Master Membership Agreement - ERA Franchise Systems Inc. and NRT Inc.
ERA FRANCHISE SYSTEMS, INC. MASTER MEMBERSHIP AGREEMENT
This Membership Agreement (this "Agreement") is made by and between ERA
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FRANCHISE SYSTEMS, INC., a Delaware corporation ("ERA"), and NRT INCORPORATED, a
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Delaware corporation ("you" or "Member"), as of February 9, 1999. You propose
to operate an ERA franchised real estate brokerage business only at the offices
and locations set forth on the list provided to Franchisor on the date hereof
(the "Office List") (individually an "Office" and collectively the "Offices")
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and only under the ERA tradenames set forth on the Office List.
RECITALS. ERA has the right to license to others various trademarks, service
marks, designs, colors, trade dress and non-functional and distinctive color
patterns described in the ERA System For Results Manuals (collectively, the "ERA
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Identification") for use in promotion of the services, products, programs,
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marketing and business methods (the "ERA Integrated Marketing System") offered
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under the ERA Identification. Substantial time, money and effort has been spent
in developing the ERA Identification and ERA Integrated Marketing System and
establishing its reputation and goodwill with consumers and the real estate
industry. You desire to become a Member licensed to use the ERA Identification
and the ERA Integrated Marketing System in your commercial and residential real
estate brokerage business (the "Business"), to be conducted at the Offices.
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ERA is willing to grant you a license to use the ERA Identification and ERA
Integrated Marketing System to conduct your Business at the Offices, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants of each
party to the other, and for other good and valuable consideration, the receipt
and sufficiency of which is acknowledged by the parties, it is mutually agreed
between the parties as follows:
1. MEMBERSHIP
A. The parties hereby agree that this Agreement amends, restates and
supersedes all prior franchise agreements (the "Old Agreements") between the
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parties under which any real estate brokerage offices owned by Member were
operating. ERA hereby agrees to waive all claims against Member that may exist
under the Old Agreements, except claims for monies due, indemnification claims
by ERA and ERA's exercise of audit rights thereunder. In addition, the parties
agree that (i) effective on the first day of the month following the month in
which a Triggering Event (as defined below) occurs, the Incremental Royalty
Agreement (the "Incremental Royalty Agreement"), dated as of August 11, 1997,
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among ERA, Member, Century 21 Real Estate Corporation, Coldwell Banker Real
Estate Corporation and HFS Incorporated, (ii) effective on the date hereof, the
Additional Royalty Agreement dated as of August 11, 1997, among ERA, Member,
Century 21 Real Estate Corporation, Coldwell Banker Real Estate Corporation and
HFS Incorporated, and (iii) upon the redemption in full of Member's Series C
Cumulative Junior Redeemable Preferred Stock, the Franchise Override Agreement,
dated as of August 11, 1997, among ERA, Member, Century 21 Real Estate
Corporation, Coldwell Banker Real Estate Corporation and HFS Incorporated, are
hereby terminated and of no further force or effect (in the case of (i) and
(ii), as a result of the royalties previously payable thereunder becoming
payable under the Master Real Estate Franchise Agreement, dated as of the date
hereof, between Member and Coldwell Banker Real Estate Corporation). "Triggering
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Event" shall mean the earliest of (i) such time as at least 20% of Member's
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issued and outstanding common shares have been distributed through a primary
public offering registered under the Securities Act of 1933, as amended, (ii)
the sale by Member, in one or a series of related transactions of assets
representing 80% or more in value of Member's consolidated assets on a fair
market value basis
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and (iii) the dividend or distribution to stockholders of cash or assets
representing 80% or more in value of Member's consolidated assets, net of
liabilities on a fair market value basis.
B. License; ERA Integrated Marketing System. As of the Effective Date (defined
below), ERA grants you a non-exclusive license (i) to use the ERA Identification
for the Business at and from the Offices set forth on the Office List and only
under the applicable ERA tradenames set forth on the Office List and to hold the
Business out to be a participant in the ERA Integrated Marketing System, and
(ii) to use the ERA Integrated Marketing System for the operation of the
Business at and from the Offices. You accept the nonexclusive license granted
by ERA, subject to the terms and conditions of this Agreement and the "ERA
System for Results" Manuals (the "Manuals") as amended from time to time. The
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ERA Integrated Marketing System consists of the full range of products,
services, programs and marketing provided by or through ERA and made available
to ERA franchisees ("Members"). The ERA Integrated Marketing System currently
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includes: 1) A system of referring properties (the "ERA National Relocation
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System"); 2) A national Home Protection Plan program; 3) A non-exclusive license
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to use ERA Affiliate Internet Manager as defined in Section 8; 4) the Sellers
Security(R) Plan program; and 5) local, regional and national identification
programs.
C. Program Expansion and Modification. ERA intends, as conditions permit, to
modify existing programs and to introduce new programs. ERA intends to make new
programs available generally to those Members who operate under Membership
Agreements which are the same or substantially similar to the form of Membership
Agreement being marketed to ERA Members at the time ERA implements such programs
nationally. ERA reserves the right to modify, add to, qualify, or eliminate
such programs as it deems are in the best interests of the system.
D. Participation in Programs. ERA may condition participation in ERA programs
upon your compliance with certain requirements, including payment of all your
financial obligations to ERA when due under the Membership Agreement or
otherwise, maintenance of specified program standards, successful completion of
any educational programs required by ERA and payment of a separate fee to
participate in all or some of such programs. Only Members who meet all
program requirements are authorized to utilize trademarks or service marks or
other identifications that are unique to such program.
E. ERA Identification. ERA reserves the right to approve any and all public
uses of the ERA Identification, other than those used on ERA-prepared materials.
All use of the ERA Identification will inure to the benefit of ERA. You
acknowledge that ERA or an affiliate is the sole owner of the ERA
Identification, and will not challenge the validity of the ownership of the ERA
Identification or ERA's right to license the same to you. At its sole option,
ERA or an affiliate will obtain and maintain its registrations for the ERA
Identification and exercise its rights against infringement or unauthorized use
of ERA Identification. You will use or display the ERA Identification solely in
connection with the operation of the Business provided for under this Agreement
and in connection with no other business, activity or enterprise.
F. Confidentiality. You will maintain, and make every effort to ensure that
your employees and sales associates maintain, the confidentiality of all
manuals, programs, training materials and other items used by ERA or you as part
of the ERA Integrated Marketing System. You will use such manuals, programs and
materials solely in connection with the operation of the Business and your ERA
Membership and will not direct or permit their copying or reproduction without
the express prior written consent of ERA.
G. Effective Date. This Agreement is effective on the date hereof (the
"Effective Date"). On the Effective Date, you will commence operation of the
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Business at the Offices listed on the Office List
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using the ERA Integrated Marketing System pursuant to this Agreement. All
closings that occur on and after the Effective Date will be subject to Fee
payments as provided in Sections 6 and 7, below.
2. INITIAL FEES
A. Initial Membership Fee. There shall be no initial membership fee
payable by Member in connection with the Offices in operation on the date
hereof. For each Additional Office (other than Transition Offices, Offices
which were already affiliated with Franchisor and Offices relocated pursuant to
Section 5E(ii)), whether through acquisition, merger, or otherwise, Member shall
pay ERA an initial franchise fee in connection with any Additional Offices,
equal to $4,000 per office. In addition, with respect to each Brokerage
Acquisition (as defined in the Acquisition Cooperation Agreement) in which
Franchisor's franchise sales staff is involved, Member shall pay to Franchisor
an additional fee equal to $3,500 per office acquired, whether such offices are
operated by Member or are immediately closed. The maximum additional fee payable
by Member pursuant to this Section 2A with respect to a single transaction shall
be $100,000. Throughout this Agreement, the terms "dollars" and "$" shall mean
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United States dollars.
B. No Refund. The Additional Office membership fee is payable and fully earned
by ERA upon your written request for the inclusion of such Additional Office(s)
on the Office List and is not refundable.
3. INITIAL ERA OBLIGATIONS
Initial ERA Obligations. Within a reasonable time after the Effective Date,
ERA will:
(1) Orientation. For each Additional Office, at ERA's election, hold a
new member orientation seminar in Parsippany, New Jersey or such other
place as designated by ERA. At least one designated representative of
Member will, at Member's expense, attend the first orientation seminar
offered after each Additional Offices is added to the Office List at which
space is available and pay all expenses to attend.
(2) Manuals. Loan to you one (1) copy of the Manuals for each office
identified on the Office List. You will abide by the policies and
procedures described in such Manuals, as amended updated and replaced from
time to time. Upon renewal, you will not receive additional copies of the
Manuals, but will continue to receive amendments, updates and replacements.
4. CONTINUING ERA OBLIGATIONS
A. Relocation and Referrals. ERA will promptly transmit your relocation and
referral listings to other appropriate Members or other brokers designated by
ERA.
B. Referral Commissions. ERA will promptly pay all referral commissions due
you after their receipt by ERA.
C. Promotional Materials. ERA will produce and maintain an inventory of
advertising and marketing materials, sales promotion items and training aids for
purchase or for license to use.
D. Staff. ERA will maintain a staff to consult with you on advertising,
marketing and technical matters by telephone, in writing or in person as ERA
deems appropriate and necessary.
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E. Real Estate License. ERA will maintain on its staff, or appoint as its
representative, an individual with a valid real estate brokers license.
F. Reserved.
5. OFFICE LOCATIONS
A. Member shall operate the Business exclusively from the locations set forth
on the Office List (herein referred to individually as an "Office" and
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collectively as the "Offices"). Member may not operate the Business from any
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other location or any additional locations without the prior written approval of
ERA or Cendant Corporation ("Cendant") (it being understood that approval of
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funding, pursuant to the Acquisition Cooperation Agreement or otherwise, of an
acquisition pursuant to which Member will acquire additional brokerage offices
shall not by itself be deemed as approval for the offices acquired in such
transaction to become Offices hereunder); provided that ERA agrees to grant its
consent to any additional offices (each, an "Additional Office") unless any such
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Additional Office (i) would have a negative impact on any other Member, as
determined by ERA consistently with impact review practices and policies
generally applicable to Members, (ii) would result in ERA being in breach of any
agreement with another Member or (iii) is an office proposed to be acquired by
Member which was affiliated with a Cendant real estate brand prior to the
proposed acquisition of such office by Member. "Acquisition Cooperation
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Agreement" shall mean the Acquisition Cooperation Agreement, dated as of
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February 9, 1999 between Member and Cendant.
B. Member shall operate a real estate brokerage business and neither Member nor
any of its subsidiaries shall operate, manage, own, have a greater than 10%
interest in, or otherwise engage in, any other business (except for the
marketing of products and services permitted pursuant to the Program Outsourcing
Agreement) or, except for real estate brokerage businesses pursuant to a
franchise or membership agreement with Cendant or a subsidiary thereof, operate,
manage, own, have a greater than 10% interest in, or otherwise engage in, any
other real estate brokerage business, either under Member's ERA trade name or
under any other name, without the prior written consent of ERA, which consent
may be withheld in ERA's sole discretion. Notwithstanding the foregoing, if
permitted pursuant to the terms of the Program Outsourcing Agreement, dated as
of February 9, 1999, between Member and Cendant (the "Outsourcing Agreement"),
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Member shall be permitted to conduct title insurance and escrow service and
closing service operations without the prior consent of ERA, provided that such
operations do not use the ERA Identification and Member apprises the public, in
each case, that such real estate related business is not associated with or
endorsed by ERA. For purposes of this Agreement, a franchise or membership
agreement with Cendant or a subsidiary thereof shall mean any franchise or
membership agreement which, at the time of execution, was with Cendant or a
subsidiary thereof.
