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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) November 17, 1994
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GRUBB & ELLIS COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-8122 94-1424307
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
One Montgomery Street, Telesis Tower, San Francisco, California 94104
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (415) 956-1990
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no change
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective November 17, 1994, Grubb & Ellis Company (the "Company")
sold certain assets related to its Southern California residential
brokerage operations to Newco Realty Corp. (the "Buyer"), which is
owned by Dennis Gordon, John Tillotson, Javier Uribe, and Charles
Neubauer (the "Principals"). The Company had operated nine
residential brokerage offices in Southern California. The Buyer hired
the real estate agents and employees who had previously worked in such
offices. The consideration for the transaction was arrived at through
arms-length negotiations between the parties, and consisted of a
preliminary cash payment representing the proration of certain
prepaid expenses, an agreement to pay to the Company a portion of
the real estate commissions to be received from certain pending real
estate transactions and listings, and the assumption by the Buyer of
the Company's obligations under certain real property and equipment
leases related to the sold operations. The Company is not aware of
any material relationships between the Company and its directors,
officers, or associates thereof, on the one hand, and Newco or the
Principals, on the other hand. Certain agreements pertaining to the
sale are filed as exhibits to this Report and are incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Inapplicable.
(b) Pro forma financial information.
It is impracticable for the registrant to provide the required
pro forma financial information at the time of filing this
report. The registrant intends to file the information within
thirty days of the date of filing this Report.
(c) The following exhibits are filed as part of this Report:
Exhibit
Number
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10.1 Agreement dated November 8, 1994 among Grubb & Ellis
Company, Newco Realty Corp., Dennis Gordon, John Tillotson,
Javier Uribe, and Charles Neubauer.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (Continued)
10.2 Servicemark License Agreement dated November 17, 1994
between Grubb & Ellis Company and Newco Realty Corp.
10.3 Guaranty dated November 8, 1994 executed by Dennis Gordon,
Javier Uribe, John Tillotson and Charles Neubauer.
99.1 Press Release of Grubb & Ellis Company dated November 18,
1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GRUBB & ELLIS COMPANY
(Registrant)
Date: December 1, 1994 By: /s/ Robert J. Hanlon, Jr.
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Robert J. Hanlon, Jr.
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number
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10.1 Agreement dated November 8, 1994 among Grubb & Ellis Company, Newco
Realty Corp., Dennis Gordon, John Tillotson, Javier Uribe, and
Charles Neubauer.
10.2 Servicemark License Agreement dated November 17, 1994 between
Grubb & Ellis Company and Newco Realty Corp.
10.3 Guaranty dated November 8, 1994 executed by Dennis Gordon, Javier
Uribe, John Tillotson and Charles Neubauer.
99.1 Press Release of Grubb & Ellis Company dated November 18, 1994.
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Exhibit 10.1
November 8, 1994
PERSONAL & CONFIDENTIAL
Mr. Dennis Gordon
1831 Newport Hills Drive East
Newport Beach, CA 92660
Dear Dennis:
This letter agreement is intended to set forth the essential terms under
which Newco Realty Corp., a California corporation ("Newco"), will acquire
certain of the assets of the residential real estate brokerage operations of
Grubb & Ellis Company ("Grubb & Ellis") in Orange County, California and in San
Diego County, California as set forth herein. This letter agreement shall be
legally binding after all parties have signed it and the attached Guaranty and
it has been returned to us. Unless and until this letter agreement is executed
by both parties it shall not be legally binding.
Newco will acquire certain assets of the residential brokerage offices of
Grubb & Ellis in Orange County, California consisting of the Mission Viejo
(24200 Alicia Parkway), Irvine (15343 Culver Drive), Dana Point (34105 Pacific
Coast Highway), Laguna Beach (1110 Glenneyre Street), Laguna Niguel (30140 Town
Center Drive) and Newport Beach (23 Corporate Plaza, Suite 190) offices and in
San Diego County, California consisting of the La Jolla (1299 Prospect Street),
Solana Beach (740 Lomas Santa Fe Drive) and Rancho Santa Fe (6119 La Granada)
offices (collectively hereinafter referred to as the "Residential Offices") on
the following terms and conditions. Specifically excluded assets from this
transaction include any and all assets of Grubb & Ellis which are related to its
commercial real estate brokerage and other businesses, including but not limited
to Grubb & Ellis Mortgage Services, Inc. ("GEMS").
1. On the Closing Date, defined below, Newco shall sublease (or, at the option
of Grubb & Ellis, Grubb & Ellis shall assign and Newco shall accept such
assignment of the leases of) the Residential Offices now rented by Grubb & Ellis
on the same terms and conditions as the existing real estate leases for the
Residential Offices (the "Leases"), including, without limitation, base or fixed
rent and all of Grubb & Ellis' pro rata share of operating or other
expenses or amounts payable by Grubb & Ellis on each Lease, including all
escalations and adjustments thereto, all upon the terms and conditions of each
Lease. Newco also agrees, to the extent Newco does not enter into a sublease,
sub-sublease, or assignment of lease with Grubb & Ellis with respect to a Lease,
to enter into an indemnity agreement in form acceptable to Grubb & Ellis
agreeing to indemnify and defend Grubb & Ellis against all future liability in
connection with Grubb & Ellis' obligations as tenant under such Lease. Each
sublease or assignment shall provide that in the event Newco is not permitted by
the lessor under the Lease to occupy a Residential Office on the basis that the
sublease or assignment violates the Lease,
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Dennis Gordon
November 8, 1994
the respective sublease or assignment may be terminated by Newco and its
liability as to said Lease will terminate. Whenever the current Lease terms of
the Residential Office Leases expire, there shall be no extensions or renewals
thereof. In the event Newco desires to continue to rent such Residential
Offices, it shall negotiate separately with the landlord and in such case Grubb
& Ellis shall have no obligations with respect to such leases. Grubb & Ellis
shall make reasonable efforts (but shall not be required to pay cash or incur
more than a nominal expense) to obtain Landlord consents, but such consents
shall not be required.
2. On the Closing Date, Newco shall sublease (or, at the option of Grubb &
Ellis, Grubb & Ellis shall assign and Newco shall accept such assignment of the
leases of) all of the furniture, fixtures and equipment in the Residential
Offices now rented by Grubb & Ellis on the same terms and conditions as the
existing personal property leases. Grubb & Ellis shall make reasonable efforts
(but shall not be required to pay cash or incur more than a nominal expense) to
obtain lessor consents, but such consents shall not be required. On the Closing
Date, except as set forth below, Newco shall acquire all furniture, fixtures and
equipment owned by Grubb & Ellis which are now located in the Residential
Offices and used in the residential business operations of Grubb & Ellis. On the
Closing Date, Grubb & Ellis shall assign to Newco all of its right, title and
interest to all furniture, fixtures and equipment owned by Grubb & Ellis now in
existence in the Residential Offices free and clear of all liens and
encumbrances. In addition, Newco shall have the right to use the telephone
numbers of the Residential Offices and Grubb & Ellis will cooperate with Newco
in its efforts to obtain such telephone numbers. Certain equipment and other
assets may be owned by Grubb & Ellis, salespersons or employees which are not
utilized in the business operations of the Residential Offices. Such equipment
and assets may be removed by salespersons, employees or Grubb & Ellis prior to
the Closing Date.
3. Grubb & Ellis will cooperate with Newco to assist in retaining its current
sales agents in each office and encourage them to transfer their broker/sales
licenses to Newco. Grubb & Ellis shall not be required to pay cash or incur
more than a nominal expense in connection with this effort. Grubb & Ellis and
Newco agree to the transfer of such licenses in accordance with the rules and
regulations of the California Department of Real Estate.
