Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to Section 240.14a-12
Grubb & Ellis Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ
No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11:
1)
Title of each class of securities to which transaction applies:
N/A
2)
Aggregate number of securities to which transaction applies:
N/A
3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4)
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
You are cordially invited to attend the Annual Meeting of
Stockholders of Grubb & Ellis Company to be held on
Wednesday, December 3, 2008, at 8:00 a.m. Eastern
Standard Time, at The Four Seasons Hotel, 2800 Pennsylvania
Ave., N.W., Washington, D.C.20007.
At the Annual Meeting you will be asked
to: (i) elect three (3) Class A
directors, each to serve for a three-year term; (ii) ratify
the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year
ending December 31, 2008; and (iii) transact such
other business as may properly come before the Annual Meeting or
any adjournments.
The Board of Directors unanimously recommends that you vote
FOR the proposals listed above. We encourage you to read
the accompanying Proxy Statement, including Annex A,
which provides information about Grubb & Ellis Company
and the election of directors to be considered at the Annual
Meeting.
It is important that your shares be represented at the Annual
Meeting. Whether or not you plan to attend the Annual Meeting,
you are requested to vote via mail, the Internet or by telephone
by following the Instructions included with your WHITE
proxy card. Returning the WHITE proxy card, or voting
via the Internet or telephone, will not deprive you of your
right to attend the Annual Meeting and vote your shares in
person. If you attend the Annual Meeting and prefer to vote in
person, you may do so.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of Grubb & Ellis Company will be held on Wednesday,
December 3, 2008, at 8:00 a.m. Eastern Standard
Time, at The Four Seasons Hotel, 2800 Pennsylvania Ave., N.W.,
Washington, D.C.20007 for the following purposes, all of
which are more completely set forth in the accompanying Proxy
Statement:
1. To elect three (3) Class A directors to serve
for a term of three (3) years expiring in 2011 and until
their successors are elected and qualified;
2. To ratify the appointment by the Board of Directors of
Grubb & Ellis Company of Ernst & Young LLP
as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2008; and
3. To transact such other business as may properly come
before the Annual Meeting and any adjournments of the meeting.
Stockholders of record at the close of business on
November 3, 2008 are entitled to notice of and to vote at
the Annual Meeting and at any adjournments of the meeting.
By Order of the Board of Directors
Gary H. Hunt Interim Chief Executive Officer
Santa Ana, CA
November , 2008
This Proxy Statement and accompanying WHITE proxy card
are being mailed beginning November [ ], 2008 in
connection with the solicitation of proxies by the Board of
Directors of Grubb & Ellis Company, a Delaware
corporation, for use at the 2008 Annual Meeting of Stockholders,
which we may refer to alternatively as the “Annual
Meeting” or the “Annual Meeting of Stockholders.”
We may refer to ourselves in this Proxy Statement alternatively
as “Grubb & Ellis,” the “Company,”“we,”“us” or “our” and we may
refer to our Board of Directors as the “Board.”
C:
IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU
OWN. EVEN IF YOU PLAN TO BE PRESENT IN PERSON, YOU ARE URGED TO
VOTE YOUR COMMON SHARES VIA MAIL, THE INTERNET OR BY TELEPHONE
BY FOLLOWING THE INSTRUCTIONS INCLUDED WITH YOUR WHITE
PROXY CARD. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR
IN PERSON AT ANY TIME PRIOR TO ITS EXERCISE.
(i) The election of three (3) Class A directors
for a term of three (3) years expiring in 2011 and until
their successors are elected and qualified; (ii) the
ratification of the appointment by the Board of Directors of
Grubb & Ellis Company (the “Board” or
“Board of Directors”) of Ernst & Young LLP
as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2008; and
(iii) the transaction of such other business as may
properly come before the Annual Meeting and any adjournments of
the such meeting.
2.
Q:
What are the Board’s recommendations?
A:
The Board recommends a vote:
• FORelection of the nominated slate of
directors (see Proposal No. 1); and
• FOR ratification of the selection of
Ernst & Young, LLP, an independent registered public
accounting firm, to be our independent registered public
accounting firm for the fiscal year ending December 31,2008 (see Proposal No. 2).
Unless you give other instructions on your WHITE proxy
card, the persons named as proxy holders on the WHITE
proxy card will vote in accordance with the recommendations
of the Board.
3.
Q:
How are directors nominated?
A:
Our Bylaws provide that nominations for director are made by
written notice to the Secretary of the Company at least
14 days before the stockholders’ meeting at which
directors are to be elected. On recommendation of the
Company’s Corporate Governance & Nominating
Committee, the Board of Directors nominated the candidates
listed in this proxy statement. The Board has no reason to
believe that any nominee will be unable to serve as a director
of the Company. If someone is nominated and becomes unable to
serve, then your signed WHITE proxy card will authorize
Richard W. Pehlke and Andrea R. Biller, officers of the Company
who are the proxy holders, to nominate someone else.
4.
Q:
Who has the right to vote?
A:
All common stockholders as of the close of business on
November 3, 2008 can vote. On that date, there were
[ ]
outstanding shares of common stock of the Company. Each share of
common stock is entitled to one vote. A quorum will exist for
the meeting if at least a majority of the outstanding shares of
common stock are represented at the meeting in person and/or by
proxy.
5.
Q:
How do I vote?
A:
If you have an account “on record” at Computershare
Investor Services, L.L.C., our stock transfer agent and
registrar (“Computershare”), or if you have
Grubb & Ellis shares in your 401(k) plan account, you
can vote in any of these ways:
(a): Return the WHITE proxy card: Mark the
boxes that show how you want to vote, sign and date each
WHITE proxy card you receive and return it in the prepaid
envelope. If you return your signed WHITE proxy card but
do not mark the boxes showing how you wish to vote, your shares
will be voted FOR the nominees listed on the card.
(b): By telephone: Call toll-free
1-800-652-VOTE
(8683) in the United States, Canada and Puerto Rico any
time prior to 1:00 A.M., Central Time, on December 3,2008 from a touchtone telephone, then follow the instructions to
cast your vote. If you vote by telephone, please do not mail
back your WHITE proxy card.
(c): On the Internet: Go to the following website
prior to 1:00 A.M., Central Time, on December 3, 2008:
www.investorvote.com/GBE and then follow
the instructions outlined no the secured website. If you vote on
the internet, please do not mail back your WHITE proxy
card.
Revoking your WHITE proxy card: You can cancel
your vote by mailing another WHITE proxy card with a
later date, telephoning to re-vote, or logging onto the Internet
and re-voting. You can also:
(1) attend the meeting and vote by ballot; or
(2) send written notice to the Secretary of the Company
canceling your vote.
If you hold shares in a brokerage account, you must follow the
instructions you received with this proxy statement for voting
and/or canceling your vote.
6.
Q:
What does it mean if I get more than one WHITE proxy card
from the Company?
A:
You should vote on each WHITE proxy card you receive. If
you are a record stockholder, have an account “on
record” with Computershare, or if you hold
Grubb & Ellis shares in your 401(k) plan account, you
will receive a WHITE proxy card with a reply envelope
addressed to Computershare. For any accounts held in different
ways, such as jointly with another person or in trust, you will
receive separate WHITE proxy cards. If you have more than
one account at Computershare and wish to consolidate the
accounts, or if you share the same address as other
Grubb & Ellis stockholders and wish to receive only
one set of stockholder materials for your household, such as
proxy statements and annual reports to stockholders, please call
Stockholder Services at Computershare at
312-360-5256.
If you hold shares in a stock brokerage account, you will
receive a WHITE proxy card or information about other
methods of voting from your broker and you should send your vote
to your broker according to the broker’s instructions. If
you do not vote your 401(k) plan shares, the plan trustee,
Fidelity Management Trust Company, will not vote your
shares.
7.
Q:
Who will count the votes?
A:
Computershare will act as inspector of election and tabulate the
votes.
8.
Q:
What vote is needed to elect a director?
A:
An affirmative vote in favor of a nominee by the holders of a
majority of the shares of common stock present in person or by
proxy at the Annual Meeting once a quorum has been established
is needed to elect a director. A quorum will exist for the
meeting if at least a majority of the outstanding shares of
common stock are represented at the meeting in person and/or by
proxy. Cumulative voting is not permitted.
Where a proxy card has been voted “abstain,”“withhold authority,” or “broker non-vote,”
the shares are counted for quorum purposes, but are not
considered cast for voting on a proposal or an election.
“Broker non-vote” means that shares are held by a
broker or in nominee name and the broker or nominee has signed
and returned the WHITE proxy card to us, but for which
the broker has no authority to vote because no instructions have
been received from its customer.
9.
Q:
What vote is needed to approve the ratification of the
appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for the fiscal
year ending December 31, 2008?
A:
Approval of the ratification of Ernst & Young LLP as
the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2008 requires the
affirmative vote of the holders of a majority of the shares of
common stock present in person or by proxy at the Annual Meeting
once a quorum has been established. A quorum will exist for the
meeting if at least a majority of the outstanding shares of
common stock are represented at the meeting in person and/or by
proxy.
Who is soliciting my vote and how much does it cost the
Company?
A:
Our Board of Directors is asking you to vote in favor of the
nominees for directors who were selected by the Board and
identified in this proxy statement and to vote in favor of the
ratification of the appointment of Ernst & Young LLP
as the Company’s independent registered public accounting
firm. MacKenzie Partners, Inc. was engaged to assist in
distribution of the proxy materials to holders of stock
brokerage accounts, at a fee of
[ ]
plus reimbursement of fees. Also, our employees and
directors may solicit proxies as part of their assigned duties,
at no extra compensation. The Company will pay the expenses
related to this proxy solicitation.
11.
Q:
How can I, as a stockholder, arrange for a proposal to
be included in next year’s Company proxy statement?
A:
For your proposal to be considered for inclusion in next
year’sproxy statement, you can submit a proposal
in writing to our Corporate Secretary at our headquarters by
July 7, 2009. If you are eligible to submit the proposal,
and if it is an appropriate proposal under proxy rules of the
Securities and Exchange Commission (“SEC”) and our
Bylaws, it will be included.
12.
Q:
Will my proxy confer discretionary authority to vote on
stockholder proposals next year?
A:
If we receive notice of a stockholder proposal after
July 7, 2009 and before September 20, 2009, then the
proposal does not need to be included in next year’s proxy
statement and the proxy holders would have discretionary
authority to vote on the matter only under certain
circumstances, and only if the matter is included in the proxy
statement. If we receive notice of a stockholder proposal after
September 20, 2009, then the proxy holders can vote on such
a proposal in their discretion based upon the signed WHITE
proxy cards which have been returned to us, but the matter
will not be discussed in the proxy statement and will not be
listed on the WHITE proxy card (because the submission
deadline will have been missed).
13.
Q:
What is the “householding” of annual disclosure
documents?
A:
Only one copy of this Proxy Statement is being sent to an
address shared by more than one stockholder unless we have
received contrary instructions. This practice, known as
“householding,” is designed to reduce our printing and
mailing costs. If any stockholder residing at such an address
wishes to receive a separate copy of this Proxy Statement, he or
she may contact the Company’s Executive Vice President,
General Counsel and Secretary at Grubb & Ellis
Company, Attn: Andrea R. Biller, Executive Vice President,
General Counsel and Secretary of the Company,
1551 N. Tustin Ave., Suite 300, Santa Ana, CA92705 or by phone at
(714) 667-8252
and the Company shall promptly deliver a copy of this Proxy
Statement to the requesting stockholder. Any such stockholder
may also contact the Company’s Executive Vice President,
General Counsel and Secretary using the above contact
information if he or she would like to receive separate Proxy
Statements in the future. If you are receiving multiple copies
of this Proxy Statement, you may request householding in the
future by contacting our Executive Vice President, General
Counsel and Secretary of the Company using the above contact
information.
14.
Q
Who can help answer my questions?
A.
If you would like to ask questions, you should call our proxy
solicitator: MacKenzie Partners, Inc., 105 Madison Avenue, NewYork, New York10016, Email: proxy@mackenziepartners.com, Call
Collect: (212) 929-5500, Call Toll-Free: (800) 322-2885.
On October 26, 2008, the Board of Directors voted to
nominate Harold H. Greene, Devin I. Murphy and D. Fleet Wallace
for election at the Annual Meeting. Our board of directors is
divided into three classes, with each director in each class
serving for a three-year, staggered term. The Board of Directors
currently consists of eight (8) members, classified into
three classes as follows: Glenn L. Carpenter, Gary H. Hunt and
Robert J. McLaughlin constitute a class with a term
ending in 2009 (the “Class B directors”);
C. Michael Kojaian and Rodger D. Young constitute a
class with a term ending in 2010 (the “Class C
directors”); and Harold H. Greene, Devin I. Murphy and D.
Fleet Wallace constitute a class with a term ending at the
upcoming Annual Meeting (the “Class A
directors”). The Board is currently seeking to fill the
ninth
(9th)
director seat, which is a Class C board seat that became
vacant as a consequence of a series of events that occurred
subsequent to the Company’s 2007 Annual Meeting.
Specifically, in July 2008, the Board of Directors, after
conducting a search, appointed Devin I. Murphy as the
Class C director to fill the vacancy resulting from the
resignation of a Class C director in February 2008.
Simultaneously with Mr. Murphy’s appointment as a
Class C director, a Class A board seat became vacant
as a result of the resignation of the Company’s chief
executive officer, who was also a Class A director of the
Company. Having not yet identified a ninth
(9th)
director, after deliberation, and in light of corporate
governance considerations, the Board of Directors on
October 26, 2008 decided that it was in the
stockholders’ best interests to re-designate
Mr. Murphy as a Class A director in order to provide
the Company’s stockholders with an opportunity to vote with
respect to Mr. Murphy’s candidacy as a Board member.
In order to accommodate the Board’s desire to have the
stockholders vote on his election at the Annual Meeting, on
October 26, 2008 Mr. Murphy resigned as a Class C
director and was immediately reappointed by the Board as a
Class A director to fill the Class A vacancy.
As nominees to serve as Class A directors, each of Harold
H. Greene, Devin I. Murphy and D. Fleet Wallace, if elected at
the Annual Meeting, will serve for a term of three (3) years
until the 2011 Annual Meeting of Stockholders and until their
respective successors are elected and qualified. The
Class B directors (Glenn L. Carpenter, Gary H.
Hunt and Robert J. McLaughlin) and the Class C directors
(C. Michael Kojaian and Rodger D. Young) will serve until the
Annual Meetings of Stockholders to be held in 2009 and 2010,
respectively, and until their respective successors have been
elected and qualified.
Unless authority to vote for any of these nominees is withheld,
the shares represented by the enclosed proxy will be voted
FOR the election of Harold H. Greene, Devin I. Murphy and
D. Fleet Wallace as directors. In the event that any nominee
becomes unable or unwilling to serve, the shares represented by
the enclosed proxy will be voted for the election of such other
person as the Board of Directors may recommend in his or her
place. We have no reason to believe that any nominee will be
unable or unwilling to serve as a director.
An affirmative vote in favor of a nominee by the holders of a
majority of the shares of common stock present in person or by
proxy at the Annual Meeting once a quorum has been established
is needed to elect a director. A quorum will exist for the
meeting if at least a majority of the outstanding shares of
common stock are represented at the meeting in person
and/or by
proxy. Cumulative voting is not permitted.
The Board Of Directors Recommends The Election Of Harold H.
Greene, Devin I. Murphy and D. Fleet Wallace As
Class A Directors, And Proxies Solicited By The Board Will
Be Voted In Favor Thereof Unless A Stockholder Has Indicated
Otherwise On The Proxy.
Information
as to Nominees and Other Directors
The following table lists our Board of Directors’ nominees
for election as Class A directors and our current
directors. Additional information regarding the members of our
Board of Directors can be found in
Annex A to this Proxy Statement. Also in the table is each
person’s age as of November 1, 2008, the periods
during which that person has served as one of our directors, and
positions currently held with us.
Age at
Director Nominees for
November 1,
Director
Expiration
a Three-Year Term:
2008
Since
of Term
Position
Harold H. Greene
69
2007
2008
Director
Devin I. Murphy
48
2008
2008
Director
D. Fleet Wallace
40
2007
2008
Director
Continuing Directors:
Glenn L. Carpenter
65
2007
2009
Chairman of the Board
Gary H. Hunt
59
2007
2009
Director and Interim CEO
C. Michael Kojaian
47
1996
2010
Director
Robert J. McLaughlin
75
2004
2009
Director
Rodger D. Young
62
2003
2010
Director
Biographical
Information
Provided below is a brief description of the principal
occupation for the past five years of each of our director
nominees and continuing directors.
Director
Nominees:
Harold H. Greene has served as a director of the Company
since December 2007. Mr. Greene also had served as a
director of NNN Realty Advisors, Inc. from November 2006 to
December 2007. Mr. Greene is a
40-year
veteran of the commercial and residential real estate lending
industry. He most recently served as the Managing Director for
Bank of America’s California Commercial Real Estate
Division from 1998 to his retirement in 2001, where he was
responsible for lending to commercial real estate developers in
California and managed an investment portfolio of approximately
$2.6 billion. From 1990 to 1998, Mr. Greene was the
Executive Vice President of SeaFirst Bank in Seattle, Washington
and prior to that he served as the Vice Chairman of MetroBank
from 1989 to 1990 and in various positions, including Senior
Vice President in charge of the Asset Based Finance Group, with
Union Bank, where he worked for 27 years. Mr. Greene
currently serves as a director of Gary’s and Company
(men’s clothing retailer), as a director and member of the
audit committee of Paladin Realty Income Properties, Inc., and
as a director and member of the audit, compensation and
nominating and corporate governance committees of William Lyon
Homes. Mr. Green’s business address is
c/o Grubb
& Ellis Company, 1551 N. Tustin Avenue, Suite 300, SantaAna, California92705.
Devin I. Murphy has served as a director of the Company
since July 2008. He is a Managing Partner of Coventry Real
Estate Advisors, LLC, a real estate private equity firm which
sponsors opportunistic institutional investment funds that
acquire and develop retail and mixed-used properties. Prior to
joining Coventry Real Estate Advisors, LLC earlier this year,
Mr. Murphy was the Global Head of Real Estate Investment
Banking at Deutsche Bank Securities, Inc. from 2004 to 2007.
From 1993 through 2007, he was at Morgan Stanley &
Company in a variety of real estate and investment banking
roles, including as Co-Head North American Real Estate
Investment Banking and Global Head of the firm’s Real
Estate Private Capital Markets Group. Mr. Murphy served on the
investment committee of the Morgan Stanley Real Estate funds for
10 years during which time the fund invested over $35
billion. Mr. Murphy’s business address is c/o Coventry
Real Estate Advisors, LLC, 1 East 52nd Street, New York,
New York10022. Mr. Murphy’s business address is c/o
Coventry Real Estate Advisors, LLC, 1 East 52nd Street, NewYork, New York10022.
D. Fleet Wallace has served as a director of the
Company since December 2007. Mr. Wallace also had served as
a director of NNN Realty Advisors, Inc. from November 2006 to
December 2007. Mr. Wallace is a principal and co-founder of
McCann Realty Partners, LLC, an apartment investment company
focusing on garden apartment properties in the Southeast formed
in October 2004. Mr. Wallace also serves as principal of
Greystone Capital Management, LLC, formed in September 2001, and
helps manage Greystone Fund, L.P. Greystone Fund, L.P. is a
professionally managed opportunity fund invested primarily in
promising venture
capital opportunities and distressed assets. From April 1998 to
August 2001, Mr. Wallace served as corporate counsel and
assistant secretary of United Dominion Realty Trust, Inc., a
publicly-traded real estate investment trust. From September
1994 to April 1998, Mr. Wallace was in the private practice
of law with McGuire Woods in Richmond, Virginia.
Mr. Wallace has also served as a Trustee of G REIT
Liquidating Trust since January 2008. Mr. Wallace’s
business address is c/o McCann Realty Partners, LLC, 2520-B
Gaskins Road, Richmond, Virginia23238-1482.
