Preferred Vendor Agreement

PREFERRED VENDOR AGREEMENT



THIS PREFERRED VENDOR AGREEMENT (the 'Agreement') dated as of the 9th day of December 1966 between HFS INCORPORATED ('HFS'), a Delaware Corporation having an office located at 6 Sylvan Way, Parsippany, New Jersey 07054 and ALL COMMUNICATIONS CORPORATION ('Vendor'), a corporation having an office located at 1450 Route 22 West, Suite 103, Mountainside, New Jersey 07092.



W I T N E S S E T H:

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WHEREAS, HFS is the parent of the franchisors (the 'Franchisors'), respectively, of the CENTURY 21'r', ERA'r' and Coldwell Banker'r' real estate brokerage franchise systems (the 'Chains'); and



WHEREAS , Vendor desires to be recommended by HFS to the franchisees of the Franchisors (the 'Franchisees') as a vendor of telephone communication systems and voice mail equipment as more fully described in Exhibit A attached hereto and made a part hereof ( the 'Products'); and



WHEREAS, Vendor and Coldwell Banker Corporation entered into an Exclusive Master Purchase/Maintenance Agreement, dated January 16, 1996 (the 'Purchase Agreement').



NOW, THEREFORE, in consideration of the promises and covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:



Section 1. Preferred Vendor. (a) HFS hereby agrees that, for the term of this Agreement as de scribed below, Vendor shall be a non-exclusive preferred vendor of the Products recommended by HFS to the Franchisees; provided, however, that HFS shall not, during the term of this Agreement, enter into a preferred vendor agreement with more t h an two (2) additional vendors or suppliers ('Additional Preferred Vendor') of telephone communication systems and voice mail equipment (other than Vendor) whereby such Additional Preferred Vendors are recommended by HFS to the Franchisees as pr o viders of telephone communication systems and/or voice mail equipment. Notwithstanding anything contained herein to the contrary, the Additional Preferred Vendor shall not mean or include any vendor or supplier of a component or element of the Produ c ts (excluding voice mail equipment) which vendor or supplier has or shall enter into a preferred vendor agreement or similar arrangement with HFS to be recommended or promoted to the Franchisees as the vendor or supplier of such component or element. Further, Vendor acknowledges that HFS through HFS's Communication Services Division may purchase from time to time various goods and services (including telephone systems) for resale to certain Franchisees. In no event shall HFS, thr ough the operations of its Communication Services Division, or the suppliers to HFS's













Communication Services Division, be considered or construed as an 'Additional Preferred Vendor'.



(b) HFS agrees that it will actively promote Vendor and the Products to the Franchisees. For marketing purposes, HFS shall make available to Vendor a list containing the names, business addresses, contact telephone numbers of the Franchisees. From time to time during the term of this Agreement, HFS s h all provide Vendor with an updated list of such information. Notwithstanding anything contained herein to the contrary, Vendor acknowledges and agrees that the Products constitute a telephone communication system which system is comprise d of various components and parts (including without limitation the voice mail component) which together, in combination, constitute such system. As such, the Products shall be promoted and marketed to the Franchisees under this Agreement as a syste m or unit and in no event shall components or elements of the system be promoted or marketed to Franchisees under this Agreement on an individual basis or as a component independent of such system; provided, however, that such restriction sh all not apply to voice mail equipment provided by Vendor under this Agreement.



(c) During the Term, Vendor shall offer the Products, including installation of the Products and maintenance service contracts relating to the Products, to th e Franchisees through programs developed in cooperation with HFS. Vendor shall provide, at its cost, a toll-free telephone number for each Chain for placement of orders for the Products. Vendor shall dedicate and commit Vendor representatives to handle Franchisees' accounts, orders and customer service inquiries. All orders of the Products shall be processed by Vendor and Vendor shall contact the Franchisee to coordinate and schedule delivery and installation of the Products. Vendor sh a ll be responsible for all invoicing and collection of payment relating to each Franchisee order. Vendor shall provide Franchisees with training instruction for the Products purchased. Training shall be conducted by Vendor's qualified personnel and shall include any and all necessary training materials and literature. Vendor's current price schedule is set forth in Exhibit A which price schedule shall remain in effect for the Term.