C. Upon Member's establishment of any Additional Office or Member's expansion
(through assignment or otherwise) of its Offices and approval of such Office or
Offices by ERA as provided herein, the location for each such Additional Office
location shall be added to the Office List by mutual agreement of ERA and Member
and such Additional Office shall be deemed for all purposes to be an "Office"
hereunder. Member shall provide ERA on the date hereof with a current list of
all of its Offices and the Broker of Record for each such office. Member shall
provide ERA with written notice upon any change in any of its Offices or Broker
of Record for any such Office.
D. Non-Exclusive. This Agreement does not grant you any express or implied
territorial rights, benefits or protections with regard to any marketing or
geographic area. ERA does not guarantee any minimum distance between your
Offices and any other Member's office. Subject to the other provisions of this
Agreement, ERA reserves the unrestricted right in its sole discretion to approve
or
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disapprove the location and relocation of your Office and any other Member
offices anywhere. Subject to the other provisions of this Agreement, ERA
reserves the unrestricted right, in its sole discretion, to offer products,
services and programs under the ERA name directly and indirectly through its
employees, representatives, agents and others at any location whatsoever, except
at your approved Office location(s). There is no restriction on the right of any
ERA affiliate to offer any product, service, franchise, membership, program or
benefit under any other name or mark at any location whatsoever.
E. If Member wishes to sell, close down or otherwise terminate one or more of
its ERA Offices, Member shall be required to obtain the prior written consent of
ERA, which consent may be withheld in ERA's sole discretion; provided however,
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that Member shall be permitted to close, without the consent of ERA, (i) a
number of Offices acquired by Member not exceeding the number of Offices which
were identified in writing to Cendant prior to such acquisition (provided that
in an acquisition in which Cendant is providing financing pursuant to the
Acquisition Cooperation Agreement, such number of Offices must be identified in
writing to Cendant prior to the date on which Cendant agrees to provide such
funding) as the number of Offices to be closed, so long as such Offices are
closed within one year of such acquisition and are not identified as being, or
being affiliated with, ERA Offices (unless such offices at the time of
acquisition by Member are ERA offices) ("Transition Offices"), (ii) Offices
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which are moved within a proximate geographical area (it being understood that
such a move requires the consent of ERA pursuant to Section 5A of this
Agreement), so long as in connection with such move, a material portion of the
personnel at such office is not reassigned to other Offices, (iii) any of the
offices acquired by Member from National Realty Trust, provided that the sum of
the Gross Revenues of all of such offices closed (whether operating under this
Agreement or any other franchise or membership agreement with a subsidiary of
Cendant), in each case for the twelve calendar month period ending on the month
immediately prior to the month in which the closure of each such office
occurred, is less than $150,000,000 and (iv) other Offices, so long as the Gross
Revenues for each such Office, together with the Gross Revenues for each other
Office (whether operating under this Agreement or any other franchise or
membership agreement with a subsidiary of Cendant) closed pursuant to this
clause (iv) in the same calendar year, in each case for the twelve calendar
month period ending on the month immediately prior to the month in which the
closure of each such Office occurred, is less than the sum of (A) 3% of Member's
Gross Revenues (pro forma for Offices closed and new Offices opened) for all of
its Offices (whether operating under this Agreement or any other franchise or
membership agreement with a subsidiary of Cendant) for the immediately prior
calendar year and (B) for office closures occurring in calendar years beginning
in 1999, an amount equal to (i) 3% of Member's Gross Revenues (pro forma for
Offices closed and new Offices opened) for all of its Offices (whether operating
under this Agreement or any other franchise or membership agreement with a
subsidiary of Cendant) for the calendar year immediately preceding the
immediately prior calendar year minus (ii) the Gross Revenues of all Offices
closed pursuant to this clause (iv) in the immediately preceding prior year, in
each case for the twelve calendar month period ending on the month immediately
prior to the month in which the closure of each such office occurred and (C) for
office closures occurring in calendar years beginning in 2000, an amount equal
to (i) 3% of Member's Gross Revenues (pro forma for Offices closed and new
Offices opened) for all of its Offices (whether operating under this Agreement
or any other franchise or membership agreement with a subsidiary of Cendant) for
the calendar year two years immediately prior to the immediately prior calendar
year minus (ii) the Gross Revenues of all Offices closed pursuant to this clause
(iv) in the year immediately prior to the immediately preceding prior year, in
each case for the twelve calendar month period ending on the month immediately
prior to the month in which the closure of each such Office occurred, provided
that all fees payable to ERA and the NAF are made through the closure date,
Member complies with the procedures set forth in Section 17 with respect to such
closed offices, no assignment of the franchise for such office(s) is involved
without ERA's consent and such Office closures or sales do
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not reduce the ERA System marketshare for the applicable market by greater than
10%. Any references to Gross Revenues in this Section 5E shall exclude all Gross
Revenues attributable to sales agents transferred to another office of Member
that is subject to a franchise or membership agreement with what is
(notwithstanding the last sentence of Section 5B) at the time of such transfer a
subsidiary of Cendant. Any determination of Member's Gross Revenues for calendar
year 1997 shall only include the period from August 29, 1997 through December
31, 1997.
6. FRANCHISE ROYALTIES
A. Gross Revenues: The phrase "Gross Revenues" means all monies or things of
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value, calculated at their fair market value in United States currency, received
or receivable (i.e., earned but not yet received) by Member (including, without
limitation, all revenues and commissions received by or on behalf of Member's
independent sales associates, regardless of whether or not such independent
sales associates are entitled to retain all or part of such revenues or
commissions), directly or indirectly, in connection with the Business at all
Offices including, but not limited to, the closing of transactions and provision
of services for which a real estate or auctioneer's license (including
appraisal, but excluding title or escrow services not using any ERA
Identification) is required, the sale or provision of products or services that
we or any of our affiliates develop or make available to you directly or through
a third party and/or any transaction, sale and/or service in which the ERA
Identification or ERA Integrated Marketing System is used in any manner, without
deducting any of Member's multiple listing fees, advertising costs, commissions,
overrides, bonuses, salaries, gifts, or any other costs or expenses, except
referral fee expenses paid and payments to outside brokers. However,
(1) Monies or things of value received or receivable by Member solely from
property management, title, escrow, mortgage or mortgage marketing
services (including fees under the Marketing Agreement (defined
below)), referral network dues, desk rental fees, broker price
opinions and home warranty fees shall not be included in Gross
Revenues. Property management services shall not include any property
management commissions paid to Member's brokers, for which royalties
will be charged.
(2) Monies or things of value received or receivable by Member from
transactions involving the renting or leasing of property for a non -
renewable term of one (1) year or less and which do not include an
option to purchase the property shall not be included in Gross
Revenues.
(3) Monies or things of value received as interest or investment income,
including interest or investment income in connection with title and
escrow deposits and/or arbitrage loans shall not be included in Gross
Revenues.
B. Royalties: Member shall pay to ERA a continuing royalty fee
("Royalty Fee") in an amount equal to six percent (6%) (the "Regular Royalty")
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of all Gross Revenues. Royalty Fees are due and payable in United States
currency on or before the tenth day of the month following the settlement or
close of escrow of each transaction which occurs, or sales contract which is
made, on or after the Effective Date and which generates Gross Revenues. Upon
expiration or termination of this Agreement, Royalty Fees shall remain payable
as to all transactions entered into, or sales contracts made, prior to the date
of such expiration or termination. Pursuant to the terms and conditions of the
Incremental Royalty Agreement, in addition to the Royalty Fees payable
hereunder, ERA shall be entitled to receive from Member from time to time
additional royalties based upon the consolidated performance of all of Member's
real estate brokerage businesses, until the termination
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of the Incremental Royalty Agreement. Notwithstanding the Regular Royalty set
forth in the first sentence of this section, upon the opening of a new office by
Member as a result of an acquisition of an existing real estate brokerage
company which was not affiliated with any Cendant franchise brand immediately
prior to such acquisition, which acquisition did not involve Cendant's or one of
its subsidiaries' acquisition of trademarks and was not consummated using funds
from Cendant or one of its subsidiaries (I) while the commitment to provide
funds under the Acquisition Cooperation Agreement (the "Commitment") has not
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been exhausted, and Member has requested in writing for Cendant to use its funds
(which request is made in good faith and on equivalent economic terms to those
in the Acquisition Cooperation Agreement) and Cendant has declined to do so, and
provided that Member is in compliance with the Acquisition Cooperation
Agreement, the royalty fee applicable to gross revenues attributable to those
sales agents affiliated with such office immediately prior to such acquisition
and new agents recruited for, and working at, such office (other than those
agents recruited from another one of Member's offices, whether such office is
operating under this Agreement or any other agreement between Member and a
subsidiary of Cendant) shall be equal to: (i) 4% if the offices acquired in such
acquisition had LTM Gross Revenues of up to $5,000,000, (ii) 3% if the offices
acquired in such acquisition had aggregate LTM Gross Revenues between $5,000,000
and $10,000,000, and (iii) 2% if the offices acquired in such acquisition had
aggregate LTM Gross Revenues in excess of $10,000,000; provided that if ERA's
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impact review policy would have, in ERA's sole determination, prevented Member
from opening such office due to the proximity of such office to Member's
existing ERA office (the "Impacted Office") if not for the fact that Member also
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owns the Impacted Office, the royalty fee applicable to gross revenues
attributable to sales agents working in such office at the time of such
acquisition and new agents recruited for, and working at, such office (other
than those agents recruited from another one of Member's offices, whether such
office is operating under this Agreement or any other agreement between Member
and a subsidiary of Cendant) shall be equal to: (i) 3% if the offices acquired
in such acquisition had aggregate LTM Gross Revenues of up to $5,000,000 and
(ii) 2% if the offices acquired in such acquisition had aggregate LTM Gross
Revenues in excess of $5,000,000 and (II) after the Commitment has been
exhausted, and Member has requested in writing for Cendant to use its funds
(which request is made in good faith and on equivalent terms, economic and
other, to those in Acquisition Cooperation Agreement) and Cendant has declined
to do so, the royalty fee applicable to gross revenues attributable to those
sales agents affiliated with such office immediately prior to such acquisition
and new agents recruited for, and working at, such office (other than those
agents recruited from another one of Member's offices, whether such office is
operating under this Agreement or any other agreement between Member and a
subsidiary of Cendant) shall be equal to: (i) 4% if the offices acquired in such
acquisition had aggregate LTM Gross Revenues of up to $5,000,000 and (ii) 3% if
the offices acquired in such acquisition had aggregate LTM Gross Revenues in
excess of $5,000,000; provided that if ERA's impact review policy would have, in
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ERA's sole determination, prevented Member from opening such office due to the
proximity of such office to an Impacted Office if not for the fact that Member
also owns the Impacted Office, the royalty fee applicable to gross revenues
attributable to sales agents working in such office at the time of such
acquisition and new agents recruited for, and working at, such office (other
than those agents recruited from another one of Member's offices, whether such
office is operating under this Agreement or any other agreement between Member
and a subsidiary of Cendant) shall be equal to 3%. Notwithstanding the
foregoing, if Member transfers the operations of one Office ("Office A") to
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another Office ("Office B"), or combines the operations of any two Offices
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("Office A" and "Office B") the royalty fee applicable to Gross Revenues
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generated at the combined Office or the Office to which the operation were
transferred, shall be equal to (X) the LTM Gross Revenues for Office A divided
by LTM Gross Revenues for Office A and Office B, multiplied by the royalty fee
applicable to Office A, plus (Y) the LTM Gross Revenues for Office B divided by
LTM Gross Revenues for Office A and Office B multiplied by the royalty fee
applicable to Office
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B. For purposes of this Agreement, the determination of whether the Commitment
has been exhausted shall be made assuming that the fifth anniversary of the date
of the Acquisition Cooperation Agreement has passed. Notwithstanding anything in
this Agreement to the contrary, royalties are payable under this Section 6 with
respect to Transition Offices.