Continuing
Directors:
Glenn L. Carpenter has served as a director of the
Company since December 2007 and has served as Chairman of the
Board of the Company since February 8, 2008.
Mr. Carpenter also had served as a director of NNN Realty
Advisors, Inc. from November 2006 to December 2007. Since August
2001, Mr. Carpenter has served as the Chief Executive
Officer, President and Chairman of FountainGlen Properties, LP,
a privately held company in Newport Beach, California, that
develops, owns and operates apartment communities for active
seniors. Prior to serving with FountainGlen, from 1994 to 2001,
Mr. Carpenter was the Chief Executive Officer and founder
of Pacific Gulf Properties Inc., a publicly traded REIT that
developed and operated industrial business parks and various
types of apartment communities. From 1970 to 1994,
Mr. Carpenter served as Chief Executive Officer and
President, and other officer positions of Santa Anita Realty
Enterprises Inc., a publicly traded REIT that owned and managed
industrial office buildings, apartments and shopping centers. He
has received numerous honors in the real estate field including
the 2000 Real Estate Man of the Year Award and was voted the
1999 Orange County Entrepreneur of the Year for real estate.
Mr. Carpenter sits on the board of councilors of the School
of Gerontology at the University of Southern California and is a
council and executive board member of the American Seniors
Housing Association. Mr. Carpenter’s business address is
c/o FountainGlen
Properties, 320 Commerce Drive, Suite 100, Irvine, California92602.
Gary H. Hunt has served as a director of the Company
since December 2007 and as the Company’s Interim Chief
Executive Officer since July 2008. Mr. Hunt also had served
as a director of NNN Realty Advisors, Inc. from November 2006 to
December 2007. Mr. Hunt has served as the managing partner
of California Strategies, LLC, a privately held consulting firm
in Irvine, California that works with large homebuilders, real
estate companies and government entities since 2001. Prior to
serving with California Strategies, Mr. Hunt was the
executive vice president and served on the board of directors
and on the Executive Committee of the Board of The Irvine
Company, a
110-year-old
privately held company that plans, develops and invests in real
estate primarily in Orange County, California for 25 years.
He also serves on the board of directors of Glenair Inc., The
Beckman Foundation and William Lyon Homes. Mr. Hunt has
also served as a Trustee of G REIT Liquidating Trust since
January 2008. Mr. Hunt’s business address is c/o Grubb
& Ellis Company, 1551 N. Tustin Avenue, Suite 300, SantaAna, California92705.
C. Michael Kojaian has served as a director of the
Company since December 1996, and served as the Chairman of the
Board of Directors of the Company from June 2002 until
December 7, 2007. He has been the President of Kojaian
Ventures, L.L.C. and also Executive Vice President, a director
and a stockholder of Kojaian Management Corporation, both of
which are investment firms headquartered in Bloomfield Hills,
Michigan, since 2000 and 1985, respectively. He is also a
director of Arbor Realty Trust, Inc. Mr. Kojaian’s business
address is
c/o The
Kojaian Companies, 39400 Woodward Avenue, Suite 250, BloomfieldHills, Michigan48304-2876
Robert J. McLaughlin has served as a director of the
Company since July 2004. Mr. McLaughlin previously served
as a director of the Company from September 1994 to March 2001.
He founded The Sutter Group in 1982, a management consulting
company that focuses on enhancing stockholder value, and
currently serves as its President. Previously,
Mr. McLaughlin served as President and Chief Executive
Officer of
Tru-Circle
Corporation, an aerospace subcontractor, from November 2003 to
April 2004, and as Chairman of the Board of Directors of
Imperial Sugar Company from August 2001 to February 2003, and as
Chairman and Chief Executive Officer from October 2001 to April
2002. Mr. McLaughin’s business address is
c/o Grubb
& Ellis Company, 1551 N. Tustin Avenue, Suite 300, SantaAna, California92705.
Rodger D. Young has served as a director of the Company
since April 2003. Mr. Young has been a name partner of the
law firm of Young & Susser, P.C., a boutique firm
specializing in commercial litigation with offices in
Southfield, Michigan and New York City, since its founding in
1991. In 2001, Mr. Young was named Chairman of the Bush
Administration’s Federal Judge and U.S. Attorney
Qualification Committee by Governor John Engler and
Michigan’s Republican Congressional Delegation.
Mr. Young is a member of the American College of Trial
Lawyers and was listed in the 2008 edition of Best Lawyers of
America. Mr. Young was named by Chambers International and
by Best Lawyers in America as one of the top commercial
litigators in the United States. Mr. Young’s business
address is c/o Young & Susser, P.C., Westview Office
Center, 26200 American Drive, Suite 305, Southfield, Michigan48034.
C:
CORPORATE
GOVERNANCE
Meetings
For the year ended December 31, 2007, our Board of
Directors held 31 meetings. Each incumbent director
attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors held during the
period that the individual served and (ii) the total number
of meetings held by all committees of the Board on which the
director served during the period that the individual served.
Independent
Directors
The Board has determined that seven of its eight current
directors, Messrs. Carpenter, Greene, Kojaian, McLaughlin,
Murphy, Wallace and Young are independent. During the year ended
December 31, 2007, Mr. Hunt was also considered
independent. However, Mr. Hunt is not currently considered
independent under New York Stock Exchange (“NYSE”)
listing requirements because he is currently serving as the
Company’s interim Chief Executive Officer until a permanent
chief executive officer is appointed.
For purposes of determining the independence of its directors,
the Board applies the following criteria:
No
Material Relationship
The director must not have any material relationship with the
Company. In making this determination, the Board considers all
relevant facts and circumstances, including commercial,
charitable and familial relationships that exist, either
directly or indirectly, between the director and the Company.
Employment
The director must not have been an employee of the Company at
any time during the past three years. In addition, a member of
the director’s immediate family (including the
director’s spouse; parents; children; siblings; mothers-,
fathers-, brothers-, sisters-, sons- and
daughters-in-law;
and anyone who shares the director’s home, other than
household employees) must not have been an executive officer of
the Company in the prior three years.
Other
Compensation
The director or an immediate family member must not have
received more than $100,000 per year in direct compensation from
the Company, other than in the form of director fees, pension or
other forms of deferred compensation during the past three years.
Auditor
Affiliation
The director must not be a current partner or employee of the
Company’s internal or external auditor. An immediate family
member of the director must not be a current partner of the
Company’s internal or external auditor, or an employee of
such auditor who participates in the auditor’s audit,
assurance or tax compliance (but not tax planning) practice. In
addition, the director or an immediate family member must not
have been
within the last three years a partner or employee of the
Company’s internal or external auditor who personally
worked on the Company’s audit.
Interlocking
Directorships
During the past three years, the director or an immediate family
member must not have been employed as an executive officer by
another entity where one of the Company’s current executive
officers served at the same time on the compensation committee.
Business
Transactions
The director must not be an employee of another entity that,
during any one of the past three years, received payments from
the Company, or made payments to the Company, for property or
services that exceed the greater of $1 million or 2% of the
other entity’s annual consolidated gross revenues. In
addition, a member of the director’s immediate family must
not have been an executive officer of another entity that,
during any one of the past three years, received payments from
the Company, or made payments to the Company, for property or
services that exceed the greater of $1.0 million or 2% of
the other entity’s annual consolidated gross revenues.
Audit
Committee
The Audit Committee of the Board is a separately designated
standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934
as amended (the “Exchange Act”) and the rules
thereunder. The Audit Committee operates under a written charter
adopted by the Board of Directors. The charter of the Audit
Committee was last revised effective January 28, 2008 and
is available on the Company’s website at
www.grubb-ellis.com. Printed copies of the charter
of the Audit Committee may be obtained upon request by
contacting Investor Relations, Grubb & Ellis Company,
1551 North Tustin Avenue, Suite 300, Santa Ana, California92705. The members of the Audit Committee at year end
December 31, 2007 and currently are Robert McLaughlin,
Chair, Harold H. Greene and D. Fleet Wallace. The Board has
determined that the members of the Audit Committee are
independent under the NYSE listing requirements and the Exchange
Act and the rules thereunder, and that Mr. McLaughlin is an
audit committee financial expert in accordance with rules
established by the SEC. For the year ended December 31,2007, the Audit Committee held ten (10) meetings.
Compensation
Committee
The Board of Directors has delegated to the Compensation
Committee, a separately designated standing committee, oversight
responsibilities for the Company’s executive compensation
programs.
The Compensation Committee determines the policy and strategies
of the Company with respect to executive compensation taking
into account certain factors that the Compensation Committee
deems appropriate such as (a) compensation elements that
will enable the Company to attract and retain executive officers
who are in a position to achieve the strategic goals of the
Company which are in turn designed to enhance stockholder value,
and (b) the Company’s ability to compensate its
executives in relation to its profitability and liquidity.
The Compensation Committee approves, subject to further, final
approval by the full Board of Directors, (a) all
compensation, arrangements and terms of employment, and any
material changes to the compensation arrangements or terms of
employment, for the named executive officers (“NEO”)
and certain other key employees (including employment agreements
and severance arrangements), and (b) the establishment of,
and changes to, equity-based awards programs. In addition, each
calendar year, the Compensation Committee approves the annual
incentive goals and objectives of each named NEO and certain
other key employees, evaluates the performance of each NEO and
certain other key employees against the approved performance
goals and objectives applicable to him or her, determines
whether and to what extent any incentive awards have been earned
by each NEO, and makes recommendations to the Company’s
Board of Directors regarding the approval of incentive awards.
Consistent with the Compensation Committee’s objectives,
the Company’s overall compensation program is structured to
attract, motivate and retain highly qualified executives by
paying them competitively and tying their compensation to the
Company’s success as a whole and their contribution to the
Company’s success.
The Compensation Committee also provides general oversight of
the Company’s employee benefit and retirement plans.
The members of the Compensation Committee at the year ended
December 31, 2007 were Glenn L. Carpenter, Chair,
Gary H. Hunt, Robert J. Mclaughlin and Rodger D. Young. In
February, 2008 when Mr. Carpenter became Chairman of the
Board, he resigned from the Compensation Committee,
Mr. Hunt became the Chairman of the Compensation Committee
and Mr. Wallace joined the Compensation Committee. In July
2008, when Mr. Hunt became the Company’s Interim Chief
Executive Officer, he resigned from the Compensation Committee,
Mr. Wallace became the Chairman of the Compensation
Committee and Mr. Kojaian joined the Compensation
Committee. Accordingly, the current members of the Compensation
Committee are Mr. Wallace, Chair, Mr. Kojaian,
Mr. McLaughlin and Mr. Young. The Board has determined
that the members of the Compensation Committee are independent
under the NYSE listing requirements and the Exchange Act and the
rules thereunder. For the year ended December 31, 2007, the
Compensation Committee held seven (7) meetings. The Compensation
Committee operates under a written charter adopted by the full
Board and revised effective December 10, 2007, which is
available on the Company’s website at
www.grubb-ellis.com. Printed copies may be
obtained upon request by contacting Investor Relations,
Grubb & Ellis Company, 1551 North Tustin Avenue,
Suite 300, Santa Ana, California92705.
Corporate
Governance and Nominating Committee
The functions of the Company’s Corporate Governance and
Nominating Committee, a separately designated standing
committee, are to assist the Board with respect to:
(i) director qualification, identification, nomination,
independence and evaluation; (ii) committee structure,
composition, leadership and evaluation; (iii) succession
planning for the CEO and other senior executives; and
(iv) corporate governance matters. The members of the
Corporate Governance and Nominating Committee at the year ended
December 31, 2007, were Rodger D. Young, Chair, Harold H.
Greene and Gary H. Hunt. In July 2008 when Mr. Hunt became
the Company’s Interim Chief Executive Officer, he resigned
from the Corporate Governance and Nominating Committee and C.
Michael Kojaian joined the Corporate Governance and Nominating
Committee. Accordingly, the current members of the Corporate
Governance and Nominating Committee are Mr. Young, Chair,
Mr. Greene and Mr. Kojaian. The Board has determined
that Messrs. Young, Greene and Kojaian are independent
under the NYSE listing requirements and the Exchange Act and the
rules thereunder. For the year ended December 31, 2007, the
Corporate Governance and Nominating Committee held four (4)
meetings. The Corporate Governance and Nominating Committee
operates under a written charter adopted by the Board, which is
available on the Company’s website at
www.grubb-ellis.comaccess and printed copies of
which may be obtained upon request by contacting Investor
Relations, Grubb & Ellis Company, 1551 North Tustin
Avenue, Suite 300, Santa Ana, California92705.
Director
Nominations
Nominations by stockholders of persons for election to the Board
of Directors must be made pursuant to timely notice in writing
to our Secretary. To be timely, a stockholder’s notice
shall be delivered or mailed to and received at our principal
executive offices not less than fourteen (14) days nor more
than fifty (50) days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than twenty-one (21) days’
notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed to the
Secretary of the Company not later than the close of the seventh
(7th) day following the day on which notice of the meeting was
mailed to the stockholders. Such stockholder’s notice shall
set forth: (1) the name, age business address or, if known,
residence address of each proposed nominee; (2) the
principal occupation or employment of each proposed nominee;
(3) the name and residence of the Chairman of the Board for
notice by the Board of Directors, or the name and residence
address of the notifying shareholder for notice by said
shareholder; and (4) the total number of shares that to the
best of the knowledge and belief of the person giving the notice
will be voted for each of the proposed nominees.
The Corporate Governance and Nominating Committee considers
candidates for director who are recommended by its members, by
other Board members, by Stockholders and by management. The
Corporate Governance and Nominating Committee evaluates director
candidates recommended by Stockholders in the same way that it
evaluates candidates recommended by its members, other members
of the Board, or other persons. The Corporate Governance and
Nominating Committee considers all aspects of a candidate’s
qualifications in the context of our needs at that point in time
with a view to creating a Board with a diversity of experience
and perspectives. Among the qualifications, qualities and skills
of a candidate considered important by the Corporate Governance
and Nominating Committee are a commitment to representing the
long-term interests of the stockholders; an inquisitive and
objective perspective; the willingness to take appropriate
risks; leadership ability; personal and professional ethics,
integrity and values; practical wisdom and sound judgment; and
business and professional experience in fields such as finance
and accounting.
Communications
to the Board
Stockholders, employees and others interested in communicating
with any of the other directors of the Company may do so by
writing to such director,
c/o Andrea
R. Biller, Executive Vice President, General Counsel and
Corporate Secretary, Grubb & Ellis Company, 1551 North
Tustin Avenue, Suite 300, Santa Ana, California92705.
Corporate
Governance Guidelines
Effective July 6, 2006, the Board adopted corporate
governance guidelines to assist the Board in the performance of
its duties and the exercise of its responsibilities. The
Company’s Corporate Governance Guidelines are available on
the Company’s website at www.grubb-ellis.com and printed
copies may be obtained upon request by contacting Investor
Relations, Grubb & Ellis Company, 1551 North Tustin
Avenue, Suite 300, Santa Ana, California92705.
Director
Attendance at Annual Meetings
Our Board has adopted a policy under which each member of the
Board is strongly encouraged to attend each Annual Meeting of
our Stockholders. Two (2) directors attended the
Company’s 2007 Annual Meeting, because at such Annual
Meeting the merger with NNN Realty Advisors, Inc. (the
“Merger”) was also approved, and as a result most of
the Company’s then current directors were not continuing
with the Company after the Merger.
Executive
Officers of Grubb & Ellis Company
Gary H. Hunt has served as the Company’s Interim Chief
Executive Officer since July 2008. For information on
Mr. Hunt see “Information about the Directors”
above. Scott D. Peters served as the Company’s Chief
Executive Officer and President from December 2007 until July
2008 when he resigned. Information with regards to
Mr. Peters is presented below. The following are the
executive officers of the Company as of December 31, 2007:
Andrea R. Biller
58, has served as Executive Vice President, General Counsel and
Secretary of the Company since December 2007. She joined
Grubb & Ellis Realty Investors, LLC in March 2003 as
General Counsel and served as NNN Realty Advisors, Inc. General
Counsel, Executive Vice President and Secretary since November
2006 and director since December 2007. Ms. Biller also has
served as Executive Vice President and Secretary of
Grubb & Ellis Healthcare REIT, Inc. since April 2006,
Secretary of Grubb & Ellis Apartment REIT, Inc. since
January 2006. Ms. Biller served as Executive Vice
President of G REIT, Inc. from December 2005 to January
2008 and Secretary of G REIT, Inc. from June 2004 to
January 2008.
Ms. Biller served as Special Counsel at the Securities and
Exchange Commission, Division of Corporate Finance, in
Washington D.C. from
1995-2000,
and as a private attorney specializing in corporate and
securities law from
1990-1995
and
2000-2002.
Ms. Biller is licensed to practice law in California,
Virginia, and Washington, D.C
Jeffrey T. Hanson
37, has served as Chief Investment Officer of the Company since
January 2008. He has served as Chief Investment Officer of NNN
Realty Advisors, Inc. since November and joined NNN Realty
Advisors, Inc. in July 2006 as the President and Chief Executive
Officer of Triple Net Properties Realty, Inc. From 1996 to July
2006, Mr. Hanson was a Senior Vice President with the Grubb
and Ellis Institutional Investment Group in Grubb &
Ellis’ Newport Beach office. Mr. Hanson served as a
real estate broker with CB Richard Ellis from 1996 to 1997.
Mr. Hanson is a member of the Sterling College Board of
Trustees and formerly served as a member of the
Grubb & Ellis President’s Counsel and
Institutional Investment Group Board of Advisors.
Richard W. Pehlke
55, has served as the Executive Vice President and Chief
Financial Officer of the Company since February 2007. Prior to
joining the Company, Mr. Pehlke served as Executive Vice
President and Chief Financial Officer and a member of the board
of directors of Hudson Highland Group, a publicly held global
professional staffing and recruiting business, from 2003 to
2005. From 2001 to 2003, Mr. Pehlke operated his own
consulting business specializing in financial strategy and
leadership development. In 2000, he was Executive Vice President
and Chief Financial Officer of ONE, Inc. a privately held
software implementation business. Prior to 2000, Mr. Pehlke
held senior financial positions in the telecommunications,
financial services and food and consumer products industries.
Dylan Taylor
38, has served as Executive Vice President of the Company since
January 2008, and President of its Corporate Services Group
since October 2007. He was named Acting President of Global
Client Services and Grubb and Ellis Management Services, Inc. in
January 2008. Mr. Taylor joined the Company in 2005 as
Executive Vice President, Regional Managing Director, Corporate
Services. Prior to joining the Company, Mr. Taylor spent
more than five years as Senior Vice President, Corporate
Solutions at Jones Lang LaSalle.
The following served as executive officers at December 31,2007, but resigned their positions in 2008 as noted below:
Francene LaPoint
43, served as the Company’s Executive Vice President,
Accounting and Finance commencing December 2007. She has served
as Chief Financial Officer of NNN Realty Advisors, Inc. since
November 2006 and director since December 2007. Ms. LaPoint
joined Grubb & Ellis Realty Investors, LLC as Senior
Vice President and Controller in July 2004 and was named
Executive Vice President and Controller in August 2005.
Ms. LaPoint served as Senior Vice President and Corporate
Controller of Hawthorne Savings, FSB (Hawthorne Financial
Corporation), a publicly traded financial institution, from June
1999 to June 2004. From January 1996 to June 1999,
Ms. LaPoint served with PricewaterhouseCoopers from where
she obtained her CPA license.
*Ms. LaPoint resigned her position with the Company
effective October 2008.
Robert H. Osbrink
61, served as Executive Vice President of the Company commencing
December 2001 and was named President of Transaction Services in
February 2004. During the five years prior to December 2001,
Mr. Osbrink served in a progression of regional managerial
positions in the Los Angeles and Southwestern United States
areas for the Company. Mr. Osbrink also acted as a Co-Chief
Executive Officer of the Company from April 2003 until March
2005.
*Mr. Osbrink resigned his position with the Company in
June 2008.
