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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 PropertySMART
TM risk
management program or a substantially similar property insurance
program created by HSOA or any of its subsidiaries and derived from
the PropertySMART
TM 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
PropertySMART
TM risk
management program or any other similar risk management program and
that HSOA may discontinue the PropertySMART
TM 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.
1
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 (10
th )
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 PropertySMART
TM risk
management program.
(b)
Immediately
prior to the Effective Date, Restoration Group America was the
sole and exclusive owner of the PropertySMART
TM 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 PropertySMART
TM 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
PropertySMART
TM risk
management program to the Purchaser under the Asset Purchase
Agreement.
(e)
The
PropertySMART
TM 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 A