C. Late Payment: Royalty Fee payments that are more than ten (10) days late
shall bear interest from the due date until paid at a rate of eighteen percent
(18%) per annum or the highest rate for commercial contracts allowed by law,
whichever is less.
D. Deductions made for special fees, employee home purchases and salesperson
home purchases shall not be included as Gross Revenue.
E. The term Gross Revenues shall not include Gross Revenues for which a royalty
fee is paid pursuant to Franchise Agreements between Member and any other
Cendant subsidiary, currently CENTURY 21 Real Estate Corporation and Coldwell
Banker Real Estate Corporation.
7. NATIONAL MARKETING FUND CONTRIBUTION
A. NMF Contribution. You will support the concept of national advertising and
marketing and will contribute two percent (2%) of your Gross Revenues to a
National Marketing Fund (the "Fund" or "NMF"), subject to the limitations in the
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next sentence. There shall be a minimum monthly NMF Contribution per Office of
$192 and a maximum monthly NMF Contribution per Office of $647. The minimum and
maximum monthly NMF Contribution levels may be increased under Section 10 of
this Agreement. Your NMF Contributions begin to accrue on the Effective Date
and are due and payable to ERA at its principal office not later than the tenth
(10th) day following the end of each calendar month. Payments not received by
that date shall bear interest at the same rate as late Royalty Fee payments as
set forth in Section 6.C of this Agreement.
B. Use and Management of NMF. The NMF is not held in trust and we do not
manage it in a fiduciary capacity. ERA may deposit NMF Contributions with its
other monies, but will separately and distinctly identify and account for NMF
Contributions on its books and records. ERA, as it determines in its sole
discretion, will manage and use the NMF Contributions for the development,
implementation, production, placement, payment and costs of NMF advertising and
marketing and other related services and programs. The NMF may also be used for
other purposes such as training, customer service support, capital improvement
incentives for ERA offices, and software development and distribution. As used
in this Agreement, "NMF advertising and marketing" means national and regional
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advertising, marketing, promotions, public relations and/or other programs,
including direct mail, market research, customer surveys and test marketing to
promote and further the recognition of the ERA Identification and the ERA
Integrated Marketing System and the ERA Members generally. "Regional" includes
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any Designated Market Area ("DMA") or group of DMA's. For purposes of this
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Agreement, DMA shall have the same definition as that used by Nielsen Media
Research of the Dun & Bradstreet Corp, or any other definition that replaces DMA
in the advertising trade as ERA reasonably determines. We shall be entitled to
reimburse ourselves and our affiliates, and other related parties from the Fund
for expenses incurred or advanced to administer and manage the Fund for the
conduct of the Fund's activities and for products or services provided to the
Fund, including, but not limited to, the reasonable costs of accounting,
collection and legal services, as well as other products or services which
historically have been provided by unaffiliated third parties, and the costs for
employees administering, managing and providing services to the Fund.
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You understand that the NMF Contributions are used for NMF advertising and
marketing as well as other services and programs as set forth in the preceding
paragraph, and that ERA is under no obligation to use or allocate NMF
Contributions on a proportional basis with the NMF Contributions collected from
any Member specific geographic area or to benefit any particular Member or group
of Members. ERA is not obligated to use all the NMF Contributions in the year
it receives such NMF Contributions. If ERA spends less NMF Contributions in any
year than the amount of NMF Contributions paid into the fund in that year, such
excess of NMF Contributions will be accumulated for use in future years.
Upon your written request, ERA will provide you with a financial report of the
Fund showing the total NMF Contributions collected and disbursed for the
previous year, certified to be true and correct by an officer of ERA or an
independent certified public accountant. ERA is not obligated to cause the Fund
to be audited or reviewed by an independent certified public accounting firm.
8. TECHNOLOGY
A. Affiliate Internet Manager. We have developed the Affiliate Internet
Manager ("AIM") system, consisting of our proprietary software and non-
proprietary operating programs, that enables you to transmit required listing
information and transaction information and other data. We will license the
software to you without charge during the term of this Agreement. However, you
must obtain appropriate connectivity and browser software for this application
as well as any platform upgrades that may be necessary within one year after we
license the software to you. You are responsible for purchasing compatible
hardware from a vendor you select. The technology systems are not available for
Apple(R), Power PCs(R) or MacIntosh(R) hardware and are not compatible with
OS2(R) or Unix(R) operating systems.
B. Required Computer Equipment. ERA is in the process of revising standards
for computer hardware and software. When ERA has completed and revised those
standards, you will use your best efforts to maintain computer hardware and
software for each Office which meets or exceeds the minimum specifications below
or in the Manuals as amended from time to time. The current standards are
listed below. You acknowledge that changes in technology may necessitate
upgrading, replacing or adding to such equipment or purchasing or leasing
additional equipment during the term of this Agreement. Any failure of your
computer equipment, software, communications capabilities, and reporting formats
to be compatible with ERA's systems shall not result in your failure to timely
satisfy your obligations under this Agreement.
Minimum Requirements: Intel Pentium CPU in an IBM-compatible personal
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computer; 166 MHz speed; 2 gigabyte hard disk drive; 32 MB Random Access
Memory; 10-speed CD ROM; Hayes-compatible 33.6 BPS modem; 15 inch SVGA
monitor (800 x 600 pixels, 256 color); Lexmark 7000 Inkjet printer or
equal; 16 MB tape or second disk drive (mirrored) for back-up; MS DOS 6.22,
Windows 95; Internet access using Internet Explorer 4.0.
C. You are required to transmit and access certain information, including
Transaction Track reports, through AIM or through such other means as ERA may
require.
D. Systems Support. Applications developed by ERA are licensed and distributed
on an "as is' basis. ERA will use its best efforts to provide support, limited
solely to ERA-issued applications. ERA reserves the right to change the level
and type of support provided at any time without notice.
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E. ERA Member's Responsibilities. You are responsible for the selection,
purchase, installation and support of all hardware and systems software required
to run the ERA technology products. ERA recommends you make arrangements with a
local personal computer consultant or dealer for installation and ongoing
support of your computer hardware and software.
9. OTHER COSTS AND OBLIGATIONS
A. Sellers Security(R) Plan. In connection with your required participation in
the ERA Sellers Security Plan ("SSP") program, you must sign a Sellers Security
---
Plan Participation Agreement with ERA and pay an annual participation fee which,
as of the Effective Date, is One Hundred Twenty-Five Dollars ($125) for each
Office. You must pay the SSP participation fee for each Office before each
April 1. If ERA does not receive your annual participation fee by April 1 of any
year, you may be required to pay an increased fee which, as of the Effective
Date, is Three Hundred Dollars ($300) per Office. ERA may adjust this
participation fee. ERA will not process any SSP application received from you
if you are more than thirty (30) days delinquent in any financial obligations
under this Agreement. If ERA incurs losses on properties you list in the SSP,
you will share in a portion of such loss, as provided in the Manuals.
B. Commercial/Industrial Broker Network. If you choose to participate in the
ERA Commercial/Industrial Broker Network (CIBN), you must sign a separate
participation agreement, pay a one-time application fee, and pay annual
participation fees. Although these fees may change, as of the Effective Date,
the application fee is $50 per Office and the annual participation fee is $300
per Office.
C. Notwithstanding any contrary terms and conditions contained in this Agreement
(other than the first sentence of Section 5B hereof), Member agrees to be bound
by and comply with the terms and conditions of the Outsourcing Agreement.
D. ERA International Business Conference. A representative of each of your
Offices identified on the Office List, as amended, will attend and encourage
your sales associates and employees to attend the ERA International Business
Conference each year. In any event, each year you will be required to pay for
at least one (1) registration fee per Office for the ERA International Business
Conference, for each Office whether or not you or your representative attend.
You will be required to pay at least one (1) registration fee per Office each
year. ERA may bill you at any time before the ERA International Business
Conference for one (1) registration fee at the non-discounted on-site rate, if
ERA has received no registration from your Office at the time of billing.
E. Brokers of Record. A designated representative responsible for the
management and operation of your Business at each Office (the "Brokers of
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Record") must maintain a valid and current real estate broker license to operate
the Business in the states where the Offices are located during the term of this
Agreement at your expense. You represent and warrant to ERA that your Broker of
Record possesses all required licenses as required by law and this Agreement.
In addition to any other obligations contained herein, Member shall defend and
indemnify ERA and their respective shareholders, directors, officers, employees,
agents, attorneys, successors and assigns and hold them harmless from and
against and reimburse them for all claims, liabilities, damages, attorneys'
fees, costs, settlement amounts, etc. arising out of or related to Member's
failure to have qualified Brokers of Record.
F. Facsimile Capability. In order to enhance participation in the ERA National
Relocation System, on or before the Effective Date you will obtain, install and
maintain at your own expense Group
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Three compatible facsimile equipment or similar computer facsimile capability
accessible by a dedicated telephone line.
G. Offsets. ERA may offset any amounts ERA owes you in full or partial
satisfaction of any amounts you owe under this Agreement or otherwise whenever
you are more than thirty (30) days past due.
H. Costs of Collection. Where permitted by law, you will pay all costs and
expenses, including reasonable attorneys' fees, that ERA incurs in the
collection of any fees or amounts due from you under this Agreement or
otherwise, whether due to ERA or the applicable local or regional ERA Broker
Council, if any, or otherwise to enforce the provisions of this Agreement.
I. Interest. All delinquent payments under this Agreement will bear interest
at the rate of 18% per annum simple interest (1.5% per month) or the highest
rate for commercial contracts permitted under applicable law, whichever is less.
J. Returned Checks. ERA will charge you a returned check charge on any checks
submitted to pay any fee or other amount owed to ERA returned unpaid for any
reason. You must replace any such check with a certified or cashiers check,
money order or electronic transfer of funds within three (3) days after
notification. ERA may charge the highest commercial rate permissible under the
law.
