EXHIBIT 99.3
================================================================================
TRADEMARK LICENSE AGREEMENT
among
SPTC, INC.
as Licensor,
and
SOTHEBY'S HOLDINGS, INC.
as Guarantor
MONTICELLO LICENSEE CORPORATION
as Licensee,
and
CENDANT CORPORATION
as Guarantor
Dated as of February 17, 2004
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND TERMS............................................................................1
Section 1.1. Definitions..........................................................................1
Section 1.2. Other Interpretive Provisions.......................................................12
ARTICLE II GRANT OF RIGHTS................................................................................12
Section 2.1. Grant of License....................................................................12
Section 2.2. License of Domain Names.............................................................13
Section 2.3. Authorized Ancillary Services.......................................................14
ARTICLE III BRANDING AND MARKETING........................................................................15
Section 3.1. Combined Names and Marks............................................................15
Section 3.2. Positioning of Brand................................................................16
Section 3.3. Alliance Marketing..................................................................16
Section 3.4. Trademark Usage Guidelines..........................................................17
Section 3.5. Promotional Materials...............................................................18
Section 3.6. Government Filings and Investor Relations...........................................18
Section 3.7. Branded Franchise Marketing.........................................................18
Section 3.8. Licensor's Publications.............................................................19
Section 3.9. Modification of Sotheby's Name......................................................19
Section 3.10. Advertising and Marketing Agents....................................................19
ARTICLE IV TERM...........................................................................................20
Section 4.1. Initial Term........................................................................20
Section 4.2. Renewal Term........................................................................20
ARTICLE V FEES............................................................................................20
Section 5.1. Fees................................................................................20
Section 5.2. Other Matters Relating to the Determination of Covered Revenue......................22
Section 5.3. Payment of Fees.....................................................................23
Section 5.4. Late Payment........................................................................23
Section 5.5. Method of Payment...................................................................23
Section 5.6. Minimum Fees........................................................................24
ARTICLE VI MUTUAL REFERRALS...............................................................................24
Section 6.1. Referrals by Licensor...............................................................24
Section 6.2. Referrals by Licensee...............................................................25
Section 6.3. Payment of Referral Fees............................................................25
ARTICLE VII QUALITY CONTROL...............................................................................25
Section 7.1. Eligible Markets....................................................................25
Section 7.2. Sublicensee Eligibility Guidelines..................................................26
Section 7.3. Quality Control Standards With Respect To Owned Operations..........................28
(i)
Section 7.4. Quality Control Standards With Respect To Affiliated and Franchised Operations......29
Section 7.5. Excluded Services by Branded Operators; Prohibition on Co-Mingling Marks............30
Section 7.6. Uniform Franchise Offering Circular.................................................30
Section 7.7. Termination of Relationship.........................................................30
Section 7.8. Notice of Breach....................................................................31
Section 7.9. Sample Uses of Licensed Marks.......................................................31
ARTICLE VIII REPRESENTATIONS AND WARRANTIES...............................................................31
Section 8.1. Representation and Warranties of Holdings and Licensor..............................31
Section 8.2. Representations and Warranties of Parent and Licensee...............................33
ARTICLE IX RECORDS; AUDITS AND INSPECTIONS................................................................34
Section 9.1. Maintenance of Records..............................................................34
Section 9.2. Right of Inspection and Audit.......................................................34
Section 9.3. Payment Deficiency..................................................................35
ARTICLE X SPECIAL COVENANTS AND AGREEMENTS................................................................35
Section 10.1. Registration of Marks...............................................................35
Section 10.2. Compliance with Laws................................................................36
Section 10.3. Right of First Offer With Respect To Timeshare Brokerage Services...................36
Section 10.4. Right of First Offer With Respect To Licensee Brokerage Business....................37
Section 10.5. Certain Trademark Filings...........................................................37
Section 10.6. Further Assurances..................................................................38
Section 10.7. Prohibition on Auction House Business...............................................38
Section 10.8. Acknowledgement of SIR Rights.......................................................38
Section 10.9. Establishment of SPV; Transfers and Pledge..........................................38
Section 10.10. Synthesis Acknowledgement...........................................................39
ARTICLE XI EXCLUSIVITY; NON-COMPETITION...................................................................39
Section 11.1. Exclusivity.........................................................................39
Section 11.2. Non-Competition.....................................................................40
ARTICLE XII OWNERSHIP AND PROTECTION OF MARKS.............................................................41
Section 12.1. Ownership of Marks..................................................................41
Section 12.2. Proprietary Materials...............................................................41
Section 12.3. Protection of Marks.................................................................41
Section 12.4. No Registration by Licensee.........................................................42
Section 12.5. Infringement Actions................................................................42
Section 12.6. Licensee Estoppel...................................................................44
ARTICLE XIII INDEMNIFICATION..............................................................................45
Section 13.1. Indemnification by Licensee.........................................................45
Section 13.2. Indemnification by Licensor.........................................................46
Section 13.3. Limitations on Indemnification......................................................46
Section 13.4. Survival of Representations and Warranties..........................................48
(ii)
Section 13.5. Notice and Resolution of Claim......................................................48
ARTICLE XIV DEFAULT AND TERMINATION.......................................................................50
Section 14.1. Termination.........................................................................50
Section 14.2. Effect of Termination...............................................................51
ARTICLE XV REVIEW COMMITTEE AND LIAISONS..................................................................52
Section 15.1. Formation...........................................................................52
Section 15.2. Responsibilities....................................................................53
Section 15.3. Liaisons............................................................................53
Section 15.4. Winding Down........................................................................54
Section 15.5. Non-Exclusive Role..................................................................54
ARTICLE XVI CERTAIN REMEDIES..............................................................................54
Section 16.1. Specific Performance................................................................54
Section 16.2. Limitation of Remedies..............................................................54
Section 16.3. DISCLAIMER OF WARRANTIES............................................................54
ARTICLE XVII ASSIGNMENT...................................................................................55
Section 17.1. Assignments Generally...............................................................55
Section 17.2. Permitted Assignment................................................................55
Section 17.3. Deemed Assignment...................................................................55
Section 17.4. Assignment of Rights to Fees........................................................55
Section 17.5. Effect of Assignment................................................................56
ARTICLE XVIII OPTION RELATING TO FOREIGN TRADEMARKS.......................................................56
Section 18.1. Grant of Option.....................................................................56
Section 18.2. Maintenance of Registration; Limitation.............................................56
Section 18.3. Exercise of Option..................................................................56
Section 18.4. Covenant of Licensor Following Exercise.............................................58
Section 18.5. Negative Covenants of Licensor With Respect to Option Territory.....................58
Section 18.6. Ownership of Marks..................................................................58
ARTICLE XIX GUARANTEE.....................................................................................59
Section 19.1. Guarantees..........................................................................59
Section 19.2. Waiver of Notices, Etc..............................................................60
Section 19.3. Reinstatement.......................................................................61
Section 19.4. Waiver of Subrogation; Subordination................................................61
Section 19.5. Successors and Assigns..............................................................61
ARTICLE XX MISCELLANEOUS..................................................................................62
Section 20.1. Information Transmission............................................................62
Section 20.2. Notices.............................................................................62
Section 20.3. Amendment; Waiver...................................................................62
Section 20.4. Expenses............................................................................62
Section 20.5. GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS; WAIVER OF JURY TRIAL........62
Section 20.6. Relationship of the Parties.........................................................63
(iii)
Section 20.7. Severability........................................................................63
Section 20.8. Headings............................................................................63
Section 20.9. Entire Agreement....................................................................64
Section 20.10. Counterparts........................................................................64
(iv)
TRADEMARK LICENSE AGREEMENT, dated as of February 17, 2004 (this
"Agreement"), among SPTC, Inc., a Nevada corporation, and Sotheby's Holdings,
Inc., a Michigan corporation ("Holdings"), on the one hand, and Cendant
Corporation, a Delaware corporation ("Parent"), and Monticello Licensee
Corporation, a Delaware corporation and an indirect wholly-owned Subsidiary of
Parent (the "Licensee"), on the other hand.
W I T N E S S E T H :
WHEREAS, Holdings, Parent and NRT Incorporated, a Delaware corporation
and an indirect Subsidiary of Parent ("Buyer"), are parties to the Stock
Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), with
respect to the purchase and sale of all of the issued and outstanding shares of
capital stock of Sotheby's International Realty, Inc., a Michigan corporation
and a wholly-owned Subsidiary of Holdings ("SIR"), upon the terms and conditions
set forth therein;
WHEREAS, in connection with the execution and delivery and closing of
the Purchase Agreement, the parties hereto are entering into this Agreement;
WHEREAS, in connection with the preparation of this Agreement, the
parties have reviewed, together and independently, their respective operations
of residential real estate brokerage services, and in particular the operations
of the Licensee Group with respect to the high quality of services that it
provides, both directly and through its franchisees, the manner in which it
operates its franchise systems, and the nature and scope of the quality control
standards contained in its franchise agreements;
WHEREAS, Licensor's determination to enter into this Agreement is
based in significant part upon the particular nature and manner of the business
operations of the Licensee Group as described above, its highly secure financial
condition, its high quality professional management and reputation as a leading
provider of residential real estate brokerage services, and the distinct
compatibility of the Licensed Marks and the high quality services and reputation
of the Licensee Group in the residential real estate brokerage industry;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1. Definitions. The following terms as used in this Agreement
shall have the following meanings:
"Acquiror" is defined in Section 11.2(c).
"Acquiror Group" is defined in Section 11.2(c).
1
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect as of
the Effective Date.
"Agreement" is defined in the initial caption of this Agreement.
"Appearance" shall mean, with respect to a ▇▇▇▇, the color, font (or
typography), and the style of such ▇▇▇▇ itself, but excluding for the avoidance
of doubt and without limitation, (i) the size of such ▇▇▇▇ (including with
respect to its use in advertising, signage, business cards, letterhead and other
similar presentations), (ii) layout and (iii) order or placement in combination
or presentation with other Marks (subject to Section 3.1).
"Applicable Registered Country" shall mean, with respect to a
Registered ▇▇▇▇, the country in the Territory in which such Registered ▇▇▇▇ is
registered.
"Applicable Registered Services" shall mean, with respect to a
Registered ▇▇▇▇, each specific Authorized Service covered by the certificate of
registration for such Registered ▇▇▇▇.
"Artistically Significant Residence" shall mean Residential Real
Estate that is reasonably considered to constitute a work of art or that
otherwise has important historical, artistic, cultural or architectural
significance (whether with respect to architecture, design or materials) or
includes or is substantially related to a collection of fine art, antiques,
objet d'art or other collectibles or an estate sale.
"Artwork" is defined in Section 12.2.
"ASP" is defined in Section 7.2(a)(i)(A).
"Auction House" shall mean a Person that, directly or indirectly,
engages in an Auction House Business.
"Auction House Business" shall mean the business of conducting and
sponsoring auctions of property, including antiques, fine art, objet d'art,
collectibles, Artistically Significant Residences, and the performance of
services and operations relating and incidental thereto, including appraisals
and valuation of property, and by way of illustration and not of limitation, the
auction business and related services and operations conducted by Holdings as of
the Effective Date; provided that the term "Auction House Business" shall be
deemed to exclude (i) the sale of real estate (other than Artistically
Significant Residences) in auction brokerage format by real estate brokers, (ii)
auctions conducted on the Internet for products that (A) are not principally
composed of items of property constituting antiques, fine art and objet d'art
and (B) are marketed to a broad cross section of consumers and (iii) Authorized
Ancillary Services.
"Authorized Ancillary Services" is defined in Section 2.3(b).
"Authorized Brokerage Services" shall mean real estate brokerage
services for Residential Real Estate.
"Authorized Services" is defined in Section 2.1(a).
2
"Branded Broker Affiliate" shall mean a Broker Affiliate of Licensee
or any Company Affiliate for so long as it offers and sells Authorized Brokerage
Services under the Licensed Marks (whether or not combined with any other ▇▇▇▇
pursuant to this Agreement).
"Branded Franchise" shall mean a franchise granted to a Franchisee
pursuant to a Branded Franchise Agreement.
"Branded Franchise Agreement" shall mean any agreement between a
Branded Franchisee and Licensee or a Company Affiliate, pursuant to which such
Branded Franchisee is granted a sublicense to any Licensed ▇▇▇▇.
"Branded Franchisee" shall mean a Person that is a licensed provider
of Authorized Brokerage Services and that is a Franchisee, for so long as it
offers and sells Authorized Brokerage Services under the Licensed Marks (whether
or not combined with any other ▇▇▇▇ pursuant to this Agreement).
"Branded Operator" shall mean Licensee and any sublicensee of any
Licensed ▇▇▇▇, including any Company Affiliate, Branded Owned Office, Branded
Broker Affiliate or Branded Franchisee.
"Branded Owned Office" shall mean an Owned Office for so long as it
provides Authorized Brokerage Services under the Licensed Marks (whether or not
combined with any other ▇▇▇▇ pursuant to this Agreement).
"Broker Affiliate" shall mean, with respect to any Person, a Person
that is a licensed provider of Authorized Brokerage Services and who provides
such Authorized Brokerage Services pursuant to or in connection with a real
estate brokerage affiliation agreement or other similar agreement (other than a
franchise agreement) with such first Person, or who is otherwise a member of a
real estate brokerage affiliate network of such first Person or its Affiliates,
with respect to the offering and provision of Authorized Brokerage Services.
"Broker Affiliate Agreement" shall mean (i) an agreement between any
Pre-Existing Broker Affiliate, on the one hand, and any of SIR, Licensee or any
Company Affiliate, as assignee of SIR or any Licensor Affiliate, on the other
hand, that is in effect as of the Effective Date or (ii) any agreement between a
Branded Broker Affiliate and Licensee or any Company Affiliate pursuant to which
such Branded Broker Affiliate is granted a sublicense to any Licensed ▇▇▇▇.
"Brokerage Service Provider Claim" is defined in Section 12.5(b)(i).
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in New York City are authorized or obligated by law or
executive order to close.
"Buyer" is defined in the introduction of this Agreement.
"Co-Marketer" is defined in Section 3.3.
"Company Affiliate" shall mean any Affiliate of Licensee.
3
"Computer Art" is defined in Section 12.2.
"Concierge Service" shall mean a service provided by a Residential
Real Estate broker to a client home buyer or seller as a service ancillary to
such brokerage service and pursuant to which the broker provides referrals to,
or assists in making logistical arrangements on behalf of the client with,
third-party providers of services associated with moving into or out of, or
maintaining, a residence, provided that such moving or maintenance services (or
services associated therewith) into or out of a residence are provided by a
third party and not by the real estate broker or any Person under the Licensed
Marks.
"Confidential Information" is defined in Section 9.2(d).
"Control" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect as of
the Effective Date.
"▇▇▇▇▇▇▇▇ Legacy Office" shall mean any Owned Office offering or
selling Authorized Brokerage Services under the ▇▇▇▇▇▇▇▇ ▇▇▇▇ or any derivative
thereof, as of the Effective Date, including any subsequent Relocation thereof.
"▇▇▇▇▇▇▇▇ ▇▇▇▇" shall mean the ▇▇▇▇▇▇▇▇ trademark and service ▇▇▇▇.
"Covered Books and Records" is defined in Section 9.1(a).
"Covered Geographic Area" is defined in Section 7.2(a)(i).
"Covered Revenue" means Franchisee Covered Revenue or Owned Covered
Revenue, as applicable.
"Damages" is defined in Section 13.1.
"Derivative Works" is defined in Section 12.2.
"Domain Names" shall mean the domain names set forth in Part I of
Schedule A attached hereto and any similar or successor electronic address
mechanism or system, whether now known or hereafter devised from any form,
consisting of any Licensed Marks and set forth in Part I of Schedule A, as such
Part I of Schedule A may be amended by the parties from time to time.
"Earned" shall mean, with respect to revenue or other income, income
or revenue that is earned and accrued.
"Effective Date" shall mean the date hereof.
"Election Period" is defined in Section 13.5(a).
"Eligible Market" is defined in Section 7.1(b).
"Eligible Marks" is defined in Section 3.1(c)(i).
4
"Eligible SPV" shall mean a Person that (i) is a Subsidiary of
Holdings and (ii) has in its Organizational Documents provisions substantially
similar to or having a substantially similar effect as, the provisions set forth
on Exhibit A.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, as in effect as of the date hereof.
"Excluded Services" shall mean (i) commercial real estate brokerage
services, (ii) Timeshare Brokerage Services, (iii) Residential Real Estate
management and management services, other than as specifically included in the
definition of "Residential Real Estate" in this Agreement, (iv) real estate
development services or products (whether as a developer or as an advisor or
consultant or other service provider with respect to real estate developments),
other than advice and consultation related to sales of Residential Real Estate
within any development and (v) any other services related to the foregoing or to
any real estate brokerage services, in each case other than the Authorized
Services.
"Existing Auction Client" is defined in Section 6.2(a).
"Existing Brokerage Lead" is defined in Section 6.1(a).
"Extension Right" is defined in Section 4.1.
"Fee Statement" is defined in Section 5.3(b).
"Fees" shall mean the royalties due to Licensor pursuant to the terms
and conditions of Article 5.
"First Offer Notice" is defined in Section 10.3(a).
"Foreign Operations Sale" is defined in Section 18.1.
"Former Branded Franchisee-Affiliate" means, as of any date, a Person
that was a Branded Franchisee or Branded Broker Affiliate in the 12-months
immediately proceeding such date.
"Franchise Wind-Down Period" is defined in Section 14.2(a)(iii).
"Franchisee" is defined in Section 2.1(b).
"Franchisee Claim" is defined in Section 12.5(a)(i).
"Franchised ▇▇▇▇" is defined in Section 3.1(b).
"Franchisee Covered Revenue" shall mean, with respect to any Branded
Franchisee or Branded Broker Affiliate, all royalty or equivalent revenue Earned
on gross commission income (or, in the event gross commission income is replaced
in whole or in part by revenue of another or an equivalent type after the
Effective Date in the Residential Real Estate brokerage industry generally, such
other or equivalent revenue) of such Branded Franchisee or
5
Branded Broker Affiliate, as applicable, which royalty or equivalent revenue
Earned on gross commission income (or such other or equivalent revenue, as
applicable) shall not include: (i) payments by any Branded Franchisee or Branded
Broker Affiliate for advertising charges and marketing fees (including by way of
example and not of limitation, the National Advertising Fund or NAF, currently
maintained by the Licensee Group as of the Effective Date); (ii) initial
franchise fees paid by any Branded Franchisee that are up front fees not related
to actual Residential Real Estate transactions; (iii) royalties or equivalent
revenue Earned on revenue from the provision of any Authorized Ancillary
Services by such Branded Franchisee or Branded Broker Affiliate; and (iv) other
payments by any Branded Franchisee or Branded Broker Affiliate in connection
with charges by Licensee or any Company Affiliate for administrative or
ancillary services provided by Licensee or any Company Affiliate in its capacity
as a franchisor or licensor and which payments are not calculated as a
percentage or function of the revenues of the Branded Franchisee or Branded
Broker Affiliate.
"Governmental Authority" shall mean any national, federal, state,
local or foreign judicial, legislative, executive, regulatory or administrative
authority, self-regulatory organization or arbitrator having legally binding
authority.
"Guarantee" is defined in Section 19.1.
"Guidelines" is defined in Section 7.2(a).
"Holdings" is defined in the introduction of this Agreement.
"Holdings Change of Control" is defined in Section 11.2(c).
"Holdings Guarantee" is defined in Section 19.1(b).
"Holdings Obligations" is defined in Section 19.1(b).
"Indemnified Party" is defined in Section 13.5(a).
"Indemnifying Party" is defined in Section 13.5(a).
"Indemnity Payments" is defined in Section 13.5(d).
"Initial Termination Date" is defined in Section 4.1.
"Laws" shall mean any federal, state, foreign or local law, common
law, statute, ordinance, rule, regulation, order, judgment, administrative
order, decree, administrative or judicial decision and any other executive,
legislative, regulatory or administrative proclamation in each case having
binding legal effect.
"Licensed Marks" shall mean, collectively, (i) the SIR ▇▇▇▇, (ii) the
Domain Names, (iii) any Unregistered ▇▇▇▇ and (iv) in any Option Territory in
which the Option is exercised, any of the foregoing (i) - (iii) transliterated
into the applicable local language or languages of such Option Territory
effective upon grant of the license pursuant to the terms and conditions of
Article 18.
6
"Licensee Brokerage Business" shall mean the real estate brokerage
business of Licensee and the Company Affiliates, including their company-owned,
licensed and franchised businesses.
"Licensee Deductible Amount" is defined in Section 13.3(a).
"Licensee Group" shall mean, individually and collectively, Licensee
and each Company Affiliate.
"Licensee Indemnified Parties" is defined in Section 13.2.
"Licensee Liaison" shall mean, individually and collectively, the
liaisons designated by Licensee pursuant to Section 15.3.
"Licensee" is defined in the initial caption of this Agreement.
"Licensee Group Marks" is defined in Section 3.1(d).
"Licensor" shall mean (i) SPTC, Inc., a Nevada corporation, and upon
an assignment of the Licensed Marks and Licensor's rights and obligations under
this Agreement to an Eligible SPV pursuant to Section 10.9(a) or 11.1(b), such
Eligible SPV, together with (ii) any Eligible SPV that becomes a Licensor
hereunder pursuant to Section 18.3(e)(v).
"Licensor Affiliate" shall mean Holdings and each of its Subsidiaries,
provided that following a Holdings Change of Control, "Licensor Affiliate" shall
further include any Affiliate of Holdings.
"Licensor Deductible Amount" is defined in Section 13.3(b).
"Licensor Indemnified Parties" is defined in Section 13.1.
"Licensor Liaison" shall mean the liaison designated by Licensor
pursuant to Section 15.3.
"Licensor Offer Notice" is defined in Section 10.4(a).
"Litigation" shall mean any litigation, action, suit, proceeding,
claim, arbitration or investigation before any Governmental Authority or before
any arbitrator or mediator or similar party, or any investigation or review by
any Governmental Authority.
