Exhibit 2
REDACTED VERSION OF TRANSITION AGREEMENT
[***] Indicates information omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.
TRANSITION AGREEMENT
This Transition Agreement (the "Agreement") is made and entered into as of the
______ day of ___________, 2003 by and among ▇▇▇▇▇ & ▇▇▇▇▇ Company, a Delaware
corporation with offices at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("G&E"), Business Real Estate Brokerage Company, a California corporation dba
BRE Commercial, with offices at ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("BRE"), BRE Phoenix, LLC, an Arizona limited liability company
("BRE Phoenix") and BRE Commercial, LLC, an Arizona limited liability company,
with offices at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
("Newco"). G&E, BRE and BRE Phoenix may be collectively referred to as the
"Investors." G&E, BRE, BRE Phoenix and Newco are sometimes each individually
referred to as a "Party" and collectively as the "Parties".
1. Purpose. The Investors have had various discussions concerning the
investment in a new commercial real estate brokerage business (i.e.,
Newco) to be operated in Phoenix, Arizona. The purpose of this
Agreement is to document the agreement of the Parties with respect to
the formation of such business, as well as certain issues that will
arise in connection with the winding up of the Phoenix office of G&E
and the commencement of operations of Newco.
2. Formation of Newco. On or before April 2, 2003 (the "Effective Date")
BRE and BRE Phoenix shall have formed Newco as a limited liability
company organized under the laws of the State of Arizona, and shall
have entered into a Limited Liability Company Operating Agreement in
substantially the form attached hereto as Exhibit A1, with such
changes thereto as may have been approved by BRE and BRE Phoenix (the
"Operating Agreement"). The Operating Agreement shall establish the
terms and conditions pursuant to which each of BRE and BRE Phoenix
shall make an investment in Newco, and shall provide for the
management of the business of Newco.
3. Option to Invest in Newco. On or before the Effective Date, the
Parties shall enter into an Option Agreement substantially in the form
of Exhibit B, with such changes as may have been approved by the
Parties ("the Option
Agreement"), under which ▇▇▇▇▇ & ▇▇▇▇▇, through a subsidiary or
affiliated company, shall have the option without cost until May 15,
2003, to invest $400,000 in Newco. The Option Agreement will require
that upon exercise of the option, the Parties will amend and restate
the Operating Agreement in the form of attached Exhibit A2
4. Sublease. On or before the Effective Date, G&E and Newco shall have
entered into a sublease (the "Sublease"), in substantially the form
attached hereto as Exhibit B, with respect to a portion of those
premises commonly known as Suite 300 in that certain office building
known as "24th At Camelback", 2375 East Camelback Road, Phoenix,
Arizona. The terms and conditions pursuant to which G&E shall sublease
such space to Newco shall be governed by the Sublease. Pursuant to the
terms of the Sublease, Newco shall have the right to use certain items
of furniture, fixtures and equipment during the term of the Sublease,
and shall have an option to purchase such items upon the expiration or
termination of the Sublease.
5. Affiliation Agreement. On or before the Effective Date, Newco shall
have entered into a Commercial Real Estate Brokerage Affiliation
Agreement (the "Affiliation Agreement"), in substantially the form
attached hereto as Exhibit C, with ▇▇▇▇▇ & ▇▇▇▇▇ Affiliates, Inc., a
wholly owned subsidiary of ▇▇▇▇▇ & ▇▇▇▇▇ Company ("GEA"). The
Affiliation Agreement, together with any amendments or exhibits
thereto, shall govern the terms and conditions pursuant to which Newco
shall act as the ▇▇▇▇▇ & ▇▇▇▇▇ family member for the Phoenix, Arizona
market and participate in the marketing and referral programs
administered by GEA.
6. Transition of Employees.
(a) For the purposes of this Agreement, the term
"Phoenix Office" shall mean the commercial real
estate brokerage transaction services business of
G&E operated out of its office in Phoenix,
Arizona, and shall exclude any property management
or facilities management business or persons
engaged in the business of property management or
facilities management out of that office. The term
"Employees" shall mean all persons employed by the
Phoenix Office on a full-time or part-time basis
as of March 1, 2003, but shall exclude all those
persons retained by the Phoenix Office as
independent contractor real estate brokers or
salespersons as of the such date.
