-----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, S+AlCrLxUkRI+I2I+xfqOzISWWhs9AGVpL0FjinxTSlsA9LUocUmAhzGg0qiX9ah Vr0PDxn5rzKYbd+4T9cj1g== 0000912057-97-004993.txt : 19970222 0000912057-97-004993.hdr.sgml : 19970222 ACCESSION NUMBER: 0000912057-97-004993 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 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: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08122 FILM NUMBER: 97530344 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 FORM 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 December 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.) 2215 Sanders Road, 4th Floor, Northbrook, IL 60062 -------------------------------------- (Address of Principal Executive Offices) (Zip Code) (847) 753-9010 -------------------------------------------------- (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 --- --- 19,457,643 -------------------------------------------------------- (Number of Shares Outstanding of the Registrant's Common Stock at February 2, 1997) 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 For the Six Months Ended December 31, Ended December 31, ------------------------ ------------------------ 1996 1995 1996 1995 --------- --------- --------- --------- Revenue: Commercial real estate brokerage commissions $ 56,510 $ 50,329 $ 99,301 $ 89,015 Real estate services fees, commissions and other 11,524 10,052 20,660 18,728 --------- --------- --------- --------- Total revenue 68,034 60,381 119,961 107,743 --------- --------- --------- --------- Costs and Expenses: Real estate brokerage and other commissions 35,214 30,652 61,153 53,614 Selling, general and administrative 11,598 11,904 22,288 23,088 Salaries and wages 13,933 10,978 26,610 23,380 Depreciation and amortization 885 608 1,652 1,173 Special charges and unusual items 993 234 900 76 --------- --------- --------- --------- Total costs and expenses 62,623 54,376 112,603 101,331 --------- --------- --------- --------- Total operating income 5,411 6,005 7,358 6,412 Other income and expenses: Interest income 221 217 351 356 Other income, net 151 (203) 126 789 Interest expense to related parties (599) (741) (1,325) (1,471) --------- --------- --------- --------- Income before income taxes 5,184 5,278 6,510 6,086 and extraordinary item Provision for income taxes (37) 54 (67) (158) --------- --------- --------- --------- Income before extraordinary item 5,147 5,332 6,443 5,928 Extraordinary item - gain on extinguishment of debt, net of income taxes 3,576 - 3,576 - --------- --------- --------- --------- Net income $ 8,723 $ 5,332 $ 10,019 $ 5,928 --------- --------- --------- --------- --------- --------- --------- ---------
See notes to condensed consolidated financial statements. 3 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations, Continued (in thousands, except per share amounts and shares) (unaudited)
For the Three Months For the Six Months Ended December 31, Ended December 31, ------------------------ ------------------------ 1996 1995 1996 1995 --------- --------- --------- --------- Net income applicable to common stockholders net of undeclared dividends earned on preferred stock $ 8,087 $ 4,609 $ 8,588 $ 4,482 --------- --------- --------- --------- --------- --------- --------- --------- Net income per common share and equivalents: Primary - - from operations $ .35 $ .42 $ .43 $ .42 - from extra- ordinary gain .27 - .28 - --------- --------- --------- --------- $ .62 $ .42 $ .71 $ .42 --------- --------- --------- --------- --------- --------- --------- --------- Weighted average common shares and equivalents outstanding 13,334,656 8,827,675 12,669,232 8,850,416 ---------- --------- ---------- --------- ---------- --------- ---------- --------- Fully diluted - - from operations $ .30 $ .32 $ .37 $ .36 - from extra- ordinary gain .20 - .21 - --------- --------- --------- --------- $ .50 $ .32 $ .58 $ .36 --------- --------- --------- --------- --------- --------- --------- --------- Weighted average common shares and equivalents outstanding 17,343,642 8,827,675 17,366,724 8,850,416 ---------- --------- ---------- --------- ---------- --------- ---------- ---------
See notes to condensed consolidated financial statements. 4 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) ASSETS (unaudited)
December 31, June 30, December 31, 1996 1996 1995 ------------ --------- ------------ Current Assets: Cash and cash equivalents $ 28,530 $ 13,547 $ 26,611 Real estate brokerage commissions receivable 2,533 206 3,313 Real estate services fees and other commissions receivable 2,713 3,172 3,669 Other receivables 3,209 4,326 3,923 Prepaids and other current assets 1,508 1,484 1,295 ------------ --------- ------------ Total current assets 38,493 22,735 38,811 Noncurrent Assets: Real estate brokerage commissions receivable 61 100 272 Real estate investments held for sale and real estate owned 666 537 579 Equipment and leasehold improvements, net 4,828 5,194 5,563 Other assets 1,611 1,092 951 ------------ --------- ------------ Total assets $ 45,659 $ 29,658 $ 46,176 ------------ --------- ------------ ------------ --------- ------------
See notes to condensed consolidated financial statements. 5 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets, continued (in thousands, except per share amounts and shares) (unaudited)
December 31, June 30, December 31, 1996 1996 1995 ------------ --------- ------------ LIABILITIES Current Liabilities: Notes payable and current portion of long-term debt $ 22 $ 28 $ 276 Accounts payable 1,508 1,624 1,498 Compensation and employee benefits payable 7,104 5,380 9,552 Deferred commissions payable 8,411 201 7,451 Accrued severance obligations 890 98 776 Accrued office closure costs 1,137 623 867 Accrued claims and settlements 1,449 1,779 2,132 Other accrued expenses 5,147 6,717 6,377 ------------ --------- ------------ Total current liabilities 25,668 16,450 28,929 Long-Term Liabilities: Long-term debt, net of current portion 291 336 351 Long-term debt to related party 15,000 27,514 26,698 Accrued claims and settlements 11,190 11,804 12,802 Accrued office closure costs 497 960 1,099 Other 406 69 16 ------------ --------- ------------ Total liabilities 53,052 57,133 69,895 ------------ --------- ------------ 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 Common stock, $.01 par value: 25,000,000 shares authorized; 16,948,619, 8,916,415 and 8,883,970 shares issued and outstanding at December 31, 1996, June 30, 1996 and December 31, 1995, respectively 170 90 90 Additional paid-in capital 99,280 57,154 57,084 Retained earnings (deficit) (106,843) (116,862) (113,036) ------------ --------- ------------ Total stockholders' equity (deficit) (7,393) (27,475) (23,719) ------------ --------- ------------ Total liabilities and stockholders' equity (deficit) $ 45,659 $ 29,658 $ 46,176 ------------ --------- ------------ ------------ --------- ------------
See notes to condensed consolidated financial statements. 6 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (unaudited - in thousands) For the Six Months Ended December 31, ---------------------- 1996 1995 --------- ---------- Cash Flows from Operating Activities: Net income $ 10,019 $ 5,928 Extraordinary item - gain on extinguishment of debt (3,576) - Other adjustments to reconcile net income to net cash used in operating activities 9,251 9,404 --------- ---------- Net cash provided by operating activities 15,694 15,332 --------- ---------- --------- ---------- Cash Flows from Investing Activities: Proceeds from disposition and distributions from real estate joint ventures and real estate owned 95 1,188 Purchases of equipment and leasehold improvements (792) (1,207) --------- ---------- Net cash used in investing activities (697) (19) --------- ---------- Cash Flows from Financing Activities: Repayment of notes payable (14) (108) Repayment of long-term debt to related party (10,000) - Issuance of common stock 10,000 - --------- ---------- Net cash used in financing activities (14) (108) --------- ---------- Net increase in cash and cash equivalents 14,983 15,205 Cash and cash equivalents at beginning of period 13,547 11,406 --------- ---------- Cash and cash equivalents at end of period $ 28,530 $ 26,611 --------- ---------- --------- ---------- -------------------------------- Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 1,357 $ 716 Income taxes 16 561 See notes to condensed consolidated financial statements. 7 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"). The Company consolidates Axiom Real Estate Management, Inc. ("Axiom"), which provides real estate property and facilities management services. The Company acquired the minority interest in Axiom in January 1996, increasing its ownership to 100%. Prior to the acquisition, the minority interest was immaterial and was included in other long-term liabilities on the Condensed Consolidated Balance Sheets and the related minority interest in operating results has been included in "Other income, net" on the Condensed Consolidated Statements of Operations through the date it was acquired. The accompanying unaudited condensed consolidated financial statements 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, as amended by Amendment No. 1 thereto on Form 10-K/A for the year ended June 30, 1996, 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 three months or six months ended December 31, 1996 are not necessarily indicative of the results that may be expected for future periods. On February 5, 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. 8 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 2. INCOME TAXES The Company's tax provision is attributable to state and local income taxes assessed on profitable subsidiaries of the Company. Additionally the provision for income taxes for the three months and six months ended December 31, 1995 included federal income taxes related solely to Axiom which filed on a separate company basis for tax purposes. 3. FINANCING TRANSACTIONS SALE AGREEMENT - LONG-TERM DEBT - On October 21, 1996, Warburg, Pincus Investors, L.P. ("Warburg") and The Prudential Insurance Company of America ("Prudential") entered into an agreement (the "Sale Agreement") pursuant to which Warburg acquired from Prudential all of the outstanding debt, common stock warrants, and substantially all of the Junior Convertible Preferred Stock held by Prudential in the Company (together, the "Prudential Securities"), for $23 million plus accrued but unpaid interest on the debt. The closing occurred on October 22, 1996. Concurrently, Warburg granted the Company an option, (the "Option") until April 16, 1997, to acquire all of the Prudential Securities which Warburg acquired from Prudential, at Warburg's cost, plus interest. The Prudential Securities included: (a) $5 million Revolving Credit Note due November 1, 1999; (b) $10 million 9.9% Senior Notes due in equal installments on November 1, 1997 and 1998; (c) $10.9 million 10.65% Subordinated Payment-In-Kind Note due November 1, 2001; (d) $2.2 million 11.65% Subordinated Payment-In-Kind Notes, due November 1, 2001 (the "PIK Notes"); (e) 130,233 shares of Junior Convertible Preferred Stock; and (f) stock subscription warrants to subscribe for 350,000 shares of common stock. The Sale Agreement provided that in the event that Warburg converts its Senior Convertible Preferred Stock to common stock, Prudential will convert its remaining Junior Convertible Preferred Stock to common stock as well. As of the date of the Sale Agreement, Prudential continued to hold 397,549 shares of common stock and 19,767 shares of Junior Convertible Preferred Stock convertible into 352,447 shares of common stock. 9 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 3. FINANCING TRANSACTIONS (CONTINUED) While the Option remained unexercised during the Option period, no interest or dividends were to accrue or be due or payable on the Prudential Securities; however, the Company was obligated to pay Warburg interest at an initial rate of 10% per annum, increasing to 12% per annum as of February 1, 1997, on Warburg's $23 million investment in the Prudential Securities. In consideration of receipt of the Option, the Company agreed to extend the expiration date of warrants to purchase an aggregate of 1,012,358 shares of common stock of the Company, currently held by Warburg, to January 29, 2002. EQUITY INVESTMENTS - On December 11, 1996, the Company sold 2.5 million shares of its common stock for $10 million to the principals of the Kojaian Companies, Southfield, Michigan. The $10 million was used to purchase from Warburg, and then retire, all of the outstanding PIK Notes (approximately $13.5 million principal amount) and 130,233 shares of Junior Convertible Preferred Stock (convertible into approximately 2.3 million shares of common stock). The repurchase of the PIK Notes resulted in a $3.6 million extraordinary gain on the extinguishment of debt. There were no income taxes recorded with respect to the extraordinary gain due to the Company's available net operating loss carryforward. In connection with these transactions, Warburg retained warrants to purchase an aggregate of 325,000 shares of common stock and Joe F. Hanauer received warrants to purchase an aggregate of 25,000 shares of common stock, which Warburg acquired from Prudential. At the same time, Warburg granted the Company a second option (the "Second Option") to purchase the 9.9% Senior Notes and Revolving Credit Note held by Warburg until April 16, 1997 (which may be extended to July 15, 1997 under certain circumstances) for $13 million, plus interest, and the Option was canceled. In addition, Warburg and Joe F. Hanauer converted all of their shares of Senior Convertible Preferred Stock and Prudential converted all of its remaining shares of Junior Convertible Preferred Stock to purchase an aggregate of 5,520,624 shares of common stock. SUBSEQUENT EVENT - On January 24, 1997, the Company sold 2.5 million shares of its common stock for $11.25 million to Archon Group, L.P., a majority owned subsidiary of the international investment bank, Goldman, Sachs & Co. The $11.25 million, together with existing cash, was used to purchase from Warburg, and then retire, the $10 million of outstanding 9.9% Senior Notes and $5 million Revolving Credit Note, at a price equal 10 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 3. FINANCING TRANSACTIONS (CONTINUED) to $13 million plus accrued interest of approximately $96,000. This transaction will result in an extraordinary gain on the extinguishment of debt in an amount equal to approximately $2 million for the quarter ending March 31, 1997. As a result of the above mentioned transactions, all shares of Senior and Junior Convertible Preferred Stock of the Company have been either converted to common stock or retired as of December 31, 1996, extinguishing accrued and unpaid dividends on such stock. Additionally, all long-term debt has been eliminated as of January 27, 1997. 4. NET INCOME PER COMMON SHARE AND EQUIVALENTS Net income per common share and equivalents computations are based on the weighted average number of common shares outstanding. Common equivalent shares from stock options and warrants are excluded from the computation if their effect is anti-dilutive. The calculation of net income per common share includes net income, adjusted for amounts applicable to the Senior and Junior Convertible Preferred Stock related to undeclared dividends earned as shown below (in thousands). Since all of the preferred stock was either retired or converted to common stock on December 11, 1996 (see Note 3), undeclared dividends were only calculated through that date. For the For the Three Months Ended Six Months Ended December 31, December 31, ------------------- -------------------- 1996 1995 1996 1995 ------ ------ -------- -------- Senior Convertible Preferred Stock $ 454 $ 516 $ 1,032 $ 1,032 Junior Convertible Preferred Stock 182 207 399 414 ------ ------ -------- -------- $ 636 $ 723 $ 1,431 $ 1,446 ------ ------ -------- -------- ------ ------ -------- -------- 11 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 4. NET INCOME PER COMMON SHARE AND EQUIVALENTS (CONTINUED) PRO FORMA INFORMATION - The information presented below presents the pro forma impact to net income per common share and equivalents assuming (a) the equity investments of $10 million in December 1996 and $11.25 million in January 1997 described in Note 3 above were made at the beginning of the respective periods, then concurrently (b) all outstanding long-term debt to Prudential was immediately retired and (c) all outstanding Senior and Junior Convertible Preferred Stock was also immediately retired or converted into common stock. The primary and fully diluted pro forma net income per common share calculations are the same within each period presented.
For the Three Months For the Six Months Ended December 31, Ended December 31, ------------------------- ------------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net income applicable to common stockholders $ 8,087 $ 4,609 $ 8,588 $ 4,482 Add pro forma adjustments - Dividends applicable to preferred stock 636 723 1,431 1,446 Interest expense to related parties 599 741 1,325 1,471 ---------- ---------- ---------- ---------- Pro forma net income applicable to common stockholders $ 9,322 $ 6,073 $ 11,344 $ 7,399 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Pro forma weighted average common shares and equivalents outstanding 19,926,207 19,226,215 19,884,170 19,306,090 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Pro forma net income per common share: From operations $ 0.29 $ 0.32 $ 0.39 $ 0.38 From extraordinary gain 0.18 - 0.18 - ---------- ---------- ---------- ---------- $ 0.47 0.32 $ 0.57 $ 0.38 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The pro forma information is not necessarily indicative of the results of the Company had such transactions occurred on the days discussed above, nor does such information purport to represent the expected results for future periods. 12 GRUBB & ELLIS COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 5. 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, as amended by Amendment No. 1 thereto on Form 10-K/A for the year ended June 30, 1996, 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 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. 13 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, appraisal and consulting fees provide substantially all of the remaining revenue. The quarter ending December 31 has historically provided the highest quarterly revenue due to increased activity caused by the desire of clients to complete transactions by calendar year-end. The Company has historically experienced its lowest quarterly revenue in the quarter ending March 31 of each year with historically higher and more consistent revenue in the quarters ending June 30 and September 30. Revenue in any given quarter during the three fiscal year period ended June 30, 1996, as a percentage of total annual revenue, ranged from a high of 31.2% to a low of 19.0%, 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. For the six months ended December 31, 1996, total revenue of $120.0 million increased by $12.2 million, or 11.3%, compared to the same period last year. Commercial brokerage revenue increased $10.3 million, or 11.6%, over the comparable 1995 period, reflecting improving conditions for commercial real estate and the Company's increasing market share in specific locations. Other real estate services fees of $20.7 million for the six months ended December 31, 1996 increased by $1.9 million, or 10.3%, as a result of higher fees for appraisal and consulting services and property management. Total revenue for the quarter ended December 31, 1996 was $68.0 million, an increase of 12.7% over revenue of $60.4 million for the same period last year. Commercial brokerage revenue increased $6.2 million or 12.3% over the comparable 1995 period. Other real estate service fees of $11.5 million increased $1.5 million, or 14.6%, over the prior year period as described above. 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 six months and the second quarter of fiscal year 1997 increased by 65 and 70 basis points, respectively, over the comparable periods in fiscal year 1996. The increased participation expense percentages were primarily related to 14 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, increased by $2.9 million or 6.1%, for the first six months of fiscal year 1997 compared to the same period in fiscal year 1996. The increase in costs and expenses was primarily attributable to the $3.2 million increase in salary and wages. Approximately one-half of this increase was due to changes in reserves related to partially self-insured employee benefit programs. The balance of the increase was due to (a) higher salary costs for Axiom related to increased property management activities, (b) the hiring costs and salaries related to additional senior level executives for the Institutional Services and Corporate Services Groups of the commercial brokerage operations, (c) increased salary cost, as opposed to participation expense, due to guarantees provided to commercial brokerage office District and Sales Managers in their initial year of service and (d) the impact of normal annual salary increases. Total costs and expenses, other than real estate brokerage commission expense and special charges and unusual items, for the quarter ended December 31, 1996 increased by $2.9 million, or 12.5%, compared to the same quarter in 1995 for the same reasons identified above. Special charges and unusual items reflect a net charge of $900,000 and $993,000, respectively, for the six and three month periods ended December 31, 1996. These amounts included a $1.2 million charge for incremental non-recurring costs related to the relocation of the Company's corporate headquarters from San Francisco, California to Northbrook, Illinois. The Company estimates that an additional $1.3 million charge will be incurred over the six month period ending June 30, 1997, for similar costs related to the relocation. As of December 31, 1996, the Company had current accrued severance and office closure costs of approximately $2.0 million, of which $890,000 of accrued severance costs and $903,000 of accrued office closure costs, net of expected sublease income, are expected to be paid in cash. All of the $497,000 of long-term accrued office closure costs, net of expected sublease income, are expected to be paid in cash over the next five years. NET INCOME The net income of $10.0 million or $.71 per common share for the six months ended December 31, 1996 compared favorably to the net income of $5.9 million or $.42 per common share for the same period in 1995. The increase over the prior year's performance was related to the $3.6 million extraordinary gain on the extinguishment of debt in connection with the financing transactions described above in Note 3 to the Condensed Consolidated Financial Statements and higher earnings from commercial brokerage activities, offset by $824,000 more in special 15 charges and unusual items, primarily related to the relocation of the Company's corporate headquarters, and $663,000 less in other income. The net income of $8.7 million or $.62 per common share for the quarter ended December 31, 1996 compared favorably to the net income of $5.3 million or a $.42 per common share for the same period in 1995. The increase over the prior year's performance was related to the $3.6 million extraordinary gain on the extinguishment of debt and higher earnings from commercial brokerage activities, offset by higher special charges and unusual items, primarily related to the relocation of the Company's corporate headquarters. LIQUIDITY AND CAPITAL RESOURCES Working capital increased by $6.5 million to $12.8 million during the six months ended December 31, 1996. Cash and cash equivalents increased by $15.0 from June 30, 1996 to December 31, 1996. The increase was primarily attributable to cash provided by operations of $15.7 million net of purchases of equipment and leasehold improvements of $792,000. The Company has historically experienced the highest use of operating cash in the quarter ending 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. Historically, operating cash requirements reduce significantly with higher and more consistent revenue in the subsequent quarters. For discussion regarding certain financing transactions, see Note 3 to Condensed Consolidated Financial Statements, which is hereby incorporated herein by reference. The Company believes that its short-term and long-term cash requirements will be met by operating cash flow. Significant progress has been made over the seven month period ended January 31, 1997 towards improving the Company's financial condition. During the six months ended December 31, 1996, the Company sold 2.5 million shares of its common stock for aggregate proceeds of $10 million, retired all of the outstanding PIK Notes (approximately $13.5 million principal amount), retired 130,233 shares of Junior Convertible Preferred Stock (convertible into approximately 2.3 million shares of common stock) and retired all outstanding shares of Senior Convertible Preferred Stock and all remaining shares of Junior Convertible Preferred Stock which were converted into an aggregate 5,520,624 shares of common stock. In January 1997, the Company raised an additional $11.25 million of equity through the sale of 2.5 million shares of its common stock and retired the $10 million of outstanding 9.9% Senior Notes and $5 million Revolving Credit Note. As of January 27, 1997, the Company had no outstanding long-term debt. The Company is 16 currently in negotiations to secure a bank line of credit for general corporate purposes and acquisitions. To the extent that the Company's cash requirements are not met by operating cash flow, due to adverse economic conditions or other unfavorable events, the Company may find it necessary to reduce expense levels or undertake other actions as may be appropriate. 17 PART II OTHER INFORMATION (Items 1, 3, 4 and 5 are not applicable for the quarter ended December 31, 1996) 18 ITEM 2. CHANGES IN SECURITIES (c) Sales of Unregistered Securities during the three month period ended December 31, 1996: All of the following transactions were consummated in reliance on Section 4(2) of the Securities Act of 1933, as amended, in that they did not involve a public offering or sale of the Company's securities. None of the sales was underwritten. On December 11, 1996, the Company sold 833,334 shares of Common Stock to Mike Kojaian, and 833,333 shares of Common Stock to each of Kenneth J. Kojaian and C. Michael Kojaian, for a purchase price of $4.00 per share, or $10,000,000 in the aggregate. The purchase price was paid in cash. Also on December 11, 1996, the Company issued to Warburg 4,828,548 shares of Common Stock upon Warburg's conversion of 128,266 shares of Series B Senior Convertible Preferred Stock. On the same date, the Company issued to the Joe F. Hanauer Trust, 339,629 shares of Common Stock upon the conversion of 8,894 shares of Series A Senior Convertible Preferred Stock held by the trust. On December 16, 1996, the Company issued to Prudential 352,447 shares of Common Stock upon the conversion of 19,767 shares of Junior Convertible Preferred Stock. SUBSEQUENT EVENT. On January 24, 1997, the Company sold 2,500,000 shares of Common Stock to Archon Group, L.P. for a purchase price of $4.50 per share, or $11,250,000 in the aggregate. The purchase price was paid in cash. ITEM 6(a). EXHIBITS (2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT LIQUIDATION OR SUCCESSION 2.1 Sale and Assignment Agreement between Warburg, Pincus Investors, L.P. and The Prudential Insurance Company of America dated October 21, 1996, incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by the Registrant on November 5, 1996 (Commission File No. 1-8122). 2.2 Option Agreement between Warburg, Pincus Investors, L.P. and the Registrant dated October 21, 1996, incorporated herein by reference to Exhibit 99.2 to the Current Report on Form 8-K filed by the Registrant on November 5, 1996 (Commission File No. 1-8122). (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). 19 3.2 Grubb & Ellis Company Bylaws, as amended and restated effective June 1, 1994, incorporated herein by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q filed on November 13, 1996 (Commission File No. 1-8122). 3.3 Certificate of Retirement with Respect to 130,233 Shares of Junior Convertible Preferred Stock of Grubb & Ellis Company, filed with the Delaware Secretary of State on January 22, 1997. 