HOME DEPOT U.S.A., INC.
U.S. HOME SYSTEMS, INC.
U.S. REMODELERS, INC.
Dated February 24, 2004
This AGREEMENT (“Program Agreement”), is made and entered into as of February 24, 2004 (the “Effective Date”), among HOME DEPOT U.S.A., INC., a Delaware corporation (“Home Depot”), U.S. HOME SYSTEMS, INC., a Delaware corporation (“USHS”), and U.S. REMODELERS, INC., 1 a Delaware corporation (“USRI”) (Home Depot, USHS, and USRI being sometimes referred to in this Program Agreement collectively as the “Parties,” and individually as a “Party”).
W I T N E S S E T H:
WHEREAS, Home Depot, has established a program which will allow it to offer for sale and sell products for in-home installation in select product/service categories in which Home Depot plans to expand its product/service offerings;
WHEREAS, one of the central elements of this program is that the suppliers of such products must be of superior quality and value and have a distribution network which permits selected The Home Depot ® stores and/or markets to have the supplier presence necessary to undertake the selling, furnishing and installing of products;
WHEREAS, Home Depot has determined, in reliance upon Service Provider’s representations, that in the product category of custom designed and installed bathtub liners and wall surrounds, Service Provider offers a potentially suitable array of products and services and capabilities to service The Home Depot customers;
WHEREAS, it is Home Depot’s intention to offer or market USRI products and services in selected The Home Depot stores and/or markets, provided USRI has the necessary qualifications, capabilities and resources to supply and service such The Home Depot Stores;
WHEREAS, the purpose of this Program Agreement is, in part, to define the aforementioned program and the Parties’ obligations and responsibilities thereunder; and
WHEREAS, certain capitalized words and phrases used in this Program Agreement are defined in Annex A to this Program Agreement.
NOW, THEREFORE, for and in consideration of the agreements set forth below, Home Depot and USRI agree as follows:
.1. Scope of the Program . The sell, furnish and install program (the “Program”) detailed herein shall refer to the relationship between Home Depot, on the one hand, and USRI on the other, pursuant to which Home Depot markets for sale at participating The Home Depot ® stores (“Participating Home Depot Stores”), custom designed, installed bathtub liners and wall surrounds offered and sold from time to time by USRI and approved by Home Depot for inclusion in the Program (the “USRI Products and Services”), in each case on the terms and subject to the conditions set forth herein. A listing of current USRI Products and Services is attached as Exhibit 1.1 to this Program Agreement. The Program shall apply only to Participating Home Depot Stores and not to other Home Depot stores or other Home Depot owned or affiliated retail locations, whether now existing or hereafter established.
.2. Basic Obligations of the Parties .
(a) Home Depot will provide on behalf of the Program:
(i) dedicated space in Participating Home Depot Stores retail showrooms for display of the USRI Products and Services to store customers who are potential purchasers of the USRI Products and Services;
1 d/b/a “U.S. Home Services” in California
(ii) services with respect to qualifying potential customers for the USRI Products and Services, completing sales lead information forms and transmitting sales leads to USRI in accordance with Program policies and procedures;
(iii) payment to USRI, as applicable, of an agreed-upon percentage of revenue derived from sales of USRI Products and Services as provided herein.
(b) USRI will provide on behalf of the Program:
(i) design, construction, set-up and maintenance of USRI Products and Services displays in the Participating Home Depot Store (“USRI Displays”);
(ii) authorized employees or agents of USRI to man the USRI Displays. USRI and Home Depot shall mutually agree upon the days and times such employees and agents must be present at the Participating Home Depot Store;
(iii) training to Participating Home Depot Store sales personnel to more effectively market the USRI Products and Services and generate sales leads;
(iv) follow-up on all sales leads generated at Participating Home Depot Stores;
(v) in-person residential sales calls to potential customers, including design consultation and price quotation;
(vi) procurement of final sales contracts for the USRI Products and Services (all sales of USRI Products and Services will be memorialized in contracts between the customers and Home Depot), the form of which contracts shall be specified by Home Depot, and in each case subject to final review and approval by authorized personnel at the applicable Participating Home Depot Store;
(vii) all labor and materials (as an independent contractor in relation to Home Depot and at the sole expense of USRI) which are reasonably necessary to complete all customer orders for USRI Products and Services;
(viii) all follow-up service to address any customer complaints and/or warranty claims; and
(c) USHS will provide on behalf of the Program:
(i) such management, oversight, and operational support of or for USRI as may reasonably be required by Home Depot to guarantee USRI’s fulfillment of its obligations under this Program Agreement;
(ii) indemnification of Home Depot as further set forth under this Program Agreement.