K. Ethical Conduct. You will uphold and take reasonable efforts to insure that
your sales associates and employees uphold high standards of honesty, integrity,
fair dealing and ethical conduct in dealing with the general public, the
customers of the Business, other Members and with ERA. All persons engaged in
the Business will comply with the Code of Ethics of the National Association of
REALTORS(R).
L. Manuals. You will keep your Manuals up-to-date, keep them at your
respective Offices , not copy, reproduce or disseminate the Manuals or any
portions of the Manuals unless expressly authorized by ERA and return all
Manuals to ERA when this Agreement expires or terminates, or ERA requests their
return before or after replacement with substituted sources of information.
M. Indebtedness. Member shall not, and shall not permit its subsidiaries to,
incur Indebtedness if the Leverage Ratio (after giving effect to the incurrence
of such Indebtedness) shall exceed 2.0 (3.0 if the Commitment has been exhausted
and not replaced with an additional commitment of funds by Cendant or one of its
subsidiaries on substantially equivalent terms). Leverage Ratio shall mean the
ratio of total consolidated Indebtedness of Member and its subsidiaries
(excluding Cash Secured Loans (as defined below) and the outstanding principal
amount of the existing development advance) to pro forma LTM EBITDA (pro forma
meaning pro forma for the LTM EBITDA of brokerage offices acquired during such
LTM including appropriate cost allocations to reflect operation on a standalone
basis if the acquired business was part of a group of companies with shared
expenses, but excluding anticipated synergies). "EBITDA" shall mean Member's
------
consolidated earnings from continuing operations (excluding extraordinary gains
or losses, Conversion Costs (as defined in the Acquisition Cooperation
Agreement) and, as agreed between ERA, Member, and, until such time as Apollo
owns less than 10% of Member's outstanding common stock, Apollo, one-time or
non-recurring items of income or expense) plus interest expense, provision for
income taxes and depreciation and amortization expense. Immediately prior to any
incurrence of Indebtedness by Member (including Indebtedness incurred by Member
upon the acquisition of another entity or upon the assumption of liabilities of
another entity), Member shall furnish ERA with a certificate executed by its
chief financial officer to the effect that such incurrence is not in violation
of this section and that, based on Member's business plan
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and a good faith forecast prepared at the time of incurrence, the Leverage Ratio
is not reasonably expected to exceed 2.0, or 3.0, as the case may be, for the
twelve full calendar months following such incurrence. Notwithstanding the
foregoing, Member shall not be prohibited from incurring (i) Cash Secured Loans
in the ordinary course of business, (ii) working capital revolving loans not in
excess of 2% of Member's LTM Gross Revenues (under this Agreement and any other
franchise or membership agreement with a subsidiary of Cendant) at any one time
outstanding, (iii) letters of credit and hedging obligations in the ordinary
course of business, (iv) Indebtedness to refinance existing Indebtedness
provided that such Indebtedness is not greater than the Indebtedness so
refinanced and (v) other Indebtedness not to exceed 1% of Member's LTM Gross
Revenues (under this Agreement and any other franchise or membership agreement
with what is then (notwithstanding the last sentence of Section 5B) a subsidiary
of Cendant) at any one time outstanding (the foregoing, collectively, "Permitted
---------
Indebtedness"); provided that the Permitted Indebtedness incurred pursuant to
------------
clauses (ii), (iv) or (v) above shall be included in the calculation of the
Leverage Ratio, for purposes of determining whether Indebtedness beyond the
Permitted Indebtedness is permitted hereunder. "LTM" shall mean, at any time,
---
the twelve consecutive full calendar months of such Person ending on the most
recently completed full month for which financial statements prepared in
accordance with generally accepted accounting principles consistently applied
are available. "Cash Secured Loans" shall mean any loan incurred in connection
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with title insurance and escrow operations to the extent that the principal and
interest thereon is secured by an amount of cash or U.S. governmental securities
to ensure the full payment of principal and interest thereon after giving effect
to the interest income earned thereon. "Indebtedness," at any date shall
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include, without duplication, (a) all indebtedness of Member or its subsidiaries
for borrowed money or for the deferred purchase price of property or services
(other than current payables incurred in the ordinary course of business and
payable in accordance with customary practices) and including earn-out or
similar contingent purchase amounts, (b) any other indebtedness of Member or its
subsidiaries which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of Member or its subsidiaries under capitalized
leases, (d) all obligations of Member or its subsidiaries in respect of
acceptances issued or created for the account of Member or its subsidiaries, (e)
all liabilities secured by any lien on any property owned by Member or its
subsidiaries even though neither Member nor its subsidiaries has assumed or
otherwise become liable for the payment thereof, and (f) all guarantees by
Member or its subsidiaries of obligations of others (including the value of
obligations of others secured by liens on the assets of Member or its
subsidiaries). For purposes of this section, Indebtedness shall include any
outstanding amount of mandatorily redeemable preferred stock or preferred stock
with scheduled mandatory redemptions, and shall not include (i) pay-in-kind
preferred stock that does not require Member to make any cash payments (other
than upon liquidation) and does not include sanctions for the non-payment of
cash, other than increasing the dividend rate to a rate not exceeding 13% per
annum, (ii) perpetual cash-pay preferred stock that does not contain any
sanctions for the non-payment of amounts provided for therein other than the
right to elect (together with all other preferred stock other than preferred
stock existing on the date hereof) no more than 2 directors to Member's board of
directors upon any default; provided that the rate thereon does not exceed 13%
per annum and, at the time of issuance thereof, Member would have been permitted
under the Leverage Ratio test to incur Indebtedness with fixed charges equal to
the fixed charges of such preferred stock and (iii) preferred stock outstanding
on the date hereof and any shares paid thereon in accordance with the term
thereof.
N. Dividends. Notwithstanding anything else herein to the contrary, Member
shall not be permitted to (i) incur Indebtedness to finance the payment of
dividends or (ii) declare or pay any Extraordinary Dividend unless the Leverage
Ratio (provided that the Leverage Ratio is calculated such that the consolidated
indebtedness is net of cash and cash equivalents) at the time such
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dividend is declared and paid is no greater than 1.0. "Extraordinary Dividend"
----------------------
shall mean any dividend or distribution which is not a regularly scheduled
quarterly dividend consistent with past practice and which exceeds the lesser of
(x) 20% of Member's net income for the fiscal year in which such dividend or
distribution is declared minus dividends or distributions already paid during
such fiscal year and (y) 20% of Member's net income for the fiscal year in which
such dividend or distribution is paid minus dividends or distributions already
paid during such fiscal year. For the avoidance of doubt, the payment by the
Member of all or any part of the $45,000,000 dividend to Apollo Management, L.P.
and/or its affiliates ("Apollo") pursuant to the Letter Agreement, dated as of
------
the date hereof, among Franchisee, Cendant, Apollo and others, shall not be
restricted in any manner by this Agreement, including this Section 9N.
10. INCREASES
A. Annual Increases in NMF Contributions. Effective April 1 each year during
the term of this Agreement, ERA at its sole option, increase the Minimum and
Maximum Monthly NMF Contribution under Section 7A of this Agreement. No
percentage increase in any particular fee will exceed the greater of 1) the
annual percentage increase of the Consumer Price Index for all Urban Consumers,
U.S. City Average (1982-84=100) ("CPI") during the period between December of
---
the applicable base year of such particular fee and the December immediately
preceding the April 1 on which such fee increase is to take effect or 2) the
yield to maturity on United States Treasury Bonds (as listed in The Wall Street
---------------
Journal or such other source as ERA deems reliable) maturing approximately 30
-------
years after December 31 in the year preceding the effective date of such
change. ERA may round to the nearest dollar the amount of increase resulting
from application of the CPI percentage or the Treasury Bond yield. The
applicable base year for each particular fee is defined for CPI purposes as the
calendar year immediately preceding the later of the date ERA first set the
particular fee or the April 1 on which ERA last raised that particular fee
pursuant to this option. As of the Effective Date of this Agreement, the base
year for the Minimum and Maximum Monthly NMF Contributions is 1997.
Notwithstanding the foregoing, the maximum and minimum NMF Contribution will be
adjusted consistently with all other franchisees of ERA.
B. Other Fee Increases. ERA will also have the right, at its sole option, to
impose, eliminate or modify initial membership fees, renewal membership fees,
training fees, fees to participate in voluntary programs at any time, including,
but not limited to, the Sellers Security Plan, referral fees, late charges and
returned check charges, which revisions will not be subject to the limitations
described in Section 10A.
11. RECORDKEEPING; AUDIT
A. Recordkeeping, Financial Statements and Audit. You will maintain accurate
records for each Office in the form prescribed by ERA during the term of this
Agreement and for two (2) years after the expiration or termination of this
Agreement. You will provide ERA, at ERA's request, with quarterly financial
statements for each Office within thirty (30) days after the end of each
calendar quarter and an annual balance sheet and profit and loss statement
within sixty (60) days after the end of your fiscal year. Financial statements
must be prepared in accordance with generally accepted accounting principles.
You must transmit information to ERA in the manner and format required by ERA
and allow ERA or its designee(s) to audit your operations, including your
financial record retention systems, or to obtain information from other sources
including the local Multiple Listing Service, regarding your Gross Revenues, to
verify the Royalty Fees, NMF Contributions and any other fees then due under
this Agreement during the applicable audit period. You must immediately pay ERA
any of such fees or contributions shown by the audit as having been due during
the audit period but not paid. If the audit discloses a deficiency of at least
five percent (5%) in amounts due
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under this Agreement for any three (3) month period, you must also pay all costs
incurred by ERA with regard to the audit and such deficiency will constitute a
material breach of this Agreement. You must also pay the costs of the audit if
ERA must spend more than the average amount of time or energy to get your
records relating to any Office in order to do the audit, as compared to an
office with a reasonably similar number of listings and transactions. ERA may
charge you an administration fee of up to Five Hundred Dollars ($500) if you
cancel or reschedule an audit within seventy two (72) hours of the scheduled
time of the audit.
B. Access to Records. ERA or such person as ERA may designate in writing will
have the right during the term of this Agreement and any renewals, and for
period of three years following any termination of this Agreement, to visit any
of your Office locations or administrative office location (or such other place
as your records may be located) during normal business hours and without
hindrance or delay, proceed:
(1) to inspect, audit, check and make copies of and extracts from your books,
records (including state and federal tax returns), journals, orders, receipts,
any correspondence and other data relating to your Business or to any
transactions;
(2) to make such verification concerning any portion of such records or of
your Business as ERA may consider reasonable under the circumstances; and
(3) to discuss your records and Business with any officers, directors,
employees responsible for maintaining the records, or with your broker of
record, or with your sales associates with respect to their transactions.
C. Condition of Assignment or Mutual Termination. ERA may require an audit of
your operations at any time, including as a condition of ERA approval of any
assignment or mutual termination of this Agreement.
D. Sales Associate Information. You will provide ERA information about your
sales associates and allow and assist ERA in any survey of your sales
associates.
E. Other Information. You will provide ERA and/or cooperate with ERA in
collecting such other information as ERA may reasonably request, including
information for research and development of services, products and programs,
identification of demographic information, industry reports and preparation of
the ERA Uniform Franchise Offering Circular.
