ROYALTY AGREEMENT
This
Royalty Agreement (this “Agreement”),
which
is made to be effective as of the Effective Date (as defined herein), is by
and
between Home Solutions of America, Inc., a Delaware corporation (“HSOA”),
and
RG Risk Management, Inc., a Texas corporation (“RGRM”).
WHEREAS,
HSOA and
RGRM are parties to that certain Asset Purchase and Indemnity Agreement (the
“Asset
Purchase Agreement”)
by and
among the Seller (as defined therein) and the Purchaser (as defined therein)
dated as of October 16, 2007, pursuant to which the Seller and the Purchaser
have agreed to consummate a transaction (the “Transaction”)
whereby the Purchaser shall acquire certain assets of the Seller, subject to
the
terms and conditions of the Asset Purchase Agreement; and
WHEREAS,
upon the
closing of the Transaction, HSOA has agreed to enter into this Agreement with
RGRM pursuant to which HSOA agrees to pay the Royalty (as defined below) to
RGRM, subject to the terms and conditions hereof; and
WHEREAS, the
parties desire to enter into this Agreement in order to confirm the terms and
conditions upon which HSOA will pay such Royalty to RGRM.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants and agreements set forth
in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
agree as follows:
1. Royalty.
Subject
to the other provisions of this Agreement, HSOA agrees to pay to RGRM a royalty
equal to seven percent (7%) of all gross written premiums actually collected
by
HSOA or its subsidiaries, less reasonable costs of collection (“Collected
Premiums”)
that
are generated under the PropertySMARTTM
risk
management program or a substantially similar property insurance program created
by HSOA or any of its subsidiaries and derived from the
PropertySMARTTM
risk
management program (the “Royalty”)
during
the Term (as defined herein). Notwithstanding anything else to the contrary
contained herein, RGRM acknowledges and agrees that HSOA has no obligation
whatsoever to operate or maintain the PropertySMARTTM
risk
management program or any other similar risk management program and that HSOA
may discontinue the PropertySMARTTM
risk
management program or any other similar risk management program at any time
and
for any reason, as determined by HSOA in its sole discretion.
2. Payments.
HSOA
will make a Royalty payment to RGRM within 15 calendar days following the end
of
each fiscal quarter occurring during the Term for all Collected Premiums
received by HSOA or its subsidiaries in such fiscal quarter. The Royalty is
payable in immediately available funds and payment shall be made to the address
provided for RGRM in Section 8 of this Agreement or such other place as
RGRM may designate from time to time. HSOA and RGRM acknowledge and agree that
the Royalty due to RGRM hereunder is fair and equitable and constitutes part
of
the consideration to the Seller for the Transaction.
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3. Term.
The
term
of this Agreement will commence upon the date that the transactions contemplated
by the Asset Purchase Agreement close (the “Effective
Date”)
and
will terminate on the tenth (10th)
anniversary of the Effective Date (the “Term”),
unless earlier terminated by the mutual agreement of the parties or by HSOA
upon
RGRM’s material breach of any provision of this Agreement that is not cured by
RGRM within thirty (30) days after HSOA’s written notice to RGRM of such breach.
After the expiration of the initial Term, this Agreement may be renewed upon
such terms and conditions as are mutually agreed to by the parties.
4. Reporting.
HSOA
will provide RGRM with a report showing Collected Premiums by client, on a
fiscal quarter basis.
5. Audits.
HSOA
will provide RGRM with a copy of its audited financial statements on an annual
basis.
6. Representations
and Warranties.
To the
best of its knowledge, RGRM represents and warrants that:
(a) Except
pursuant to the Asset Purchase Agreement, Restoration Group America, Inc.,
a
Texas corporation (“Restoration
Group America”),
has
not assigned, transferred, conveyed or otherwise encumbered any right, title
and
interest under any license or other agreements relating to the
PropertySMARTTM
risk
management program.
(b) Immediately
prior to the Effective Date, Restoration Group America was the sole and
exclusive owner of the PropertySMARTTM
risk
management program, free and clear of any liens, charges and encumbrances.
No
other person or entity other than HSOA and its subsidiaries has any claim with
respect to the PropertySMARTTM
risk
management program whatsoever.
(c) Immediately
prior to the Effective Date, Restoration Group America had the sole, full and
clear title to the patents shown on Schedule
A
hereto
for the goods and services covered by the registrations thereof or applications
therefor. None of such trademarks and patents have been abandoned or dedicated
to the public. RGRM, however, makes no representation that the applications
currently filed with the United States Patent and Trademark Office will actually
result in registrations.
(d) Restoration
Group America has not granted any license or entered into any contract or
agreement or granted any security interest that in any way hinders or prohibits
its right, power, and authority to grant all of the right, title, and interest
the PropertySMARTTM
risk
management program to the Purchaser under the Asset Purchase Agreement.
(e) The
PropertySMARTTM
risk
management program does not infringe any rights owned or possessed by any third
party, nor is there any valid ground for a claim that challenges the validity,
enforceability, ownership or right of Restoration Group America to
PropertySMARTTM
risk
management program. There are no claims, judgments or settlements to be paid
by
Restoration Group America or pending claims or litigation or threatened,
relating to the PropertySMARTTM
risk
management program.
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7. Indemnity.
RGRM
shall indemnify and hold harmless HSOA, its subsidiaries and their respective
officers directors, affiliates employees and agents from and against any claim
or loss, and any cost associated therewith (including but not limited to
reasonable attorneys' fees), with respect to the breach of any representation,
warranty or covenant of RGRM contained herein.
8. Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) on the date of delivery
if personally delivered, delivered by nationally recognized overnight delivery
service guaranteeing at least second business day delivery, or (b) on the date
of delivery as evidenced by the return receipt or similar evidence or on the
fifth calendar day after mailing, whichever is earlier in time, if mailed,
by
registered or certified mail or delivered by any express delivery service,
postage prepaid, and properly addressed as set forth below or at such other
address as the addressee may have previously specified by notice delivered
in
accordance with this paragraph.
If
to
RGRM:
RG
Risk
Management, Inc.
Attention:
Xxxxx Xxx
0000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx,
Xxxxx 00000
Facsimile:
(000) 000-0000
With
a
copy (which shall not constitute notice) to:
Xxxxxx
& Xxxx LLP
0000
Xxxx
Xxxxxx
Xxxxx
0000
Xxxxxx,
Xxxxx 00000
Attention:
I. Xxxxx Xxxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to
HSOA:
Home
Solutions of America, Inc.
Attention:
Xxxxxxx X. Xxxxxxx, CFO
0000
Xxxxxx Xxxxxx, Xxxxx X
Xxxxxx,
Xxxxx 00000
Facsimile:
(000) 000-0000
9. Force
Majeure. For the period and to the extent that a
party is disabled from fulfilling in whole or in part its obligations under
this
Agreement where such disability arises by reason of an event of force majeure
(including any law or government regulation or any act of God, flood, war,
revolution, civil commotion, political disturbance, strike, lockout, fire,
explosion, breakdown of plant or machinery, shortages of transportation,
facilities, fuel, energy, labor or materials or any other cause whatsoever
over
which such party has no direct control), such party will be released from such
obligations until the abatement of such disability. Notice of any such
disability and any abatement will be promptly given to the other party by the
party claiming the benefit of this Section 9.
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10. Severability.
To the
extent permitted by law, if it should ever be held that any provision contained
in this Agreement does not contain reasonable limitations as to time,
geographical area or scope of activity to be restrained, then the court so
holding will at the request of either party hereto reform such provisions to
the
extent necessary to cause them to contain reasonable limitations as to time,
geographical area, and scope of activity to be restrained and to give the
maximum permissible effect to the intentions of the parties as set forth in
this
Agreement; and the court will enforce such provisions as so reformed. If,
notwithstanding the foregoing, any provision contained in this Agreement will
be
held to be invalid, illegal or unenforceable under present or future laws
effective during the term of this Agreement, then such provisions will be fully
severable; this Agreement will be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in
lieu of such illegal, invalid, or unenforceable provision, there will be added
automatically by the parties as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable.
11. Amendment;
Waiver.
No
amendment, modification or waiver of any of the provisions of this Agreement,
or
any future representation or promise, will be binding upon the parties unless
agreed to in writing by the party to be bound thereby. The waiver by either
party hereto of a breach or violation of any provision of this Agreement will
not operate as, or be construed to be, a waiver of any subsequent breach of
the
same or other provision of this Agreement.
12. Binding
on Successors.
The
provisions of this Agreement will be binding upon and inure to the benefit
of
the parties, their successors and assigns. HSOA may assign its obligations
under
this Agreement to any successor of HSOA or to any purchaser acquiring the
PropertySMARTTM
risk
management program upon written notice to RGRM.
13. Captions;
Facsimile Signatures.
Captions
contained in this Agreement are solely for convenience of reference and will
not
be deemed to affect the interpretation or meaning of any of the provisions
of
this Agreement. A photographic,
photostatic,
facsimile or similar reproduction of a signature of this Agreement by or on
behalf of any party hereto will be regarded as signed by that party for the
purposes of this Agreement.
14. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed an original, and all of which together constitute one and the same
instrument.
15. Governing
Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed therein, exclusive of the conflict of laws
provisions thereof. Any action or proceeding arising out of or related in any
way to this Agreement may be brought in any state or federal court of competent
jurisdiction sitting in Dallas County, Texas.
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16. Attorneys’
Fees.
If any
action or proceeding is brought under this Agreement, the prevailing party
will
be entitled to recover all costs and expenses, including reasonable attorneys’
fees.
17. No
Third Party Beneficiaries.
None of
the obligations hereunder of either party shall run to or be enforceable by
any
party other than a party to this Agreement or by a party deriving rights
hereunder as a result of an assignment permitted pursuant to the terms
hereof.
18. Offset
- Legal Fees.
RGRM
hereby grants HSOA the right to offset and credit against the quarterly Royalty
payments due to RGRM hereunder, up to $50,000 in legal fees paid by HSOA on
behalf of RG America, Inc. and its subsidiaries in accordance with Section
2.01
of the
Asset Purchase Agreement. The amount of offset to be deducted from each Royalty
payment due to RGRM hereunder shall not exceed twenty percent (20%) of such
Royalty payment. HSOA’s offset rights hereunder shall continue until HSOA is
repaid in full for all legal fees paid by HSOA on behalf of RG America, Inc.
and
its subsidiaries in accordance with Section
2.01
of the
Asset Purchase Agreement.
19. Entire
Agreement.
This
Agreement sets forth the entire agreement and understanding between the parties
relating to the subject matter hereof.
[Remainder
of page intentionally left blank.]
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IN
WITNESS WHEREOF, the parties to this Agreement have executed and delivered
this
Agreement on the date first above written.
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HOME
SOLUTIONS OF AMERICA, INC.
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By:
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/s/
Xxxx Xxxxxxx
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Name:
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Xxxx
Xxxxxxx
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Title:
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Chief
Financial Officer
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By:
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/s/
Xxxxx X. Xxx
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Name:
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Xxxxx
X. Xxx
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Title:
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