The foregoing is intended only as a general description and overview of the Parties’ respective contributions to the Program, and is qualified in its entirety by the specific provisions contained elsewhere in this Program Agreement and in the detailed program guidelines set forth as Exhibit 1.2 (“Program Guidelines”). The Program Guidelines are subject to periodic review and revision by Home Depot, provided, however, that (a) Home Depot shall provide at least thirty (30) days’ advance written notice to USRI before such revisions take effect and (b) such revisions shall not alter any material term of this Program Agreement.
.3. Contractual Relationships . All sales to customers under the Program shall be between Home Depot and the customer. Home Depot, through the Participating Home Depot Store shall invoice the customer, and all checks, credit card payments and other payments from customers shall be made payable solely to Home Depot. The contractual role of USRI under the Program shall be that of independent contractors in relation to Home Depot, in exchange for which Home Depot will pay to USRI an agreed-upon percentage of all revenues collected from customers for the USRI Products and Services, as provided in Section 2.1.
.4. Designation of Participating Home Depot Stores . Attached to this Agreement as Exhibit 1.4 is a list of Participating Home Depot Stores as of the Effective Date. Home Depot intends, from time to time, to designate additional Participating Home Depot Stores as the term is defined below, provided, among other things, that USRI is ready, willing and able to offer and sell the USRI Products and Services at such additional Participating Home Depot Stores and has the necessary qualifications, capabilities, financial resources and
reputation (both national and local) to operate the Program at such additional Participating Home Depot Stores. Home Depot will communicate regularly with USRI regarding its intended roll-out of the Program to additional Participating Home Depot Stores and solicit USRI’s evaluation regarding the markets in which USRI is qualified to establish and operate the Program in order to justify the further designation of The Home Depot stores as Participating Home Depot Stores. The term “Participating Home Depot Store” shall refer exclusively to Participating Home Depot Stores that have been designated by Home Depot as Program participants; Participating Home Depot Stores that are not Program participants shall be referred to herein as “Non-Participating Stores.”
.5. Designation of Home Depot Stores by Home Depot . For each Participating Home Depot Store designated by Home Depot following the Effective Date, Home Depot shall notify USRI of the designation of such Participating Home Depot Store. Each such designation shall require specific approval by Home Depot as described in more detail in the Program Guidelines, Section 1.6 below and elsewhere in this Program Agreement.
.6. Approval of USRI Requests for Designation of Home Depot Stores by Home Depot . In each case in which USRI requests that Home Depot designate a particular The Home Depot store as a Participating Home Depot Store, such designation shall be subject to approval by Home Depot in Home Depot’s sole discretion. Upon receipt of USRI’s request to designate a particular The Home Depot store as a Participating Home Depot Store, Home Depot may, at its option, arrange an interview with the local managers of USRI or its subcontractors and may request an inspection of its facilities, interviews with employees and review of financial and other records that Home Depot deems relevant to the approval process. All local managers of USRI will be required to submit to background checks as described in more detail in the Program Guidelines. Home Depot’s approval or rejection of USRI’s request may be based upon any criteria Home Depot deems relevant in its discretion, and may include, among other criteria: a USRI’s capitalization and ability to expand to meet demand for USRI Products and Services anticipated to be generated by the Program; ability to deliver USRI Products and Services in accordance with Program standards; proximity to the pertinent Home Depot store; evidence of compliance with relevant legal requirements; and cooperation with Home Depot in the investigation and approval process. Home Depot will notify USRI of its approval or rejection of USRI’s request.