12. RELOCATION AND REFERRAL OBLIGATIONS
A. Operation of Relocation Program. You and ERA each will abide by the
Manuals, as amended from time to time at the sole discretion of ERA, with
respect to relocation eligibility, format, and procedures and the manner and
amount of commission payments from ERA to you or from you to ERA for relocation
transactions transmitted through the ERA National Relocation System.
B. Obligation to Refer. You will transmit all residential and commercial real
estate relocations exclusively through the ERA National Relocation System.
C. Listing Inventory. You agree to supply to ERA, no later than fifteen (15)
days after the Effective Date (in the case of Additional Offices, within 15 days
of the amendment of the Office List to include any such Additional Offices), and
at all times to maintain with ERA, a complete and current inventory of all
listings of your Business, in the format required by ERA, transmitted in the
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manner required by ERA, for ERA to transmit to other ERA Members or brokers
designated by ERA when appropriate.
D. Prospect Contacts. You will contact by telephone each buyer or listing
prospect referred or supplied to you by ERA within twenty-four (24) hours of
receipt, unless otherwise specified on the relocation form.
E. Follow-Up Reports. You will complete all prospect follow-up report forms in
a manner specified by ERA and return them to ERA within seventy-two (72) hours
after receipt.
F. Payment of Referral Fee. You will direct the escrow company, attorney or
other party handling the closing of any transaction in which a referral fee is
due to pay the referral fee at closing directly to the ERA Relocation Center and
to identify the referral fee paid with the referral transaction number. If the
escrow company, attorney or other party handling the closing of a transaction
fails or refuses to do so, you will pay the referral fee to the ERA Relocation
Center within three (3) days after the closing of any transaction on which that
fee is due. You shall pay the fee in cash, check or certified funds and
identify the referral fee with the referral transaction number.
G. Failure to Follow Procedures. ERA reserves the right at its option to cease
furnishing referrals to you if you violate any provision of this Section 12 or
any provision of the Manuals relating to referral procedures, are otherwise in
breach of this Agreement or are delinquent in the payment of any financial
obligation to ERA then due and payable.
H. Consent to Use. You consent to ERA's use of your listing and Transaction
information.
13. SHARED IDENTITY OBLIGATIONS; ADVERTISING
A. Advertising. Whenever you advertise or otherwise identify your real estate
brokerage Business, you agree to use the mark "ERA" and any other ERA
Identification according to ERA standards specified in the Manuals, and to allow
no other trade name, logotype or trademark to appear in the advertisement or
identification without the express written consent of ERA. ERA consents to
Member's use of Cendant Mortgage Corporation's advertisements.
B. Outdoor Sign. As of the Effective Date, you must have installed an ERA
approved outdoor illuminated sign, in accordance with specifications in the
Manuals, at each Office, and to provide ERA either a color photograph of such
sign or a copy of the order for such sign. ERA and you will use commercially
reasonable efforts to implement an acceptable alternative to the outdoor
illuminated sign if its use is prevented by any code, contract or covenant
binding on you.
C. Yard Signs; Business Cards; Flipcharts. As of the Effective Date, you must
obtain and put into continuous use for the term of this Agreement:
(1) Standard ERA yard signs on all listings;
(2) Standard ERA business cards and office stationery; and
(3) Listing Presentation Flipcharts or portable computers equipped to
show a Listing Presentation Flipchart for each sales associate.
D. Independently Owned. You must use the phrase "Each Office Independently
Owned and Operated" (or a similar slogan which has been approved by ERA) in
conspicuous lettering on all business cards and stationery, real estate listing
and Transaction documents, advertising, ERA yard signs, purchase and sale
documents, listing agreements, all other printed or recorded material you
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and your sales associates and employees use and in all other places required by
state or local law or regulation.
E. Verification of Use. With regard to yard signs, you will provide ERA,
within sixty (60) days after the Effective Date (In the case of an Additional
Office, within sixty (60) days of the amendment of the Office List to include
such Additional Office), either a color photograph of such signs or a copy of
the order for such signs.
F. ERA Standards. For each Office, you must purchase Items in subsections B
and C above, and any other supplies and Materials bearing ERA Identification
from a supplier approved by ERA.
G. Fictitious or Assumed Name. For each Office, you must adopt a trade name
which includes the mark "ERA" in accordance with the Manuals, and use no other
name to conduct the Business for the duration of this Agreement. If required by
law, you must file for and maintain a Certificate of Fictitious Name or
comparable instrument and furnish ERA evidence of such filing. You agree not to
use "ERA" or "Electronic Realty Associates" as any part of the legal name of an
entity without the advance written consent of ERA. Once established, you may
not change your legal entity or trade names without the advance written consent
of ERA.
H. Maintain Image Standards. ERA may undertake from time to time to determine
if you are meeting ERA's standards for ERA Identification usage. You will
promptly correct whatever deficiencies ERA finds to exist.
I. Goodwill. You covenant with us that you will not make or publish any
statement or advertisement which would, or could be construed to, demean the
image, value, identity, or goodwill of ERA or of any other Member. This
covenant is independent of and will survive any termination, expiration or
assignment of this Agreement.
J. Ethical Standards. You will adhere and take efforts to ensure that your
sales associates and employees adhere to the standard of ethics that may be
specified by the National Association of REALTORS or in the Manuals from time to
time.
K. Advertising Standards. All of your advertising will be completely factual,
not intentionally misleading and in good taste in the judgment of ERA.
14. ERA HOME PROTECTION PROGRAMS
A. Required to Present. As part of the ERA Integrated Marketing System, and
unless otherwise prohibited by law, you will use your best efforts to cause the
marketing and issuance of the Seller Protection Plan ("SPP") and Buyer
---
Protection Plan ("BPP") coverage in connection with every listing agreement
---
written or secured on eligible properties by your Business. The BPP and SPP
coverages are referred to collectively as the "Home Protection Plans." The Home
---------------------
Protection Plans are administered by Aon Home Warranty Services, Inc. as of the
Effective Date. You must submit a signed form to ERA or such other entity
designated by ERA (its "Designee") within three (3) days after taking each
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listing, evidencing acceptance or rejection of the SPP or BPP. You will comply
with all the terms and provisions of the Manuals governing SPP and BPP.
B. Listing or Selling Broker. You will restrict your efforts for issuance of
any ERA Home Protection Plan contracts only to those sellers and buyers of homes
in which you are the listing or selling real estate broker at the time of sale
or offering for sale.
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C. Collection of Contract Price. For each BPP you cause to be issued, you must
collect all BPP fees and pay ERA or its Designee, within three (3) days after
close of escrow on the sale, the contract price specified in the Manuals or
announced by ERA from time to time. ERA has the right, at its sole option, to
amend, or authorize the amendment of, the contract price for BPP contracts, and
you will, upon thirty (30) days' advance written notice (or such advance notice
as ERA can reasonably give) abide by such amendment.
D. Improper Withholding of BPP Fees. You will not withhold from ERA or its
Designee any BPP fees collected and due ERA or its Designee. If you do withhold
any BPP fees collected and due ERA or its Designee, such action will constitute
a material breach of this Agreement and you will immediately pay ERA or its
Designee such amount and late fees. Such conduct is considered consumer fraud
in many states and may subject you to criminal charges. ERA may suspend your
right to market the ERA Home Protection Plans if you withhold BPP fees.
E. Price. You will market BPP contracts on behalf of ERA or its Designee at
the current price listed on the state specific schedule of fees, or at such
current price as is announced by ERA from time to time.
F. Inform of Availability. You will inform each seller and buyer of any home
being sold in which the Business is involved of the availability of SPP and BPP
and will satisfy ERA or its Designee that you have done so in accordance with
procedures specified in the Manuals. You will deliver to each buyer or buyer's
agent (if buyer is represented by someone other than the Business), the Buyer
Protection Plan closing instructions before closing, as required by the
Manuals.
G. Home Protection Plan Claims. If the amount or number of claims paid on Home
Protection Plan contracts you submit for any Office exceed the acceptable loss
ratio of claims paid to fees paid established by ERA or its Designee, then ERA
may terminate your continued participation of such Office or impose additional
requirements or conditions on the continued offering of Home Protection Plans.
The nature and extent of this action will be at the sole discretion of ERA. An
unacceptable loss ratio will not relieve you of your obligation to present the
ERA Home Protection Plans. Acceptable loss ratios and other conditions are
determined solely by ERA or its Designee and are described in the Manuals.
H. This Section 14 shall only apply if, pursuant to the Outsourcing Agreement,
Member is required to participate in Aon Home Warranty Programs. In the event
of any conflict between this Section 14 and the terms of any program in which
NRT is participating pursuant to the Outsourcing Agreement, the terms of such
program shall control.
15. LOCAL BROKER COUNCILS
A. Obligation to Participate. You support the concept of cooperative marketing
activities with other Members in your area in order to derive more fully the
benefits of local and regional identity. Therefore, each Office will use its
reasonable best efforts to join and participate in local and regional ERA Broker
Councils when formed to serve the DMA or area in which such Office is located.
Each Office will also use its reasonable best efforts to adopt and abide by the
ERA Broker Council By-Laws and decisions of the respective Broker Councils. ERA
may amend the ERA Broker Council By-Laws from time to time.
16. MODIFICATION OF THE SYSTEM; IMPROVEMENTS; CONFIDENTIALITY
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A. Agreement to Accept Modifications. ERA may change, augment or modify the
ERA Identification or ERA Integrated Marketing System, including the adoption
and use of new or modified trade names, trademarks, trade dress, service marks,
copyrighted materials, new products or services, new equipment, new business
methods or new techniques in its sole discretion from time to time, without the
consent of the Members. You will accept, use and display any such changes in
the ERA Integrated Marketing System as if they were a part of this Agreement at
the Effective Date. You will make such expenditures as may be required to
conform to such changes, augmentations or modifications.
B. Elimination of Programs. Notwithstanding any other provision of this
Agreement, ERA reserves the right to modify, suspend or eliminate any new or
existing portion of the ERA Integrated Marketing System or ERA Identification.
C. Improvements by You. If, during the initial or any renewal term of this
Agreement, you conceive of or develop any improvements or additions to the ERA
Integrated Marketing System, new trade names, trademarks, service marks or other
commercial symbols related to the Business or any advertising or promotion ideas
related to the Business ("Improvements"), you will fully disclose the
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Improvements to ERA without disclosing the Improvements to others. You must
obtain ERA's written approval before using any of the Improvements. Any
Improvements approved by ERA shall be deemed licensed to ERA on a royalty-free,
paid-up, perpetual worldwide license, and may be used by ERA and all other ERA
Members without any obligation to you for royalties or similar fees. You assign
to ERA without charge, any and all of your right, title and interest in and to
any and all Improvements, including the right to grant sublicenses to use any
Improvements. ERA at its discretion may make application for and own
copyrights, trade names, trademarks and service marks relating to any
Improvements. ERA may also consider the Improvements as the property and trade
secret of ERA. ERA will authorize you to utilize any Improvements authorized
generally for use by other ERA Members.
