM to extend it for two additional one year periods, the reduction of fees charged, and the ability for IBM to change the facilities portfolio under management by Axiom under certain circumstances. The modified Managed Service Agreement is expected to result in the reduction of annual fees paid by IBM to Axiom of approximately $1.8 million for each of the years 1996 and 1997. This reduction in revenue is expected to be offset in part by the extension of the contract, the opportunity to obtain additional business from IBM and a reduction in costs by reducing certain duplicative administrative, marketing and other costs. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUE The Company's revenue is derived principally from commercial brokerage activities. Property and asset management, mortgage brokerage and appraisal and consulting fees provide substantially all of the remaining revenue. The Company has historically experienced its lowest quarterly revenue in the first calendar quarter of each year with historically higher and more consistent revenue in the second and third calendar quarters. The fourth calendar quarter has historically provided the highest quarterly level of revenue due to increased activity caused by the desire of clients to complete transactions by calendar year-end. Revenue in any given quarter during 1995, 1994 and 1993, as a percentage of total annual revenue, ranged from a high of 31.7% to a low of 19.8%, as adjusted to eliminate the effect of operations sold or closed. Additionally, the Company operates in an industry that may be affected by various economic conditions, such as interest rates, and tax and environmental laws. Total revenue for the quarter ended March 31, 1996 was approximately $36.9 million, a decrease of 3.0% from revenue of $38.1 million for the same period last year. Commercial brokerage revenue decreased $1.3 million or 4.2% from the comparable 1995 period. The commercial brokerage revenue for the quarter ended March 31, 1995 was particularly strong and at a level which had not been surpassed since the comparable 1990 period. Commercial brokerage revenues for the quarter ended March 31, 1996 reflected slower paced commercial brokerage market activities which has been historically characteristic of the quarter ending March 31. Other real estate service fees of $8.3 million increased slightly over the prior year period. COSTS AND EXPENSES Real estate brokerage and other commission expense (salespersons' participation) is the Company's major expense and is a direct function of gross brokerage commission revenue levels. As a percentage of total commercial real estate brokerage commission revenue, commercial brokerage salespersons' participation expense for the first three months of 1996 increased by 200 basis points over the comparable period in 1995. The increased participation expense percentage was primarily related to performance of top producers who earned commissions at higher levels. Total costs and expenses, other than real estate brokerage commission expense and special charges and unusual items, for the quarter ended March 31, 1996 were $24.2 million, level with the comparable prior year quarter. 10 Special charges and unusual items reflect net favorable adjustments of $110,000 and $119,000 for the quarters ended March 31, 1996 and 1995, respectively, primarily related to the non-cash reversal of the remaining net office lease liability of the Southern California residential brokerage operations sold in November 1994. As of March 31, 1996, the Company had current accrued severance and office closure costs of approximately $1.5 million of which $713,000 of accrued severance costs and $403,000 of accrued office closure costs, net of expected sublease income, are expected to be paid in cash. Approximately $900,000 of the $1.0 million of long-term accrued office closure costs, net of expected sublease income, are expected to be paid in cash over the next six years. NET LOSS The net loss of $5.1 million or $.66 per common share for the quarter ended March 31, 1996 compared unfavorably to the net loss of $3.9 million or $.52 per common share for the same period in 1995. The decrease from prior year's performance was primarily related to lower earnings from commercial brokerage activities and higher national marketing costs reflecting the continued implementation of the strategy to integrate the Company's resources to better serve its clients. LIQUIDITY AND CAPITAL RESOURCES Working capital decreased by $5.1 million to $4.8 million during the first three months of 1996. Cash and cash equivalents decreased by $17.4 million from December 31, 1995 to March 31, 1996. The decrease was mainly attributable to cash used by operations of $17.6 million, which included cash outflows of $4.0 million for 1995 salespersons' and managers' incentive compensation, $7.4 million for deferred salespersons' commission payments, and aggregate interest payments of $600,000 on the 9.9% Senior Notes and the Revolving Credit Note. The Company has historically experienced the highest use of operating cash in the quarter ended March 31, primarily related to the payment of incentive and deferred commission payable balances which attain peak levels as a result of business activity levels during the quarter ending December 31. Additionally, quarterly revenues are typically at their lowest level of the year during the quarter ending March 31. Historically, operating cash requirements reduce significantly with higher and more consistent revenue in the subsequent quarters. Operating cash flow is expected to be sufficient to meet the Company's anticipated normal operating expenses. The Company's long-term cash requirements include principal payments on its long-term debt as described in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and footnotes thereto. To the extent that the Company's cash requirements are not met by operating cash flow, due to adverse economic 11 conditions or other unfavorable events, the Company may find it necessary to further reduce expense levels, seek refinancing, or undertake other actions as may be appropriate. In such event, the Company anticipates that its ability to raise financing on acceptable terms would be severely limited and there can be no assurance that the Company would be able to raise additional financing. 