"▇▇▇▇" shall mean any name, brand, design, trademark, service ▇▇▇▇,
trade dress, logo, domain name, corporate, trade or business name.
"Measurement Period" is defined in Section 7.1(b).
"Minimum Amount" is defined in Section 5.6(b).
"Model Code of Ethics" shall mean the International Franchise
Association Code of Principles and Standards of Conduct as set forth on Exhibit
B hereto.
7
"Model Co-Mingling Provisions" shall mean the "Model Co-Mingling
Provisions" set forth on Exhibit C hereto.
"Model Provisions" shall mean, collectively, the Model Co-Mingling
Provisions, the Model Quality Control Provisions and the Model Code of Ethics.
"Model Quality Control Provisions" shall mean the "Model Quality
Control Provisions" set forth on Exhibit D hereto.
"MSP" is defined in Section 7.1(b).
"New Broker Affiliate" shall mean any Branded Broker Affiliate that is
not a Pre-Existing Broker Affiliate.
"New Market" shall mean a Covered Geographic Area in which a Sold
Owned Office or a ▇▇▇▇▇▇▇▇ Legacy Office, as applicable, performs or offers for
sale Authorized Brokerage Services, other than the Covered Geographic Area in
which the Sold Owned Office or ▇▇▇▇▇▇▇▇ Legacy Office, as applicable, performed
the Authorized Brokerage Services as of the Effective Date.
"New Owned Office" shall mean any Branded Owned Office that is not a
Sold Office or a ▇▇▇▇▇▇▇▇ Legacy Office.
"New Style Date" is defined in Section 3.9.
"New Style Notice" is defined in Section 3.9.
"Non-Compete Period" is defined in Section 11.2(a).
"Obligations" is defined in Section 19.1(a).
"Offer" is defined in Section 10.4(b).
"Offer Period" is defined in Section 10.4(b).
"Option" is defined in Section 18.1.
"Option Consents and Filings" is defined in Section 18.3(c).
"Option Period" is defined in Section 18.1.
"Option Territory" shall mean any country in the world other than (i)
the Territory, (ii) Australia and (iii) New Zealand.
"Organizational Documents" shall mean, as to any Person, the
certificate of incorporation and bylaws or memorandum and articles of
association or other organizational documents of such Person.
8
"Original Territory" shall mean each of the following countries: (i)
Canada, (ii) Barbados, (iii) Israel, (iv) Mexico, (v) Nassau, The Bahamas, (vi)
St. Barthelemy, (vii) St. ▇▇▇▇▇▇, (viii) Turks and Caicos and (ix) the United
States of America (including the U.S. Virgin Islands).
"Other Licensed ▇▇▇▇ Claim" is defined in Section 12.5(c)(i).
"Owned Covered Revenue" shall mean, with respect to any Branded Owned
Office, 6% of gross commission income (or, in the event gross commission income
is replaced in whole or in part by revenue of another or an equivalent type
after the Effective Date in the Residential Real Estate brokerage industry
generally, such other or equivalent revenue) of such Branded Owned Office, which
gross commission income (or such other or equivalent revenue, as applicable)
shall not include (i) payments by any Company Affiliate or Branded Owned Office
for advertising charges and marketing fees (including by way of example and not
of limitation, the National Advertising Fund or NAF, currently maintained by the
Licensee Group as of the Effective Date), (ii) any revenue Earned from the
provision of Authorized Ancillary Services by any such Branded Owned Office and
(iii) revenue earned by any Branded Owned Office for "principal basis" sales of
Residential Real Estate where no commission is earned.
"Owned Office" shall mean a business unit or Person, as applicable,
organized as a Residential Real Estate brokerage office, that is owned or held
(directly or indirectly) by Licensee or by a Company Affiliate.
"Parent" is defined in the initial caption of this Agreement.
"Parent ▇▇▇▇" shall mean the CENDANT trademark and service ▇▇▇▇.
"Percentage Increase" is defined in Section 5.6(b).
"Person " shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, firm, Governmental Authority or other entity (governmental or
private).
"Photographs" is defined in Section 12.2.
"Pre-Existing Broker Affiliate" shall mean a Broker Affiliate of SIR
or its Affiliates as of the time immediately prior to the Effective Date.
"Prime Rate" shall mean, at any given time, the prime rate most
recently reported by ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇, New York, New York (or any successor
entity).
"Proprietary Materials" is defined in Section 12.2.
"Purchase Agreement" is defined in the introduction of this Agreement.
"Real Estate Referral Services" shall mean the service of providing a
referral with respect to a provider of Authorized Brokerage Services.
9
"Redirection Domain Names" shall mean the domain names set forth in
Part II of Schedule A attached hereto.
"Registered Ancillary Services" shall mean any one or more Authorized
Ancillary Services for which Licensor has obtained a certificate of registration
of the Licensed Marks from the applicable Governmental Authority in the
Territory.
"Registered Marks" shall mean any Licensed ▇▇▇▇ that is registered for
one or more of the Authorized Services, as set forth in the applicable
certificate of registration.
"Relocation" shall mean, with respect to any Sold Owned Office or
▇▇▇▇▇▇▇▇ Legacy Office, the relocation of the office facility from which its
sales associates and brokers offered and sold Authorized Brokerage Services to
another office facility located in the same Covered Geographic Area or a New
Market and in which same Covered Geographic Area or New Market the sales
associates and brokers of such Sold Owned Office or ▇▇▇▇▇▇▇▇ Legacy Office offer
and sell Authorized Brokerage Services thereafter.
"Residential Real Estate" shall mean real estate consisting of a
residential dwelling (including an apartment within a multi-family building),
including leaseholds of dwellings (including the rental and management of
properties in vacation and resort markets), cooperatives, condominiums,
fractional ownership, manufactured homes, panelized or pre-fabricated housing,
undeveloped land, resort, farm and ranch real estate and any other form of real
estate for which a residential real estate brokerage license is required under
applicable Law, excluding Timeshares.
"Review Committee" is defined in Section 15.1.
"Sale Transaction" is defined in Section 10.4(a).
"SIR" is defined in the introduction of this Agreement.
"SIR Legacy Affiliate" is defined in Section 7.1(e).
"Sold Owned Office" shall mean a residential real estate brokerage
office the fee title, leasehold interest or subleasehold interest of which was
transferred (directly or indirectly) to Buyer pursuant to the Purchase
Agreement.
"SIR ▇▇▇▇" shall mean the SOTHEBY'S INTERNATIONAL REALTY trademark and
service ▇▇▇▇.
"Sotheby's ▇▇▇▇" shall mean the SOTHEBY'S trademark and service ▇▇▇▇.
"Subsidiary" shall mean, with respect to any Person, any Person in
which such first Person, directly or indirectly, holds stock or other ownership
interests representing (a) more than 50% of the voting power of all outstanding
stock or ownership interests of such Person or (b) the right to receive more
than 50% of the net assets of such Person available for distribution to the
holders of outstanding stock or ownership interests upon a liquidation or
dissolution of such Person.
10
"Superior Offer" is defined in Section 10.4(c).
"Synthesis Agreement" shall mean the Strategic Partnership Agreement
dated as of November 1, 2000, between SIR and Synthesis Realty, LLC.
"Taubman Family Member" shall mean (i) A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, (ii) any of
A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ lineal descendants, spouses, lineal descendants of spouses,
adopted children or grandchildren, mothers- and fathers-in-law, sons- and
daughters-in-law or brothers- and sisters-in-law, (iii) the estate of any Person
described in clauses (i) and (ii), (iv) any trust for the benefit of any Person
described in clauses (i), (ii) and (iii) (including the A. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Restated Revocable Trust (as the same may be amended)), (v) any charity,
charitable trust or other charitable organization of which any Person described
in clauses (i) or (ii) is a director, trustee or officer or (vi) any Person,
more than 50% of the voting stock, voting securities, partnership interests,
limited liability company interests or other beneficial ownership and Control of
which is and remains owned and Controlled by one or more Persons described in
clauses (i), (ii), (iii) or (iv).
"Territory" shall mean the Original Territory and any country set
forth in Schedule C following any exercise of the Option and upon (and subject
to) the grant of the license thereunder pursuant to the terms and conditions of
Article 18.
"Timeshare" shall mean a commercial arrangement under which a
purchaser receives an interest in real property or the right to use an
accommodation or amenities related to real properties, or both, for a specified
period and on a recurring basis, including in connection with residential and
vacation properties.
"Timeshare Brokerage Services" is defined in Section 10.3(a).
"Timeshare License" is defined in Section 10.3(a).
"Trademark Usage Guidelines" shall mean the Trademark Usage Guidelines
set forth on Exhibit G hereto.
"Transaction Value" is defined in Section 7.2(a)(i)(B).
"UFOC" shall mean any Uniform Franchise Offering Circular or such
other franchise offering documents or circulars that any Person prepares or
otherwise uses in connection with the grant of or proposed grant of or offer to
grant any franchise.
"Unregistered Marks" shall mean, collectively, the following marks:
(i) SOTHEBY'S REALTY, (ii) SOTHEBY'S REAL ESTATE, (iii) SOTHEBY'S REALTOR, (iv)
SOTHEBY'S REALTORS, and (v) SOTHEBY'S in combination with words (A) denoting
realty or real estate and (B) words denoting any of the Authorized Ancillary
Services (e.g., SOTHEBY'S REALTY TITLE or SOTHEBY'S REALTY MORTGAGE).
11
Section 1.2. Other Interpretive Provisions.
(a) Except where expressly stated otherwise in this Agreement, the
following rules of interpretation apply to this Agreement: (i) "either" and "or"
are not exclusive and "include", "includes" and "including" are not limiting;
(ii) "hereof", "hereto", "hereby", "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (iii) "date hereof" refers to the
date set forth in the initial caption of this Agreement; (iv) "extent" in the
phrase "to the extent" shall mean the degree to which a subject or other thing
extends, and such phrase does not mean simply "if"; (v) definitions contained in
this Agreement are applicable to the singular as well as the plural forms of
such terms; (vi) references to an agreement or instrument mean such agreement or
instrument as from time to time amended, modified or supplemented, in each case
to the extent not prohibited by such agreement or instrument; (vii) references
to a Person are also to its permitted successors and assigns; (viii) references
to an "Article", "Section", "Subsection", "Exhibit" or "Schedule" refer to an
Article of, a Section or Subsection of, or an Exhibit or Schedule to, this
Agreement; (ix) words importing the masculine gender include the feminine or
neuter and, in each case, vice versa; (x) references to "$" or otherwise to
dollar amounts refer to the lawful currency of the United States; (xi)
references to a Law include any amendment or modification to such Law and any
rules, regulations and delegated legislation issued thereafter, whether such
amendment or modification is made, or issuance of such rules, regulations or
delegated legislation occurs, before or after the date of this Agreement and
(xii) any consent or approval of any Person may be granted or withheld in such
Person's sole and absolute discretion.
(b) The parties waive the application of any Law or rule of
construction providing that ambiguities in an agreement will be construed
against the party drafting such agreement.
ARTICLE II
GRANT OF RIGHTS
Section 2.1. Grant of License.
(a) Pursuant to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee the exclusive right and license, during the term of
this Agreement, to use the Licensed Marks (other than the Domain Names) in the
Territory solely for the offer and sale of (i) Authorized Brokerage Services and
(ii) subject to Section 2.3, Authorized Ancillary Services (collectively,
"Authorized Services"), and not in connection with any other product or service
of any kind (including any related product or service).
(b) Pursuant to the terms and conditions of this Agreement, including
Section 2.3, Licensor hereby grants to Licensee the exclusive right and license
to grant sublicenses, none for a term that extends beyond the then-current term
of this Agreement, of the rights and licenses granted pursuant to the terms and
conditions of Section 2.1(a) solely to any (i) Company Affiliate only for so
long as it is a Company Affiliate, (ii) Owned Office only for so long as it is
an Owned Office, (iii) Broker Affiliate of Licensee only for so long as it is a
Broker Affiliate of
12
Licensee and (iv) franchisee of Licensee or any Company Affiliate (other than
any franchisee that is a Company Affiliate) that offers and sells Authorized
Brokerage Services ("Franchisee") only for so long as it is a Franchisee, but in
each case only for the offer and sale of Authorized Services in the Territory.
For the avoidance of doubt, a Company Affiliate that has received a sublicense
hereunder may in turn further sublicense the Licensed Marks to any Owned Office,
Broker Affiliate or Franchisee set forth in clauses (ii), (iii) or (iv) of the
preceding sentence, subject to the terms and conditions of this Agreement.
(c) Pursuant to the terms and conditions of this Agreement, including
Section 2.4, Licensor hereby grants to Licensee the exclusive right to use the
Licensed Marks (other than the Domain Names) in its or its Affiliates'
corporate, trade or assumed name during the term of this Agreement, and to grant
sublicenses of such right to any (i) Company Affiliate only for so long as it is
a Company Affiliate, (ii) Owned Office only for so long as it is an Owned
Office, (iii) Broker Affiliate of Licensee only for so long as it is a Broker
Affiliate of Licensee and (iv) Franchisee only for so long as it is a franchisee
of Licensee, but in each case only for the offer and sale of Authorized Services
in the Territory.
(d) The parties acknowledge that the rights of Licensor in and to the
SIR ▇▇▇▇ in Israel are pursuant to a sublicense from Sotheby's (UK), a Licensor
Affiliate, for the period from the Effective Date until such time as the
registration for the SIR ▇▇▇▇ in Israel is transferred to an Eligible SPV
pursuant to the terms and conditions of Section 10.9.
Section 2.2. License of Domain Names.
(a) Pursuant to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee a license to use, and to sublicense to a Company
Affiliate the right to use, during the term of this Agreement, the Domain Names,
solely in connection with marketing and promoting the Authorized Services being
provided in the Territory by any Branded Operator.
(b) Pursuant to the terms and conditions of this Agreement, Licensor
hereby grants to Licensee a license to use, during the term of this Agreement,
the Redirection Domain Names solely for the limited purpose of redirecting users
of the Internet who misspell a domain name in a Uniform Resource Locator to
another Uniform Resource Locator that is a Domain Name.
(c) The parties acknowledge and agree that insofar as Domain Names are
Licensed Marks, any use of the Domain Names, including in connection with any
website or other advertising or promotional materials (including electronic mail
sent from an electronic mail address associated with the Domain Names) or other
content available through the Domain Names, must comply with all restrictions in
this Agreement relating to the Licensed Marks, to the extent applicable.
(d) Licensor shall maintain a link on the ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ website, to
the website at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇. Licensor may include such disclaimers on
the ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ website or include such intermediary screens to the extent
it reasonably considers necessary or advisable under applicable Law to indicate
that the ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ website is that of the Licensee. Licensee shall
reimburse Licensor's
13
reasonable out-of-pocket expenses resulting from the maintenance of such link,
but shall not otherwise be required to compensate Licensor therefor. Unless
Licensor shall request the discontinuation thereof, Licensee shall maintain a
link on the ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ website, to the website ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇.
Licensee may include such disclaimers on the www. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ website or
include such intermediary screens to the extent it reasonably considers
necessary or advisable under applicable Law to indicate that the
▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ website is that of the Licensor. Licensor shall reimburse
Licensee's reasonable out-of-pocket expenses resulting from the maintenance of
such link, but shall not otherwise be required to compensate Licensee therefor.
The Review Committee shall regularly, and not less than once every five years,
review this Section 2.2(d) with respect to its practical application to the
parties' businesses and in light of changes in technology, and the Review
Committee may propose such amendments to this Section 2.2(d) as it shall deem
reasonable and appropriate, such amendments to be subject to the terms and
conditions of Section 20.3. For the avoidance of doubt, (i) the content included
in the ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ website shall be owned by Licensee and its
Affiliates and (ii) Licensor shall remain the owner and registrant with respect
to the Domain Names; provided, however, that during the term of this Agreement,
Licensee or one of its Affiliates shall be the administrator and administrative,
technical and billing contact with the relevant Internet registrar for all
purposes with respect to the Domain Names and shall have the right to alter the
content of the relevant websites in its sole and absolute discretion, subject to
the terms of this Agreement.
(e) With respect to any domain name (if any) registered in the name of
SIR as of the time immediately prior to the Effective Date that has not be
transferred to a Licensor Affiliate as of, or prior to the Effective Date,
Parent shall cause Buyer to execute, acknowledge and deliver all documents,
agreements and instruments necessary to transfer to Licensor, and to act in good
faith and cooperate with Licensor in connection with the transfer to Licensor
of, any such domain name.
Section 2.3. Authorized Ancillary Services.
(a) Pursuant to the terms and conditions of this Agreement, Authorized
Ancillary Services may be provided under the Licensed Marks by a Branded
Operator only to the extent offered as a service ancillary to the provision of
Authorized Brokerage Services, and subject to the condition that such Branded
Operator does not hold itself out as providing such Authorized Ancillary
Services as its principal business or as being a stand-alone provider solely of
such Authorized Ancillary Services. Licensee shall cause any materials
describing or otherwise relating to the offer or sale of Authorized Ancillary
Services by any Branded Operator to include a disclaimer providing that such
Authorized Ancillary Services are not provided by Holdings or any Licensor
Affiliate.
(b) For purposes of this Agreement, "Authorized Ancillary Services"
shall mean only the following services: (i) relocation, (ii) Residential Real
Estate title search, (iii) Residential Real Estate title insurance, (iv)
Residential Real Estate appraisal, (v) Residential Real Estate closing and
Residential Real Estate escrow services and Residential Real Estate mortgage
origination, (vi) Residential Real Estate mortgage brokerage, (vii) Residential
Real Estate mortgage banking, (viii) home warranties, (ix) Real Estate Referral
Services, (x) Concierge Services and (xi) with the consent of Licensor (such
consent not to be
14
unreasonably withheld), such additional services that are or become commonly
offered or promoted by high-quality brokers of Residential Real Estate as a
service ancillary to the provision of Authorized Brokerage Services.
ARTICLE III
BRANDING AND MARKETING
Section 3.1. Combined Names and Marks.
(a) Generally. Except as expressly permitted by this Agreement,
Licensee shall not, and shall cause each of its sublicensees not to, and the
licenses and sublicenses granted hereunder and pursuant hereto shall not be
deemed to permit, the use of the Sotheby's ▇▇▇▇ or any Licensed ▇▇▇▇, or any
derivative thereof, or any confusingly similar ▇▇▇▇, as a ▇▇▇▇ by itself or with
any other ▇▇▇▇.
(b) Franchise Marks. Notwithstanding anything to the contrary in this
Section 3.1, Licensee shall not, and shall cause each of its sublicensees not
to, use any Licensed ▇▇▇▇ in combination with any other ▇▇▇▇ (other than any
Licensed ▇▇▇▇) that is (i) offered for use by, offered for license (or
sublicense) to, or licensed (or sublicensed) to, any Franchisee, or (ii) offered
for use by, or offered for license (or sublicense) to, any prospective
Franchisee, by (in the case of both clauses (i) and (ii)) Licensee or any
Company Affiliate (including pursuant to a UFOC) (a "Franchised ▇▇▇▇").
(c) Permitted Combinations of Marks.
(i) Subject to the terms and conditions of this Agreement,
including Section 3.1(c)(ii) and (iii), Licensee and each sublicensee of any
Licensed ▇▇▇▇ shall be permitted to use any Licensed ▇▇▇▇ in combination with
any other ▇▇▇▇ of Licensee or Company Affiliate or any sublicensee of any
Licensed ▇▇▇▇, solely (x) in connection with the Authorized Services in the
Territory and (y) as follows (each such ▇▇▇▇ described in (A) and (B) below, an
"Eligible ▇▇▇▇"):
(A) in certain associations with the Parent ▇▇▇▇ as set
forth in Exhibit E (and for so long as the Parent ▇▇▇▇ is not a Franchised ▇▇▇▇
or combined with or embodied in a Franchised ▇▇▇▇); and
(B) subject to Section 3.1(c)(ii), in combination with any
▇▇▇▇ of any sublicensee of any Licensed ▇▇▇▇, including any Company Affiliate
sublicensee or any Branded Franchisee, that is not the Parent ▇▇▇▇ or a
Franchised ▇▇▇▇ (or combined with or embodied in a Franchised ▇▇▇▇).
(ii) Licensee shall not, and Licensee shall cause each Company
Affiliate not to, register, or take any action to effect registration of, any
▇▇▇▇ that combines any Licensed ▇▇▇▇ with any other ▇▇▇▇; provided, however,
that, subject to Section 2.1(c), this clause (ii) shall not be interpreted to
prevent Licensee and any Company Affiliate from making such filings with a
secretary of state or similar Governmental Authority to establish, or qualify to
15
do business using, a corporate or trade name or assumed name (or d/b/a)
consisting of any Licensed ▇▇▇▇.
(iii) With respect to any domain name consisting of any
combination of any Licensed ▇▇▇▇ with any Eligible ▇▇▇▇ pursuant to the terms of
Section 3.1(c)(i), the parties acknowledge and agree that (A) such domain name
shall be subject to Section 2.2(c) with respect to registration and maintenance
and (B) the respective rights of Licensor and the Licensor Affiliates, on the
one hand, and Licensee, the Company Affiliates and their respective
sublicensees, on the other hand, to such domain name shall be limited to each of
their respective rights, in the case of Licensor and the Licensor Affiliates, in
the Licensed Marks, and in the case of Licensee, the Company Affiliates and
their respective sublicensees, in the Eligible Marks.
(d) With respect to any use of any Licensed ▇▇▇▇ in combination with
the Parent ▇▇▇▇, the ▇▇▇▇▇▇▇▇ ▇▇▇▇ or any other ▇▇▇▇ of Licensee or any Company
Affiliate (collectively, "Licensee Group Marks") as a combined ▇▇▇▇ pursuant to
the terms and conditions of this Agreement, the size of such Licensed ▇▇▇▇
(taken as a whole) shall not be smaller relative to the size of such Licensee
Group ▇▇▇▇ (taken as a whole) with which it is combined as part of a combined
▇▇▇▇.
Section 3.2. Positioning of Brand.