4. The Net Commission Income (gross commissions less customary referral fees
and sales commissions) from all pending residential real estate transactions in
progress for which a sale, exchange, lease, option, or other contract to sell,
exchange or lease has been executed by principals ("Pendings") on or prior to
the Closing Date of the transaction between Grubb & Ellis and Newco, including
extensions and renewals thereof, shall be split, on an undivided basis, fifty
percent (50%) to Newco and fifty percent (50%) to Grubb & Ellis. Grubb & Ellis
shall continue to be the named real estate broker on such transactions after the
Closing Date. On and after the Closing Date, Newco shall collect all cash and
other commissions in connection with Pendings on behalf of Grubb & Ellis and
shall remit, within three days following the end of the month in which a
transaction closes and payment is received, fifty percent (50%) of same to Grubb
& Ellis. On the Closing Date, Newco shall be given such authority from Grubb &
Ellis so as to enable it to collect commissions on Pendings as provided herein.
Newco shall keep appropriate books and records of such transactions which Grubb
& Ellis may inspect, copy and audit at its
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request from time to time at the expense of Grubb & Ellis. Newco and Grubb &
Ellis shall direct each Residential Office to prepare a list of, and to
inventory, all closed transaction files with respect to old business and shall
further require that all such files be boxed and shipped to the corporate
offices of Grubb & Ellis in San Francisco, California. Grubb & Ellis shall pay
for shipping costs. If this file handling is not accomplished by the Closing
Date, Newco shall fully cooperate in this effort which shall be completed within
30 days after the Closing Date. Upon the closing of each Pending transaction,
Newco shall send a complete copy of the file to Grubb & Ellis.
5. On and after the Closing Date, Grubb & Ellis will make its best efforts to
transfer to Newco all Orange County, California and San Diego County, California
residential listing agreements in respect of the Residential Offices in
existence as of the Closing Date which are not Pendings (hereinafter
"Transferred Listings"). Grubb & Ellis shall not be required to pay cash or
incur more than a nominal expense in connection with this effort. If such
Transferred Listings, including extensions and renewals, result in commissions
to Newco, Newco shall collect all cash and other commissions in connection with
such Transferred Listings and shall remit to Grubb & Ellis the following
remuneration within three days following the end of the month in which a
transaction closes and payment is received. If a transaction is effected by
Newco, Grubb & Ellis shall receive twenty five percent (25%) of the Net
Commission Income received by Newco. Newco shall keep appropriate books and
records of such transactions which Grubb & Ellis may inspect, copy and audit at
its request from time to time at the expense of Grubb & Ellis. Upon the closing
of each Transferred Listing, Newco shall send a complete copy of the file to
Grubb & Ellis.
6. Grubb & Ellis shall, as of the Closing Date, retain liability and
responsibility for all liabilities incurred or arising prior to the Closing Date
in connection with all present Grubb & Ellis Orange County, California and San
Diego County, California residential employees or independent contractors
including, without limitation, all liabilities and obligations for all accrued
wages, vacations, employee benefits, bonuses, commissions, compensation,
incentive compensation, deferred compensation, profit participation, disability
income, unemployment benefits, and workers' compensation and benefits. It shall
be a pre-condition to the closing of this transaction that Newco offer to hire
and retain all Grubb & Ellis residential employees and independent contractors
associated with the Residential Offices, other than Milton Naylor, who elect to
be hired by Newco. Newco may terminate such employees and independent
contractors in the ordinary course of business for valid business purposes on
and after 90 days after the Closing Date. Such employees shall not receive any
separation payments from Grubb & Ellis. On and after the Closing Date, Newco
shall be responsible for any and all liabilities for severance, salary, bonuses,
commissions, employee benefits, compensation, incentive compensation, deferred
compensation, profit participation, disability income, unemployment benefits,
workers' compensation benefits and all other payments to Grubb & Ellis employees
and independent contractors Newco hires as aforesaid.
7. Grubb & Ellis shall remain responsible for and bear the liabilities in
connection with all litigation, claims and other actions resulting from past
closed residential transactions as of the Closing Date and for the operation of
the Residential Offices during the period prior to the Closing Date. Newco
shall assume responsibility and liability for seventy-five percent (75%)
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and Grubb & Ellis shall assume responsibility and liability for twenty-five
percent (25%) of the uninsured portion (and any deductible thereon) of all
litigation, claims and other actions in connection with Transferred Listings.
If, however, Newco makes any changes to the listing agreement or information
sheets, then to the extent any litigation, claims or other actions relate to
such changes, Newco shall be responsible for one hundred percent (100%) of the
liabilities in respect of such litigation, claims or other actions. Newco shall
assume responsibility and liability for all new residential listings and other
transactions entered into or actions undertaken by Newco after the Closing Date
and for the operation of the Residential Offices on and after the Closing Date.
8. Grubb & Ellis agrees to defend, indemnify, and hold harmless Newco and its
affiliates and each of their officers, directors, shareholders, employees,
independent contractors, agents, successors, predecessors and assigns with
respect to any claims, demands, damages, liabilities, costs and expenses, known
or unknown, asserted or unasserted, including reasonable attorneys' fees, to the
extent arising out of any closed transaction or any other activities of Grubb &
Ellis related to the operation of the Residential Offices during the period
prior to the Closing Date except with respect to any claims, demands, damages,
liabilities, costs and expenses, including reasonable attorneys' fees which are
related to any Transferred Listings, which shall be divided as set forth in
paragraph 7 herein.
9. Newco agrees to defend, indemnify, and hold harmless, Grubb & Ellis and its
affiliates and each of their officers, directors, shareholders, employees,
independent contractors, agents, successors, predecessors and assigns with
respect to any claims, demands, damages, liabilities, costs and expenses, known
or unknown, asserted or unasserted, including reasonable attorneys' fees, to the
extent arising out of any real estate transactions brokered by Newco, certain
employee claims as set forth in paragraph six herein, certain independent
contractor claims as set forth in paragraph six herein, or any other activities
of Newco related to the operation of the Residential Offices during the period
on or after the Closing Date except with respect to any claims, demands,
damages, liabilities, costs and expenses, including reasonable attorneys' fees
which are related to Transferred Listings, which shall be divided as set forth
in paragraph 7 herein. Claims, demands, damages, liabilities, costs and
expenses, including reasonable attorneys' fees, relating to Pendings shall be
divided fifty percent (50%) to Grubb & Ellis and fifty percent (50%) to Newco.
Grubb & Ellis shall have the right, but not the obligation, in its absolute and
sole discretion to defend, coordinate, counter-sue, cross-claim, settle, and
otherwise handle any and all claims, demands, litigation or arbitration arising
from Pendings or Transferred Listings from time to time.
10. Whichever party undertakes the defense of a claim as set forth in
paragraphs 7, 8 and 9 herein, that party shall keep the other party advised of
all developments in the matter and in any related matter. Either party may
participate in any such matter at its own expense.
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Dennis Gordon
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11. Prepaid accounts (including, but not limited to, preprinted advertising
materials, brochures, mailers, stationery and the like), accounts payable, and
accruals herein shall be prorated as of the Closing Date. Grubb & Ellis shall
receive a credit for posted security deposits at the Closing Date. The party
receiving a credit balance after all prorations on the Closing Date shall be
paid the credit balance in cash by the other party on the Closing Date.
12. Newco agrees that for twelve (12) months after the Closing Date it shall
provide a non-exclusive opportunity to the escrow company owned by Milton Naylor
to solicit the escrow business for closings from Newco offices. It is
understood that Newco intends to establish its own escrow company.
13. Newco and Dennis Gordon agree that they have requested and received from
Grubb & Ellis all such information as they have deemed necessary regarding this
transaction. Newco and Dennis Gordon acknowledge and agree that they require no
other information and they have completed such due diligence as they have seen
fit to complete in connection with this transaction. Grubb & Ellis makes no
representations or warranties regarding the assets to be purchased by Newco or
regarding the operations of the Residential Offices, and Newco is acquiring the
assets "as is," relying solely on its own and Dennis Gordon's investigation of
the assets it will acquire.
14. The closing of this transaction shall occur on November 17, 1994 (the
"Closing Date") at the corporate offices of Grubb & Ellis in San Francisco,
California, or such other place as the parties mutually agree.