12 PART II OTHER INFORMATION (Items 2, 3, 4 and 5 are not applicable for the quarter ended March 31, 1996) 13 ITEM 1. LEGAL PROCEEDINGS The Company previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 1995 the information concerning a lawsuit entitled JOHSZ ET AL. V. KOLL COMPANY, ET AL., and a related lawsuit entitled YOUNKIN, MAIONA, ET AL. V. KOLL COMPANY, ET AL. and a purported class action lawsuit, JOHN W. MATTHEWS, ET AL. V. KIDDER, PEABODY & CO., ET AL. AND HSM INC., ET AL. There has been no material change with respect to these matters. ITEM 6(A). EXHIBITS (3) ARTICLES OF INCORPORATION AND BYLAWS 3.1 Certificate of Incorporation of the Registrant, as restated effective November 1, 1994, incorporated herein by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed on March 31, 1995 (Commission File No. 1-8122). 3.2 Grubb & Ellis Company Bylaws, as amended effective June 1, 1994, incorporated herein by reference to Exhibit 4.21 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 1994 (Commission File No. 1-8122). (10) MATERIAL CONTRACTS 10.1 Employment agreement between Neil R. Young and the Registrant dated as of February 22, 1996. (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE ITEM 6(b) REPORTS ON FORM 8-K NONE 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GRUBB & ELLIS COMPANY (Registrant) Date: May 15, 1996 /s/ James E. Klescewski ---------------------------- James E. Klescewski Vice President and Corporate Controller (Chief Accounting Officer) 15 Grubb & Ellis Company and Subsidiaries EXHIBIT INDEX (A) FOR THE QUARTER ENDED MARCH 31, 1996 EXHIBIT (10) MATERIAL CONTRACTS 10.1 Employment Agreement between Neil R. Young and the Registrant dated as of February 22, 1996. (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE (A) Exhibits incorporated by reference are listed in Item 6(a) ofthis report. 16 EX-10.1 2 EXH 10-1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement"), is made and entered into as of February 22, 1996, between GRUBB & ELLIS COMPANY, a Delaware corporation (the "Company"), and NEIL R. YOUNG (the "Executive"). 1. POSITION AND DUTIES. The Executive shall have the title and position of Chief Executive Officer and President of the Company. Effective February 22, 1996, the Executive shall be elected to the Board of Directors of the Company (the "Board"), and during the Period of Contract Employment (as defined in Section 2 of this Agreement) he shall be nominated for reelection to the Board upon expiration of his term as a Director. The Executive, subject to control of the Board, shall direct the day-to-day operations of the Company and formulate plans and policies to achieve overall corporate objectives and targeted profitability. 2. PERIOD OF CONTRACT EMPLOYMENT. The term "Period of Contract Employment," as used in this Agreement, means the period beginning on February 22, 1996 and ending on the earlier of June 30, 1999 or upon termination of the Executive's employment with the Company. The Executive may elect to extend the Period of Contract Employment to June 30, 2000 by providing written notice to the Company during December 1998, provided that no termination of the Executive's employment with the Company has occurred on or prior to the date such written notice is provided. In the event that the Executive elects to extend the Period of Contract Employment, the terms of such employment shall include a compensation arrangement that includes an amount of Base Salary and Bonus Compensation (each as defined below) equal to or greater than the amount of Base Salary and Bonus Compensation paid or payable during fiscal year 1999. If the Executive remains in the employ of the Company following the Period of Contract Employment and any extension thereof in accordance with this Section, such employment will be at will unless different terms of employment are established in writing. 3. ANNUAL BASE SALARY. During the Period of Contract Employment, the Company agrees to pay the Executive a base salary (the "Base Salary") in the annual amount set forth below: PERIOD BASE SALARY ------ ----------- February 22, 1996 through $400,000 (pro-rated for the June 30, 1996 portion of the year the Executive is employed by the Company under this Agreement) July 1, 1996 through June 30, 1997 $400,000 July 1, 1997 through June 30, 1998 $425,000 July 1, 1998 through June 30, 1999 $425,000 The Base Salary shall be payable as current salary, in installments (not less frequently than monthly) subject to all applicable withholding and deductions, in accordance with the Company's customary payroll practices. 