D. Confidentiality. You acknowledge that all of the information you now have
or obtain in the future regarding the ERA Integrated Marketing System and the
concepts and methods of promotion are part of ERA's franchise system and you
will treat as confidential all information disclosed to you in confidence. You
will never directly or indirectly engage in or aid in the misappropriation,
disclosure, divulgence or distribution of any part of the ERA Integrated
Marketing System or the concepts and methods of promoting ERA franchises. You
also will require all your management personnel employed in the Business to
enter into an agreement that ERA can enforce, under which they agree to treat
that information as confidential.
17. TERM AND TERMINATION
A. Initial Term and Renewals.
(1) Initial Term. The initial term of this Agreement is for a period
------------
commencing on the date hereof and ending on the date 50 years from the date
hereof (the "Expiration Date").
---------------
(2) Renewals. Upon the expiration of each term hereof (other than
--------
upon a termination by ERA), Member shall have the option to extend the term
hereof for an additional 50 years, provided that, Member complies with all
-------- ----
of the following:
(i) At the time of the extension of the term hereof, Member shall not
be in material default under Member's existing Franchise Agreement or any other
agreement or obligation Member may have with ERA (such as other ERA membership
agreements), including, but not limited to,
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Member's obligations to (x) pay Royalty Fees, National Marketing Fund
contributions, Broker Council assessments (to the extent Member is required
herein to participate in such Broker Councils), interest and late charges, audit
fees and other properly chargeable amounts; and (y) comply with the Manuals,
including trade name and logo guidelines.
(ii) Member shall deliver to ERA written notice of Member's intent to renew
not more than one hundred eighty (180) days and not less than ninety (90) days
prior to the Expiration Date of the term under which Member is then operating;
if no such notice has been received by ERA at least ninety (90) days but not
more than one hundred eighty (180) days prior to said Expiration Date, then
Member's option to extend the term hereof shall be extinguished and ERA shall
have the right, during the ninety (90) day period prior to said Expiration Date,
subject to local law, and notwithstanding any other provision of this Agreement,
to market, grant, place and/or operate franchises in the general vicinity of any
of Member's Offices. Upon receipt of such notice, the term hereof shall
automatically and without further action be extended to a date 50 years from the
date the term of this Agreement was otherwise to terminate.
(iii) Member, as a condition for extending the term hereof, shall make such
reasonable expenditures as ERA may require, pursuant to this Agreement, as are
necessary to conform with ERA's standards for interior and exterior office size,
decor, overall attractiveness and cleanliness then in effect.
(iv) Member shall pay no initial franchise fee or renewal fee in connection
with extending the term hereof.
OTHER THAN AS SET FORTH IN THIS SECTION, NEITHER PARTY HAS RENEWAL RIGHTS.
B. Termination. This Agreement may be terminated in its entirety or as to any
particular Office(s) only under the following terms and conditions:
(1) Mutual Consent. By mutual consent of the parties;
--------------
(2) Termination by Member. By you for a material breach by ERA of Sections 3
---------------------
or 4 of this Agreement upon ninety (90) days' advance written notice to ERA
and opportunity to cure during the entire notice period. If ERA cures that
breach during the ninety (90) day notice period, or if the breach cannot be
cured in ninety (90) days, if ERA diligently commences to cure that breach
within the ninety (90) period and cures the breach within a reasonable time,
your right to terminate this Agreement for such notice and material breach
will cease. For you to terminate, you must be in compliance under this
Agreement at the time you give notice and at the time of termination.
(3) Termination by ERA for Good Cause. By ERA for good cause which will
---------------------------------
mean any material breach by you of your obligations under this Agreement as
determined by ERA in its sole discretion exercised in good faith. Good cause
includes both curable and non-curable defaults, such as, but not limited to,
the following:
(a) Curable Defaults; Notice.
After giving you thirty (30) days' advance written notice of the proposed
termination and the opportunity to cure the breach during the entire notice
period, or such longer or shorter notice as is required or permitted by the
law of the state where the Office is located, if the breach is:
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1. The failure to pay when due any financial obligation to ERA, to the
applicable Broker Council, or to the National Marketing Fund;
2. Refusal or failure of any Office to join and/or participate in your
local Broker Council or to comply with or abide by the authorized and
lawful actions and decisions of that Broker Council;
3. An audit by ERA of your records which discloses a deficiency of at
least five percent (5%) in amounts due under this Agreement within any
three (3) month period, or your refusal to permit ERA to audit your
operations and records;
4. Any attempt by you to subfranchise (Subfranchising is defined to
include, without limitation, any license or grant to any other person
or entity of the right to use the ERA Identification or the ERA
Integrated Marketing System in connection with the operation of an
office owned or leased, in whole or in part, by such other person or
entity, or in which such other person or entity is responsible for
losses, if any, incurred in the operation of such office.);
5. Any other material breach of this Agreement not listed below as a
noncurable default.
Upon receipt of notice to terminate with right to cure, you must immediately
commence diligently to cure that breach. If you cure that breach during such
period, the right of ERA to terminate this Agreement for such breach will cease,
subject to termination for repeating the same default as described below.
(b) Noncurable Defaults; No Notice Required.
ERA reserves the right to terminate this Agreement immediately without
prior notice and without your right to cure for any of the following
causes:
1. Suspension or revocation of your real estate license;
2. Any conduct by you which impairs the image, identity, value or
goodwill associated with ERA Identification or the ERA Integrated
Marketing System, including, without limitation, any breach of
Section 13;
3. You are the subject of any bankruptcy, receivership, composition,
assignment, marshaling, insolvency or similar proceeding for the
benefit of creditors, provided that termination upon bankruptcy
may not be enforceable under Title 11, United States Code;
4. Abandonment of your Office(s), demonstrated by removal of the ERA
Identification or by your not operating the Business for five
consecutive business days or any shorter period when, under the
facts and circumstances, it would not be unreasonable for ERA to
conclude that you do not intend to continue to operate the
Business, unless the cause is a force majeure beyond your
control, e.g., flood, earthquake or similar acts of God;
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5. Any default for which ERA has issued you a notice of default
during the last twelve (12) months advising you of ERA's intent
to terminate for the same cause, even if the default(s) were
cured;
6. Any material misrepresentation or omission by you, or at your
direction to ERA with respect to acquiring the ERA Membership; or
7. Upon any merger, consolidated or reorganization, or sale or
transfer or any series of sales or transfers (whether related or
unrelated) that result in thirty percent (30%) or more of the
voting power or the outstanding shares of Member's common stock
being owned beneficially or of record by a single person or group
(each as defined in Section 13)d)(3) of the Securities Exchange
Act of 1934, as amended) (other then Cendant or any successor
thereto or Apollo) (the "Acquiring Person") whether by operation
----------------
of law or otherwise, unless the prior written consent of ERA
shall have been obtained; provided that the Acquiring Person
still owns such 30% or more ten business days after notice to the
Acquiring Person (which notice Member hereby agrees to deliver to
the Acquiring Person and ERA). For purposes of determining the
outstanding shares of Member's common stock, securities
convertible into (but not exercisable for) common stock shall be
deemed to have been converted into common stock. Notwithstanding
anything to the contrary herein, transfers of interest in the
Member by Sponsors (as defined in the Stockholders Agreement) in
accordance with the terms of the Stockholders Agreement shall not
be a termination event under this Agreement.
C. Pretermination Options of ERA. Before termination, if you fail to pay any
amount owed under this Agreement, or fail to comply with any term of this
Agreement, then in addition to any right ERA may have to terminate this
Agreement or to bring a claim for damages, ERA will also have the following
options with respect to any or all Offices:
(1) To suspend all services provided to you under this Agreement or
otherwise, including training, marketing assistance and other award(s)
eligibility for you and your agents, and the sale of products and
supplies;
(2) To suspend taking or placing referrals or relocation requests, Home
Protection Plans and/or Sellers Security Plan applications for or from
you and to direct any inquiries regarding these or other programs or
services to other ERA Members; and/or
(3) To eliminate listing you in any advertising, marketing or
promotional materials, including Yellow Pages directory or other
------------
directory listings, approved or published by ERA.
ERA may continue taking such actions until you have brought your account
current, cured any default, and complied with ERA requirements, and ERA
has acknowledged such compliance in writing. ERA's exercising one or
more of the options permitted in this Section 17C will not suspend or
release you from any obligation you would otherwise owe to ERA, the
applicable ERA Broker Council or to the National Marketing Fund. Your
right to cure does not restrict the right of ERA to initiate or
institute any legal action it deems appropriate before, during or after
the cure period.
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D. Effect of Nonrenewal or Termination. In the event of nonrenewal or
termination, you must, for each terminated Office, immediately, at your expense,
return to ERA all property belonging to ERA including originals and all copies
of the Manuals, all copies of ERA-issued technology products (including copies
held or under the control of your sales associates), and all films, cassettes
and instruction manuals which are part of the ERA programs. Each such Office
must also immediately discontinue all use of the ERA Identification licensed to
you by this Agreement in any and all of your materials. Such Office must
immediately discontinue all use of signs or cross arm signposts displaying the
unique style, logo, colors, color patterns and designs of ERA and/or ERA
Identification. If you desire to use such signs or cross arm signposts after
the nonrenewal or termination, you must immediately change the colors and color
patterns by complete repainting of the signs or signposts and you must
permanently remove or cover any ERA Identification on the signs and must provide
ERA with color photographs of such changed signs and signposts. Effective
immediately upon the date of termination or nonrenewal, all representatives of
such terminated Office(s) will refrain from any representation whatsoever that
you are an ERA Member or are or have been otherwise affiliated with ERA. You
must immediately advise all of your then-current real estate listings associated
with such Office that you are no longer associated with ERA and must assign the
telephone number to ERA or its designee(s) and immediately cause the local phone
company (white pages) and the Yellow Pages publisher to remove the Offices from
------------
its listings of ERA Members in any directory or listings.
E. Effect of Continued Use of ERA Identification. Upon nonrenewal or
termination for any reason whatsoever, any continued use of the ERA
Identification by you, the Business or any sales associates of a terminated or
nonrenewed Office: (1) will constitute willful and knowing mark infringement,
dilution of ERA's trademark rights and unfair competition; and (2) may
constitute trafficking in a counterfeit mark for which both civil remedies and
criminal penalties may be imposed.
F. Infringement Damages. If ERA brings an action against you or anyone
associated with you in the Business, before or after nonrenewal or termination,
seeking to halt infringement of ERA Identification, you acknowledge that any
court having jurisdiction of the matter may enter temporary restraining orders,
preliminary and permanent injunctions without posting a bond or other security;
and may order the immediate seizure and destruction of any infringing materials.
If any court rules that a bond is required and cannot be waived, you stipulate
that a $1,000 bond will be sufficient. Furthermore, in addition to your
continuing obligations under Section 17G, H and I below, you will pay ERA
Royalty Fees, and NMF Contributions on all Gross Revenues during the period of
any infringement; attorneys' fees incurred by ERA in the enforcement of the
rights of ERA with respect to the ERA Identification; and the costs and
disbursements of bringing the enforcement action.