15. Grubb & Ellis shall retain all cash, accounting systems, manuals, books and
records of past transactions, accounts receivable and independent contractor
receivables as of the Closing Date. Grubb & Ellis shall retain its name, trade
names, trademarks and all other intellectual property rights. Newco may have a
limited right to use the trade name and service mark "Grubb & Ellis" (the
"Licensed Mark") for a period of up to twenty-four months after the Closing Date
solely in connection with a residential real estate brokerage business in Orange
County, California and in San Diego County, California, on such terms as are set
forth in the Service Mark License Agreement attached hereto as Exhibit A and
made a part hereof, which agreement shall only be effective on and after the
closing of this transaction. If the trust account beneficiaries approve, Grubb
& Ellis shall transfer any cash held in trust accounts in respect of Pendings
and Transferred Listings to Newco trust accounts on the Closing Date.
16. Newco shall obtain and maintain professional errors and omissions liability
insurance, and general liability insurance, which shall each provide for
coverage of $3 million in the aggregate with no greater than a twenty-five
thousand dollar ($25,000) deductible per occurrence. Any and all policies shall
have an endorsement insuring Grubb & Ellis and its affiliates as additional
named insureds. Grubb & Ellis shall obtain and maintain professional errors and
omissions liability insurance, and general liability insurance, which shall each
provide for coverage of $3 million in the aggregate with no greater than a two
hundred fifty thousand dollar ($250,000) deductible per occurrence.
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Dennis Gordon
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17. Grubb & Ellis warrants and represents to Newco as follows:
a. ORGANIZATION. Grubb & Ellis is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite power and authority to enter into this letter agreement and
perform its obligations hereunder.
b. AUTHORIZATION OF LETTER AGREEMENT. The execution, delivery and
performance of this letter agreement by Grubb & Ellis and the consummation by it
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of Grubb & Ellis and this letter agreement
constitutes the legal, valid and binding obligation of Grubb & Ellis enforceable
against it in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization or other laws relating to or affecting
the enforcement of creditors' rights or principles of equity.
c. LITIGATION. To the actual knowledge of the Grubb & Ellis legal
department, there are no outstanding litigation or administrative actions with
respect to the Transferred Listings.
d. PERSONAL PROPERTY. The obligations of Grubb & Ellis with respect to
the personal property leases or personal property purchase agreements do not
exceed, in the aggregate, the present value of forty-two thousand dollars
($42,000.00).
18. Newco and Dennis Gordon warrant and represent to Grubb & Ellis as follows:
a. ORGANIZATION. Newco is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, and has all
requisite power and authority to enter into this letter agreement and perform
its obligations hereunder.
b. AUTHORIZATION OF LETTER AGREEMENT. The execution, delivery and
performance of this letter agreement by Newco and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action and this letter agreement constitutes the legal, valid and binding
obligation of Newco enforceable against it in accordance with its terms, except
as the same may be limited by bankruptcy, insolvency, reorganization or other
laws relating to or affecting the enforcement of creditors' rights or principles
of equity.
c. REAL ESTATE BROKER'S LICENSE. Newco will have at the Closing Date a
valid real estate broker's license issued by the California Department of Real
Estate.
19. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and continuing agreements and obligations of the parties set forth in
this letter agreement shall be deemed continuing representations and warranties
and continuing agreements and obligations and shall survive the date of this
letter agreement and the Closing Date and the closing of this transaction.
20. a. It shall be a material obligation of Newco, within two (2) business
days from the execution of this letter agreement by all parties, to be organized
and validly in existence and to have in place and funded the financing set forth
herein in this paragraph 20. Newco shall
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Dennis Gordon
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provide evidence of its being duly organized and the funding of such financing
to the reasonable satisfaction of Grubb & Ellis within two (2) business days
from the execution of this letter agreement by all parties. If such evidence of
organization and financing is not in place within two (2) business days from the
execution of this letter agreement by all parties, Grubb & Ellis shall have the
right to terminate this letter agreement AB INITIO in its sole and absolute
discretion, each party to bear its own costs.
b. Within two (2) business days from the execution of this letter
agreement by all parties, Newco shall have received and there shall have been
funded in cash to Newco, initial working capital in the amount of five hundred
thousand dollars ($500,000). In addition, Newco shall be obligated to be
further capitalized as follows:
(i) For the first twelve months after the Closing Date, Newco shall
have funded total subordinated capital (the "First Year Capital
Requirement") in an amount not less than that which is required for
Newco to meet its obligations as they come due, up to one million two
hundred thousand dollars ($1,200,000) in cash, including the initial
funded capital of five hundred thousand dollars ($500,000), all of
which shall be subordinated to x) the prior receipt in cash, in full
by Grubb & Ellis of its pro rata share of cash receipts from any and
all Pendings and Transferred Listings as provided in this letter
agreement, and y) all payments in cash, in full to be made by Newco
for all real property leases and personal property leases of the
Residential Offices which are assumed liabilities of Newco in
connection with this letter agreement in respect of which Grubb &
Ellis has any remaining liability (the "Lease Obligations"); and
(ii) On and after the later of a) Grubb & Ellis having received all of
its pro rata share of cash receipts from Pendings as provided in this
letter agreement, or b) twelve months after the Closing Date, the
amount of capital required to be subordinated and funded to Newco (the
"Second Year Capital Requirement") shall be reduced to an amount equal
to the lesser of x) six hundred thousand dollars ($600,000) in cash,
or y) the present value (using a 6% discount factor) of the future
payments required to be made by Newco in respect of the Lease
Obligations plus the amount of the outstanding portion of Grubb &
Ellis' pro rata share of cash receipts from the remaining Transferred
Listings. The Second Year Capital Requirement may be reduced further
on a pro rata basis from time to time as Newco makes payments in
respect of the Lease Obligations.
c. The current shareholders of Newco, namely, Dennis Gordon ("Gordon"),
Javier R. Uribe ("Uribe"), Charles K. Neubauer ("Neubauer") and John Tillotson
("Tillotson"), shall immediately, jointly and severally, guaranty the
obligations of Newco to pay to Grubb & Ellis, all remuneration to be received by
Grubb & Ellis in respect of: 1) Pendings (paragraph 4 hereof); 2) Transferred
Listings (paragraph 5 hereof); 3) payments pursuant to the subleases or
assignments (paragraphs 1 and 2 hereof); and 4) contingent obligations
(paragraphs 6, 7 and 9 hereof), per the guaranty agreement attached hereto and
made a part hereof (hereinafter, collectively, the "Guaranty"), provided,
however, that such Guaranty shall be limited as follows:
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Dennis Gordon
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(i) For the later of a) the first twelve months after the Closing
Date, or b) Grubb & Ellis having received all of its pro rata share of
the cash receipts from the Pendings, the Guaranty shall be an amount
equal to the lesser of (x) one million two hundred thousand dollars
($1,200,000) in cash, less capital previously funded in cash to Newco
as provided herein and plus an amount (not to exceed one million two
hundred thousand dollars {$1,200,000} in the aggregate) equal to any
payments made in violation of the provisions of paragraph 20(d)
herein, and (y) one million two hundred thousand dollars ($1,200,000);
(ii) On or after the later of a) Grubb & Ellis having received all of
its pro rata share of the cash receipts from the Pendings, or b)
twelve months after the Closing Date, the Guaranty shall be reduced to
an amount equal to the lesser of x) six hundred thousand dollars
($600,000) in cash, or y) the present value (using a 6% discount
factor) of the future payments required to be made by Newco on the
Lease Obligations plus the amount of the outstanding portion of Grubb
& Ellis' pro rata share of receipts from the remaining Transferred
Listings (the "Second Year Guaranty Limit"). The Second Year Guaranty
Limit shall be increased by an amount (not to exceed six hundred
thousand dollars {$600,000} in the aggregate) equal to (a) any
shortfall in the six hundred thousand dollars ($600,000) capital
required to be funded in cash herein plus (b) any payments made by
Newco in violation of the provisions of paragraph 20(d) herein.