17 4. BONUS COMPENSATION. During the Period of Contract Employment, the Executive shall receive annual bonus compensation ("Bonus Compensation") as follows: PEROID BONUS COMPENSATION ------ ------------------ July 1, 1996 through June 30, 1997 $125,000 guaranteed, but $200,000 in the event the Company's net income for the twelve (12) months ending June 30, 1997 is at least eighty percent (80%) of the target net income level for such period established by the Board July 1, 1997 through June 30, 1998 $212,500 in the event the Company's net income for the twelve (12) months ending June 30, 1998 is at least eighty percent (80%) of the target net income level for such period established by the Board July 1, 1998 through June 30, 1999 $212,500 in the event the Company's net income for the twelve (12) months ending June 30, 1999 is at least eighty percent (80%) of the target net income level for such period established by the Board Bonus Compensation may be increased in the sole discretion of the Compensation Committee of the Board. Bonus Compensation shall be payable after June 30th of the year to which the Bonus Compensation is applicable in one lump sum subject to all applicable withholding and deductions, in accordance with the Company's customary payroll practices. 5. EQUITY INCENTIVE. Pursuant to the Company's 1990 Amended and Restated Stock Option Plan (the "Plan"), the Company has granted the Executive stock options (the "Options") to purchase an aggregate of four hundred and fifty thousand (450,000) shares of the Company's common stock, $.01 par value per share (the "Common Stock"), at an exercise price equal to $2.375 per share (the closing price of the Common Stock on The New York Stock Exchange on February 21, 1996). The terms of the Options shall be set forth in an agreement between the Company and the Executive (the "Option Agreement") which shall not be less favorable to the Executive than the terms of this Agreement. The Options shall become exercisable in five equal, annual installments commencing on December 31, 1996 and shall expire on February 22, 2006; provided, however, that in the event that the Executive's employment with the Company is terminated, whether by the Company or the Executive, the Executive shall have the right to exercise vested Options (i.e., Options which are exercisable as of the termination date) for a period of three (3) months after such termination date and if such termination occurs on or after June 30, 2000 the Executive shall also have the right to exercise unvested Options (i.e., Options which had not been exercisable as of the termination date) for a period of three 18 (3) months after the termination date. Notwithstanding the foregoing, in addition to the provisions of Section 8(b)(iii) of the Plan, following an event that causes a stockholder other than Warburg, Pincus Investors, L.P. or its affiliates to own more than twenty-five percent (25%) of the issued and outstanding Common Stock of the Company, if the Executive terminates his employment with the Company after a material reduction in his position or responsibilities with the Company, then all unvested Options shall immediately become exercisable and remain so for a period of three (3) months. The Options are subject to approval of the Company's stockholders of an amendment to the Plan adopted by the Board of Directors on November 21, 1995, which approval the Company covenants to use its best efforts to obtain. Notwithstanding any other provision of this Section 5, if the Executive's employment is extended through June 30, 2000 but does not continue thereafter then all unvested Options shall immediately become exercisable and remain so for a period of three (3) months. 6. BENEFITS. During the Period of Contract Employment, and in the event of a termination under Sections 7 or 8 of this Agreement during the Severance Period or Extension Period (each as defined below), as applicable, the Executive shall be entitled to participate in or receive benefits equivalent to any employee benefit plan or other arrangement, including but not limited to any medical, dental, retirement, disability, life insurance, sick leave and vacation plans or arrangements, generally made available by the Company to its executive officers, subject to or on a basis consistent with the terms, conditions and overall administration of such plans or arrangements; PROVIDED, that such plans and arrangements are made available at the discretion of the Company and nothing in this Agreement establishes any right of the Executive to the availability or continuance of any such plan or arrangement. 7. SEVERANCE. The Company may terminate the Executive's employment hereunder with or without cause at any time, including during the extended period referred to in Section 2 of this Agreement, by giving written notice ("Termination Notice") to the Executive. Such termination shall become effective upon the date specified in the Termination Notice (the "date of termination"). In the event of such termination the Executive shall be entitled to: (i) payment of all earned but unpaid Base Salary, Bonus Compensation, and vacation pay through the date of termination, payable in a lump sum within five (5) days after the date of termination; (ii) payment of an amount equal to the Base Salary the Executive would have earned during the twelve (12) months following the date of termination (the "Severance Period"), payable in equal installments over the Severance Period in accordance with the Company's customary payroll practices; (iii) continuation during the Severance Period of all benefit plans or other arrangements, or their equivalent, referred to in Section 6 of this Agreement; and, (iv) payment of a pro-rata share of the Bonus Compensation the Executive would have otherwise earned during the fiscal year in which the date of termination occurred based on the percentage of the fiscal year the Executive was employed by the Company, payable in a lump sum when such Bonus Compensation would have been payable in accordance with the Company's customary payroll practices. Upon the termination of his employment by the Company, the Executive shall have no right to compensation except as set forth in this Section and Section 5 of this Agreement. 