Scott D. Peters
50, has served as the Company’s Chief Executive Officer and
President and as a director of the Company commencing December
2007. Mr. Peters joined NNN’s predecessor, GERI, in
September 2004 as Executive Vice President and Chief Financial
Officer. Mr. Peters served as Chief Executive Officer and
President of NNN since November 2006, a director since September
2006 and Chairman since December 2007. Mr. Peters has also
served as Chairman, President and Chief Executive Officer of
Grubb & Ellis Healthcare REIT, Inc. since April 2006,
Executive Vice President and a director of Grubb &
Ellis Apartment REIT, Inc. since January 2006 and April 2007,
respectively, and President and Chief Executive Officer of
G REIT, Inc., from December 2005 to January 2008, having
previously served as that company’s Executive Vice
President and Chief Financial Officer from September 2004 to
December 2005. Mr. Peters served as Senior Vice President
and Chief Financial Officer and a director of Golf
Trust America, Inc., a publicly traded real estate
investment trust, from February 1997 to February 2007.
*Mr. Peters resigned his position with the Company in
July 2008.
Section 16(a) of the Exchange Act requires
Grubb & Ellis’ directors, certain officers and
persons who own more than 10% of its Common Stock, to file with
the SEC initial reports of ownership of Grubb &
Ellis’ equity securities and to file subsequent reports
when there are changes in such ownership. Based on a review of
reports submitted to Grubb & Ellis, we believe that
during the fiscal year ended December 31, 2007 all
Section 16(a) filing requirements applicable to our
officers, directors, and more than 10% owners were complied with
on a timely basis.
Executive
Compensation Discussion And Analysis
This compensation discussion and analysis describes the
governance and oversight of the Company’s executive
compensation programs and the material elements of compensation
paid or awarded to those who
served as the Company’s principal executive officer, the
Company’s principal financial officer, and the three other
most highly compensated executive officers of the Company during
the period from January 1, 2007 through December 31,2007 (collectively, the “named executive officers” or
“NEOs” and individually, a “named executive
officer” or “NEO”). The specific amounts and
material terms of such compensation paid, payable or awarded are
disclosed in the tables and narrative included in this Proxy
Statement.
The compensation disclosure provided with respect to the
Company’s NEOs and directors with respect to calendar years
2007 and 2006 represent their full year’s compensation for
each of those years, incurred by either NNN Realty Advisors Inc.
(“NNN”) or the Company, as applicable, with respect to
calendar year 2006, and incurred by either NNN or the Company,
as applicable, with respect to the entire 2007 calendar year,
except for the period December 8, 2007 through
December 31, 2007, for which three (3) week stub
period the Company incurred the entire compensation to all NEOs
and directors.
Compensation
Committee Overview
The Board of Directors has delegated to the Compensation
Committee oversight responsibilities for the Company’s
executive compensation programs.
The Compensation Committee determines the policy and strategies
of the Company with respect to executive compensation taking
into account certain factors that the Compensation Committee
deems appropriate such as (a) compensation elements that
will enable the Company to attract and retain executive officers
who are in a position to achieve the strategic goals of the
Company which are in turn designed to enhance stockholder value,
and (b) the Company’s ability to compensate its
executives in relation to its profitability and liquidity.
The Compensation Committee approves, subject to further, final
approval by the full Board of Directors, (a) all
compensation arrangements and terms of employment, and any
material changes to the compensation arrangements or terms of
employment, for the NEOs and certain other key employees
(including employment agreements and severance arrangements),
and (b) the establishment of, and changes to, equity-based
awards programs. In addition, each calendar year, the
Compensation Committee approves the annual incentive goals and
objectives of each NEO and certain other key employees,
evaluates the performance of each NEO and certain other key
employees against the approved performance goals and objectives
applicable to him or her, determines whether and to what extent
any incentive awards have been earned by each NEO, and makes
recommendations to the Company’s Board of Directors
regarding the approval of incentive awards.
Consistent with the Compensation Committee’s objectives,
the Company’s overall compensation program is structured to
attract, motivate and retain highly qualified executives by
paying them competitively and tying their compensation to the
Company’s success as a whole and their contribution to the
Company’s success.
The Compensation Committee also provides general oversight of
the Company’s employee benefit and retirement plans.
The Compensation Committee operates under a written charter
adopted by the full Board and revised effective
December 10, 2007, which is available on the Company’s
website at www.grubb-ellis.com. Printed copies may be
obtained upon request by contacting Investor Relations,
Grubb & Ellis Company, 1551 North Tustin Avenue,
Suite 300, Santa Ana, California92705.
Use of
Consultants
Under its charter, the Compensation Committee has the power to
select, retain, compensate and terminate any compensation
consultant it determines is useful in the fulfillment of the
Committee’s responsibilities. The Committee also has the
authority to seek advice from internal or external legal,
accounting or other advisors.
In the fourth quarter of 2007, and in anticipation of the
closing of the Merger, the Company engaged the services of FPL
Associations Compensation, an outside consulting firm, to
provide a comprehensive compensation study of the merged
companies for the Compensation Committee and the board of
directors with respect
to an analysis of, and proposed designs and recommendations for,
compensation arrangements primarily for the NEO’s, other
lay service executives, directors, brokers and the board.
The Company has previously engaged the services of Ferguson
Partners, an affiliate of FPL Associates Compensation. In
February 2007, Ferguson Partners managed the search for the
Company’s Chief Financial Officer which resulted in the
hiring of the Company’s Chief Financial Officer, Richard W.
Pehlke in February 2007. In conjunction with the search,
Ferguson Partners advised the Committee with respect to
Mr. Pehlke’s compensation arrangements and terms of
employment. Similarly, the Compensation Committee has used the
services of Ferguson Partners in the past in connection with the
search and establishment of the compensation arrangements and
terms of employment for the other executive officers. In each
instance, and in connection with the study conducted by its
affiliate, FPL Associates Compensation in the fourth quarter of
2007, Ferguson Partners and FPL Associates Compensation provided
to the Compensation Committee and the board with information
regarding comparative market compensation arrangements.
Role of
Executives in Establishing Compensation
The Compensation Committee periodically consults with the Chief
Executive Officer of the Company with respect to the hiring and
the compensation of the other NEOs and certain other key
employees. Members of management, typically the Chief Executive
Officer, the Chief Financial Officer and General Counsel,
regularly participate in non-executive portions of Compensation
Committee meetings.
Certain
Compensation Committee Activity
The Compensation Committee met five times during the year ended
December 31, 2007 and in fulfillment of its obligations,
among other things, determined on December 10, 2007, based
upon a compensation study prepared by FPL Associates
Compensation that had been commissioned by the Company in
contemplation of the Merger, that the annual compensation for
independent, outside directors should be as follows: (i) an
annual retainer fee of $50,000 per annum; (ii) a fee of
$1,500 for each regular meeting of the Board of Directors
attended in person or telephonically; (iii) a fee of $1,500
for each standing committee member of the Board of Directors
attended in person or telephonically; and (iv) $60,000
worth of restricted shares of common stock issued at the then
current market price of the common stock, to vest ratably in
equal annual installments over three years, except in the event
of a change in control, in which event vesting is accelerated.
In addition, on March 12, 2008 the Compensation Committee,
in consultation with FPL Associates Compensation, revised the
compensation arrangements for the non-executive Chairman of the
Board to provide for an annual aggregate retainer fee of
$100,000, an aggregate of $140,000 worth of restricted stock per
annum and an expense allowance of $25,000 per annum. Outside
directors are also required to commit to an equity position in
the Company over five years in the amount equal to $250,000
worth of common stock which may include annual restricted stock
grants to the directors. The directors are also to be reimbursed
for lodging and travel expenses in connection with attending
meetings of the Board.
Compensation
Philosophy, Goals and Objectives
As a commercial real estate services company, the Company is a
people oriented business which strives to create an environment
that supports its employees in order to achieve its growth
strategy and other goals established by the board so as to
increase stockholder value over the long term.
The primary goals and objectives of the Company’s
compensation programs are to:
•
Compensate management, key employees, independent contractors
and consultants on a competitive basis to attract, motivate and
retain high quality, high performance individuals who will
achieve the Company’s short-term and long term
goals; and
•
The Compensation Committee established these goals in order to
enhance stockholder value.
•
Motivate and reward executive officers whose knowledge, skill
and performance are critical to the Company’s success;
Align the interests of the Company’s executive officers and
stockholders through equity-based long-term incentive awards
that motivate executive officers to increase stockholder value
and reward executive officers when stockholder value
increases; and
•
Ensure fairness among the executive management team by
recognizing contributions each executive officer makes to the
company’s success.
The Company believes that it is important for variable
compensation, i.e. where an NEO has a significant portion of his
or her total “cash compensation” as risk, to
constitute a significant portion of total compensation and that
such variable compensation be designed so as to reward effective
team work (through the achievement of Company-wide financial
goals) as well as the achievement of individual goals (through
the achievement of business unit/functional goals and individual
performance goals and objectives). The Company believes that
this dual approach best aligns the individual NEO’s
interest with the interests of the stockholders.
Compensation
During Term of Employment
The Company’s compensation program for NEOs is comprised of
five key elements — base salary, annual bonus
incentive compensation, long-term cash incentives, stock-based
compensation and incentives and a retirement plan —
that are intended to balance the goals of achieving both
short-term and long-term results which the Company believes will
effectively align management with stockholders.
Base
Salary
Amounts paid to NEOs as base salaries are included in the column
captioned “Salary” in the Summary Compensation Table
below. The base salary of each NEO is determined based upon
their position, responsibility, qualifications and experience,
and reflects consideration of both external comparison to
available market data and internal comparison to other executive
officers.
The base salary for an NEO is typically established at the time
of the negotiation of his or her respective employment
agreement. In the cases of each of the Company’s Chief
Financial Officer and Executive Vice President, Richard W.
Pehlke, General Counsel, Executive Vice President and Secretary,
Andrea R. Biller, former Chief Executive Officer, Mark E. Rose,
former Executive Vice President, Accounting and Finance,
Francene LaPoint, Chief Investment Officer, Jeffrey T. Hanson,
and former Executive Vice President and President of Global
Client Services, Maureen E. Ehrenberg, the compensation of each
of these executives has not been adjusted since the inception of
their current respective employment agreements. Pursuant to the
Merger Agreement, upon the closing of the Merger, the base
salary of Scott D. Peters, the Company’s former Chief
Executive Officer and President, was increased to $600,000 per
year from $550,000 per year.
The base salary component is designed to constitute between 20%
and 50% of total annual compensation at target for the NEOs
based upon each individual’s position in the organization
and the Committee’s determination of each position’s
ability to directly impact the Company’s financial results.
Annual
Bonus Incentive Compensation
Amounts paid to NEOs under the annual bonus plan are included in
the column captioned “Bonus” in the Summary
Compensation Table below. In addition to earning base salaries,
each of the Company’s NEOs is eligible to receive an annual
cash bonus, the target amount of which is set by the individual
employment agreement with each NEO. The annual bonus incentive
of each NEO is determined based upon his or her position,
responsibility, qualifications and experience, and reflects
consideration of both external comparison to available market
data and internal comparison to other executive officers.
No NEO had a change in his or her annual bonus target incentive
compensation during the year ended December 31, 2007.
In 2007, the bonus plan with respect to those NEOs who were
executive officers of the Company had a formulaic component
based on achievement of specified Company earnings before
interest and taxes (“EBIT”) and business unit/function
EBIT goals and also a component based on the achievement of
personal goals and
objectives designed to enhance the overall performance of the
Company. The bonus plan of those NEOs, who were executive
officers of the NNN, while taking into account NNN’s
earnings before interest, taxes, depreciation and amortization
(“EBITDA”), as well as personal goals and objectives,
was not formulaic, but rather, more discretionary in nature.
Beginning in 2008, the bonus plan for all NEOs has been
standardized and will be tied to the specified targets based on
the Company’s EBITDA as discussed below.
The annual cash bonus plan target for NEOs is between 50% and
200% of base salary and is designed to constitute from 20% to
50% of an NEO’s total annual target compensation. The bonus
plan component is based on each individual’s role and
responsibilities in the Company and the Compensation
Committee’s determination of each NEO’s ability to
directly impact the Company’s financial results.
The Compensation Committee reviews each NEO’s bonus plan
annually. Annual Company EBITDA targets are determined in
connection with the annual calendar-year based budget process. A
minimum threshold of 80% of Company EBITDA must be achieved
before any payment is awarded with respect to this component of
bonus compensation. At the end of each calendar year, the Chief
Executive Officer reviews the performance of each of the other
NEOs and certain other key employees against the financial
objectives and against their personal goals and objectives and
makes recommendations to the Compensation Committee for payments
on the annual cash bonus plan. The Compensation Committee
reviews the recommendations and forwards these to the Board for
final approval of payments under the plan.
The Compensation Committee and the full Board approved all bonus
payments made to the NEOs.
During 2007, the Compensation Committee revised the calendar
2007 bonus plans for the Company’s NEOs to increase the
percentage of bonus tied to the Company’s EBIT performance
in order to more closely link the annual bonus to the
Company’s overall financial performance. The chart directly
below captioned “Annual Bonus Incentive Compensation”
provides the details of the calendar 2006 and calendar 2007
plans.
In addition to the annual bonus program, from time to time the
Board may establish one-time cash bonuses related to the
satisfactory performance of identified special projects. Upon
the closing of the Merger, Scott D. Peters, the Company’s
former Chief Executive Officer and President received (i) a
special one-time transaction success fee of $1,000,000,
(ii) 528,000 shares of common stock of the Company
from Anthony W. Thompson, the former Chairman of the Board of
the Company, and (iii) the right to receive up to
$1,000,000 for a second residence in California, which right
Mr. Peters irrevocably waived in January 2008. Such
528,000 shares of common stock to be received by
Mr. Peters from Mr. Thompson were to vest in equal,
annual installments over five years and were subject to
Mr. Peters’ continued employment with the Company.
Former Executive Vice President, Accounting and Finance Chief
Financial Officer, NNN
Andrea R. Biller
150
%
—
—
—
—
—
—
—
Executive Vice President, General Counsel and Secretary
Maureen A. Ehrenberg
80
%
30
%
60
%
10
%
80
%
30
%
60
%
10
%
Former Executive Vice President, and President Global Client
Services
Jeffrey T. Hanson
100
%
—
—
—
—
—
—
—
Chief Investment Officer
(1)
Mr. Pehlke has a minimum guaranteed bonus of $125,000 for
calendar 2007, prorated based on his hire date (equal to
$110,577).
(2)
Table does not include Gary H. Hunt, who was appointed the
Company’s Interim Chief Executive Officer in July 2008.
Stock-Based
Compensation and Incentives
The compensation associated with stock awards granted to NEOs is
included in the Summary Compensation Table and other tables
below (including the charts that show outstanding equity
awards). Equity grants to the Company’s NEOs have generally
been made at the time of the entering into of their individual
employment agreements and, except as provided by such employment
agreements and the June 27, 2007 grant of an aggregate of
532,400 restricted shares of common stock to various executives
of NNN, no new grants were made to NEOs during the year ended
December 31, 2007. The equity grants are intended to align
management with the long-term interests of the Company’s
stockholders and to have a retentive effect upon the
Company’s NEOs. The Compensation Committee and the Board of
Directors approve all equity grants to NEOs.
Pursuant to his employment agreement, Mr. Pehlke has an
annual equity performance based bonus plan (in addition to his
annual cash bonus plan) under which he may be granted restricted
shares valued at up to 65% of his base salary, which, if
awarded, would vest on the third anniversary of the date of
grant. This plan is covered in more detail in the section
entitled “Employment Contracts and Compensation
Arrangements — Richard W. Pehlke”.
Profit
Sharing Plan
NNN has established a profit sharing plan for its employees,
pursuant to which NNN provides matching contributions.
Generally, all employees are eligible to participate following
one year of service with NNN. Matching contributions are made in
NNN’s sole discretion. Participants’ interests in
their respective
contribution account vests over 4 years, with 0.0% vested
in the first year of service, 25.0% in the second year, 50.0% in
the third year and 100.0% in the fourth year.
Retirement
Plans
The amounts paid to the Company’s NEOs under the retirement
plan are included in the column captioned “All Other
Compensation” in the Summary Compensation Table directly
below. The Company has established and maintain a retirement
savings plan under Section 401(k) of the Internal Revenue
Code of 1986 (the “Code”) to cover the Company’s
eligible employees including the Company’s NEOs. The Code
allows eligible employees to defer a portion of their
compensation, within prescribed limits, on a tax deferred basis
through contributions to the 401(k) Plan. The Company’s
401(k) Plan is intended to constitute a qualified plan under
Section 401(k) of the Code and its associated trust is
intended to be exempt from federal income taxation under
Section 501(a) of the Code. The Company makes Company
matching contributions to the 401(k) Plan for the benefit of the
Company’s employees including the Company’s NEOs.
Personal
Benefits and Perquisites
The amounts paid to the Company’s NEOs for personal
benefits and perquisites are included in the column captioned
“All Other Compensation” in the Summary Compensation
Table below. Perquisites to which all of the Company’s NEOs
are entitled include health, dental, life insurance, long-term
disability, profit-sharing and a 401(k) savings plan, and 100%
of the premium cost of health insurance for certain NEOs is paid
for by the Company. In addition, Mr. Rose and
Ms. Ehrenberg, former NEOs, were entitled to reimbursement
for Supplemental Life Insurance premiums up to $2,500 per year,
reimbursement of up to $3,000 per year for additional long term
disability insurance, reimbursement for an annual physical up to
$500 per year and payment of club dues/memberships up to $3,000
per year. In addition, Mr. Rose was entitled to
reimbursement of additional club dues of $12,320 per year. Upon
the closing of the Merger, Scott D. Peters, the Company’s
former Chief Executive Officer and President had the right to
receive up to $1,000,000 for a second residence in California,
which right Mr. Peters irrevocably waived in January2008.
The following table sets forth certain information with respect
to compensation for the calendar years ended December 31,2007 and 2006 earned by or paid to the Company’s named
executive officers for such full calendar years (by either NNN
or the Company, as applicable, prior to the Merger, and by the
Company subsequent to the Merger) and sets forth (i) with
respect to calendar year ended December 31, 2007, the
results of operations (of which compensation is a component) of
NNN’s business for the full twelve month period and the
results of operations of the Company’s business for the
period December 8, 2007 through December 31, 2007, and
(ii) with respect to calendar year ended December 31,2006, the results of operations of NNN’s business only.
Change in
Pension Value
and
Non-Equity
Nonqualified
Year
Option
Incentive Plan
Deferred
All other
Name and
Ended
Salary
Bonus
Stock
Awards
Compensation
Compensation
Compensation
Principal Position
December
($)
($)
Awards($)(5)
($)(6)
($)
Earnings
($)(3)(7)(8)
Total
Mark E. Rose
2007
$
527,600
$
—
$
1,583,344
$
633,638
$
62,900
—
$
2,345,589(9
)
$
5,153,071
Former Chief Executive Officer
2006
500,000
377,368
458,329
534,129
—
—
16,878
1,886,704
Scott D. Peters
2007
587,808
1,825,800
2,610,555
91,250
—
—
655,621
5,771,034
Former Chief Executive Officer
2006
611,250
1,125,900
(2)
1,834,669
81,345
977,260
4,630,424
Richard W. Pehlke(10)
2007
299,500
200,000
49,770
198,808
—
—
—
748,078
Executive Vice President, and Chief Financial Officer
2006
—
—
—
—
—
—
—
—
Francene LaPoint
2007
350,000
280,800
763,913
73,000
—
—
24,090
1,491,803
Former Executive Vice President, Accounting and Finance
2006
277,899
270,720
237,500
65,076
—
—
23,449
874,644
Andrea R. Biller
2007
400,000
451,000
1,286,413
73,000
—
—
592,134
2,802,547
Executive Vice President, General Counsel and Secretary
2006
391,674
501,200
(2)
411,667
65,076
—
—
72,834
1,442,451
Maureen A. Ehrenberg
2007
360,000
—
166,646
—
74,100
—
1,219,186(9
)
1,819,932
Former Executive Vice President, and President, Global Client
Services
2006
360,000
247,326
166,680
—
—
—
2,650
776,656
Jeffrey T. Hanson
2007
350,000
500,350
3,410,352
45,625
—
—
425,106
4,731,433
Chief Investment Officer
2006
117,628
(1)
1,212,180
(4)
726,079
40,673
—
—
1,083
2,097,643
(1)
Mr. Hanson’s annual salary for fiscal 2006 was
$250,000. The $117,628 represents amounts paid or to be paid to
Mr. Hanson from July 29, 2006 (the date
Mr. Hanson joined GERI) through December 31, 2006.