(d) Vendor shall, at its expense and in conjunction with a designated representative of HFS's preferred vendor group, develop marketing materials for use in connection with promoting the Products to the Franchisees. All such materials shall be subject to the prior approval of HFS and shall identi fy Vendor's toll-free telephone number(s). Further, within sixty (60) days from the signing of this Agreement by the parties, HFS shall announce the the Franchisees the appointment of Vendor by HFS as a preferred vendor of the Products.















(e) For each purchase of the Products by a Franchisee, Vendor and Franchisee shall enter into an agreement as mutually agreed to by Vendor and Franchisee. A form of agreement is attached hereto and made part hereof as Exhibit B. Vendor shall negotiate the terms of the agreement in good faith. Vendor agrees that it will provide Franchisees purchasing the Products the warranties described in Exhibit C, which is attached hereto and made part hereof.



Section 2. Term. The term of this Agreement (the 'Term') shall commence on December 9, 1996 and shall terminate on December 8, 2000, unless earlier terminated in accordance with the terms herein set forth.



Section 3. Access Fee. Concurrently with the execution of this Agreement, Vendor shall pay to HFS, in immediately available funds, the sum of Fifty Thousand Dollars ($50,000) as compensation to HFS for providing access to the Franchisees. Said fee is fully earned upon payment and shall not be subject to refund or reduction regardless of the termination of this Agreement for any reason.



Section 4. Commissions. (a) During the Term, Vendor shall pay to HFS commissions on the gross amount of all sales of Products (excluding labor, taxes a nd shipping) made by Vendor to the Franchisees ('Gross Sales') for each category described below, based on sales and not collections, as follows:





Percentage of Gross Sales Category

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7% *All Products, excluding

voice mail



13% Voice Mail



*Commissions for the sale of the Products (excluding voice mail) made to

the National Realty Trust by Vendor (if any) shall be payable at a rate of

2% of the Gross Sales for the Products (excluding voice mail). Commissions

for the sale of voice mail equipment made to the National Realty Trust by

Vendor (if any) shall be payable at the rate stated above.



(b) In addition to the commissions in subsection (a) above and during the Term, Vendor shall pay to HFS commissions on th e gross amount of revenue from all maintenance services contracts entered into or renewed by Vendor with the Franchisees ('Gross Revenues'), based on sales and not collections, in the amount of 10% of Gross Revenues.



(c) The commissions pay able with respect to Gross Sales and Gross Revenues made in each calendar quarter shall be paid not more than fifteen (15) days after the end of such calendar quarter. Vendor shall provide HFS with each such payment a report, certified











as t rue and correct by a duly authorized representative of Vendor, detailing the sales made to the Franchisees and the calculation of the commissions paid thereon. In addition to the certified report submitted with each payment, Vendor shall furnish t o HFS on January 31st of each year during the Term and one (1) year thereafter a report detailing the sales made to the Franchisees and the calculation of the commissions paid thereon for the preceding calendar year. This report shall be certif ied as true and correct by Vendor's independent public accountants.



Section 5. Conferences; Publications. Vendor shall participate as an exhibitor at each national conference for the Chains (with each Chain holding a single national conf erence on an annual basis.) Vendor shall be obligated to follow all rules and procedures established for each conference. Basis booth costs are expected to be $2,500 per booth. Vendor shall be responsible for booth costs and all other costs relating to its participation in the conferences and booth set-up.



Section 6. Insurance and Indemnity. (a) During the Term and for a period of not less than six (6) months after the termination of this Agreement, Vendor will secure and maintain comp rehensive general liability insurance on an occurrence basis (including, independent contractors, contractual, personal injury, products and completed operations, and broad form property damage) with combined single limits of not less than One M illion Dollars ($1,000,000) per occurrence. Such insurance shall name HFS and its affiliates, and their respective officers, directors, employees and agents as additional insureds and shall be primary for all purposes. All policies shal l be endorsed with a statement that the coverage may not be cancelled, altered or permitted to lapse or expire without thirty (30) days advance written notice to HFS, that the coverage shall be primary and that any insurance carried by H F S or its affiliates shall be non-contributory to such coverage. The names of the Vendor and HFS as identified in the policies shall be identical to the names of the Vendor and HFS as identified in this Agreement. If an umbrella policy is used to sat isfy any required coverage of this Section 6, such policy shall be at least 'Follow-Form' with the requirements described in this Section 6 and not limit the coverage of any other policies used to provide coverage under this Section



(b) Simult aneously with the execution of this Agreement, annually thereafter, and each time a change is made in any insurance policy or insurance carrier, Vendor will furnish to HFS a certificate of insurance evidencing the insurance coverages in effe c t, the named insured and additional insureds, and endorsed with a statement that the coverage may not be cancelled, altered or permitted to lapse or expire without thirty (30) days advance written notice to HFS. Failure to demand such certificate s or other evidence of full compliance with these insurance requirements or failure of HFS to identify a deficiency from evidence that is









provided, shall not be construed as a waiver of obligation to maintain such insurance.