3.4 Certificate of Retirement with Respect to 8,894 Shares of Series A Senior Convertible Preferred Stock, 128,266 Shares of Series B Senior Convertible Preferred Stock, and 19,767 Shares of Junior Convertible Preferred Stock of Grubb & Ellis Company. (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES 4.1 Third Amendment to Stockholders' Agreement by and among the Registrant, Warburg, Pincus Investors, L.P., Joe F. Hanauer and The Prudential Insurance Company of America, dated October 22, 1996, incorporated herein by reference to Exhibit 99.3 to the Current Report on Form 8-K filed by the Registrant on November 5, 1996 (Commission File No. 1-8122). 4.2 First Amendment to Warrant No. 18, held by Warburg, Pincus Investors, L.P., exercisable for 687,358 shares of common stock of the Registrant extending the expiration date to January 29, 2002, incorporated herein by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q filed on November 13, 1996 (Commission File No. 1-8122). 4.3 First Amendment to Warrant No. 19, held by Warburg, Pincus Investors, L.P., exercisable for 325,000 shares of common stock of the Registrant extending the expiration date to January 29, 2002, incorporated herein by reference to Exhibit 4.3 to the Registrant's Quarterly Report on Form 10-Q filed on November 13, 1996 (Commission File No. 1-8122). 4.4 Tri-Party Agreement dated as of December 11, 1996 by and among the Registrant, Warburg, Pincus Investors, L.P., Joe F. Hanauer, Mike Kojaian, Kenneth J. Kojaian and C. Michael Kojaian, incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on December 20, 1996 (Commission File No. 1-8122). 4.5 Option Agreement dated as of December 11, 1996 by and between the Registrant and Warburg, Pincus Investors, L.P., incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on December 20, 1996 (Commission file No. 1-8122). 4.6 Stock Purchase Agreement dated as of December 11, 1996 by and among the registrant, Mike Kojaian, Kenneth J. Kojaian and C. Michael Kojaian, incorporated herein by reference to Exhibit 20 4.3 to the Registrant's Current Report on Form 8-K filed on December 20, 1996 (Commission File No. 1-8122). 4.7 Registration Rights agreement dated as of December 11, 1996 by and among the Registrant, Warburg, Pincus Investors, L.P., Joe F. Hanauer, Mike Kojaian, Kenneth J. Kojaian and C. Michael Kojaian, incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on December 20, 1996 (Commission File No. 1-8122). 4.8 Purchase Agreement dated as of January 24, 1997 by and among the Registrant, and Warburg, Pincus Investors, L.P., incorporated herein by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on February 4, 1997 (Commission File No. 1-8122). 4.9 Stock Purchase Agreement dated as of January 24, 1997 by and between the Registrant and Archon Group, L.P., incorporated herein by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on February 4, 1997 (Commission File No. 1-8122). 4.10 Registration Rights agreement dated as of January 24, 1997 by and between the Registrant and Archon Group, L.P., incorporated herein by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K filed on February 4, 1997 (Commission File No. 1-8122). 4.11 Stock Subscription Warrant No. 20 dated December 11, 1996 issued to Joe F. Hanauer Trust. 4.12 Stock Subscription Warrant No. 21 dated December 11, 1996 issued to Warburg, Pincus Investors, L.P. 4.13 Stock Subscription Warrant No. 22 dated December 11, 1996 issued to Joe F. Hanauer Trust. 4.14 Stock Subscription Warrant No. 23 dated December 11, 1996 issued to Warburg, Pincus Investors, L.P. 4.15 Form of Amendment No. 1 to Stock Subscription Warrants No. 8, 9, 13 and 15 issued to Joe F. Hanauer Trust. 4.16 Termination of Stockholders Agreement dated as of December 11, 1996 by and among the Registrant, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. (10) MATERIAL CONTRACTS 10.1 Property Management Services Agreement between Axiom Real Estate Management, Inc., a wholly-owned subsidiary of the Registrant, and The Chase Manhattan Bank dated as of January 1, 1997. (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE 21 ITEM 6(b) REPORTS ON FORM 8-K A Current Report on Form 8-K dated October 21, 1996 was filed, reporting under Item 5 the sale of certain notes, common stock warrants and preferred stock (the "Prudential Securities") held in the Company by The Prudential Insurance Company of America to Warburg, Pincus Investors, L.P. ("Warburg"), and the issuance of an option by Warburg to the Company for the sale by Warburg to the Company of the Prudential Securities. A Current Report on Form 8-K dated December 4, 1996 was filed, reporting under Item 5 the relocation of the Company's principal offices from San Francisco, California to Northbrook, Illinois. A Current Report on Form 8-K dated December 11, 1996 was filed, reporting under Item 5 a series of transactions whereby a portion of the Prudential Securities was purchased by the Company, a new option was issued by Warburg to the Company relating to the purchase of the remainder of the Prudential Securities, and the sale of 2,500,000 shares of Common Stock to the principals of the Kojaian Companies, Southfield, Michigan was consummated. SUBSEQUENT EVENT. A Current Report on Form 8-K dated January 24, 1997 was filed, reporting under Item 5 a series of transactions whereby the second option to purchase the remainder of the Prudential Securities was exercised by the Company and the sale of 2,500,000 shares of Common Stock to Archon Group, L.P. was consummated. 22 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: February 13, 1997 /s/ Brian D. Parker ------------------------------- Brian D. Parker Senior Vice President and Chief Financial Officer 23 Grubb & Ellis Company and Subsidiaries EXHIBIT INDEX (A) FOR THE QUARTER ENDED DECEMBER 31, 1996 EXHIBIT (3) ARTICLES OF INCORPORATION AND BYLAWS 3.3 Certificate of Retirement with Respect to 130,233 shares of Junior Convertible Preferred Stock of Grubb & Ellis Company, filed with the Delaware Secretary of State on January 22, 1997. 3.4 Certificate of Retirement with Respect to 8,894 Shares of Series A Senior Convertible Preferred Stock, 128,266 Shares of Series B Senior Convertible Preferred Stock, and 19,767 Shares of Junior Convertible Preferred Stock of Grubb & Ellis Company. (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES 4.11 Stock Subscription Warrant No. 20 dated December 11, 1996 issued to Joe F. Hanauer Trust. 4.12 Stock Subscription Warrant No. 21 dated December 11, 1996 issued to Warburg, Pincus Investors, L.P. 4.13 Stock Subscription Warrant No. 22 dated December 11, 1996 issued to Joe F. Hanauer Trust. 4.14 Stock Subscription Warrant No. 23 dated December 11, 1996 issued to Warburg, Pincus Investors, L.P. 4.15 Form of Amendment No. 1 to Stock Subscription Warrants No. 8, 9, 13 and 15 issued to Joe F. Hanauer Trust. 4.16 Termination of Stockholders' Agreement dated as of December 11, 1996 by and among the Registrant, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. (10) MATERIAL CONTRACTS 10.1 Property Management Services Agreement between Axiom Real Estate Management, Inc., a wholly-owned subsidiary of the Registrant, and The Chase Manhattan Bank dated as of January 1, 1997. (11) STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (27) FINANCIAL DATA SCHEDULE (A) Exhibits incorporated by reference are listed in Item 6(a) of this report. 24 EX-3.3 2 EXHIBIT 3.3 EXHIBIT 3.3 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:01 PM 01/22/1997 971021664 - 904032 CERTIFICATE OF RETIREMENT WITH RESPECT TO 130,233 SHARES OF JUNIOR CONVERTIBLE PREFERRED STOCK OF GRUBB & ELLIS COMPANY Under Section 243 of the Delaware General Corporation Law GRUBB & ELLIS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That by unanimous written consent taken as of December 17, 1996, the Board of the Directors duly adopted resolutions that identified shares of the capital stock of the Corporation which, to the extent hereinafter set forth, had the status of retired and canceled shares. SECOND: That the Restated Certificate of Incorporation of Grubb & Ellis Company (the "Restated Certificate") authorizes the issuance of 1,000,000 shares of Preferred Stock (the "Preferred Stock"), of which Preferred Stock 200,000 shares are designated Junior Convertible Preferred Stock (the "Junior Preferred Stock"). THIRD: That on December 11, 1996, the Corporation purchased 130,233 shares of Junior Convertible Preferred Stock in exchange for cash. Therefore, the 130,233 of Junior Preferred Stock so acquired have, pursuant to the provisions of Section 243 of the General Corporation Law of the State of Delaware (the "GCL"), attained the status of retired shares. FOURTH: That the Restated Certificate prohibits the reissue of the shares of Junior Preferred Stock when so retired and provides that such retired shares shall have the status of authorized and unissued shares of Preferred Stock, undesignated as to series. Therefore, pursuant to Section 243 of the GCL, this Certificate shall, when it becomes effective, have the effect of amending the Restated Certificate so as to reduce the authorized number of shares of the Junior Preferred Stock to 69,767 shares, but not to reduce the total authorized number of shares of the Preferred Stock. -1- IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this certificate to be signed by Robert J. Walner, its authorized officer, this 15 day of January, 1997. GRUBB & ELLIS COMPANY /s/ Robert J. Walner ----------------------------- Robert J. Walner Secretary -2- EX-3.4 3 EXHIBIT 3.4 EXHIBIT 3.4 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:00 PM 01/22/1997 971021659 - 0904032 CERTIFICATE OF RETIREMENT WITH RESPECT TO 8,894 SHARES OF SERIES A SENIOR CONVERTIBLE PREFERRED STOCK, 128,266 SHARES OF SERIES B SENIOR CONVERTIBLE PREFERRED STOCK, AND 19,767 SHARES OF JUNIOR CONVERTIBLE PREFERRED STOCK OF GRUBB & ELLIS COMPANY Under Section 243 of the Delaware General Corporation Law GRUBB & ELLIS COMPANY, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That by unanimous written consent taken as of December 17, 1996, the Board of the Directors duly adopted resolutions that identified shares of the capital stock of the Corporation which, to the extent hereinafter set forth, had the status of retired and canceled shares. SECOND: That the Restated Certificate of Incorporation of Grubb & Ellis Company (the "Restated Certificate") authorizes the issuance of 25,000,000 shares of Common Stock (the "Common Stock") and 1,000,000 shares of Preferred Stock (the "Preferred Stock"), of which Preferred Stock 50,000 shares are designated Series A Senior Convertible Preferred Stock (the "Series A Preferred Stock"), 200,000 shares are designated Series B Senior Convertible Preferred Stock (the "Series B Preferred Stock") and 200,000 shares are designated Junior Convertible Preferred Stock (the "Junior Preferred Stock", and together with the Series A Preferred Stock and Series B Preferred Stock, the "Convertible Preferred Stock"). THIRD: That on December 11, 1996, 8,894 shares of Series A Preferred Stock were converted into an aggregate of 339,629 shares of Common Stock and 128,266 shares of Series B Preferred Stock were converted into an aggregate of 4,828,548 shares of Common Stock; and that on December 16, 1996, 19,767 shares of Junior Preferred Stock were converted into an aggregate of 352,447 shares of Common Stock. FOURTH: That pursuant to the Restated Certificate any shares of Convertible Preferred Stock so converted shall be retired and cancelled and shall not be reissued as shares of Convertible Preferred Stock. Therefore, pursuant to Section 243 of the General Corporation Law of the State of Delaware, this Certificate shall, when it becomes effective, have the effect of amending the Restated Certificate so as to reduce the authorized number of shares of the Series A Preferred Stock to 41,106 shares, to reduce the authorized number of shares of Series B Preferred Stock to 71,734 shares, to reduce the authorized number of shares of Junior Preferred Stock to 50,000 shares, but not to reduce the total authorized number of shares of the Preferred Stock. -1- IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this certificate to be signed by Robert J. Walner, its authorized officer, this 15 day of January, 1997. GRUBB & ELLIS COMPANY /s/ Robert J. Walner --------------------------- Robert J. Walner Secretary -2- EX-4.11 4 EXHIBIT 4.11 EXHIBIT 4.11 Stock Subscription Warrant to Subscribe for 14,286 Shares of Common Stock Stock Subscription Warrant No. 20 THIS STOCK SUBSCRIPTION WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS STOCK SUBSCRIPTION WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS STOCK SUBSCRIPTION WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. STOCK SUBSCRIPTION WARRANT To Subscribe for and Purchase Shares of Common Stock of GRUBB & ELLIS COMPANY THIS CERTIFIES THAT, for value received, JOE F. HANAUER TRUST ("HANAUER") or registered assigns, is entitled to subscribe for and purchase from GRUBB & ELLIS COMPANY (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, at any time or from time to time during the period specified in paragraph 2 hereof, up to FOURTEEN THOUSAND TWO HUNDRED EIGHTY SIX fully paid and nonassessable shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), at an exercise price per share of $3.50 (the "Exercise Price"). The number of shares purchasable hereunder and the Exercise Price are subject to adjustment as provided in paragraph 4 hereof. This Stock Subscription Warrant is being issued pursuant to the Agreement. The term "Warrant," as used herein, shall mean this Stock Subscription Warrant, including all amendments hereto. The term "Warrant Shares," as used herein, refers to the shares purchasable upon the exercise of the Warrants. Certain terms used herein and not elsewhere defined are defined in paragraph 15 hereof. This Warrant is subject to the following provisions, terms and conditions: 1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. The rights represented by this Warrant may be exercised by the holder hereof in whole or in part (but not as to a fractional Warrant Share), by the surrender of this Warrant, together with a completed Exercise Agreement in the form attached hereto, during normal business hours on any business day at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) at any time during the period set forth in paragraph 2 hereof and upon payment to the Company by certified check or bank draft of the Exercise Price for such shares, or, at the election of the holder hereof, by delivery of other Warrants equal in value to the aggregate Exercise Price with respect to such Warrants being exercised, the value of which other Warrants shall be deemed to equal the difference between the Market Price of a share of Common Stock on the date immediately preceding the date of exercise and the then current Exercise Price. The Company agrees that the shares so purchased shall be and are deemed to be issued to the holder hereof or its designee as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in said Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding five business days, after the rights represented by this Warrant shall have been so exercised. Each stock certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of said holder or such other name (upon compliance with the transfer requirements hereinafter set forth) as shall be designated by said holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of said stock certificates, deliver to said holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. The Company shall pay all taxes and other expenses and charges payable in connection with the preparation, execution and delivery of stock certificates (and any new Warrants) pursuant to this paragraph except that, in case such stock certificates shall be registered in a name or names other than the holder of this Warrant or its nominee, funds sufficient to pay all stock transfer taxes which shall be payable in connection with the execution and delivery of such stock certificates shall be paid by the holder hereof to the Company at the time of the delivery of such stock certificates by the Company as mentioned above. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time to time prior to January 29, 2002. 3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and agrees that all Warrant Shares will, upon issuance, be fully paid and nonassessable and free from preemptive rights and all taxes, liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such action as may be required to assure that the par value per Warrant Share is at all times equal to or less than the effective Exercise Price. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company shall take all 2 such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation and will be approved for listing on any domestic securities exchange upon which the Common Stock may be listed. The Company further covenants and agrees that it will, at any time, at its expense, promptly list on each national securities exchange on which any Capital Stock is at the time listed, upon official notice of issuance, Common Stock issuable upon the exercise of any Warrant as provided in paragraph 1 hereof, and maintain such listing of all shares of Common Stock from time to time issuable upon such exercise, and will, at any time, register under the Securities Exchange Act of 1934, as amended, all shares of Common Stock from time to time issuable upon such exercise if and at the time that any existing shares of Capital Stock are so registered. 4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above shall be subject to adjustment from time to time as hereinafter provided. For purposes of this paragraph 4, the term "Capital Stock" as used herein includes the Company's Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Warrant shall include only Common Stock. Upon each adjustment of the Exercise Price, this Warrant shall thereafter represent the right to purchase, at the Exercise Price resulting from such adjustment, the largest number of shares of Common Stock obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable thereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In case the Company, at any time, shall be a party to any Transaction, each holder hereof, upon the exercise hereof at any time on or after the Consummation Date shall be entitled to receive, and this Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon exercise prior to the Consummation Date, the kind and amount of securities or property (including cash) which it would have owned or have been entitled to receive after the happening of such Transaction had this Warrant been exercised immediately prior to such Transaction. Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants, the surrender of Warrants or the satisfaction of exercise rights as provided herein, shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants, including, without limitation, the exercise provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in 3 accordance with the terms hereof and thereof and, together with such other matters as such holders may reasonably request. In case the Company shall (i) pay a dividend in shares of Capital Stock or securities convertible into Capital Stock or make a distribution to all holders of shares of Capital Stock in shares of Capital Stock or securities convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital Stock, (iii) combine its outstanding shares of Capital Stock into a smaller number of shares of Capital Stock or (iv) issue by reclassification of its shares of Capital Stock other securities of the Corporation, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Capital Stock outstanding immediately prior to the occurrence of such event, and of which the denominator shall be the number of shares of Capital Stock outstanding (including any convertible securities issued pursuant to clause (i) or (iv) above on an as converted basis) immediately thereafter. An adjustment made pursuant to the foregoing sentence shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to each holder of Warrants a certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company (an "Officers' Certificate") stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon exercise of the Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by any holder of Warrants stating that such holder contemplates exercise of such Warrants, the Company will obtain and deliver to each holder of Warrants the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors who are satisfactory to the registered holder of this Warrant, which opinion shall confirm the statements in the most recent Officers' Certificate delivered under this paragraph 4(d). (e) OTHER NOTICES. In case at any time: (i) the Company shall declare or pay to the holders of Capital Stock any dividend other than a regular periodic cash dividend or any periodic cash dividend in excess of 115% of the cash dividend for the comparable fiscal period in the immediately preceding fiscal year; (ii) the Company shall declare or pay any dividend upon Capital Stock payable in stock or make any special dividend or other distribution (other than regular cash dividends) to the holders of Capital Stock; 4 (iii) the Company shall offer for subscription pro rata to the holders of Capital Stock any additional shares of stock of any class or other rights; (iv) there shall be any capital reorganization, or reclassification of the Capital Stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity; (v) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (vi) there shall be any other Transaction; then, in any one or more of such cases, the Company shall give to the holder of each Warrant (a) at least 15 days prior to any event referred to in clause (i) or (ii) above, at least 30 days prior to any event referred to in clause (iii), (iv) or (v) above, and within five business days after it has knowledge of any pending Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Capital Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required. 5. CERTAIN AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) CERTAIN ACTIONS PROHIBITED. The Company will not by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of any Warrant in order to protect the exercise rights of the holders of the Warrants. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company 5 may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all Warrants from time to time outstanding, (iii) will not take any action which results in any adjustment of the number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise, and (iv) will not issue any capital stock of any class which has the right to more than one vote per share or any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof shall be limited to a fixed sum or percentage (or floating rate related to market yields) of par value or stated value in aspect of participation in dividends and a fixed sum or percentage of par value or stated value in any such distribution of assets. (b) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. (c) ISSUANCE OF WARRANT SECURITIES. If the issuance of any Warrant Shares required to be reserved for purposes of exercise of this Warrant or for the conversion of such Warrant Shares requires registration with or approval of any Federal governmental authority under any Federal or state law (other than any registration under the Securities Act) or listing on any national securities exchange, before such shares may be issued upon exercise of this Warrant, the Company will, at its expense, use its best efforts to cause such shares to be duly registered or approved, or listed on the relevant national securities exchange, as the case may be, at such time, so that such shares may be issued in accordance with the terms hereof and so converted. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of Warrants shall be made without charge to the holders of such Warrants or such shares for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of the Warrant exercised. 7. CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Warrant, of any Warrant Shares issued or issuable upon the exercise of any Warrant or in any manner which interferes with the timely exercise of this Warrant. 8. AMENDMENTS TO TERMS OF WARRANT SHARES. The Company will not amend the terms of the Warrant Shares. 9. AVAILABILITY OF INFORMATION. The Company will cooperate with each holder of any Warrants or Warrant Shares in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrants or Warrant Shares. The Company will deliver to any person at the time holding any Warrants, promptly upon their becoming available, copies of all 6 financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Securities and Exchange Commission. 10. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11. TRANSFER AND EXCHANGE. (a) (1) The transfer of this Warrant and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company referred to below by the holder hereof in person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. (2) The holder of this Warrant, by acceptance hereof, understands that the Warrant Securities are characterized as "restricted securities" under the federal securities laws inasmuch as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Warrant Securities may be resold without registration under the Securities Act only in certain limited circumstances. The holder of this Warrant, by acceptance hereof, agrees to comply with all applicable laws (including, without limitation, any filing required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976) upon exercise hereof. The holder of this Warrant, by acceptance hereof, represents that such holder is acquiring this Warrant and any Warrant Shares to be issued upon exercise hereof for its own account (including any separate account) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. The holder hereof further represents that such holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant Securities as required by Section (b)(2)(v) of Rule 502 of Regulation D under the Securities Act. 7 Without in any way limiting the foregoing, the holder hereof further agrees not to make any disposition of all or any portion of the Warrant Securities unless and until: (x) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or (y) (i) The holder hereof shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company (it being understood that if the holder of this Warrant is a party to the Agreement, counsel who is such party's employee shall be deemed reasonably satisfactory to the Company), that such disposition will not require registration of such Warrant Securities under the Securities Act. (b) REGISTER. The Company shall maintain, at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice to the holder hereof), a register for the Warrants, in which the Company shall record the name and address of the person in whose name a Warrant has been issued, as well as the name and address of each transferee and each prior owner of such Warrant. Within 10 days after any holder of Warrants shall by notice request the same, the Company will deliver to such holder a certificate, signed by one of its officers, listing the name and address of every other holder of Warrants and/or Warrant Shares, as such information appears in said register and in the stock transfer books of the Company at the close of business on the day before such certificate is signed. (c) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in paragraph 11(b), for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder of Common Stock, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder hereof at the time of such surrender. (d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity bond (or, in the case of any institutional holder, an indemnity agreement) reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. (e) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any exchange, transfer or replacement as provided in this paragraph 11, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than 8 securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this paragraph 11. 