(2)
Bonus amounts include bonuses of $100,000 earned in fiscal 2006
to each of Mr. Peters and Ms. Biller upon the receipt
by NNN from Grubb & Ellis Realty Investors, LLC
(“GERI”), a public non-traded REIT that NNN sponsored,
of net commissions aggregating $5 million or more from the
sale of G REIT properties pursuant to a plan of liquidation
approved by G REIT stockholders.
(3)
All other compensation also includes: (i) cash
distributions based on membership interests of $159,418 and
$50,000 earned by each of Mr. Peters and Ms. Biller
from Grubb & Ellis Apartment Management, LLC for each
of the calendar years ended December 31, 2007 and December
2006, respectively; and (ii) cash distributions based on
membership interests of $413,546 and $0 earned by each of
Messrs. Peters and Hanson and Ms. Biller from
Grubb & Ellis Healthcare Management, LLC for each of
the calendar years ended December 31, 2007 and December
2006, respectively.
(4)
Mr. Hanson was appointed GERI’s Managing Director,
Real Estate on July 29, 2006. His bonus amount included a
$750,000 sign-on bonus that was paid in September 2006. Amount
also included a special bonus paid to Mr. Hanson pursuant
to his employment agreement for being the procuring cause of at
least
$25 million in equity from new sources, which equity was
received by GERI during the fiscal year, for real estate
investments sourced by GERI.
(5)
The amounts shown are the amounts of compensation cost related
to the grants of restricted stock, as well as the compensation
expense associated with the accelerated vesting of the
restricted stock at the Merger date, as described in Statement
of Financial Accounting Standards No. 123R, utilizing the
assumptions discussed in Note 23 to the consolidated
financial statements included in Item 8 of this Report.
(6)
The amounts shown are the amounts of compensation cost related
to the grants of stock options, as well as compensation expense
associated with the accelerated vesting of the stock options at
the Merger date, as described in Statement of Financial
Accounting Standards No. 123R, utilizing the assumptions
discussed in Note 23 to the consolidated financial
statements included in Item 8 of this Report.
(7)
The amounts shown include the Company’s incremental cost
for the provision to the named executive officers of certain
specified perquisites in fiscal 2007 and 2006, as follows:
Living
Travel
Tax Gross up
Medical & Dental
Named Executive Officer
Year
Expenses
Expenses
Payment
Premiums
Total
Mark E. Rose
2007
$
—
$
—
$
—
$
—
$
—
2006
—
—
—
—
—
Scott D. Peters
2007
27,314
29,573
0
8,340
65,227
2006
24,557
31,376
853,668
1,043
910,644
Richard W. Pehlke
2007
—
—
—
—
—
2006
—
—
—
—
—
Francene LaPoint
2007
—
—
—
6,660
6,660
2006
—
—
—
833
833
Andrea R. Biller
2007
—
—
—
1,740
1,740
2006
—
—
—
218
218
Maureen A. Ehrenberg
2007
—
—
—
—
—
2006
—
—
—
—
—
Jeffrey T. Hanson
2007
—
—
—
8,340
8,340
2006
—
—
—
1,043
1,043
(8)
The amounts shown also include the following 401(k) matching
contributions made by the Company, income attributable to life
insurance coverage and contributions to the profit-sharing plan
in fiscal 2007 and 2006, as follows:
401(k) Plan
Profit-Sharing Plan
Company
Life Insurance
Company
Named Executive Officer
Year
Contributions
Coverage
Contributions
Total
Mark E. Rose
2007
$
2,250
$
2,700
$
—
$
4,950
2006
2,200
2,400
—
4,600
Scott D. Peters
2007
3,100
120
14,210
17,430
2006
—
116
16,500
16,616
Richard W. Pehlke
2007
—
—
—
—
2006
—
—
—
—
Francene LaPoint
2007
3,100
120
14,210
17,430
2006
6,000
116
16,500
22,616
Andrea R. Biller
2007
3,100
120
14,210
17,430
2006
6,000
116
16,500
22,616
Maureen A. Ehrenberg
2007
2,250
1,040
—
3,290
2006
2,200
450
—
2,650
Jeffrey T. Hanson
2007
3,100
120
—
3,220
2006
—
40
—
40
(9)
Includes payments made on termination of employment in
connection with a change of control, totaling $2,340,639 for
Mr. Rose and $1,215,896 for Ms. Ehrenberg, to be paid
over a
12-month
period.
Table does not include Donald D. Olinger, the Company’s SVP
and Chief Accounting Officer who provided services as the
interim Chief Financial Officer of the Company for the
approximately six week period from January 1, 2007 through
February 14, 2007 prior to Mr. Pehlke joining the
Company and subsequent to the departure of
Mr. Pehlke’s predecessor.
(11)
Table does not include Gary H. Hunt, who was appointed the
Company’s Interim Chief Executive Officer in July 2008.
Grants of
Plan-Based Awards
The following table sets forth information regarding the grants
of plan-based awards made to its named executive officers for
the fiscal year ended December 31, 2007.
All Other
All Other
Option Awards:
Exercise or
Stock Awards:
Number of
Base Price
Grant Date Fair
Number of
Securities
of Option
Value of Stock
Grant
Shares of
Underlying
Awards
and Option
Name
Date
Stock or Units
Options(3)
($/Share)
Awards(4)
Mark E. Rose
3/8/07
71,158
(1)
—
$
10.54
$
750,000
Scott D. Peters
6/27/07
462,000
(1)
—
11.36
5,250,000
12/7/07
528,000
(2)
—
6.43
3,396,000
Richard W. Pehlke
2/15/07
—
25,000
11.75
198,808
Francene LaPoint
6/27/07
26,400
(1)
—
11.36
300,000
Andrea R. Biller
6/27/07
26,400
(1)
—
11.36
300,000
Maureen A. Ehrenberg
—
—
—
—
—
Jeffery T. Hanson
6/27/07
17,600
(1)
—
11.36
200,000
(1)
Amounts shown with respect to Messrs. Peters and Hanson and
Ms. LaPoint and Ms. Biller represent restricted stock,
with a grant date of June 27, 2007, issued under NNN’s
2006 Long Term Incentive Plan, that vest in three equal
installments on June 27, 2008, June 27, 2009 and
June 27, 2010, subject to continued service with the
Company. The stock award to Mr. Rose represents shares
issued by the Company pursuant to his employment agreement as
Chief Executive Officer in March, 2005, which shares became
fully vested upon the Merger as a result of change in control
provisions related to the award.
(2)
Amount shown represents shares of common stock received by
Mr. Peters from Anthony W. Thompson on December 7,2007 and which were subject to a five year vesting schedule and
Mr. Peters’ continued employment with the Company.
(3)
Amount shown represents a stock option award granted to
Mr. Pehlke in connection with his employment agreement with
the Company, which becomes exercisable in three equal
installments on the business day immediately preceding the
first, second and third anniversaries of the grant date,
generally subject to continued employment with the Company. The
options have a maximum term of ten years.
(4)
The grant date fair value of the shares of restricted stock and
stock options granted were computed in accordance with
SFAS No. 123R.
(5)
Table does not include Gary H. Hunt, who was appointed the
Company’s Interim Chief Executive Officer in July 2008.
The following table sets forth summary information regarding the
outstanding equity awards held by the Company’s named
executive officers at December 31, 2007:
Option Awards
Stock Awards
Number of
Number of
Number of
Market Value
Securities
Securities
Shares or
of Shares
Underlying
Underlying
Units of
or Units
Unexercised
Unexercised
Option
Option
Stock That
of Stock That
Options
Options
Exercise
Expiration
Have not
Have not
Name
Exercisable
Unexercisable(1)
Price
Date
Vested
Vested(4)
Mark E. Rose
500,000
—
$
4.70
12/11/2009
—
$
—
Scott D. Peters
29,333
14,667
11.36
11/16/2016
462,000
(2)
5,250,000
528,000
(3)
3,396,000
Richard W. Pehlke
—
25,000
11.75
2/15/2017
—
—
Francene LaPoint
23,467
11,733
11.36
11/16/2016
26,400
(2)
300,000
Andrea R. Biller
23,467
11,733
11.36
11/16/2016
26,400
(2)
300,000
Maureen A. Ehrenberg
137,022
—
9.00
(5)
4/1/2008
—
—
Jeffery T. Hanson
14,667
7,333
11.36
11/16/2016
17,600
(2)
200,000
(1)
Amounts shown represent options granted in fiscal year 2007 and
2006 under NNN’s 2006 Long Term Incentive Plan that vest
and become exercisable with respect to one-third of the
underlying shares of the Company’s common stock on each of
November 16, 2006, November 16, 2007 and
November 16, 2008, subject to the executive’s
continued employment with the Company, and have a maximum term
of ten-years.
(2)
Amounts shown represent restricted stock granted on
June 27, 2007 under NNN’s 2006 Long Term Incentive
Plan. The June 27, 2007 restricted stock vests in three
equal installments on June 27, 2008, June 27, 2009 and
June 27, 2010, subject to continued service with the
Company.
(3)
Represents shares of common stock received by Mr. Peters
from Anthony W. Thompson on December 7, 2007 and which were
subject to a five year vesting schedule and
Mr. Peters’ continued employment with the Company.
(4)
The grant date fair value of the shares of restricted stock
granted on June 27, 2007, as computed in accordance with
SFAS No. 123R and is reflected in the table, Grants of
Plan-Based Awards.
(5)
Amount represents the weighted average option exercise price for
multiple awards, all expiring on April 1, 2008.
(6)
Table does not include Gary H. Hunt, who was appointed the
Company’s Interim Chief Executive Officer in July 2008.
Employment
Contracts and Compensation Arrangements
Gary
H. Hunt
In July 2008, Mr. Hunt became Interim Chief Executive
Officer of the Company. Mr. Hunt does not have an
employment agreement with the Company. On August 28, 2008,
the Compensation Committee of the Board of Directors determined
that until the appointment of a permanent Chief Executive
Officer and President, Mr. Hunt will be paid a monthly fee
of $50,000. However, Mr. Hunt will not receive a bonus nor
will he receive any additional compensation for his service as a
member of the Company’s Board of Directors.
Scott
D. Peters
*In July 2008, Mr. Peters resigned from the Company. The
following is a description of the employment agreement under
which Mr. Peters was employed during calendar year 2007.
In November, 2006, Mr. Peters entered into an executive
employment agreement with the Company pursuant to which
Mr. Peters served as the Chief Executive Officer and
President of the Company. The agreement provided for an annual
base salary of $550,000 per annum. His base salary was increased
to $600,000 per annum upon the closing of the Merger.
Mr. Peters was eligible to receive an annual discretionary
bonus of up to 200% of his base salary. The executive employment
agreement had an initial term of three (3) years, and on
the final day of the original term, and on each anniversary
thereafter, the term of the agreement could have been extended
automatically for an additional year unless the Company or
Mr. Peters provided at least one year’s written notice
that the term would not be extended. In connection with the
entering into of his Employment Agreement in November, 2006,
Mr. Peters received 154,000 shares of restricted stock
and 44,000 stock options at an exercise price of $11.36 per
share, one-third of which options vest on the grant date, and
the remaining options vest in equal installments on the first
and second anniversary date of the option grant.
Mr. Peters was also entitled to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and was reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with his duties. The employment agreement contained
confidentiality, non-competition, no raid, non-solicitation,
non-disparagement and indemnification provisions.
In the event the Company had terminated Mr. Peters’
employment for Cause (as defined in the executive employment
agreement) or if he had voluntarily resigned without Good Reason
(as defined in the executive employment agreement),
Mr. Peters would have been entitled to accrued salary and
any unreimbursed business expenses. In the event that
Mr. Peters’ employment terminated because of the
expiration of his term, death or disability, the Company would
have paid any accrued salary, any unreimbursed business
expenses, and a prorated performance bonus equal to the
performance bonus (and in the case of termination for reason of
death or disability, equal to the maximum target) that otherwise
would have been payable to Mr. Peters in the fiscal year in
which the termination occured had he continued employment
through the last day of such fiscal year, prorated for the
number of calendar months he was employed by the Company in such
fiscal year. The prorated performance bonus would have been paid
within 60 days after Mr. Peters’ date of
termination, provided that he executes and delivers to the
Company a general release and was not in material breach of any
of the provisions of the executive employment agreement.
In the event of termination of employment without Cause, or
voluntary resignation with Good Reason, the Company would have
paid any accrued salary, any unreimbursed business expenses and
a severance benefit, in a lump sum cash payment, equal to
Mr. Peters’ annual salary plus the target bonus in the
year of the termination, the sum of which will be multiplied by
a “severance benefit factor.” The “severance
benefit factor” would have been determined as follows:
(a) if the date of termination occurred during the original
three year employment term, the “severance benefit
factor” will be the greater of one, and the number of
months from the date of termination to the last day of the
original three year employment term, divided by 12, or
(b) if the date of termination was after the original three
year employment term, the “severance benefit factor”
will equal one. Also, all options become fully vested.
In the event of a termination by the Company without Cause at
any time within 90 days before, or 12 months after, a
Change in Control (as defined in the executive employment
agreement), or in the event of resignation for Good Reason
within 12 months after a change in control, or if without
good reason during the period commencing six months after a
change in control and ending 12 months after a change in
control, then the Company would have paid any accrued salary,
any unreimbursed business expenses, and a severance benefit. The
severance benefit would have been in a lump sum cash payment,
equal to the annual salary plus the target bonus in the year of
the termination, the sum of which will be multiplied by three.
Mr. Peters would have also received 100% of the
Company’s paid health insurance coverage as provided
immediately prior to the termination. The health insurance
coverage would have continued for two years following
termination of employment, or until Mr. Peters became
covered under another employer’s group health insurance
plan, whichever came first. Also, Mr. Peters would have
become fully vested in his options. These severance benefits
upon a change of control would have been paid 60 days after
the date of termination, provided the execution and delivery to
the Company of a general release and Mr. Peters was not in
material breach of any of the provisions of his employment
agreement. Any payment and benefits discussed in this paragraph
regarding a termination associated with a change in control
would have been in lieu of any payments and benefits that would
otherwise be awarded in an executive’s termination.
If payments or other amounts become due to Mr. Peters under
his employment agreement or otherwise, and the excise tax
imposed by the Internal Revenue Code Section 4999 applies
to such payments, the Company was required to pay a gross up
payment in the amount of such excise tax plus the amount of
income, excise and other taxes due as a result of the gross up
payment. All determinations required to be made and the
assumptions to be utilized in arriving at such determinations,
with certain exceptions, would have been made by the
Company’s independent certified public accountants serving
immediately prior to the change in control.
Potential
Payments upon Termination or Change in Control
Scott D. Peters
Involuntary
not for
Involuntary
Resignation
Executive Payments
Voluntary
Early
Normal
Cause
for Cause
for Good
Change in
upon Termination
Termination
Retirement
Retirement
Termination
Termination
Reason
Control
Death
Disability
Severance Payments
$
—
$
—
$
—
$
3,162,500
$
—
$
3,162,500
$
4,950,000
$
—
$
—
Bonus Incentive Compensation
—
—
—
—
—
—
—
—
—
Long Term Incentive Plan
—
—
—
—
—
—
—
—
—
Stock Options (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Restricted Stock (unvested and accelerated)
—
—
—
8,646,000
—
8,646,000
8,646,000
—
—
Performance Shares (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Benefit Continuation
—
—
—
2,086
—
2,086
2,086
—
—
Tax Gross-Up
—
—
—
—
—
968,996
—
—
Total Value
$
—
$
—
$
—
$
11,810,586
$
—
$
11,810,586
$
14,567,082
$
—
$
—
Mark E.
Rose
Upon the closing of the Merger on December 7, 2007, Mark E.
Rose resigned as Chief Executive Officer of the Company.
Because Mr. Rose’s resignation took place following
consummation of the Merger, a deemed Change of Control under his
employment agreement, Mr. Rose was entitled to receive
payment of two times his base salary and two times his
applicable bonus, paid ratably over 12 months in accordance
with the Company’s customary payroll practices.
Mr. Rose and the Company amended this provision of his
employment agreement such that the foregoing payments of base
salary and bonus would be paid in eight (8) equal
installments of one-twelfth (1/12) in January, February, July,
August, September, October, November and December of 2008 and
one installment of four-twelfths (4/12) in June 2008. In
addition, upon consummation of the Merger, Mr. Rose’s
stock options became fully vested and he will have
24 months to exercise the unexercised options. The
Company’s payment of any amounts to Mr. Rose upon his
termination following the Merger was contingent upon
Mr. Rose executing a release in a form that has been
pre-negotiated by Mr. Rose and the Company, which
Mr. Rose has executed and delivered.
Prior to that time, pursuant to an employment agreement, which
became effective March 2005, Mr. Rose served as the
Company’s Chief Executive Officer and also served on the
Company’s Board of Directors, at an annual base salary of
$500,000. In addition, Mr. Rose was entitled to receive
target bonus compensation at a target level of at least two
times his base salary based upon annual performance goals to be
established by the Compensation Committee of the Company. At the
time of the commencement of his employment with the Company, the
Company paid Mr. Rose a sign-on bonus of $2,083,000 and he
received non-qualified stock options, exercisable at the then
current market price ($4.70 per share), to purchase up to
500,000 shares of the
Company’s common stock. Mr. Rose received on the
effective date and on each of the first and second anniversaries
thereof, annual grants of $750,000 worth of restricted shares of
the Company’s common stock. The first grant of 159,575
restricted shares of the Company’s common stock was granted
on March 8, 2005 at a per share price of $4.70 (equal to
the market price of the Company’s common stock on the date
immediately preceding the grant date). The second grant of
64,158 restricted shares of the Company’s common stock was
granted on March 8, 2006 at a per share price of $11.69
(equal to the market price of the Company’s common stock on
the date immediately preceding the grant date). The third grant
of 71,158, was granted on March 8, 2007, at a per share
price of $10.54 (equal to the market price of the Company’s
common stock on the date immediately preceding the grant date).
Both the stock options and all of the restricted shares were
vested prior to December 7, 2007 or became vested on
December 7, 2007 as a result of a Change of Control of the
Company following the Merger. Mr. Rose was also entitled to
participate in the Company’s Long Term Incentive
Compensation Plan at a target of 65% of his base salary.
Mr. Rose was also entitled to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and was reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with his duties.
Richard
W. Pehlke
Effective February 15, 2007, Mr. Pehlke and the
Company entered into a three-year employment agreement pursuant
to which Mr. Pehlke serves as the Company’s Executive
Vice President and Chief Financial Officer at an annual base
salary of $350,000. In addition, Mr. Pehlke is entitled to
receive target bonus cash compensation of up to 50% of his base
salary based upon annual performance goals to be established by
the Compensation Committee of the Company. Mr. Pehlke is
also eligible to receive a target annual performance based
equity bonus of 65% of his base salary based upon annual
performance goals to be established by the Compensation
Committee. The equity bonus is payable in restricted shares that
vest on the third anniversary of the date of the grant.
Mr. Pehlke was also granted stock options to purchase
25,000 shares of the Company’s common stock which have
a term of 10 years, are exercisable at $11.75 per share
(equal to the market price of the Company’s common stock on
the date immediately preceding the grant date) and vest ratably
over three years.
Mr. Pehlke is also entitled to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and is reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with her duties. The employment agreement contains
confidentiality, non-competition, no raid, non-solicitation,
non-disparagement and indemnification provisions.
The employment agreement is terminable by the Company upon
Mr. Pehlke’s death or incapacity or for Cause (as
defined in the employment agreement), without any additional
compensation other than what has accrued to Mr. Pehlke as
of the date of any such termination, except that in the case of
death or incapacity, any unvested restricted shares
automatically vest.