d. Newco and its subsidiaries hereby covenant and agree that, on and
after the Closing Date and until two years from the date thereof, they shall
comply with each of the following provisions:
1. RESTRICTED PAYMENTS. Newco and its subsidiaries will not (a) declare
or pay any dividend or other distribution, directly or indirectly, on any of its
capital stock, now or hereafter outstanding, (b) purchase, redeem, retire, or
deposit into a sinking fund account or make any similar type of payment for the
purchase or other acquisition of, directly or indirectly, any of its capital
stock, now or hereafter outstanding, (c) redeem, purchase, retire, or deposit
into a sinking fund account or make any similar type of payment for the purchase
or other acquisition of, or convert to a senior class, or obtain the surrender
of, directly or indirectly, any warrants, options or other rights in respect of
its capital stock, now or hereafter outstanding, (d) make any other distribution
to its shareholders, (e) purchase, redeem, retire, or deposit into a sinking
fund account or make any similar type of payment, purchase or other acquisition
of, directly or indirectly, any of its subordinated debt, now or hereafter
outstanding or (f) enter into an agreement or set aside funds to do any of the
foregoing.
2. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Newco and its
subsidiaries will not, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchasing, selling, leasing or
exchanging of any property, the rendering of any services, the paying of any
fees or bonuses, the granting of any liens or the extending of any indebtedness)
with any holder of capital stock of Newco and its subsidiaries or with any other
individual or entity directly or indirectly controlling, controlled by, or under
common control with, Newco and its subsidiaries or with Gordon, Tillotson,
Neubauer, Uribe and their affiliates;
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Dennis Gordon
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PROVIDED HOWEVER, that Newco and its subsidiaries may pay salaries or other
compensation in the ordinary course of business to Gordon, Neubauer and
Tillotson for salary, performance bonuses and commissions up to an annual
aggregate amount not to exceed Four Hundred Thousand Dollars ($400,000).
3. RESTRICTION ON FUNDAMENTAL CHANGES. Newco and its subsidiaries will
not, directly or indirectly, enter into any merger or consolidation, or sell,
transfer, convey or lease all or any substantial part of its assets, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution).
4. INVESTMENTS. Except as otherwise provided in this letter agreement,
Newco and its subsidiaries will not, directly or indirectly, make, incur, assume
or suffer to exist any loan, advance or other extension of credit or capital
contribution to any other person or entity.
5. LIENS. Newco and its subsidiaries will not create or permit to exist
any lien, charge or other encumbrance on any of its real or personal properties,
assets or rights of whatsoever nature (whether now owned or hereafter acquired).
6. DEBT AND CONTINGENT LIABILITIES. Newco and its subsidiaries will not,
directly or indirectly, create, incur, assume or suffer to exist any
indebtedness for borrowed money, obligation under any capital lease,
indebtedness arising under any title retention agreement (other than trade
accounts payable in the ordinary course of business), unpaid reimbursement
obligation under any letter of credit, or contingent liability for any
indebtedness, lease payment or other obligation of any other person or entity
(other than by endorsements or negotiable instruments for collection in the
ordinary course of business) or for the payment of dividends or other
distributions upon the shares of any other person or entity.
7. Notwithstanding anything herein to the contrary in this paragraph
20(d), Newco shall be permitted to pay to affiliates who are licensed real
estate brokers or salespersons, customary, cooperating real estate brokerage
commissions for origination of new real estate business to Newco in the ordinary
course of Newco's residential real estate brokerage business.
e. Each of Newco, Gordon, Uribe, Tillotson, and Neubauer shall, jointly
and severally, have the burden of proof by clear and convincing evidence that a)
the capital of Newco was funded after the Closing Date in amounts up to one
million two hundred thousand dollars ($1,200,000) for the first twelve months
and six hundred thousand dollars ($600,000) during the next twelve months, as
provided in this paragraph 20 and b) no payments were made in violation of this
paragraph 20. If such burden of proof as aforesaid is not carried, then the
consequence shall be that the Guaranty shall be increased by such amounts as
provided in this paragraph 20.
21. It shall be conditions of closing that the following shall first occur:
a. The warranties and representations of the parties are true and correct
in all material respects as of the Closing Date.
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Dennis Gordon
November 8, 1994
b. Consents of Newco shareholders and their spouses to this transaction;
and the individual, joint and several guaranty and consents of spouses set forth
in paragraph 20 shall be in full force and effect and shall remain in place on
and after the Closing Date.
c. Newco and Grubb & Ellis shall sign the Service Mark License Agreement
referred to in paragraph 15 herein.
d. Newco shall provide evidence to Grubb & Ellis of the insurance
coverage required to be in place as provided herein.
e. Newco shall have offered to hire and retain all Grubb & Ellis
residential employees and independent contractors associated with the
Residential Offices, other than Milton Naylor, who elect to be hired by Newco.
f. Good standing certificates for Newco and Grubb & Ellis shall be
provided.
g. Certificates of each the Secretaries of Newco and of Grubb & Ellis
shall be provided as to the adoption of respective corporate resolutions and
authorities for each party to enter into this transaction.
h. Opinions of respective counsel for Newco and Grubb & Ellis regarding
sections a,b and c of paragraph 17 and sections a and b of paragraph 18.
i. Evidence shall be provided by Newco and Grubb & Ellis of existence of
a valid real estate broker's license from the California Department of Real
Estate.
j. Evidence shall be provided by Newco and Grubb & Ellis of good standing
with the Franchise Tax Board of the State of California.
22. Any press releases or other public announcements shall be approved in
advance by both parties to this transaction, except that Grubb & Ellis may make
such public announcements or disclosures from time to time it deems appropriate
pursuant to the federal and state securities laws. Newco and Gordon shall not
disclose the existence of this letter agreement or any of its terms to any
person or entity, including but not limited to, any personnel related to the
Residential Offices prior to the Closing Date.
23. Newco agrees to waive compliance with the Bulk Sales laws of the State of
California and Grubb & Ellis agrees to indemnify Newco for any damages, claims
or judgments incurred as a result of such waiver.
24. Grubb & Ellis reserves the right to assign all of its rights, powers and
privileges under this letter agreement, including, without limitation, the right
to enforce all of the terms of this letter agreement. Newco and Gordon agree
not to assign their rights, powers and privileges under this letter agreement
unless approved in advance in writing by Grubb & Ellis, in its sole and absolute
discretion.
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Dennis Gordon
November 8, 1994
25. It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement and that the parties
to this letter agreement shall be entitled to equitable relief, including
injunction and specific performance, as a remedy for any such breach. Such
remedies shall not be deemed to be the exclusive remedies for a breach of this
letter agreement but shall be in addition to all other remedies available at law
or in equity. In the event of litigation relating to this letter agreement, if
a court of competent jurisdiction determines in a final, nonappealable order
that a party has breached this letter agreement, then such party shall be liable
and pay to the non-breaching party the reasonable legal fees such non-breaching
party has incurred in connection with such litigation, including any appeal
therefrom. Otherwise, each party shall bear its own costs in connection with
this transaction.
26. Notices and other communications provided for herein shall be in writing
and shall be delivered by personal delivery or overnight courier service or
mailed by certified mail, return receipt requested or first class postage
prepaid as follows:
(a) If to Grubb & Ellis:
Grubb & Ellis Company
One Montgomery Street
Telesis Tower, 9th Floor
San Francisco, CA 94104
Attention: General Counsel
(b) If to Newco:
Dennis Gordon
1831 Newport Hills Drive East
Newport Beach, CA 92660
(c) If to Dennis Gordon
1831 Newport Hills Drive East
Newport Beach, CA 92660
(d) If to Javier R. Uribe
20501 Ventura Blvd. #220
Woodland Hills, CA 91364
(e) If to John Tillotson
16426 Ladona Circle
Huntington Beach, CA 92649
(f) If to Charles K. Neubauer
14041 Woodlawn Avenue
Tustin, CA 92680
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Dennis Gordon
November 8, 1994
or to such other address or attention of such other person as either party shall
advise the other party in writing. All notices and other communications given
pursuant to this letter agreement shall be deemed to have been given on the date
of receipt.