(c) All poli cies required by this Agreement shall be written by insurance carriers rated 'A' or better by A.M. Best and approved by and satisfactory to HFS. No 'cut through' endorsements shall be acceptable. All policies shall provide that the insurer w a ives any right of subrogation against HFS. By requiring insurance as provided in this Section 6, HFS does not represent that coverage and limits will be necessarily adequate to protect HFS and its affiliates, and their officers, directors, employees and agents, and such limits shall not be deemed as a limitation of Vendor's liability under this Agreement.



(d) Vendor will indemnify HFS and its affiliates against, hold each harmless from, and promptly reimburse each for any a nd all payments of money (fines, damages, legal fees, expenses) arising out of any demand, claim, tax, penalty, administrative or judicial proceedings, or actions relating to any claimed occurrence with respect to the Products (even where HFS's n e gligence is alleged) and any act, omission or obligation of Vendor or anyone associated or affiliated with Vendor or the Products. Vendor waives any right of recovery against HFS for any direct or indirect loss arising out of any occurrence relating to the Products.



In the event that HFS is required to respond to any claim, action, demand or proceeding relating to the Products, Vendor will, at HFS's election, respond and defend HFS and its affiliates against such claims and demands in any actions or proceedings. In the event that Vendor fails to defend HFS when requested, Vendor will reimburse HFS for all costs and expenses, including attorney fees, incurred by HFS. Regardless of Vendor's obligation to indemnify and defend under this Section, HFS has the right, through counsel of its choice, and at Vendor's expense to control any matter to the extent said matter could directly or indirectly adversely affect HFS. The obligations of Vendor pursuant to this subsection ( d) shall survive termination of this Agreement.



Section 7. Books and Records; Audit. Vendor shall keep accurate and complete records of the Gross Sales and Gross Revenues made by Vendor for Franchisee accounts. All such records and al l accounting systems with respect thereto shall be available for inspection, copy and audit by HFS or its representatives on reasonable notice to Vendor during normal business hours throughout the Term of this Agreement and for one (1) yea r thereafter. Vendor shall fully cooperate with HFS in such inspection and audit. Neither HFS's acceptance of any information nor HFS's inspection or audit of Vendor's records shall waive HFS's right later to dispute the accuracy or completenes s of any information supplied by Vendor. In the event any such audit established an underpayment of commissions, Vendor shall pay the amount of the deficit within five















(5) business days of notification of such deficiency. In the event suc h audit identifies an overpayment of commissions, such overpayment shall be a credit against future commissions to become due from Vendor to HFS. If an audit establishes an underpayment of commissions greater than five percent (5%) of the tota l commissions then due and payable to HFS, Vendor shall pay for the costs and expenses of such audit. In the event of a dispute over the result of any such audit, the amount so disputed shall be deposited by the party to be charged with an escrow a gent acceptable to both parties and pursuant to an escrow agreement acceptable to both parties and such escrow agent until such time as the dispute is resolved.



Section 8. Acknowledgements. (a) Vendor acknowledges that HFS and its affil iates are the franchisors, and not the owners or operators of real estate brokerage offices and that, as such, HFS does not purchase the Products for its own use and cannot compel or guarantee any level of sales of the Products. Vendor further a c knowledges that, although HFS will recommend the purchase of the Products from Vendor to the Franchisees, each Franchisee will be making an independent buying decision which may or may not be affected by HFS's recommendation of the Produc ts. Neither HFS nor any Franchisor shall be responsible for any amounts owed to Vendor by any Franchisee.