(b) Prior to the Effective Date, Newco shall have
extended offers of employment to all Employees of
the Phoenix Office. G&E shall manage the Employees
prior to the Effective Date. Subject to G&E's
right to terminate an
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Employee for cause, G&E shall permit all Employees
to remain in the employment of G&E until the
Effective Date. On the Effective Date, G&E shall
terminate the employment of all such Employees and
shall cooperate with and use commercially
reasonable efforts to assist Newco in its efforts
to secure reasonably satisfactory employment
arrangements with the Employees. G&E shall pay no
severance compensation to any Employee. Newco
shall indemnify and hold G&E, and its
shareholders, directors, officers and employees
harmless from and against any and all loss,
damage, liability or expense, including but not
limited to attorney's fees and litigations
expenses, arising out of any claims of any
Employee for severance compensation or other
benefits arising out of the termination of that
Employee's employment with G&E, including claims
of any Employee that Newco has failed to hire, but
excluding claims that G&E has failed to pay
accrued vacation time in accordance with paragraph
(c) of this Section and any claims that arose
prior to the termination of the Employee's
employment with G&E. Newco shall use reasonable
efforts to induce each Employee to sign a waiver
in the form attached hereto as Exhibit D.
(c) If any Employee has accrued but unused vacation
time at the time his or her employment is
terminated, G&E shall pay for such time in
accordance with standard G&E company policies and
procedures.
(d) G&E shall be responsible for all of the G&E
employee benefit plans ("Employee Plans") listed
on Schedule 1 to this Agreement, and all
obligations and liabilities thereunder. Any
individual who is covered under any Employee Plan
that constitutes a "group health plan" within the
meaning of Section 5000(b)(a) of the Internal
Revenue Code pursuant to the provisions of Part 6
of Title I, subtitle B of ERISA or Section 4980B
of the Code as of the Closing Date shall continue
to be covered under such group health plan after
the Closing Date, to the extent required by such
Code sections or other applicable law. Otherwise,
after the Effective Date, no Employee will be
covered by or eligible for any benefits under any
Employee Plan in which such Employee participates,
provided, however, that to the extent such
Employee has
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rights under any Plan, nothing in this Agreement
will impair those rights.
(e) If any Employee has been advanced vacation pay,
the amount of the advance will be deducted from
that Employee's final paycheck. Any Employee on
disability leave as of the Effective Date shall
remain an Employee of G&E until the disability
period has ended.
7. Transition of Independent Contractors.
(a) For the purposes of this Agreement, the term
"Salesperson" shall mean those independent
contractor real estate salespersons who have
entered into an Independent Contractor Agreement,
as well as Employee salespersons who have entered
into an Employment Agreement with G&E and who have
been associated with the Phoenix Office and remain
associated with the Phoenix Office as of the
Effective Date. G&E shall not terminate its
agreement with any Salesperson, except for cause,
prior to the Effective Date.
(b) On the Effective Date, the association of all
Salespersons with the Phoenix Office shall be
terminated. In connection therewith, each of the
Salespersons shall have executed and delivered to
G&E a Termination Agreement, in G&E's standard
form, with such changes thereto, if any, as are
necessary to conform such agreement to the terms
of this Agreement.
(c) On or before the Effective Date, Newco shall apply
for and become licensed as a Real Estate broker in
the State of Arizona. G&E will cooperate with
Newco in the transfer from G&E to Newco of all
Salespersons' real estate licenses.
(d) G&E has, from time to time, made loans or advances
to or for the benefit of certain Salespersons
("Salesperson Loans"). A list of all such
Salespersons and the amount of their respective
Salesperson Loans is attached hereto as Exhibit D
and by this reference made a part hereof. The
Salesperson Loans generally, by their terms,
become due and payable upon the termination of the
salesperson's employment or affiliation with G&E.
In lieu of declaring such loans to be immediately
due and payable, within 10 days after the
Effective Date, Newco
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will purchase from G&E any Salesperson Loan
remaining outstanding on such date. The purchase
price for any loan shall be the principal balance
of such loan plus any interest that has accrued
thereon and which remains unpaid. Upon payment of
the purchase price for any loan, G&E will assign
to Newco its interest in any promissory note or
other document or agreement evidencing or securing
such loan
8. [***]
9. [***]
10. [***]
11. Technology and Other Vendor Contracts. To the extent that the Phoenix
Office, prior to the Effective Date, licensed or purchased data base
programs, information, software, publications or services specifically
for the Phoenix or Arizona real estate markets, and not as a part of a
national contract procured by G&E, G&E will use commercially
reasonable efforts, at no cost to G&E, to assign such contracts to
Newco. To the extent such agreements are assignable, Newco shall
assume such contracts and perform them according to their terms, and
shall comply with any restrictions as to the use of any data, service
or product supplied by the applicable vendor. Newco shall be
responsible for and shall pay any costs relating to such contracts
that first become due and payable on or after the Effective Date.