In the event that Mr. Pehlke is terminated without Cause,
or if Mr. Pehlke terminates the agreement for Good Reason
(as defined in the employment agreement), Mr. Pehlke is
entitled to receive his annual base salary, payable in
accordance with the Company’s customary payroll practices,
for the balance of the term of the agreement or 24 months,
whichever is less (subject to the provisions of
Section 409A of the Internal Revenue Code of 1986, as
amended) and all then unvested options shall automatically vest.
The Company’s payment of any amounts to Mr. Pehlke
upon his termination without Cause or for Good Reason is
contingent upon him executing the Company’s then standard
form of release.
In addition, in the event that Mr. Pehlke is terminated
without Cause or resigns for Good Reason upon a Change in
Control (as defined in the employment agreement) or within six
months thereafter or three months prior to a Change of Control,
in contemplation thereof, Mr. Pehlke is entitled to receive
two times his base salary payable in accordance with the
Company’s customary payroll practices (subject to the
provisions of Section 409A of the Internal Revenue Code of
1986, as amended) plus an amount equal to 50% of his base salary
payable in cash on each of the next two immediately following
dates when similar annual cash bonus compensation is paid to
other executive officers of the Company (but in no event later
then March 15th of the calendar year following the
calendar year to which such bonus payment relates). In addition,
upon a Change in
Control, all then unvested options and restricted shares
automatically vest. The Company’s payment of any amounts to
Mr. Pehlke upon his termination upon a Change of Control is
contingent upon his executing the Company’s then standard
form of release.
Potential
Payments upon Termination or Change in Control
Richard W. Pehlke
Involuntary
not for
Involuntary
Resignation
Executive Payments
Voluntary
Early
Normal
Cause
for Cause
for Good
Change in
upon Termination
Termination
Retirement
Retirement
Termination
Termination
Reason
Control
Death
Disability
Severance Payments
$
—
$
—
$
—
$
700,000
$
—
$
700,000
$
700,000
$
—
$
—
Bonus Incentive Compensation
—
—
—
—
—
—
$
350,000
—
—
Long Term Incentive Plan
—
—
—
—
—
—
—
—
—
Stock Options (unvested and accelerated)(1)
—
—
—
—
—
—
—
—
—
Restricted Stock (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Performance Shares (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Benefit Continuation
—
—
—
—
—
—
—
—
—
Tax Gross-Up
—
—
—
—
—
—
—
—
—
Total Value
$
—
$
—
$
—
$
700,000
$
—
$
700,000
$
1,050,000
$
—
$
—
(1)
Mr. Pehlke’s agreement provides for immediate vesting
of all stock options in the event of involuntary termination not
for cause, resignation for good reason, or in the event of
change in control; the option exercise price is $11.75 and the
closing price on the NYSE on December 31, 2007 was $6.41,
therefore, as of December 31, 2007, Mr. Pehlke’s
options were out of the money.
Andrea R.
Biller
In November 2006, Ms. Biller entered into an executive
employment agreement with the Company pursuant to which
Ms. Biller serves as the Company’s General Counsel,
Executive Vice President and Secretary. The agreement provides
for an annual base salary of $400,000 per annum. Ms. Biller
is eligible to receive an annual discretionary bonus of up to
150% of her base salary. The executive employment agreement has
an initial term of three (3) years, and on the final day of
the original term, and on each anniversary thereafter, the term
of the agreement is extended automatically for an additional
year unless the Company or Ms. Biller provides at least one
year’s written notice that the term will not be extended.
In connection with the entering into of her employment agreement
in November 2006, Ms. Biller received 114,400 shares
of restricted stock and 35,200 stock options at an exercise
price of $11.36 per share, one-third of which options vest on
the grant date, and the remaining options vest in equal
installments on the first and second anniversary date of the
option grant.
Ms. Biller is also entitled to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and is reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with her duties. The employment agreement contains
confidentiality, non-competition, no raid, non-solicitation,
non-disparagement and indemnification provisions.
In the event the Company terminates Ms. Biller’s
employment for Cause (as defined in the executive employment
agreement) or if she voluntarily resigns without Good Reason (as
defined in the executive employment agreement), Ms. Biller
is entitled to accrued salary and any unreimbursed business
expenses. In the event that Ms. Biller’s employment
terminates because of the expiration of her term, death or
disability, the Company will pay an accrued salary, any
unreimbursed business expenses, and a prorated performance bonus
equal to the performance bonus (and in the case of termination
for reason of death or disability, equal to the maximum target)
that otherwise would have been payable to Ms. Biller in the
fiscal year in which the termination occurs had she continued
employment through the last day of such fiscal year, prorated
for the
number of calendar months she was employed by the Company in
such fiscal year. The prorated performance bonus will be paid
within 60 days after Ms. Biller’s date of
termination, provided that she executes and delivers to the
Company a general release and is not in material breach of any
of the provisions of the executive employment agreement.
In the event of termination of employment without Cause, or
voluntary resignation with Good Reason, the Company will pay any
accrued salary, any unreimbursed business expenses and a
severance benefit, in a lump sum cash payment, equal to
Ms. Biller’s annual salary plus the target bonus in
the year of the termination, the sum of which will be multiplied
by a “severance benefit factor.” The “severance
benefit factor” will be determined as follows: (a) if
the date of termination occurs during the original three year
employment term, the “severance benefit factor” will
be the greater of one, and the number of months from the date of
termination to the last day of the original three year
employment term, divided by 12, or (b) if the date of
termination is after the original three year employment term,
the “severance benefit factor” will equal one. Also,
all options become fully vested.
In the event of a termination by the Company without Cause at
any time within 90 days before, or 12 months after, a
Change in Control (as defined in the executive employment
agreement), or in the event of resignation for Good Reason
within 12 months after a change in control, or if without
good reason during the period commencing six months after a
change in control and ending 12 months after a change in
control, then the Company will pay any accrued salary, any
unreimbursed business expenses, and a severance benefit. The
severance benefit will be in a lump sum cash payment, equal to
the annual salary plus the target bonus in the year of the
termination, the sum of which will be multiplied by three.
Ms. Biller will also receive 100% of the Company’s
paid health insurance coverage as provided immediately prior to
the termination. The health insurance coverage will continue for
two years following termination of employment, or until
Ms. Biller becomes covered under another employer’s
group health insurance plan, whichever comes first. Also,
Ms. Biller will become fully vested in her options and
restricted shares. These severance benefits upon a change of
control will be paid 60 days after the date of termination,
provided the execution and delivery to the Company of a general
release and Ms. Biller is not in material breach of any of
the provisions of her employment agreement. Any payment and
benefits discussed in this paragraph regarding a termination
associated with a change in control will be in lieu of any
payments and benefits that would otherwise be awarded in an
executive’s termination.
If payments or other amounts become due to Ms. Biller under
her employment agreement or otherwise, and the excise tax
imposed by the Internal Revenue Code Section 4999 applies
to such payments, the Company is required to pay a gross up
payment in the amount of this excise tax plus the amount of
income, excise and other taxes due as a result of the gross up
payment. All determinations required to be made and the
assumptions to be utilized in arriving at such determinations,
with certain exceptions, will be made by the Company’s
independent certified public accountants serving immediately
prior to the change in control.
Potential
Payments upon Termination or Change in Control
Andrea R. Biller
Involuntary
Not for
Involuntary
Resignation
Executive Payments
Voluntary
Early
Normal
Cause
for Cause
for Good
Change in
upon Termination
Termination
Retirement
Retirement
Termination
Termination
Reason
Control
Death
Disability
Severance Payments
$
—
$
—
$
—
$
1,916,667
$
—
$
1,916,667
$
3,000,000
$
—
$
—
Bonus Incentive Compensation
—
—
—
—
—
—
—
—
—
Long Term Incentive Plan
—
—
—
—
—
—
—
—
—
Stock Options (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Restricted Stock (unvested and accelerated)
—
—
—
300,000
—
300,000
300,000
—
—
Performance Shares (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Benefit Continuation
—
—
—
436
—
436
436
—
—
Tax Gross-Up
—
—
—
—
—
—
1,343,817
—
—
Total Value
$
—
$
—
$
—
$
2,217,103
$
—
$
2,217,103
$
4,644,253
—
—
Francene
LaPoint
*Effective October 2008, Ms. LaPoint resigned from the
Company. The following is a description of the employment
agreement under which Ms. LaPoint was employed during
calendar year 2007.
In November, 2006, Ms. LaPoint entered into an executive
employment agreement to serve as NNN’s Chief Financial
Officer. Upon the closing of the Merger, Ms. LaPoint’s
title with the Company was changed to Executive Vice President,
Accounting and Finance. The agreement provided for an annual
base salary of $350,000 per annum. Ms. LaPoint was eligible
to receive an annual discretionary bonus of up to 100% of her
base salary. The executive employment agreement had an initial
term of three (3) years, and on the final day of the
original term, and on each anniversary thereafter, the term of
the agreement could have been extended automatically for an
additional year unless the Company or Ms. LaPoint provided
at least one year’s written notice that the term would not
be extended. In connection with the entering into of her
employment agreement in November, 2006, Ms. LaPoint
received 66,000 shares of restricted stock and 35,200 stock
options at an exercise price of $11.36 per share, one-third of
which options vested on the grant date, and the remaining
options were to vest in equal installments on the first and
second anniversary dates of the option grant.
Ms. LaPoint was also entitld to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and was reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with her duties. The employment agreement contained
confidentiality, non-competition, no raid, non-solicitation,
non-disparagement and indemnification provisions.
In the event the Company terminated Ms. LaPoint’s
employment for Cause (as defined in the executive employment
agreement) or if she voluntarily resigns without Good Reason (as
defined in the executive employment agreement), Ms. LaPoint
was entitled to accrued salary and any unreimbursed business
expenses. In the event that Ms. LaPoint’s employment
terminates because of the expiration of her term, death or
disability, the Company would have paid an accrued salary, any
unreimbursed business expenses, and a prorated performance bonus
equal to the performance bonus (and in the case of termination
for reason of death or disability, equal to the maximum target)
that otherwise would have been payable to Ms. LaPoint in
the fiscal year in which the termination occurred had she
continued employment through the last day of such fiscal year,
prorated for the number of calendar months she was employed by
the Company in such fiscal year. The prorated performance bonus
would have been paid within 60 days after
Ms. LaPoint’s date of termination, provided that she
executes and delivered to the Company a general release and was
not in material breach of any of the provisions of the executive
employment agreement.
In the event of termination of employment without Cause, or
voluntary resignation with Good Reason, the Company would have
paid any accrued salary, any unreimbursed business expenses and
a severance
benefit, in a lump sum cash payment, equal to
Ms. LaPoint’s annual salary plus the target bonus in
the year of the termination, the sum of which would have been
multiplied by a “severance benefit factor.” The
“severance benefit factor” would have been determined
as follows: (a) if the date of termination occured during
the original three year employment term, the “severance
benefit factor” would have been the greater of one, and the
number of months from the date of termination to the last day of
the original three year employment term, divided by 12, or
(b) if the date of termination was after the original three
year employment term, the “severance benefit factor”
will equal one. Also, all options would have become fully vested.
In the event of a termination by the Company without Cause at
any time within 90 days before, or 12 months after, a
Change in Control (as defined in the executive employment
agreement), or in the event of resignation for Good Reason
within 12 months after a change in control, or if without
good reason during the period commencing six months after a
change in control and ending 12 months after a change in
control, then the Company would have paid any accrued salary,
any unreimbursed business expenses, and a severance benefit. The
severance benefit would have been in a lump sum cash payment,
equal to the annual salary plus the target bonus in the year of
the termination, the sum of which would have been multiplied by
three. Ms. LaPoint would have also received 100% of the
Company’s paid health insurance coverage as provided
immediately prior to the termination. The health insurance
coverage would have continued for two years following
termination of employment, or until Ms. LaPoint became
covered under another employer’s group health insurance
plan, whichever came first. Also, Ms. LaPoint would have
become fully vested in her options. These severance benefits
upon a change of control would have been paid 60 days after
the date of termination, provided the execution and delivery to
the Company of a general release and Ms. LaPoint was not in
material breach of any of the provisions of her employment
agreement. Any payment and benefits discussed in this paragraph
regarding a termination associated with a change in control
would have been in lieu of any payments and benefits that would
otherwise be awarded in an executive’s termination.
If payments or other amounts which would have become due to
Ms. LaPoint under her employment agreement or otherwise,
and the excise tax imposed by the Internal Revenue Code
Section 4999 applies to such payments, the Company would
have been required to pay a gross up payment in the amount of
such excise tax plus the amount of income, excise and other
taxes due as a result of the gross up payment. All
determinations required to be made and the assumptions to be
utilized in arriving at such determinations, with certain
exceptions, would have been made by the Company’s
independent certified public accountants serving immediately
prior to the change in control.
Potential
Payments upon Termination or Change in Control
Francene LaPoint
Involuntary
Not for
Involuntary
Resignation
Voluntary
Early
Normal
Cause
for Cause
for Good
Change in
Executive Payments upon Termination
Termination
Retirement
Retirement
Termination
Termination
Reason
Control
Death
Disability
Severance Payments
$
—
$
—
$
—
$
1,341,667
$
—
$
1,341,667
$
2,100,000
$
—
$
—
Bonus Incentive Compensation
—
—
—
—
—
—
—
—
—
Long Term Incentive Plan
—
—
—
—
—
—
—
—
—
Stock Options (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Restricted Stock (unvested and accelerated)
—
—
—
300,000
—
300,000
300,000
—
—
Performance Shares (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Benefit Continuation
—
—
—
436
—
436
436
—
—
Tax Gross-Up
—
—
—
—
—
—
806,788
—
—
Total Value
$
—
$
—
$
—
$
1,642,103
$
—
$
1,642,103
$
3,207,244
$
—
$
—
Jeffrey
T. Hanson
In November, 2006, Mr. Hanson entered into an executive
employment agreement with the Company pursuant to which
Mr. Hanson serves as the Company’s Chief Investment
Officer. The agreement provides for an annual base salary of
$350,000 per annum. Mr. Hanson is eligible to receive an
annual discretionary bonus of up to 100% of his base salary. The
executive employment agreement has an initial term of three
(3) years, and on the final day of the original term, and
on each anniversary thereafter, the term of the agreement is
extended automatically for an additional year unless the Company
or Mr. Hanson provides at least one year’s written
notice that the term will not be extended. In connection with
the entering into of his employment agreement in November, 2006,
Mr. Hanson received 44,000 shares of restricted stock
and 22,000 stock options at an exercise price of $11.36 per
share, one-third of which options vest on the grant date, and
the remaining options vest in equal installments on the first
and second anniversary date of the option grant. Mr. Hanson
is entitled to receive a special bonus of $250,000 if, during
the applicable fiscal year, (x) Mr. Hanson is the
procuring cause of at least $25 million of equity from new
sources, which equity is actually received by the Company during
such fiscal year, for real estate investments sourced by the
Company, and (y) Mr. Hanson is employed by the Company
on the last day of such fiscal year.
Mr. Hanson is also entitled to participate in the
Company’s health and other benefit plans generally afforded
to executive employees and is reimbursed for reasonable travel,
entertainment and other reasonable expenses incurred in
connection with his duties. The employment agreement contains
confidentiality, non-competition, no raid, non-solicitation,
non-disparagement and indemnification provisions.
In the event the Company terminates Mr. Hanson’s
employment for Cause (as defined in the executive employment
agreement) or if he voluntarily resigns without Good Reason (as
defined in the executive employment agreement), Mr. Hanson
is entitled to accrued salary and any unreimbursed business
expenses. In the event that Mr. Hanson’s employment
terminates because of the expiration of his term, death or
disability, the Company will pay an accrued salary, any
unreimbursed business expenses, and a prorated performance bonus
equal to the performance bonus (and in the case of termination
for reason of death or disability, equal to the maximum target)
that otherwise would have been payable to Mr. Hanson in the
fiscal year in which the termination occurs had he continued
employment through the last day of such fiscal year, prorated
for the number of calendar months he was employed by the Company
in such fiscal year. The prorated performance bonus will be paid
within 60 days after Mr. Hanson’s date of
termination, provided that he executes and
delivers to the Company a general release and is not in material
breach of any of the provisions of the executive employment
agreement.
In the event of termination of employment without Cause, or
voluntary resignation with Good Reason, the Company will pay any
accrued salary, any unreimbursed business expenses and a
severance benefit, in a lump sum cash payment, equal to
Mr. Hanson’s annual salary plus the target bonus in
the year of the termination, the sum of which will be multiplied
by a “severance benefit factor.” The “severance
benefit factor” will be determined as follows: (a) if
the date of termination occurs during the original three year
employment term, the “severance benefit factor” will
be the greater of one, and the number of months from the date of
termination to the last day of the original three year
employment term, divided by 12, or (b) if the date of
termination is after the original three year employment term,
the “severance benefit factor” will equal one. Also,
all options become fully vested.
In the event of a termination by the Company without Cause at
any time within 90 days before, or 12 months after, a
Change in Control (as defined in the executive employment
agreement), or in the event of resignation for Good Reason
within 12 months after a change in control, or if without
good reason during the period commencing six months after a
change in control and ending 12 months after a change in
control, then the Company will pay any accrued salary, any
unreimbursed business expenses, and a severance benefit. The
severance benefit will be in a lump sum cash payment, equal to
the annual salary plus the target bonus in the year of the
termination, the sum of which will be multiplied by three.
Mr. Hanson will also receive 100% of the Company’s
paid health insurance coverage as provided immediately prior to
the termination. The health insurance coverage will continue for
two years following termination of employment, or until
Mr. Hanson becomes covered under another employer’s
group health insurance plan, whichever comes first. Also,
Mr. Hanson will become fully vested in his options and
restricted shares. Mr. Hanson’s employment agreement
further provides for an additional severance benefit equal to
the lesser of (x) one percent of the amount of equity from
new sources not previously related to the Company or any of its
subsidiaries, for which Mr. Hanson is the procuring cause
in the Company’s fiscal year in which the date of
termination occurs, which equity is actually received by the
Company or any of its subsidiaries during such fiscal year, for
real estate investments sourced by the Company or any of its
subsidiaries, or (y) $250,000, if he is discharged by the
Company without Cause, or he voluntarily resigns for Good
Reason. The additional severance benefit to Mr. Hanson will
be in lieu of the $250,000 special bonus to Mr. Hanson in
respect of the fiscal year in which his termination of
employment occurs.
These severance benefits upon a change of control will be paid
60 days after the date of termination, provided the
execution and delivery to the Company of a general release and
Mr. Hanson is not in material breach of any of the
provisions of his employment agreement. Any payment and benefits
discussed in this paragraph regarding a termination associated
with a change in control will be in lieu of any payments and
benefits that would otherwise be awarded in an executive’s
termination.
If payments or other amounts become due to Mr. Hanson under
his employment agreement or otherwise, and the excise tax
imposed by the Internal Revenue Code Section 4999 applies
to such payments, the Company is required to pay a gross up
payment in the amount of this excise tax plus the amount of
income, excise and other taxes due as a result of the gross up
payment. All determinations required to be made and the
assumptions to be utilized in arriving at such determinations,
with certain exceptions, will be made by the Company’s
independent certified public accountants serving immediately
prior to the change in control.
Potential
Payments upon Termination or Change in Control
Jeffrey T. Hanson
Involuntary
Not for
Involuntary
Resignation
Voluntary
Early
Normal
Cause
for Cause
for Good
Change in
Executive Payments upon Termination
Termination
Retirement
Retirement
Termination
Termination
Reason
Control
Death
Disability
Severance Payments
$
—
$
—
$
—
$
1,341,667
$
—
$
1,341,667
$
2,100,000
$
—
$
—
Bonus Incentive Compensation
—
—
—
—
—
—
—
—
—
Long Term Incentive Plan
—
—
—
—
—
—
—
—
—
Stock Options (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Restricted Stock (unvested and accelerated)
—
—
—
200,000
—
200,000
200,000
—
—
Performance Shares (unvested and accelerated)
—
—
—
—
—
—
—
—
—
Benefit Continuation
—
—
—
2,086
—
2,086
2,086
—
—
Tax Gross-Up
—
—
—
—
—
—
2,789,450
—
—
Total Value
$
—
$
—
$
—
$
1,543,753
$
—
$
1,543,753
$
5,091,536
$
—
$
—
Maureen
A. Ehrenberg
Ms. Ehrenberg resigned from the Company effective
December 31, 2007. In connection with the cessation of her
employment with the Company and in consideration for a release,
Ms. Ehrenberg will receive a total of $1,215,896 payable in
equal semi-monthly payments over the twelve months ended
December 31, 2008.