12. NOTICES. All notices, requests and other communications required or permitted to be given or delivered to the holders of Warrants shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to each holder at the address shown on the register for the Warrants, or at such other address as shall have been furnished to the Company by notice from such holder. All notices, requests and other communications required or permitted to be given or delivered to the Company shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to the office of the Company, at 10275 West Higgins Road, Suite 300, Rosemont, Illinois 60018, Attention: Chief Financial Officer, with a copy to General Counsel, or at such other address as shall have been furnished to the holders of Warrants by notice from the Company. Any such notice, request or other communication may be sent by telegram or telex, but shall in such case be subsequently confirmed by a writing delivered or sent by certified or registered mail as provided above. All notices shall be deemed to have been given either at the time of the delivery thereof to (or the receipt by, in the case of a telegram or telex) any officer or employee of the person entitled to receive such notice at the address of such person for purposes of this paragraph 12, or, if mailed, at the completion of the third full day following the time of such mailing thereof to such address, as the case may be. 13. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of New York without regard to the principles of conflicts of laws. 14. REMEDIES. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. DEFINITIONS. For the purpose of this Warrant, the following terms shall have the following meanings: "AGREEMENT" shall mean the Tri-Party Agreement dated December 11, 1996 by and among the Company, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. "CAPITAL STOCK" shall have the meaning assigned to such term in paragraph 4. "CONSUMMATION DATE" shall mean the date of the consummation of a Transaction. "MARKET PRICE" shall mean, on any date specified herein, (A) if any class of Capital Stock is listed or admitted to trading on any national securities exchange, the highest price obtained by taking the arithmetic mean over a period of twenty consecutive Trading Days ending the second Trading Day prior to such date of the average, on each such Trading Day, of the high and low sale 9 price of shares of each such class of Capital Stock or if no such sale takes place on such date, the average of the highest closing bid and lowest closing asked prices thereof on such date, in each case as officially reported on all national securities exchanges on which each such class of Capital Stock is then listed or admitted to trading, or (B) if no shares of any class of Capital Stock are then listed or admitted to trading on any national securities exchange, the highest closing price of any class of Capital Stock on such date in the over-the-counter market as shown by NASDAQ or, if no such shares of any class of Capital Stock are then quoted in such system, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by the Company. If no shares of any class of Capital Stock are then listed or admitted to trading on any national securities exchange and if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market, "Market Price" shall mean the higher of (x) the book value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock) as determined on a fully diluted basis in accordance with generally accepted accounting principles by a firm of independent public accountants of recognized standing (which may be its regular auditors) selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock), as determined on a fully diluted basis in good faith by an independent brokerage firm or Standard & Poor's Corporation (as selected by the Board of Directors of the Company), as of a date which is 15 days preceding the date as of which the determination is to be made. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "TRADING DAY" shall mean any day on which the New York Stock Exchange is open for trading on a regular basis. "TRANSACTION" shall mean any transaction to which the Company is a party at any time (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, liquidation or recapitalization of the Capital Stock) in which the previously outstanding Capital Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing or in which the Capital Stock ceases to be a publicly traded security either listed on the New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ or any successor thereto or comparable system. 10 "WARBURG/HANAUER WARRANTS" shall mean (i) this Stock Subscription Warrant No. 20, (ii) the Stock Subscription Warrant No. 21 issued to Warburg, Pincus Investors, L.P. to purchase 185,714 shares of Common Stock, (iii) the Stock Subscription Warrant No. 22 issued to Joe F. Hanauer Trust to purchase 10,714 shares of Common Stock, and (iv) the Stock Subscription Warrant No. 23 issued to Warburg, Pincus Investors, L.P. to purchase 139,286 shares of Common Stock, and including any amendments to the warrants referred to in (i), (ii), (iii) and (iv) of this definition. "WARRANT SECURITIES" shall mean the Warrants and the Warrant Shares. 16. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may be amended or waived only by an instrument in writing signed by the holders of then outstanding Warburg/Hanauer Warrants representing the right to purchase not less than a majority of the total number of shares of Common Stock issuable upon exercise of all then outstanding Warburg/Hanauer Warrants then not transferable without registration under the Securities Act and, if it is to be bound thereby, by the Company. (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 11 IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this Stock Subscription Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and the Warrant to be dated as of December 11, 1996. GRUBB & ELLIS COMPANY By /s/ Robert J. Walner ------------------------------ Name: Robert J. Walner Title: Senior Vice President Attest: By /s/ Carol Vanairsdale -------------------------- 12 FORM OF EXERCISE AGREEMENT Date To: The undersigned, pursuant to the provisions set forth in the within Stock Subscription Warrant, hereby agrees to subscribe for and purchase ________ shares of Common Stock covered by such Stock Subscription Warrant, and makes payment herewith in full therefor at the price per share provided by such Stock Subscription Warrant [in cash] [by delivery of $_____ principal amount of ______ Notes] [by cancellation of $______ of accrued and unpaid interest on ______ Notes]. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Address_______________________ ______________________________ ASSIGNMENT FOR VALUE RECEIVED hereby sells, assigns and transfers all of the rights of the undersigned under the within Stock Subscription Warrant, with respect to the number of Warrant Shares covered thereby set forth hereinbelow to: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: ___________, 19__. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Witness_______________________ EX-4.12 5 EXHIBIT 4.12 EXHIBIT 4.12 Stock Subscription Warrant to Subscribe for 185,714 Shares of Common Stock Stock Subscription Warrant No. 21 THIS STOCK SUBSCRIPTION WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS STOCK SUBSCRIPTION WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS STOCK SUBSCRIPTION WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. STOCK SUBSCRIPTION WARRANT To Subscribe for and Purchase Shares of Common Stock of GRUBB & ELLIS COMPANY THIS CERTIFIES THAT, for value received, WARBURG, PINCUS INVESTORS, L.P. or registered assigns, is entitled to subscribe for and purchase from GRUBB & ELLIS COMPANY (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, at any time or from time to time during the period specified in paragraph 2 hereof, up to ONE HUNDRED EIGHTY FIVE THOUSAND SEVEN HUNDRED FOURTEEN fully paid and nonassessable shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), at an exercise price per share of $3.50 (the "Exercise Price"). The number of shares purchasable hereunder and the Exercise Price are subject to adjustment as provided in paragraph 4 hereof. This Stock Subscription Warrant is being issued pursuant to the Agreement. The term "Warrant," as used herein, shall mean this Stock Subscription Warrant, including all amendments hereto. The term "Warrant Shares," as used herein, refers to the shares purchasable upon the exercise of the Warrants. Certain terms used herein and not elsewhere defined are defined in paragraph 15 hereof. This Warrant is subject to the following provisions, terms and conditions: 1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. The rights represented by this Warrant may be exercised by the holder hereof in whole or in part (but not as to a fractional Warrant Share), by the surrender of this Warrant, together with a completed Exercise Agreement in the form attached hereto, during normal business hours on any business day at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) at any time during the period set forth in paragraph 2 hereof and upon payment to the Company by certified check or bank draft of the Exercise Price for such shares, or, at the election of the holder hereof, by delivery of other Warrants equal in value to the aggregate Exercise Price with respect to such Warrants being exercised, the value of which other Warrants shall be deemed to equal the difference between the Market Price of a share of Common Stock on the date immediately preceding the date of exercise and the then current Exercise Price. The Company agrees that the shares so purchased shall be and are deemed to be issued to the holder hereof or its designee as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in said Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding five business days, after the rights represented by this Warrant shall have been so exercised. Each stock certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of said holder or such other name (upon compliance with the transfer requirements hereinafter set forth) as shall be designated by said holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of said stock certificates, deliver to said holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. The Company shall pay all taxes and other expenses and charges payable in connection with the preparation, execution and delivery of stock certificates (and any new Warrants) pursuant to this paragraph except that, in case such stock certificates shall be registered in a name or names other than the holder of this Warrant or its nominee, funds sufficient to pay all stock transfer taxes which shall be payable in connection with the execution and delivery of such stock certificates shall be paid by the holder hereof to the Company at the time of the delivery of such stock certificates by the Company as mentioned above. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time to time prior to January 29, 2002. 3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and agrees that all Warrant Shares will, upon issuance, be fully paid and nonassessable and free from preemptive rights and all taxes, liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such action as may be required to assure that the par value per Warrant Share is at all times equal to or less than the effective Exercise Price. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company shall take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation and will be approved for listing on any domestic securities exchange upon which the Common Stock may be listed. The Company further 2 covenants and agrees that it will, at any time, at its expense, promptly list on each national securities exchange on which any Capital Stock is at the time listed, upon official notice of issuance, Common Stock issuable upon the exercise of any Warrant as provided in paragraph 1 hereof, and maintain such listing of all shares of Common Stock from time to time issuable upon such exercise, and will, at any time, register under the Securities Exchange Act of 1934, as amended, all shares of Common Stock from time to time issuable upon such exercise if and at the time that any existing shares of Capital Stock are so registered. 4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above shall be subject to adjustment from time to time as hereinafter provided. For purposes of this paragraph 4, the term "Capital Stock" as used herein includes the Company's Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Warrant shall include only Common Stock. Upon each adjustment of the Exercise Price, this Warrant shall thereafter represent the right to purchase, at the Exercise Price resulting from such adjustment, the largest number of shares of Common Stock obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable thereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In case the Company, at any time, shall be a party to any Transaction, each holder hereof, upon the exercise hereof at any time on or after the Consummation Date shall be entitled to receive, and this Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon exercise prior to the Consummation Date, the kind and amount of securities or property (including cash) which it would have owned or have been entitled to receive after the happening of such Transaction had this Warrant been exercised immediately prior to such Transaction. Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants, the surrender of Warrants or the satisfaction of exercise rights as provided herein, shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants, including, without limitation, the exercise provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof and, together with such other matters as such holders may reasonably request. 3 In case the Company shall (i) pay a dividend in shares of Capital Stock or securities convertible into Capital Stock or make a distribution to all holders of shares of Capital Stock in shares of Capital Stock or securities convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital Stock, (iii) combine its outstanding shares of Capital Stock into a smaller number of shares of Capital Stock or (iv) issue by reclassification of its shares of Capital Stock other securities of the Corporation, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Capital Stock outstanding immediately prior to the occurrence of such event, and of which the denominator shall be the number of shares of Capital Stock outstanding (including any convertible securities issued pursuant to clause (i) or (iv) above on an as converted basis) immediately thereafter. An adjustment made pursuant to the foregoing sentence shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to each holder of Warrants a certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company (an "Officers' Certificate") stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon exercise of the Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by any holder of Warrants stating that such holder contemplates exercise of such Warrants, the Company will obtain and deliver to each holder of Warrants the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors who are satisfactory to the registered holder of this Warrant, which opinion shall confirm the statements in the most recent Officers' Certificate delivered under this paragraph 4(d). (e) OTHER NOTICES. In case at any time: (i) the Company shall declare or pay to the holders of Capital Stock any dividend other than a regular periodic cash dividend or any periodic cash dividend in excess of 115% of the cash dividend for the comparable fiscal period in the immediately preceding fiscal year; (ii) the Company shall declare or pay any dividend upon Capital Stock payable in stock or make any special dividend or other distribution (other than regular cash dividends) to the holders of Capital Stock; (iii) the Company shall offer for subscription pro rata to the holders of Capital Stock any additional shares of stock of any class or other rights; 4 (iv) there shall be any capital reorganization, or reclassification of the Capital Stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity; (v) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (vi) there shall be any other Transaction; then, in any one or more of such cases, the Company shall give to the holder of each Warrant (a) at least 15 days prior to any event referred to in clause (i) or (ii) above, at least 30 days prior to any event referred to in clause (iii), (iv) or (v) above, and within five business days after it has knowledge of any pending Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Capital Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required. 5. CERTAIN AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) CERTAIN ACTIONS PROHIBITED. The Company will not by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of any Warrant in order to protect the exercise rights of the holders of the Warrants. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all Warrants from time to time outstanding, (iii) will not take any action which results in any adjustment of the number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then 5 authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise, and (iv) will not issue any capital stock of any class which has the right to more than one vote per share or any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof shall be limited to a fixed sum or percentage (or floating rate related to market yields) of par value or stated value in aspect of participation in dividends and a fixed sum or percentage of par value or stated value in any such distribution of assets. (b) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. (c) ISSUANCE OF WARRANT SECURITIES. If the issuance of any Warrant Shares required to be reserved for purposes of exercise of this Warrant or for the conversion of such Warrant Shares requires registration with or approval of any Federal governmental authority under any Federal or state law (other than any registration under the Securities Act) or listing on any national securities exchange, before such shares may be issued upon exercise of this Warrant, the Company will, at its expense, use its best efforts to cause such shares to be duly registered or approved, or listed on the relevant national securities exchange, as the case may be, at such time, so that such shares may be issued in accordance with the terms hereof and so converted. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of Warrants shall be made without charge to the holders of such Warrants or such shares for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of the Warrant exercised. 7. CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Warrant, of any Warrant Shares issued or issuable upon the exercise of any Warrant or in any manner which interferes with the timely exercise of this Warrant. 8. AMENDMENTS TO TERMS OF WARRANT SHARES. The Company will not amend the terms of the Warrant Shares. 9. AVAILABILITY OF INFORMATION. The Company will cooperate with each holder of any Warrants or Warrant Shares in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrants or Warrant Shares. The Company will deliver to any person at the time holding any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Securities and Exchange Commission. 6 10. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11. TRANSFER AND EXCHANGE. (a) (1) The transfer of this Warrant and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company referred to below by the holder hereof in person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. (2) The holder of this Warrant, by acceptance hereof, understands that the Warrant Securities are characterized as "restricted securities" under the federal securities laws inasmuch as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Warrant Securities may be resold without registration under the Securities Act only in certain limited circumstances. The holder of this Warrant, by acceptance hereof, agrees to comply with all applicable laws (including, without limitation, any filing required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976) upon exercise hereof. The holder of this Warrant, by acceptance hereof, represents that such holder is acquiring this Warrant and any Warrant Shares to be issued upon exercise hereof for its own account (including any separate account) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. The holder hereof further represents that such holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant Securities as required by Section (b)(2)(v) of Rule 502 of Regulation D under the Securities Act. Without in any way limiting the foregoing, the holder hereof further agrees not to make any disposition of all or any portion of the Warrant Securities unless and until: (x) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or 7 (y) (i) The holder hereof shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company (it being understood that if the holder of this Warrant is a party to the Agreement, counsel who is such party's employee shall be deemed reasonably satisfactory to the Company), that such disposition will not require registration of such Warrant Securities under the Securities Act. (b) REGISTER. The Company shall maintain, at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice to the holder hereof), a register for the Warrants, in which the Company shall record the name and address of the person in whose name a Warrant has been issued, as well as the name and address of each transferee and each prior owner of such Warrant. Within 10 days after any holder of Warrants shall by notice request the same, the Company will deliver to such holder a certificate, signed by one of its officers, listing the name and address of every other holder of Warrants and/or Warrant Shares, as such information appears in said register and in the stock transfer books of the Company at the close of business on the day before such certificate is signed. (c) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in paragraph 11(b), for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder of Common Stock, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder hereof at the time of such surrender. (d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity bond (or, in the case of any institutional holder, an indemnity agreement) reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. (e) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any exchange, transfer or replacement as provided in this paragraph 11, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this paragraph 11. 12. NOTICES. All notices, requests and other communications required or permitted to be given or delivered to the holders of Warrants shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to each holder at the address shown on the register for the Warrants, or at such other address as shall have been furnished to the Company by notice from such holder. All notices, requests and other communications 8 required or permitted to be given or delivered to the Company shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to the office of the Company, at 10275 West Higgins Road, Suite 300, Rosemont, Illinois 60018, Attention: Chief Financial Officer, with a copy to General Counsel, or at such other address as shall have been furnished to the holders of Warrants by notice from the Company. Any such notice, request or other communication may be sent by telegram or telex, but shall in such case be subsequently confirmed by a writing delivered or sent by certified or registered mail as provided above. All notices shall be deemed to have been given either at the time of the delivery thereof to (or the receipt by, in the case of a telegram or telex) any officer or employee of the person entitled to receive such notice at the address of such person for purposes of this paragraph 12, or, if mailed, at the completion of the third full day following the time of such mailing thereof to such address, as the case may be. 13. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of New York without regard to the principles of conflicts of laws. 14. REMEDIES. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. DEFINITIONS. For the purpose of this Warrant, the following terms shall have the following meanings: "AGREEMENT" shall mean the Tri-Party Agreement dated December 11, 1996 by and among the Company, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. "CAPITAL STOCK" shall have the meaning assigned to such term in paragraph 4. "CONSUMMATION DATE" shall mean the date of the consummation of a Transaction. "MARKET PRICE" shall mean, on any date specified herein, (A) if any class of Capital Stock is listed or admitted to trading on any national securities exchange, the highest price obtained by taking the arithmetic mean over a period of twenty consecutive Trading Days ending the second Trading Day prior to such date of the average, on each such Trading Day, of the high and low sale price of shares of each such class of Capital Stock or if no such sale takes place on such date, the average of the highest closing bid and lowest closing asked prices thereof on such date, in each case as officially reported on all national securities exchanges on which each such class of Capital Stock is then listed or admitted to trading, or (B) if no shares of any class of Capital Stock are then listed or admitted to trading on any national securities exchange, the highest closing price of any class of Capital Stock on such date in the over-the-counter market as shown by NASDAQ or, if no such shares of any class of Capital Stock are then quoted in such system, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by the Company. If no shares of 9 any class of Capital Stock are then listed or admitted to trading on any national securities exchange and if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market, "Market Price" shall mean the higher of (x) the book value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock) as determined on a fully diluted basis in accordance with generally accepted accounting principles by a firm of independent public accountants of recognized standing (which may be its regular auditors) selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock), as determined on a fully diluted basis in good faith by an independent brokerage firm or Standard & Poor's Corporation (as selected by the Board of Directors of the Company), as of a date which is 15 days preceding the date as of which the determination is to be made. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "TRADING DAY" shall mean any day on which the New York Stock Exchange is open for trading on a regular basis. "TRANSACTION" shall mean any transaction to which the Company is a party at any time (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, liquidation or recapitalization of the Capital Stock) in which the previously outstanding Capital Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing or in which the Capital Stock ceases to be a publicly traded security either listed on the New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ or any successor thereto or comparable system. "WARBURG/HANAUER WARRANTS" shall mean (i) this Stock Subscription Warrant No. 21, (ii) the Stock Subscription Warrant No. 20 issued to Joe F. Hanauer Trust to purchase 14,286 shares of Common Stock, (iii) the Stock Subscription Warrant No. 22 issued to Joe F. Hanauer Trust to purchase 10,714 shares of Common Stock, and (iv) the Stock Subscription Warrant No. 23 issued to Warburg, Pincus Investors, L.P. to purchase 139,286 shares of Common Stock, and including any amendments to the warrants referred to in (i), (ii), (iii) and (iv) of this definition. "WARRANT SECURITIES" shall mean the Warrants and the Warrant Shares. 16. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may be amended or waived only by an instrument in writing signed by the holders of then outstanding Warburg/Hanauer Warrants representing the right to purchase not less than a majority of the total number of shares of Common Stock issuable upon exercise of all then outstanding 10 Warburg/Hanauer Warrants then not transferable without registration under the Securities Act and, if it is to be bound thereby, by the Company. (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 11 IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this Stock Subscription Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and the Warrant to be dated as of December 11, 1996. GRUBB & ELLIS COMPANY By /s/ Robert J. Walner --------------------------------- Name: Robert J. Walner Title: Senior Vice President Attest: By /s/ Carol Vanairsdale ------------------------------ 12 FORM OF EXERCISE AGREEMENT Date To: The undersigned, pursuant to the provisions set forth in the within Stock Subscription Warrant, hereby agrees to subscribe for and purchase ________ shares of Common Stock covered by such Stock Subscription Warrant, and makes payment herewith in full therefor at the price per share provided by such Stock Subscription Warrant [in cash] [by delivery of $_____ principal amount of ______ Notes] [by cancellation of $______ of accrued and unpaid interest on ______ Notes]. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Address_______________________ ______________________________ ASSIGNMENT FOR VALUE RECEIVED hereby sells, assigns and transfers all of the rights of the undersigned under the within Stock Subscription Warrant, with respect to the number of Warrant Shares covered thereby set forth hereinbelow to: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: ___________, 19__. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Witness_______________________ EX-4.13 6 EXHIBIT 4.13 EXHIBIT 4.13 Stock Subscription Warrant to Subscribe for 10,714 Shares of Common Stock Stock Subscription Warrant No. 22 THIS STOCK SUBSCRIPTION WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS STOCK SUBSCRIPTION WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS STOCK SUBSCRIPTION WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. STOCK SUBSCRIPTION WARRANT To Subscribe for and Purchase Shares of Common Stock of GRUBB & ELLIS COMPANY THIS CERTIFIES THAT, for value received, JOE F. HANAUER TRUST or registered assigns, is entitled to subscribe for and purchase from GRUBB & ELLIS COMPANY (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, at any time or from time to time during the period specified in paragraph 2 hereof, up to TEN THOUSAND SEVEN HUNDRED FOURTEEN fully paid and nonassessable shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), at an exercise price per share of $2.375 (the "Exercise Price"). The number of shares purchasable hereunder and the Exercise Price are subject to adjustment as provided in paragraph 4 hereof. This Stock Subscription Warrant is being issued pursuant to the Agreement. The term "Warrant," as used herein, shall mean this Stock Subscription Warrant, including all amendments hereto. The term "Warrant Shares," as used herein, refers to the shares purchasable upon the exercise of the Warrants. Certain terms used herein and not elsewhere defined are defined in paragraph 15 hereof. This Warrant is subject to the following provisions, terms and conditions: 1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. The rights represented by this Warrant may be exercised by the holder hereof in whole or in part (but not as to a fractional Warrant Share), by the surrender of this Warrant, together with a completed Exercise Agreement in the form attached hereto, during normal business hours on any business day at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) at any time during the period set forth in paragraph 2 hereof and upon payment to the Company by certified check or bank draft of the Exercise Price for such shares, or, at the election of the holder hereof, by delivery of other Warrants equal in value to the aggregate Exercise Price with respect to such Warrants being exercised, the value of which other Warrants shall be deemed to equal the difference between the Market Price of a share of Common Stock on the date immediately preceding the date of exercise and the then current Exercise Price. The Company agrees that the shares so purchased shall be and are deemed to be issued to the holder hereof or its designee as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in said Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding five business days, after the rights represented by this Warrant shall have been so exercised. Each stock certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of said holder or such other name (upon compliance with the transfer requirements hereinafter set forth) as shall be designated by said holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of said stock certificates, deliver to said holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. The Company shall pay all taxes and other expenses and charges payable in connection with the preparation, execution and delivery of stock certificates (and any new Warrants) pursuant to this paragraph except that, in case such stock certificates shall be registered in a name or names other than the holder of this Warrant or its nominee, funds sufficient to pay all stock transfer taxes which shall be payable in connection with the execution and delivery of such stock certificates shall be paid by the holder hereof to the Company at the time of the delivery of such stock certificates by the Company as mentioned above. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time to time prior to January 29, 2002. 3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and agrees that all Warrant Shares will, upon issuance, be fully paid and nonassessable and free from preemptive rights and all taxes, liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such action as may be required to assure that the par value per Warrant Share is at all times equal to or less than the effective Exercise Price. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company shall take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation and will be approved for listing on any 2 domestic securities exchange upon which the Common Stock may be listed. The Company further covenants and agrees that it will, at any time, at its expense, promptly list on each national securities exchange on which any Capital Stock is at the time listed, upon official notice of issuance, Common Stock issuable upon the exercise of any Warrant as provided in paragraph 1 hereof, and maintain such listing of all shares of Common Stock from time to time issuable upon such exercise, and will, at any time, register under the Securities Exchange Act of 1934, as amended, all shares of Common Stock from time to time issuable upon such exercise if and at the time that any existing shares of Capital Stock are so registered. 4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above shall be subject to adjustment from time to time as hereinafter provided. For purposes of this paragraph 4, the term "Capital Stock" as used herein includes the Company's Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Warrant shall include only Common Stock. Upon each adjustment of the Exercise Price, this Warrant shall thereafter represent the right to purchase, at the Exercise Price resulting from such adjustment, the largest number of shares of Common Stock obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable thereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In case the Company, at any time, shall be a party to any Transaction, each holder hereof, upon the exercise hereof at any time on or after the Consummation Date shall be entitled to receive, and this Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon exercise prior to the Consummation Date, the kind and amount of securities or property (including cash) which it would have owned or have been entitled to receive after the happening of such Transaction had this Warrant been exercised immediately prior to such Transaction. Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants, the surrender of Warrants or the satisfaction of exercise rights as provided herein, shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants, including, without limitation, the exercise provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof and, together with such other matters as such holders may reasonably request. 3 In case the Company shall (i) pay a dividend in shares of Capital Stock or securities convertible into Capital Stock or make a distribution to all holders of shares of Capital Stock in shares of Capital Stock or securities convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital Stock, (iii) combine its outstanding shares of Capital Stock into a smaller number of shares of Capital Stock or (iv) issue by reclassification of its shares of Capital Stock other securities of the Corporation, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Capital Stock outstanding immediately prior to the occurrence of such event, and of which the denominator shall be the number of shares of Capital Stock outstanding (including any convertible securities issued pursuant to clause (i) or (iv) above on an as converted basis) immediately thereafter. An adjustment made pursuant to the foregoing sentence shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to each holder of Warrants a certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company (an "Officers' Certificate") stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon exercise of the Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by any holder of Warrants stating that such holder contemplates exercise of such Warrants, the Company will obtain and deliver to each holder of Warrants the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors who are satisfactory to the registered holder of this Warrant, which opinion shall confirm the statements in the most recent Officers' Certificate delivered under this paragraph 4(d). (e) OTHER NOTICES. In case at any time: (i) the Company shall declare or pay to the holders of Capital Stock any dividend other than a regular periodic cash dividend or any periodic cash dividend in excess of 115% of the cash dividend for the comparable fiscal period in the immediately preceding fiscal year; (ii) the Company shall declare or pay any dividend upon Capital Stock payable in stock or make any special dividend or other distribution (other than regular cash dividends) to the holders of Capital Stock; (iii) the Company shall offer for subscription pro rata to the holders of Capital Stock any additional shares of stock of any class or other rights; 4 (iv) there shall be any capital reorganization, or reclassification of the Capital Stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity; (v) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (vi) there shall be any other Transaction; then, in any one or more of such cases, the Company shall give to the holder of each Warrant (a) at least 15 days prior to any event referred to in clause (i) or (ii) above, at least 30 days prior to any event referred to in clause (iii), (iv) or (v) above, and within five business days after it has knowledge of any pending Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Capital Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required. 5. CERTAIN AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) CERTAIN ACTIONS PROHIBITED. The Company will not by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of any Warrant in order to protect the exercise rights of the holders of the Warrants. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all Warrants from time to time outstanding, (iii) will not take any action which results in any adjustment of the number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then 5 authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise, and (iv) will not issue any capital stock of any class which has the right to more than one vote per share or any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof shall be limited to a fixed sum or percentage (or floating rate related to market yields) of par value or stated value in aspect of participation in dividends and a fixed sum or percentage of par value or stated value in any such distribution of assets. (b) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. (c) ISSUANCE OF WARRANT SECURITIES. If the issuance of any Warrant Shares required to be reserved for purposes of exercise of this Warrant or for the conversion of such Warrant Shares requires registration with or approval of any Federal governmental authority under any Federal or state law (other than any registration under the Securities Act) or listing on any national securities exchange, before such shares may be issued upon exercise of this Warrant, the Company will, at its expense, use its best efforts to cause such shares to be duly registered or approved, or listed on the relevant national securities exchange, as the case may be, at such time, so that such shares may be issued in accordance with the terms hereof and so converted. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of Warrants shall be made without charge to the holders of such Warrants or such shares for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of the Warrant exercised. 7. CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Warrant, of any Warrant Shares issued or issuable upon the exercise of any Warrant or in any manner which interferes with the timely exercise of this Warrant. 8. AMENDMENTS TO TERMS OF WARRANT SHARES. The Company will not amend the terms of the Warrant Shares. 9. AVAILABILITY OF INFORMATION. The Company will cooperate with each holder of any Warrants or Warrant Shares in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrants or Warrant Shares. The Company will deliver to any person at the time holding any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Securities and Exchange Commission. 6 10. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11. TRANSFER AND EXCHANGE. (a) (1) The transfer of this Warrant and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company referred to below by the holder hereof in person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. (2) The holder of this Warrant, by acceptance hereof, understands that the Warrant Securities are characterized as "restricted securities" under the federal securities laws inasmuch as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Warrant Securities may be resold without registration under the Securities Act only in certain limited circumstances. The holder of this Warrant, by acceptance hereof, agrees to comply with all applicable laws (including, without limitation, any filing required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976) upon exercise hereof. The holder of this Warrant, by acceptance hereof, represents that such holder is acquiring this Warrant and any Warrant Shares to be issued upon exercise hereof for its own account (including any separate account) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. The holder hereof further represents that such holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant Securities as required by Section (b)(2)(v) of Rule 502 of Regulation D under the Securities Act. Without in any way limiting the foregoing, the holder hereof further agrees not to make any disposition of all or any portion of the Warrant Securities unless and until: (x) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or 7 (y) (i) The holder hereof shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company (it being understood that if the holder of this Warrant is a party to the Agreement, counsel who is such party's employee shall be deemed reasonably satisfactory to the Company), that such disposition will not require registration of such Warrant Securities under the Securities Act. (b) REGISTER. The Company shall maintain, at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice to the holder hereof), a register for the Warrants, in which the Company shall record the name and address of the person in whose name a Warrant has been issued, as well as the name and address of each transferee and each prior owner of such Warrant. Within 10 days after any holder of Warrants shall by notice request the same, the Company will deliver to such holder a certificate, signed by one of its officers, listing the name and address of every other holder of Warrants and/or Warrant Shares, as such information appears in said register and in the stock transfer books of the Company at the close of business on the day before such certificate is signed. (c) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in paragraph 11(b), for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder of Common Stock, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder hereof at the time of such surrender. (d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity bond (or, in the case of any institutional holder, an indemnity agreement) reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. (e) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any exchange, transfer or replacement as provided in this paragraph 11, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this paragraph 11. 12. NOTICES. All notices, requests and other communications required or permitted to be given or delivered to the holders of Warrants shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to each holder at the address shown on the register for the Warrants, or at such other address as shall have been furnished to the Company by notice from such holder. All notices, requests and other communications 8 required or permitted to be given or delivered to the Company shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to the office of the Company, at 10275 West Higgins Road, Suite 300, Rosemont, Illinois 60018, Attention: Chief Financial Officer, with a copy to General Counsel, or at such other address as shall have been furnished to the holders of Warrants by notice from the Company. Any such notice, request or other communication may be sent by telegram or telex, but shall in such case be subsequently confirmed by a writing delivered or sent by certified or registered mail as provided above. All notices shall be deemed to have been given either at the time of the delivery thereof to (or the receipt by, in the case of a telegram or telex) any officer or employee of the person entitled to receive such notice at the address of such person for purposes of this paragraph 12, or, if mailed, at the completion of the third full day following the time of such mailing thereof to such address, as the case may be. 13. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of New York without regard to the principles of conflicts of laws. 14. REMEDIES. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. DEFINITIONS. For the purpose of this Warrant, the following terms shall have the following meanings: "AGREEMENT" shall mean the Tri-Party Agreement dated December 11, 1996 by and among the Company, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. "CAPITAL STOCK" shall have the meaning assigned to such term in paragraph 4. "CONSUMMATION DATE" shall mean the date of the consummation of a Transaction. "MARKET PRICE" shall mean, on any date specified herein, (A) if any class of Capital Stock is listed or admitted to trading on any national securities exchange, the highest price obtained by taking the arithmetic mean over a period of twenty consecutive Trading Days ending the second Trading Day prior to such date of the average, on each such Trading Day, of the high and low sale price of shares of each such class of Capital Stock or if no such sale takes place on such date, the average of the highest closing bid and lowest closing asked prices thereof on such date, in each case as officially reported on all national securities exchanges on which each such class of Capital Stock is then listed or admitted to trading, or (B) if no shares of any class of Capital Stock are then listed or admitted to trading on any national securities exchange, the highest closing price of any class of Capital Stock on such date in the over-the-counter market as shown by NASDAQ or, if no such shares of any class of Capital Stock are then quoted in such system, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by the Company. If no shares of 9 any class of Capital Stock are then listed or admitted to trading on any national securities exchange and if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market, "Market Price" shall mean the higher of (x) the book value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock) as determined on a fully diluted basis in accordance with generally accepted accounting principles by a firm of independent public accountants of recognized standing (which may be its regular auditors) selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock), as determined on a fully diluted basis in good faith by an independent brokerage firm or Standard & Poor's Corporation (as selected by the Board of Directors of the Company), as of a date which is 15 days preceding the date as of which the determination is to be made. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "TRADING DAY" shall mean any day on which the New York Stock Exchange is open for trading on a regular basis. "TRANSACTION" shall mean any transaction to which the Company is a party at any time (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, liquidation or recapitalization of the Capital Stock) in which the previously outstanding Capital Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing or in which the Capital Stock ceases to be a publicly traded security either listed on the New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ or any successor thereto or comparable system. "WARBURG/HANAUER WARRANTS" shall mean (i) this Stock Subscription Warrant No. 22, (ii) the Stock Subscription Warrant No. 20 issued to Joe F. Hanauer Trust to purchase 14,286 shares of Common Stock, (iii) the Stock Subscription Warrant No. 21 issued to Warburg, Pincus Investors, L.P. to purchase 185,714 shares of Common Stock, and (iv) the Stock Subscription Warrant No. 23 issued to Warburg, Pincus Investors, L.P. to purchase 139,286 shares of Common Stock, and including any amendments to the warrants referred to in (i), (ii), (iii) and (iv) of this definition. "WARRANT SECURITIES" shall mean the Warrants and the Warrant Shares. 16. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may be amended or waived only by an instrument in writing signed by the holders of then outstanding Warburg/Hanauer Warrants representing the right to purchase not less than a majority of the total number of shares of Common Stock issuable upon exercise of all then outstanding 10 Warburg/Hanauer Warrants then not transferable without registration under the Securities Act and, if it is to be bound thereby, by the Company. (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 11 IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this Stock Subscription Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and the Warrant to be dated as of December 11, 1996. GRUBB & ELLIS COMPANY By /s/ Robert J. Walner -------------------------- Name: Robert J. Walner Title: Senior Vice President Attest: By /s/ Carol Vanairsdale --------------------------- 12 FORM OF EXERCISE AGREEMENT Date To: The undersigned, pursuant to the provisions set forth in the within Stock Subscription Warrant, hereby agrees to subscribe for and purchase ________ shares of Common Stock covered by such Stock Subscription Warrant, and makes payment herewith in full therefor at the price per share provided by such Stock Subscription Warrant [in cash] [by delivery of $_____ principal amount of ______ Notes] [by cancellation of $______ of accrued and unpaid interest on ______ Notes]. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Address_______________________ ______________________________ ASSIGNMENT FOR VALUE RECEIVED hereby sells, assigns and transfers all of the rights of the undersigned under the within Stock Subscription Warrant, with respect to the number of Warrant Shares covered thereby set forth hereinbelow to: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: ___________, 19__. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Witness_______________________ EX-4.14 7 EXHIBIT 4.14 EXHIBIT 4.14 Stock Subscription Warrant to Subscribe for 139,286 Shares of Common Stock Stock Subscription Warrant No. 23 THIS STOCK SUBSCRIPTION WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS STOCK SUBSCRIPTION WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS STOCK SUBSCRIPTION WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. STOCK SUBSCRIPTION WARRANT To Subscribe for and Purchase Shares of Common Stock of GRUBB & ELLIS COMPANY THIS CERTIFIES THAT, for value received, WARBURG, PINCUS INVESTORS, L.P. or registered assigns, is entitled to subscribe for and purchase from GRUBB & ELLIS COMPANY (herein called the "Company"), a corporation organized and existing under the laws of the State of Delaware, at any time or from time to time during the period specified in paragraph 2 hereof, up to ONE HUNDRED THIRTY NINE THOUSAND TWO HUNDRED EIGHTY SIX fully paid and nonassessable shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), at an exercise price per share of $2.375 (the "Exercise Price"). The number of shares purchasable hereunder and the Exercise Price are subject to adjustment as provided in paragraph 4 hereof. This Stock Subscription Warrant is being issued pursuant to the Agreement. The term "Warrant," as used herein, shall mean this Stock Subscription Warrant, including all amendments hereto. The term "Warrant Shares," as used herein, refers to the shares purchasable upon the exercise of the Warrants. Certain terms used herein and not elsewhere defined are defined in paragraph 15 hereof. This Warrant is subject to the following provisions, terms and conditions: 1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. The rights represented by this Warrant may be exercised by the holder hereof in whole or in part (but not as to a fractional Warrant Share), by the surrender of this Warrant, together with a completed Exercise Agreement in the form attached hereto, during normal business hours on any business day at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) at any time during the period set forth in paragraph 2 hereof and upon payment to the Company by certified check or bank draft of the Exercise Price for such shares, or, at the election of the holder hereof, by delivery of other Warrants equal in value to the aggregate Exercise Price with respect to such Warrants being exercised, the value of which other Warrants shall be deemed to equal the difference between the Market Price of a share of Common Stock on the date immediately preceding the date of exercise and the then current Exercise Price. The Company agrees that the shares so purchased shall be and are deemed to be issued to the holder hereof or its designee as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in said Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding five business days, after the rights represented by this Warrant shall have been so exercised. Each stock certificate so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of said holder or such other name (upon compliance with the transfer requirements hereinafter set forth) as shall be designated by said holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of said stock certificates, deliver to said holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. The Company shall pay all taxes and other expenses and charges payable in connection with the preparation, execution and delivery of stock certificates (and any new Warrants) pursuant to this paragraph except that, in case such stock certificates shall be registered in a name or names other than the holder of this Warrant or its nominee, funds sufficient to pay all stock transfer taxes which shall be payable in connection with the execution and delivery of such stock certificates shall be paid by the holder hereof to the Company at the time of the delivery of such stock certificates by the Company as mentioned above. 2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time to time prior to January 29, 2002. 3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants and agrees that all Warrant Shares will, upon issuance, be fully paid and nonassessable and free from preemptive rights and all taxes, liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Company covenants and agrees that it will from time to time take all such action as may be required to assure that the par value per Warrant Share is at all times equal to or less than the effective Exercise Price. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of issue upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company shall take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation of any applicable law or regulation and will be approved for listing on any domestic securities exchange upon which the Common Stock may be listed. The Company further 2 covenants and agrees that it will, at any time, at its expense, promptly list on each national securities exchange on which any Capital Stock is at the time listed, upon official notice of issuance, Common Stock issuable upon the exercise of any Warrant as provided in paragraph 1 hereof, and maintain such listing of all shares of Common Stock from time to time issuable upon such exercise, and will, at any time, register under the Securities Exchange Act of 1934, as amended, all shares of Common Stock from time to time issuable upon such exercise if and at the time that any existing shares of Capital Stock are so registered. 4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above shall be subject to adjustment from time to time as hereinafter provided. For purposes of this paragraph 4, the term "Capital Stock" as used herein includes the Company's Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Warrant shall include only Common Stock. Upon each adjustment of the Exercise Price, this Warrant shall thereafter represent the right to purchase, at the Exercise Price resulting from such adjustment, the largest number of shares of Common Stock obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable thereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In case the Company, at any time, shall be a party to any Transaction, each holder hereof, upon the exercise hereof at any time on or after the Consummation Date shall be entitled to receive, and this Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon exercise prior to the Consummation Date, the kind and amount of securities or property (including cash) which it would have owned or have been entitled to receive after the happening of such Transaction had this Warrant been exercised immediately prior to such Transaction. Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Warrants, the surrender of Warrants or the satisfaction of exercise rights as provided herein, shall assume, by written instrument delivered to each holder of Warrants, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Warrants, which opinion shall state that all the outstanding Warrants, including, without limitation, the exercise provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof and, together with such other matters as such holders may reasonably request. 3 In case the Company shall (i) pay a dividend in shares of Capital Stock or securities convertible into Capital Stock or make a distribution to all holders of shares of Capital Stock in shares of Capital Stock or securities convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital Stock, (iii) combine its outstanding shares of Capital Stock into a smaller number of shares of Capital Stock or (iv) issue by reclassification of its shares of Capital Stock other securities of the Corporation, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Capital Stock outstanding immediately prior to the occurrence of such event, and of which the denominator shall be the number of shares of Capital Stock outstanding (including any convertible securities issued pursuant to clause (i) or (iv) above on an as converted basis) immediately thereafter. An adjustment made pursuant to the foregoing sentence shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to each holder of Warrants a certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company (an "Officers' Certificate") stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon exercise of the Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by any holder of Warrants stating that such holder contemplates exercise of such Warrants, the Company will obtain and deliver to each holder of Warrants the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors who are satisfactory to the registered holder of this Warrant, which opinion shall confirm the statements in the most recent Officers' Certificate delivered under this paragraph 4(d). (e) OTHER NOTICES. In case at any time: (i) the Company shall declare or pay to the holders of Capital Stock any dividend other than a regular periodic cash dividend or any periodic cash dividend in excess of 115% of the cash dividend for the comparable fiscal period in the immediately preceding fiscal year; (ii) the Company shall declare or pay any dividend upon Capital Stock payable in stock or make any special dividend or other distribution (other than regular cash dividends) to the holders of Capital Stock; (iii) the Company shall offer for subscription pro rata to the holders of Capital Stock any additional shares of stock of any class or other rights; 4 (iv) there shall be any capital reorganization, or reclassification of the Capital Stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity; (v) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (vi) there shall be any other Transaction; then, in any one or more of such cases, the Company shall give to the holder of each Warrant (a) at least 15 days prior to any event referred to in clause (i) or (ii) above, at least 30 days prior to any event referred to in clause (iii), (iv) or (v) above, and within five business days after it has knowledge of any pending Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Capital Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required. 5. CERTAIN AGREEMENTS OF THE COMPANY. The Company covenants and agrees that: (a) CERTAIN ACTIONS PROHIBITED. The Company will not by amendment of its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of any Warrant in order to protect the exercise rights of the holders of the Warrants. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Exercise Price then in effect, (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of all Warrants from time to time outstanding, (iii) will not take any action which results in any adjustment of the number of shares of Common Stock issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then 5 authorized by the Company's certificate of incorporation and available for the purpose of issue upon such exercise, and (iv) will not issue any capital stock of any class which has the right to more than one vote per share or any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof shall be limited to a fixed sum or percentage (or floating rate related to market yields) of par value or stated value in aspect of participation in dividends and a fixed sum or percentage of par value or stated value in any such distribution of assets. (b) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. (c) ISSUANCE OF WARRANT SECURITIES. If the issuance of any Warrant Shares required to be reserved for purposes of exercise of this Warrant or for the conversion of such Warrant Shares requires registration with or approval of any Federal governmental authority under any Federal or state law (other than any registration under the Securities Act) or listing on any national securities exchange, before such shares may be issued upon exercise of this Warrant, the Company will, at its expense, use its best efforts to cause such shares to be duly registered or approved, or listed on the relevant national securities exchange, as the case may be, at such time, so that such shares may be issued in accordance with the terms hereof and so converted. 6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the exercise of Warrants shall be made without charge to the holders of such Warrants or such shares for any issuance tax in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the holder of the Warrant exercised. 7. CLOSING OF BOOKS. The Company will at no time close its transfer books against the transfer of any Warrant, of any Warrant Shares issued or issuable upon the exercise of any Warrant or in any manner which interferes with the timely exercise of this Warrant. 8. AMENDMENTS TO TERMS OF WARRANT SHARES. The Company will not amend the terms of the Warrant Shares. 9. AVAILABILITY OF INFORMATION. The Company will cooperate with each holder of any Warrants or Warrant Shares in supplying such information as may be necessary for such holder to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrants or Warrant Shares. The Company will deliver to any person at the time holding any Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its stockholders, and copies of all regular and periodic reports and all registration statements and prospectuses filed by the Company with any securities exchange or with the Securities and Exchange Commission. 6 10. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a stockholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 11. TRANSFER AND EXCHANGE. (a) (1) The transfer of this Warrant and all rights hereunder, in whole or in part, is registrable at the office or agency of the Company referred to below by the holder hereof in person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Warrant shall have been so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner and holder hereof for any purpose and as the person entitled to exercise the rights represented by this Warrant, or to the registration of transfer hereof on the books of the Company; and until due presentment for registration of transfer on such books the Company may treat the registered holder hereof as the owner and holder for all purposes, and the Company shall not be affected by notice to the contrary. (2) The holder of this Warrant, by acceptance hereof, understands that the Warrant Securities are characterized as "restricted securities" under the federal securities laws inasmuch as they are being or will be acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Warrant Securities may be resold without registration under the Securities Act only in certain limited circumstances. The holder of this Warrant, by acceptance hereof, agrees to comply with all applicable laws (including, without limitation, any filing required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976) upon exercise hereof. The holder of this Warrant, by acceptance hereof, represents that such holder is acquiring this Warrant and any Warrant Shares to be issued upon exercise hereof for its own account (including any separate account) for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. The holder hereof further represents that such holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant Securities as required by Section (b)(2)(v) of Rule 502 of Regulation D under the Securities Act. Without in any way limiting the foregoing, the holder hereof further agrees not to make any disposition of all or any portion of the Warrant Securities unless and until: (x) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such Registration Statement; or 7 (y) (i) The holder hereof shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company (it being understood that if the holder of this Warrant is a party to the Agreement, counsel who is such party's employee shall be deemed reasonably satisfactory to the Company), that such disposition will not require registration of such Warrant Securities under the Securities Act. (b) REGISTER. The Company shall maintain, at the principal office of the Company (or such other office or agency of the Company in New York, New York or San Francisco, California as it may designate by notice to the holder hereof), a register for the Warrants, in which the Company shall record the name and address of the person in whose name a Warrant has been issued, as well as the name and address of each transferee and each prior owner of such Warrant. Within 10 days after any holder of Warrants shall by notice request the same, the Company will deliver to such holder a certificate, signed by one of its officers, listing the name and address of every other holder of Warrants and/or Warrant Shares, as such information appears in said register and in the stock transfer books of the Company at the close of business on the day before such certificate is signed. (c) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in paragraph 11(b), for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder of Common Stock, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by said holder hereof at the time of such surrender. (d) REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of an indemnity bond (or, in the case of any institutional holder, an indemnity agreement) reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. (e) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this Warrant in connection with any exchange, transfer or replacement as provided in this paragraph 11, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution and delivery of Warrants pursuant to this paragraph 11. 12. NOTICES. All notices, requests and other communications required or permitted to be given or delivered to the holders of Warrants shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to each holder at the address shown on the register for the Warrants, or at such other address as shall have been furnished to the Company by notice from such holder. All notices, requests and other communications 8 required or permitted to be given or delivered to the Company shall be in writing, and shall be delivered, or shall be sent by certified or registered mail, postage prepaid and addressed, to the office of the Company, at 10275 West Higgins Road, Suite 300, Rosemont, Illinois 60018, Attention: Chief Financial Officer, with a copy to General Counsel, or at such other address as shall have been furnished to the holders of Warrants by notice from the Company. Any such notice, request or other communication may be sent by telegram or telex, but shall in such case be subsequently confirmed by a writing delivered or sent by certified or registered mail as provided above. All notices shall be deemed to have been given either at the time of the delivery thereof to (or the receipt by, in the case of a telegram or telex) any officer or employee of the person entitled to receive such notice at the address of such person for purposes of this paragraph 12, or, if mailed, at the completion of the third full day following the time of such mailing thereof to such address, as the case may be. 13. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of New York without regard to the principles of conflicts of laws. 14. REMEDIES. The Company stipulates that the remedies at law of the holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. 15. DEFINITIONS. For the purpose of this Warrant, the following terms shall have the following meanings: "AGREEMENT" shall mean the Tri-Party Agreement dated December 11, 1996 by and among the Company, Warburg, Pincus Investors, L.P. and Joe F. Hanauer. "CAPITAL STOCK" shall have the meaning assigned to such term in paragraph 4. "CONSUMMATION DATE" shall mean the date of the consummation of a Transaction. "MARKET PRICE" shall mean, on any date specified herein, (A) if any class of Capital Stock is listed or admitted to trading on any national securities exchange, the highest price obtained by taking the arithmetic mean over a period of twenty consecutive Trading Days ending the second Trading Day prior to such date of the average, on each such Trading Day, of the high and low sale price of shares of each such class of Capital Stock or if no such sale takes place on such date, the average of the highest closing bid and lowest closing asked prices thereof on such date, in each case as officially reported on all national securities exchanges on which each such class of Capital Stock is then listed or admitted to trading, or (B) if no shares of any class of Capital Stock are then listed or admitted to trading on any national securities exchange, the highest closing price of any class of Capital Stock on such date in the over-the-counter market as shown by NASDAQ or, if no such shares of any class of Capital Stock are then quoted in such system, as published by the National Quotation Bureau, Incorporated or any similar successor organization, and in either case as reported by any member firm of the New York Stock Exchange selected by the Company. If no shares of 9 any class of Capital Stock are then listed or admitted to trading on any national securities exchange and if no closing bid and asked prices thereof are then so quoted or published in the over-the-counter market, "Market Price" shall mean the higher of (x) the book value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock) as determined on a fully diluted basis in accordance with generally accepted accounting principles by a firm of independent public accountants of recognized standing (which may be its regular auditors) selected by the Board of Directors of the Company as of the last day of any month ending within 60 days preceding the date as of which the determination is to be made or (y) the fair value per share of Capital Stock (assuming for the purposes of this calculation the economic equivalence of all shares of all classes of Capital Stock), as determined on a fully diluted basis in good faith by an independent brokerage firm or Standard & Poor's Corporation (as selected by the Board of Directors of the Company), as of a date which is 15 days preceding the date as of which the determination is to be made. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "TRADING DAY" shall mean any day on which the New York Stock Exchange is open for trading on a regular basis. "TRANSACTION" shall mean any transaction to which the Company is a party at any time (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, liquidation or recapitalization of the Capital Stock) in which the previously outstanding Capital Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing or in which the Capital Stock ceases to be a publicly traded security either listed on the New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ or any successor thereto or comparable system. "WARBURG/HANAUER WARRANTS" shall mean (i) this Stock Subscription Warrant No. 23, (ii) the Stock Subscription Warrant No. 20 issued to Joe F. Hanauer Trust to purchase 14,286 shares of Common Stock, (iii) the Stock Subscription Warrant No. 21 issued to Warburg, Pincus Investors, L.P. to purchase 185,714 shares of Common Stock, and (iv) the Stock Subscription Warrant No. 22 issued to Joe F. Hanauer Trust to purchase 10,714 shares of Common Stock, and including any amendments to the warrants referred to in (i), (ii), (iii) and (iv) of this definition. "WARRANT SECURITIES" shall mean the Warrants and the Warrant Shares. 16. MISCELLANEOUS. (a) AMENDMENTS. This Warrant and any provision hereof may be amended or waived only by an instrument in writing signed by the holders of then outstanding Warburg/Hanauer Warrants representing the right to purchase not less than a majority of the total number of shares of Common Stock issuable upon exercise of all then outstanding 10 Warburg/Hanauer Warrants then not transferable without registration under the Securities Act and, if it is to be bound thereby, by the Company. (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. 11 IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this Stock Subscription Warrant to be signed by its duly authorized officer under its corporate seal, attested by its duly authorized officer, and the Warrant to be dated as of December 11, 1996. GRUBB & ELLIS COMPANY By /s/ Robert J. Walner ---------------------------- Name: Robert J. Walner Title: Senior Vice President Attest: By /s/ Carol Vanairsdale ------------------------- 12 FORM OF EXERCISE AGREEMENT Date To: The undersigned, pursuant to the provisions set forth in the within Stock Subscription Warrant, hereby agrees to subscribe for and purchase ________ shares of Common Stock covered by such Stock Subscription Warrant, and makes payment herewith in full therefor at the price per share provided by such Stock Subscription Warrant [in cash] [by delivery of $_____ principal amount of ______ Notes] [by cancellation of $______ of accrued and unpaid interest on ______ Notes]. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Address_______________________ ______________________________ ASSIGNMENT FOR VALUE RECEIVED hereby sells, assigns and transfers all of the rights of the undersigned under the within Stock Subscription Warrant, with respect to the number of Warrant Shares covered thereby set forth hereinbelow to: Name of Assignee Address No. of Shares - ---------------- ------- ------------- Dated: ___________, 19__. Name__________________________ Title_________________________ Company_______________________ Signature_____________________ Witness_______________________ EX-4.15 8 EXHIBIT 4.15 EXHIBIT 4.15 AMENDMENT NO. 1 TO WARRANT NO. ---------------------------------- Reference is made to the Stock Subscription Warrant No. ___ (the "Warrant No. ___") of Grubb & Ellis Company (the "COMPANY"), issued to Joe F. Hanauer Trust. WHEREAS, pursuant to paragraph 1(b) of the Tri-Party Agreement dated December 11, 1996 by and among the Company, Warburg, Pincus Investors, L.P. and Joe F. Hanauer, certain amendments to the Warrant No. ___ shall be effected. NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Paragraph 2 of the Warrant No. ___ shall be amended in its entirety to read as follows: "2. PERIOD OF EXERCISE. This Stock Warrant is exercisable at any time or from time to time prior to January 29, 2002." 2. Paragraph 4 of the Warrant No. ___ shall be amended in its entirety to read as follows: "4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above shall be subject to adjustment from time to time as hereinafter provided. For purposes of this paragraph 4, the term "Capital Stock" as used herein includes the Company's Common Stock and shall also include any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided that the shares purchasable pursuant to this Stock Warrant shall include only Common Stock. Upon each adjustment of the Exercise Price, this Stock Warrant shall thereafter represent the right to purchase, at the Exercise Price resulting from such adjustment, the largest number of shares of Common Stock obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable thereunder immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. In case the Company, at any time, shall be a party to any Transaction, each holder hereof, upon the exercise hereof at any time on or after the Consummation Date shall be entitled to receive, and this Stock Warrant shall thereafter represent the right to receive, in lieu of the Common Stock issuable upon exercise prior to the Consummation Date, the kind and amount of securities or property (including cash) which it would have owned or have been entitled to receive after the happening of such Transaction had this Stock Warrant been exercised immediately prior to such Transaction. 1 Notwithstanding anything contained herein to the contrary, the Company shall not effect any Transaction unless prior to the consummation thereof each corporation or entity (other than the Company) which may be required to deliver any securities or other property upon the exercise of Stock Warrants, the surrender of Stock Warrants or the satisfaction of exercise rights as provided herein, shall assume, by written instrument delivered to each holder of Stock Warrants, the obligation to deliver to such holder such securities or other property to which, in accordance with the foregoing provisions, such holder may be entitled, and such corporation or entity shall have similarly delivered to each holder of Stock Warrants an opinion of counsel for such corporation or entity, satisfactory to each holder of Stock Warrants, which opinion shall state that all the outstanding Stock Warrants, including, without limitation, the exercise provisions applicable thereto, if any, shall thereafter continue in full force and effect and shall be enforceable against such corporation or entity in accordance with the terms hereof and thereof and, together with such other matters as such holders may reasonably request. In case the Company shall (i) pay a dividend in shares of Capital Stock or securities convertible into Capital Stock or make a distribution to all holders of shares of Capital Stock in shares of Capital Stock or securities convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital Stock, (iii) combine its outstanding shares of Capital Stock into a smaller number of shares of Capital Stock or (iv) issue by reclassification of its shares of Capital Stock other securities of the Corporation, the Exercise Price shall be adjusted (to the nearest cent) by multiplying the Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of shares of Capital Stock outstanding immediately prior to the occurrence of such event, and of which the denominator shall be the number of shares of Capital Stock outstanding (including any convertible securities issued pursuant to clause (i) or (iv) above on an as converted basis) immediately thereafter. An adjustment made pursuant to the foregoing sentence shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. (d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring an adjustment of the Exercise Price, then and in each such case the Company shall promptly deliver to each holder of Stock Warrants a certificate signed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company (an "Officers' Certificate") stating the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock issuable upon exercise of the Stock Warrants, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by any holder of Stock Warrants stating that such holder contemplates exercise of such Stock Warrants, the Company will obtain and deliver to each holder of Stock Warrants the opinion of its regular independent auditors or another firm of independent public accountants of recognized national standing selected by the Company's Board of Directors who are satisfactory to the registered holder of this Stock Warrant, which opinion shall confirm the statements in the most recent Officers' Certificate delivered under this paragraph 4(d). 2 (e) OTHER NOTICES. In case at any time: (i) the Company shall declare or pay to the holders of Capital Stock any dividend other than a regular periodic cash dividend or any periodic cash dividend in excess of 115% of the cash dividend for the comparable fiscal period in the immediately preceding fiscal year; (ii) the Company shall declare or pay any dividend upon Capital Stock payable in stock or make any special dividend or other distribution (other than regular cash dividends) to the holders of Capital Stock; (iii) the Company shall offer for subscription pro rata to the holders of Capital Stock any additional shares of stock of any class or other rights; (iv) there shall be any capital reorganization, or reclassification of the Capital Stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or other entity; (v) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (vi) there shall be any other Transaction; then, in any one or more of such cases, the Company shall give to the holder of each Stock Warrant (a) at least 15 days prior to any event referred to in clause (i) or (ii) above, at least 30 days prior to any event referred to in clause (iii), (iv) or (v) above, and within five business days after it has knowledge of any pending Transaction, written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction known to the Company, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Capital Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act or to a favorable vote of security holders, if either is required." 3 3. Paragraph 15 of the Warrant No. ___ shall be amended to include the following definitions: "CONSUMMATION DATE" shall mean the date of the consummation of a Transaction. "TRANSACTION" shall mean any transaction to which the Company is a party at any time (including, without limitation, a merger, consolidation, sale of all or substantially all of the Company's assets, liquidation or recapitalization of the Capital Stock) in which the previously outstanding Capital Stock shall be changed into or exchanged for different securities of the Company or common stock or other securities of another corporation or interests in a noncorporate entity or other property (including cash) or any combination of any of the foregoing or in which the Capital Stock ceases to be a publicly traded security either listed on the New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ or any successor thereto or comparable system. 4. Except as amended hereby, Warrant No. ___ is fully ratified and remain in full force and effect. 