Newco shall hold G&E harmless from and indemnify G&E against any
claims arising out of any violation of any and all such contracts
occurring on or after the Effective Date. With respect to any
contracts with data, software or other vendors that are part of
national contracts signed by G&E at the corporate level, G&E shall
seek the right, for the remaining term of the applicable data or other
contract, to sublicense such data or software to Newco, or otherwise
allow Newco to access the data, software or services, and if such
right is granted, shall make such data, software or services available
to Newco. Any costs in respect of such national contracts that are
specifically allocable to the Phoenix market will be passed through to
Newco without ▇▇▇▇-up. Newco shall hold harmless and indemnify G&E
from any loss, damage, liability or expense relating to any alleged
breach of any such vendor agreement arising out of an act or omission
of Newco or Newco personnel after the Effective Date. Nothing herein
shall obligate G&E to (i) renew any license agreement or other vendor
contract for the benefit of Newco (provided that G&E shall endeavor to
inform Newco of the expiration date of any such existing agreement);
(ii) assign any vendor contract to Newco except with the prior consent
of the Vendor; or (iii) allow Newco access to any data, software,
publications or services licensed or subscribed for by G&E if G& E, in
good faith, believes
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that allowing such access would violate or potentially violate the
terms of any license or other agreement by which G&E is bound. If G&E
is denied the right to assign, sublicense, sell or transfer any such
agreement to Newco, and is denied the right to allow Newco to access
or use the software, information or services for which G&E has
contracted, it shall be Newco's responsibility to contract directly
for such any information, software, services or publications that
Newco deems necessary for the conduct of its business. If G&E is
granted the right to assign any such vendor contract, or to sublicense
any data or software to Newco, such assignment shall be "As-Is,
Where-Is, With All Faults", and without any warranty or representation
of any kind.
12. [***]
13. eNet. For so long as the Affiliation Agreement shall be in effect,
Newco shall have access to the eNet in accordance with the terms of
the Affiliation Agreement.
14. Equipment and Hardware and Related Services. Pursuant to the terms of
the Sublease, G&E shall provide Newco with access to, and the right
and license to use, certain furniture, fixtures, equipment and
hardware owned by G&E, including but not limited to the office
furniture owned by G&E and utilized as part of the Phoenix Office, the
telephone system hardware utilized by the Phoenix Office, all computer
equipment (including desk top and lap top personal computers and any
printers), typewriters, binding equipment or other office equipment
owned by G&E and used by the Phoenix Office ("Equipment"). A schedule
of all such Equipment shall be prepared by BRE Phoenix and, subject to
the reasonable approval of G&E, shall be appended to this Agreement
and to the Sublease. Newco shall be responsible for purchasing or
leasing, at its sole expense, any other hardware, furniture or
equipment which Newco, in its discretion, deems necessary or desirable
for the conduct of its business. Newco shall be responsible for any
telecommunications services, including local and long-distance, voice
and data, and internet connection services, necessary for the
operation of any equipment, whether such equipment was provided by G&E
or obtained directly by Newco. The parties shall seek to assign the
leases of any "Blackberries" or cellular telephone equipment, and/or
any contracts for cellular telephone or other service necessary to
operate such equipment, to those former Employees or Salespersons
currently utilizing such equipment, provided that if such assignments
are not permitted by the lessor or service provider, such equipment
shall be returned to G&E. G&E makes no representations or warranties
concerning any of the Equipment, including any warranty of
merchantability or fitness for particular purposes, all of which are
hereby disclaimed. Newco shall accept all equipment "As-Is" and
"Where-Is". Newco shall be responsible for any costs relating to the
use of such equipment after the Effective Date. Newco shall hold G&E
harmless from, and indemnify G&E against, any and all loss,
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damage, liability or expense arising out of the use of any such
equipment by Newco or Newco personnel after the Effective Date.