G. Surviving Obligations.
(1) Except as specifically set forth in this Agreement, upon expiration of the
Membership Agreement or its termination by ERA as to any or all Offices, you
will have no further interest or rights pursuant to this Agreement with respect
to such Offices. All financial obligations of ERA and you to each other,
incurred before termination or expiration, will not be affected by such
expiration or termination; and must be satisfied as would have been required
under this Agreement. In addition, you will remain obligated to pay Royalty
Fees, NMF Contributions, referral fees, Home Protection fees and Sellers
Security Plan fees on transactions pending at the time of expiration,
termination or assignment. The provisions of this Section 17 also survive
termination or expiration of this Agreement.
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(2) In the event that prior to the expiration of any term hereof, there is (i)
a failure to pay royalties on a timely basis, (ii) a termination of this
Agreement by Member, (iii) any breach of Section 5E hereof due to the willful
closure or willful deidentification of Offices in excess of those permitted to
be closed or deidentified pursuant to Section 5E, (iv) any breach of Section 5E
hereof due to the closure or deidentification of in excess of 20 of the Offices
permitted to be closed or deidentified pursuant to Section 5E, (v) termination
of this Agreement pursuant to Section 17(B)(3)(b)(7), (vi) the affiliation by
Member with another real estate brokerage system (other than a system owned by
Cendant), or (vii) any breach of this Agreement by Member (other than a breach
of Section 9C hereof) that has, or is reasonably expected to have, a material
adverse effect on the ERA System, in each case other than clause (v) above after
notice to Member and a reasonable opportunity to cure (each, a "Liquidated
----------
Damages Event"), Member shall immediately become obligated to pay ERA ERA's
-------------
"lost future profits" (as hereinafter defined). For purposes of this Agreement
"lost future profits" for an office shall consist of all royalty fees which
Member would have paid to ERA with respect to such office from the date of the
Liquidated Damages Event through the earlier of the end of the then-current term
of this Agreement, had there been no Liquidated Damages Event, and 25 years from
the date of the Liquidated Damages Event. The parties acknowledge and agree that
it would be impracticable and extremely difficult to calculate the actual amount
of lost future profits payable by Member, and that the following method of
calculation represents a fair and reasonable estimate of foreseeable lost future
profits: Lost future profits shall be calculated on an Office by Office basis by
determining the average monthly royalty fee payment payable by the Member to ERA
for each such Office from the commencement date of this Agreement through the
date of the Liquidated Damages Event, and multiplying these average amounts by
the lesser of (i) the actual number of months (and any fraction thereof)
remaining between the date of the Liquidated Damages Event and the end of the
then-current term of this Agreement and (ii) 300. Lost future profits shall be
payable with respect to all of Member's Offices, provided that in the case of
clauses (iii) and (iv) of the definition of Liquidated Damages Event, lost
future profits shall only be payable with respect to the Offices closed or
deidentified in violation of Section 5E (including the 20 permitted to be closed
or deidentified before clause (iv) becomes effective). Member acknowledges that
the lost future profits set forth in this section are fair and reasonable, in
light of the fact that ERA's affiliate has participated in Member's prior
acquisitions and will participate in Member's future acquisitions by purchasing
the tradenames and trademarked operating names of the acquired entities with the
intention of licensing such names, together with the names licensed hereunder,
to Member and the expectation of royalties in consideration of the use of such
names, for the full term of this Agreement.
H. Other Damages. If you take any action after this Agreement is terminated or
expires that causes damage to ERA, and ERA is successful in obtaining judicial
relief against you as a result of such action, you will be liable to ERA for an
additional amount equal to the aggregate of ERA's costs of commencing and
prosecuting the action, including, reasonable attorneys' fees, costs of
investigation and proof of facts, court costs and other litigation expenses.
Member acknowledges that in addition to the provisions of Section 17G hereof,
upon a termination of this Agreement prior to its Expiration Date, or breach of
this Agreement, ERA shall be entitled to any other remedy at law or in equity.
I. In addition, the parties agree that in event of a termination, for any and
all offices, of this Agreement by ERA by reason of a breach of this Agreement by
Member, other than an Early Termination, the parties agree that ERA shall not be
entitled to any damages for lost future profits and ERA shall be required to
pursue its other remedies in connection with such breach under this Agreement
and under applicable law.
J. Post Termination Audit. You will cooperate with ERA and permit ERA to
conduct an audit of your records in accordance with Section 11B above after this
Agreement expires or is terminated.
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18. ASSIGNMENT
A. Assignment Generally. You may not assign the rights, or delegate your
duties under this Agreement without advance written approval of ERA, which
approval may be withheld in ERA's sole discretion.
B. Reserved.
C. Notwithstanding anything to the contrary herein, each party acknowledges that
transfers of interests in Member by Sponsors (as defined in the Stockholders
Agreement) in accordance with the terms of the Stockholders Agreement shall not
violate this Section 18. "Stockholders Agreement" shall mean the Stockholders
----------------------
Agreement, dated as of August 11, 1997 between and among Member and the
Stockholders thereof identified on Schedule A thereto, as amended or restated
from time to time.
D. Reserved.
E. Reserved.
F. Assignment by ERA. ERA may assign, delegate or subcontract all or any part
of its rights and duties under this Agreement, including by operation of law,
without notice and without your consent. You are not the third party
beneficiary of any contract with a third party to provide services to you under
this Agreement. ERA will have no obligations to you after you are notified that
a transferee has assumed ERA's obligations under this Agreement except those
that arose before ERA assigns this Agreement.
19. INDEMNIFICATION AND INSURANCE
A. (1) Your Indemnification of ERA. You will indemnify ERA, Cendant and their
respective officers, directors, employees, successors and assigns (the
"Indemnified Parties") in any legal action, claim or other adversary proceeding
--------------------
(including alternative dispute resolution proceedings) related to the Business
or to you in which the liability of the Indemnified Party is alleged or in which
the Indemnified Party is named as a defendant or codefendant as a result of
activities by you which are not in accordance with this Agreement, with ERA
policy as published in the Manuals or with any law, rule, regulation or custom
governing real estate brokerage operations, or in which the alleged liability of
the Indemnified Party is based on principles of agency, respondent superior, or
the existence of a joint or common enterprise between an Indemnified Party and
you, or in which the Indemnified Party is alleged to have been negligent in your
selection, training or supervision. You will reimburse the Indemnified Party
for all costs and expenses of defending the matter incurred by the Indemnified
Party, including attorneys' fees, if your insurer or you do not assume defense
of the Indemnified Party promptly when requested or a conflict of interest
requires retention of separate counsel. ERA must approve any resolution or
course of action in a matter that could directly or indirectly have any adverse
effect on us or the ERA franchise system, or could serve as a precedent for
other matters. Your obligations to indemnify and hold harmless each Indemnified
Party will survive the termination, expiration or assignment of this Agreement,
but any release by ERA of your obligations under this Agreement will not release
your obligations under this Section 19 with respect to any claim that arose
before expiration, assignment or termination of this Agreement. Notwithstanding
the foregoing, the indemnification provided for in this subparagraph shall not
extend to any liability, cost or expense or to any suits, proceedings or claims
(i) to the extent arising from the affirmative acts of ERA or its employees or
any indemnified party or from the actions of
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Member or its employees engaged in at the direction of ERA or any indemnified
party, or (ii) which do not arise out of or relate to member's operation of the
Business, including those that arise out of disputes under any agreement (A)
between ERA and Member, other than this Agreement or (B) between Member and its
stockholders. The obligations of Member pursuant to this Paragraph shall survive
the expiration or termination of this Agreement.
(2) Reserved.
B. Insurance.
(1) Required Policies and Coverage. You will obtain and maintain for
the term of the Membership Agreement for each Office identified on the
Office List, at Member's expense, commercial general liability insurance
for all of its operations (including operations under other franchise or
membership agreements) in an amount not less than a $50,000,000 coverage
limit per year (with a $1,000,000 coverage limit per occurrence). Member
shall, for the entire term of this Agreement, maintain at Member's
expense errors and omissions insurance for all of its operations
(including operations under other franchise or membership agreements) in
a coverage limit per year not less than the Yearly Insurance Limit (with
a coverage limit per occurrence not less than 10% of the Yearly
Insurance Limit). ERA reserves the right to establish minimum standards
with which underwriters providing the aforementioned insurance coverage
must comply. Said policies of insurance shall insure Member against any
liability which may arise in connection with the operation of Member's
real estate brokerage business and such collateral businesses as may be
approved in writing by ERA and shall be in such form as ERA approves. If
required by law, Workers' Compensation Insurance shall be carried on all
employees and sales associates. All insurance policies maintained by
Member, other than Worker's Compensation Insurance, shall contain a
separate endorsement naming ERA, Cendant and Cendant Finance Holding
Corporation as additional insureds; shall not be subject to
cancellation, except on ten (10) days written notice to ERA; and shall
contain an express waiver of any and all rights of subrogation
whatsoever against ERA. Member shall cause certificates of insurance of
all such policies and endorsements, showing compliance with the above
requirements, to be deposited with ERA within thirty (30) days of the
execution of this Agreement and annually thereafter. "Yearly Insurance
----------------
Limit" shall mean", for each calendar year of this Agreement, (i)
-----
$10,000,000 if Member's total revenue (as reported on Member's financial
statements) ("Total Revenue") for the calendar year immediately prior to
-------------
the calendar year for which the Yearly Insurance Limit is being
calculated is not more than $2,500,000,000, (ii) $15,000,000 if Member's
Total Revenue for the calendar year immediately prior to the calendar
year for which the Yearly Insurance Limit is being calculated is between
$2,500,000,000 and $3,000,000,000 and (iii) $20,000,000 if Member's
Total Revenue for the calendar year immediately prior to the calendar
year for which the Yearly Insurance Limit is being calculated exceeds
$3,000,000,000. Such policies must be in form and content satisfactory
to ERA and must be issued by an insurer(s) rated A or better in Class X
by Alfred M. Best and Company Inc., or comparably rated by Moody's
and/or Standard and Poor's or similarly reliable rating services
acceptable to ERA. ERA reserves the right to change the minimum
acceptable rating requirement.
C. Tail Coverage. As one of the conditions to ERA's granting approval of an
assignment or request for mutual termination of this Agreement, you must
purchase and provide evidence to ERA that you have purchased tail (extended
option) coverage on all applicable policies for a minimum of twelve (12) months
after the effective date of any assignment or mutual termination.
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20. AMENDMENT
A. Written and Signed. Any modification, change or amendment to this Agreement
must be in writing and signed by the President or any Vice President authorized
by the President of ERA and by you.
B. Authority to Amend. NO FIELD REPRESENTATIVE, INCLUDING ANY DIVISIONAL OR
REGIONAL PRESIDENT, REGIONAL VICE PRESIDENT OR REGIONAL OR DISTRICT BUSINESS
MANAGER OF ERA, HAS THE RIGHT OR AUTHORITY TO MAKE ORAL OR WRITTEN
MODIFICATIONS, CHANGES OR AMENDMENTS TO THE TERMS OF THIS AGREEMENT. NO SUCH
UNAUTHORIZED MODIFICATION, CHANGE OR AMENDMENT WILL BE BINDING UPON EITHER
PARTY.