Prior to that time, pursuant to an employment agreement, which
became effective June 6, 2005, Ms. Ehrenberg served as
the Company’s Executive Vice President and as the President
of both Grubb & Ellis Management Services, Inc. and
the Company’s Global Client Services, at an annual base
salary of $360,000. In addition, Ms. Ehrenberg was entitled
to receive target bonus compensation of up to 80% of her base
salary based upon annual performance goals to be established by
the Compensation Committee of the Company. Ms. Ehrenberg
was also granted $500,000 worth of restricted shares of the
Company’s common stock, or 84,746 shares, at a per
share price of $5.90 (equal to the market price of the
Company’s common stock on the date immediately preceding
the grant date). All of the restricted shares vested on
December 7, 2007 as a result of a Change of Control of the
Company following the Merger. Ms. Ehrenberg was also
entitled to participate in the Company’s Long Term
Incentive Compensation Plan at a target of 65% of her base
salary. Ms. Ehrenberg was also entitled to participate in
the Company’s health and other benefit plans generally
afforded to executive employees and was reimbursed for
reasonable travel, entertainment and other reasonable expenses
incurred in connection with her duties.
Directors’
Compensation
Pursuant to the FPL Associates Compensation report obtained by
the Board of Directors in contemplation of the Merger,
directors’ compensation was further reviewed and revised in
December 2007.
Only individuals who serve as directors and are otherwise
unaffiliated with the Company (“Outside Directors”)
receive compensation for serving on the Board and on its
committees. Outside Directors are compensated for serving on the
Board with a combination of cash and equity based compensation
which includes annual grants of restricted stock, an annual
retainer fee, meeting fees and chairperson fees. Directors are
also reimbursed for out-of-pocket travel expenses incurred in
attending board and committee meetings.
The compensation program is designed to compensate Outside
Directors above $100,000 annually with approximately 45% paid in
cash and approximately 55% in restricted stock. In support of
the long term goals of increasing stockholder value, Outside
Directors are expected to accumulate an equity position in the
Company equal to $250,000 over a five year period.
Prior to December, compensation for Outside Directors consisted
of a retainer of $40,000 per annum, a fee of $1,500 for each
meeting of the Board or one of its committees attended in person
and a fee of $1,000 for each meeting (up to six meetings) of the
Board or one of its committees attended telephonically. In
addition, the chairperson of the audit committee received a fee
at the rate of $10,000 per annum and the chairperson of each of
the Board’s other standing committees received a fee of
$5,000 per annum. The foregoing fees with respect to committee
attendance pertain only to standing committees of the Board and
do not pertain to any special or ad hoc committees, compensation
for which is determined on a
case-by-case
basis.
Pursuant to the FPL Associates Compensation report, Board
compensation was adjusted in December 2007 as follows:
(i) an annual retainer fee of $50,000 per annum;
(ii) a fee of $1,500 for each regular meeting of the board
of directors attended in person or telephonically; (iii) a
fee of $1,500 for each standing committee member of the board of
directors attended in person or telephonically; and
(iv) $60,000 worth of restricted shares of common stock
issued at the then current market price of the common stock, to
vest ratably in equal annual installments over three years,
except in the event of a change in control, in which event
vesting is accelerated. In addition, on March 12, 2007 the
Compensation Committee, in consultation with FPL Associates
Compensation, revised the compensation arrangements for the
non-executive Chairman of the Board to provide for an annual
aggregate retainer fee of $100,000, an aggregate of $140,000
worth of restricted stock per annum and an expense allowance of
$25,000 per annum. Outside directors are also required to commit
to an equity position in the Company over five years in the
amount equal to $250,000 worth of common stock which may include
annual restricted stock grants to the directors. The directors
are also to be reimbursed for lodging and travel expenses in
connection with attending meetings of the board.
Effective September 20, 2006, each of Rodger D. Young,
Robert J. McLaughlin, Anthony G. Antone and F. Joseph Moravec,
received their annual restricted stock grant of
5,446 shares of common stock which is based upon the
closing price of the Company’s common stock on
September 20, 2006, which was $9.18.
Effective November 16, 2006, each of Glenn L. Carpenter,
Harold H. Greene, Gary H. Hunt and D. Fleet Wallace received a
grant of 8,800 shares of restricted stock from NNN.
Effective June 27, 2007 each of Glenn L. Carpenter, Harold
H. Greene, Gary H. Hunt and D. Fleet Wallace received a grant of
11,000 shares of restricted stock from NNN.
Effective September 20, 2007, each of Rodger D. Young,
Robert J. McLaughlin, Anthony G. Antone and F. Joseph Moravec
received their annual restricted stock grant of
5,291 shares of common stock which is based upon the
closing price of the Company’s common stock on
September 20, 2007, which was $9.45.
Effective December 10, 2007, each of the Company’s
Outside Directors appointed following the Merger, Glenn L.
Carpenter, Harold H. Greene, Gary H. Hunt (who, prior to his
appointment as the Company’s Interim Chief Executive
Officer in July 2008, was an Outside Director of the Company),
C. Michael Kojaian, and D. Fleet Wallace received their initial,
and each of the Company’s then current outside directors,
Rodger D. Young and Robert J. McLaughlin, received their annual,
restricted stock grant of 8,996 shares of common stock
which is based upon the closing price of the Company’s
common stock on December 10, 2007, which was $6.67.
Represents annual retainers plus all meeting and committee
attendance fees earned by non-employee directors in 2007.
(2)
The amounts shown are the compensation costs recognized by the
Company in 2007 in accordance with SFAS No. 123R,
Share-Based Payment (“SFAS No. 123R).
Includes $66,666 in compensation expense each for
Messrs. Carpenter, Greene, Hunt and Wallace related to the
accelerated vesting of the restricted stock issued in November
2006 upon the closing of the Merger. Each of the outside
directors received a grant of 8,996 shares on
December 10, 2007 which vest in three equal increments on
each of the next three annual anniversary dates of the grant.
The grant date fair value of the 8,996 shares of restricted
stock was $60,000, as computed in accordance with
SFAS No. 123R, based on a market price of $6.67 per
share on the date of grant. In addition, Messrs. Carpenter,
Greene, Hunt and Wallace each received a grant of
11,000 shares of restricted stock on June 27, 2007,
which also vest in three equal increments on each of the next
three annual anniversary dates of the grant. The grant date fair
value of the 11,000 shares of restricted stock was $125,000
based on a value of $11.36 per share on the date of grant.
(3)
The following table shows the aggregate number of unvested stock
awards and option awards granted to non-employee directors and
outstanding as of December 31, 2007:
Stock Awards
Options Outstanding
Outstanding at
Director
at Fiscal Year End
Fiscal Year End
Glenn L. Carpenter
0
19,996
Harold H. Greene
0
19,996
C. Michael Kojaian
0
8,996
Gary H. Hunt
0
19,996
Robert J. McLaughlin
10,000
8,996
D. Fleet Wallace
0
19,996
Rodger D. Young
10,000
8,996
Stock
Ownership Policy for Outside Directors
On December 10, 2007, the Compensation Committee adopted a
new charter which, among other things, revised the stock
ownership policy for Outside Directors initially adopted by the
Board in October 2005. Under the policy, Outside Directors are
required to accumulate an equity position in the Company over
five years in an amount equal to $250,000 worth of common stock
(the previous policy required an accumulation of $200,000 worth
of common stock over a five year period). Shares of common stock
acquired by Outside Directors pursuant to the restricted stock
grants can be applied toward this equity accumulation
requirement.
Compensation
Committee Interlocks and Insider Participation
The members of the Compensation Committee for the year ended
December 31, 2007, without giving effect to the Merger,
were Robert J. McLaughlin, Chair, and Rodger D. Young. Upon the
effectiveness of the Merger, Glenn L. Carpenter and Gary H. Hunt
joined the Compensation Committee, and Mr. Carpenter
replaced Mr. McLaughlin as Chairman of the Committee. In
February, 2008 when Mr. Carpenter became Chairman of the
Board, replacing Anthony W. Thompson, he resigned from the
Compensation Committee. Mr. Hunt became the Chairman of the
Compensation Committee and D. Fleet Wallace joined the
Compensation Committee. In July 2008, when Mr. Hunt became
the Company’s Interim Chief Executive Officer, he resigned
from the Compensation Committee, Mr. Wallace became the
Chairman of the Compensation Committee and Mr. Kojaian
joined the Compensation Committee. Accordingly, the current
members of the Compensation Committee are D. Fleet Wallace,
Chair, C. Michael Kojaian, Robert J. McLaughlin and Rodger D.
Young. None of the current members of the Compensation Committee
is or was a current or former officer or employee of the Company
or any of its subsidiaries or had any relationship requiring
disclosure by the Company under any paragraph of Item 404
of
Regulation S-K
of the SEC Rules and Regulations. During the year ended
December 31, 2007, none of the executive officers of the
Company served as a member of the board of directors or
compensation committee of any other company that had one or more
of its executive officers serving as a member of the
Company’s Board of Directors or Compensation Committee.
The
Compensation Committee D.
Fleet Wallace, Chair
C. Michael Kojaian
Robert J. McLaughlin
Rodger P. Young
Compensation
Committee Report
The above Compensation Committee Report is not to be deemed to
be “soliciting material” or to be “filed”
with the SEC or subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that the Company specifically requests that such
information be treated as soliciting material or specifically
incorporates it by reference into any filing under the
Securities Act of 1933, as amended (the “Securities
Act”) or the Exchange Act.
The Compensation Committee has reviewed and discussed with the
Company’s management the Compensation Discussion and
Analysis presented in the Company’s Annual Report on
Form 10-K
as filed with the SEC on March 17, 2008 (“Annual
Report”). Based on such review and discussion, the
Compensation Committee has recommended to the Board that the
Compensation Discussion and Analysis be included in the Annual
Report.
C:
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Party Transaction Review Policy
The Company recognizes that transactions between the Company and
any of its directors, officers or principal stockholders or an
immediate family member of any director, executive officer or
principal stockholder can present potential or actual conflicts
of interest and create the appearance that Company decisions are
based on considerations other than the best interests of the
Company and its stockholders. The Company also recognizes,
however, that there may be situations in which such transactions
may be in, or may not be inconsistent with, the best interests
of the Company.
The review and approval of related party transactions are
governed by the Code of Business Conduct and Ethics. The Code of
Business Conduct and Ethics is a part of the Company’s
Employee Handbook, a copy of which is distributed to each of the
Company’s employees at the time that they begin working for
the Company, and the Company’s Salespersons Manual, a copy
of which is distributed to each of the Company’s brokerage
professionals at the time that they begin working for the
Company. The Code of Business Conduct and Ethics is also
available on the Company’s website at
www.grubb-ellis.com.
In order to ensure that related party transactions are fair to
the Company and no worse than could have been obtained through
“arms-length” negotiations with unrelated parties,
such transactions are monitored by
the Company’s management and regularly reviewed by the
Audit Committee, which independently evaluates the benefit of
such transactions to the Company’s stockholders. Pursuant
to the Audit Committee’s charter, on a quarterly basis,
management provides the Audit Committee with information
regarding related party transactions for review and discussion
by the Audit Committee and, if appropriate, the Board of
Directors. The Audit Committee, in its discretion, may approve,
ratify, rescind or take other action with respect to a related
party transaction or, if necessary or appropriate, recommend
that the Board of Directors approve, ratify, rescind or take
other action with respect to a related party transaction.
In addition, each director and executive officer annually
delivers to the Company a questionnaire that includes, among
other things, a request for information relating to any
transactions in which both the director, executive officer, or
their respective family members, and the Company participates,
and in which the director, executive officer, or such family
member, has a material interest.
Related
Party Transactions
The following are descriptions of certain transactions as of
December 31, 2007, in which the Company was a participant
and in which any of the Company’s directors, executive
officers, principal stockholders or any immediate family member
of any director, executive officer or principal stockholder had
or may have had direct or indirect material interest.
Grubb &
Ellis Realty Advisors, Inc. (“GERA”)
The Company owned 5,667,719 shares, or approximately 19%,
of the issued and outstanding common stock of GERA, a special
purpose acquisition company organized by the Company to acquire
one or more United States commercial real estate properties
and/or
assets. C. Michael Kojaian, a director of the Company, and
Kojaian Ventures, LLC, an entity with which Mr. Kojaian is
affiliated and in which Mr. Kojaian has a substantial
economic interest, collectively owned approximately 6.4%
of the outstanding common stock of GERA. Mr. Kojaian
was the Chairman of the Board and Chief Executive Officer of
GERA. Mark Rose, the former Chief Executive Officer of the
Company, was a director of GERA and Richard W. Pehlke, the Chief
Financial Officer of the Company, was also the Chief Financial
Officer of GERA.
As consideration for serving as initial directors to GERA,
during fiscal 2006, the Company transferred 41,670 shares
of GERA’s common stock from the Company’s initial
investment to each of the initial directors of GERA, including
Messrs. Kojaian and Rose.
Pursuant to an agreement with Deutsche Bank Securities Inc., the
Company agreed to purchase, during the period commencing
May 3, 2006 and ending on June 28, 2006, to the extent
available in the public marketplace, up to $3.5 million of
the warrants issued in connection with GERA’s initial
public offering (the “IPO”) if the public price per
warrant was $0.70 or less. The Company agreed to purchase such
warrants pursuant to an agreement in accordance with the
guidelines specified by
Rule 10b5-1
under the Exchange Act, through an independent broker-dealer
registered under Section 15 of the Exchange Act that did
not participate in the IPO. In addition, the Company further
agreed that any such warrants purchased by it would not be sold
or transferred until the completion of a business combination by
GERA. On June 28, 2006, the Company agreed to a
60-day
extension of this agreement, through August 27, 2006.
Pursuant to such agreement, as extended, the Company purchased
an aggregate of approximately 4.6 million warrants of GERA
for an aggregate purchase price of approximately
$2.2 million, or approximately $0.47 per warrant, excluding
commissions of approximately $186,000.
The Company agreed that, through the consummation of an initial
business combination or liquidation by GERA, the Company would
make available to GERA office space, utilities and secretarial
support for general and administrative purposes as GERA required
from time to time. GERA agreed to pay the Company $7,500 per
month for these services. During 2007, GERA paid the Company an
aggregate amount of approximately $90,000 for such services.
At the time of the IPO, GERA entered into a Master Agreement for
Services (“MSA”) with the Company, whereby the Company
would serve as the exclusive agent with respect to commercial
real estate brokerage
and consulting services relating to real property acquisitions,
dispositions as well as agency leasing. The initial term of the
MSA is five years and is cancelable based on certain conditions
as defined.
Additionally, at the time of the IPO, GERA entered into a
Property Management Agreement (“PMA”) with the
Company’s wholly owned subsidiary, Grubb & Ellis
Management Services (“GEMS”), whereby GEMS would serve
as sole exclusive managing agent for all real property acquired
by GERA. Under the PMA, GEMS is entitled to a monthly management
fee equal to the greater of (a) three percent of a
property’s monthly gross cash receipts from the operations
of the property, and (b) a minimum monthly fee to be
determined by mutual agreement based upon then current market
prices and terms for services for comparable projects. In
addition, GERA was required to reimburse GEMS for salaries and
other expenses paid or incurred by GEMS that are directly
related to managing the asset or assets. The initial term of the
PMA was 12 months from the date of the consummation of a
business combination and could be automatically renewed for
successive terms, each with a duration of one year unless
otherwise terminated in accordance with its terms. Either party
could have terminated with 60 days notice.
Finally, at the time of the IPO, GERA entered into a Master
Agreement for Project Management Services with the Company. The
project management agreement contained a
60-day
cancellation provision by either party. For each project under
the project management agreement, the Company would have
received a fee equal to five percent of the total project costs.
On June 18, 2007, the Company entered into, along with its
wholly owned subsidiary, GERA Property Acquisition, LLC, a
Membership Interest Purchase Agreement (the “Purchase
Agreement”) with GERA which contemplated the transfer of
the three (3) commercial office properties from the Company
to GERA and, if consummated, would have constituted GERA’s
business combination. Pursuant to the Purchase Agreement, the
Company was to sell the properties to GERA, on a “cost
neutral basis,” reimbursement for the actual costs and
expenses paid by the Company with respect to the purchase of the
properties and imputed interest on cash advanced by the Company
with respect to the properties.
Under the terms of the Purchase Agreement, the Purchase
Agreement was subject to termination under certain
circumstances, including but not limited to if GERA failed to
obtain the requisite stockholder consents required under the
laws of the State of Delaware and Realty Advisors’ charter
to approve the transactions contemplated by the Purchase
Agreement.
Effective January 25, 2008, the Company entered into a
letter agreement (the “Letter Agreement”) with GERA
pursuant to which the Company agreed, subject to and
simultaneously upon the closing of the Acquisition Agreement,
that GERA would have had the right to redeem an aggregate of
4,395,788 shares of common stock, par value $.0001 per
share, of GERA stock currently owned by the Company (the
“Redemption”). As noted above, the Company owned
5,667,719 shares of common stock of GERA, which represented
approximately 19% of the issued and outstanding shares of GERA.
The per share purchase price of each share that would have been
redeemed is the par value thereof, which would have resulted in
an aggregate purchase price with respect to the Redemption of
$439.58. Subsequent to the Redemption, the Company would have
still owned 1,271,931 shares of common stock of GERA, which
would have represented 5% of the then issued and outstanding
shares of GERA.
On February 28, 2008, a special meeting of the stockholders
of GERA was held to vote on, among other things, the proposed
transaction with the Company, GERA failed to obtain the
requisite consents of its stockholders to approve its proposed
business combination (i.e. the transactions contemplated by the
Purchase Agreement). Specifically, of the 23,958,334 shares
of GERA common stock eligible to vote with respect to the
proposed transaction, stockholders holding an aggregate of
22,695,082 shares voted on the transaction. Of those
stockholders voting, 17,144,944 shares were cast against
the proposed business combination, and the holders of all such
17,144,944 shares also elected to convert their shares into
a pro rata share of GERA’s trust account.
4,860,127 shares voted in favor of the proposed business
combination, and the remaining shares did not vote with respect
to the proposed transaction.
As a result thereof, GERA, in accordance with
Section 8.1(f) of the Purchase Agreement, advised the
Company in a letter effective February 28, 2008, that it
was terminating the Purchase Agreement in accordance with its
terms.
As a result of its failure to obtain the requisite stockholder
approvals, GERA was unable to effect a business combination
within the proscribed deadline of March 3, 2008 in
accordance with its charter. Consequently, GERA filed a proxy
statement with the SEC on March 11, 2008 with respect to a
special meeting of its stockholders to vote on the dissolution
and liquidation of GERA. The Company wrote-off in the first
quarter of 2008 its investment in GERA of approximately
$5.6 million, including its stock and warrant purchases,
operating advances and third party costs. The Company also paid
any third-party legal, accounting, printing and other costs
(other than monies to be paid to stockholders of GERA on
liquidation) associated with the dissolution and liquidation of
GERA. In addition, the various exclusive service agreements that
the Company had previously entered into with GERA for
transaction services, property and facilities management, and
project management, are no longer of any force or effect. The
Company presently intends to market the three commercial
properties so as to effect their sale on or before
March 31, 2009, as required under the terms of its credit
facility.