(a) Licensee shall, and shall cause each Company Affiliate and Branded
Owned Office, and shall use reasonable efforts to cause each Branded Broker
Affiliate and Branded Franchisee, to, (i) market, hold out and otherwise
position the Authorized Brokerage Services offered under the Licensed Marks, as
a leading luxury brand of Residential Real Estate brokerage services. Licensee
shall not, and shall not permit any Company Affiliate to, market, hold out or
otherwise position any other ▇▇▇▇ of the Licensee Group, including any franchise
system owned or operated, directly or indirectly, by the Licensee Group, as
being associated with more luxurious Residential Real Estate brokerage services
or more luxurious Residential Real Estate properties than those offered and sold
under the Licensed Marks.
(b) Licensee shall not, and Licensee shall cause each Branded Operator
not to, segment or distinguish any Licensed ▇▇▇▇ from any other Licensed ▇▇▇▇,
or for any Licensed ▇▇▇▇, on the basis of luxury, quality, pre-eminence or
similar categorizations, distinctions or brand layering (e.g., "Sotheby's
International Realty Premier" shall be prohibited). The use of a trade or
corporate name (including an assumed name or d/b/a) by a Branded Franchisee or
Branded Broker Affiliate that contains a word or name that would be reasonably
likely to be interpreted to denote brand segmentation shall not be prohibited by
this Section 3.2(b), including by way of example and not of limitation, a
Branded Franchisee whose trade name is PREMIER PROPERTIES SOTHEBY'S
INTERNATIONAL REALTY. No Branded Owned Office or Company Affiliate may have a
corporate or trade name or use an assumed name or d/b/a that includes any word
or name that, when combined with any Licensed ▇▇▇▇, could be interpreted to
denote any brand segmentation prohibited by this Section 3.2(b).
Section 3.3. Alliance Marketing. Subject to Section 3.4, in connection with
any proposed agreements between Licensee or any Company Affiliate and any third
party pursuant to which Licensee or any Branded Operator would co-market with
third-party providers of products
16
or services offered or marketed to home owners or home buyers (or prospective
home buyers) (any such Person, a "Co-Marketer") the products or services of such
Co-Marketer, including in connection with the Licensee Group's "alliance
marketing program," Licensee shall only have the right to include any Licensed
▇▇▇▇ in any co-marketing materials created in connection with such agreement
with any Co-Marketer if (a) the products or services relating to such
co-marketing arrangements shall be performed by the Co-Marketer and not by the
Licensee or any Branded Operator and (b) Licensor has approved such Co-Marketer
in advance of any such agreement as provided below. In the event that Licensee
or any Company Affiliate proposes to enter into an agreement with any
Co-Marketer involving any use of any Licensed ▇▇▇▇, Licensee shall submit to
Licensor a written request for approval of such Co-Marketer including a template
or mock-up or representative sample demonstrating such intended use, whereupon
Licensor may request such additional information as it may reasonably deem
relevant to evaluating such request. If Licensor does not object to any proposed
Co-Marketer within ten Business Days following receipt of all information
requested pursuant to the preceding sentence, Licensor shall be deemed to have
approved the proposed Co-Marketer. Licensee shall cause any co-marketing
materials to include a disclaimer providing that such Co-Marketer's products or
services are not provided by Holdings, any Licensor Affiliate or any Branded
Operator, as applicable, and the use of the Licensed Marks in any co-marketing
materials shall comply with the terms and conditions of this Agreement. The
right under this Section 3.3 is a right to co-market the Authorized Services
with the services or products of an approved Co-Marketer and in no event shall
this Section 3.3 be interpreted to expand the scope of the Authorized Services
that may be offered and sold under the Licensed Marks.
Section 3.4. Trademark Usage Guidelines.
(a) Any use of a Licensed ▇▇▇▇, including in combination with any
other ▇▇▇▇ of Licensee, must comply with the Trademark Usage Guidelines (i) in
all respects relating to the Appearance of any Licensed ▇▇▇▇ and (ii) otherwise
in all material respects, including with respect to the inclusion of all
appropriate trademark notices, including the use of the designations (R) and sm,
as applicable, with the Licensed Marks; provided, however, that solely to the
extent that any Licensed ▇▇▇▇ is used in a media that does not reasonably permit
use in conformity with such Trademark Usage Guidelines (including by way of
illustration and not of limitation, use of the Licensed Marks in ▇▇▇▇▇ filings
with the Securities and Exchange Commission), such use shall not be prohibited
by this Section 3.4(a).
(b) Subject to Section 3.4(a) above:
(i) Licensee shall provide Licensor a draft of Licensee's first
Identity Standards Manual that it proposes to include in a UFOC with respect to
prospective Branded Franchisees, and which the parties acknowledge may be in a
form comparable to the forms of the identity standards manuals that the Licensee
Group uses in connection with its other franchisee systems, but must comply with
the Trademark Usage Guidelines with respect to the Appearance of any Licensed
▇▇▇▇. Licensor shall review such draft Identity Standards Manual promptly upon
receipt, and Licensee acknowledges and agrees that the final Identity Standards
Manual included in such UFOC shall be subject to Licensor's prior approval, such
approval not to be unreasonably withheld. To the extent that the Identity
Standards Manual approved by Licensor pursuant to the foregoing differs from the
Trademark Usage Guidelines, Licensee shall have the
17
right to rely upon and comply with such Identity Standards Manual approved by
Licensor as provided herein.
(ii) The Identity Standards Manual approved by Licensor may be
amended or supplemented in good faith by Licensee from time to time, provided
that any such amendment or supplement complies with the Trademark Usage
Guidelines with respect to the Appearance of any Licensed ▇▇▇▇ and contains or
proposes a change to the Identity Standards Manual that is of a quality equal to
or higher, or as or more strict, than the Identity Standards Manual approved by
Licensor pursuant to Section 3.4(b)(i).
(c) The words contained in or comprising any Licensed ▇▇▇▇ other than
the word "Sotheby's" shall not be smaller in proportion to the word "Sotheby's"
than the approximate proportion of the word "Sotheby's" with the words
"International Realty" as such words appear together in the SIR ▇▇▇▇ in the
Trademark Usage Guidelines.
(d) This Section 3.4 shall not be deemed to limit or modify any other
provision of this Agreement, including with respect to any use of the Licensed
Marks.
Section 3.5. Promotional Materials. Subject to Section 3.4, Licensee and
their permitted sublicensees shall be permitted to use the Licensed Marks in
connection with internal promotional materials for the Authorized Services
(examples include clothing, hats, writing implements, mugs and other similar
customary marketing materials) that are (i) distributed free of charge to any
existing or prospective customer of the Authorized Brokerage Services or
distributed or sold to any sales associate or employee of any Branded Operator
for subsequent distribution free of charge to any existing or prospective
customer of the Authorized Brokerage Services, (ii) not sold or offered for sale
to any person that is not a sales associate or employee of any Branded Operator
and (iii) subject to the Trademark Usage Guidelines, the Model Provisions and
other quality control provisions no less strict than those contained in the
Licensee Group's franchise agreements for Authorized Brokerage Services as in
effect on the Effective Date with respect to the use of marks on or in
connection with marketing and promotional materials used by Franchisees.
Section 3.6. Government Filings and Investor Relations. Subject to Section
3.4, Licensee and each Company Affiliate is permitted to use any Licensed ▇▇▇▇
in or in connection with any filing with any Governmental Authority or stock
exchange or any disclosure or materials provided to investors or prospective
investors or financial analysts or any materials used for corporate or business
matters (including presentation materials) used by Parent, in each case only to
the extent that the use permitted by this Section 3.6 is incidental to the
operation of the business of providing Authorized Brokerage Services under the
Licensed Marks.
Section 3.7. Branded Franchise Marketing
(a) Licensee covenants and agrees that it shall, and it shall cause
the applicable Company Affiliates, to spend all advertising charges and
marketing payments received from any Branded Franchisees on advertising and
marketing promoting the business of such Branded Franchisees. For purposes of
the foregoing, the parties acknowledge and agree that such spending of
advertising charges and marketing fees is deemed to include spending of
18
such charges and fees for the Licensee Group's administrative and personnel
costs associated with administering the marketing program of the Branded
Franchisee franchise system.
(b) Independent of, and without regard to, amounts collected by
Licensee or any Company Affiliate from Branded Franchisees for advertising and
marketing, Licensee covenants and agrees that it will spend $10,000,000 in cash
in calendar year 2005, and that it is its intent to spend $10,000,000 and
$5,000,000 in cash in calendar years 2006 and 2007, respectively, in connection
with the marketing of the Branded Franchisee system.
Section 3.8. Licensor's Publications. Licensor covenants and agrees that it
will, or will cause the applicable Licensor Affiliates to, accept for
publication in its proprietary Preview publication an advertisement from
Licensee or from Company Affiliates for Authorized Brokerage Services under any
Licensed ▇▇▇▇, which advertisements will be purchased and sold at the
then-prevailing rates charged by Licensor to third-party advertisers. The form
and presentation of such advertising shall be in Licensor's sole discretion,
including with respect to matters of good taste and the appearance (including as
to color, size and other matters) of the Licensed Marks.
Section 3.9. Modification of Sotheby's Name. In the event that Licensor
desires to modify the Sotheby's ▇▇▇▇ or its stylized design with respect to
Licensor's and its Affiliates businesses, Licensor shall provide Licensee with
not less than six months' advance written notice of such change (the "New Style
Notice") and the effective date of such change (the "New Style Date"), and on
the New Style Date each Licensed ▇▇▇▇ (including as it is sublicensed by
Licensee hereunder) shall be automatically modified accordingly and Licensor's
and its Affiliates use of the Sotheby's ▇▇▇▇ shall also be modified accordingly;
provided that modification of the Licensed Marks shall not be required to the
extent that the name SOTHEBY'S is changed to include descriptive terms
inconsistent with real estate brokerage services (e.g., "Sotheby's Auction
Houses"). Notwithstanding the foregoing, if the Licensor and its Affiliates
discontinue all use of the Sotheby's ▇▇▇▇ for a period of at least 12
consecutive months, then Licensee shall have the right to use the Sotheby's ▇▇▇▇
to the extent embodied in each Licensed ▇▇▇▇ during the term of this Agreement
and pursuant to the terms and conditions of this Agreement. As of the New Style
Date, all new advertising, marketing materials, signage and any other new
representation of each Licensed ▇▇▇▇ shall conform to the noticed modifications,
provided that for a period of three years from the New Style Date, Licensee and
each Branded Operator shall be permitted to use its inventory of marketing
materials, signage and other similar materials to the extent in existence as of
date of the New Style Notice. The right of Licensor to cause a change to any
Licensed ▇▇▇▇ pursuant to this Section 3.9 shall be exercisable not more than
once in any five-year period during the term.
Section 3.10. Advertising and Marketing Agents. The parties acknowledge and
agree that Licensee's rights hereunder include the right to allow its agents and
the agents of its permitted sublicensees to use the Licensed Marks in the
ordinary course of business for the sole and limited purpose of creating and
placing marketing and advertising on behalf of Licensee or such permitted
sublicensee for the marketing and sale of Authorized Services, subject to the
terms and conditions of this Agreement.
19
ARTICLE IV
TERM
Section 4.1. Initial Term. Except as otherwise provided in Sections 4.2 and
4.3, this Agreement shall commence on the Effective Date and continue, unless
earlier terminated, for a term of fifty years ending at 11:59 p.m. on February
16, 2054 (the "Initial Termination Date").
Section 4.2. Renewal Term. Except as otherwise provided in Section 4.3,
Licensee shall have the right, exercisable in its sole discretion and subject to
Section 4.3, to extend the term of this Agreement for a single additional term
of fifty years (the "Extension Right"), which Extension Right shall be
exercisable at any time on or after February 17, 2049 and prior to the date 180
days prior to the Initial Termination Date, by written notice from Licensee to
Licensor. Unless this Agreement has been terminated prior to the date of
exercise of such Extension Right, upon timely exercise of the Extension Right,
the term of this Agreement shall not terminate as provided in Section 4.1, and
shall continue after the Initial Termination Date until 11:59 p.m. on February
16, 2104.
ARTICLE V
FEES
Section 5.1. Fees.
(a) Licensee shall pay to Licensor royalties equal to 9.5% of, without
duplication:
(i) Franchisee Covered Revenue Earned by the Licensee Group from
the performance of Authorized Brokerage Services by any Branded Franchisee
(without regard to whether such Branded Franchisee was previously a Broker
Affiliate (including a Pre-Existing Broker Affiliate that was terminated or
converted into a Branded Franchisee) or Franchisee of Licensee or any
Company Affiliate) during the term of this Agreement and during any
Franchisee Wind-Down Period pursuant to Section 14.2(a)(iii);
(ii) Franchisee Covered Revenue Earned by the Licensee Group from
the performance of Authorized Brokerage Services by any Pre-Existing Broker
Affiliate during the period commencing on January 1, 2006 (but only to the
extent that such Pre-Existing Broker Affiliate has not been terminated or
converted into a Branded Franchisee prior to such date) and, thereafter,
for the remainder of the term of this Agreement;
(iii) Franchisee Covered Revenue Earned by the Licensee Group
from the performance of Authorized Brokerage Services by any New Broker
Affiliate during the term of this Agreement;
(iv) Owned Covered Revenue Earned by the Licensee Group
(excluding the Owned Office referenced in this paragraph) from the
performance of Authorized Brokerage Services by any Branded Owned Office
(or otherwise by Licensee
20
or any Company Affiliate performing Authorized Brokerage Services under the
Licensed Marks) during the term of this Agreement, exclusive of (A) any
▇▇▇▇▇▇▇▇ Legacy Office that is a Branded Owned Office (except to the extent
clause (C) of Section 5.1(a)(vi) applies) and (B) any Sold Owned Office;
(v) Owned Covered Revenue Earned by the Licensee Group (excluding
the Owned Office referenced in this paragraph) from the performance of
Authorized Brokerage Services by any Sold Owned Office during the term of
this Agreement, solely to the extent Earned by the Licensee Group
(excluding the Owned Office referenced in this paragraph) from the
performance of the Authorized Brokerage Services (A) by any sales
associates or brokers of a Sold Owned Office added after the Effective Date
pursuant to a direct or indirect merger, combination or acquisition by or
with such Sold Owned Office or (B) in New Markets (excluding any Relocation
to a New Market); and
(vi) Owned Covered Revenue Earned by the Licensee Group
(excluding the Owned Office referenced in this paragraph) from the
performance of Authorized Brokerage Services by any ▇▇▇▇▇▇▇▇ Legacy Office
that is a Branded Owned Office during the term of this Agreement, solely to
the extent Earned by the Licensee Group (excluding the Owned Office
referenced in this paragraph) from the performance of the Authorized
Brokerage Services (A) by any sales associates or brokers of a ▇▇▇▇▇▇▇▇
Legacy Office added after the Effective Date pursuant to a direct or
indirect merger, combination or acquisition by or with such ▇▇▇▇▇▇▇▇ Legacy
Office, (B) in New Markets (excluding any Relocation to a New Market) or
(C) following the date such Branded Owned Office ceases to use the ▇▇▇▇▇▇▇▇
▇▇▇▇ for Authorized Services.
(b) With respect to any ▇▇▇▇▇▇▇▇ Legacy Office that is a Branded Owned
Office, unless and until any royalties are owed pursuant to Section 5.1(a)(iv)
or (vi), Licensee shall pay to Licensor royalties equal to 5% of all Owned
Covered Revenue Earned by the Licensee Group (excluding the Owned Office
referenced in this paragraph) from the performance of Authorized Brokerage
Services by such ▇▇▇▇▇▇▇▇ Legacy Office that is a Branded Owned Office during
the term of this Agreement.
(c) For the avoidance of doubt, with respect to Section 5.1, Owned
Covered Revenue or Franchisee Covered Revenue "Earned by the Licensee Group from
the performance of Authorized Brokerage Services" refers to the royalty fees
payable to a member of the Licensee Group with respect to Authorized Brokerage
Services by any Branded Franchisee, Branded Broker Affiliate or Branded Owned
Office, as the case may be, not the underlying gross commission income (or other
or equivalent revenue) itself of such Branded Franchisee, Branded Broker
Affiliate or Branded Owned Office, as the case may be.
(d) Examples of the basic calculation of the Fee payable to Licensor
with respect to Covered Revenue from the performance of Authorized Brokerage
Services under Section 5.1 are set forth immediately below, for purposes of
illustration only:
21
Branded Owned Offices:
Example 1: Broker of Branded Owned Office on both sides of
transaction*
House price sale: $500,000
Commission Rate: 6%(1)
Total Commission (or gross commission income): $ 30,000
Royalty Rate: 6%
Total Royalty Recorded by Parent ("Owned Covered Revenue"): $ 1,800
License Agreement Rate: 9.5%(2)
Fee payable to Licensor: $ 171
Example 2: Broker of Branded Owned Office on single side of
transaction
House price sale: $500,000
Commission Rate: 3%(1)
Total Commission (or gross commission income): $ 15,000
Royalty Rate: 6%
Total Royalty Recorded by Parent ("Owned Covered Revenue"): $ 900
License Agreement Rate: 9.5%(2)
Fee payable to Licensor: $ 85.50
Branded Franchisee:
Example 3: Franchisee Royalty
Total Royalty Recorded by Parent ("Franchisee Covered Revenue"): $ 900
License Agreement Rate: 9.5%
Fee payable to Licensor: $ 85.50
Section 5.2. Other Matters Relating to the Determination of Covered
Revenue.
(a) Covered Revenue shall include the franchise, broker affiliation or
Owned Office royalty or fee payable (in each case net of the amounts included in
the definition of "Franchisee Covered Revenue" or "Owned Covered Revenue", as
applicable) with respect to
----------
* Example assumes that the broker is on both the listing and buying side of the
relevant transaction.
(1) Example only, by Law all commissions are negotiable.
(2) Assumes that the applicable Branded Owned Office is not a ▇▇▇▇▇▇▇▇ Legacy
Office that is a Branded Owned Office that is subject to the 5% license fee
under Section 5.1(b).
22
sales of personal property made in connection with real estate sales except
where such sale of personal property is covered in a transaction separate from
the applicable sale of real property (including sales covered under separate
bills of sale), which shall be deemed to be excluded from Covered Revenue.
(b) Covered Revenue shall be deemed to include the franchise, broker
affiliation or Owned Office royalty or fee payable (in each case net of the
amounts included in the definition of "Franchisee Covered Revenue" or "Owned
Covered Revenue", as applicable) with respect to transactions entered into, or
sales contracts made, prior to the date of termination of this Agreement
irrespective of whether such Covered Revenue is received after the date of
termination of this Agreement; provided that, for avoidance of doubt, revenues
shall be deemed included in Covered Revenue pursuant to the preceding clause
only to the extent such revenues would have constituted Covered Revenue prior to
the termination of this Agreement.
(c) In the event that the Licensee Group shall be awarded any damages
or shall be paid consideration in settlement of any claim of the Licensee Group,
and all or any portion of such award or payment constitutes or is otherwise
characterized as being a type of payment that would otherwise constitute
Franchisee Covered Revenue (or which is in lieu of, or as compensation for, a
payment that would constitute Franchisee Covered Revenue), including any award
of damages in lieu of Franchisee royalties or future Franchisee royalties, such
portion of such award or payment shall be treated as Franchisee Covered Revenue
subject to Section 5.1.
Section 5.3. Payment of Fees.
(a) Fees on Covered Revenue Earned for each calendar quarter (prorated
for any shorter period) shall be due and payable on the 15th Business Day after
the end of such calendar quarter, in arrears.
(b) Each payment of Fees to Licensor shall be accompanied by a
statement, certified by the chief financial officer of the Licensee Brokerage
Business, setting forth a reasonably detailed calculation of the Fees and the
Covered Revenue corresponding thereto, which statement shall be in substantially
the form the parties have agreed to and attached hereto as Exhibit F (the "Fee
Statement"), with such changes to the form thereof as the parties may agree upon
in writing from time to time; provided, however, that in no event shall the form
of such Fee Statement be deemed to modify in any respect the terms and
conditions of Article 5 or otherwise of this Agreement.
Section 5.4. Late Payment. Any payments of Fees which are not paid by the
date such payments are due and payable shall bear interest to the extent
permitted by applicable Law at the Prime Rate on the date such payment is due,
calculated based on the number of months (pro rated, as necessary) such payment
is delinquent; provided that the foregoing shall not limit or otherwise modify
any other remedies available to Licensor whether pursuant to this Agreement or
at law or equity.
Section 5.5. Method of Payment. All payments to Licensor under this
Agreement shall be made by wire transfer of same day funds or check in United
States dollars in the requisite amount to such bank account as Licensor may from
time to time designate by notice to
23
Licensee. Payments shall be net of any withholding taxes required by applicable
Law. With respect to Fees calculated on Covered Revenue Earned outside the
United States upon exercise of the Option, payments shall be calculated based on
currency exchange rates for the calendar quarter for which remittance is made
for Fees. For each month and each currency, such exchange rate shall equal the
arithmetic average of the daily exchange rates (obtained as described below)
during the Calendar Quarter; each daily exchange rate shall be obtained from the
Reuters Daily Rate Report or, if not so available, from The ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Edition, or, if not so available, as otherwise agreed by
the parties.
Section 5.6. Minimum Fees.
(a) In any case and notwithstanding the foregoing, Licensee shall pay,
for each calendar year beginning with the calendar year starting January 1, 2009
(and, at the end of the term for the prorated period, a prorated amount),
aggregate Fees (including any true-up payment by Licensee paid by the applicable
due dates described in this Section 5.6(a), as needed, to ensure that the
Minimum Amount has been satisfied) in an amount not less than the Minimum Amount
calculated as of the end of such calendar year. Payment of such minimum Fees
shall be made no later than the date on which Fees are due for the last calendar
quarter of such calendar year. The final payment of any minimum Fees pursuant to
this Section 5.6 shall be due within 60 days following the date of termination
of this Agreement (pro rated for the period of the year in which such
termination occurs).
(b) "Minimum Amount" shall mean $1,500,000, provided that such amount
shall be increased as of December 31, 2010 and each December 31 of each
subsequent year during the term of this Agreement, by an amount equal to the
Percentage Increase of the then-applicable Minimum Amount; provided that such
amount shall not exceed $2,000,000. The "Percentage Increase" shall be the
percentage, if any, by which the Consumer Price Index -- All Urban Consumers (or
if such ceases to be published, the most reasonably comparable index published
by the United States government) increased by the end of the then applicable
calendar year from the prior calendar year.