21. WAIVER
A. Waiver. If any provision(s) of this Agreement is or becomes in violation of
any local, state or federal law, then such provision(s) will be considered
immediately amended to conform to that law. If the violative provision cannot
be amended to conform to that law, each party expressly releases the other from
any liability under the violative provision of this Agreement if either party
cannot fulfill any obligation under this Agreement due to any provisions of
local, state, or federal laws governing the violative provision. No waiver of
any breach of any term or condition contained in this Agreement will constitute
a waiver of any subsequent breach of the same term or condition.
B. Limitations Period. Failure, refusal or neglect by either you or ERA to
exercise any right or remedy arising under this Agreement or otherwise, or with
any specification, standard or operating procedure of ERA as to any Office, will
waive any default arising under this Agreement or the right of a party to any
remedy resulting from such action or inaction of the other, and will prevent
exercise or enforcement of any right or remedy as to such Office, unless the
non-defaulting party provides written notice of such default to the other party
within twelve (12) months after such right or default occurs. If ERA conducts
an audit and discovers defaults not previously known, then ERA will have an
additional twelve (12) months after an audit by ERA before any waiver of any of
your defaults will become effective. Such waiver will not apply to your
financial obligations of which ERA had no knowledge, e.g., without limitation,
Royalty Fees and NMF Contributions on unreported Gross Revenues . Any
obligation billed by ERA will be deemed to be notice of a right to collect.
C. Disputes with Others. You and ERA agree that a decision of an arbitrator,
mediator or court of competent jurisdiction in arbitration, mediation or
litigation to which one of them is not a party will not in any manner prevent
the person that was a party to such action from making similar arguments or
taking similar positions in any action between you and ERA. You and ERA each
waive the right to assert that principles of collateral estoppel prevent either
you or ERA from raising any claim or defense in an action between you and ERA as
a result of such party having lost a similar claim or defense in another action.
22. NON-COMPETITION COVENANTS
A. Reserved
B. Reserved.
C. Competing Services or Products. During the initial or any renewal term of
this Agreement, neither you nor any of your subsidiaries, nor your respective
officers, directors, employees, sales
26
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associates or agents will organize, manage, operate, hold any ownership interest
in or receive compensation from any firm, company or other business entity which
provides or seeks to provide equipment, supplies, services or other operating
materials to other ERA Members, without the advance written consent of ERA.
23. INDEPENDENT CONTRACTOR
A. Independently Owned and Operated. You will, at all times, hold yourself and
the Business out to be an independently owned and operated business and
otherwise operate your Business in compliance with any applicable laws, rules
and regulations. You must conspicuously disclose in your real estate sale
documents, listing agreements and on all business cards, stationery, and in all
advertisements and in all other printed or recorded material you and your sales
associates and employees use, that you are independently owned and operated and
are not an agent of or owned by ERA. That disclosure must be conspicuous. You
expressly understand that you will be an independent contractor and must hold
yourself out to the general public as such. This Agreement does not make you an
agent, legal representative, joint venture, partner, employee or servant of ERA
for any purpose. You are not authorized to make or promise any contract,
agreement, warranty or representation on behalf of ERA or an affiliate, except
as expressly provided in this Agreement, or to create any obligation, express or
implied on behalf of ERA. You are not authorized to accept service of process
or legal notices directed to ERA. You acknowledge that this Agreement does not
constitute or create, and the relationship between ERA and you is not and is not
intended to be, a fiduciary relationship.
B. Responsibility for Operations. ERA will have no obligation to pay your
commissions, taxes, wages or other expenses, and will have no right to regulate
or participate in the recruitment, selection, engagement, retention, discipline
or termination of your sales associates or employees, or to determine or limit
the parties from whom you may accept listings or to or for whom you may sell
property, the commission rates you charge, the commission splits between you and
your sales associates, your working conditions, the manner or details of work
performed by you or your sales associates or employees, except as may be
necessary to protect the ERA Identification and goodwill. You agree that you
are solely responsible for the conduct of the Business operated under this
Agreement according to your own judgment, and in accordance with the provisions
of this Agreement and the Manuals as they may be amended from time to time.
C. Ownership/Participants. Notwithstanding the foregoing, ERA and its
affiliates may be equity owners of and may participate in the operating profits
of Member or any affiliates of Member and this Section 23 shall not limit, in
any way, the rights, responsibilities or relationships relating to such equity
interest or profit participation.
24. MISCELLANEOUS
A. Credit Report. You authorize ERA to investigate your credit and will supply
ERA with references and signed consent forms for this purpose. You consent to
exchange of information about you, the Business and your business and credit
history on a privileged basis between ERA and your references or persons named
in your credit report.
B. Automatic Withdrawal. You will sign any documentation necessary to permit
payment from your bank accounts through electronic funds transfer or similar
methods of any fees or payments due under this Agreement to ERA or your ERA
Broker Council.
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C. Taxes. If any sales, income, services, use or privilege tax is imposed or
levied by any government or governmental agency on account of your payment to
ERA of Royalty Fees, NMF Contributions or other payments to ERA under this
Agreement, then you must pay to ERA an amount equal to the amount of that tax.
This provision will not apply to federal or state income taxes (or optional
alternatives to an income tax) imposed on ERA.
D. Successors and Assigns. Subject to the provisions of Section 18, this
Agreement will be binding upon and inure to the benefit of the parties and their
respective legal representatives, successors and assigns.
E. Notices. All notices required under this Agreement must be in writing and
will be deemed given: (1) if personally delivered to the respective party at the
address specified below (or at such other address as a party may subsequently
designate for itself by notice to the other party), or (2) if deposited in the
United States mail, by certified mail, return receipt requested, postage
prepaid, and addressed to the respective party at the address specified below
(or at such other address as a party may subsequently designate for itself by
notice to the other party), or (3) if faxed, provided that a confirmation copy
of any fax transmission is mailed to the respective party via first class United
States mail:
(1) If to you: NRT Incorporated, 6 Sylvan Way. Parsippany, NJ 07054;
-----------------------------------------------------
Attention: President
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(2) If to ERA: ERA Franchise Systems, Inc., 6 Sylvan Way, Parsippany, NJ
07054; Attention: Vice President-Franchise Compliance; FAX: (973) 496-5641.
Any notice will be considered given as of the date personally delivered or
faxed or three (3) business days after the date of deposit in the United
States mail, as the case may be. Either party has the right to change their
address for notice by giving written notice as provided in this paragraph.
F. Headings. The headings in this Agreement are for convenience only, do not
constitute a part of this Agreement, and will not be deemed to limit or affect
any of the provisions of this Agreement.
G. Time of the Essence. Time is of the essence of this Agreement.
H. Applicable Law. This Agreement will be governed by the laws of the state of
New Jersey, except that the New Jersey Franchise Practices Act shall not apply
to Members with Offices located outside New Jersey.
I. Venue and Jurisdiction. You submit to the non-exclusive personal
jurisdiction of the State and Federal courts of New Jersey with respect to any
litigation pertaining to this Agreement or to any aspect of the business
relationship between the parties. Such litigation will have venue in State
courts in Morris County, New Jersey, or in the United States District Court for
the District of New Jersey.
J. WAIVER OF JURY TRIAL. The parties waive the right to a jury trial in any
action related to this Agreement or any aspect of the relationship between the
Member, ERA and their respective successors and assigns.
K. Waiver of Punitive Damages. ERA and you fully waive any right to or claim
for any punitive or exemplary damages against the other and agree that if any
dispute arises between them, each will be
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limited to recovery of actual damages sustained which, in the case of ERA,
includes lost future profits as set forth herein.
L. Attorney Fees. In any claim or counterclaim or other legal proceeding
brought by either you or ERA against the other in connection with this
Agreement, if such party instituting the claim, counterclaim or legal proceeding
is unsuccessful, then it will pay the prevailing party's reasonable attorneys'
fees and costs.
M. Reserved
N. Variations Among Agreements. ERA specifically reserves the right and
privilege, at its sole discretion and as it may deem in the interests of those
concerned in any specific instance, to vary standards for any other Member based
upon the peculiarities of a particular area, circumstance, business practice or
other condition which ERA deems of importance to the successful operation of
such other Member's business. You will not complain on account of any variation
from standard specifications and practices granted to any other Member and will
not be entitled to require ERA to grant you a like or similar variation under
this Agreement. You are not the third party beneficiary of any other Membership
Agreement. In the event of any conflict between this Agreement and the Manuals
or any other document, this Agreement shall control.
O. Opportunity to Investigate. You acknowledge that you have had full
opportunity to investigate independently the operations of ERA and to be
thoroughly advised of the terms and conditions of this Agreement by counsel of
your choice.
P. Integration. You acknowledge that ERA's operations have been fully
explained to you; that you understand its uses, benefits and limitations; and
that no representations as to the particular type or amount of benefit to be
gained by you have been made by or on behalf of ERA. You have not relied on any
written or oral representations except those specifically included in or made a
part of this Agreement in writing. Except as expressly provided in this Section
24(P), this Agreement, the Marketing Agreement, the Outsourcing Agreement, the
Acquisition Cooperation Agreement, the Incremental Royalty Agreement and the
Stockholders Agreement contain all agreements, understandings, conditions,
warranties and representations of any kind, oral or written, between the parties
hereto, and constitute the entire and final agreement between them with respect
to the subject matter addressed herein. Accordingly, all prior and
contemporaneous agreements, understandings, conditions, warranties and
representations of any kind, oral or written, are hereby superseded and canceled
by this Agreement, except as to any monies due and unpaid between the parties to
this Agreement at the time of the execution hereof. There are no implied
agreements, understandings, conditions, warranties or representations of any
kind. No officer, employee or agent of ERA has any authority to make any
representation or promise not contained in this Agreement. "Marketing
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Agreement" shall have the meaning ascribed to it in the Acquisition Cooperation
Agreement.
Q. Reserved
R. Reserved
S. Member acknowledges that it has provided input for the preparation of this
Agreement, that is has consulted with counsel of its choice, that the Agreement
reflects a negotiation between Franchisor and Member, and that this Agreement
shall not be construed more strongly against either party on account of that
party drafting this Agreement.
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DO NOT SIGN THIS AGREEMENT IF YOU BELIEVE ERA OR ANY OF ITS REPRESENTATIVES HAS
PROMISED YOU SOMETHING THAT IS NOT PART OF THIS AGREEMENT, ANY ATTACHED ADDENDUM
OR THE OFFERING CIRCULAR.
25. ADDITIONAL REPRESENTATIONS
Member makes the following additional warranties and representations on which
ERA is relying to enter into this Agreement:
A. Member is a corporation duly organized and existing under the laws of
Delaware. Member is qualified to do business and in good standing under the
laws of the State where each Office is located.
B. Reserved.
C. Reserved.
D. Reserved.
E. Reserved.
F. Reserved.
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IN WITNESS WHEREOF, the parties have signed this Agreement effective as of the
Effective Date.
ERA FRANCHISE SYSTEMS, INC.
By: /s/ John J. Kornfeind Dated: February 9, 1999
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John J. Kornfeind
Vice President-Franchise Sales and Administration
MEMBER NRT INCORPORATED
By: /s/ Steven L. Barnett Dated: February 9, 1999
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Name: Steven L. Barnett
Title: Senior Vice President, General
Counsel and Secretary
#58040.12
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