15. Accounting and Financial Software/ Cooperation. G&E maintains certain
proprietary accounts receivable and revenue processing and tracking
software and systems which are proprietary to G&E. Newco shall not be
provided with access to such software or systems following the
Effective Date. Notwithstanding the foregoing, Newco and G&E shall
cooperate, in good faith, in a commercially reasonable manner, and
provide each other with such information and data which the other
reasonably needs to collect money, resolve disputes, or otherwise to
conduct their businesses. The receiving Party shall reimburse any
costs to the providing Party.
16. Due Organization and Authorization. Each of the Parties represents and
warrants to the other that it is duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its
organization. Each of the Parties has the requisite power and
authority to carry on its business as contemplated by this Agreement.
Each of the Parties has the full legal rights, power and authority to
enter into, execute and deliver this Agreement, and as appropriate the
Operating Agreement, Option Agreement, Sublease, Affiliation Agreement
and any other documents or agreements to be executed by each
respective Party in connection herewith (collectively, the "Related
Documents") and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement
and the Related Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary action of the Parties or their governing bodies.
17. [***]
18. GEMS. It is understood and acknowledged that G&E is subleasing to
Newco only a portion of the space previously occupied by G&E and its
subsidiaries in Phoenix, Arizona, and that Newco and G&E presently
intend that the remainder of such space will continue to be occupied
by ▇▇▇▇▇ & ▇▇▇▇▇ Management Services, Inc. ("GEMS"). For so long as
the Sublease remains in effect, Newco will provide GEMS with access to
e-mail and with internet access via Newco's hardware. GEMS shall
continue to use existing direct dial and main switchboard telephone
numbers at no cost to GEMS. Suite signage shall indicate that GEMS
occupies the space as a separate entity. Subject to the consent of the
Landlord, GEMS will be entitled to a separate listing in the building
directory and separate building signage. GEMS shall pay its pro-rata
share of operating expenses for shared office services such as
photocopies, fax machines, switchboard, long distance service and
kitchen supplies. GEMS will be billed for those shared services on a
monthly basis. Any costs associated with the construction of separate
demising walls, should
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the Parties deem such construction necessary, shall be allocated among
the Parties in accordance with the terms of the Sublease.
19. [***]
20. Confidentiality. As a material inducement to entering into this
Agreement, each Party agrees that neither it, nor any of its
employees, officers, directors, shareholders or managers will, except
as to their attorneys, accountants and members of their own
organizations on a need-to-know basis, and unless required by
applicable law, administrative rule, regulation, court order or order
of other governmental authority having appropriate jurisdiction, or
otherwise permitted by express written permission from all of the
other Parties, disclose to anyone any information regarding the terms
of this Agreement or the Operating Agreement to be entered into by the
Parties, provided that the Parties may disclose that there has been a
reorganization of the office on terms mutually acceptable to the
parties, and that Newco remains a member of the G&E Family (as that
term is defined in the Affiliation Agreement), and the parties may
further disclose the information set forth in Exhibit H announcing the
existence of the relationship. It is understood that --------- BRE
Phoenix also desires to disclose certain information about the terms
of this Agreement, and other information, to individuals desiring to
invest in BRE Phoenix ("BRE Offeree(s)"). BRE Phoenix may not disclose
the terms of this Agreement to any BRE Offeree unless such BRE Offeree
shall have agreed in writing in a confidentiality agreement to be
bound by the provisions of this paragraph to the same extent as if
they were parties to this Agreement. BRE Phoenix shall also be
responsible for the reasonable enforcement of compliance with any such
confidentiality agreement on the part of a BRE Offeree. If a Party is
served with a Subpoena or similar official request for information in
connection with any legal or governmental or regulatory proceeding,
such Party shall provide all other Parties with prompt notice thereof
so that such Party(ies) may seek an appropriate protective order
preventing the disclosure.. It is further understood an agreed that
money damages would not be a sufficient remedy for any breach of this
letter agreement by a party or any of its representatives and that any
of the Parties shall be entitled to equitable relief, including
injunction and specific performance, as a remedy for such breach, in
additions to any other remedies available at law or in equity.