4 IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Warrant No. ___ this 11th day of December, 1996. GRUBB & ELLIS COMPANY By: /s/ Robert J. Walner -------------------- Name: Robert J. Walner Title: Senior Vice President and General Counsel Joe F. Hanauer Trust By: /s/ Joe F. Hanauer ------------------ Name: Joe F. Hanauer Title: Trustee 5 EX-4.16 9 EXHIBIT 4.16 EXHIBIT 4.16 TERMINATION OF THE STOCKHOLDERS' AGREEMENT Reference is made to that certain Stockholders' Agreement dated as of January 29, 1993, as amended as of July 1, 1993, November 1, 1994 and October 22, 1996 (the "Stockholders' Agreement"), by and among Grubb & Ellis Company, a Delaware corporation (the "Company"), Warburg, Pincus Investors, L.P., a Delaware limited partnership ("Warburg"), Joe F. Hanauer ("Hanauer"), and The Prudential Insurance Company of America, a New Jersey insurance corporation ("Prudential"). RECITALS A. The Company, Prudential, Warburg and Hanauer executed the Third Amendment to Stockholders' Agreement dated as of October 22, 1996 terminating all of Prudential's obligations under the Stockholders' Agreement and pursuant to which Prudential released all of its rights under the Stockholders' Agreement as a condition of closing the transactions contemplated by the Sale and Assignment Agreement dated October 21, 1996 by and between Prudential and Warburg. B. As a condition of closing the transactions contemplated by the Tri-Party Agreement dated as of December ___, 1996 by and among the Company, Warburg and Hanauer, the Stockholders' Agreement shall be terminated. NOW, THEREFORE, in acknowledgement of the foregoing recitals, the parties hereby agree that: 1. All of the obligations of each of the Company, Warburg and Hanauer under the Stockholders' Agreement are hereby terminated. 2. All of the rights of each of the Company, Warburg and Hanauer under the Stockholders' Agreement are hereby terminated and released. 3. The Stockholders' Agreement shall have no further force or effect as of the date hereof. 1 IN WITNESS WHEREOF, the parties have executed this Termination of the Stockholders' Agreement this 11th day of December, 1996. GRUBB & ELLIS COMPANY By: /s/ Robert J. Walner --------------------------------- Name: Robert J. Walner Title: Senior Vice President WARBURG, PINCUS INVESTORS, L.P., By: Warburg, Pincus & Co., its General Partner By: /s/ John D. Santoleri --------------------------------- Name: John D. Santoleri Title: Partner /s/ Joe F. Hanauer ---------------------------------------- Joe F. Hanauer 2 EX-10.1 10 EXHIBIT 10.1 EXHIBIT 10.1 Property Management Services Agreement made effective as of the First day of January in the year of Nineteen Hundred and Ninety Seven by and between The Chase Manhattan Bank ("Chase") Facilities Management 2 Chase Manhattan Plaza, 9th Floor New York, New York 10081 and Axiom Real Estate Management, Inc. ("Axiom") 55 E. 59th Street New York, New York 10022 WITNESSETH: Whereas, Chase for itself and on behalf of its Parent, subsidiaries and affiliates, and Axiom wish to enter into an Agreement providing for the furnishing of services by Axiom to Chase in/at the premises owned/leased by Chase set forth in Exhibit A attached hereto and incorporated herein (the "Properties"); and Whereas, Contractor and Chase wish to formalize the terms and conditions of such Agreement and place them in one written document. NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and in accordance with Axiom's Proposal dated July 11, 1996 modified as agreed, the parties agree as follows: 1 ARTICLE I AXIOM'S SERVICES AND RESPONSLBILLTLES Chase hereby appoints Axiom to assist in the management of the Properties set forth in Exhibit A. Axiom shall use its best efforts to manage the various Properties in accordance with the provisions of this Agreement. In carrying out the services required by this Agreement, Axiom shall at all times exercise the care, skill and diligence exercised by prudent and experienced property managers. Axiom is responsible to assist Chase in its management, coordination and supervision of the operation, maintenance and management of the Properties in a manner consistent with industry standards compatible with first class office buildings in New York City. To the maximum extent practicable, Axiom shall maintain such standards in accordance with the Annual Plan agreed to between Chase and Axiom. 1.1 BASIC SERVICES Axiom's Basic Services consist of the services set forth below and those services stated in Article 16 as Basic Services. 1.1.1 Develop an overall plan to effectively manage the maintenance and operations of each Property within thirty (30) days (the "Plan). This Plan shall include (i) a staffing plan detailing on-site employee positions (including detailed job descriptions and salary ranges for employees selected to fill key operating positions) which Axiom deems necessary for the proper operation, maintenance and management of the Properties (hereinafter Employees of the Properties). Once approved in writing by Chase, Axiom shall implement the Plan. Axiom shall alter or change this Plan as needed to meet the changing needs of the Properties. It is understood and agreed that the number of and positions of Employees of the Properties shall be subject to change during the term of this Agreement as mutually agreed by and between Axiom and Chase. 1.1.2 To the extent Axiom deems it necessary for the proper operation, maintenance and management of the Properties, Axiom shall select, assign, hire and supervise Employees of the Properties who, in each instance, shall be employees of Axiom or one of Axiom's affiliates or subsidiaries (and not of Chase). Axiom shall train, direct and supervise all Employees of the Properties in the performance of their duties. In addition, prior to assignment to Chase's Properties of Employees of the Properties, Axiom will assure processing and compliance with Chase's requirements for any individual assigned to work on Chase's premises. These requirements are subject to all applicable statutes, ordinances, rules, and regulations and not violative of any collective bargaining agreement and are set out in Exhibit C (as the same may be amended from time to time by Chase on notice to Axiom (the "Chase Requirements"). Chase Requirements may be amended by Chase from time to time. 1.1.2.1 Axiom shall perform this Agreement in the following manner: (i) Axiom agrees that at all times herein, from and after the effective hire date of any Employees of the Properties, it will be the employer of the Employees of the Properties in the performance of this Agreement, except to the extent that it utilizes, hires or contracts agents, sub-contractors, servants or any other third party to assist it in the performance of all or any part of the Basic Services (hereinafter collectively referred to as "Others retained by Axiom"). Such Employees of the Properties and Others retained by Axiom shall not be considered to be the agents or employees of Chase for any purpose whatsoever. Chase shall be advised of, and shall have the right to request reassignment of any such Employees of the Properties or Others retained by Axiom to perform 2 any of the Basic Services, and it is expressly understood that Chase's exercise of its discretion to seek reassignment of any such Employees of the Properties or Others retained by Axiom is not intended to affect the employment or employmentability of any such Employees of the Properties or Others retained by Axiom and such request shall be advisory in nature only. All Basic Services performed by Employees of the Properties or Others retained by Axiom, must conform to the level of technical expertise and performance maintained by Chase. (ii) The manner and means of accomplishing all the Basic Services shall be entirely under the direction and control of Axiom; PROVIDED, HOWEVER, that Axiom shall collaborate with Chase or its employees or agents when Chase determines the circumstances warrant and shall notify Chase of circumstances where policy issues may be of particular sensitivity or concern to Chase; and further PROVIDED, HOWEVER, that Chase may, at any time and without articulating or demonstrating any reason, request reassignment of Employees of the Properties or Others retained by Axiom assigned to perform Basic Services subject to the terms of any applicable collective bargaining agreements. Axiom will be solely and entirely responsible for acts of Employees of the Properties, and Others retained by Axiom that Axiom supervises during the terms of this Agreement. (iii) The execution of this Agreement shall not create the relationship of a partnership or joint venture by and between Chase and Axiom. 1.1.2.2 Axiom shall at a minimum: (i) pay all wages and other benefits properly payable to Employees of the Properties hired by Axiom, (ii) maintain proper payroll records, (iii) remit to the proper authorities all required income and social security withholding taxes, unemployment insurance payments, workmen's compensation payments, sales tax (if applicable), and such other amounts with respect to wages and other benefits payable to such Employees of the Properties as may be required under applicable laws, together in each case with all required reports or other filings, (iv) remit to all Employees of the Properties IRS W2 forms and any other statements required by applicable laws, within the time periods required by such laws, and (v) obtain, maintain and administer all medical, disability and other insurance benefits and other fringe benefits as may from time to time be required under any union or other agreements or arrangements pertaining to Axiom's employment of such Employees of the Properties. 1.1.3 Within forty-five (45) days after the commencement of this Agreement, Axiom shall develop a preventive maintenance schedule for each piece of equipment in the Properties and thereafter shall maintain and supervise such schedules. Axiom shall cause such ordinary and necessary repairs to be made to the Properties and all equipment and systems located in or servicing the Properties as shall be necessary or advisable for proper operation and maintenance. Notwithstanding the cost limitations set forth herein, Axiom shall cause to be made all repairs which are immediately necessary for the preservation or protection of the Properties or the safety of users, tenants and other persons in or on the Properties, or are otherwise immediately required to avoid the suspension of any necessary services in the Properties without Chase's prior approval and without limitation as to cost, provided, however, that in each such instance Axiom shall (i) before causing any such emergency repair to be made, use reasonable efforts under the circumstances to notify Chase of the emergency situation and obtain Chase's approval of such repair, and (ii) immediately after such emergency repair, fully apprise Chase in writing of the emergency and the repairs made and account to Chase for the costs thereof. 1.1.4 Develop and maintain a system of dealing with service requests and complaints from the users and/or tenants, including a method to ensure that each building management function has been satisfied. Once approved by Chase, Axiom shall implement the system. Axiom shall use its best efforts to attend to and resolve all complaints of the users and/or tenants of which Axiom shall become aware and shall attempt to resolve any complaints, disputes or disagreements by or among users/tenants. 3 1.1.5 Develop a system of quality control inspections to ensure that contracted services as well as in-house manpower services are being performed in a first-class manner. Once approved by Chase, Axiom shall implement the system. 1.1.6 Develop and maintain a Building Management Manual for each Property. At a minimum, this manual should include procedures and telephone numbers for service requests, emergency notification lists, actions to be taken in the event of fire, flood, other natural disasters and first-aid procedures including location of emergency equipment and such other items as may be directed by Chase. 1.1.7 Develop and maintain a system for ensuring compliance with all Federal, State and Local statutes applicable to the services being provided under this Agreement. 1.1.8 Ensure that all licenses necessary to operate each facility are held by individuals or staff members as required by law. Axiom shall immediately notify Chase in writing of its inability to obtain any such license or permit. Notwithstanding the cost limitations set forth herein, Axiom may, without Chase's prior written approval, take or cause to be taken any such actions without limitation as to cost if failure to do so immediately would or might, in Axiom's reasonable judgment, expose Chase or Axiom to criminal liability, provided, however, that in each such instance Axiom shall, before taking or causing to be taken any such action, use Axiom's best efforts under the circumstances to notify Chase of the need for such action and obtain Chase's approval. Axiom and Chase shall each promptly notify the other of any violation, order, rule or determination affecting the Properties of any governmental authority or Board of Fire Underwriters or similar agency. 1.1.9 Interface as needed with Chase's project management staff and any independent contractors retained by Chase or its construction managers on capital projects. Axiom shall plan and coordinate the moving in and moving out of the users/tenants in the Properties at the option and direction of Chase, in order to ensure a minimum of disturbance to the operation of the Properties and to other users/tenants then occupying or preparing to occupy space in the Properties. 1.1.10 Interface with Chase's security staff ensuring building management participation as necessary in the security process. 1.1.11 Continuously keep Chase advised of methods for lowering occupancy costs by recommending upgrading/changing equipment, energy conservation, or contracting methods. 1.1.12 Evaluate service contracts versus "in-house" manpower with performance and economy as major concerns. Within thirty (30) days of Axiom's receipt of any service and maintenance contract for the Properties, Axiom shall provide Chase with a written analysis of such contracts, including Axiom's recommendations with respect to the rebid, restructuring or elimination of any or all of such contracts. If Chase shall decide to rebid any such contract then, within thirty (30) after Chase advises Axiom of such decision, Axiom shall complete and submit to Chase a proposed bid package for same. From time to time during the term of this Agreement, Chase can require Axiom to rebid any or all of the service and maintenance contracts, in which case the foregoing procedure shall be applicable. Service contracts are to include a thirty (30) day cancellation clause exercisable by Chase. All service contracts shall be between Chase and the Vendor (unless otherwise agreed between Chase and Axiom to be between Axiom and the Vendor); Axiom will administer these contracts (including payment of all invoices). 4 1.1.13 Within sixty (60) days after the commencement of this Agreement and on or before July 1 of each year thereafter during the term of this Agreement, Axiom shall prepare and submit to Chase, for Chase's review and approval, a comprehensive written plan ("Annual Plan") setting forth the program planned by Axiom for the operation, maintenance and management of the Properties during the next following calendar year (or portion thereof in the case of the first Annual Plan). Each Annual Plan shall be prepared in a format requested by Chase and shall contain at a minimum (i) a proposed budget for each Property with a comparison of the previous year's "estimated actual" versus budget for the Plan year, (ii) an analysis of major changes in expenses, previous year vs. Plan year, (iii) cost per square foot comparison by category, (iv) a full narrative for each budget category, (v) annual operating budget schedules, (vi) capital improvements narrative, (vii) cash requirements by month, and (viii) such other information as may be reasonably requested by Chase. As part of each Annual Plan, Axiom shall prepare and submit for Chase's approval a pro forma budget in form satisfactory to Chase, setting forth anticipated expenditures (capital, operating and other) pertaining to the Properties. The proposed budget shall also include explanatory notes where any item varies materially from the corresponding item in the previous year's budget or where any item was not included in the last year's budget or where an item so included has been excluded from the proposed budget. Axiom shall manage the Properties consistent with and subject to the cost limitations set forth in the approved Annual Plan. Axiom shall make such reasonable modifications to each proposed budget as may be requested by Chase from time to time. 1.1.14 Develop a system to receive, process and pay all properly documented and approved invoices for all services required to operate and maintain the facilities in a first class condition. Obtain prior approval for all invoices exceeding $10,000 except for payment of previously approved service contracts, i.e. monthly cleaning, HVAC, etc. This system must ensure purchasing efficiency and provide a readily auditable "trail" acceptable to Chase. This system also includes creation of an imprest account for needed disbursements. Once approved by Chase, Axiom shall implement the system. Axiom shall establish and maintain proper, complete and current books and accounts, records and other documentation (collectively "Records") pertaining to the operation and maintenance of each of the Properties in the manner specified by Chase from time to time, and same shall be available for inspection by Chase and their authorized representatives during normal business and at other reasonable times upon reasonable notice. The Records shall be the property of Chase and shall be delivered to Chase immediately upon the termination of this Agreement without any payment or additional consideration to Axiom. 1.1.15 Axiom shall open and maintain, in Axiom's name, an account or accounts (collectively, "Operating Accounts") in a Chase Branch Bank in the type of account or accounts designated from time to time by Chase. Axiom shall make only those withdrawals from the Operating Accounts as necessary to pay the Reimbursable Costs when due in accordance with this Agreement. All funds deposited in the Operating Accounts and any interest thereon shall be and remain Chase's property. All other withdrawals by Axiom from the Operating Accounts shall be made only with Chase's prior approval. In the event that at any time there be insufficient funds available in the Operating Accounts to be disbursed as hereinabove set forth, Chase agrees to supply Axiom immediately with funds required to make such payments. Chase agrees to reimburse Axiom promptly for any disbursement which Axiom may elect to advance for the account of Chase. Nothing herein shall be construed to obligate Axiom to make any such advances. 1.1.16 Develop and when directed by Chase implement a semi-annual performance critique by the user community. Results shall be tabulated by Axiom and submitted for review by Chase's Director of Property Management and Axiom's executives. 5 1.1.17 Develop an audit program in which two independent auditors, previously approved by Chase, will when directed by Chase semi-annually review all expenses disbursed by Axiom. The auditors shall submit results of their audits directly to Chase's Occupancy Accounting Department. The auditors shall be independent auditors (out-of-house and non-Axiom affiliated) approved by Chase. 1.1.18 The providing of the needed project management services stated in Article 16 for Capital Projects with Construction Cost less than $150,000. 1.1.18.1 If/when any bid package is estimated to be over $10,000, competitive bids shall be solicited, subject to protocols and procedures established by Chase for competitive bidding. 1.1.19 Axiom shall furnish any and all business administration and management services that are needed to provide the Basic Services in an expeditious and economical manner consistent with the interests of Chase. 1.1.20 Axiom shall interface with Labor Union activities in all phases of building operations. Axiom shall negotiate all union labor contracts affecting all employees of Axiom (including, but not limited to, Employees of the Properties) who are rendering services in connection with this Agreement, and shall use its best efforts to settle and compromise all controversies and disputes arising under such contracts upon such terms and conditions as Axiom may deem to be in Chase's best interests, subject to Chase's written approval. 1.1.21 Axiom shall monitor the performance of all work performed under service and maintenance contracts and shall evaluate if any such work should be performed by Employees of the Properties. Axiom shall make an appropriate recommendation to Chase. Axiom shall implement a system of quality control inspections (which shall be available for review and approval by Chase) to ensure that all services are performed in a first class manner. 1.1.22 Ensure all trade and volume discounts available are passed on to Chase. 1.1.23 Ensure that each purchase or contract exceeding $9,999 is competitively bid (except as otherwise approved by Chase), subject to protocols and procedures established by Chase for competitive bidding. 1.1.24 Axiom shall prepare and deliver to Chase prior to the 15th day of each month a monthly report in form acceptable to Chase setting forth at a minimum: (i) a cost report detailing budget as projected in the approved Annual Plan versus actual expense for the latest complete month and for the current year to date in sufficient detail to allow thorough analysis. It shall include explanations of any variance exceeding the lesser of five percent (5%) or $4,999.99 in any budget category, (ii) a cash disbursement statement for the previous month with supporting documentation, and (iii) monthly bank statements as to the Operating Accounts, copies of checks and Chase reconciliation statement on software compatible with that utilized by Chase from time to time, (iv) A report delineating charges against Chase's Chart of Accounts for all disbursements made the previous month as well as for charges year to date, and (v) Minority/Women Business Enterprise ("MWBE") Report showing amount of MWBE participation in contracted work. All reports shall be in sufficient detail and in a computerized format compatible with Chase's systems. Within fifteen (15) days after the end of each month, Axiom shall remit to Chase all unexpended funds in the Operating Accounts at the end of the previous month. 1.1.25 Schedule and conduct quarterly conferences between Axiom's executives and the Directors of Chase's Facility Management Unit and Property Management Group. These conferences will include a comprehensive inspection of each Property and a review of Axiom's performance. 1.1.26 Subcontract awards to MWBEs are crucial to achieving goals for participation by these Disadvantaged Business Enterprises. The goals are currently 20% for MWBEs. Axiom shall establish and monitor a plan on 6 how it intends to meet and, if possible, exceed the stated goals. The actual results of this plan are to be tabulated monthly for inclusion in the Monthly Report. 1.1.27 Within thirty (30) days of Axiom's receipt of a Lease and or modification thereto from Chase, Axiom shall provide Chase with an abstract of same. 1.1.28 Any other service that is customarily provided by a property management services firm doing business in the location of the Properties. 1.2 ADDITIONAL SERVICES The following Additional Services shall be performed upon authorization in writing from Chase and shall be paid for as provided in this Agreement. 1.2.1 As directed by Chase, Axiom shall provide only such additional services that are within their competence to provide. 1.2.2 Additional services shall be any service requested by Chase that is not set forth as part of Basic Services. 1.2.2.1 Additional Services could include but are not limited to: 1.2.2.1.1 Basic Services for the amount of Rentable Square Feet (RSF) in excess of the specific quantity set forth in Exhibit A of this Agreement. 1.2.2.1.2 The providing of the project management services stated in Article 16 for Capital Projects greater than $150,000. 1.2.2.1.2.1 There is no guarantee that Chase will use Axiom to provide such project management services. Chase will consider Axiom for such projects but reserves the right to either manage the work in-house or have a consultant provide such services. 1.2.2.1.2.2 Consultation on replacement of work damaged by fire or other cause during construction, and furnishing services in conjunction with the replacement of such work which damage impacts the critical path of the Project Schedule. 1.2.2.1.2.3 Services made necessary by the default of a contractor, which default impacts the critical path of the Project Schedule. 1.2.2.1.3 An extension of the Basic Services beyond a 3 year duration. 1.3 TIME 1.3.1 Axiom shall perform Basic and Additional Services as expeditiously as is consistent with reasonable skill and care. The duration of Basic Services is three years from the effective date of this Agreement. ARTICLE 2 CHASE'S RESPONSIBILITIES 2.1 Chase shall work with Axiom in managing the Properties. 7 Chase shall provide information regarding the requirements of the Properties, which shall set forth Chase's objectives, constraints and criteria, special equipment and systems, and site requirements. 2.2 Based on consultation with and recommendation of Axiom, Chase shall approve an Annual Plan for each Property. 2.3 Chase shall designate a representative authorized to act in Chase's behalf with respect to this Agreement. Chase's authorized representative shall examine documents submitted by Axiom and shall render decisions pertaining thereto promptly to avoid unreasonable delay in the progress of the services provided by Axiom. 2.4 If Chase observes or otherwise becomes aware of any deficiency of Axiom in performing any of the services stated herein, prompt notice thereof shall be given by Chase to Axiom. 2.5 Chase reserves the right to perform work related to the Properties with Chase's own resources, and to award contracts in connection with the Properties which are not part of Axiom's responsibilities under this Agreement. Axiom shall notify Chase if any such independent action in any way compromises Axiom's ability to meet Axiom's responsibilities under this Agreement. 2.6 Chase shall furnish required information and services and shall render approvals and decisions as expeditiously as necessary for the orderly progress of Axiom's services. 2.7 Chase shall provide Axiom with a complete copy of all then effective leases, subleases and license, occupancy or similar agreements (individually a "Lease" and collectively "Leases") with all persons, agents and entities occupying or using portions of the Properties (individually a "tenant" and collectively "tenants") under Leases with Chase. In addition, Chase shall provide Axiom with a complete copy of all then effective leases and licenses, occupancy or similar agreements between Chase, as lessee, and the owners of the Properties ("Chase Leases"). Chase shall supply Axiom with a complete copy of any new Lease, modification of Lease, new Chase Lease or modification of Chase Lease entered into by Chase during the term of this Agreement. 2.8 Chase shall provide Axiom with a copy of all then effective service and maintenance contracts for the Properties, including, but not limited to, contracts for utilities, elevator maintenance, telephone service, office cleaning, window cleaning, landscape maintenance, rubbish removal, fuel, and vermin extermination. 2.9 During the term of this Agreement Chase will provide, at no cost to Axiom (or shall reimburse Axiom for the costs associated with the provision of suitable space at the Properties (such space is hereinafter referred to as the "Property Offices") to be utilized by Axiom for the purposes of performing its services under this Agreement and for no other purpose. The Property Offices shall be properly equipped with necessary office supplies, business machines and telephones. Chase will reimburse Axiom for all costs incurred with respect to such office supplies, business machines and telephones including, but not limited to, acquisition, installation and reasonable usage charges incurred in carrying out the services required under this Agreement. ARTICLE 3 KEY PERSONNEL 3.1 Axiom shall appoint a single individual, the Portfolio Manager, who shall be the person primarily responsible for Axiom's proper execution of the Services required by this Agreement. Such individual shall have sufficient experience and stature to effectively discharge all responsibilities. 