.1. USRI Commission . Home Depot shall pay USRI 85% of gross revenues (excluding sales taxes) actually collected from a customer (“Lead Fulfillment Incentive” or “LFI”) in consideration for the sale, furnishing, and installation of Service Provider of USRI Products and Services under the Program. Additional details pertaining to financial matters associated with the Program are detailed in the Program Guidelines.
.2. Costs and Expenses .
(a) Home Depot will be responsible for transmitting customer leads it receives to USRI, processing customer payments and fulfilling the other obligations of Home Depot hereunder and under the Program Guidelines. Provided, however, that USRI shall be responsible-, at its sole expense, for obtaining a dedicated toll-free telephone number for use by prospective Home Depot customers inquiring about USRI’s product offerings under the Program.
(b) USRI will be responsible for all costs associated with designing, building, installing and maintaining the USRI Displays, other than as specified in Section 2.2(a); manning the USRI Displays in each Participating Home Depot Store as required by Section 1.2(b)(ii); educating Home Depot employees about the USRI Products and Services and training Home Depot employees on sales techniques to help generate interest in the USRI Products and Services at each Participating Home Depot Store; responding to customer leads, including initial telephone response and in-person sales calls, design consultation, providing price quotations and procuring signed purchase orders; all labor, material, delivery and installation costs relating to the provision of the USRI Products and Services and fulfillment of the customer contracts; all labor, material, delivery, refund or other costs associated with customer complaints and/or warranty claims following the sale of the USRI Products and Services; and all other cost or expenses incurred in connection with the fulfillment of the USRI’s obligations under this Program Agreement, including the Program Guidelines. Provided, however, that the
foregoing is not intended to be used by Home Depot as a mechanism to undertake activities outside the scope of the Program the cost of which, under the terms hereof, would be borne by the USRI.
.3. Reporting . USRI shall provide Home Depot with regular reports analyzing USRI’s performance in generating leads and closing sales and such other reports as shall be mutually agreed upon by the Parties. Home Depot shall provide USRI with certain financial and operating reports as described in the Program Guidelines.
.4. Customer Invoicing and Payment . USRI shall prepare and present to the customer for payment all invoices for USRI Products and Services, including sales taxes where applicable. All invoices shall be in a form created by Home Depot from time to time for use in the Program. USRI shall also collect and remit to Home Depot customer deposits at the times and in the amounts prescribed by Home Depot from time to time. All invoices shall be in the name of Home Depot and all payments shall be made directly to Home Depot in accordance with procedures prescribed by Home Depot.
.5. Pricing . USRI shall be responsible for quoting prices to customers and securing signed customer purchase orders in the name of Home Depot and subject to final acceptance by Home Depot. The prices quoted by USRI shall be competitive with the prices charged by USRI for comparable goods and services offered by the USRI to its own customers outside the Program.
.6. Audit Rights . Home Depot or its designees shall have the right at all times while this Program Agreement is in effect and for a period of three (3) years following any expiration or termination of this Program Agreement, to inspect, audit and copy all relevant books and records of USRI as it may reasonably request solely for the purpose of verifying its compliance with its obligations under this Program Agreement. Information in such books and records that are not related to the foregoing may be redacted.
.7. Promotions . From time to time, Home Depot may implement various store-wide or targeted promotions or purchase incentives applicable to the USRI Products and Services. Such promotions or purchase incentives may apply nationally, regionally, or only with respect to particular Participating Home Depot Stores. Home Depot will notify USRI in advance of promotions and purchase incentives applicable to the USRI Products and Services. USRI shall participate in such promotions and purchase incentives to the extent consistent with this Program Agreement.
RESTRICTIONS ON CERTAIN ACTIVITIES
.1. Obligations of Home Depot . Nothing herein shall restrict in any way the right of Home Depot or any Home Depot Affiliates to offer products and services from USRI Competitors, or to contract with any third party to offer products and services that compete with the USRI Products and Services, through channels other than Participating Home Depot Stores, including, without limitation, Home Depot warehouse outlets, catalogs and via the Internet.