ARTICLE VI
MUTUAL REFERRALS
Section 6.1. Referrals by Licensor.
(a) Licensee agrees to pay to Licensor (or to a Licensor Affiliate
designated by Licensor) a fee equal to 30% of any gross commission income per
transaction side earned by Licensee or any Company Affiliate from the provision
of Authorized Brokerage Services to a third party referred by Licensor or any
Licensor Affiliate to the Licensee Group for such Authorized Brokerage Services,
provided that such third party is not an Existing Brokerage Lead (it being
understood that Licensee shall give first preference in transmitting any such
referral to Branded Operators). Any such referral by Licensor or any Licensor
Affiliate shall be communicated to Licensee, or to such Company Affiliate as
Licensee may from time to time designate to receive such referrals, by written
notice to Licensor. An "Existing Brokerage Lead" shall mean a Person with whom a
broker of a Branded Operator has an existing client
24
relationship providing Authorized Brokerage Services as of the time Licensor or
any Licensor Affiliate made such referral.
(b) Nothing contained in this Section 6.1 shall obligate Licensor or
any Licensor Affiliate to make any referral or affirmatively promote the
Authorized Brokerage Services of any Branded Operator.
Section 6.2. Referrals by Licensee.
(a) Licensor agrees to pay to Licensee a fee equal to 10% of the gross
commission income earned by a Licensor Affiliate from the sale of any property
at auction by Holdings, which property is referred to such Licensor Affiliate by
Licensee or any Company Affiliate, provided that the property referred to
auction by Licensee or a Company Affiliate, as applicable, is not the property
of an Existing Auction Client; provided further, that no such fee shall be due
to Licensee unless the gross sale price of such property, or such property
together with other related properties referred to such Licensor Affiliate in
accordance with this Section 6.2(a), is in excess of $100,000. An "Existing
Auction Client" shall mean a Person with whom a Licensor Affiliate has an
existing client relationship with respect to the purchase or sale of property at
auction as of the time Licensee or any Company Affiliate made such referral.
(b) Nothing contained herein shall obligate Licensee or any Company
Affiliate to make any referral or affirmatively promote the Auction House
Business of the Licensor Affiliates.
Section 6.3. Payment of Referral Fees. Payments of any fees under this
Article 6 shall be made within 30 days of the payment of the commission or other
payment giving rise to a referral fee hereunder and such payment shall be
accompanied by a statement setting forth in reasonable detail the calculation of
such referral fee, including the amount of the applicable gross commission or
other payment and the corresponding referral, and attaching any reasonably
requested supporting documentation, which shall be treated confidentially.
ARTICLE VII
QUALITY CONTROL
Section 7.1. Eligible Markets.
(a) Licensee shall have the right to offer and sell the Authorized
Services under the Licensed Marks, and to sublicense such right or grant a
franchise to a Broker Affiliate, Franchisee or Company Affiliate, including for
any Owned Office, in each case only for a geographic area qualifying as an
Eligible Market; provided, that in the case of any exercise of the Option, the
foregoing requirement shall not apply to any country in the Option Territory for
which a license is granted pursuant to such Option exercise.
(b) For purposes hereof, an "Eligible Market" shall mean a geographic
area in which the median sales price ("MSP") for homes sold in such area during
the most recent 12 full calendar months for which data is available immediately
prior to (i) entering into a Branded Franchise Agreement with a proposed Branded
Franchisee or (ii) branding the Authorized
25
Services of a Branded Owned Office with the Licensed Marks, as applicable (the
"Measurement Period"), is at least 1.5 times the MSP for the United States
during the Measurement Period.
(c) The MSPs for the United States shall be determined by Licensee
based on data to the extent available provided by a recognized independent
publisher of home sale price information (e.g. the National Association of
Realtors or Federal National Mortgage Association (▇▇▇▇▇▇ ▇▇▇)). The MSP for
each Covered Geographic Area shall be determined by Licensee based upon data
provided by the same source as Licensee used for the foregoing determination
with respect to the United States to the extent such data is available from such
source and, to the extent that such data is not available from such source,
Licensee shall use data that is in Licensee's good faith business judgment the
most comparable to the data used with respect to Licensee's determination of the
MSP for the United States.
(d) Before Licensee shall grant any franchise to a prospective Branded
Franchisee, Licensee's franchise review committee shall, at a minimum, review
and consider the following in determining whether to grant such franchise: (i) a
full and complete franchise application from the prospective franchisee, (ii) to
the extent available, relevant market data provided by an independent third
party, (iii) to the extent available, relevant data provided by the Multiple
Listing Service covering the applicable geographic area and (iv) an on site
inspection report submitted by Licensee's representative.
(e) Each (i) Sold Owned Office, (ii) ▇▇▇▇▇▇▇▇ Legacy Office, (iii)
Pre-Existing Broker Affiliate and (iv) Person that was a broker affiliate of SIR
that was terminated by SIR other than for cause, or that exercised a right of
termination, during the two years prior to the Effective Date (an "SIR Legacy
Affiliate") is deemed to be in an Eligible Market and to satisfy the Guidelines
described in Section 7.2 below solely with respect to the Covered Geographic
Area in which it offered and sold Authorized Services as of the Effective Date
(or in the case of an SIR Legacy Affiliate, as of the time of termination of its
broker affiliate agreement with SIR); provided that any Branded Franchise to be
granted to an SIR Legacy Affiliate or Pre-Existing Broker Affiliate shall not
cover a Covered Geographic Area larger than the Covered Geographic Area provided
in such prospective franchisee's broker affiliate agreement, as in effect as of
the Effective Time or as in effect at the time of such termination, as
applicable, with SIR, including as modified by any oral agreement or authorized
course of dealing.
Section 7.2. Sublicensee Eligibility Guidelines.
(a) In addition to the requirements set forth in Section 7.1, (x)
prior to granting any franchise to any prospective Branded Franchisee, (y) prior
to executing any Broker Affiliate Agreement with any prospective Branded Broker
Affiliate and (z) prior to any Owned Office being branded with any Licensed ▇▇▇▇
(including pursuant to any sublicense), Licensee, in determining whether to make
such grant or effect such branding, shall take into account the guidelines set
forth in clauses (i) and (ii) below (the "Guidelines"). Determinations as to
whether the Guidelines have been satisfied shall be made by Licensee, in their
good faith business judgment, based on such available data as Licensee
reasonably deems appropriate. The Guidelines apply to offices of Branded
Franchisees, Branded Broker Affiliates and Branded Owned Offices on a
company-by-company basis rather than on an office-by-office basis, so that
multiple offices operated by a single Person are tested as a whole. Once a
Branded ▇▇▇▇▇▇▇▇▇▇,
▇▇
Branded Broker Affiliate or Branded Owned Office has satisfied the Guidelines it
shall be deemed to have satisfied the Guidelines for the term of the License
Agreement. The parties acknowledge that the Owned Offices of Buyer and its
Subsidiaries and the Pre-Existing Broker Affiliates satisfy the Guidelines for
the term of this Agreement. Notwithstanding the foregoing, in connection with
any exercise of the Option, the Guidelines shall not apply to any prospective
Branded Franchisee, Branded Broker Affiliate and Branded Owned Office located
outside of the United States, which Branded Franchisee, Branded Broker Affiliate
and Branded Owned Office shall be chosen in Licensee's sole discretion, provided
that, with respect to any Branded Franchisee located outside of the United
States, Licensee grants the Branded Franchises pursuant to a master franchisee
agreement with a master franchisor the material terms of which master franchise
agreement have been presented to Licensor, and such materials terms and such
master franchisor are acceptable to Licensor as indicated by it in writing (such
approval not to be unreasonably withheld).
A prospective Branded Franchisee, Branded Broker Affiliate or Branded
Owned Office shall satisfy the Guidelines if:
(i) it satisfies any one of the following guidelines for the
geographic area (as determined by Licensee) to be covered (the "Covered
Geographic Area") by the prospective Branded Franchisee, Branded Broker
Affiliate or Branded Owned Office:
(A) the average selling price ("ASP") for homes sold or
purchased by the customers of such prospective Branded Franchisee, Branded
Broker Affiliate or Branded Owned Office in transactions brokered by such
prospective Branded Franchisee, Branded Broker Affiliate or Branded Owned Office
in the Covered Geographic Area during the Measurement Period is in the top 40%
of selling prices for all homes sold in the Covered Geographic Area; or
(B) during the Measurement Period, such prospective Branded
Franchisee, Branded Broker Affiliate or Branded Owned Office ranked in the top
40% in terms of home purchases or sales brokered in the Covered Geographic Area
based on the aggregate sales price of residential real estate transactions
actually closed (the "Transaction Value"); or
(C) such prospective Branded Franchisee, Branded Broker
Affiliate or Branded Owned Office is ranked first, second or third in the
Covered Geographic Area in terms of (1) highest ASP for homes sold or purchased
during the Measurement Period in the Covered Geographic Area or (2) highest
Transaction Value for homes sold or purchased in the Covered Geographic Area
during the Measurement Period; or
(D) such prospective Branded Franchisee, Branded Broker
Affiliate or Branded Owned Office owns or operates a newly formed residential
brokerage office, which office is or will be composed of agents substantially
all of whom, immediately prior to the time the office would become a Branded
Franchisee, Branded Broker Affiliate or Branded Owned Office, were affiliated
with a licensed broker that would have satisfied the guidelines in one of
clauses (A), (B) or (C) of this Section 7.2(a)(i) with respect to the
Measurement Period; or
27
(ii) it does not satisfy any of the guidelines set forth in
Section 7.2(a)(i) but such prospective Branded Franchisee, Branded Broker
Affiliate or Branded Owned Office, together with all Franchisees that became
Branded Franchisees, all Broker Affiliates that became Branded Broker Affiliates
and all Owned Offices that became Branded Owned Offices during the immediately
preceding Measurement Period and who became eligible pursuant this clause (ii)
(and not pursuant to Section 7.2(a)(i)), would not represent more than 10% of
the total number of all prospective Branded Franchisees, Branded Broker
Affiliates or Branded Owned Offices, taken together, that became Branded
Franchisees, Branded Broker Affiliates or Branded Owned Offices, respectively,
during the Measurement Period.
(b) With respect to the renewal by Licensee or its sublicensee of any
Branded Franchise Agreement with a then-existing Branded Franchisee or any
Broker Affiliate Agreement with a then-existing Branded Broker Affiliate, in
each case during the term of this Agreement, Licensee shall use reasonable
efforts to apply the Guidelines; provided, however, that any renewals of such
existing Branded Franchisee or Branded Broker Affiliate shall be at Licensee's
sole discretion; and provided further, that in the event a then existing Branded
Franchisee or Branded Broker Affiliate (other than a Pre-Existing Broker
Affiliate) was granted a franchise pursuant to Section 7.2(a)(ii), the renewal
of any such Branded Franchisee or Branded Broker Affiliate shall be subject to
the satisfaction of the Guidelines pursuant to the terms and conditions of
Section 7.2, including Section 7.2(a)(ii).
(c) If the Covered Geographic Area covered by the Branded Franchisee
changes to include new offices of such Branded Franchisee located outside of the
Eligible Market, then Licensee shall be permitted to expand the Covered
Geographic Area to include such new offices if such expanded Covered Geographic
Area satisfies the requirements of an Eligible Market at the time of such
expansion.
(d) Licensee shall provide to Licensor, on a quarterly basis, a report
containing (i) the number of Branded Franchises granted and the number of
sublicenses granted to Branded Owned Offices and Branded Broker Affiliates
during the prior quarter and the corresponding Covered Geographic Area and (ii)
brief general descriptive information with respect to the business of each such
new Branded Franchisee, Branded Broker Affiliate and Branded Owned Office and
(iii) such other information as Licensor reasonably requests. Semiannually for
the first three years of the term of this Agreement, and thereafter on an annual
basis, at Licensor's option, the parties shall meet in person to discuss the
general process by which Licensee determines prospective Branded Franchisee,
Branded Broker Affiliate or Branded Owned Office eligibility and related
matters.
Section 7.3. Quality Control Standards With Respect To Owned Operations.
(a) Licensee shall, and shall cause any Company Affiliate that is a
sublicensee hereunder (including any Branded Owned Office) to:
(i) not make or publish any statement or advertisement which
would reasonably be expected to be construed to demean the image, value,
identity, reputation or goodwill associated with the Sotheby's ▇▇▇▇ or any
Licensed ▇▇▇▇;
28
(ii) advertise only in a manner that is professional, dignified
and not intentionally misleading;
(iii) conduct its business in a manner that complies with (A) the
terms of this Agreement, (B) the Code of Ethics of the National Association
of REALTORS and (C) the provisions of the Model Code of Ethics; and
(iv) not provide any Excluded Service under any Licensed ▇▇▇▇.
(b) Licensee shall, and shall cause each Company Affiliate who is a
sublicensee of any Licensed ▇▇▇▇ to, comply with the terms of this Agreement.
Section 7.4. Quality Control Standards With Respect To Affiliated and
Franchised Operations.
(a) In connection with the development of certain supplemental quality
control standards established by this Article 7 and elsewhere in this Agreement,
the parties acknowledge and express their respective intentions that the
provision of the Authorized Services under the Licensed Marks, whether by
Licensee or any of its sublicensees (including any Branded Operator), conform to
the standards currently employed by Licensor and the Licensor Affiliates and the
expectations of the prospective customers of Authorized Services offered and
sold under the Licensed Marks as to consistency and quality of the residential
real estate brokerage services. The parties have reviewed together their
respective operations in the residential real estate brokerage business with
respect to the maintenance of quality control. In connection with the foregoing,
Licensor has identified and developed Model Provisions for the purpose of
maintaining the quality of the Authorized Services provided under the Licensed
Marks pursuant to this Agreement at a high-level of quality commensurate with
Licensor's standards of quality existing as of the Effective Date and the
standards applicable to the Licensee Brokerage Business pursuant to Section 7.3.
Licensee covenants and agrees that any sublicense to use any Licensed ▇▇▇▇
granted by Licensee or any Company Affiliate, as sublicensees, to any Branded
Broker Affiliate or Branded Franchisee (including as contained in any
affiliation agreement or Franchise Agreement) shall:
(i) include a code of ethics no less strict than the Model Code
of Ethics;
(ii) include specific provisions with respect to the maintenance
of the high quality of the Authorized Services provided under the Licensed
Marks, which provisions shall be no less strict than the Model Quality
Control Provisions; and
(iii) not include any provision in conflict with any term of this
Agreement applicable to Branded Broker Affiliates or Branded Franchisees.
(b) Licensee covenants and agrees to enforce diligently, in its
reasonable judgment and in good faith, each agreement granting a sublicense to
any Licensed ▇▇▇▇ to any Branded Broker Affiliate or Branded Franchisee,
including any Broker Affiliate Agreement or Branded Franchise Agreement.
29
(c) Licensee acknowledges that its compliance, and the compliance of
each of its sublicensees, including any Branded Operator, with the quality
control provisions of Section 7.3 and this Section 7.4, is essential to preserve
the goodwill of the Licensed Marks and the integrity of the Authorized Services.
Section 7.5. Excluded Services by Branded Operators; Prohibition on
Co-Mingling Marks.
(a) Licensee is not prohibited by this Agreement from authorizing or
permitting any Branded Operator to provide any Excluded Service provided that
such Excluded Service is not (i) provided or offered to the public under any
Licensed ▇▇▇▇, (ii) provided or offered to the public in any way inconsistent
with the terms of the Model Co-Mingling Provisions or (iii) otherwise provided
or offered to the public in any way that could reasonably be expected to cause
confusion that any Excluded Service is designated as being provided under any
Licensed ▇▇▇▇.
(b) Licensee covenants and agrees that any agreement between Licensee
or any Company Affiliate, on the one hand, and any Branded Franchisee or Branded
Broker Affiliate, on the other hand, and any sublicense of any Licensed ▇▇▇▇ to
any Branded Owned Office, will contain terms and conditions requiring standards
for the separation of any Excluded Service from the offer and sale of any
Authorized Service under any Licensed ▇▇▇▇, which provisions will be no less
strict than the Model Co-Mingling Provisions.
Section 7.6. Uniform Franchise Offering Circular. With respect to any UFOC
that includes or is proposed to include or otherwise relate to a sublicense of
any Licensed ▇▇▇▇, such UFOC shall state that such sublicense is granted
pursuant to and as authorized by this Agreement, and Licensee shall reference in
such UFOC the terms and conditions of this Agreement to the extent Licensee
determines to be reasonably necessary or appropriate under applicable Law.
Section 7.7. Termination of Relationship.
(a) Any sublicense to any Branded Owned Office granted pursuant to
Section 2.1(b) shall automatically and immediately terminate in the event that
the sublicensee ceases to be an Owned Office of Licensee; provided that the
foregoing shall not prohibit the Person constituting, owning or acquiring any
such Branded Owned Office from offering and selling Authorized Services under
the Licensed Marks thereafter pursuant to a Branded Franchise Agreement or any
other sublicense of the Licensed Marks, including a Branded Broker Affiliate
Agreement, pursuant to this Agreement. For the avoidance of doubt, this Section
7.7(a) is not intended by the parties to limit the terms and conditions of
Section 17.2.
(b) Any sublicense to any Branded Franchisee or Broker Affiliate
granted pursuant to Section 2.1(b) shall automatically and immediately terminate
upon termination of each Branded Franchise Agreement between such Branded
Franchisee or Branded Broker Affiliate and Licensee or any Company Affiliate,
except to the extent of any post-termination wind-down period provided in the
terms of the applicable Branded Franchise or Broker Affiliate Agreement and then
solely for the duration of such wind-down period (during which time, for
30
the avoidance of doubt, the Franchisee Covered Revenue Earned from the
performance of the Authorized Brokerage Services by such Branded Franchisee or
Branded Broker Affiliate shall be subject to Article 5).
Section 7.8. Notice of Breach. Licensee shall promptly deliver to Licensor
notice of any material breach with respect to breaches of the quality control
standards contained herein by (a) any Licensee of the terms and conditions of
this Agreement or (b) to the extent known to Licensee, any sublicensee of any
Licensed ▇▇▇▇ of the terms and conditions of any such sublicensee's agreement,
including any Branded Franchise Agreement and Branded Broker Affiliate
Agreement, that are contemplated by this Article 7 to be included therein.
Section 7.9. Sample Uses of Licensed Marks.
(a) Licensee shall periodically deliver to Licensor, upon Licensor's
request, representative samples of promotional materials, including those
produced by or on behalf of Licensee or any Company Affiliate, that embody
Licensed Marks.
(b) Licensee shall periodically submit to the Licensor Liaison, upon
Licensor's request, representative samples in all applicable media of uses of
any Licensed ▇▇▇▇, including labels, signs and advertising and promotional
materials embodying any Licensed ▇▇▇▇ (including television and radio
advertising, print advertising, on-line advertising (including home pages)).
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1. Representation and Warranties of Holdings and Licensor.
Holdings and Licensor represents and warrants to Licensee as follows:
(a) Authority; Validity. Each of Holdings and Licensor is a
corporation validly existing and in good standing under the laws of the state of
its incorporation. Each of Holdings and Licensor has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereunder. The execution, delivery and performance of
this Agreement by Holdings and Licensor and the consummation by Holdings and
Licensor of the transactions contemplated hereunder, have been duly and validly
authorized by Holdings and Licensor, and no other corporate proceedings on the
part of Holdings or Licensor are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereunder. This Agreement has been
duly executed and delivered by Holdings and Licensor, and, assuming due
execution and delivery by Parent and Licensee, constitutes a valid and binding
obligations of Holdings and Licensor enforceable against Holdings and Licensor
in accordance with its terms, except as may be limited by any bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
31
(b) No Conflict; Government Consents.
(i) Neither the execution, delivery or performance by Holdings
and Licensor of this Agreement nor the consummation of the transactions
contemplated hereby and compliance by Holdings and Licensor with any of the
provisions hereof will: (x) violate any provision of any Organizational Document
of Holdings or Licensor, (y) require any consent, approval or notice under,
violate or result in the violation of, conflict with or result in a breach of
any provisions of, constitute a default (or an event which, with notice or lapse
of time or both, could reasonably be expected to constitute a default) under,
result in the termination of, result in a right of termination of, any material
contractual obligation of Holdings or Licensor (other than such consents as have
already been obtained), or (z) violate any material Law of the United States
applicable to Holdings or Licensor.
(ii) No material consent, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to be obtained or made by Licensor in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby that has not been obtained or made.
(c) Litigation. There is no Litigation brought by or against Holdings
or Licensor or any Licensor Affiliate or any of their respective assets or
businesses pending or, to the knowledge of Licensor, threatened against
Holdings, Licensor or any Licensor Affiliate which seeks to prevent consummation
of the transactions contemplated hereby or which seeks damages in connection
with the transactions contemplated hereby, and no temporary restraining order,
preliminary or permanent injunction or other order or decree which prevents
consummation of the transactions contemplated hereby has been issued against
Holdings, Licensor or any Licensor Affiliate.