(b) The parties acknowledge that Vendor and Coldwell Banker Corporation entered into the Purchase Agreement, dated January 16, 1996 , for the sale of telecommunication systems and related services and that subsequent to the execution of the Purchase Agreement HFS acquired Coldwell Banker Corporation. As a result of the acquisition, Coldwell Banker Corporation has become and r e mains a subsidiary of HFS. Upon the execution of this Agreement by HFS and Vendor, HFS (acting on behalf of Coldwell Banker Corporation ) and Vendor agree that the Purchase Agreement shall automatically terminate without penalty or further notice . Notwithstanding the termination of the Purchase Agreement, vendor acknowledges and agrees to honor all its obligations and responsibilities under the Purchase Agreement which obligations and responsibilities are existing or outstanding as of t he date of termination of the Purchase Agreement, including without limitation, any warranty and maintenance service obligations and responsibilities.



Section 9. Termination. (a) When fully executed, this Agreement will constitute a b inding obligation of both parties which may not be terminated by either party except that either party may terminate in the event of a material breach of the terms of this Agreement by the other party. In the event of a material breach as set fo r th above, the breaching party shall be given written notice of such breach and the opportunity to cure such breach within thirty (30) days of the date of such notice (ten (10) days in the case of a payment default). Failure to cure such breach within the applicable period stated above shall result in







termination of the Agreement without the necessity of any further notice.



(b) In addition to the parties' right of termination set forth in subsection (a) above, this Agreeme nt may be terminated by HFS as follows. If HFS receives a bona fide offer in writing from a supplier for the services provided by Vendor under this Agreement at pricing that is at least five percent (5%) less than the pricing provided herein, HFS may elect to notify Vendor of the receipt of such a written bona fide offer, including the terms thereof. Within fifteen (15) days after such notice, Vendor may offer to HFS the same pricing and services offered by such other supplier. If Vendo r does not make such offer to HFS within the fifteen (15) days, HFS may, in its sole discretion, terminate this Agreement upon thirty (30) days written notice to Vendor.



Section 10. Representations. (a) Each party has full power and authority and has been duly authorized, to enter into and perform its obligations under this Agreement, all necessary approvals of any Board of Directors, shareholders, partners, co-tenants and lenders having been obtained. The execution, delivery and perfor m ance of this Agreement by each party will not violate , create a default under of breach of any charter, bylaws, agreement or other contract, license, permit, indebtedness, certificate, order, decree or security instrument to which such party or a n y of its principals is a party or is subject. Neither party is the subject of any current or pending dissolution, receivership, bankruptcy, reorganization, insolvency, or similar proceeding on the date this Agreement is executed by such party a n d was not within the three years preceding such date. The persons signing this Agreement on behalf of each party personally represent and warrant to the other party that they are authorized to execute this Agreement for and on behalf of such party a nd have full authority to so bind such party.



(b) All written information provided to HFS about Vendor, the principal owners of Vendor or the finances or any such persons or entities, was or will be at the time delivered, true, accurate and complete, and such information contained no misrepresentation of a material fact, and does not omit any material fact necessary to make the information disclosed not misleading under the circumstances in which it is disclosed.



Sec tion 11. Trademarks. Vendor specifically acknowledges that this Agreement does not confer upon Vendor any interest in or right to use any trademark, service mark or other intellectual property right of HFS, the Franchisors or their affiliates (collectively referred to as the 'Intellectual Property Rights') in connection with the Products unless Vendor receives the prior written consent of HFS which consent HFS may grant or withhold in its sole discretion. Vendor further agr ees that upon termination of this Agreement, Vendor shall immediately cease and discontinue all use









of the Intellectual Property Rights. Further, if Vendor wishes to utilize the Intellectual Property Rights in advertising or promotional mat erials, it must submit such materials to HFS for final approval before utilizing them. In no event may Vendor or any affiliated or associated person or entity utilize the Intellectual Property Rights in connection with any products or services other t han the Products. Vendor further acknowledges that this Agreement does not create or grant any rights in Vendor to use any Intellectual Property Rights owned or controlled by any Franchisee or its affiliates, nor does HFS have any right to gran t any such rights.



Section 12. Relationship to Parties. Vendor is an independent contractor. Neither party is the legal representative or agent of, or has the power to obligate (or have the right to director supervise the daily affairs of ) the other or any other party for any purpose whatsoever. HFS and Vendor expressly acknowledge that the relationship intended by them is a business relationship based entirely on and circumscribed by the express provisions of this Agreement and t hat no partnership, joint venture, agency, fiduciary or employment relationship is intended or created by reason of this Agreement.



Section 13. Assignments. This Agreement may be freely assigned by HFS without recourse. This Agreement may not be assigned by Vendor without the consent of HFS, which consent shall not be unreasonably withheld.



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