.2. Obligations of USRI . During the term of this Program Agreement, USRI shall not enter into any agreement with any of the parties listed on Exhibit 3.2 (the “Home Depot Competitors”) to market, sell or provide any USRI Products and Services or any competing products and services to, or to customers in association with, such Home Depot Competitor. USRI represents to Home Depot that USRI is not a party to any such agreement with a Home Depot Competitor as of the Effective Date.
.3. No Diversion of Business . All sales leads and Customer Information (as defined in Section 4.3) generated in connection with the Program shall be used by USRI solely to solicit and make sales of USRI Products and Services under the Program. Under no circumstances shall USRI nor any of its Affiliates (i) use any sales leads or Customer Information generated through the Program to solicit or sell, or assist any third party in assisting or selling any products or services (including USRI Products and Services) outside the Program; or (ii) otherwise divert any business opportunity which is rightfully a Program opportunity. Home Depot’s audit rights under Section 2.6 shall include the right to confirm compliance with this Section 3.3.
INTELLECTUAL PROPERTY RIGHTS
.1. Use of Trademarks .
(a) Pursuant to a Trademark and Service Mark License Agreement in the form of Exhibit 4.1(a) (the “Trademark and Service Mark License Agreement”) executed among Home Depot, Homer TLC, Inc., and USRI as of the date of this Program Agreement, each Party shall receive a nonexclusive license to use specific trademarks and service marks (the “Marks”) of the other Party for the sole purpose of fulfilling their respective obligations under the Program. The terms and conditions of the Trademark and Service Mark License Agreement are hereby incorporated by reference into this Program Agreement.
(b) All advertising, promotional, marketing materials and telephone scripts (collectively, the “Materials”) created or produced by a Party relating to the Program or the USRI Products and Services must be pre-approved in writing by the other Party. Materials, signage or documents bearing trademarks, artwork or designs of the other Party that have not been approved by such Party must be destroyed promptly at the request of such other Party.
(c) From time to time, each Party may provide the other Party with certain promotional materials related to the Program and/or the USRI Products and Services. The other Party shall use commercially reasonable efforts to use such promotional materials in a manner consistent with the terms and conditions of this Program Agreement.
.2. Ownership Rights . Except as explicitly set forth in this Program Agreement, each Party shall at all times maintain all right, title and interest in the intellectual property rights owned by such Party relating to the Materials used in the Program. Each Party hereby expressly disclaims all right, title and interest in and to intellectual property rights in the Materials provided by the other Party under the Program, and agrees that it will not take any action or suffer or permit any condition to exist that gives rise to any claim adverse to the other Party’s title in or right to possess the intellectual property rights in such Materials.
.3. Customer Information . USRI shall be responsible for developing and maintaining an information database relating to all sales leads and customer information pertaining to the Program, and customer and transaction tracking information. Except as otherwise set forth in this Section 4.3, Home Depot shall own all right, title and interest to all information and data collected or stored in any medium relating to customers or potential customers of the Program (collectively, the “Customer Information”), and USRI may use the Customer Information during the term of this Program Agreement solely for purposes related to the Program. Home Depot shall not be restricted from using the Customer Information in any manner, including uses outside the Program. In no event shall USRI disclose, or permit any third party to use, the Customer Information; provided, that USRI may permit its employees and suppliers to use relevant Customer Information solely to the extent necessary to properly provide USRI Products and Services to a Program customer, and provided they have been advised of and acknowledged the foregoing restrictions on use of the Customer Information. During the term of this Program Agreement and in accordance with the reporting requirements of this Program Agreement and the Program Guidelines, USRI shall provide Home Depot with copies of all Customer Information in a form or medium agreed upon by the Parties. Upon termination of this Program Agreement, USRI shall deliver (a) a copy of the Customer Information to Home Depot in a form and medium agreed upon by the Parties and (b) remove from all files and copies of the Customer Information all references to the fact that such information was obtained from Home Depot or as a result of the Program.