27. This letter agreement constitutes the entire agreement between the parties
hereto and supersedes all prior negotiations, communications, discussions,
representations, warranties and correspondence concerning the subject matter
hereof.
28. If any provision of this letter agreement shall be prohibited by or deemed
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or any remaining provisions of this letter agreement.
29. This letter agreement shall be governed by and construed in accordance with
the internal laws of the State of California and without regard to conflict of
laws principles.
30. Each party hereto agrees to execute and deliver all such other documents
and instruments and to take all such other actions as may be necessary to carry
out the terms and provisions of this letter agreement.
31. This letter agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each of the parties hereto.
This letter agreement shall be amended or modified only by a written instrument
executed by each party hereto.
32. Each party hereto will pay all of its own costs and expenses incident to
its negotiation and preparation of this letter agreement and to its performance
of and compliance with all agreements and conditions contained herein on its
part to be performed or complied with, including, without limitation, the fees,
expenses and disbursements of its legal counsel.
33. a. GRANT OF SECURITY. To secure the prompt and complete payment,
observance and performance of all the obligations under this letter agreement
and any related agreements, Newco hereby assigns, pledges and grants to Grubb &
Ellis a security interest in all of Newco's right, title and interest in and to
Newco's accounts, accounts receivable or any other payment for goods sold or
leased or for services rendered, whether or not they have been earned by
performance, notes receivable, loans receivable, royalties, tax refunds and tax
refund claims, other rights to the payment of money and other obligations
receivable of any kind, inventory, deposit accounts, escrow accounts, cash, cash
equivalents, books and records, contract rights, equipment, furniture, fixtures,
computers, computer software, trademarks, trade names, and general intangibles,
whether now owned or existing or hereafter arising or acquired and wherever
located, together, in each instance, with all accessions and additions thereto,
substitutions therefor, and replacements, proceeds and products thereof.
b. DEPOSIT ACCOUNTS. Set forth on Schedule 33, attached hereto, are all
deposit accounts maintained by Newco, and Newco may not establish additional
deposit accounts without the consent of Grubb & Ellis. Grubb & Ellis may
deliver a notice of its security interest with
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Dennis Gordon
November 8, 1994
respect to each of Newco's deposit accounts to the organization in which each
such deposit account is maintained. Newco may not amend, modify, cancel or
encumber any of its deposit accounts, except as provided herein. Other than as
set forth in this letter agreement, Newco is not and shall not become indebted
to any organization in which it maintains a deposit account.
34. Newco is aware that Grubb & Ellis has been in discussions with a limited
number of other parties for the sale of the Residential Offices and that such
parties were provided with information about the Residential Offices and their
salespersons after having signed confidentiality agreements.
35. Grubb & Ellis agrees not to hire any of Newco's employees or independent
contractors for a period of one year after the Closing Date.
36. From the Closing Date through the earlier of a) two years from the Closing
Date or b) the termination of the Service Mark License Agreement, Grubb & Ellis
will not, directly or indirectly, either in Orange County, California or in San
Diego County, California, engage in the residential real estate brokerage
business in substantial competition with Newco. Notwithstanding the above,
Grubb & Ellis shall not be prohibited from engaging in activities relating to 1)
the closing of Pendings, 2) the closing of Transferred Listings, 3) the
commercial real estate brokerage, property management and related businesses, 4)
the sale of multi-family apartments, 5) an occasional sale of a single family
home where the buyer thereof converts such property to commercial use, 6) the
sale of raw land which may be used for residential real estate, and 7) the sale
of a personal residence by representatives of Grubb & Ellis. In addition, Grubb
& Ellis shall not be prohibited from becoming a commercial real estate
franchisor even if franchisees are also engaged in the residential real estate
brokerage business. The prohibitions contained in this paragraph shall not be
binding upon the stockholders of Grubb & Ellis.
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Dennis Gordon
November 8, 1994
Please sign and return both duplicate originals of this letter agreement to
the undersigned.
Very truly yours,
GRUBB & ELLIS COMPANY
By: /s/Robert J. Walner
----------------------------------------------
Name: Robert J. Walner
----------------
Title: Senior Vice President and General Counsel
-----------------------------------------
ACCEPTED AND AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE:
NEWCO REALTY CORP.
By: /s/Dennis Gordon
----------------------------------------------
Name: Dennis Gordon
-------------
Title: President
----------
/s/Dennis Gordon /s/John Tillotson
- - - ----------------------------- ----------------------------------
Dennis Gordon, Individually John Tillotson, Individually as to
paragraph 20
/s/Javier R. Uribe /s/Charles K. Neubauer
- - - ----------------------------- ----------------------------------
Javier R. Uribe, Individually Charles K. Neubauer, Individually
as to paragraph 20 as to paragraph 20
14
<PAGE>
Exhibit 10.2
EXHIBIT "A"
SERVICE MARK LICENSE AGREEMENT
THIS SERVICE MARK LICENSE AGREEMENT (this "Agreement") is made and
entered as of November 17, 1994 by and between Grubb & Ellis Company, a
Delaware corporation ("Licensor"), and Newco Realty Corp., a California
corporation ("Licensee").
RECITALS
A. Since as early as September, 1971, Licensor adopted and used and
now uses and owns all right, title and interest in and to the trade name and
service mark GRUBB & ELLIS AND DESIGN (the "Registered Mark") and the goodwill
associated therewith as used in connection with real estate brokerage services;
mortgage brokerage services; insurance brokerage services; insurance consulting
services; real estate appraisal and consulting services; property management
services; arranging for investment in real estate syndications; and investment
banking services (the "Registered Services"). Licensor has obtained
Registration No. 1,304,099 dated November 6, 1984 in the U.S. Patent and
Trademark Office for the Registered Mark as used to promote the Registered
Services.
B. Licensee has contemporaneously entered into an agreement to
purchase from Licensor its residential real estate brokerage business in Orange
County and San Diego County, California and desires a temporary license to use
the trade name and service mark GRUBB & ELLIS RESIDENTIAL REAL ESTATE SERVICES
(the "Licensed Mark") solely in connection with residential real estate
brokerage services for parcels not to exceed ten acres with single family
housing or multi-family housing (not to exceed four units per building) (the
"Licensed Services").
1
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the parties hereto agree as follows:
1. GRANT OF LICENSE. Upon the terms and subject to the conditions
of this Agreement, Licensor hereby grants to Licensee a non-exclusive, royalty-
free license (the "License") to use the Licensed Mark only in connection with
the Licensed Services and only in Orange and San Diego Counties, California for
a term not to exceed 24 months beginning as of the date of this Agreement.
Licensee shall not use or display the Licensed Mark in connection with or to
promote any other goods or services.
2. ACCEPTANCE OF LICENSE. Licensee hereby accepts the License.
3. LICENSOR'S OWNERSHIP. Licensee acknowledges that Licensor is the
exclusive owner of the Registered Mark and Licensed Mark, and the goodwill
associated therewith, and agrees to do nothing inconsistent with such ownership.
Licensee shall not engage in any action that disparages or tends to disparage
Licensor, the Registered Mark or the Licensed Mark.
4. PRESERVATION OF LICENSED MARK.
A. Licensor shall take all steps reasonably necessary to
preserve and protect the validity of the Licensed Mark and its right to use, and
to license Licensee to use, the Licensed Mark.