21. Trade Secrets. The Employees and Salespersons to be hired by Newco
have had access to certain information that is proprietary to G&E and
not publicly available, including, among other things, the terms of
the Affiliation Agreement, the Related Documents, the ▇▇▇▇▇ & ▇▇▇▇▇
Corporate Identity System Manual, the ▇▇▇▇▇ & ▇▇▇▇▇ and GEA referral
policies, computer software, copyrighted materials, information about
G&E's products, materials, methods, practices, procedures, concepts
invented and/or owned by GEA or G&E, finances, client lists, and
information concerning the marketing
8
of G&E services (collectively "Trade Secrets"). Except as otherwise
provided in or allowed by this Agreement or the Affiliation Agreement,
Newco shall not use, and shall take any and all reasonable measures to
prevent any Employees or Salespersons from using, any of G&E's Trade
Secrets after the Effective Date, but shall return, and shall require
all Employees and Salespersons to return immediately to G&E, any
documents or materials containing any Trade Secrets, whether such
materials exist in hard copy, electronic, magnetic or other format or
media. Reasonable measures to be taken by Newco to maintain the
security of the Trade Secrets shall include, but not be limited to
Newco entering into an appropriate non-disclosure agreement with its
Salespersons and Employees, and requiring any and all Salespersons and
Employees who leave the employ of Newco to return to Newco any and all
materials containing Trade Secrets. The section shall be deemed to
have been complied with in connection with the offering of Units in
the BRE Phoenix, if Newco has taken all reasonable measures to assure
the confidentiality of such information, including requiring that any
potential investor receiving the private placement memorandum for that
offering delivers to BRE Phoenix a confidentiality agreement
reasonably satisfactory to G&E.
22. Miscellaneous. This Agreement along with the Exhibits, attachments and
Related Documents, constitutes the entire agreement between the
Parties hereto and supersedes all prior negotiations, communications,
discussions, representations, warranties and correspondence concerning
the subject matter hereof. This Agreement may be executed in any
number of counterparts, and it shall be amended or modified only by a
written instrument executed by each Party hereto. There shall be no
third party beneficiaries of this Agreement. The undersigned warrant
and represent that they have due authority to sign this Agreement on
behalf of their respective organizations. This Agreement shall be
governed by and construed in accordance with the internal laws of the
State of Arizona, without regard to the principles of conflicts of
laws thereof. If any provision of this 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 Agreement. This Agreement shall not be construed
for or against any Party hereto. All of the representations,
warranties, covenants and agreements contained in this Agreement have
been relied on by the Parties and shall survive the termination of
this Agreement.
23. [***]
24. Disputes. In the event of a dispute regarding any provision of this
Agreement or the respective obligations of the Parties hereunder, the
Parties agree that they shall attempt to resolve such dispute promptly
by negotiation. Each Party to the dispute shall appoint one person to
negotiate on its behalf, with person shall be an officer of that
respective entity and shall be authorized to
9
act on its behalf. If the parties shall, following a good faith
effort, be unable to agree on a resolution of the dispute, the parties
agree that such dispute shall be settled by arbitration, in accordance
with the terms and procedures set forth in Section 15(b) of the
Affiliation Agreement.
25. Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service
or mailed certified mail, return receipt requested or first class
postage prepaid, or by facsimile with electronic confirmation, as
follows:
(a) If to G&E,
▇▇▇▇▇ & ▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(b) If to BRE:
BRE Commercial
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(c) If to BRE Phoenix:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
(d) If to Newco:
BRE Commercial, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
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 Agreement shall
be deemed to have been given on the date of receipt.
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26. Further Assurances. From time to time, each Party will execute and
deliver such further instruments and will take such other action as
any other Party reasonably may request in order to discharge and
perform their obligations as contemplated pursuant to this Agreement.
27. Executed Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single
agreement and each of which shall be an original for all purposes.
In Witness Whereof, and intending to be legally bound hereby, the parties have
entered into this Transition Agreement as of the day and year first written
above.
▇▇▇▇▇ & ▇▇▇▇▇ COMPANY
By:
------------------------
Name:
------------------------
Title:
------------------------
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BUSINESS REAL ESTATE BROKERAGE COMPANY,
dba BRE Commercial
By:
------------------------
Name:
------------------------
Title:
------------------------
BRE COMMERCIAL, LLC, an
Arizona limited liability company
By:
------------------------
Name:
------------------------
Title:
------------------------
BRE PHOENIX, LLC, an Arizona limited
Liability company
By:
------------------------
Name:
------------------------
Title:
------------------------
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