.1. USRI shall hold all Home Depot Confidential Information in the strictest confidence and shall not, without Home Depot’s prior written consent, directly or indirectly use such Confidential Information or disclose such Confidential Information to any third parties except as required by law or governmental regulation or for the performance of USRI’s obligations under this Program Agreement. USRI shall take appropriate measures to safeguard Home Depot Confidential Information from disclosure by USRI’s employees and others. USRI agrees that any disclosure of Home Depot Confidential Information in
contravention of this Article 5 would result in irreparable injury to Horne Depot and agrees that injunctive relief would be an appropriate remedy in the event of any breach of this Article 5 by USRI.
.2. USRI acknowledges that Home Depot does not want to receive from USRI any information, data, material or documents that USRI deems to be its confidential, proprietary or trade secret information. Accordingly, any information, data, material or documentation that USRI transmits, discloses or disseminates to Home Depot shall not under any circumstances constitute any confidential information or trade secrets of USRI or its Affiliates.
PERFORMANCE COVENANTS OF USRI PROGRAM PARTICIPANTS
.1. Warranty, Quality Standards . USRI warrants and guarantees that all USRI Products and Services furnished or installed by USRI shall be free from defects in workmanship for a period of one (1) year, or as otherwise mutually agreed in writing by the Parties, from completion of said USRI Products and Services by USRI, which completion shall be dated as of the customer’s acceptance of the work and execution of any required lien, waiver or release, or for an additional warranty as may be agreed upon in writing with a customer. USRI warrants and guarantees that all USRI Products and Services furnished or installed by USRI shall be free from material defects for the greater of (i) a period of five years, or as otherwise mutually agreed in writing by the Parties, from completion of said USRI Products and Services by USRI as defined above or (ii) the applicable period contained in the manufacturer’s warranty. If any claim is made that a defect developed or was revealed during the warranty period, USRI agrees to promptly investigate such claim and if such claim is accurate, remedy said defect promptly without cost to Home Depot or the customer. If USRI fails to remedy such defect promptly, Home Depot shall have the right to have the defect corrected at USRI’s expense in accordance with Section 6.2. Home Depot may, at its sole cost and expense, use customer surveys to measure each USRI’s adherence to quality standards. From time to time, Home Depot may, at its sole cost and expense, use other methods to measure such USRI’s adherence to quality standards. USRI shall, upon request, fully cooperate with Home Depot to help ensure the success of any such efforts to measure customer satisfaction or verify USRI’s adherence to quality standards. Notwithstanding any provision herein to the contrary, USRI acknowledges that it may incur incidental expenses in providing such cooperation. USRI must maintain a minimum level of service that is reasonably acceptable to Home Depot and that meets or exceeds the standards set forth in the Program Guidelines. Home Depot shall have the right to visit each USRI’s field offices, worksites and/or other places of business at any reasonable time, and with reasonable notice to the responsible branch manager, for the purpose of verifying such USRI’s compliance with said standards of quality and/or performance.
.2. Customer Adjustments/Satisfaction . All USRI shall at all times maintain the general policy of satisfaction of customers and shall adjust all complaints of, and controversies with customers, with respect to said sales made under the Program. In any case in which such adjustment is unsatisfactory to the customer and where Home Depot has provided USRI with reasonable time and opportunity to satisfy the customer and, in Home Depot’s reasonable judgment, the customer is being fair and reasonable, Home Depot reserves and shall have the right, at USRI’s expense, to make such further adjustment as Home Depot may reasonably deem necessary under the circumstances and such adjustment made by Home Depot, even when in excess of the sales price of the USRI Products and Services in question, shall be conclusive and binding upon USRI. USRI shall maintain and provide to Home Depot files pertaining to customer complaints and their adjustment, which files shall be deemed Customer Information. Home Depot agrees to promptly forward to USRI information received by Home Depot with respect to customer complaints to assist such USRI in its efforts to respond to customer complaints in a timely manner. If USRI should fail to re