8 3.2 In addition to the Portfolio Manager, the Property Management Axiom shall also propose other Key Personnel to handle the day to day services for the Properties. 3.3 All Key Personnel proposed by Axiom must be approved in writing by Chase prior to their working for any of the Properties. 3.4 Axiom shall remove from the Properties any of the Key Personnel Chase so directs Axiom to remove. 3.5 Axiom may not remove any Key Personnel associated with this Agreement unless Axiom receives prior written approval from Chase. The only exception is if the Key Person ceases to be in the employ of Axiom or any of its affiliates. ARTICLE 4 PROPERTIES 4.1 This Agreement covers the Properties set forth on Exhibit A, attached hereto. ARTICLE 5 DIRECT PERSONNEL EXPENSE 5.1 Direct Personnel Expense is defined as the direct salaries of all of Axiom's personnel engaged for this Agreement, excluding those whose compensation is included in the fee, and the portion of the cost of their mandatory and customary contributions and benefits related thereto such as employment taxes, sales and use taxes, and other statutory employee benefits, insurance, sick leave, holidays, vacations, pensions, all benefits under the terms of any applicable bargaining agreements and severance benefits under Axiom policy, consistently applied as changed from time to time, and similar contributions and benefits. ARTICLE 6 REIMBURSABLE COSTS 6.1 The term Reimbursable Costs shall mean all costs necessarily incurred in the proper performance of Basic Services and paid by Axiom from the imprest account established under this Agreement. Such costs shall be at rates not higher than the standard paid in the locality of the Properties, except with prior consent of Chase. Reimbursable Costs and costs not to be reimbursed shall be further enumerated in Article 15. 6.2 Trade discounts, rebates and refunds, and returns from sale of surplus materials and equipment shall accrue to Chase, and Axiom shall make provisions so that they can be secured, to the extent possible. 9 ARTICLE 7 PAYMENTS TO AXIOM 7.1 PAYMENTS ON ACCOUNT OF BASIC SERVICES 7.1.1 Payments for Basic Services Fee shall be made monthly and shall be on the basis set forth in Article 15. 7.1.1.1 The Basic Services Fee shall include and be limited to all costs associated with: 1. The provision of the Portfolio Manager. 2. All overhead and profit as well as any Axiom office overhead and other support services including data processing support for bill paying functions and generation of all reports consistent with the Basic Services. This includes all direct and indirect overhead except for salary expenses and benefits associated with on site personnel below the level of Portfolio Manager. 3. All time spent by Axiom's personnel in any office not at one of the Properties. This also includes the time of any of Axiom's personnel above the level of Portfolio Manager. 4. Any other costs specifically stated to be a nonreimbursable expense. 7.2 PAYMENTS ON ACCOUNT OF REIMBURSABLE COSTS 7.2.1 Chase shall fund the imprest account to the level agreed by and between Chase and Axiom. Axiom may disburse amounts from the imprest account for all reimbursable costs. Prior approval by Chase is required for disbursement of a reimbursable cost exceeding $10,000 except for payment of previously approved service contracts, i.e. monthly cleaning, HVAC, etc. 7.3 PAYMENTS ON ACCOUNT OF ADDITIONAL SERVICES 7.3.1 Chase shall compensate Axiom for Additional Services and Reimbursable Expenses associated therewith. 7.4 PAYMENTS WITHHELD 7.4.1 No deductions shall be made from Axiom's Basic Services Fee on account of penalty, liquidated damages or other sums withheld from payments to Vendors, or on account of the cost of changes in Work other than those for which Axiom is held legally liable. ARTICLE 8 AXIOM'S ACCOUNTING RECORDS 8.1 Records of Reimbursable Costs and costs pertaining to services performed on an hourly basis or on the basis of a Multiple of Direct Personnel Expense shall be kept on the basis of generally accepted accounting principles and shall be available to Chase or Chase's authorized representative at mutually convenient times. 10 ARTICLE 9 ARBITRATION 9.1 All claims, disputes and other matters in question between the parties to this Agreement arising out of or relating to this Agreement or the breach thereof, shall be decided by arbitration in accordance with the Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. No arbitration arising out of or relating to this Agreement shall include, by consolidation, joinder or in any other manner, any additional person not a party to this Agreement except by written consent containing a specific reference to this Agreement and signed by Axiom, Chase and any other person or party sought to be joined. Any consent to arbitration involving an additional person or party shall not constitute consent to arbitration of any dispute not described therein. This agreement to arbitrate and any agreement to arbitrate with an additional person or party duly consented to by the parties to this Agreement shall be specifically enforceable under the prevailing arbitration law. 9.2 Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. 9.3 The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. ARTICLE 10 TERMINATION OF AGREEMENT 10.1 This agreement may be terminated at any time by mutual consent of both parties. 10.2 TERMINATION FOR CAUSE Chase may terminate this agreement for cause. Chase shall deliver written notice of deficiency to Axiom. Axiom shall respond to the deficiency notice within ten days and advise what steps will be taken to cure the deficiency. If in the sole judgment of Chase, Axiom is not taking adequate action to assure the deficiency will be cured within another thirty (30) days or if the deficiency remains uncured for another thirty (30) days, Chase may immediately terminate the Contract for cause. 10.3 TERMINATION FOR CONVENIENCE Chase shall have the right to terminate this Agreement without cause only after this Agreement has been in force for one (1) year or more and at any time thereafter upon thirty (30) days prior written notice. 10.4 This Agreement and the term and interest hereby granted are subject to the limitations that: 11 (i) In the event a petition in bankruptcy is filed by or against either Chase or Axiom, or in the event that either shall make an assignment for the benefit of creditors or take advantage of any insolvency act, either party hereto may forthwith terminate this Agreement upon ten (10) days' notice in writing. (ii) If Axiom makes an assignment of its property for the benefit or creditors or files a voluntary petition under any bankruptcy or insolvency law or if an involuntary petition under any bankruptcy or insolvency law is filed against Axiom and Axiom had theretofore committed an act of bankruptcy or insolvency as alleged in such petition; (iii) If a petition is filed by or against Axiom under the reorganization provisions of the United States Bankruptcy Act or under the provision of any law of a like import; (iv) If Axiom files a petition under the arrangement provision of the United States Bankruptcy Act or under the provisions of any of like import; (v) If a receiver is appointed for Axiom or for the property of Axiom; (vi) If Axiom does anything or permits to be done anything, whether by action or inaction, contrary to any covenant, agreement, term, provision or condition of this Agreement on the part of Axiom; Then, if any of said contingencies occur, Chase may give to Axiom a notice of intention to terminate this Agreement and, at the expiration of five (5) days from the date of giving of notice, this Agreement will expire and terminate with the same effect as if that day were the date hereinafter set for the expiration of the term of this Agreement and Chase will have no further obligation under this Agreement whatsoever; provided, however, that Axiom will remain liable for damages as hereinafter provided. In addition to all of Chase's other rights and remedies, Chase will be entitled to such other damages, consequential and otherwise as Chase may sustain by reason of Axiom's default. In the event of breach or threatened breach of this Agreement or any of the covenants, agreements, terms, provision or conditions hereof, Chase will have the right of injunction, the right to invoke any remedy of that law or in equity as if other remedies were not herein provided for. 10.5 This Agreement or part thereof shall automatically terminate in the event that Chase sells, leases and otherwise vacates some or all of the Premises for which the Services are being rendered and Chase will have no further liability or obligation whatsoever. If all or part of any Property is sold, its lease terminated or otherwise vacated, upon notice by Chase, Axiom shall discontinue its Services as directed by Chase. Compensation otherwise due Axiom shall be adjusted based on the annual square foot rate multiplied by the number of RSF taken out of service prorated to the effective date of Chase's notice. Any reduction in the number of Properties due to this Article l0.5 shall not affect this Agreement as it pertains to the remainder of the Properties for which Axiom is providing Services. 10.6 In the event of termination not the fault of Axiom, Axiom shall be compensated for all services performed and payments requested by Chase to the termination date. ARTICLE 11 MISCELLANEOUS PROVISIONS 11.1 Unless otherwise specified, this Agreement shall be governed by the laws of the State of New York. 12 11.2 As to all acts or failures to act by either party to this Agreement, any applicable statute of limitations shall commence to run, and any alleged cause of action shall be deemed to have accrued, in any and all events not later than the actual termination date of this agreement. 11.3 Except as provided elsewhere in this Agreement or where the law imposes a legal duty or penalty upon Axiom, or upon Axiom and Chase, as distinguished from Chase alone, Axiom shall not make repairs, additions or alterations to the Properties or comply with orders of public authority affecting the Properties without first obtaining prior written consent of Chase. 11.4 All notices referred to herein, shall be deemed to be sufficiently given if in writing and sent by United States registered or certified mail (return receipt requested) to Chase's Director of Property Management or to Axiom, as the case may be, at their respective business addresses first hereinabove given or at such other address or addresses as either party shall hereafter designate by written notice. 11.5 Axiom represents that it is an Equal Opportunity Employer in accordance with Executive Order No. 11246, dated September 24, 1965, as amended by Executive Order No. 11375, dated October 13, 1967. In addition, during the performance of this Agreement, Axiom agrees as follows: (i) Axiom will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin, age, disability, sexual orientation, creed, alienage, citizenship status, marital status or any other protected status. Axiom will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex or national origin, age, disability, sexual orientation, creed, alienage, citizenship status, marital status or any other protected status. Such action may include, but not be limited to, the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Axiom agrees to post in conspicuous places, available to the employees and applicants for employment, notices setting forth the provisions of this nondiscrimination clause. (ii) Axiom will in all solicitations or advertisements for employees placed by or on behalf of Axiom, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, national origin, age, disability, sexual orientation, creed, alienage, citizenship status, marital status or any other protected status. (iii) If applicable to Axiom, Axiom shall comply with all provisions of the Equal Opportunity/Affirmative Action clauses of and the implementing regulations for: (a) Executive Order 11246, as amended; (b) Affirmative Action Regulations for minorities and women - 41 CFR 60-1 et seq. (c) Section 503 of the Rehabilitation Act of 1973; (d) Affirmative Action Regulations for Handicapped Workers - 41 CFR 60-741; (e) Section 402 of the Vietnam-Era Veterans Readjustment Assistant Act of 1974; and (f) Affirmative Action Regulations for Special Disabled and Vietnam-Era Veterans - 41 CFR 60-250 These above six provisions are hereby incorporated by reference into this Agreement. 13 Axiom also agrees to comply with Federal, State and Local non-discrimination laws, to ensure that its employment policies and practices are non-discriminatory, and to take affirmative action efforts, where appropriate. Further, Axiom agrees to comply with the Americans with Disabilities Act ("ADA"), identify issues of compliance with the ADA (including Titles I and III) for both Chase and Axiom and ensure Chase and Axiom's compliance with the ADA including Titles I and III to the extent such compliance is covered by this Agreement. 11.6 It is the policy of Chase through its Minority and Women-Owned Business Development Program ("Vendor Program") (the terms of which are incorporated herein) that registered minority owned business enterprises ("MBE's") and women owned business enterprises ("WBE's") (together referred to as "MWBE's") shall have equal opportunity to bid on Chase contracts and to participate in the performance of contracts for goods and services with Chase. Axiom is asked to share in this commitment and to work with Chase to achieve this. 11.6.1 Axiom shall take all Necessary and Reasonable Steps to seek to achieve the purposes of Chase's Vendor Program and to achieve the Plan described below, including the MWBE Utilization Goal. 11.6.1.1 Chase's MWBE utilization goal for this Agreement is 20%. 11.6.1.2 If either Chase or Axiom determine that there are subcontracting opportunities for portions of the Work specifically identifiable with the services provided and/or goods purchased under this Agreement, Axiom shall propose, establish, implement and monitor an approved Plan, identifying the Necessary and Reasonable Steps to be undertaken to seek to achieve the purposes of the Vendor Program and the Plan including the Utilization Goal. 11.6.1.2.1 The actual results of this Plan are to be tabulated monthly by Axiom and submitted to Chase. If Axiom does not achieve compliance with the Plan and Utilization Goal, Chase will evaluate whether Axiom has taken all Necessary and Reasonable Steps to seek to achieve the purposes of the Vendor Program and the Plan. 11.6.2 Failure to comply with this Article 11.6 of the Agreement may constitute a material breach. 11.7 Any provisions of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and no such prohibition or unenforceability in any jurisdiction shall invalidate such provision in any other jurisdiction. 11.8 The term "Axiom" as used in this Agreement shall include any corporate subsidiaries or affiliates of Axiom who perform services in, on, or about the Properties or the land on which the Properties are located, arising out of or in connection with this Agreement. 11.9 Non-Waiver. No course of dealing or failure of either party to strictly enforce any term, right or condition of this Agreement shall be construed as a waiver of such term, right or condition. The failure of Chase to insist in any one or more instances upon the strict performance of any of the covenants, agreements, terms, provisions or conditions of this Agreement or to exercise any election herein contained will not be construed as a waiver or a relinquishment of the future enforceability of such covenant, agreement, term, provision, condition or election. Any waiver by Chase of any covenant, agreement, term, provision or election will only be deemed effective when expressed in writing and signed by Chase. Mention in this Agreement of any particular remedy will not preclude Chase from any other remedy in law or equity. 11.10 If any provision of this Agreement is found to be invalid for any reason, the invalidity of such provision will not affect the validity of any other provision of this Agreement. 14 11.11 The descriptions of the provisions of this Agreement which are contained in the margins hereof are for descriptive purposes only and have no legal significance. 11.11 All rights and remedies afforded under this Agreement will be cumulative and in addition to such other rights and remedies as may be available to Axiom and Chase at law and/or in equity. 11.12 Axiom shall not except for a generic listing of Axiom's clients which Axiom may disseminate in the ordinary course of business, without first obtaining the written consent of Chase, advertise or publish the fact that Axiom has furnished or contracted to furnish to Chase, work contracted hereunder. 11.16 Chase's determination of the meaning of such terms as "necessary" "as necessary" "as required" "as needed" "if necessary" and terms of similar import shall be final and binding upon Axiom. 11.17 Axiom acknowledges that some or all of the facilities set forth on Exhibit A may contain hazardous materials (including asbestos containing materials) in various places through the facilities. Axiom shall comply with all federal, state, and local statutes, rules and regulations regarding hazardous materials and, as appropriate, it shall take all necessary precautions to safeguard its employees and occupants of the facilities if it encounters any hazardous material while providing the Services required by this Agreement. 11.18 If in performing the Services, Axiom infringes on a patent and/or copyright it knows of or should know of, Axiom shall fully indemnify and hold Chase harmless from any claim made by the lawful owner of the patent and/or copyright (made either during the term of this Agreement or in the future). This paragraph shall survive the termination of this Agreement. 11.19 If Axiom sells all or a substantial part of its business within the first year this Agreement is in effect, not withstanding other language to the contrary, Chase shall have the right to terminate this Agreement for its convenience by giving Axiom 30 days' notice. 11.20 While on Chase's Properties, Employees of the Properties will comply with all of Chase's security regulations upon reasonable notice of such requirements and when deemed appropriate by Chase, Employees of the Properties will be issued visitor identification cards, which cards will be surrendered to Chase upon demand or at the termination of this Agreement, whichever occurs first. 11.21 If there is a conflict between Axiom's Proposal and this Agreement, the terms and conditions of this Agreement shall govern. ARTLCLE 12 SUCCESSORS AND ASSIGNS 12.1 Chase and Axiom, respectively, bind themselves, their partners, successors, assigns and legal representatives to the other party to this Agreement, and to the partners, successors, assigns and legal representatives of such other party with respect to all covenants of this Agreement. Axiom shall not assign, sublet or transfer any interest in this Agreement without the written consent of Chase. 15 ARTICLE 13 EXTENT OF AGREEMENT 13.1 This Agreement including any Exhibits attached hereto represents the entire and integrated agreement between Chase and Axiom and supersedes all prior negotiations, representations or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both Chase and Axiom. ARTICLE 14 INSURANCE 14.1 INSURANCE CARRIED BY AXIOM Axiom, within five (5) business days after the execution of the Agreement or before commencing work or permitting any subcontractor to commence work prior to the expiration of five (5) business days after the execution of the Agreement, whichever is the earliest, shall procure and maintain, the following insurance of the kinds and limits enumerated hereunder, with companies acceptable to Chase. Should Axiom at any time neglect or refuse to provide the required insurance, or should such insurance be canceled, Chase shall have the right to procure such insurance and the cost thereof shall be deducted from moneys then due or thereafter to become due Axiom. Axiom may carry, at its own expense, such additional insurance as it may deem necessary. Axiom shall not be deemed to be relieved on any responsibility by the fact that it carries insurance. 14.1.1 REQUIRED INSURANCE (a) Workers' Compensation and Employer's Liability Insurance in accordance with the applicable laws of the State of New York or the state in which the work is to be performed or of the state in which Axiom is obligated to pay compensation to employees engaged in the performance of the work. The policy limit under Employer's Liability Insurance section shall not be less than One Million Dollars ($1,000,000.00) for any one accident. The insurance required by this paragraph 14.1.1.a shall be nonreimbursable except for the personnel stationed full time at a Chase facility. (b) Comprehensive crime policy covering its employees who deal with the Properties or bank accounts hereunder having a policy limit of no less than Two Million and Five Hundred Thousand Dollars ($2,500,000.00). The insurance required by this paragraph shall be nonreimbursable. 14.1.2 CERTIFICATES OF INSURANCE (a) Axiom shall have its insurance carrier or carriers certify to Chase that all insurance required is in force. Such certificates shall stipulate that the insurance will not be canceled or substantially changed without thirty (30) days' prior notice and shall be sent by certified mail to Chase at 2 Chase Plaza, 23rd Floor, New York, New York, 10081, Attention: Corporate Insurance Services. Certificates shall be sent to aforementioned address with a copy to the Property Services Group at Chase Facilities Management. (b) In the event that service under Agreement is rendered by persons other than Axiom, Axiom shall arrange to have such subcontractors furnish to Axiom evidence of insurance, subject to the same terms and conditions set forth above and applicable to Axiom, at least two (2) weeks prior to commencing such work. 16 14.2 NOTICE TO CHASE Axiom shall promptly advise Chase's authorized representative of all damages to property of Chase or of others, or injuries incurred by persons other than employees of Axiom (or any subcontractor) in any manner relating, either directly or indirectly, to the work. 14.3 MATERIALS USED BY AXIOM (a) Axiom or subcontractors will be responsible for insurance coverage on their equipment, tools, supplies and any other materials which they may use in the course of the work or store on Chase's premise; and (b) in work done by Axiom requiring the use of floor finishes, Axiom shall use Underwriters Laboratories approved finishes only. 14.4 INSURANCE CARRIED BY CHASE (a) Chase agrees to carry general liability insurance with a minimum limit of at least $5,000,000.00 including elevator liability and contractual liability insurance (specifically insuring the indemnity provisions set forth below in paragraph 14.5, and such other insurance as may be necessary for the protection of the interests of Chase and Axiom. In each such policy of insurance, Chase agrees to designate Axiom and its corporate subsidiaries and affiliates, who are performing services under this Agreement, as parties insured with Chase. The general liability, elevator and contractual liability insurance must contain a severability of interest clause and coverage for Personal Injury Insurance. A certificate of each policy issued by the carrier shall be delivered to Axiom by Chase. (b) Chase shall procure an appropriate clause in, or endorsement on, each of its policies for fire or extended coverage insurance and on all other forms of property damage insurance covering the Properties or personal property, fixtures or equipment whereby the insurer waives subrogation or consents to a waiver of the right of recovery against Axiom, and to the extent permitted by law, Chase hereby agrees that it will not make any claim against or seek to recover from Axiom for any loss or damage to property of the type covered by such insurance. (c) It is understood and agreed that with respect to any insurance to be provided hereunder and covering Axiom's interest, Chase shall be responsible for the payment of all premiums thereon. All dividends or return premiums in connection with such insurance shall be paid to Chase. 14.5 INDEMNITY AGREEMENT 14.5.1 Chase agrees (a) to hold and save Axiom free and harmless from any claim for damages or injuries to persons or property by reason of any cause whatsoever either in or about the Properties or elsewhere when Axiom is properly carrying out the provisions of this Agreement or acting under the express or implied directions of Chase; or due to Chase's failure or refusal to comply with or abide by any rule, order, determination, ordinance or law of any Federal, State or Municipal Authority and (b) to defend promptly and diligently, at Chase's sole expense, any claim, action or preceding brought against Axiom or Axiom and Chase, jointly or severally, arising out of or connected with any of the foregoing, and to hold harmless and fully indemnify Axiom from any judgment, loss or settlement on account thereof. The foregoing provisions of this paragraph shall survive the expiration or termination of this Agreement. Nothing contained in this paragraph shall relieve Axiom from responsibility to Chase for the gross negligence and/or willful misconduct of Axiom. 14.5.2.1 Axiom agrees to defend (with counsel satisfactory to Chase), indemnify and save harmless Chase, its officers, directors and employees, from any and all claims, expenses (including reasonable attorneys' fees), damages, suits, costs or judgments whatsoever, whether groundless or otherwise, arising from or out of employment-related claims (including third party action arising out of Worker's Compensation claims of Axiom employees against Chase) arising after the effective date of hiring of any such Employees of the Properties and unrelated to any claim being asserted against Chase as to employment prior to the effective date of hiring or benefits-related claim prior to the effective date of hiring arising out of, incident to, or in connection with, in 17 whole or in part, this Agreement relating to employment related claims (including but not limited to a breach by the Axiom of any term or condition of this Agreement relating to employment related claims or any act or omission of Axiom or of the Employees of the Properties or Others retained by Axiom relating to employment related claims), PROVIDED, HOWEVER, that Axiom shall not be required to indemnify Chase for that portion of damage attributable to Chase's gross negligence or willful misconduct, or where Axiom followed an express instruction by Chase and the instruction is the basis for such damages, in which case Chase will defend and indemnify Axiom except with respect to claims arising from Worker's Compensation claims. 14.5.2.2 As a condition to indemnification, Chase and Axiom agree that each will grant the indemnifying party complete control of the defense of any action and all negotiation in its settlement or compromise, provided that any settlement or compromise shall be reasonably acceptable to the other, and does not adversely affect any rights of or create any obligation on the part of the other. 14.5.2.3 Axiom agrees to indemnify Chase for any loss arising out of fraud, theft, misappropriation or any similar act by Axiom, its officers, directors, employees and Agents. 14.6 The terms of this Paragraph 14 shall survive the termination of this Agreement regardless of the party which terminated or the reasons therefor. ARTICLE L5 BASIS OF COMPENSATION Chase shall compensate Axiom for the Services provided, in accordance with the Terms and Conditions of this Agreement, as follows: 15.1 BASIC SERVICES COMPENSATION 15.1.1 FOR BASIC SERVICES, as described elsewhere in this Agreement, Basic Compensation shall be computed as follows: 15.1.1.1 The annual Basic Services Compensation shall be: A Lump Sum of Six Hundred Fifty Eight Thousand Eight Hundred Twenty Four Dollars ($658,824) for Year One ($0.065 for Regions 1 thru 4 and $0.085 for Region 7 times the square feet in Exhibit A); A Lump Sum of Six Hundred Seventy Nine Thousand Two Hundred Eighty Four Dollars ($679,284) for Year Two ($0.067 for Regions 1 thru 4 and $0.088 for Region 7 times the square feet in Exhibit A); and A Lump Sum of Seven Hundred Thousand Two Hundred Fourty Eight Dollars ($700,248) for Year Three ($0.069 for Regions 1 thru 4 and $0.092 for Region 7 times the square feet in Exhibit A); which amounts shall be paid in the following installments: 15.1.1.1.1 Schedule of Payments: Axiom shall be paid monthly in arrears as follows: 1. Months 1-12 A total of Six Hundred Fifty Eight Thousand Eight Hundred Twenty Four Dollars ($658,824) payable in equal monthly installments of Fifty Four Thousand Nine Hundred and Two Dollars ($54,902) in arrears. 