B. Licensee shall use the registration symbol "[Registered]"
immediately after GRUBB & ELLIS as used in the Licensed Mark wherever the
Licensed Mark is used or displayed in connection with the Licensed Services and
shall include the legend "Independently Owned and Operated" in each
advertisement bearing the Licensed Mark. An approved display of the Licensed
Mark is as follows:
2
<PAGE>
GRUBB & ELLIS[Registered] RESIDENTIAL REAL ESTATE SERVICES
INDEPENDENTLY OWNED AND OPERATED
5. QUALITY CONTROL. The quality of the Licensed Services offered by
Licensee in connection with the Licensed Mark shall meet or exceed the quality
of the Licensed Services as described in Licensor's RESIDENTIAL SALESPERSON'S
POLICY AND PROCEDURES MANUAL and other quality assurance publications, as
amended from time to time in the sole and absolute discretion of Licensor.
Licensor and its authorized representatives shall have the right to test and
inspect the Licensed Services provided by Licensee at any reasonable time with
24 hours' prior notice. Licensor shall maintain the confidentiality of all
information provided by Licensee to Licensor under this Section 5 and shall not
use any such information except to carry out the purposes or to enforce the
terms of this Agreement.
6. DEFENDING THE LICENSED MARK. Licensor has the right, but not the
obligation, to take action against uses by others that may constitute
infringement of the Licensed Mark. Licensor shall defend Licensee against any
third-party claim, suit or demand alleging that Licensee's use of the Licensed
Mark in connection with the Licensed Services violates the trademark rights of
such third party. If Licensor undertakes the defense or prosecution of any
litigation relating to Licensee's use of the Licensed Mark, Licensee shall
execute any and all documents and do such acts and things as may, in the opinion
of counsel for Licensor, be necessary to carry out such defense or prosecution,
including, but not limited to, becoming a nominal party to any legal action.
Except to the extent that such litigation is the result of Licensee's use of the
Licensed Mark in a manner inconsistent with the terms of this Agreement,
Licensor shall reimburse Licensee for its out-of-pocket costs in doing such acts
and things, except that Licensee shall bear the salary costs of its employees.
3
<PAGE>
7. RELATIONSHIP OF THE PARTIES. The relationship of the Licensor
and Licensee shall be solely that of a service mark licensor and licensee, and
Licensee shall not represent otherwise. This Agreement shall not be construed
to create any other relationship between the parties, whether as principal and
agent, as joint venturers, as franchisor and franchisee, or otherwise. Neither
party is authorized by this Agreement to enter into any agreement for or on
behalf of the other, collect any obligation due or owed to the other, accept
service of process for the other, or bind the other in any manner whatsoever.
8. NON-COMPETITION. In consideration of the sale of assets
referenced in Recital B and license granted herein, Licensee covenants that, for
a period of two years or during the term of this Agreement, whichever is longer,
Licensee and its officers, directors, shareholders, subsidiaries, corporate
parents and affiliates (hereafter, the "Licensee Parties") shall not:
A. Conduct any commercial real estate business in connection
with the Licensed Mark or any other service mark or under any trade name;
B. Provide or offer to provide any of the Registered Services
(other than the Licensed Services);
C. Own any interest in any business offering any of the
Registered Services (except for publicly traded companies in which the ownership
interest of Licensee and the Licensee Parties collectively does not exceed five
percent); or
D. Engage in real estate brokerage services for parcels
exceeding ten acres or parcels with multi-family housing containing more than
four units per building.
9. INDEMNIFICATION OF LICENSOR. Licensee shall indemnify, defend
and hold Licensor, its affiliates and subsidiaries, and its and their respective
shareholders, employees, representatives, officers, directors, agents and
attorneys harmless from and against any and all
4
<PAGE>
costs, losses, liabilities, damages, lawsuits, claims and expenses (including
without limitation, interest, penalties, reasonable attorneys' fees, and all
amounts paid in the investigation, defense or settlement of any or all of the
foregoing) ("Claims") that arise out of Licensee's use or display of the
Licensed Mark or the sale, marketing, advertisement, promotion or distribution
of the Licensed Services by Licensee, except for any third-party claim, suit or
demand alleging that Licensee's use of the Licensed Mark in connection with the
Licensed Services violates the trademark rights of such third party.
10. TERMINATION. If Licensee 1) conducts itself so as to disparage
or tend to disparage the Licensed Mark or Licensor in the sole and absolute
discretion of Licensor; 2) fails to comply with the quality control standards
set forth in the Agreement in the sole and absolute discretion of Licensor; or
3) defaults at any time in any of its obligations under the agreement to
purchase of even date herewith, then Licensor shall have the right to terminate
this Agreement on five (5) days' written notice. Upon termination of this
Agreement for any reason, the Agreement shall be void and have no further force
or effect except for the obligations set forth in Sections 3, 8 and 9 of this
Agreement, which shall survive termination.
11. NOTICES. All notices and other communications hereunder shall be
in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person by telegram, telecopy, telex or other standard
form of telecommunications (with telephonic confirmed receipt of such
telecommunication), or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
(a) If to Licensor:
Grubb & Ellis Company
One Montgomery Street
Telesis Tower --9th Floor
San Francisco, California 94104
Attention: General Counsel
5
<PAGE>
(b) If to Licensee:
Mr. Dennis Gordon
Newco Realty Corp.
1831 Newport Hills Drive East
Newport Beach, California 92660
or to such other addresses as may have been furnished to the other in writing.
12. ASSIGNMENTS AND SUBLICENSES. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations of Licensee hereunder
shall be assigned by Licensee without the prior written consent of Licensor,
which may be withheld in its sole discretion.
13. SEVERABILITY. Should any part or provision of this Agreement be
held unenforceable or in conflict with the law of any jurisdiction, the validity
of the remaining parts or provisions shall not be affected by such holding so
long as the primary purposes and intentions of the parties can still be
accomplished.
14. GOVERNING LAW. This Agreement and the legal relations between
the parties hereto shall be governed by and construed in accordance with the
internal laws of the State of California and without regard to conflict of laws
principles.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
16. ENTIRE AGREEMENT. This Agreement constitutes the complete, final
and exclusive statement of the entire agreement among the parties and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. This
Agreement may not be amended or supplemented in
6
<PAGE>
any manner except by a written agreement executed by an authorized
representative of the party sought to be bound. All references to sections,
subsections, clauses and schedules shall be deemed to refer to such part of this
Agreement, unless the context shall otherwise require.
17. JURISDICTION. The courts of the State of California, including
the federal courts sitting in the State of California, shall have exclusive
jurisdiction to hear and decide all controversies that may arise under or
concern the interpretation or enforcement of this Agreement.
IN WITNESS WHEREOF, the authorized representatives of the parties
hereto have duly executed this Agreement as of the first date above.
LICENSOR:
GRUBB & ELLIS COMPANY,
a Delaware corporation
By:/s/Robert J. Walner
----------------------------------
Title: Senior Vice President
and General Counsel
LICENSEE:
NEWCO REALTY CORP.,
a California corporation
By:/s/Dennis Gordon
----------------------------------
Title: President
7
<PAGE>
Exhibit 10.3
GUARANTY
THIS GUARANTY (this "GUARANTY") dated as of November 8, 1994, is
executed by Dennis Gordon, Javier R. Uribe, John Tillotson and Charles K.
Neubauer (collectively, "GUARANTORS"), for the benefit of Grubb & Ellis Company
(the "COMPANY"), to guaranty certain hereinafter defined obligations of Newco
Realty Corp., a California corporation (the "Buyer") under that certain letter
agreement dated November 8, 1994 by and between Buyer and the Company (the
"AGREEMENT").
RECITALS
A. Guarantors are the sole shareholders of Buyer. Pursuant to the
Agreement, Buyer has agreed to acquire and the Company has agreed to sell
certain residential real estate brokerage operations in Southern California.
Pursuant to the Agreement, Buyer has agreed, among other things, to make certain
payments to the Company based upon future commissions and certain lease
obligations and other liabilities.
B. As an inducement to Buyer to enter into the Agreement, Guarantors
have agreed to enter into this Guaranty.
C. Guarantors acknowledge that they will benefit from the
consummation of the transactions contemplated by the Agreement.