8. TERMINATION BY THE EXECUTIVE. The Executive may terminate his employment with the Company by giving a Termination Notice to the Company. Such termination will become effective upon the date specified in the Termination Notice (the "Effective Date"), 19 provided that the Effective Date is at least thirty (30) days after the date of the Termination Notice. In the event that the Executive delivers a Termination Notice to the Company after February 22, 1996 and the Effective Date is on or prior to June 30, 1997, the Executive shall be entitled to: (i) payment of all earned but unpaid Base Salary, Bonus Compensation, and vacation pay through the Effective Date, payable in a lump sum within five (5) days after the Effective Date; (ii) payment of an amount equal to the Base Salary the Executive would have earned during the six (6) months following the Effective Date (the "Extension Period"), payable in equal installments over the Extension Period in accordance with the Company's customary payroll practices; (iii) continuation during the Extension Period of all benefit plans or other arrangements, or their equivalent, referred to in Section 6 of this Agreement. 9. COMPETING BUSINESS. The Executive hereby covenants and agrees that, during the Period of Contract Employment and for one year following the expiration or termination of employment with the Company, the Executive will not have any investment in a Competing Business (as defined in this Section) other than an equity interest of less than five percent (5%) of any company whose securities are listed on The New York Stock Exchange, The American Stock Exchange or quoted on NASDAQ and will not render personal services to any Competing Business in any manner, including, without limitation, as owner, partner, director, trustee, officer, employee, consultant or advisor thereof. For purposes of this Agreement, "Competing Business" shall mean any business which derives a substantial portion of its revenue from business similar or competitive to that now, or at any time during the Period of Contract Employment, conducted by the Company, in any metropolitan area, city, county or other political subdivision, where the Company presently does business or, at any time during the Period of Contract Employment, will do business. If the Executive shall breach the agreement contained in this Section, such breach may render the Executive liable to the Company for damages therefor and entitle the Company to enjoin the Executive from making such investment or from rendering such personal services. In addition, the Company shall have the right in such event to enjoin the Executive from disclosing any confidential information concerning the Company to any Competing Business, to enjoin any Competing Business from receiving from the Executive or using any such confidential information and/or to enjoin any Competing Business from retaining or seeking to retain any other employees of the Company. 10. NO SOLICITATION. The Executive hereby covenants and agrees that during the Period of Contract Employment and for one year following the expiration or termination of employment with the Company, he will not, for himself or any third party, directly or indirectly: (i) divert or attempt to divert from the Company any business of any kind in which the Company is engaged; or (ii) employ or solicit for employment any person employed by the Company during the period of such person's employment. 11. SEVERABILITY. ENFORCEABILITY. In the event that the provisions of the Sections captioned "Competing Business" and "No Solicitation", or any portion thereof, should ever be adjudicated by a court of competent jurisdiction in proceedings to which the Company is a proper party to exceed the time or geographic or other limitations permitted by applicable law, then such provisions will be deemed reformed to the maximum time or geographic or other limitations permitted by applicable law, as determined by such court in such action, the parties 20 hereby acknowledging their desire that in such event such action be taken. Without limiting the foregoing, the covenants contained herein will be construed as separate covenants covering their respective subject matters, including, without limitation, with respect to (a) each of the separate cities, counties, metropolitan areas, and each other political subdivision of the United States in which any of the Company or its successors now transact any business or propose to transact business, (b) each business now conducted by the Company or its successors, and (c) the Company and its successors separately. In addition to the above, all provisions of this Agreement are severable, and the invalidity or unenforceability of any provision or provisions of this Agreement or portions or aspects thereof will not affect the validity or enforceability of any other provision, or portion of this Agreement, which will remain in full force and effect as if executed with the unenforceable or invalid provision or portion or aspect thereof modified, as set forth above. 