18 2. Months 13-24 A total of Six Hundred Seventy Nine Thousand Two Hundred Eighty Four Dollars ($679,284) payable in equal monthly installments of Fifty Six Thousand Six Hundred Seven Dollars ($56,607) in arrears. 3. Months 25-36 A total of Seven Hundred Thousand Two Hundred FoUrty Eight Dollars ($700,248) payable in equal monthly installments of Fifty Eight Thousand Three Hundred Fifty Four Dollars ($58,354) in arrears. 15.1.1.2 REIMBURSABLE EXPENSES - BASIC SERVICES Axiom shall be reimbursed for all expenses incurred associated with the performance of Basic Services except for those costs included in the Basic Services Fee. Axiom may withdraw from the Imprest Account the actual costs of all Reimbursable Expenses incurred by Axiom in the interest of this Agreement with no mark-up. 15.2 ADDITIONAL SERVICES COMPENSATION 15.2.1 For additional services of Axiom, approved in writing by Chase and provided by Axiom in accordance with the Terms and Conditions of this Agreement, compensation shall be computed as follows: 15.2.1.1 The amount of Additional Services Compensation to be paid to Axiom shall be set forth in a written amendment to this Agreement and executed by Chase and Axiom. In the event no agreement is reached as to the amount of Additional Services Compensation to be paid to Axiom, Chase may issue a written order to Axiom to proceed with the work and Axiom must proceed with the Additional Services, and such Additional Services Compensation shall be determined as follows: 15.2.1.1.1 For Managing a quantity of RSF which differs from the quantity stated in Exhibit A, Axiom's Basic Services Fee shall be adjusted and paid at the RSF rate stated in 15.1.1.1 prorated by month and contract year the quantity of space changed. 15.2.1.1.2 For Services related to project management services for capital projects costing in excess of $150,000, Chase will compensate Axiom for all actual construction costs plus fee to be negotiated the maximum of which would be 5% of the construction costs. 15.2.1.1.3 REIMBURSABLE EXPENSES - ADDITIONAL SERVICES In connection with Additional Services, Reimbursable Expenses are those actual expenditures made by Axiom, its employees, or its professional consultants in the interest of this Agreement including but not limited to, field office, furniture, equipment and utilities, all out-of-pocket expenses for travel and living expenses, long distance telephone, telex, overnight package express, and any direct labor and materials for the construction, if any, that are purchased on Chase's behalf, computer time, photocopies, professional consultants, and document reproduction. This shall include cost of professional consultants retained by Axiom with regard to such Additional Services. Reimbursable Expenses shall be drawn from the Imprest Account as they are paid by Axiom. ARTICLE 16 OTHER CONDITIONS OR SERVICES 16.1 The following services are also considered Basic Services: 16.1.1 Axiom shall provide adequate staff to be able to control and to respond timely to Chase, Chase's other Architects, Engineers, separate vendors, contractors (and their subcontractors), building officials, etc. and to complete all services within the agreed durations and budgets. 19 16.1.2 When Axiom is to administer separate Vendor Contracts, Axiom shall use the appropriate standard Chase Contract. Axiom is responsible for completion of said contract, execution by the separate Vendors and return to Chase (2 signed copies) prior to the Vendor commencing work. 16.1.3 Axiom is to provide to Chase all requests for change orders from the separate vendors, utilizing Change Order forms and procedures approved by Chase. Verbal authorization of change orders to the vendor is restricted to an officer of the Facilities Management Department of Chase. Such authorization if provided verbally must be followed within 5 business days by written notice. 16.1.4 Axiom is responsible to obtain from the separate vendors and their subcontractors releases of lien within thirty (30) days after completion of contract work. (Exhibit B) 16.1.5 All services provided by Axiom under this Agreement shall be coordinated with Chase's Project and Property Management Procedures. 16.2 On all capital projects costing less than $150,000 for which Chase requests Axiom to manage on Chase's Behalf, Axiom shall provide any/all the following Project Management Services that are needed with the level of detail that is appropriate for the specific Project. 16.2.1 PRECONSTRUCTION PHASE 16.2.1.1 Engage the services of approved design consultant(s). 16.2.1.2 Provide and coordinate the preliminary evaluation of the program and Project budget requirements. With the Architect's and Engineer's assistance, prepare preliminary estimates of Construction Costs for early schematic designs based on area, volume or other customary standards. Assist Chase and the Architect and Engineer in achieving mutually agreed upon program and Project budget requirements and other design parameters. Provide cost evaluations of alternative materials and systems. 16.2.1.2.1 Axiom shall take certain provisions contained in Leases between various Landlords and Chase into consideration in the preparation of the budget and schedules. 16.2.1.2.2 Evaluate Chase's Project budget and cost estimates prepared by Axiom in Axiom's best judgment as a professional familiar with the construction industry. It is recognized, however, that neither Axiom nor Chase has control over the cost of labor, materials or equipment, over Contractors' methods of determining bid prices or other competitive bidding or negotiating conditions. Accordingly, Axiom cannot and does not warrant or represent that bids or negotiated prices will not vary from the Project budget proposed, established or approved by Chase, or from any cost estimate or evaluation prepared by Axiom. 16.2.1.2.3 If a fixed limit of Construction Cost has been established, Axiom shall include contingencies for design, bidding and price escalation, and shall determine what materials, equipment, component systems and types of construction are to be included in the Contract Documents, reasonable adjustments in the scope of the Project, and to suggest alternate Bids in the Construction Documents to adjust the Construction Cost to the fixed limit. Any such fixed limit shall be increased in the amount of any increase in the Contract Sums occurring after the execution of the Contracts for Construction. 16.2.1.2.4 If due to causes beyond Axiom's control, bids are not received within the time scheduled at the time the fixed limit of Construction Cost was established, the fixed limit of Construction Cost shall be adjusted to reflect any change in the general level of prices in the construction industry occurring between the originally scheduled date and the date on which bids are actually received. 16.2.1.2.5 If a fixed limit of Construction Cost or the approved budget is exceeded by the sum of the lowest figures from bona fide bids or negotiated proposals plus Axiom's estimate of other elements of Construction Cost for the Project, Chase shall (1) give written approval of an increase in such fixed limit, (2) authorize rebidding or 20 renegotiation of the Project or portions of the Project within a reasonable time, (3) if the Project is abandoned, terminate Axiom's services for the specific project, or (4) cooperate in revising the scope and quality of the work as required to reduce the Construction Cost. In the case of item (4), Axiom, without additional Fee compensation, shall cooperate as necessary to bring the Construction Cost within the fixed limit or the approved budget. 16.2.1.3 Review designs during their development. Advise on site use and improvements, selection of materials, building systems and equipment and methods of Project delivery. Provide recommendations on relative feasibility of construction methods, availability of materials and labor, time requirements for procurement, installation and construction, and factors related to costs including, but not limited to, costs of alternative designs or materials, preliminary budgets, and possible economies. 16.2.1.4 Provide for the Architect's and Engineer's and Chase's review and acceptance, and periodically update, a Project Schedule that coordinates and integrates Axiom's services, the Architect's and Engineer's services and Chase's responsibilities with anticipated construction schedules. 16.2.1.5 Prepare for Chase's approval a more detailed estimate of Construction Cost(s), developed by using estimating techniques which anticipate the various elements of the Project, and based on Schematic Design Documents prepared by the Architect. Update and refine this estimate periodically as the Architect and Engineer prepares Design Development and Construction Documents. Advise Chase and the Architect and Engineer if it appears that the Construction Cost may exceed the Project budget. Make recommendations for corrective action. 16.2.1.6 Coordinate Contract Documents by consulting with Chase and the Architect and Engineer regarding Drawings and Specifications as they are being prepared, and recommend alternative solutions whenever design details affect construction feasibility, cost or schedules. 16.2.1.6.1 Provide recommendations and information to Chase and the Architect and Engineer regarding the assignment of responsibilities for safety precautions and programs; temporary Project facilities; and equipment, materials and services for common use of contractors. Verify that the requirements and assignment of responsibilities are included in the proposed Contract Documents. 16.2.1.6.2 Advise on the separation of the Project into contracts for various categories of work. Advise on the method to be used for selecting contractors and awarding contracts. If separate contracts are to be awarded, review the Drawings and Specifications and make recommendations as required to provide that (1) the work of the separate contractors is coordinated, (2) all requirements for the Project have been assigned to the appropriate separate contract, (3) the likelihood of jurisdictional disputes has been minimized, and (4) proper coordination has been provided for phased construction. 16.2.1.6.3 Develop a Project Schedule providing for all major elements such as phasing of construction and times of commencement and completion required of each separate contractor. Provide the Project Construction Schedule for each set of bidding documents. 16.2.1.6.4 Investigate and recommend a schedule for Chase's purchase of materials and equipment requiring long lead time procurement, and coordinate the schedule with the early preparation of portions of the Contract Documents by the architect. Expedite and coordinate delivery of these purchases. 16.2.1.7 Provide an analysis of the types and quantities of labor required for the Project and review the availability of appropriate categories of labor required for critical phases. Make recommendations for actions designed to minimize adverse effects of labor shortages. 16.2.1.7.1 Identify or verify applicable requirements for equal employment opportunity programs and MWBE participation for inclusion in the proposed Contract Documents. 21 16.2.1.8 Make recommendations for pre-qualification criteria for bidders and develop bidders' interest in the Project. Establish bidding schedules. Assist Chase in issuing Bidding Documents to bidders. Conduct pre-bid conferences to familiarize bidders with the Bidding Documents and management techniques and with any special systems, materials or methods. Assist Chase and the Architect and Engineer with the receipt of questions from bidders, and with the issuance of addenda. 16.2.1.8.1 If/when any bid package is estimated to be over $10,000, competitive bids shall be solicited, subject to protocols and procedures established by Chase for competitive bidding. In accordance with Chase's procurement procedures, assist in bid receipt, prepare bid analyses and make recommendations to Chase for award of Contracts or rejection of bids. 16.2.1.9 With Chase and the Architect's and Engineer's assistance, conduct pre-award conferences with successful bidders. Assist Chase in preparing Construction Contracts and advise Chase on the acceptability of subcontractors and material suppliers proposed by contractors. After execution by Chase issue and administer construction contracts between Chase and the separate contractors. 16.2.2 CONSTRUCTION PHASE The Construction Phase will commence with the award of the initial Construction Contract or purchase order and will end thirty (30) days after final payment to all contractors is due. 16.2.2.1 Axiom, in cooperation with Chase, shall provide administration of the Contracts for Construction as set forth below and in the Chase General Conditions of the Contract for Construction. 16.2.2.2 Provide administrative, management and related services as required to coordinate work of the contractors with each other and with the activities and responsibilities of Axiom, Chase and the architect and engineer to complete the Project in accordance with Chase objectives for cost, time and quality. Provide sufficient organization, personnel and management to carry out the requirements of this Agreement. 16.2.2.2.1 Schedule and conduct pre-construction, construction and progress meetings to discuss such matters as procedures, progress, problems and scheduling. Prepare and promptly distribute minutes. 16.2.2.2.2 Consistent with the Project Construction Schedule issued with the Bidding Documents, and utilizing the Contractors' Construction Schedules provided by the separate contractors, update the Project Construction Schedule incorporating the activities of contractors on the Project, including activity sequences and durations, allocation of labor and materials, processing of Shop Drawings, Product Data and Samples, and delivery of products requiring long lead time procurement. Include Chase occupancy requirements showing portions of the Project having occupancy priority. Update and reissue the Project Construction Schedule as required to show current conditions and revisions required by actual experience. 16.2.2.2.3 Endeavor to achieve satisfactory performance from each of the contractors. Recommend courses of action to Chase when requirements of a contract are not being fulfilled, and the non performing party will not take satisfactory corrective action. 16.2.2.3 Revise and refine the approved estimate of construction cost, incorporate approved changes as they occur, and develop cash flow reports and forecasts as needed. 16.2.2.3.1 Provide regular monitoring of the approved estimate of construction cost, showing actual costs for activities in progress and estimates for uncompleted tasks. Identify variances between actual and budgeted or estimated costs, and advise Chase whenever projected costs exceed budgets or estimates. 16.2.2.3.2 Maintain cost accounting records on authorized work performed under unit costs, additional work performed on the basis of actual costs of labor and materials, or other work requiring accounting records. 22 16.2.2.3.3 Recommend necessary or desirable changes to the architect and engineer and Chase, review requests for changes, assist in negotiating Contractors' proposals, submit recommendations to Chase, and if they are accepted, prepare a Change Order for Chase's authorization. 16.2.2.3.4 Develop and implement procedures for the review and processing of Applications by contractors for progress and final payments. Make recommendations to Chase for payment. 16.2.2.4 Review the safety programs developed by each of the contractors as required by their Contract Documents and coordinate the safety programs for the Project. 16.2.2.5 Assist in obtaining building permits and special permits for permanent improvements, excluding permits required to be obtained directly by the various contractors. Verify that Chase has paid applicable fees and assessments. Assist in obtaining approvals from authorities having jurisdiction over the Project. 16.2.2.6 If required, assist Chase in selecting and retaining the professional services of surveyors, special consultants and testing laboratories. Coordinate their services. 16.2.2.7 Determine in general that the work of each contractor is being performed in accordance with the requirements of the Contract Documents. Endeavor to guard Chase against defects and deficiencies in the work. As appropriate, require special inspection or testing, or make recommendations to the architect and engineer regarding special inspection or testing, of work not in accordance with the provisions of the Contract Documents whether or not such work be then fabricated, installed or completed. Subject to review by Chase, reject work which does not conform to the requirements of the Contract Documents. 16.2.2.7.1 Axiom shall not be responsible for construction means, methods, techniques, sequences and procedures employed by Contractors in the performance of their Contracts, and shall not be responsible for the failure of any contractor to carry out work in accordance with the Contract Documents. 16.2.2.8 Consult with the architect and engineer and Chase if any contractor requests interpretations of the meaning and intent of the Drawings and Specifications, and assist in the resolution of questions which may arise. 16.2.2.9 Receive and assure that current and satisfactory Certificates of Insurance are provided from the contractors, prior to the inception of any contract and forward them to Chase's insurance services department on an as requested basis. 16.2.2.10 Receive from the contractors and review all Shop Drawings, Product Data, Samples and other submittals. Coordinate them with information contained in related documents and transmit to the architect and engineer those recommended for approval. In collaboration with the architect and engineer, establish and implement procedures for expediting the processing and approval of Shop Drawings, Product Data, Samples and other submittals. 16.2.2.11 Record the progress if the Project. Submit written progress reports to Chase, the architect and engineer including information on each contractor and each contractor's work, as well as the entire Project, showing percentages of completion and the number and amounts of all Change Orders. Keep a daily log containing a record of weather, contractors' work on the site, number of workers, Work accomplished, problems encountered, and other similar relevant data as Chase may require. Make the log available to Chase. 16.2.2.11.1 Maintain at the Project site, on a current basis: a record copy of all contracts, drawings, specifications, addenda, change orders and other modifications, in good order and marked to record all changes made during construction; Shop Drawings; Product Data; Samples; submittals; purchases; materials; equipment; applicable handbooks; maintenance and operating manuals and instructions; other related documents and revisions which arise out of the contracts or work. Maintain records, in duplicate, of principal building layout lines, elevations of the bottom of footings, floor levels and key site elevations certified by a qualified surveyor or 23 professional engineer. Make all records available to Chase, the architect and engineer. At the completion of the Project, deliver all such records to Chase. 16.2.2.12 Arrange for delivery and storage, protection and security for Chase purchased materials, systems and equipment which are a part of the Project, until such items are incorporated into the Project. 16.2.2.13 With Chase Property Management personnel, observe the contractors' checkout of utilities, operational systems and equipment for readiness and assist in their initial start-up and testing. 16.2.2.14 When Axiom considers each contractor's work or a designated portion thereof substantially complete, Axiom shall prepare for the architect, engineer and Chase a list of incomplete or unsatisfactory items and a schedule for their completion. Axiom shall assist the architect, engineer and Chase in conducting inspections. After the architect, engineer and Chase certify the Dates of Substantial Completion of the work, Axiom shall coordinate the correction and completion of the work. 16.2.2.15 Assist the architect and engineer and Chase in determining when the Project or a designated portion thereof is substantially complete. Prepare for the architect and engineer a summary of the status of the work of each contractor, listing changes in the previously issued Certificates of Substantial Completion of the Work and recommending the times within which contractors shall complete uncompleted items on their Certificate of Substantial Completion of the work. 16.2.2.16 Following the architect's issuance of a Certificate of Substantial Completion of the Project or designated portion thereof, evaluate the completion of the work of the contractors and make recommendations to the architect, engineer and Chase when work is ready for final inspection. Assist the architect, engineer and Chase in conducting final inspections. Secure and transmit to Chase required guarantees, affidavits, releases, bonds and waivers. Deliver all keys, manuals, record drawings and maintenance stocks to Chase. 16.2.2.17 The extent of the duties, responsibilities and limitations of authority of Axiom as a representative of Chase during construction shall not be modified or extended without the written consent of Chase and Axiom, which consent shall not be unreasonably withheld. 16.2.2.18 Axiom shall prepare and distribute, at a minimum, monthly construction schedule updates. After an evaluation of the actual progress as observed by Axiom; schedule activities shall then be assigned percentage-complete values in conjunction with the Contractor. The report shall reflect actual progress as compared to schedule progress noting variances (if any) as negative float. This report shall also be the basis for determining implementation of certain Chase prerogatives concerning progress of the Project, when required. 16.2.2.19 Axiom shall be the recipient of all notices of claims by Contractors against Chase for additional cost or time due to any alleged cause. Axiom shall perform a preliminary evaluation of the contents of the claim, obtain factual information concerning the claim, and make recommendations to Chase. 16.2.2.19.1 Axiom shall analyze the claims for extension of time and impact cost, using the schedule reports. An impact evaluation report shall be prepared which shall reflect the actual impact to the schedule. The report shall also provide a narrative including a recommendation for action to Chase. 16.2.2.19.2 Axiom shall prepare estimates based on the alleged cause of claims submitted by the Contractor and Axiom shall prepare alternate estimates based on varying scenarios of the claim cause. These estimates shall be transmitted to Chase and shall be used in claim rulings and negotiations. 16.2.2.19.3 Axiom shall negotiate claims with the Contractor on behalf of Chase at Chase's instructions. Axiom shall make a final recommendation to Chase concerning settlement or other appropriate action. 24 16.2.3 POST CONSTRUCTION SERVICES: 16.2.3.1 Occupancy Permit (Building Department Sign-off). Axiom shall obtain for Chase the necessary occupancy permits. This task may encompass accompanying governmental officials during inspections of the facility, assist in preparing and submitting proper documentation to the appropriate approving agencies, assisting in final testing and other necessary and reasonable activities. 16.2.3.2 Support of Chase's Furniture/Equipment Installation Activities. Axiom shall assist Chase's Furniture and Fine Arts Group as requested to prepare requests for proposals, solicit quotes, prepare contracts, obtain execution of contracts, conduct pre-moving conferences and administer the contract for moving activities in conjunction with move-in for the Project. Axiom shall provide on-site personnel to oversee the relocation of all furniture, equipment, and other articles by the movers while actual move-in is in progress. Axiom shall make a final report to Chase concerning the move-in and make recommendations as to payment to the movers. 16.2.3.3 Move-in Coordination. Axiom shall prepare an occupancy plan which shall include a schedule indicating critical interfaces for relocation of furniture, equipment, new furniture and equipment and the relocation of Chase's personnel. This schedule shall be distributed to the moving contractors, Chase's affected departments, and other appropriate parties. Axiom shall prepare and distribute reports associated with move-in occupancy plan and other contracts as required by Chase. 16.2.3.4 Claims Evaluation. Axiom shall continue to evaluate any remaining Contractor claims during the Post-Construction Phase. 16.2.3.5 Final Project Report. At the conclusion of the project, Axiom shall prepare final Project accounting and close-out reports of all above indicated report systems. These reports shall summarize for historical purposes any items which are not self-explanatory. 16.2.3.6 Warranty Period. During the warranty period of the Project, Axiom shall conduct warranty inspections every three months and shall report deficiencies which should be covered by the warranty. 16.2.4 CONSTRUCTION COSTS 16.2.4.1 Construction Cost shall be the total of the final contract sums of all separate contracts including general conditions, and other approved Reimbursable Costs relating to the Project. 16.2.4.2 Construction Cost does not include the compensation of the architect and engineer and the architect's and engineer's consultants, the cost of the land, rights-of-way or other costs which are the responsibility of Chase unless Chase specifically requires Axiom to manage and provide those services. 25 This Agreement entered into as of the day and year first written above. CHASE AXIOM The Chase Manhattan Bank /s/ Walter E. Mystkowski /s/ Philip Rogers - ---------------------------- -------------------------------- Walter E. Mystkowski Philip Rogers Senior Vice President Senior Vice President 26 EX-11 11 EXHIBIT 11 GRUBB & ELLIS COMPANY AND SUBSIDIARIES EXHIBIT (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS - FORM 10-Q for the three and six months periods ended December 31, 1996 and 1995 (Unaudited) (in thousands, except for shares and per share amounts)
Three Months Six Months Ended December 31, Ended December 31, -------------------------- ------------------------- 1996 1995 1996 1995 ----------- ----------- ---------- ---------- Primary income per share applicable to Common Stock: Weighted average common shares and equivalents outstanding 13,334,656 8,827,675 12,669,232 8,850,416 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- Net income $ 8,723 $ 5,332 $ 10,019 $ 5,928 Earnings applicable to Preferred Stock (636) (723) (1,431) (1,446) ----------- ----------- ---------- ---------- Net income applicable to Common Stockholders $ 8,087 $ 4,609 $ 8,588 $ 4,482 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- Net income per common shares and equivalents applicable to Common Stock - From operations $ .35 $ .42 $ .43 $ .42 From extraordinary gain .27 - .28 - ----------- ----------- ---------- ---------- $ .62 $ .42 $ .71 $ .42 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- Fully-diluted income per share applicable to Common Stock: Weighted average common shares and equivalents outstanding 17,343,642 8,827,675 17,366,724 8,850,416 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- Net income applicable to Common Stockholders $ 8,087 $ 4,609 $ 8,588 $ 4,482 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ---------- Net income per common share and equivalents applicable to Common Stock - From operations $ .30 $ .32 $ .37 $ .36 From extraordinary gain .20 - .21 - ----------- ----------- ---------- ---------- $ .50 $ .32 $ .58 $ .36 ----------- ----------- ---------- ---------- ----------- ----------- ---------- ----------
25 EX-27 12 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 28,530 0 8,308 3,001 0 38,493 21,239 16,411 45,659 25,668 0 0 0 170 99,280 45,659 0 120,438 0 61,153 51,450 0 1,325 6,510 67 6,443 0 3,576 0 10,019 .71 .58 INTEREST INCOME AND OTHER INCOME, NET ARE INCLUDED UNDER TOTAL REVENUES.
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