D. Guarantors are incurring obligations hereunder concurrently with
the incurrence by Buyer of its obligations under the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises set forth above and
as an inducement to the Company to enter into the Agreement and consummate the
transactions contemplated thereby, Guarantors agree as follows:
1. GUARANTY OF OBLIGATIONS. Guarantors unconditionally and
irrevocably guaranty, to the Company, on a joint and several basis, the payment
and performance when due of Buyer's obligations as set forth in the Agreement
(the "OBLIGATIONS"), up to a maximum of one million two hundred thousand dollars
($1,200,000) in respect of the first twelve months after closing, and
thereafter, up to the lesser of a) six hundred thousand dollars ($600,000) or b)
the present value (using a 6% discount factor) of the future payments required
to be made by Buyer in respect of real estate and personal property leases of
the Residential Offices, assumed by Buyer, plus the amount of the outstanding
portion of Grubb & Ellis' pro rata share of receipts from the remaining
Transferred Listings, all as more completely set forth in the Agreement. If for
any reason Buyer shall fail fully and punctually to pay and perform any
Obligation, Guarantors shall pay such sum to the Company. This Guaranty is an
absolute, unconditional, continuing guaranty of payment and performance and not
of collectibility, and is in no way conditioned or contingent upon any attempt
to collect from Buyer, enforce performance by Buyer or on any other condition or
contingency. The obligations and agreements of Guarantors under
<PAGE>
this SECTION 1 shall be performed and observed without requiring any notice of
non-payment, non-performance or non-observance by Buyer or any proof thereof or
demand therefor, all of which Guarantors expressly waive.
2. CONSENTS AND WAIVERS BY GUARANTORS.
(a) This Guaranty shall be binding upon each of the Guarantors
and shall remain in full force and effect irrespective of, and shall not be
terminated by, the existence of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting the terms of this Guaranty. The liability
of Guarantors under this Guaranty shall be absolute, unconditional and
irrevocable irrespective of:
(i) any lack of validity or enforceability of the
Obligations;
(ii) any change, whether or not agreed to by Guarantor, in
the time, manner or place of any payment or performance of the
Obligations, or in any other term of the Agreement or any other
amendment, renewal, extension, acceleration, compromise or waiver of
or any consent or departure from the terms or provisions of the
Obligations or the Agreement;
(iii) the lack of power or authority of any Guarantor to
execute and deliver this Guaranty or of Buyer to execute and deliver
the Agreement; any defense, set-off or counterclaim which may at any
time be available to, or asserted by, Buyer against the Company under
the Agreement (other than by reason of the full payment and
performance of the Obligations); the existence or continuance of Buyer
as a legal entity; the consolidation or merger of Buyer with or into
any other partnership or other entity, or the sale, lease or other
disposition by Buyer of all or substantially all of its assets to any
other entity; or the bankruptcy or insolvency of Buyer, the admission
in writing by Buyer of its inability to pay its debts as they mature,
or its making of a general assignment for the benefit of, or entering
into a composition or arrangement with creditors;
(iv) any act, failure to act, delay or omission whatsoever
on the part of Buyer, any failure to give to Buyer notice of default
in the making of any payment due and payable under the Obligations or
notice of any failure on the part of Buyer to do any act or thing or
to observe or perform any covenant, condition or agreement by it to be
observed or performed under the Agreement; or
(v) any other event or circumstance which might otherwise
constitute a defense available to, or a discharge of Buyer in respect
of the Obligations, it being the purpose and intent of this Guaranty
that the obligations of Guarantors hereunder shall be absolute,
unconditional and irrevocable and shall not be discharged or
terminated except by full and complete payment and performance of all
of the Obligations.
2
<PAGE>
(b) Each of the Guarantors waives notice of acceptance of this
Guaranty and of any Obligation. Each of the Guarantors also waives promptness,
diligence, presentment, demand of payment, notice of default, dishonor, non-
payment, non-performance or any other notice to or upon Buyer or Guarantors.
(c) Each of the Guarantors, to the extent they may legally do
so, waives any right now or hereafter existing requiring the Company, as a
condition to proceeding against Guarantors hereunder, to proceed against Buyer
or any other person, or pursue any other remedy in the Company's power.
(d) Each of the Guarantors, to the extent they may legally do
so, waives the benefit of any statute of limitations affecting the liability of
such Guarantor hereunder or the enforcement hereof as amended or recodified from
time to time, and agree that any payment or performance of the Obligations or
other act which tolls any statute of limitations applicable thereto shall
similarly operate to toll such statute of limitations applicable to any
liability of such Guarantor hereunder.
(e) Each of the Guarantors waives all rights and benefits under
any applicable law (to the extent applicable to such Guarantor hereunder)
purporting to reduce a guarantor's obligation in proportion to the principal
obligation guaranteed.
(f) Each of the Guarantors waives all rights and benefits under
any applicable law (to the extent applicable to such Guarantor hereunder)
requiring the beneficiaries of this Guaranty to pursue Buyer or any other person
or remedy or exhaust any security before proceeding against any Guarantor.
(g) The Company may, at any time and from time to time without
the consent of or notice to any Guarantor, except such notice as may be required
by applicable law which cannot be waived, without incurring responsibility to
any Guarantor, and without impairing or releasing the obligations of any
Guarantor hereunder, upon or without any terms or conditions and in whole or in
part, (i) subject to the terms of the Agreement, change the manner, place and
terms of payment or change or extend the time of payment of, renew, or alter any
Obligation or in any manner modify, amend or supplement the terms of the
Agreement or any documents, instruments or agreements executed in connection
therewith, and this Guaranty shall apply to the Obligations, as changed,
extended, renewed, modified, amended, supplemented or altered in any manner;
(ii) exercise or refrain from exercising any rights against Buyer or other
person (including Guarantors) or otherwise act or refrain from acting;
(iii) release any one or more of the Guarantors from any of the obligations
hereunder without obtaining the consent of the remaining Guarantors and without
affecting or impairing the obligations of the remaining Guarantors hereunder;
(iv) settle or compromise any obligation; (v) take and hold security for the
payment or performance of the Obligations, and exchange, enforce, waive,
surrender, modify, impair, change, alter, renew, continue, compromise or release
in whole or in part any such security, or fail to perfect its interest in any
such security or to establish its priority with respect thereof; (vi) apply any
sums received from any Guarantor or from the sale of such security and direct
the order or manner of sale thereof as the Company in its sole discretion may
determine; and/or (vii) consent to or waive any breach of, or any act, omission
or default under
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the Agreement, or otherwise amend, modify or supplement the Agreement or any of
such other instruments or agreements. Notwithstanding the foregoing, no delay
on the part of the Company in exercising any of its rights (including those
hereunder) and no partial or single exercise thereof and no action or non-action
shall constitute a waiver of any rights or shall affect or impair this Guaranty.
(h) In the event that, notwithstanding the provisions of
SECTION 1 hereof, this Guaranty shall be deemed revocable in accordance with
applicable law, then any such revocation shall become effective only upon actual
receipt by the Company of written notice of revocation signed by each Guarantor.
No revocation or termination hereof shall affect in any manner rights arising
under this Guaranty with respect to obligations and liabilities outstanding on
the date of receipt by the Company of written notice of such revocation or
termination (Guarantors shall remain liable for all obligations incurred
hereunder prior to such revocation or termination) and the sole effect of
revocation and termination hereof shall be to exclude from this Guaranty
obligations and liabilities thereafter arising which are unconnected with
obligations and liabilities theretofore arising or transactions theretofore
entered into.
3. REPRESENTATIONS AND WARRANTIES. Each Guarantor makes the
representations and warranties set forth below to the Company as of the date
hereof:
(a) This Guaranty has been duly executed and delivered by
Guarantor and constitutes the legal, valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and subject to general equitable principles.
(b) All governmental authorizations and actions necessary in
connection with the execution and delivery by Guarantor of this Guaranty and the
performance of Guarantor's obligations hereunder have been obtained or performed
and remain valid and in full force and effect.