(d) SIR ▇▇▇▇. Licensor is the sole and exclusive owner of the SIR ▇▇▇▇
in the United States. Licensor has the valid right to use the SIR ▇▇▇▇ in the
Domain Names in the United States. To the knowledge of Licensor, the use of the
SIR ▇▇▇▇ by Licensee for the offer and sale of Authorized Brokerage Services in
the United States and Israel will not infringe on the intellectual property
rights of any third party. Schedule 8.1(d) sets forth a complete and accurate
list of all registrations as of the Effective Date of the Licensed Marks in the
United States and Israel and such registrations are valid and subsisting and in
full force and effect as of the Effective Date. Except as set forth in Schedule
3.11(b) to the Purchase Agreement, there is no material Litigation pending or,
to the knowledge of Licensor, threatened, and Licensor has not received or sent
any written notice of a claim or suit, (x) alleging that the SIR ▇▇▇▇ infringes
upon or otherwise violates any intellectual property rights of any third party
in the Original Territory or (y) challenging the ownership, use, validity or
enforceability of, or application or registration for, the SIR ▇▇▇▇ in the
Original Territory. Licensor has the full power to license the SIR ▇▇▇▇ in the
United States, and to sublicense the SIR ▇▇▇▇ in Israel, for use in connection
with the Authorized Brokerage Services pursuant to the terms and conditions of
this Agreement. Except with respect to (i) any license of any Licensed ▇▇▇▇
pursuant to any agreement with a Pre-Existing Broker Affiliate, (ii) any license
or sublicense of any Licensed ▇▇▇▇ granted to any agent of any Licensor
Affiliate in the ordinary course of business for the sole and limited purpose of
creating and placing marketing and advertising on behalf of such
32
Licensor Affiliate and (iii) the Synthesis Agreement, Licensor has not licensed
the Licensed Marks to any Person as of the Effective Date other than pursuant to
this Agreement.
Section 8.2. Representations and Warranties of Parent and Licensee. Parent
and Licensee jointly and severally represent and warrant to Licensor as follows:
(a) Authority; Validity. Each of Parent and Licensee is a corporation
validly existing and in good standing under the laws of the state of its
incorporation. Each of Parent and Licensee has the corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereunder. The execution, delivery and performance of this
Agreement by Parent and Licensee and the consummation by Parent and Licensee of
the transactions contemplated hereunder, have been duly and validly authorized
by Parent and Licensee, and no other corporate proceedings on the part of Parent
or Licensee are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereunder. This Agreement has been duly executed and
delivered by Parent and Licensee, and, assuming due execution and delivery by
Holdings and Licensor, constitutes a valid and binding obligation of Parent and
Licensee enforceable against Parent and Licensee in accordance with its terms,
except as may be limited by any bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(b) No Conflict; Government Consents.
(i) Neither the execution, delivery or performance by Parent and
Licensee of this Agreement nor the consummation of the transactions contemplated
hereby and compliance by Parent and Licensee with any of the provisions hereof
will: (x) violate any provision of any Organizational Document of Parent or
Licensee, (y) require any consent, approval or notice under, violate or result
in the violation of, conflict with or result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time or both,
could reasonably be expected to constitute a default) under, result in the
termination of, result in a right of termination of, any material contractual
obligation of Parent or Licensee (other than such consents as have already been
obtained), or (z) violate any material Law of the United States applicable to
Parent or Licensee.
(ii) No material consent, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to be obtained or made by Parent or Licensee in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby that has not been obtained or made.
(c) Litigation. There is no Litigation brought by or against Parent or
Licensee or any Company Affiliate or any of their respective assets or
businesses pending or, to the knowledge of Parent or Licensee, threatened
against Parent or Licensee or any Company Affiliate (i) which seeks to prevent
consummation of the transactions contemplated hereby or which seeks damages in
connection with the transactions contemplated hereby or (ii) which was required
by applicable Law to be described in Parent's most recent Annual Report on Form
10-K
33
filed with the Securities Exchange Commission or in any registration
statement, report, schedule, form, statement or other document filed by Parent
with the Securities Exchange Commission since the filing of such Form 10-K, and
was not so described therein. There is no temporary restraining order,
preliminary or permanent injunction or other order or decree which prevents
consummation of the transactions contemplated hereby has been issued against
Parent, License or any Company Affiliate.
ARTICLE IX
RECORDS; AUDITS AND INSPECTIONS
Section 9.1. Maintenance of Records.
(a) Licensee shall, and shall cause the Company Affiliates to,
maintain accurate books, records and accounts, including financial and
accounting records (including by using commercially reasonable efforts to cause
each of their independent accountants to retain their working papers) relating
to the offer and sale of the Authorized Services, directly or indirectly, by
Licensee or any Company Affiliate, including any Branded Owned Office and any
Branded Broker Affiliate and Branded Franchisee, the determination of any Fees
and referral fees pursuant to this Agreement, and the general process followed
by Licensee to confirm compliance by Licensee and any sublicensee of any
Licensed ▇▇▇▇ with the quality control provisions set forth in Article 7 (such
books, records and accounts, collectively, the "Covered Books and Records").
(b) The Covered Books and Records shall be maintained in accordance
with Parent's applicable document retention policy (including as to length of
retention).
Section 9.2. Right of Inspection and Audit.
(a) Licensor shall be permitted, during the term of this Agreement and
for a period of three years following any termination of this Agreement (or
longer to the extent of any applicable statute of limitations or any dispute
hereunder), no more than twice in any twelve-month period, to inspect and
conduct an audit of the Covered Books and Records relating to the determination
of the Fees and referral fees due hereunder. During an inspection or audit, at
Licensor's expense, Licensor shall have the right to make copies or extracts of
the Covered Books and Records.
(b) Licensor shall be permitted, during the term of this Agreement and
for a period of two years following any termination of this Agreement (or longer
to the extent of any applicable statute of limitations or any dispute
hereunder), no more than twice in any twelve month period, to meet with
Licensee's officers, employees and applicable agents and representatives for the
purpose of reviewing Licensee's compliance with the quality control provisions
of this Agreement, including Sections 7.3 and 7.4.
(c) Licensor shall provide Licensee with not less than 20 days'
advance written notice of any inspection and audit or meeting conducted pursuant
to this Section 9.2. Access to Licensee's facilities in connection with any
inspection and audit or meeting conducted pursuant to this Section 9.2 shall be
during regular business hours. Licensee shall reasonably
34
cooperate with, and shall not cause any interference with, any inspection and
audit or meeting conducted pursuant to this Section 9.2.
(d) Licensor shall, and cause each Licensor Affiliate and each of
their representatives and agents to, keep confidential all proprietary and
confidential information that is obtained by Licensor pursuant to this Section
9.2 other than information (i) which is generally available to the public at the
time it is provided to Licensor or thereafter becomes generally available to the
public (other than as a result of disclosure by Licensor or any Licensor
Affiliate or any of their representatives or agents), (ii) which was available
to Licensor or any Licensor Affiliate prior to it being furnished to Licensor
pursuant to this Section 9.2, (iii) is or becomes available to Licensor or any
Licensor Affiliate from a Person other than Licensee or any Company Affiliate or
any of their representatives or agents, provided such Person shall not be known
by Licensor to be in breach of its obligations to keep confidential such
information or (iv) was or is independently developed by Licensor or any
Licensor Affiliate or others on any of their behalf without recourse to or
reliance upon Confidential Information (the "Confidential Information");
provided, however, that Licensor and any Licensor Affiliate and any of their
representatives and agents may disclose any Confidential Information to the
extent such disclosure is required by applicable Law or stock market rule,
subject (other than in the case of disclosure pursuant to applicable corporation
or securities Laws or regulations of any securities exchange) to prior written
notice to Licensee and cooperation with Licensee to obtain a protective order or
similar confidentiality arrangement, if available. The covenant set forth in
this Section 9.2(d) shall terminate with respect to any Confidential Information
one year after the disclosure of such Confidential Information to Licensor under
this Section 9.2.
Section 9.3. Payment Deficiency.
(a) Except as otherwise provided in Section 9.3(b), the expenses of
any inspection and audit conducted pursuant to Section 9.2 shall be borne by
Licensor (which shall not include reimbursement of Licensee's internal or
third-party expenses).
(b) If the aggregated Fees and referral fees actually paid by Licensee
pursuant to Articles 5 and 6 are less than the aggregated Fees and referral fees
that Licensee was required to pay pursuant to Articles 5 and 6, then Licensee
shall promptly (and in no event later than five days following such
determination of such payment deficiency) pay to Licensor the amount of such
payment deficiency (together with interest from the date originally due to the
extent permitted by applicable Law at the Prime Rate on the date such payment
was originally due).
ARTICLE X
SPECIAL COVENANTS AND AGREEMENTS
Section 10.1. Registration of Marks.
(a) At the request of Licensee, from time to time during the term of
this Agreement, Licensor shall use commercially reasonable efforts to file a
trademark or domain name registration (or similar or successor electronic
address mechanism or system) application for:
35
(i) the use of any Licensed ▇▇▇▇ solely for Authorized Services
(as designated by Licensee) in the Territory, in each case in accordance
with the terms and conditions of this Agreement, to the extent not already
expressly covered by any existing registration of such Licensed ▇▇▇▇; or
(ii) the use of any Licensed ▇▇▇▇ or Unregistered ▇▇▇▇ solely for
Authorized Services (as designated by Licensee) in any country in the
Option Territory (as designated by Licensee).
(b) Upon or following any such request by Licensee, Licensee shall
prepare (at Licensee's expense) and deliver to Licensor a trademark registration
application in a form suitable for filing by Licensor with the applicable
Governmental Authority in connection with such requested registration.
(c) Subject to the ultimate control and authority of Licensor with
respect to the form and content of the registration application in all respects,
within 10 days following receipt of such trademark application from Licensee,
Licensor shall file a trademark registration application with respect to such
requested registration, with such changes to such trademark registration
application as Licensor determines appropriate in its reasonable discretion.
Licensee shall promptly reimburse Licensor for all filing fees and expenses
(including reasonable attorneys' fees) incurred in connection with the
preparation, filing and prosecution of any such trademark registration
application.
(d) Licensor shall promptly forward to Licensee copies of all
communications received from the applicable Governmental Authority with whom the
trademark registration application was filed and shall otherwise reasonably
cooperate with Licensee (at Licensee's expense) with respect to the prosecution
and maintenance of all applications and registrations for Licensed Marks.
Section 10.2. Compliance with Laws. Licensee shall, and shall cause each
sublicensee and Branded Owned Office and Company Affiliate to, comply in all
material respects with all Laws applicable to the Authorized Services conducted
under any Licensed ▇▇▇▇, including all Laws relating to franchisors and
franchisees. Licensee shall be responsible for complying with all requirements
of Law relating to required franchise disclosure statements (including their
preparation) and applicable filing requirements and shall ensure that such
franchise disclosure statements (and any oral or written statements made in
connection therewith) comply in all material respects with applicable Laws.
Section 10.3. Right of First Offer With Respect To Timeshare Brokerage
Services.
(a) Prior to licensing the Sotheby's ▇▇▇▇ to any third party for use
in marketing and selling real estate brokerage services in connection with
Timeshares in the Territory ("Timeshare Brokerage Services"), Licensor shall
deliver to Licensee a notice (the "First Offer Notice") advising Licensee that
it may make an offer to Licensor to acquire a license to offer and sell
Timeshare Brokerage Services under the Licensed Marks in the Territory (a
"Timeshare License").
36
(b) Upon receipt of a First Offer Notice, Licensee shall have 60 days
to make such an offer. Licensor shall not be under any obligation to accept or
negotiate any offer so received from Licensee and may reject any such offer in
its sole discretion. Licensor shall be free, for a period of one year after
giving such opportunity to make an offer to Licensee, to enter into any
arrangement with any third party on any terms with respect to a Timeshare
License.
Section 10.4. Right of First Offer With Respect To Licensee Brokerage
Business.
(a) Prior to selling all or substantially all of the business of
Licensee and the Company Affiliates with respect to this Agreement and of any
Company Affiliate that is a Branded Operator (such business all taken as a
whole) (as it exists on the date of such sale), directly or indirectly, in one
or more related transactions, to any Person who is not a Company Affiliate,
whether by asset sale, stock sale, merger or combination of any entity with any
entity Controlled by a Person who is not a Company Affiliate, or any similar
transaction, or any combination of any such transactions (a "Sale Transaction"),
or offering, directly or indirectly, a Sale Transaction to any Person who is not
a Company Affiliate, Parent shall deliver to Licensor a notice (the "Licensor
Offer Notice") advising Licensor that it may make an offer to Parent to acquire
the Licensee Brokerage Business.
(b) Upon receipt of a Licensor Offer Notice, Licensor shall have 120
days (the "Offer Period") to make a bona fide offer to acquire the Licensee
Brokerage Business pursuant to a Sale Transaction (the "Offer"), which shall
include the proposed consideration and other material terms and conditions of
Licensor's proposed acquisition of the Licensee Brokerage Business. If Licensor
does not deliver a Offer during the Offer Period, then, during the 120 days
following the last day of the Offer Period, Parent may offer a Sale Transaction
to any Person who is not a Company Affiliate, and during such 120-day period
consummate any such Sale Transaction.
(c) If Licensor delivers a Offer within the Offer Period, then Parent
shall have 120 days following the date of receipt of such Offer to solicit
offers from third parties to acquire the Licensee Brokerage Business pursuant to
a Sale Transaction. If, by the end of such 120-day period, Parent has not
received a bona fide firm and binding written offer from a third party that
Parent reasonably determines in its good faith judgment to have a higher value
and to be otherwise more favorable for Parent than the value of the Offer, then
Parent may accept the Offer and use its reasonable best efforts to consummate a
Sale Transaction on the terms of the Offer as soon as reasonably practicable.
If, during such 120-day period, Parent receives a bona fide firm and binding
written offer from a third party that Parent reasonably determines in its good
faith judgment to have a higher value and to be otherwise more favorable for
Parent than the value of the Offer (a "Superior Offer"), then Parent may, only
during the 120 day period following receipt of such offer, consummate a Sale
Transaction on the terms of the Superior Offer only with the third party who
made such Superior Offer. If Parent does not consummate a Sale Transaction
during such 120-day period, then Parent may not consummate any Sale Transaction
or offer any Sale Transaction to any Person who is not a Company Affiliate
without first complying anew with this Section 10.4.
Section 10.5. Certain Trademark Filings. Following the Effective Date,
Licensor shall have the right to make any filings related to this Agreement and
the performance of the
37
parties' obligations and rights hereunder that are required or advisable
pursuant to applicable Law in any jurisdiction within the Territory, and
Licensee shall cooperate with and reasonably assist Licensor in connection
therewith, including in connection with withdrawing any filings upon termination
of this Agreement.
Section 10.6. Further Assurances. From and after the Effective Date, upon
the terms of this Agreement and subject to applicable Law, Licensor and Licensee
shall act in good faith and shall cooperate with each other and use their
commercially reasonable efforts to, as soon as reasonably practicable, (i) take,
or cause to be taken, all actions, (ii) execute, acknowledge and deliver all
documents, agreements and instruments and (iii) perform such other acts and do,
or cause to be done, all things necessary, proper or advisable, in each case to
confer on each party the rights, benefits and obligations provided by, and to
consummate and make effective the transactions contemplated by, this Agreement
as soon as practicable.
Section 10.7. Prohibition on Auction House Business.
(a) Licensee shall not, and Licensee shall cause each Branded Owned
Office and Company Affiliate not to enter into an affiliation, license or
similar agreement with respect to real estate brokerage services with a third
party Auction House, in each case in the Territory or any other country in the
world, other than Licensor or any Licensor Affiliate.
(b) Licensee shall not, and Licensee shall cause each Company
Affiliate not to, use any Licensed ▇▇▇▇ in combination with the word "auction"
or any word denoting an auction, or any derivation of the word "auction", in any
corporate or trade name or assumed name or d/b/a or in any ▇▇▇▇ under which any
Authorized Service is offered or sold.
(c) Licensee shall require, in each Branded Franchise Agreement and
each Broker Affiliate Agreement with a Branded Broker Affiliate, that the
Branded Franchisee or Branded Broker Affiliate, as applicable, will not use any
Licensed ▇▇▇▇ in combination with the word "auction" or any word denoting an
auction, or any derivation of the word "auction", in any corporate or trade name
or assumed name or d/b/a or in any ▇▇▇▇ under which any Authorized Service is
offered or sold.
Section 10.8. Acknowledgement of SIR Rights. It is understood and agreed by
the parties, and Parent and Licensee acknowledge, that any license or sublicense
of the Sotheby's ▇▇▇▇, any Licensed ▇▇▇▇ or any other trademark or service ▇▇▇▇
from any Licensor Affiliate to SIR, or any agreement relating to any such
matter, is hereby terminated and of no further force and effect, effective as of
the Effective Date, and each of Parent and Licensee agree that they will, and
will cause the Company Affiliates to, execute such further documents and take
such further actions as may be necessary to further evidence or give further
effect to the termination of any such license, sublicense or agreement.
Section 10.9. Establishment of SPV; Transfers and Pledge.
(a) Licensor shall, within 60 days of the Effective Date, have (i)
established an Eligible SPV, (ii) assigned to such Eligible SPV (A) all
registrations for any Licensed Marks for which registration has been obtained by
Licensor or any Licensor Affiliate in the Original Territory, (B) all
sublicenses of any Licensed ▇▇▇▇ for which Licensor is a
38
sublicensee in the Original Territory and (C) all other rights that Licensor has
in and to the Licensed Marks in the Original Territory, and (iii) assigned its
rights and obligations under this Agreement to such Eligible SPV (and such
Eligible SPV shall have executed and delivered to Licensee an instrument
acknowledging its assumption of Licensor's rights and obligations under this
Agreement and its agreement to be bound by the terms and conditions of this
Agreement as Licensor); provided, however, that with respect to the registration
for the SIR ▇▇▇▇ in Israel, Licensor shall have the right to establish an
Eligible SPV to hold such registration in any jurisdiction permitted under
Section 18(d), provided further that such Eligible SPV executes and delivers to
Licensee the instrument contemplated in the preceding clause (iii).
(b) During such 60-day period, Licensor and Licensee, negotiating in
good faith with each other, shall prepare and execute a pledge agreement
providing for the grant by the Eligible SPV of a first priority security
interest in the Licensed Marks, which agreement shall secure the performance by
Licensor of its obligation under this Agreement to license the Licensed Marks to
Licensee in the Territory and providing that that the pledgee will be able to
exercise its remedies under the lien only upon the occurrence of, "any material
failure of Licensor, in breach of the provisions of the License Agreement, to
license the Licensed Marks to the Licensee in the Territory, which failure
prevents the Licensee from being able to use the Licensed Marks in the Territory
as contemplated under the License Agreement."
(c) In connection with any assignment of this Agreement to an Eligible
SPV, Holdings covenants and agrees that it will cause such Eligible SPV to
maintain appropriate corporate formalities.
Section 10.10. Synthesis Acknowledgement. It is understood and agreed by
the parties that the Synthesis Agreement is in effect as of the Effective Date
and that, notwithstanding anything to the contrary herein, neither the existence
of the Synthesis Agreement, nor the performance of the obligations by either
party thereunder pursuant to the terms and conditions thereof, including the
grant of the sublicense of the SIR ▇▇▇▇ thereunder, shall constitute a breach of
the terms and conditions of this Agreement or otherwise be prohibited by this
Agreement.
ARTICLE XI
EXCLUSIVITY; NON-COMPETITION
Section 11.1. Exclusivity. (a) During the period commencing on the
Effective Date and ending on the date of termination of this Agreement (and not
extending into any Franchise Wind-Down Period), Holdings and Licensor shall not,
and shall cause the Licensor Affiliates (for so long as they remain Licensor
Affiliates) not to, use, or grant to any other Person, the right or license to
use, anywhere in the Territory or in the Option Territory, (i) the Sotheby's
▇▇▇▇ or the name "Sotheby's" or any derivative thereof or any confusingly
similar ▇▇▇▇ (other than any Licensed ▇▇▇▇), for any Authorized Brokerage
Services, Authorized Ancillary Services or any service described in the
definition of Excluded Services, other than Timeshare Brokerage Services and
sales of Artistically Significant Residences in auction format, which shall not
be prohibited by this Section 11.1 or (ii) any Licensed ▇▇▇▇.
39
(b) During the period commencing on the Effective Date and ending on
the date of termination of this Agreement, Holdings and Licensor shall not, and
Holdings shall cause the Licensor Affiliates (for so long as they remain
Licensor Affiliates) not to, sell, dispose or otherwise transfer to any Person
any Licensed ▇▇▇▇; provided, however, that the Licensed Marks may, at any time
and from time to time, be transferred to an Eligible SPV, provided that (i)
Licensor's rights and obligations under this Agreement are assigned to such
Eligible SPV, (ii) such Eligible SPV shall execute an instrument acknowledging
its assumption of Licensor's rights and obligations under this Agreement and its
agreement to be bound by the terms and conditions of this Agreement as Licensor
and (iii) such Eligible SPV executes and delivers to Licensee a pledge agreement
substantially similar to the pledge agreement executed by Licensor pursuant to
Section 10.9(b).
Section 11.2. Non-Competition.
(a) During the period commencing on the Effective Date and ending on
the date that is 10 years following the Effective Date (the "Non-Compete
Period"), neither Licensor nor Holdings shall, and Holdings shall cause its
Subsidiaries (for so long as they remain its Subsidiaries) not to, directly or
indirectly, engage, in the Territory, in the Authorized Brokerage Services,
other than (i) sales of Artistically Significant Residences in auction format
and (ii) in the performance of its obligations under this Agreement. If the
foregoing, or any portion thereof, shall for any reason be held invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
portions thereof shall not be affected or impaired thereby and such remaining
portions shall remain in full force and effect. Moreover, if any provision shall
be held to be excessively broad as to duration, activity or subject, such
provision shall be construed by limiting and reducing it so as to be enforceable
to the maximum extent allowable by applicable Law.
(b) During the period commencing on the Effective Date and ending on
the date that is three years following the Effective Date, neither Licensor nor
Holdings shall, and Holdings shall cause its Subsidiaries (for so long as they
remain Subsidiaries) not to, directly or indirectly:
(i) cause or attempt to cause any employee of Licensee and any of
its Affiliates, in each case who was an employee of SIR as of the Effective Date
to terminate his or her employment with the Licensee and any of its Affiliates
or otherwise engage or participate in any effort to induce any such employee to
terminate his or her employment with the Licensee and any of its Affiliates; or
(ii) hire, or solicit or attempt to hire (other than by general
advertising), any employee of the Licensee and any of its Affiliates, in each
case who was an employee of SIR as of the Effective Date, provided that nothing
in this Section 11.2(b) shall prohibit Licensor or any Licensor Affiliate from
hiring any such employee whose employment by Licensee or any of its Affiliates
has been terminated for at least six months and who initiates, directly or
indirectly, discussions with such Licensor or Licensor Affiliate regarding
possible employment.