Other
Related Party Transactions
A director of the Company, C. Michael Kojaian, is affiliated
with and has a substantial economic interest in Kojaian
Management Corporation and its various affiliated portfolio
companies (collectively, “KMC”). KMC is engaged in the
business of investing in and managing real property both for its
own account and for third parties. During the 2007 calendar
year, KMC paid the Company and its subsidiaries the following
approximate amounts in connection with real estate services
rendered: $9,447,000 for management services, which include
reimbursed salaries, wages and benefits of $3,971,000; $797,000
in real estate sale and leasing commissions; and $68,000 for
other real estate and business services. The Company also paid
KMC approximately $3,088,000, which reflected fees paid by
KMC’s asset management clients for asset management
services performed by KMC, but for which the Company billed the
clients.
The Company believes that the fees and commissions paid to and
by the Company as described above were comparable to those that
would have been paid to or received from unaffiliated third
parties in connection with similar transactions.
In August 2002, the Company entered into an office lease with a
landlord related to KMC, providing for an annual average base
rent of $365,400 over the ten-year term of the lease.
As of August 28, 2006, the Company entered into a written
agreement with 1up Design Studios, Inc. (“1up”), of
which Ryan Osbrink, the son of Robert H. Osbrink, Former
Executive Vice President and President, Transaction Services of
the Company, is a principal shareholder, to procure graphic
design and consulting services on assignments provided by
brokerage professionals
and/or
employees of the Company. The term of the agreement was for a
period beginning September 1, 2006 ending on
August 31, 2007 and was terminable by either party upon
60 days prior notice. The agreement provided that the
Company would pay 1up a monthly retainer of $25,000, from which
1up would deduct the cost of its design services. The pricing
for 1up’s design services was fixed pursuant to a price
schedule attached as an exhibit to the agreement. In addition,
at the inception of the agreement, the Company sold certain
computer hardware and software to 1up for a price of $6,500
which was the approximate net book value of such items. The
written agreement with 1up was terminated effective as of
March 1, 2007 at the request of the Audit Committee which
believed that, although the agreement did not violate the
Company’s related party transaction policy, termination of
the agreement was appropriate in order to avoid any appearance
of impropriety that might result from the agreement to pay 1up a
fixed monthly retainer. While the Company is no longer obligated
to pay the monthly retainer to 1up, the Company has continued to
use 1up to provide design and consulting services on an ad hoc
basis. During the 2007 fiscal year, 1up was paid approximately
$239,000 in fees for its services. The Company believes that
amounts paid to 1up for services are comparable to the amounts
that the Company would have paid to unaffiliated, third parties.
GERI owns a 50.0% managing member interest in Grubb &
Ellis Apartment REIT Advisor, LLC. Grubb & Ellis
Apartment Management LLC owns a 25.0% equity interest in
Grubb & Ellis Apartment REIT Advisor, LLC and each of
Mr. Peters and Ms. Biller received an equity interest
of 18.0% of Grubb & Ellis Apartment Management, LLC.
GERI owns a 75.0% managing member interest in Grubb &
Ellis Healthcare REIT Advisor, LLC. Grubb & Ellis
Healthcare Management, LLC owns a 25.0% equity interest in
Grubb & Ellis Healthcare REIT Advisor, LLC and each of
Mr. Peters, Ms. Biller and Jeffery T. Hanson received
an equity interest of 18.0% of Grubb & Ellis
Healthcare Management, LLC.
Anthony W. Thompson, former Chairman of the Company and NNN, and
a substantial stockholder of the Company, as a special member,
is entitled to receive up to $175,000 annually in compensation
from each of Grubb & Ellis Apartment Management, LLC
and Grubb & Ellis Healthcare Management, LLC.
The grants of these membership interests in Grubb &
Ellis Apartment Management, LLC and Grubb & Ellis
Healthcare Management, LLC to certain executives are being
accounted for by the Company as a profit sharing arrangement.
Compensation expense is recorded by the Company when the
likelihood of payment is probable and the amount of such payment
is estimable, which generally coincides with Grubb &
Ellis Apartment REIT Advisor, LLC and Grubb & Ellis
Healthcare REIT Advisor, LLC recording its revenue. Compensation
expense related to this profit sharing arrangement associated
with Grubb & Ellis Apartment Management, LLC includes
cash distributions based on membership interests of $175,000 and
$22,000 earned by Mr. Thompson and $159,418 and $50,000
earned by each of Mr. Peters and Ms. Biller from
Grubb & Ellis Apartment Management, LLC for each of
the calendar years ended December 31, 2007 and 2006,
respectively. No cash distributions were paid in 2005.
Compensation expense related to this profit sharing arrangement
associated with Grubb & Ellis Healthcare Management,
LLC includes cash distributions based on membership interests of
$175,000 earned by Mr. Thompson and $413,546 earned by each
of Messrs. Peters and Hanson and Ms. Biller from
Grubb & Ellis Healthcare Management, LLC for the
calendar year ended December 31, 2007. No cash
distributions were paid in 2006 or 2005.
As of December 31, 2007 and 2006, the remaining 64.0% and
46.0%, respectively, equity interest in Grubb & Ellis
Apartment Management, LLC and the remaining 46.0% equity
interest in Grubb & Ellis Healthcare Management, LLC
were owned by GERI; however, the Partnership agreements require
that any allocable earnings attributable to the GERI’s
ownership interests be paid out as performance bonuses to
Company employees. As such, Grubb & Ellis Apartment
Management, LLC incurred $492,000, $182,000 and $0 for the years
ended December 31, 2007, 2006 and 2005, respectively, and
Grubb & Ellis Healthcare Management, LLC incurred
$882,000, $0 and $0 for the years ended December 31, 2007,
2006 and 2005, respectively, to other Company employees, which
was included in compensation expense in the consolidated
statement of operations.
In connection with the SEC investigation, to the extent that the
Company pays the SEC an amount in excess of $1.0 million in
connection with any settlement or other resolution of this
matter, Mr. Thompson has agreed to forfeit to the Company
up to 1,064,800 shares of its common stock. In connection
with this arrangement, NNN has entered into an escrow agreement
with Mr. Thompson and an independent escrow agent, pursuant
to which the escrow agent holds 1,064,800 shares of the
Company’s common stock that were otherwise assumable to
Mr. Thompson in connection with the NNN formation
transactions to secure Mr. Thompson’s obligations to
the Company. Mr. Thompson’s liability under this
arrangement will not exceed the shares in the escrow. The
Company cannot make any assurance as to the value of the shares
at the time of any claim under this agreement.
On September 20, 2006, the Company awarded Mr. Peters
a bonus of $2.1 million, which was payable in
178,957 shares of the Company’s common stock,
representing a value of $1.3 million and a cash tax
gross-up
payment of $854,000.
G REIT, Inc. had agreed to pay Mr. Peters and
Ms. Biller, retention bonuses in connection with its
stockholder approved liquidation of $50,000 and $25,000,
respectively, upon the filing of each of G REIT’s
annual and quarterly reports with the SEC during the period of
the liquidation process, beginning with the
annual report for the year ending December 31, 2005. These
retention bonuses were agreed to by the independent directors of
G REIT and approved by the stockholders of G REIT in
connection with G REIT’s stockholder approved
liquidation. As of each of December 31, 2007 and
December 31, 2006, Mr. Peters and Ms. Biller have
received retention bonuses of $200,000 and $100,000 from
G REIT, respectively. On January 28, 2008,
G REIT’s remaining assets and liabilities were
transferred to G REIT Liquidating Trust. Effective
January 30, 2008, and March 4, 2008, respectively,
Mr. Peters and Ms. Biller irrevocably waived their
rights to receive all future retention bonuses from G REIT
Liquidating Trust. Additionally, Mr. Peters and
Ms. Biller, each were entitled to a performance-based bonus
of $100,000 upon the receipt by GERI of net commissions
aggregating $5,000,000 or more from the sale of G REIT
properties. As of December 31, 2007, Mr. Peters and
Ms. Biller have received their performance-based bonuses of
$100,000 each from GERI.
T REIT, Inc. had paid performance bonuses in connection with its
shareholder approved liquidation to Ms. Biller of $25,000
in August 2005 and $35,000 in March 2006. On July 20, 2007,
T REIT’s remaining assets and liabilities were transferred
to T REIT Liquidating Trust.
The Company’s directors and officers, as well as officers,
managers and employees of the Company’s subsidiaries, have
purchased, and may continue to purchase, interests in offerings
made by the Company’s programs at a discount. The purchase
price for these interests reflects the fact that selling
commissions and marketing allowances will not be paid in
connection with these sales. The net proceeds to the Company
from these sales made net of commissions will be substantially
the same as the net proceeds received from other sales.
Mr. Thompson has routinely provided personal guarantees to
various lending institutions that provided financing for the
acquisition of many properties by the Company’s programs.
These guarantees cover certain covenant payments, environmental
and hazardous substance indemnification and indemnification for
any liability arising from the SEC investigation of Triple Net
Properties. In connection with the formation transactions, the
Company indemnified Mr. Thompson for amounts he may be
required to pay under all of these guarantees to which Triple
Net Properties, Realty or Capital Corp. is an obligor to the
extent such indemnification would not require the Company to
book additional liabilities on the Company’s balance sheet.
In September 2007, NNN acquired Cunningham Lending Group LLC
(“Cunningham”), a company that was wholly-owned by
Mr. Thompson, for $255,000 in cash. Prior to the
acquisition, Cunningham made unsecured loans to some of the
properties under management by GERI. The loans, which bear
interest at rates ranging from 8.0% to 12.0% per annum are
reflected in advances to related parties on the Company’s
balance sheet and are serviced by the cash flows from the
programs. In accordance with FIN No. 46R, the Company
consolidated Cunningham in its financial statements beginning in
2005.
The Company has made advances totaling $1.0 million and
$3.3 million as of December 31, 2007 and
December 31, 2006, respectively to Colony Canyon, a
property 30.0% owned by Mr. Thompson. The advances bear
interest at 10.0% per annum and are required to be repaid within
one year (although the repayments can and have been extended
from time to time).
NNN was organized in September 2006 to acquire each of Triple
Net Properties, Realty, and Capital Corp, to bring the
businesses conducted by those companies under one corporate
umbrella. On November 30, 2006, NNN completed a
$160.0 million private placement of common stock to
institutional investors and certain accredited investors with
16 million shares of its common stock sold in the offering
at $10.00 per share. Net proceeds from the offering
were $146.0 million. Triple Net Properties was the
accounting acquirer of Realty and Capital Corp.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock
Ownership Table
The following table shows the share ownership as of
October 27, 2008 by persons known by the Company to be
beneficial holders of more than 5% of the Company’s
outstanding capital stock, directors, named executive officers,
and all current directors and executive officers as a group.
Unless otherwise noted, the stock listed is common stock, and
the persons listed have sole voting and dispositive powers over
the shares held in their names, subject to community property
laws if applicable.
Name and Address
Amount and Nature of
Percent of
of Beneficial Owner(1)
Beneficial Ownership
Class(2)
Persons affiliated with Kojaian Holdings, LLC(3)
3,366,326
5.1
%
Persons affiliated with Kojaian Ventures, L.L.C.(4)
11,700,000
17.9
%
Anthony W. Thompson(5)
8,672,708
13.3
%
Sharon Thompson(6)
5,293,647
8.1
%
Wellington Management Company, LLP(7)
8,460,188
12.9
%
Executive Officers and Directors
Glenn L. Carpenter
40,399
(8)(9)
*
Harold H. Greene
22,799
(9)
*
Gary H. Hunt
22,799
(9)
*
C. Michael Kojaian
15,069,325
(9)(10)
23.0
%
Robert J. McLaughlin
131,804
(9)
*
Devin I Murphy
10,000
(11)
*
D. Fleet Wallace
22,799
(9)
*
Rodger D. Young
31,244
(9)(12)
*
Andrea R. Biller
337,810
(13)
*
Jeffrey Hanson
578,989
(14)
*
Francene LaPoint
115,867
(15)
*
Stanley J. Olander, Jr.
126,133
(16)
*
Robert H. Osbrink
84,278
(17)
*
Richard W. Pehlke
15,833
(18)
*
Scott D. Peters
1,401,416
(19)
2.1
%
Dylan Taylor
60,000
(20)
*
Jacob Van Berkel
5,867
(21)
*
All Current Directors and Executive Officers as a Group
(14 persons)
16,475,801
(22)
25.2
%
*
Less than one percent.
(1)
Unless otherwise indicated, the address for each of the
individuals listed below is
c/o Grubb &
Ellis Company, 1551 Tustin Avenue, Suite 300, Santa Ana,
California92705
(2)
The percentage of shares of capital stock shown for each person
in this column and in this footnote assumes that such person,
and no one else, has exercised any currently outstanding
warrants, options or convertible securities held by him or her.
(3)
Kojaian Holdings LLC is affiliated with both C. Michael
Kojaian,a director of the Company, and Kojaian Ventures, L.L.C.
(See footnote 10 below). The address for Kojaian Holdings LLC is
39400 Woodward Avenue, Suite 250, Bloomfield Hills,
Michigan48304.
(4)
Kojaian Ventures, L.L.C. is affiliated with both C. Michael
Kojaian, a director of the Company and Kojaian Holdings LLC (see
footnote 10 below). The address of Kojaian Ventures, L.L.C. is
39400 Woodward Ave., Suite 250, Bloomfield Hills, Michigan48304.
Pursuant to the Schedule 13D/A filed with the SEC by
Anthony Thompson and Sharon Thompson on October 27, 2008,
Mr. Thompson is deemed to be the beneficial owner of
8,672,708 shares of Common Stock. These shares are held as
follows: (i) 2,699,730 shares are held of record by
Mr. Thompson; (ii) 701,875 shares are held by AWT
Family, L.P., of which Mr. Thompson and his spouse, Sharon
Thompson are the sole limited partners (the Corporate General
Partner of AWT Family, L.P. also is controlled by
Mr. Thompson); (iii) 679,331 shares of common
stock held by Cunningham Stafford, LLC, of which
Mr. Thompson is the sole member; and
(iv) 4,591,772 shares are held in a brokerage account
by Mr. and Mrs. Thompson as joint tenants with right of
survivorship and, accordingly, Mr. and Mrs. Thompson share
voting and dispositive power with respect to such shares.
Mr. Thompson’s address is
c/o Thompson
National Properties, LLC, 1901 Main St., Suite 108, Irvine,
California92614.
(6)
Pursuant to Schedule 13D/A filed by Sharon Thompson and
Anthony Thompson on October 27, 2008, Sharon Thompson may
be deemed to be the beneficial owner of 5,293,647 shares of
Common Stock. According to the such Schedule 13D/A, these
shares are held as follows: (i) 701,875 shares are
holder by AWT Family L.P. of which Mrs. Thompson and her
spouse, Anthony Thompson, are the sole limited partners (the
corporate general partner of AWT Family L.P. is controlled by
Mr. Thompson and, accordingly, Mr. Thompson is
entitled to exercise sole voting and dispositive power with
respect to the shares held by such entity), although
Mrs. Thompson expressly disclaims beneficial ownership of
such shares except to the extent of pecuniary interest therein;
and (ii) 4,591,772 shares are held in a brokerage
account by Mr. and Mrs. Thompson as joint tenants with a
right of survivorship and, accordingly, Mr. and
Mrs. Thompson share voting and dispositive power with
respect to such shares. Mrs. Thompson’s address is
c/o Thompson
National Properties, LLC, 1901 Main St., Suite 108, Irvine,
California92614.
(7)
Wellington Management Company, LLP (“Wellington”), in
its capacity as investment advisor, may be deemed to
beneficially own 8,460,188 shares of the Company which are
held of record by clients of Wellington. Wellington’s
address is 75 State Street, Boston, Massachusetts02109.
(8)
Beneficially owned shares do not include 11,958 share of
the Company’s restricted stock which vest in equal
331/3
portions on each first business day following March 12,2009, 2010 and 2011.
(9)
Beneficially owned shares include 2,999 shares of
restricted stock that vest on the first business day after
December 10, 2008. Beneficially owned shares do not include
2,999 shares of restricted stock that vest on the first
business day following December 10, 2009 or
2,998 shares of restricted stock that vest on the first
business day following December 10, 2010, such
5,998 shares are subject to certain terms and conditions
contained in each of those certain Restricted Stock Agreements
between the Company and Messrs. Carpenter, Greene, Hunt,
Kojaian, McLaughlin, Wallace and Young, respectively, dated
December 10, 2007.
(10)
Beneficially owned shares include shares directly held by
Kojaian Holdings LLC and Kojaian Ventures, L.L.C. C. Michael
Kojaian, a director of the Company, is affiliated with Kojaian
Ventures, L.L.C. and Kojaian. Holdings LLC. Pursuant to rules
established by the SEC, the foregoing parties may be deemed to
be a “group,” as defined in Section 13(d) of the
Exchange Act, and C. Michael Kojaian is deemed to have
beneficial ownership of the shares directly held by Kojaian
Ventures, L.L.C. and the shares directly held by Kojaian
Holdings LLC.
(11)
Beneficially owned shares do not include 19,481 shares of
the Company’s restricted stock which vest in equal
331/3
portions on each first business day following July 10,2009, 2010 and 2011.
(12)
Beneficially owned shares include 10,000 shares of common
stock issuable upon exercise of fully vested outstanding options.
(13)
Beneficially owned shares include 35,200 restricted shares of
common stock issuable upon exercise of fully vested outstanding
options.
(14)
Beneficially owned shares include 22,000 shares of common
stock issuable upon exercise of fully vested outstanding options.
(15)
Francene LaPoint resigned her position with the Company
effective as of October 2008. Beneficially owned shares
include 23,467 shares of common stock issuable upon
exercise of fully vested outstanding options.
Stanley J. Olander, Jr. indirectly owns 352,000 shares of
the Company’s restricted common stock owned of record by
ROC Advisors, LLC of which Mr. Olander is one of three
members and is the managing member. Beneficially owned shares
include 117,333 shares of such restricted stock which will
vest on the first business day following January 2, 2008
but do not include 117,333 shares of such restricted Stock
which will vest on the first business day following
January 1, 2009 nor do they include and 117,334 shares
of such restricted Stock which will vest on the first business
day following January 1, 2010.
(17)
Robert H. Osbrink resigned his position with the Company in
June 2008. Beneficially owned shares include 15,000 shares
of common stock issuable upon exercise of fully vested
outstanding options.
(18)
Beneficially owned shares include 8,333 shares of common
stock issuable upon exercise of fully vested outstanding
options. Beneficially owned shares do not include
8,333 shares of Company common stock issuable upon exercise
of outstanding options which do not vest until February 15,2009 nor do they include 8,334 shares of Company common
stock issuable upon exercise of outstanding options which do not
vest until February 15, 2010. Nor do beneficially owned
shares include 25,000 shares of restricted stock that vest
on the first business day following January 24, 2009,
25,000 shares of restricted stock that vest on the first
business day January 24, 2010 or 25,000 shares of
restricted stock that vest on the first business day
January 24, 2011, all of these 75,000 shares are
subject to certain terms and conditions contained in that
certain Restricted Stock Agreement between the Company and
Mr. Pehlke dated January 24, 2008.
(19)
Scott D. Peters resigned his position with the Company in
July 2008. Beneficially owned shares include
29,333 shares of common stock issuable upon exercise of
fully vested outstanding options.
(20)
Beneficially owned shares do not include 13,333 shares of
restricted stock that vest on the first business day following
January 24, 2009, 13,333 shares of restricted stock
that vest on the first business day following January 24,2010 or 13,334 shares of restricted stock that vest on the
first business day following January 24, 2011, all of these
40,000 shares are subject to certain terms and conditions
of the Company’s 2006 Omnibus Equity Plan.
(21)
Beneficially owned shares include 5,867 shares of the
Company’s restricted stock which vest on the first business
day after December 4, 2008. Beneficially owned shares do
not include 5,867 shares of the Company’s restricted
stock which vest on the first business day after
December 4, 2009 or 5,866 shares of restricted stock
which vests on the first business day after December 4,2010. Nor do beneficially owned shares include
80,000 shares of Company restricted stock that were awarded
to Mr. Van Berkel pursuant to the Company’s 2006
Omnibus Equity Plan which will vest in equal 331/3 portions on
each first business day following January 24, 2009, 2010,
and 2011.
