EXHIBIT 10.51
PROGRAM AGREEMENT
Between
HOME DEPOT U.S.A.,
INC.
And
U.S. HOME SYSTEMS,
INC.
And
U.S. REMODELERS,
INC.
Dated February 24,
2004
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PROGRAM AGREEMENT
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:
ARTICLE 1
THE PROGRAM
.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
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(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
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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.
ARTICLE 2
FINANCIAL MATTERS
.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
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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.
ARTICLE 3
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.
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ARTICLE 4
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.
ARTICLE 5
CONFIDENTIALITY
.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
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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.
ARTICLE 6
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