40
(c) In the event that Holdings becomes Controlled by any Person who is
not a Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) who Controls Holdings as of the Effective Date or a Taubman Family
Member or such a group of Taubman Family Members (an "Acquiror") (such event, a
"Holdings Change of Control"), then such Acquiror and such Acquiror's Affiliates
(other than Holdings and its Subsidiaries) (the "Acquiror Group") shall neither
provide nor offer any Authorized Brokerage Services under the Licensed Marks or
the Sotheby's ▇▇▇▇. It is understood that the Acquiror Group is not prohibited
from offering and providing Authorized Brokerage Services other than under any
Licensed ▇▇▇▇ or the Sotheby's ▇▇▇▇.
ARTICLE XII
OWNERSHIP AND PROTECTION OF MARKS
Section 12.1. Ownership of Marks. Licensee shall not (and no sublicense
granted by Licensee shall represent or suggest otherwise) acquire any ownership
interest in the Licensed Marks throughout the term of this Agreement or
otherwise. Licensee acknowledges, and shall caused each sublicensee to
acknowledge, that Licensor exclusively owns, and will continue to own, the
Licensed Marks and all copyrights, trademarks, services marks, trade names and
other intellectual property rights in and to them and all registrations relating
to the foregoing. Licensee acknowledges, and shall cause each sublicensee to
acknowledge, (a) the great value of the goodwill associated with the Licensed
Marks and the Sotheby's ▇▇▇▇; (b) that all goodwill associated with the Licensed
Marks and the Sotheby's ▇▇▇▇ will inure to the benefit of Licensor; (c) that the
Licensed Marks and the Sotheby's ▇▇▇▇ have secondary meaning in the minds of the
public and (d) that the nature of the businesses of Licensor requires public
respect for and trust in the reputation and integrity of Licensor and the
Licensor Affiliates.
Section 12.2. Proprietary Materials. Licensor acknowledges that Licensee
shall own worldwide in perpetuity the following materials (collectively
"Proprietary Materials") created by or on behalf of Licensee or any Company
Affiliate holding a sublicense for any Licensed ▇▇▇▇: (i) all artwork produced
that bears any Licensed ▇▇▇▇ ("Artwork"); (ii) all computer artwork
incorporating graphic descriptions of any Licensed ▇▇▇▇ ("Computer Art"); (iii)
all photographs incorporating graphic descriptions of any Licensed ▇▇▇▇
("Photographs"); (iv) all derivative works based on any of the Licensed Marks,
Computer Art, Photographs, or Artwork ("Derivative Works"); and (v) all
copyrights and other intellectual property rights in, and all duplicates and
copies of, the Artwork, Computer Art, Photographs and Derivative Works described
in clauses (i) through (iv) except with respect to any Licensed ▇▇▇▇ contained
or embodied in any such Proprietary Materials. All Proprietary Materials, and
the creation and any use thereof, shall be subject to the terms and conditions
of this Agreement in all respects. Nothing contained in this Section 12.2 shall
be construed to alter or modify the rights and interests of Licensor in and to
the Licensed Marks.
Section 12.3. Protection of Marks. Licensor will take all reasonable steps
to maintain all registrations of the Licensed Marks, including any such
registrations obtained pursuant to Section 10.1, in the Territory during the
term hereof, to the extent such Licensed ▇▇▇▇ is used by Licensee throughout the
term hereof. Licensee will fully cooperate with Licensor, at Licensee's expense,
in efforts to obtain, perfect and enforce Licensor's rights in the Licensed
Marks.
41
Section 12.4. No Registration by Licensee. Licensee shall not, and Licensee
shall cause each Branded Owned Office and Company Affiliate not to, on its own
behalf or on behalf of any other Person, in any jurisdiction in the Territory or
any other country in the world, register or attempt to register as trademarks or
service marks any of the Licensed Marks, any trademark or service ▇▇▇▇ that
consists of or includes the Sotheby's ▇▇▇▇ or any trademark or service ▇▇▇▇ that
is confusingly similar thereto.
Section 12.5. Infringement Actions.
(a) Franchisee-Related Claims. In the event that any Branded
Franchisee, Branded Broker Affiliate, or a Former Branded Franchisee-Affiliate,
imitates, infringes, uses without authorization or dilutes, in the Territory,
any Licensed ▇▇▇▇ in connection with the offer or sale of Authorized Services or
Excluded Services by such Branded Franchisee, Branded Broker Affiliate or Former
Branded Franchisee-Affiliate:
(i) Licensee shall have the sole right (subject to Section
12.5(a)(ii)) to commence or prosecute and control the disposition of any claims
or suits against such Branded Franchisee, Branded Broker Affiliate or Former
Branded Franchisee-Affiliate relative to such imitation, infringement, use
without authorization or dilution (a "Franchisee Claim"). Holdings shall, and
shall cause each Licensor Affiliate to, reasonably cooperate with and provide
reasonable assistance to Licensee in connection with such Franchisee Claim, at
Licensee's expense. Subject to Section 12.5(a)(ii), Licensee shall determine
whether to take action and the type of action, if any, to take against such
imitation, infringement, use without authorization or dilution.
(ii) If Licensee determines that it will not commence or
prosecute such Franchisee Claim within 60 days after Licensee has become aware
thereof, (A) Licensee shall deliver to Licensor notice thereof, accompanied by a
reasonable description of such Franchisee Claim and (B) Licensor shall have the
right to compel Licensee to commence and prosecute such Franchisee Claim. The
right to compel prosecution hereunder shall be exercisable by written notice to
Licensee, and Licensee shall commence with reasonable diligence prosecute such
claim within 60 days following receipt of notice of such demand from Licensor.
(iii) Licensee shall be solely responsible for the fees and
expenses (including attorneys' fees but not including any fees of co-counsel
hired pursuant to the terms and conditions of Section 12.5(d)) incurred in
connection with such Franchisee Claim.
(iv) Licensee shall receive the full amount of any settlement
made or damages awarded in or for such Franchisee Claim (it being understood
that to the extent any such settlement or damages awarded is characterized as or
deemed or otherwise treated as royalties and to the extent that Licensee has not
previously paid Licensor a Fee with respect to such royalties pursuant to the
terms and conditions of Section 5.1, then such amount shall be treated as
Franchisee Covered Revenue and a Fee shall be paid thereon pursuant to the terms
and conditions of Section 5.1).
(b) Brokerage Service Provider Claims. In the event that any third
party imitates, infringes, uses without authorization or dilutes, in the
Territory, any Licensed ▇▇▇▇ and
42
such third party (x) is not then a Branded Franchisee, Branded Broker Affiliate
or Former Branded Franchisee-Affiliate and (y) is in the business of offering
and selling Authorized Services:
(i) Licensee shall have the sole initial right (subject to
Section 12.5(b)(ii)) to commence or prosecute and control the disposition of a
claim or suit relative to such imitation, infringement, use without
authorization or dilution (a "Brokerage Service Provider Claim"). Holdings
shall, and shall cause each Licensor Affiliate to, reasonably cooperate with and
provide reasonable assistance to Licensee in connection with such Brokerage
Service Provider Claim, at Licensee's expense. Subject to Section 12.5(b)(ii),
Licensee shall determine whether to take action and the type of action, if any,
to take against such imitation, infringement, use without authorization or
dilution.
(ii) If Licensee determines that it will not commence or
prosecute such Brokerage Service Provider Claim within 30 days after Licensee
has become aware thereof, (A) Licensee shall deliver to Licensor notice thereof
accompanied by a reasonable description of such Brokerage Service Provider Claim
and (B) Licensor shall have the right (but not the obligation) to commence or
prosecute and control the disposition of such Brokerage Service Provider Claim.
Parent shall, and shall cause each of its Affiliates to, reasonably cooperate
with and provide reasonable assistance to Licensor in connection with such
Brokerage Service Provider Claim, at Licensee's expense.
(iii) Licensee shall be solely responsible for the fees and
expenses (including attorneys' fees but not including any fees of co-counsel
hired pursuant to the terms and conditions of Section 12.5(d)) incurred in
connection with any Brokerage Service Provider Claim, whether commenced and
prosecuted by Licensee or Licensor. In the case of any Brokerage Service
Provider Claim commenced and prosecuted by Licensor, Licensee shall reimburse
Licensor for such fees and expenses as incurred.
(iv) Any settlement made or damages awarded in or for such
Brokerage Service Provider Claim shall be applied first to reimburse Licensee
for its fees and expenses paid pursuant to the terms and conditions of Section
12.5(b)(iii), and the remainder of such settlement or damages shall be divided
equally between Licensee and Licensor.
(c) Other Licensed ▇▇▇▇ Claims. In the event that any third party
imitates, infringes, uses without authorization or dilutes any Licensed ▇▇▇▇ in
the Territory and such third party (x) is not then a Branded Franchisee, Branded
Broker Affiliate or Former Branded Franchisee-Affiliate and (y) is not in the
business of offering and selling Authorized Services:
(i) Licensor shall have the sole initial right (subject to
Section 12.5(c)(ii)), in its sole discretion, to commence or prosecute and
control the disposition of a claim or suit relative to such imitation,
infringement, use without authorization or dilution (an "Other Licensed ▇▇▇▇
Claim"). Parent shall, and shall cause each of its Affiliates to, reasonably
cooperate with and provide reasonable assistance to Licensor in connection with
such Other Licensed ▇▇▇▇ Claim, at Licensor's expense. Subject to Section
12.5(c)(ii), Licensor shall determine whether to take action and the type of
action, if any, to take against such imitation, infringement, use without
authorization or dilution.
43
(ii) If Licensor does not commence or prosecute such Other
Licensed ▇▇▇▇ Claim within 60 days after Licensor has become aware thereof, (A)
Licensor shall deliver to Licensee written notice thereof accompanied by a
reasonable description of such Other Licensed ▇▇▇▇ Claim and (B) Licensee shall
have the right to compel Licensor to commence and prosecute such Other Licensed
▇▇▇▇ Claim. The right to compel prosecution hereunder shall be exercisable by
written notice to Licensor, and Licensor shall commence and with reasonable
diligence prosecute such claim within 60 days following receipt of notice of
such demand from Licensee.
(iii) Licensor shall be solely responsible for the fees and
expenses (including attorneys' fees but not including any fees of co-counsel
hired pursuant to the terms and conditions of Section 12.5(d)) incurred in
connection with such Other Licensed ▇▇▇▇ Claim.
(iv) Licensor shall receive the full amount of any settlement
made or damages awarded in or for such Other Licensed ▇▇▇▇ Claim.
(d) Retention of Co-Counsel. Each of Licensor and Licensee shall have
the right to hire co-counsel at its sole expense in connection with, and to
participate in the prosecution of, any claim or suit that it is not controlling
and prosecuting and that is subject to Sections 12.5(a), (b) or (c).
(e) Diligent Prosecution. In the event that Licensor or Licensee has
commenced prosecution of any claim that is subject to Sections 12.5(a), (b) or
(c), and such Licensor or Licensee does not, or ceases to, conduct the
prosecution of such claim or suit with reasonable diligence, then the other of
Licensor or Licensee may apply to the court having jurisdiction over such claim
or suit to assume control of the prosecution of such claim or suit.
(f) Notice of Infringement. Each of Licensee and Licensor shall notify
the other in writing reasonably promptly (and in no event later than 30 days)
after becoming aware of any imitation, infringement, use without authorization
or dilution of any Licensed ▇▇▇▇ by any Person.
(g) Reservation of Rights. Licensor reserves all rights with respect
to any claim with respect to the imitation, infringement, use without
authorization or dilution of any ▇▇▇▇ owned by a Licensor Affiliate or in which
any Licensor Affiliate holds rights or interests, whether or not a Licensed ▇▇▇▇
or owned by Licensor, that is not expressly described in Sections 12.5(a), (b)
or (c). It is understood and agreed by the parties that Licensor shall have the
sole right to commence or prosecute and control the disposition of any claims or
suits with respect to any such imitation, infringement, use without
authorization or dilution, or choose not to so commence or prosecute, without
any limitation hereunder, and Licensee shall not have any rights with respect to
any such imitation, infringement, use without authorization or dilution or any
such claim or suit.
Section 12.6. Licensee Estoppel. Licensee shall not, and Licensee shall
cause each Company Affiliate not to, at any time do, or permit to be done, any
acts or things which would in any way challenge or impair the rights of Licensor
in and to the Licensed Marks or which would be reasonably likely to adversely
affect the validity of the Licensed Marks.
44
ARTICLE XIII
INDEMNIFICATION
Section 13.1. Indemnification by Licensee. Licensee shall indemnify, defend
and hold harmless Licensor, Holdings and the Licensor Affiliates, the
representatives and agents thereof, and each of the successors and assigns of
any of the foregoing (but excluding for the avoidance of doubt any Broker
Affiliate or franchisee or any sublicensee of Licensor other than an Affiliate
thereof) (collectively, the "Licensor Indemnified Parties"), from and against
any and all costs, expenses, losses, damages and liabilities (including
reasonable attorneys' fees and expenses) ("Damages") suffered by any of the
Licensor Indemnified Parties resulting from, arising out of, relating to or
incurred with respect to (without duplication of any amounts paid pursuant to
Section 7.3 of the Purchase Agreement):
(i) any breach by Licensee of this Agreement (including in
respect of any representation or warranty of Licensee as of the Effective Date);
and
(ii) any claim, suit, demand, investigation, proceeding,
arbitration or litigation by a third party against any Licensor Indemnified
Party resulting from, arising out of, relating to or incurred with respect to
the business, operations, conduct, acts or omissions of Licensee or any Company
Affiliate or any of their agents, Subsidiaries, Franchisees or sublicensees or
any of their directors, officers, employees, sales agents, independent
contractors or representatives, including (t) the offer and sale by any such
Person or provision of or offer to provide by any such Person any Authorized
Services and any matter relating thereto, (u) any other ▇▇▇▇ of Licensee or any
Company Affiliate or other Branded Operator that is combined with any Licensed
▇▇▇▇, to the extent of the portion of the combined ▇▇▇▇ that is not the Licensed
▇▇▇▇, (v) any failure by any such Person to comply with any applicable Law
(including any franchise Law and all Laws relating to the preparation, offering
and contents of a Uniform Franchise Offering Circular and any other franchise
disclosure or offering documents and any representations made to franchisees or
prospective franchisees), (w) acts or omissions by any such Person after the
Effective Date constituting fraud, tortious conduct, unfair trade practices,
negligence or willful misconduct, or resulting in damage or destruction of
property, injury, death, loss or other damages of any kind, (x) any agreement by
or among Licensee or any Company Affiliate or any of their agents, Subsidiaries,
Franchisees or sublicensees and any Owned Office, Branded Broker Affiliate
(other than a Pre-Existing Broker Affiliate), Branded Franchisee or any other
Person (other than a Pre-Existing Broker Affiliate) with respect to any Licensed
▇▇▇▇, including in each case any termination thereof after the Effective Date or
breach thereof, (y) any agreement by or among Licensee or any Company Affiliate
and any Pre-Existing Broker Affiliate (A) in existence prior to the Effective
Date, including any termination thereof or breach thereof, except for any
Damages described on Schedule D or (B) entered into after the Effective Date,
including any termination thereof or breach thereof and (z) any co-marketing
agreement between a Co-Marketer and Licensee or any Company Affiliate, or the
offer or sale of any product or service of such Co-Marketer pursuant thereto or
in connection therewith, except with respect to all of the foregoing clauses in
this Section 13.1(ii), for those Losses for which Licensor has an obligation to
indemnify a Licensee Indemnified Party pursuant to the terms of Section 13.2
(without giving effect to Section 13.3) or pursuant to the Purchase Agreement
(without giving effect to Section 7.4 thereof).
45
Section 13.2. Indemnification by Licensor. Licensor shall indemnify, defend
and hold harmless Licensee and the Company Affiliates, the representatives and
agents thereof, and each of the successors and assigns of any of the foregoing
(but excluding for the avoidance of doubt any Broker Affiliate or Franchisee or
any other sublicensee of Licensee other than a Company Affiliate) (collectively,
the "Licensee Indemnified Parties"), from and against any and all Damages
suffered by any of the Licensee Indemnified Parties resulting from, arising out
of, relating to or incurred with respect to (without duplication of any amounts
paid pursuant to Section 7.2 of the Purchase Agreement):
(i) any breach by Licensor of this Agreement (including in
respect of any representation or warranty of Licensor as of the Effective
Date, or with respect to the exercise of the Option with respect to any
Option Territory, as of the date of license to the extent applicable);
(ii) any third-party claim, suit, demand, investigation,
proceeding, arbitration or litigation against any Licensee Indemnified
Party that the use of any Registered ▇▇▇▇ for the Applicable Registered
Services in the Applicable Registered Country violates or infringes the
trademark, copyright, right of publicity or privacy or other intellectual
property rights of such third party except to the extent resulting from,
arising out of, relating to or incurred with respect to (x) any use of any
Licensed ▇▇▇▇ by any Person in breach of this Agreement or any sublicense,
(y) any combination of any Licensed ▇▇▇▇ with any other ▇▇▇▇ or (z) the
provision of any service or product other than the Applicable Registered
Services in the Applicable Registered Country under the Registered ▇▇▇▇
corresponding thereto; and
(iii) any claim, suit, demand, investigation, proceeding,
arbitration or litigation by a third party against any Licensee Indemnified
Party resulting from, arising out of, relating to or incurred with respect
to the business, operations, conduct, acts or omissions of Licensor, any
Licensor Affiliate or any of their agents, Subsidiaries, Affiliates,
franchisees or sublicensees conducting business under the Sotheby's ▇▇▇▇ in
connection with any service other than the Authorized Services (which shall
not include the business, operations, conduct, acts or omissions of any
Licensee Indemnified Party or any direct or indirect sublicensee,
franchisee, Affiliate or agent of Licensee), and any matter relating
thereto, including (x) any failure of any such Person to comply with any
applicable Law and (y) acts or omissions of any such Person constituting
fraud, tortious conduct, unfair trade practices, negligence or willful
misconduct, or resulting in damage or destruction of property, injury,
death, loss or other damages of any kind, except with respect to all of the
foregoing for those Damages for which Licensee has an obligation to
indemnify a Licensor Indemnified Party pursuant to the terms of clause (i)
of Section 13.1 (without giving effect to Section 13.3).
Section 13.3. Limitations on Indemnification. Anything contained in this
Agreement to the contrary notwithstanding:
(a) in no event shall Licensee be liable for, or required to make any
payment pursuant to, clause (i) of Section 13.1, with respect to any breach of
any representation or warranty of Parent and Licensee (other than with respect
to any breach or inaccuracy in any of
46
the representations and warranties of Parent and Licensee set forth in Section
8.2(a) which shall not be subject to the Licensee Deductible Amount), for any
indemnifiable Damages suffered by the Licensor Indemnified Parties unless and
until the aggregate dollar amount of all such Damages, taken together with the
aggregate dollar amount of all indemnifiable Damages suffered by the Seller
Indemnified Parties (as such term is defined in the Purchase Agreement) under
clause (i) of Section 7.2 of the Purchase Agreement exceeds $1,000,000 (the
"Licensee Deductible Amount"), and then only to the extent of such excess,
provided that Damages indemnified hereunder in respect of claims made by the
Licensor Indemnified Parties with respect to breaches or inaccuracies in the
representations or warranties set forth in Section 8.2(a), and Damages
indemnified under the Purchase Agreement in respect of claims made by the
Purchaser Indemnified Parties (as defined in the Purchase Agreement) with
respect to breaches or inaccuracies in the representations or warranties of
Sellers (as defined in the Purchase Agreement) set forth in Sections 4.1, 4.2,
and 4.6 and 4.7 of the Purchase Agreement, shall be disregarded for purposes of
determining whether the aggregate Damages exceed the Licensee Deductible Amount
as described above;
(b) in no event shall Licensor be liable for, or required to make any
payment pursuant to, clause (i) of Section 13.2, with respect to any breach of
any representation or warranty of Licensor (other than with respect to any
breach or inaccuracy in any of the representations and warranties of Licensor
set forth in Section 8.1(a)) which shall not be subject to the Licensor
Deductible Amount), for any indemnifiable Damages suffered by the Licensee
Indemnified Parties unless and until the aggregate dollar amount of all such
Damages, taken together with the aggregate dollar amount of all indemnifiable
Damages suffered by the Purchaser Indemnified Parties (as such term is defined
in the Purchase Agreement) under clause (i) of Section 7.3 of the Purchase
Agreement exceeds $1,000,000 (the "Licensor Deductible Amount"), and then only
to the extent of such excess, provided that Damages indemnified hereunder in
respect of claims made by the Licensee Indemnified Parties with respect to
breaches or inaccuracies in the representations or warranties set forth in
Section 8.1(a), and Damages indemnified under the Purchase Agreement in respect
of claims made by the Seller Indemnified Parties (as defined in the Purchase
Agreement) with respect to breaches or inaccuracies in the representations or
warranties set forth in Section 3.1, 3.2, 3.10(c), 3.19, 3.21 and 3.22 of the
Purchase Agreement, shall be disregarded for purposes of determining whether the
aggregate Damages exceed the Licensor Deductible Amount as described above;
(c) in no event shall Licensor or Licensee be liable for, or required
to make any payment pursuant to, Sections 13.1 or 13.2 (i) to the extent arising
out of any indemnifiable matter unless a claim therefor is asserted specifying
in good faith, in reasonable detail and in writing by the applicable Licensor
Indemnified Party or Licensee Indemnified Party, as the case may be, within the
time period that such indemnifiable matter survives in accordance with Section
13.4, failing which such claim shall be waived and extinguished, (ii) to the
extent arising out of any legislation not in force as of the Effective Date or
any change of Law or administrative practice, which takes effect retroactively
to periods prior to the Effective Date, (iii) which are merely estimates of
Damages and not actual Damages or (iv) to the extent that the indemnifiable
Damages have been incurred as a result of any failure by the Licensor
Indemnified Party or Licensee Indemnified Party, as the case may be, to mitigate
such Damages as required by applicable law; and
47
(d) in no event shall Licensor or Licensee be liable for any damages
of the type described in Section 16.2.