(c) Execution, delivery and performance of this Guaranty (i) do
not and will not contravene any provisions of any law, rule, regulation, order,
judgment or decree applicable to or binding on Guarantor or any of Guarantor's
properties; (ii) do not and will not contravene, or result in any breach of or
constitute any default under, any agreement or instrument to which Guarantor is
a party or by which Guarantor or any of Guarantor's properties may be bound or
affected; and (iii) do not and will not require the consent of any person under
any existing law or agreement which has not already been obtained.
(d) There is no pending or, to the best of Guarantor's
knowledge, threatened action or proceeding affecting Guarantor before any court,
governmental agency or arbitrator, which might reasonably be expected to
materially and adversely affect the ability of Guarantor to perform Guarantor's
obligations under this Guaranty.
(e) Guarantor has established adequate means of obtaining
financial and other information pertaining to the businesses, operations and
condition (financial and otherwise) of Buyer and its properties on a continuing
basis, and Guarantor now is and hereafter will be
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completely familiar with the businesses, operations and condition (financial and
otherwise) of Buyer and its properties. The Company shall not have any duty to
advise any Guarantor of any information known to them regarding such matters.
(f) (i) Guarantor is not, and will not as a result of the
execution and delivery of this Guaranty, be rendered insolvent, (ii) Guarantor
does not intend to incur, or believe it is incurring, obligations beyond his
ability to pay and (iii) Guarantor's property remaining after the delivery and
performance of this Guaranty will not constitute unreasonably small capital.
4. COVENANTS OF GUARANTOR. Each Guarantor agrees that such
Guarantor:
(a) Will maintain in full force and effect all consents of any
governmental or other authority that are required to be obtained by Guarantor
with respect to this Guaranty and will obtain any that may become necessary in
the future.
(b) Will comply in all material respects with all applicable
laws and orders to which Guarantor may be subject if failure so to comply would
materially impair Guarantor's ability to perform Guarantor's obligations under
this Guaranty.
5. COLLECTION EXPENSES. If the Company is required to pursue any
remedy against Guarantors hereunder, Guarantors shall pay to the Company, upon
demand, all reasonable attorney's fees and expenses and all other costs and
expenses incurred by such party in enforcing this Guaranty.
6. SUBROGATION. Guarantors will not exercise any rights which they
may acquire by way of subrogation under this Guaranty by any payment made
hereunder or otherwise, until all of the Obligations have been paid in full. If
any amount shall be paid to Guarantors on account of such subrogation rights at
any time when all Obligations shall not have been paid in full, such amount
shall be held in trust for the benefit of the Company and applied to such
liabilities and obligations, whether matured or unmatured.
7. SUCCESSIONS OR ASSIGNMENTS. This Guaranty shall inure to the
benefit of the successors or assigns of the Company who shall have, to the
extent of their interest, the rights of the Company hereunder. This Guaranty is
binding upon Guarantors and their successors and permitted assigns. Guarantors
are not entitled to assign their obligations hereunder to any other person
without the written consent of the Company, and any purported assignment in
violation of this provision shall be void.
8. INTERPRETATION. The section headings in this Guaranty are for
the convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
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9. NOTICES. All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, to the party to whom it is directed:
(a) If to Guarantors:
Dennis Gordon
1831 Newport Hills Drive East
Newport Beach, CA 92660
Javier R. Uribe
20501 Ventura Blvd. #220
Woodland Hills, CA 91364
John Tillotson
16426 Ladona Circle
Huntington Beach, CA 92649
Charles K. Neubauer
14041 Woodlawn Avenue
Tustin, CA 92680
or at such other address as a Guarantor shall have specified by notice in
writing to the Company.
(b) If to the Company:
Grubb & Ellis Company
One Montgomery Street
Telesis Tower, 9th Floor
San Francisco, CA 94104
Attention: General Counsel
10. AMENDMENTS. Notwithstanding anything contained herein that may
be construed to the contrary, this Guaranty may be amended only with the written
consent of the Company and the Guarantors.
11. JURISDICTION; GOVERNING LAW.
(a) Any action or proceeding relating in any way to this
Guaranty may be brought and enforced in the courts of the State of California
within the County of San Francisco, or of the United States for the Northern
District of California.
(b) This Guaranty and the rights and obligations of Guarantors
and the Company shall be governed by and construed in accordance with the laws
of the State of California.
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12. INTEGRATION OF TERMS. This Guaranty contains the entire
agreement among Guarantors and the Company relating to the subject matter hereof
and supersedes all oral statements and prior writing with respect hereto.
13. TERMINATION; REINSTATEMENT OF GUARANTY.
(a) Subject to the provisions of SECTION 13(b) hereof, this
Guaranty shall terminate upon the satisfaction of all Obligations.
(b) Notwithstanding the provisions of SECTION 13(a) hereof, this
Guaranty shall be reinstated if at any time following the termination of this
Guaranty under SECTION 13(a) hereof, any payment by Guarantors under this
Guaranty or pursuant hereto is rescinded or must otherwise be returned by the
Company or any other person upon the insolvency, bankruptcy, reorganization,
dissolution or liquidation of Buyer or Guarantors or otherwise, and is so
rescinded or returned to Guarantors, all as though such payment had not been
made. Such period of reinstatement shall continue until satisfaction of the
conditions contained in, and shall continue to be subject to, the provisions of
this SECTION 13.
IN WITNESS WHEREOF, Guarantors have caused this Guaranty to be duly
executed and delivered as of the day and year first written above.
/s/Dennis Gordon
----------------------------------------
Name: Dennis Gordon
/s/Javier R. Uribe
----------------------------------------
Name: Javier R. Uribe
/s/John Tillotson
----------------------------------------
Name: John Tillotson
/s/Charles K. Neubauer
----------------------------------------
Name: Charles K. Neubauer
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Exhibit 99.1
GALLEN FOR MORE INFORMATION, CONTACT
ASSOCIATES, INC. MOLLY DAVIS, GALLEN ASSOCIATES (510) 268-9848
500 12th Street,
Suite 330
Oakland, CA 94607-4010
510.268.9848,
fax 510.268.8274
GRUBB & ELLIS SELLS SOUTHERN CALIFORNIA
RESIDENTIAL BROKERAGE OPERATIONS
ALL RESOURCES AND MANAGEMENT WILL FOCUS ON CORE COMMERCIAL BUSINESS
San Francisco, CA (November 18, 1994) - Grubb & Ellis Company (NYSE: GBE)
announced today that it has sold its Southern California residential brokerage
operations to Newco Realty Associates, Inc. Corporation based in Newport Beach,
CA. The sale marks the final disposition of non-strategic businesses which
permits the company to focus all of its resources on its commercial operations.
The sale includes nine residential real estate brokerage offices in Mission
Viejo, Irvine, Dana Point, Laguna Beach, Laguna Niguel, and Newport Beach
(Orange County), and La Jolla, Solano Beach and Rancho Santa Fe (San Diego
County). Financial terms were not disclosed.
"Over the past two years, the company disposed of a variety of non-strategic
businesses which were acquired during its expansion in the 1980's," said Grubb &
Ellis Chairman Joe Hanauer. "During the same period, the core commercial
capabilities of Grubb & Ellis have been strengthened and have resulted in two
consecutive profitable quarters for the first time since 1989." The company
also completed a rights offering earlier this month which gave its management
greater flexibility and improved the company's balance sheet significantly.
According to Hanauer, the residential offices will continue to operate under the
name Grubb & Ellis as an independent licensee of Grubb & Ellis. "We've agreed
to allow Newco Realty Corporation to take advantage of our name recognition for
an undisclosed period," said Hanauer.
With offices nationwide, Grubb & Ellis Company meets the real estate needs of
corporate users, institutional and private investors, providing real estate
brokerage and consulting, property facilities management (through its Axiom
subsidiary), appraisal, mortgage brokerage and auction services.
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