(22)
Beneficially owned shares include the following shares of common
stock issuable upon exercise of outstanding options which are
exercisable at October 27, 2008 or within sixty days
thereafter under the Company’s various stock option plans:
Mr. Young — 10,000 shares,
Ms. Biller — 35,200 shares,
Mr. Hanson — 22,000 shares,
Mr. Pehlke — 8,333 shares, and all current
directors and executive officers as a group 75,533 shares.
The Board of Directors has appointed the firm of
Ernst & Young LLP to continue as the Company’s
independent registered public accounting firm for the year
ending December 31, 2008, subject to ratification of the
appointment by Grubb & Ellis’ stockholders. If
the stockholders do not ratify the appointment of
Ernst & Young LLP, the Audit Committee will reconsider
whether to retain Ernst & Young LLP, but may decide to
retain Ernst & Young LLP as the Company’s
independent registered public accounting firm. Even if the
appointment is ratified, the Audit Committee in its discretion
may change the appointment at any time during the year if it
determines that a change would be in the best interests of
Grubb & Ellis and its stockholders.
Assuming the presence of a quorum at the Annual Meeting, the
affirmative vote of a majority of the shares, represented either
in person or by proxy, and entitled to vote at the Annual
Meeting is required to ratify the appointment of
Ernst & Young LLP as Grubb & Ellis’
independent registered public accounting firm for the year
ending December 31, 2008.
Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting. They will be given an
opportunity to make a statement if they desire to do so and will
be available to respond to appropriate questions.
The Board Of Directors Recommends A Vote To Ratify The
Appointment Of Ernst & Young LLP As Independent Public
Accountants For the Year Ending December 31, 2008, And
Proxies Solicited By The Board Will Be Voted In Favor Of Such
Ratification Unless A Stockholder Indicates Otherwise On The
Proxy.
Auditor
Fee Information
Ernst & Young, independent public accountants, began
serving as the Company’s auditors from December 10,2007. Ernst & Young also served as the legacy
Grubb & Ellis’ auditors from January 1, 2007
to December 7, 2007 and for the year ended
December 31, 2006. Ernst & Young billed the
Company and the legacy Grubb & Ellis the fees and
costs set forth below for services rendered during the years
ended December 31, 2007 and 2006, respectively.
2007
2006
Audit Fees(1)
Audit of consolidated financial statements
$
652,250
$
270,375
Audit of internal control over financial reporting
324,450
28,000
Timely quarterly reviews
47,750
45,750
SEC filings, including comfort letters, consents and comment
letters
236,000
176,100
Total Audit Fees
1,260,450
520,225
Audit Related Fees(2)
Employee benefit plans
25,500
17,000
Audits in connection with acquisitions and other accounting
consultations
Includes fees and expenses related to the year-end audit and
interim reviews, notwithstanding when the services were rendered.
(2)
Includes fees and expenses for services rendered from January
through December of the year, notwithstanding when the fees and
expenses were billed.
All audit and non-audit services have been pre-approved by the
Audit Committee.
Deloitte & Touche, independent public accountants,
served as NNN’s auditors for the period from
January 1, 2007 to December 7, 2007 and for the year ended
December 31, 2006. Deloitte & Touche billed NNN
the fees and costs set forth below for services rendered during
the years ended December 31, 2007 and 2006, respectively.
2007
2006
Audit Fees(1)
Audit of consolidated financial statements
$
881,297
$
803,769
Timely quarterly reviews
756,970
80,219
SEC filings, including comfort letters, consents and comment
letters
—
760,023
Total Audit Fees
1,638,267
1,644,011
Audit Related Fees(2)
Audits in connection with acquisitions and other accounting
consultations
373,996
43,240
Due diligence services on pending merger
19,798
—
Total Audit-Related Fees
393,794
43,240
Tax Fees(2)
Tax return preparation
61,850
—
Total Tax Fees
61,850
—
Total Fees
$
2,093,911
$
1,687,251
(1)
Includes fees and expenses related to the year-end audit and
interim reviews, notwithstanding when the fees and expenses were
billed or when the services were rendered.
(2)
Includes fees and expenses for services rendered from January
through December of the year, notwithstanding when the fees and
expenses were billed.
Policy on
Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
Consistent with SEC requirements regarding auditor independence,
the Audit Committee has adopted a policy to pre-approve all
audit and permissible non-audit services provided by the
independent registered public accounting firm.
The Audit Committee’s policy requiring pre-approval of all
audit services and permissible non-audit services provided by
the independent registered public accounting firm, along with
the associated fees for those services, provides for the annual
pre-approval of specific types of services pursuant to the
policies and procedures adopted by the Audit Committee, and
gives guidance to management as to the specific services that
are eligible for such annual pre-approval. The policy requires
the specific pre-approval of all other permitted services. For
both types of pre-approval, the Audit Committee considers
whether the provision of a non-audit service is consistent with
the SEC’s rules on auditor independence, including whether
provision of the service (i) would create a mutual or
conflicting interest between the independent registered public
accounting firm and the Company, (ii) would place the
independent registered public accounting firm in the position of
auditing its own work, (iii) would result in the
independent registered public accounting firm acting in the role
of management or as an employee of the Company, or
(iv) would place the independent registered public
accounting firm in a position of acting as an
advocate for us. Additionally, the Audit Committee considers
whether the independent registered public accounting firm is
best positioned and qualified to provide the most effective and
efficient service, based on factors such as the independent
registered public accounting firm’s familiarity with our
business, personnel, systems or risk profile and whether
provision of the service by the independent registered public
accounting firm would enhance our ability to manage or control
risk or improve audit quality or would otherwise be beneficial
to us.
Audit
Committee Report
The Audit Committee currently has three members Robert J.
McLaughlin, Chair, Harold H. Greene, and D. Fleet Wallace. The
Board has determined that the members of the Audit Committee are
independent under the NYSE listing requirements and the
Securities Exchange act of 1943 as amended and the rules
thereunder, and that Mr. McLaughlin is an audit committee
financial expert in accordance with rules established by the
SEC. The Audit Committee’s responsibilities are described
in a written charter that was adopted by the Board of Directors
of Grubb & Ellis Company. The charter of the Audit
Committee is available on the Company’s website at
www.grubb-ellis.comand printed copies of which
may be obtained upon request by contacting Investor Relations,
Grubb & Ellis Company, 1551 N. Tustin
Avenue, Suite 300, Santa Ana, CA92705.
The primary function of the Audit Committee is to provide
oversight relating to the corporate accounting functions, the
systems of internal controls, and the integrity and quality of
the financial reports of the Company. The responsibilities of
the Audit Committee include recommending to the Board the
appointment of independent accountants as auditors, approval of
the scope of the annual audit, and a review of: (a) the
independence and performance of the auditors; (b) the audit
results and compliance with the auditors’ recommendations;
and (c) financial report to stockholders. In addition, the
Audit Committee approves the selection of any vendor utilized
for internal audit function, its corporate accounting function
and the effectiveness of internal controls, and compliance with
certain aspects of the Company’s conflicts-of-interest
policy.
The independent accountants are responsible for performing an
independent audit of the Company’s consolidated financial
statements in accordance with generally accepted auditing
standards and to issue a report thereon. The Company’s
management is responsible for the Company’s internal
controls and the financial reporting process. The Audit
Committee is responsible for monitoring these processes.
In the performance of its oversight function, the Audit
Committee has reviewed and discussed the Company’s audited
consolidated financial statements for the fiscal year ended
December 31, 2007 with the Company’s management. The
Audit Committee has discussed with Ernst & Young LLP,
the Company’s independent registered public accounting
firm, the matters required to be discussed by Statement and
Auditing Standards No. 61, Communication with Audit
Committees. The Audit Committee has received the written
disclosures and the letter from Ernst & Young LLP
required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has
discussed with Ernst & Young LLP the independence of
Ernst & Young LLP.
The Audit Committee discussed with Ernst & Young LLP
the overall scope and plans for its audits. The Audit Committee
meets with the independent registered public accounting firm
with and without management present to discuss the results of
their examinations, their evaluations of the Company’s
internal controls, and the overall quality of the Company’s
financial reporting and other matters.
Based on the review and discussions described above, the Audit
Committee recommended to the Company’s Board of Directors
that the Company’s audited consolidated financial
statements for the fiscal year ended December 31, 2007 be
included in the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 for filing with
the SEC.
The above Audit Committee Report is not to be deemed to be
“soliciting material” or to be “filed” with
the SEC or subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that the Company specifically requests that such
information be treated as soliciting material or specifically
incorporates it by reference into any filing under the
Securities Act or the Exchange Act.
Members
of The Audit Committee Robert
J. McLaughlin, Chair
Harold H. Greene
D. Fleet Wallace
C:
DATE FOR
SUBMISSION OF STOCKHOLDER PROPOSALS
FOR INCLUSION IN PROXY STATEMENT
Any proposal that a stockholder wishes to have included in our
Proxy Statement and form of proxy relating to our 2009 annual
meeting of stockholders under
Rule 14a-8
of the SEC must be received by our Secretary at
Grubb & Ellis Company, 1551 N. Tustin Ave.,
Suite 300, Santa Ana, California92705, by
[July 7th],
2009. Any stockholder proposal submitted for consideration
at next year’s annual meeting but not submitted for
inclusion in the proxy statement that is received by the Company
after [September 20], 2009, will not be considered
filed on a timely basis with the Company under
Rule 14a-4(c)(1).
For such proposals that are not timely filed, the Company
retains discretion to vote proxies it receives. For such
proposals that are timely filed, the Company retains discretion
to vote proxies it receives provided (i) the Company
includes in its proxy statement advice on the nature of the
proposal and how it intends to exercise its voting discretion;
and (ii) the proponent does not issue a proxy statement.
Nothing in this paragraph shall be deemed to require us to
include in our proxy statement and form of proxy for such
meeting any stockholder proposal that does not meet the
requirements of the SEC in effect at the time. The
Company’s bylaws provide that in order for a stockholder to
make nominations for the election of directors to be brought
before the 2009 annual meeting of Stockholders, a stockholder
must deliver written notice mailed or delivered of such
nomination to the Company not less than fourteen (14) days
nor more than fifty (50) days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if less than twenty-one (21) days’
notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed to the
Secretary of the Company not later than the close of the seventh
(7th) day
following the day on which notice of the meeting was mailed to
the stockholders. The Company’s bylaws do not contain any
provisions that govern the submission of proposals by
stockholders. A copy of the bylaws may be obtained from the
Company.
C:
CODE OF
CONDUCT AND ETHICS
The Company has adopted, and revised effective January 25,2008, a code of business conduct and ethics (“Code of
Business Conduct and Ethics”) that applies to all of the
Company’s directors, officers, employees and independent
contractors, including the Company’s principal executive
officer, principal financial officer and controller and complies
with the requirements of the Sarbanes-Oxley Act of 2002 and the
NYSE listing requirements. The January 25, 2008 revision
was effected to make the Code of Business Conduct and Ethics
consistent with the amendment of even date to the Company’s
by-laws so as to provide that members of the board of directors
who are not an employee or executive officer of the Company
(“Non-Management Directors”) have the right to
directly or indirectly engage in the same or similar business
activities or lines of business as the Company, or any of its
subsidiaries, including those business activities or lines of
business deemed to be competing with the Company or any of its
subsidiaries. In the event that the Non-Management Director
acquires knowledge, other than as a result of his or her
position as a director of the Company, of a potential
transaction or matter that may be a corporate opportunity for
the Company, or any of its subsidiaries, such Non-Management
Director shall be entitled to offer such corporate opportunity
to the Company as such Non-Management Director deems appropriate
under the circumstances in their sole discretion.
The Company’s Code of Business Conduct and Ethics is
designed to deter wrongdoing, and to promote, among other
things, honest and ethical conduct, full, timely, accurate and
clear public disclosures, compliance with all applicable laws,
rules and regulations, the prompt internal reporting of
violations of the code, and accountability. In addition, the
Company maintains an Ethics Hotline with an outside service
provider in order to assure compliance with the so-called
“whistle blower” provisions of the Sarbanes Oxley Act
of 2002. This toll-free hotline and confidential web-site
provide officers, employees and independent contractors with a
means by which issues can be communicated to management on a
confidential basis. A copy of the
Company’s Code of Business Conduct and Ethics is available
on the company’s website at
www.grubb-ellis.comand upon request and without charge by contacting Investor
Relations, Grubb & Ellis Company, 1551 North Tustin
Avenue, Suite 300, Santa Ana, California92705.
C:
OTHER
MATTERS
Please note that Anthony Thompson has provided notice that he
intends to nominate his own slate of three (3) nominees for
election as directors at the Annual Meeting and solicit proxies
for use at the Annual Meeting to vote in favor of his own slate
in opposition of the three (3) nominees named in
Proposal No. 1. Additionally, Mr. Thompson has
provided notice that he intends to introduce proposals at the
Annual Meeting to take the following actions (the “Thompson
Proposals”):
(i) approve the ratification of an independent auditor
other than Ernst & Young, LLP for the Company for the
fiscal year ending December 31, 2008 in opposition to
Proposal No. 2;
(ii) approve and adopt a binding resolution to amend the
Amended and Restated Bylaws of the Company (the
“Bylaws”) to require the Company to hold the 2008
Annual Meeting on December 3, 2008 and to prevent the
Company from delaying such meeting to a later date; and
(iii) approve and adopt a binding resolution to amend the
Bylaws to require stockholder approval for adjournment of a
stockholder meeting at which a quorum is present.
We do not believe that election of the Mr. Thompson’s
nominees to our Board of Directors or the Thompson Proposals are
in the best interests of our stockholders.
You may receive proxy solicitation materials from
Mr. Thompson, including an opposition proxy statement and
proxy card. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR THE ELECTION OF ALL OF THE BOARD’S NOMINEES ON THE
ENCLOSED WHITE PROXY CARD, FOR THE RATIFICATION OF
ERNST & YOUNG, LLP AS THE COMPANY’S INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM AND URGES YOU NOT TO SIGN OR
RETURN ANY PROXY CARD SENT TO YOU BY ANTHONY THOMPSON.
Even if you have previously signed a proxy card sent by
Mr. Thompson, you have the right to change your vote by
using the enclosed WHITE proxy card to vote by telephone,
by Internet or by signing, dating and returning the enclosed
WHITE proxy card in the postage-paid envelope provided.
Only the latest dated proxy you submit will be counted. We urge
you to disregard any proxy card sent to you by Mr. Thompson
or any person other than Grubb & Ellis Company.
We are not responsible for the accuracy of any information
provided by or relating to Anthony Thompson contained in any
proxy solicitation materials filed or disseminated by, or on
behalf of Anthony Thompson or any other statements that Anthony
Thompson may otherwise make.
As of the date of this Proxy Statement, the Board of Directors
does not know of any other matters to be presented for action by
the Stockholders at the Annual Meeting. If, however, any other
matters not now known are properly brought before the meeting,
the persons named in the accompanying proxy will vote such proxy
in accordance with the determination of a majority of the Board
of Directors.
C:
REVOCATION
OF PROXIES
You may change your proxy instructions at any time prior to the
vote at the Annual Meeting for share of Common Stock held
directly in your name. You may accomplish this by attending the
Annual Meeting and voting in person which will automatically
cancel any proxy previously given (but your attendance alone
will not revoke any proxy previously given), or by delivering to
the Corporate Secretary of the Company, Andrea R. Biller
c/o Grubb &
Ellis Company, 1551 North Tustin Avenue, Suite 300, SantaAna, California92705, a written notice, bearing a later date
than the date of your proxy instructions provided to the
Company, stating that your proxy provided to the Company is
revoked. If your shares of Common Stock are held in “street
name,” you must either vote your shares of Common stock
according to the enclosed voting instruction form
or contact your broker or other nominee and follow the
directions provided to you in order to change your vote.
C:
SOLICITATION
OF PROXIES
In connection with the solicitation of proxies by the Company
for use at the 2008 Annual Meeting, proxies may be solicited by
mail, facsimile, telephone, telegraph, electronic mail,
Internet, in person and by advertisements. Solicitations may
also be made by officers and divisions of the Company, none of
whom will receive compensation for such solicitation.
The Company has retained MacKenzie Partners, Inc. for
solicitation and advisory services in connection with the Annual
Meeting for a fee of
[ ],
plus reimbursement for its reasonable out-of-pocket expenses and
will be indemnified against certain liabilities.
C:
ANNUAL
REPORT
A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2007, which was filed with
the SEC on March 17, 2008, accompanies this Proxy Statement.
A copy of our Annual Report on
Form 10-K
for the year ended December 31, 2007, including the
exhibits filed thereto, may be obtained by stockholders without
charge by written request addressed to Investor Relations,
Grubb & Ellis Company, 1551 N. Tustin Ave,.
Suite 300, Santa Ana, CA92705 or may be accessed on the
Internet at www.grubb-ellis.com.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU
ARE URGED TO FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY,
OR COMPLETE YOUR PROXY BY TELEPHONE OR VIA THE INTERNET, AT YOUR
EARLIEST CONVENIENCE.
PROXY — GRUBB & ELLIS COMPANY For the Annual Meeting of Stockholders — December 3, 2008THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF GRUBB & ELLIS COMPANY I am a stockholder of Grubb & Ellis Company
(“Grubb & Ellis”) and I have received the Notice of the Annual Meeting of Stockholders dated
December 3, 2008 and the accompanying joint proxy statement/prospectus. I appoint Richard W.
Phelke and Andrea R. Biller and each or either of them as Proxy Holders, with full power of
substitution, to represent and vote all the shares of capital stock which I may be entitled to vote
at the Annual Meeting of Stockholders to be held at The Four Seasons Hotel, 2800 Pennsylvania
Avenue, N. W., Washington, D.C.20007 on Wednesday, December 3, 2008 at 8:00 a.m. or at any and all
adjournments thereof, with all powers which I would have if I were personally present at the
meeting. The shares represented by this Proxy will be voted in the way that I direct. If this
Proxy is executed but no direction is made, this Proxy will be voted “FOR”all of the nominees
listed under the “Election of Directors,” all of whom have been nominated by the Board of Directors
as described in the accompanying Proxy Statement and “FOR”Proposal 2. In any of the nominees
listed becomes unavailable to serve as a director prior to the Annual Meeting, the Proxy will be
voted for any substitute nominee(s) designated by the Board of Directors. I ratify and confirm all
that the above Proxy Holders may legally do in relation to this Proxy. PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED POSTMARKED ENVELOPE. (Continued and to be marked,
signed and dated on reverse side.) Telephone and Internet Voting Instructions You can vote by
telephone OR Internet! Available 24 hours a day 7 days a week! Instead of mailing your proxy, you
may choose one of the two voting methods outlined below to vote your proxy To vote using the
Telephone (within U.S. and Canada) To vote using the Internet Call toll free in the United
States or Go to the following web site
Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. Follow the simple instructions provided by the recorded
message. Enter the information requested on your computer screen and
follow the simple instructions. If you vote by telephone or
the Internet, please DO NOT mail this proxy card. Proxies submitted by telephone or the Internet
must be received by 1:00 a.m., Central Time, on December 3, 2008. THANK YOU FOR VOTING
Annual Meeting of Stockholders Proxy Card Votes must be indicated (X) in black or blue ink. The
Board of Directors recommends a vote FOR all of the proposals. To vote in accordance with the
Board of Directors’ recommendations, just sign below; no boxes need to be checked. 1. Election
of Directors: 1. Harold H. Greene FOR WITHHOLD 2. Devin I. Murphy FOR WITHHOLD 3.
D. Fleet Wallace FOR WITHHOLD 2. TO ratify the appointment of Ernst & Young LLP as the
Company’s independent auditors for the year ending December 31, 2008: FOR AGAINST ABSTAIN
In the Proxy Holders are authorized to vote upon such other business as may properly come before
the meeting and at ay and all adjournments thereof. Please sign exactly as name appears on this
Proxy Card. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. Dated: , 2007
Signature Signature if held jointly PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Dates Referenced Herein and Documents Incorporated by Reference