Section 13.4. Survival of Representations and Warranties. Each of the
representations and warranties made by the parties in this Agreement shall
terminate on March 31, 2006; provided, however, that (i) the representations and
warranties contained in Sections 8.1(a) and (d) and Section 8.2(a) shall remain
in full force and effect without termination. In the event notice of any claim
for indemnification under Sections 13.1(i) or 13.2(i) of this Agreement shall
have been given (within the meaning of Section 13.5) within the applicable
survival period, the representations and warranties that are the subject of such
indemnification claim shall survive with respect to such claims until such time
as such claim is finally resolved.
Section 13.5. Notice and Resolution of Claim.
(a) The Licensor Indemnified Parties or the Licensee Indemnified
Parties to be indemnified hereunder (each, an "Indemnified Party"), as the case
may be, shall promptly give written notice to the indemnifying party (the
"Indemnifying Party") after obtaining knowledge of any third party claim against
the Indemnified Party as to which recovery may be sought against the
Indemnifying Party because of the indemnities set forth in Sections 13.1 or
13.2, specifying in good faith and in reasonable detail the third party claim
including, to the extent reasonably practicable, an estimate of Damages claimed,
and the basis for indemnification; provided, that the failure of an Indemnified
Party promptly to notify the Indemnifying Party of any such matter shall not
release the Indemnifying Party, in whole or in part, from its obligations under
this Article 13 except to the extent the Indemnified Party's failure to so
notify in breach of this Section 13.5 actually prejudices the Indemnifying
Party. The Indemnifying Party shall have the right to assume the defense of any
such third party claim at its own cost and expense with counsel selected by the
Indemnifying Party (as to which the Indemnified Party has not promptly and
reasonably objected) by giving written notice to the Indemnified Party of its
intention to assume such defense within the lesser of (i) thirty (30) days after
notice thereof has been given to the Indemnifying Party, and (ii) five (5)
Business Days prior to the date required to answer or respond to any such claim
(the "Election Period"). Commencing on the beginning of and during the Election
Period, the Indemnified Party agrees to make available to the Indemnifying Party
and its authorized representatives the information relied upon by the
Indemnified Party to substantiate the third party claim, as well as any other
information bearing thereon reasonably requested by the Indemnifying Party. If
the Indemnifying Party fails to notify the Indemnified Party of its election to
assume the defense of any such third party claim within the Election Period,
then the Indemnified Party shall defend or settle such third party claim in a
diligent and commercially reasonable manner and in good faith and may settle
such third party claim on such terms as the Indemnified Party may deem
appropriate; provided, however, that such Indemnified Party shall not, in
defense of such a third party claim, be permitted to admit any liability with
respect to, or consent to the entry of any judgment or enter into any settlement
with respect to, any such third party claim without the prior written consent of
the Indemnifying Party (which consent shall not be unreasonably withheld or
delayed), and the Indemnifying Party will not be subject to any liability for
any such admission, settlement, compromise, discharge or consent to judgment
made by an Indemnified Party without such prior written consent of the
Indemnifying Party. An Indemnifying Party may participate in (but not control)
any defense assumed by an Indemnified Party pursuant to this Section 13.5(a),
and an Indemnifying Party will bear its own
48
costs and expenses with respect to such participation. Notwithstanding the
foregoing, an Indemnifying Party shall have the right to assume the defense of
such third party claim at any time prior to settlement, compromise or final
determination thereof; provided, however, that an Indemnifying Party shall pay
all fees and expenses incurred by an Indemnified Party prior to such
Indemnifying Party's assumption of such defense.
(b) If the Indemnifying Party assumes the defense of any such third
party claim, the obligations of the Indemnifying Party under this Article 13
shall include taking all steps deemed necessary by the Indemnifying Party,
acting in good faith, in the investigation, defense or settlement of such third
party claim (including the retention of legal counsel) and the Indemnifying
Party shall, as a condition to assuming such defense, acknowledge that it will
hold the Indemnified Party harmless from and against any and all Damages caused
by or arising out of any settlement approved by the Indemnifying Party or any
judgment in such claim (subject to the applicable deductibles and limitations
set forth in Section 13.4). The Indemnifying Party shall notify the Indemnified
Party as to the existence of any offers to settle such third party claim, and
the Indemnifying Party shall not settle a third party claim if to the knowledge
of the Indemnifying Party (after notifying and consulting with the Indemnified
Party) such action would reasonably be expected to have a materially adverse
impact on the Indemnified Party; otherwise the Indemnifying Party shall have
full control of such defense and settlement, including any compromise or
settlement thereof; provided, however, that such Indemnifying Party shall permit
the Indemnified Party to participate in (but not control) such defense or
settlement through separate counsel chosen by such Indemnified Party, with the
fees and expenses of such participation and separate counsel borne solely by
such Indemnified Party. The Indemnifying Party shall not, in the defense of a
third party claim, make any payment of any of such claims, consent to the entry
of any judgment or enter into any settlement with respect to any third party
claim without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed) unless the judgment or proposed
settlement (i) involves only the payment of money damages and does not involve
any finding or admission of any violation of law, (ii) includes, as an
unconditional term thereof, a release of such Indemnified Party given by the
claimant or the plaintiff from any liabilities arising from such third party
claim, and (iii) does not impose an injunction or other equitable relief,
directly or indirectly, upon such Indemnified Party or result in an admission of
any wrongdoing by the Indemnified Party. The Indemnified Party shall cooperate
with the Indemnifying Party in the defense or settlement thereof, and the
Indemnifying Party shall reimburse the Indemnified Party for all its reasonable
out-of-pocket expenses in connection therewith.
(c) Indemnified Parties and Indemnifying Parties shall cooperate
reasonably in all aspects of any investigation, defense, pre-trial activities,
trial compromise, settlement or discharge of any third party claim, including,
without limitation, by providing the other party with reasonable access to
employees, directors and officers (as witnesses) and other information.
(d) All indemnity payments owed under this Article 13 ("Indemnity
Payments"), shall be paid in immediately available funds within ten (10)
Business Days after final determination (which is final in the sense that it is
no longer subject to appeal) and written request therefor by the Indemnified
Party. All such Indemnity Payments shall be made to the accounts and in the
manner specified in writing by the party entitled to such Indemnity
49
Payments. Any amounts that are not paid within such ten day period shall accrue
interest at the Prime Rate on the date such payment is due.
(e) In the event of any conflict between Section 12.5 and this Article
13, Article 13 shall govern.
ARTICLE XIV
DEFAULT AND TERMINATION
Section 14.1. Termination. Licensor, at its option and in its sole
discretion, may immediately terminate this Agreement, upon or at any time after
the occurrence of any of the following events:
(a) Licensee attempts to assign any of its rights under this Agreement
or any interest herein knowingly in contravention of Article 17 hereof;
(b) Licensee or Parent files a petition in bankruptcy, is adjudicated
a bankrupt or files a petition or otherwise seeks relief under or pursuant
to any bankruptcy, insolvency or reorganization statute or proceeding, or
if a petition in bankruptcy is filed against it or it becomes insolvent or
makes an assignment for the benefit of its creditors or a custodian,
receiver or trustee is appointed for it or a substantial portion of its
business or assets;
(c) a court of competent jurisdiction issues a non-appealable, final
judgment that either Licensee or Parent is in breach of any payment
obligation hereunder, and has failed to cure such breach within 60 days
following the date of issuance of such non-appealable, final judgment;
(d) a court of competent jurisdiction issues a non appealable, final
judgment that Licensee has committed a pattern of multiple material
breaches, that Licensee knew or should have known about at the time of
committing such breaches, of Section 7.1(a), 7.1(b) or 7.1(c) of this
Agreement, that collectively have had a material adverse effect on the
goodwill associated with the Sotheby's ▇▇▇▇, which breaches shall not have
been cured within 60 days after the date of issuance of such
non-appealable, final judgment;
(e) any Licensee or any Company Affiliate (i) begins to offer or sell
services as, or enters into an affiliation, license or similar agreement
with respect to real estate brokerage services with, an Auction House in
the Territory or any other country in the world, other than Licensor or any
Licensor Affiliate or (ii) is or becomes, in part or in whole, an Auction
House (whether operating in the Territory or any other country in the
world), or any Licensee or any Company Affiliate enters into any
arrangement which would effect any of the foregoing, and has failed to
either (x) terminate any agreement, or cease offering or selling services,
referenced in clause (i) of this Section 14.1(e) within 60 days following
Licensee's or Parent's notice (whether constructive or actual) that such
agreement has been entered into, or such services have begun to be offered
or sold or (y) use reasonable best efforts to divest as soon as reasonably
practicable any of its assets constituting, individually or collectively,
an Auction House referred to in clause (ii)
50
(Licensee to use and to cause each Company Affiliate to use reasonable best
efforts to cause any such divestiture to occur within six months of the
event described in clause (ii));
(f) Parent, Licensee, any Company Affiliate or any other Person acting
in the name of or on behalf of Parent, Licensee or any Company Affiliate,
or the estate of any of the foregoing, including any receiver, custodian,
trustee (including any trustee in bankruptcy) and any successor in interest
or assignee of any of the foregoing, disclaims the enforceability of the
Guarantee or otherwise asserts a defense to the enforceability of the
Guarantee (and such assertion is not withdrawn prior to the earlier of (i)
the time at which a responsive pleading is due to be filed under applicable
law or (ii) 10 days); or
(g) Licensee discontinues all use of all of the Licensed Marks for a
period of twelve consecutive months.
Section 14.2. Effect of Termination.
(a) Upon termination of this Agreement:
(i) except as otherwise provided in Section 14.2(a)(iii) below,
the right of Licensee and each Company Affiliate and sublicensee to use the
Licensed Marks shall immediately terminate, provided that Licensee shall have a
reasonable period of time (not to exceed 180 days) to de-identify each Branded
Owned Office and Company Affiliate, and the services offered thereby and by it,
with respect to the Licensed Marks, and Licensee shall, and shall cause each
Company Affiliate to, promptly take and cause to be taken all actions reasonably
necessary to effect such de-identification;
(ii) Licensee shall, and shall cause each Company Affiliate to,
and shall use commercially reasonable efforts to cause any other sublicensee of
any Licensed ▇▇▇▇ to, promptly cease using any Licensed ▇▇▇▇ in any corporate or
trade name and shall take all actions required to effect a change in such
corporate or trade name;
(iii) other than in the case of termination of this Agreement
pursuant to Article 4, each sublicense granted by a Licensee to a Branded Broker
Affiliate or Branded Franchisee pursuant to the terms of this Agreement shall
continue to be valid and in effect (and a non-exclusive license of the Licensed
Marks to Licensee shall remain in effect solely to the extent necessary to allow
such sublicense to remain in effect) for the remainder of the term of each
Branded Franchise Agreement or Broker Affiliate Agreement in effect (such
period, the "Franchise Wind-Down Period"), it being understood that all
Franchisee Covered Revenue relating to the Franchise Wind-Down Period shall be
subject to Fees pursuant to the terms and conditions of Article 5 as if during
the term of this Agreement and that all other applicable terms and conditions in
this Agreement, including Sections 7.4 and 7.5, shall continue in effect for the
duration of the Franchise Wind-Down Period; and provided that, during such
Franchise Wind-Down Period, Licensee and its Affiliates may seek to re-affiliate
any such Branded Franchisees or Broker Affiliate in its discretion with any
other franchise brands of Licensee and its Affiliates (but such Branded
Franchisee's or Branded Broker Affiliate's sublicense to any Licensed ▇▇▇▇ shall
nevertheless terminate upon the later of termination of the respective Branded
Franchise
51
Agreement or Broker Affiliate Agreement or termination of any post-termination
wind-down period (including mandatory renewal periods) required by applicable
Law or provided for in any such Branded Franchise Agreement or Broker Affiliate
Agreement);
(iv) Licensee shall, and shall cause each Company Affiliate to,
cause the non-renewal of each Branded Franchise Agreement, except and solely to
the extent prohibited by applicable Law;
(v) the registration for any domain name consisting of both a
Licensed ▇▇▇▇ and an Eligible ▇▇▇▇ shall be cancelled within 60 days following
termination of this Agreement; and
(vi) except to the extent expressly provided otherwise by
Sections 14.2(a)(i) through (iv), all rights and obligations of any party under
this Agreement shall terminate and be of no further force and effect, except
that (A) the agreements and covenants of the parties contained in Articles 5, 9,
13, 15, 16, 19 and 20 and Sections 12.1, 12.2, 12.4 and 12.6 shall survive
termination of this Agreement for the period stated therein (or indefinitely if
no such period is set forth) and (B) the agreements and covenants of Licensee
set forth in Section 7.3(a)(i) shall survive for ten years from the end of the
Franchise Wind-Down Period.
(b) Termination of this Agreement for any reason shall be without
prejudice to any rights that shall have accrued to the benefit of any party
prior to such termination.
(c) In the event of termination of this Agreement as a result of the
occurrence of an event described in Section 14.1(b), no assignee for the benefit
of creditors, custodian, receiver, trustee in bankruptcy, sheriff or any other
officer of the court or official charged with taking over custody of Licensee's
assets or business may continue this Agreement or exploit or in any way use any
Licensed ▇▇▇▇.
(d) Notwithstanding any other provision of this Agreement, Licensor
acknowledges and agrees that this Agreement may not be terminated except as
expressly set forth in Section 14.1.
ARTICLE XV
REVIEW COMMITTEE AND LIAISONS
Section 15.1. Formation. Licensee, on the one hand, and Licensor, on the
other, shall establish a committee (the "Review Committee") for the purpose of
discussing the parties' respective businesses conducted in connection with this
Agreement, those certain other matters contemplated hereby, including as set
forth in Section 15.2, and such other matters relating to this Agreement,
including disputes hereunder, as the parties may desire to raise with one
another. Licensee and Licensor shall have the right to appoint an equal number
of representatives to the Review Committee, which shall not exceed two
representatives, respectively, unless the parties agree otherwise. The parties'
representatives to the Review Committee shall be officers who (a) have
responsibility for, and familiarity with, in the case of Licensee, Licensee's
business and operations under the Licensed Marks and, in the case of Licensor,
Licensor and the Licensor Affiliates' business as it relates to matters
contemplated by this Agreement and (b) the requisite
52
authority within their respective organizations to make decisions with respect
to those business and non-legal matters customarily addressed by the Review
Committee. Licensee, on the one hand, and Licensor, on the other, may replace
its respective representatives to the Review Committee from time to time by
giving notice to the other party.
Section 15.2. Responsibilities. The Review Committee shall meet once
approximately every six months until December 31, 2006, and annually thereafter
during the term of this Agreement. Without limiting the generality of the
foregoing, in connection with and in view of the long-term nature of the License
Agreement and changes which may occur in Law or in the marketplace in the
future, in the event that either party proposes amendments in good faith to this
Agreement to address any such change to the extent the change would or does
result in a material diminishment of the benefits of this Agreement from those
that would have been realized by such party without such change, the Review
Committee shall discuss and consider such changes and proposed amendments in
good faith and the Review Committee shall serve as a non-exclusive forum in
which the parties shall negotiate in good faith regarding any such proposed
changes; provided that no party hereto shall be obligated to agree to any change
to this Agreement and nothing in this Section 15.2 shall modify or limit the
terms and conditions of Section 20.3. The Review Committee shall also discuss
ways in which each party may benefit from the client base of the other party in
marketing or cross-marketing their respective services. The Review Committee
shall establish its own procedures with respect to the conduct of its meetings,
provided that Licensee, on the one hand, and Licensor, on the other, shall
propose any matters for the agenda of each meeting of the Review Committee
reasonably in advance by notice to the members of the Review Committee. The
parties shall in good faith coordinate with one another to establish the
schedule of meetings for the Review Committee as contemplated by this Section
15.2.
Section 15.3. Liaisons. In supplement to, and without limiting the scope
and purposes of, the Review Committee, the parties desire that Licensor and
Licensee each designate an officer thereof to act as a liaison to the other
parties for purposes of facilitating communications by and among the parties in
connection with matters relating to this Agreement and addressing business
issues and disputes between the parties and issues involving mutual clients that
may arise during the term. Licensor and Licensee covenant and agree that its
liaison under this Section 15.3 shall have the requisite authority to address
the issues and disputes that may be communicated to such liaison, including
direct access to senior-level management of Licensee and Licensor, as
applicable, as necessary. Licensor and Licensee shall each designate their
respective liaisons under this Section 15.3 by written notice to the other
parties, which notice shall include the relevant contact information for such
liaison. Licensor and Licensee shall have the right to replace its liaison from
time to time and designate a replacement liaison who meets the criteria for a
liaison contemplated by this Section 5.13, upon notice to the other parties.
Licensor shall and shall cause each Licensor Affiliate and the Licensor Liaison,
and Licensee shall and shall cause each Company Affiliate and the Licensee
Liaison, to cooperate with one another to ensure that they each respond to any
matter raised by another party hereunder, including by its liaison, with due
regard for the magnitude and time requirements of such matter and, with respect
to matters relating to any mutual client regarded by Licensor or Licensee as a
very important client, on an extremely expedited basis.
53
Section 15.4. Winding Down. This Article 15 shall survive termination of
this Agreement, for the purpose of monitoring, and otherwise coordinating with
respect to, the matters contemplated in Section 14.2, and shall thereafter
terminate when the obligations of the parties under Section 14.2 have been
fulfilled.
Section 15.5. Non-Exclusive Role. Nothing in this Article 15, including the
formation of the Review Committee, its purposes or the designation of the
liaisons hereunder, shall in any way limit or modify Section 16.1.
ARTICLE XVI
CERTAIN REMEDIES
Section 16.1. Specific Performance.
(a) The parties agree that if any of the material provisions of this
Agreement are not performed in accordance with their specific terms or are
otherwise breached, irreparable damage would occur, no adequate remedy at Law
would exist and damages would be difficult to determine, and that the parties
shall be entitled to specific performance of the terms of this Agreement, in
addition to any other remedy at law or equity.
(b) With respect to any material breach or default under this
Agreement by Licensee and without limiting in any way the obligation of Licensor
to establish such breach, Licensee hereby waives any defense to (other than as
to Licensor's ability to establish its likelihood of success on the merits), and
to that extent consents to, the order of specific performance and the entry of
preliminary and permanent injunctive relief against Licensee barring such
nonperformance or breach and imposing reasonable measures to prevent further
nonperformance or breach.
(c) This Section 16.1 shall not in any way limit any remedy that any
party may have at law or in equity, and no party shall be required to pursue its
rights under this Section 16.1 prior to pursuit of any other remedy at law or in
equity. The remedies provided for in this Agreement are cumulative and not
exclusive.
Section 16.2. Limitation of Remedies. None of the parties hereto shall be
liable to any other party for any indirect, special, incidental, consequential,
exemplary or punitive damages, or for lost profits, unrealized expectations or
other similar terms, claimed by such other party resulting from such first
party's breach of its obligations, agreements, representations or warranties
hereunder, provided that nothing in this Section 16.2 shall preclude any
recovery by a party entitled to indemnification pursuant to Article XIII for
such Damages payable to any third party as a result of a third party claim.
Section 16.3. DISCLAIMER OF WARRANTIES. OTHER THAN AS EXPRESSLY SET FORTH
IN SECTION 8.1, LICENSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LICENSED MARKS AND THE OTHER MATTERS CONTEMPLATED
BY THIS AGREEMENT, INCLUDING (A) ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, (B) ANY WARRANTY WITH RESPECT TO THE VALIDITY OR
54
ENFORCEABILITY OF, OR OF ANY NON-INFRINGEMENT RELATING TO, THE USE OF ANY
LICENSED ▇▇▇▇ IN CONNECTION WITH ANY AUTHORIZED ANCILLARY SERVICE AND (C) ANY
WARRANTY ARISING THROUGH COURSE OF DEALING OR USAGE OF TRADE.
ARTICLE XVII
ASSIGNMENT
Section 17.1. Assignments Generally. The rights granted to Licensee
hereunder are personal in nature. Licensee may not assign, sublicense or
otherwise transfer any of its rights under this Agreement or other interests
herein other than as expressly provided by Article II and 17.2, and any such
attempted assignment, sublicense or other transfer, whether voluntary or by
operation of law, directly or indirectly, shall be void and of no further force
and effect.
Section 17.2. Permitted Assignment. Licensee may assign its rights and
obligations under this Agreement in their entirety (but not in part) to (a) a
Company Affiliate or (b) a Person who (i) acquires (whether by stock purchase,
merger, asset purchase, reorganization, consolidation or in any other form of
transaction) all or substantially all of (x) the business of Licensee and the
Company Affiliates with respect to this Agreement and of any Company Affiliate
that is a Branded Operator (such business all taken as a whole) (as it exists on
the date of such assignment), (y) the Licensee Brokerage Business or (z)
Licensee's Residential Real Estate franchise business and (ii) agrees with
Licensor, in writing, to be bound as a "Licensee" under this Agreement; provided
that any assignment to any Person that primarily operates an Auction House
Business (whether or not in the United States) or is an Affiliate of any such
Person shall require the prior written consent of Licensor.
Section 17.3. Deemed Assignment. For purposes of this Agreement, the
following events shall be deemed to be an "assignment" (provided that a
permitted assignment shall have not theretofore occurred pursuant to the
provisions of Section 17.2):
(a) Licensee ceases to be, directly or indirectly, wholly-owned by
Parent; and
(b) Licensee sells or otherwise disposes of or transfers all or
substantially all of its assets to any Person.
Section 17.4. Assignment of Rights to Fees. Following the twelfth
anniversary of the Effective Date and at any time thereafter during the term,
Licensor shall have the right to assign to any Person, Licensor's right to
receive payment of all Fees due and payable thereafter (including any Minimum
Amount if applicable); provided, that, only in the case of any proposed
assignment to a Person that is not a Licensor Affiliate, not less than 30 days
prior to any such proposed assignment, Licensor shall deliver notice to Licensee
of Licensor's intention to assign such right to receive License Fees hereunder,
and during such 30-day period Licensee shall have the right to make an offer to
be the assignee of such right. Licensor shall not be under any obligation to
accept any offer so received from Licensee and may reject any such offer in its
sole discretion. At any time following the expiration of the 30-day period
following notice from
55
Licensor, Licensor shall be free to enter into any arrangement with any third
party on any terms with respect to the assignment of rights referenced above.