12. GOVERNING LAW. This Agreement is being made and executed in and is intended to be performed in the State of Illinois and shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Illinois, without regard to the conflict of laws principles thereof. 13. ENTIRE AGREEMENT. This Agreement and the Option Agreement comprise the entire agreement between the parties hereto relating to the subject matter hereof and, as of the date hereof, supersede, cancel and annul all previous employment agreements between the Company (and/or its predecessors) and the Executive, as the same may have been amended or modified, and any right of the Executive thereunder other than for compensation accrued thereunder as of the date hereof, and supersede, cancel and annul all other prior written and oral agreements between the Executive and the Company or any predecessor to the Company. The terms of this Agreement and the Option Agreement are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement. In the event of any inconsistency between this Agreement and the Option Agreement, the Option Agreement shall control. 14. DISPUTES. Any dispute or controversy arising under, out of, in connection with or in relation to this Agreement shall be finally determined and settled by arbitration. Arbitration shall be initiated by one party making written demand upon the other party and simultaneously filing the demand together with required fees in the office of the American Arbitration Association in Chicago, Illinois. The arbitration proceeding shall be conducted in Chicago, Illinois by a single arbitrator in accordance with the Expedited Procedures of the Employment Dispute Resolution Rules of the American Arbitration Association, except as otherwise provided herein. Except as required by the arbitrator, the parties shall have no obligation to comply with discovery requests made in the arbitration proceeding. The arbitration award shall be a final and binding determination of the dispute and shall be fully enforceable as an arbitration award in any court having jurisdiction and venue over such parties. The prevailing party (as determined by the arbitrator) shall be awarded by the arbitrator such party's attorneys' fees and expenses in connection with such proceeding, in addition to any other relief that may be granted. The nonprevailing party (as determined by the arbitrator) shall pay the arbitrator's fees and expenses. 15. NOTICES. Any notice, request, claim, demand, document and other communication hereunder to any party will be effective upon receipt (or refusal of receipt) and 21 will be in writing and delivered personally or sent by telecopy or certified or registered mail, postage prepaid, as follows: if to the Company, addressed to the attention of its General Counsel at One Montgomery Street, 9th Floor, San Francisco, CA 94104 with a copy to Grubb & Ellis Company, 10275 W. Higgins Road, Suite 300, Rosemont, IL 60018, attention: General Counsel; and if to the Executive, at the address set forth below under his signature; or at any other address as any party has specified by notice in writing to the other party. 16. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or terminated except by an instrument in writing, approved by the Board and signed by the Executive and the Company. By an instrument in writing similarly executed, the Executive or the Company may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy or power hereunder shall preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. GRUBB & ELLIS COMPANY NEIL R. YOUNG /s/ R.J. Hanlon, Jr. /s/ Neil R. Young - --------------------------------- ----------------------------------- Name: R.J. Hanlon, Jr. Neil R. Young Title: SVP & CFO 1 Court of Connecticut River Valley Lincolnshire, Illinois 60069 22 EX-11 3 EXH 11 EXHIBIT 11 GRUBB & ELLIS COMPANY AND SUBSIDIARIES EXHIBIT (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS - FORM 10-Q for the three months ended March 31, 1996 and 1995 (Unaudited) (in thousands, except for shares and per share amounts)
THREE MONTHS ENDED MARCH 31, ------------------------ 1996 1995 ---------- ---------- Primary loss per share applicable to Common Stock: Weighted average common shares outstanding 8,883,970 8,797,377 ---------- ---------- ---------- ---------- Net loss $ (5,116) $ (3,911) Earnings applicable to Preferred Stock (771) (701) ----------- ---------- Net loss applicable to Common Stockholders $ (5,887) $ (4,612) ----------- ---------- ----------- ---------- Net loss per common share and equivalents applicable to Common Stock $ (.66) $ (.52) ----------- ---------- ----------- ---------- Fully-diluted loss per share applicable to Common Stock: Weighted average common shares outstanding 8,883,970 8,797,377 ----------- ---------- ----------- ---------- Net loss $ (5,887) $ (4,612) ----------- ---------- ----------- ---------- Net loss per common share and equivalents applicable to Common Stock $ (.66) $ (.52) ----------- ---------- ----------- ----------
23 EX-27 4 EXH 27
5 The schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 9,189 0 12,119 5,342 0 19,990 20,031 14,657 27,774 15,163 0 0 32,143 90 57,068 28,850 0 37,174 0 17,467 24,040 0 777 (5,110) 6 (5,116) 0 0 0 (5,116) (.66) (.66) Interest income and Other income, net are included in Total Revenue.
-----END PRIVACY-ENHANCED MESSAGE-----