Section 17.5. Effect of Assignment. No assignment by any party hereto of
any rights or interests hereunder shall increase the indemnifiable Damages for
which an Indemnifying Party may seek indemnification hereunder, or otherwise
increase any obligations hereunder of the non-assigning party (it being
understood that no such rights or interests may be assigned except as expressly
permitted by this Agreement).
ARTICLE XVIII
OPTION RELATING TO FOREIGN TRADEMARKS
Section 18.1. Grant of Option. Pursuant to the terms and conditions of this
Agreement, during the five-year period commencing on the Effective Date (the
"Option Period"), Licensee shall have the option (the "Option") to (i) license
the Licensed Marks for use solely for the offer and sale of Authorized Services,
on the terms provided herein, in the Option Territory and (ii) to the extent
permitted by applicable Law and Licensor's obligations under applicable
agreements of Licensor and the Licensor Affiliates, acquire (a "Foreign
Operations Sale") on an "as is, where is" basis and without warranties, either
Licensor's brokerage operations (to the extent not then shut down) in the Option
Territory or the franchise and affiliation agreements, if any, to which Licensor
is a party at the time of such exercise of the Option.
Section 18.2. Maintenance of Registration; Limitation.
(a) Licensor shall have no obligation to maintain (i) its business
operations relating to any Licensed ▇▇▇▇ in any country in the Option Territory
or (ii) its use of any Licensed ▇▇▇▇ in any country in the Option Territory
except with respect to the filings contemplated under Section 18.2(b). In
connection with the foregoing, the parties acknowledge that Licensor and the
Licensor Affiliates intend to cease conducting residential real estate brokerage
services in the Option Territory, and nothing in this Agreement is intended by
the parties, nor shall it be interpreted to prevent, Licensor or any Licensor
Affiliate from reducing the scope of or ceasing such operations in any country
or otherwise restrict the conduct of such operations, except as provided herein.
(b) Subject to Section 18.2(a), if requested by Licensee at any time
during the Option Period, Licensor shall make any filing and pay any filing fee
in connection with the maintenance of the Licensed Marks, to the extent
permitted by applicable Law, provided that Licensee shall reimburse Licensor for
its expenses in connection therewith, including all filing fees and attorneys'
fees.
Section 18.3. Exercise of Option.
(a) The exercise price to be paid by Licensee upon any exercise of the
Option shall be $1.00 for each country in the Option Territory covered by such
exercise.
(b) Each exercise of the Option shall be in writing, accompanied by
payment in full of the applicable exercise price. Licensee shall have the right
to exercise the Option from
56
time to time during the Option Period, with respect to one or more countries in
any single exercise. Licensee shall retain the right to any additional partial
exercise during the Option Period, or any exercise of the Option with respect to
the remainder of the countries in the Option Territory, for the remaining
balance of the Option Period.
(c) Following any exercise of the Option, Licensor and Licensee shall
use commercially reasonable efforts to obtain (at Licensee's expense) any
consents, authorizations, approvals, permits or licenses and submission of all
filings, declarations, registrations or notices as are necessary or advisable
under applicable Law, including antitrust Laws ("Option Consents and Filings").
With respect to any exercise of the Option with respect to Germany, the approval
of the German Federal Cartel Office or the confirmation by the German Federal
Cartel Office that no filing is required shall be among the Option Consents and
Filings.
(d) Following any exercise of the Option, Licensor shall use
commercially reasonable efforts to file (at Licensee's expense) a trademark
registration application with respect to the Licensed Marks in each country with
respect to which the Option is being exercised, to the extent not already
registered (including at Licensee's request prior to such time). The procedures
for preparing, filing and prosecuting each such trademark registration
application shall be those applicable to the registration of Licensed Marks in
the Option Territory. Licensor will establish (at Licensee's expense) an
Eligible SPV in (i) the United States, (ii) in the country with respect to which
the Option has been exercised (to the extent permitted by applicable Law), (iii)
the country in which the Licensed Marks with respect to which the Option is
being exercised are held at the time of exercise or (iv) such other jurisdiction
as Licensor reasonably determines, and shall file such trademark registration
application in the name of such Eligible SPV (after effecting any necessary
transfers of rights to such Eligible SPV).
(e) Following (x) the receipt by Licensor of a certificate of
registration from the applicable Governmental Authority with respect to each
such trademark registration application and (y) the receipt or submission of any
Option Consents and Filings as are necessary or advisable under applicable Law,
the parties will in good faith prepare and enter into an addendum or joinder
agreement to this Agreement:
(i) reflecting the application of the terms and conditions of
this Agreement to the use of the Licensed Marks in the country or countries with
respect to which the Option is being exercised, including with respect to
quality control matters and the representations and warranties of each of the
parties with respect to the Licensed Marks as of the date of the entering into
of such addendum or joinder agreement, and the survival of such representations
and warranties for a period of two years thereafter;
(ii) amending Schedule C to reflect as part of the Territory
under this Agreement the addition of such country with respect to which the
Option has been exercised;
(iii) providing that Fees shall accrue with respect to Covered
Revenue Earned from Authorized Brokerage Services in such country or countries,
as provided herein;
(iv) containing such other modification to the terms of this
Agreement and additional terms and conditions as may be reasonably necessary to
comport with the
57
applicable Law of the country or countries with respect to which the Option is
being exercised, to permit Licensor and its Affiliates to comply with any
remaining contractual obligations of Licensor and the Licensor Affiliates with
respect to the Licensed Marks in such country or countries (including any
then-existing broker affiliate agreements) and to accomplish the purposes of
this Article 18 and the intentions of the parties without affecting the
financial and legal substance of the matters contemplated by this Agreement in a
way that is materially adverse to any party; and
(v) otherwise evidencing the agreement of such Eligible SPV to be
bound by the terms and conditions of this Agreement as a Licensor hereunder,
subject to the foregoing clauses (i) through (iv), including with respect to
modifications and additions to the terms and conditions of this Agreement.
(f) In the event that Licensee exercises the Option with respect to
any Foreign Operations Sale, following the receipt by Licensor of any Option
Consents and Filings as are necessary or advisable under applicable Law with
respect to such Foreign Operations Sale, the parties will in good faith prepare
and enter into a separate agreement effecting such Foreign Operations Sale on an
"as is, where is" basis and without warranties, and as otherwise contemplated by
this Section 18.3; provided that any Foreign Operations Sale shall be
conditioned upon the simultaneous or prior grant of the license for the Licensed
Marks (pursuant to Section 18.3(e)) in the country in which the assets covered
by such Foreign Operations Sale are located.
Section 18.4. Covenant of Licensor Following Exercise. Following each
exercise of the Option, Licensor shall (unless otherwise agreed by Licensor and
Licensee), wind-up as promptly as practicable (and in any event within 180 days)
all residential real-estate brokerage operations in the country with respect to
which the Option is being exercised, including termination of then-existing
broker affiliate agreements and franchise agreements to the extent not being
assigned to Licensee pursuant to a separate agreement, with respect to such
country, subject to the requirements of applicable Law in such country and the
contractual and legal obligations of Licensor and the Licensor Affiliates in
such country.
Section 18.5. Negative Covenants of Licensor With Respect to Option
Territory. During the term of this Agreement, Holdings and Licensor shall not,
and Holdings shall cause the Licensor Affiliates (for so long as they remain
Licensor Affiliates) not to, without the consent of Licensee, (a) enter into any
new master franchise agreement or affiliation agreement with respect to the use
of (i) any Licensed ▇▇▇▇ or (ii) the Sotheby's ▇▇▇▇ for the offer and sale of
Authorized Services in any country in the Option Territory, other than Timeshare
Brokerage Services and sales of Artistically Significant Residences in auction
format and (b) sell, dispose or otherwise transfer to any Person, other than to
an Eligible SPV, or grant a license to any Person to use, (x) any Licensed ▇▇▇▇
or (y) the Sotheby's ▇▇▇▇ for the offer and sale of Authorized Services, in any
country in the Option Territory, other than Timeshare Brokerage Services and
sales of Artistically Significant Residences in auction format.
Section 18.6. Ownership of Marks. Licensee acknowledges that the direct
ownership of any Licensed ▇▇▇▇ with respect to any country in the Option
Territory may be held by a Licensor Affiliate. In the event that Licensee shall
exercise the Option with respect to a country
58
in the Option Territory for which the Licensed Marks are held by a Licensor
Affiliate, Licensor shall cause such Licensor Affiliate to execute the
respective addendum and/or joinder agreement for the purpose of effecting the
grant of the license of the Licensed Marks as contemplated herein.
ARTICLE XIX
GUARANTEE
Section 19.1. Guarantees. (a) Parent hereby unconditionally and absolutely
guarantees (this "Guarantee"), as a primary obligor and not merely as surety,
the full and punctual payment and performance of all debts, obligations and
liabilities (including in respect of Fees and referral fees), whether such
obligations are direct or indirect, absolute or contingent, now existing or
subsequently arising, primary or secondary, now due or hereafter falling due,
monetary or otherwise, of Licensee under this Agreement, together with all costs
of collection, compromise or enforcement, including reasonable attorneys' fees,
incurred with respect to any such debt, obligations or liabilities, or with
respect to this or any other guaranty of any of them, or with respect to a
proceeding under the federal bankruptcy laws or any moratorium, insolvency,
receivership, arrangement or reorganization law or an assignment for the benefit
of creditors concerning Licensee or Parent, together with interest on all such
costs of collection, compromise or enforcement from the date arising
(collectively, the "Obligations"). Parent further agrees that its liability
under the Guarantee shall not be discharged, impaired, diminished or otherwise
affected by any (a) extension, settlement, modification, compromise, waiver,
release or renewal of any Obligation, in whole or in part or (b) any
modification or amendment or supplement to this Agreement. The Guarantee is a
continuing guarantee, which shall apply to all Obligations which now exist or
subsequently arise, whether or not notice of such Obligations is given to
Parent, whether or not any or all prior Obligations had been fully paid,
performed and observed before any such Obligation arose, and notwithstanding
Holdings' dissolution.
(b) Holdings hereby unconditionally and absolutely guarantees (this
"Holdings Guarantee"), as a primary obligor and not merely as surety, the full
and punctual payment and performance of all debts, obligations and liabilities
(including in respect of referral fees), whether such obligations are direct or
indirect, absolute or contingent, now existing or subsequently arising, primary
or secondary, now due or hereafter falling due, monetary or otherwise, of
Licensor under this Agreement, together with all costs of collection, compromise
or enforcement, including reasonable attorneys' fees, incurred with respect to
any such debt, obligations or liabilities, or with respect to this or any other
guaranty of any of them, or with respect to a proceeding under the federal
bankruptcy laws or any moratorium, insolvency, receivership, arrangement or
reorganization law or an assignment for the benefit of creditors concerning
Licensor or Holdings, together with interest on all such costs of collection,
compromise or enforcement from the date arising (collectively, the "Holdings
Obligations"). Holdings further agrees that its liability under the Holdings
Guarantee shall not be discharged, impaired, diminished or otherwise affected by
any (a) extension, settlement, modification, compromise, waiver, release or
renewal of any Holdings Obligation, in whole or in part or (b) any modification
or amendment or supplement to this Agreement. The Holdings Guarantee is a
continuing guarantee, which shall apply to all Holdings Obligations which now
exist or subsequently arise, whether or not notice of such Holdings Obligations
is given to Holdings,
59
whether or not any or all prior Holdings Obligations had
been fully paid, performed and observed before any such Holdings Obligation
arose, and notwithstanding Parent's dissolution.
Section 19.2. Waiver of Notices, Etc. (a) Parent agrees that Licensor shall
not be required to give Parent any notice pursuant to the Guarantee, and that no
failure to give any notice shall discharge, impair, diminish or otherwise affect
the liability which Parent would have had under the Guarantee if notice had been
given. Parent waives: (a) notice of acceptance of the Guarantee, (b) notice of
the incurring of additional or increased Obligations, (c) notice of the
application of any payment, transfer or recovery from security, (d) presentment,
demand and protest of any instrument, and notice thereof, (e) notice of
nonpayment or other default under the Guarantee or under any Obligation, (f) any
right to demand public foreclosure sale of any security, (g) notice of
foreclosure, (h) notice of any release, discharge, modification or failure to
obtain any security for any of the Obligations, (i) notice of any waiver by
Licensor of any of the terms, covenants or conditions of any of the Obligations,
(j) notice of the granting of any indulgence or extension of time to Licensee,
(k) notice of any modification, supplement or extension of any of the
Obligations, (l) notice of any agreement or arrangement with Licensee or anyone
else, (m) any right to exoneration or to require election of remedies, (n) all
suretyship defenses and (o) any other defenses or notice requirements which may
exist at law or in equity. The obligations of Parent under this Article 19 shall
not be affected by (x) the failure of Licensor to assert any claim or demand or
to enforce any right or remedy against Licensee under the provisions of this
Agreement or (y) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement. Parent further agrees that the Guarantee
constitutes a guarantee of payment and performance when due and not of
collection and waives any right to require that any resort be had by Licensor to
any other guarantee or any security held for payment or performance of the
Obligations.
(b) Holdings agrees that Licensee shall not be required to give
Holdings any notice pursuant to the Holdings Guarantee, and that no failure to
give any notice shall discharge, impair, diminish or otherwise affect the
liability which Holdings would have had under the Guarantee if notice had been
given. Holdings waives: (a) notice of acceptance of the Holdings Guarantee, (b)
notice of the incurring of additional or increased Holdings Obligations, (c)
notice of the application of any payment, transfer or recovery from security,
(d) presentment, demand and protest of any instrument, and notice thereof, (e)
notice of nonpayment or other default under the Holdings Guarantee or under any
Holdings Obligation, (f) any right to demand public foreclosure sale of any
security, (g) notice of foreclosure, (h) notice of any release, discharge,
modification or failure to obtain any security for any of the Holdings
Obligations, (i) notice of any waiver by Licensee of any of the terms, covenants
or conditions of any of the Holdings Obligations, (j) notice of the granting of
any indulgence or extension of time to any Licensor, (k) notice of any
modification, supplement or extension of any of the Holdings Obligations, (l)
notice of any agreement or arrangement with any Licensor or anyone else, (m) any
right to exoneration or to require election of remedies, (n) all suretyship
defenses and (o) any other defenses or notice requirements which may exist at
law or in equity. The obligations of Holdings under this Article 19 shall not be
affected by (x) the failure of Licensee to assert any claim or demand or to
enforce any right or remedy against Licensor under the provisions of this
Agreement or (y) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Agreement. Holdings further agrees that the Holdings
Guarantee constitutes a guarantee of payment and performance when due and not of
collection and waives any right to
60
require that any resort be had by Licensee to any other guarantee or any
security held for payment or performance of the Holdings Obligations.
Section 19.3. Reinstatement. (a) Parent agrees that the Guarantee shall
continue to be effective or be reinstated, as the case may be, if at any time
payment or performance, or any part thereof, on any Obligation (including any
payment pursuant to the Guarantee) is rescinded or must otherwise be restored by
Licensor upon the bankruptcy or reorganization of Licensee or otherwise.
(b) Holdings agrees that the Holdings Guarantee shall continue to be
effective or be reinstated, as the case may be, if at any time payment or
performance, or any part thereof, on any Holdings Obligation (including any
payment pursuant to the Holdings Guarantee) is rescinded or must otherwise be
restored by Licensee upon the bankruptcy or reorganization of any Licensor or
otherwise.
Section 19.4. Waiver of Subrogation; Subordination. (a) Parent shall have
no right of subrogation, reimbursement or indemnity whatsoever, nor any right of
recourse to security for the Obligations, except when and so long as all of the
Obligations have been fully paid, performed and observed, and have not been
reinstated by reason of the avoidance of any transfer, the return of any
payment, or otherwise. All present and future debts, obligations and liabilities
of Licensee to Parent are hereby waived and postponed in favor of and
subordinated to the full payment, performance and observance of the Obligations,
and Parent agrees to assign and deliver to Licensor on request, as security for
the Guarantee, (a) any such debts, obligations or liabilities, (b) any
instruments or documents evidencing the same, (c) any security therefor and (d)
any payments or transfers with respect thereto, or recoveries on security
therefor, received by Parent after default under any of the Obligations.
(b) Holdings shall have no right of subrogation, reimbursement or
indemnity whatsoever, nor any right of recourse to security for the Holdings
Obligations, except when and so long as all of the Holdings Obligations have
been fully paid, performed and observed, and have not been reinstated by reason
of the avoidance of any transfer, the return of any payment, or otherwise. All
present and future debts, obligations and liabilities of Licensor to Holdings
are hereby waived and postponed in favor of and subordinated to the full
payment, performance and observance of the Holdings Obligations, and Holdings
agrees to assign and deliver to Licensee on request, as security for the
Holdings Guarantee, (a) any such debts, obligations or liabilities, (b) any
instruments or documents evidencing the same, (c) any security therefor and (d)
any payments or transfers with respect thereto, or recoveries on security
therefor, received by Holdings after default under any of the Holdings
Obligations.
Section 19.5. Successors and Assigns. (a) The benefit of the Guarantee
shall run to Licensor and its heirs, personal representatives, successors and
assigns. The burden of the Guarantee shall bind Parent and its heirs, personal
representatives, successors and assigns. The Guarantee shall apply to the
Obligations of Licensee and of Licensee's heirs, personal representatives,
successors and assigns, including the successor to Licensee upon any merger,
consolidation, liquidation or dissolution of Licensee and, including any
transferee of all or substantially all of the assets of Licensee to any Person
which carries on the business of Licensee.
61
(b) The benefit of the Holdings Guarantee shall run to Licensee and
its heirs, personal representatives, successors and assigns. The burden of the
Holdings Guarantee shall bind Holdings and its heirs, personal representatives,
successors and assigns. The Holdings Guarantee shall apply to the Holdings
Obligations of Licensor and of Licensor's heirs, personal representatives,
successors and assigns, including the successor to any Licensor upon any merger,
consolidation, liquidation or dissolution of Licensor and, including any
transferee of all or substantially all of the assets of any Licensor to any
Person which carries on the business of any Licensor.
ARTICLE XX
MISCELLANEOUS
Section 20.1. Information Transmission. Each party shall use commercially
reasonable efforts to provide all statements and other information required to
be provided to the other party pursuant to this Agreement in the format and
medium reasonably requested by the other party.
Section 20.2. Notices. All notices, requests, claims, demands, waivers and
other communications under this Agreement shall be in writing and shall be by
facsimile, courier services or personal delivery to the applicable addresses set
forth on Schedule B, or at such other address as may be designated from time to
time by a party in accordance with this Section 20.2 (in which case Schedule B
shall be updated to reflect such new address and an updated copy of Schedule B
shall be attached hereto). All notices and communications under this Agreement
shall be deemed to have been duly given (a) when delivered by hand, if
personally delivered, (b) when sent, if sent by facsimile, with an
acknowledgement of sending being produced by the sending facsimile machine or
(c) by one Business Day after when delivered to a courier, if delivered by
commercial one-day overnight courier service and sent only within the United
States.
Section 20.3. Amendment; Waiver. Any provision of this Agreement may be
amended, supplemented, modified or waived if, and only if, such amendment,
supplement, modification or waiver is in writing and signed, in the case of an
amendment, supplement or modification, by Licensee and Licensor or, in the case
of a waiver, by the party against whom the waiver is to be effective. No failure
or delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
Section 20.4. Expenses. Except as otherwise expressly provided herein, each
party will bear its own fees and expenses incident to this Agreement and the
transactions contemplated hereby.
Section 20.5. GOVERNING LAW; JURISDICTION; VENUE; SERVICE OF PROCESS;
WAIVER OF JURY TRIAL. THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED
IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE
62
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OR
RULES OF CONFLICTS OF LAW THAT WOULD CAUSE THE APPLICATION OF ANOTHER LAW. EACH
PARTY HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MUST BE
BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ LOCATED IN NEW YORK CITY OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY
EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE
PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM
THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS BY NOTICE
IN THE MANNER SPECIFIED IN SECTION 20.2. EACH PARTY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY SUCH ACTION
OR PROCEEDING.
Section 20.6. Relationship of the Parties.
(a) The parties acknowledge that none of Licensee or any sublicensee
has been asked by Licensor to pay a direct or indirect franchise fee to Licensor
or any Licensor Affiliate. The parties further acknowledge that is not the
intent of the parties that Licensor enter into a franchise relationship with
Licensee, any Company Affiliate or any of their respective sublicensees, and
such rights as Licensor is provided by this Agreement are for the purpose of
maintaining the integrity and value of the Licensed Marks, and such rights do
not, and are not intended to, permit Licensor to control the business operations
of Licensee, any Company Affiliate or any of their sublicensees, notwithstanding
that some sublicensees may be Franchisees of Licensee or any Company Affiliate.
(b) The parties further acknowledge and agree that this Agreement does
not create a fiduciary relationship between the parties, and each party hereto
shall be an independent contractor. The parties are not partners, joint
venturers, or agents or in a franchisor-franchisee relationship and nothing in
this Agreement is intended by the parties to create, nor shall be construed to
place them in, any such relationship.
Section 20.7. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
Section 20.8. Headings. The headings herein and in the table of contents
hereto are for convenience purposes only, do not constitute a part of this
Agreement, and shall not be deemed to limit or affect any of the provisions of
this Agreement.
63
Section 20.9. Entire Agreement. This Agreement and the Purchase Agreement,
together with the exhibits and schedules referenced herein and therein, the
Transition Services Agreement (as defined in the Purchase Agreement) and the
other agreements, documents and instruments delivered in connection herewith and
therewith, contain the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters.
Section 20.10. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which,
when taken together, shall constitute one and the same agreement.
64
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
SPTC, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
SOTHEBY'S HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
CENDANT CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, IV
-----------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, IV
Title: Senior Vice President
MONTICELLO LICENSEE CORPORATION
By: /s/ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, IV
-----------------------------------
Name: ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, IV
Title: Senior Vice President