Filed by Bowne Pure Compliance



 




Exhibit 10.2




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.




(a) If to RGRM:




RG Risk Management, Inc.

Attention: James Rea

1507 Capital Avenue, Suite 101

Plano, Texas 75074

Facsimile: (972) 665-0865




With a copy (which shall not constitute notice) to:




Hughes & Luce LLP

1717 Main Street

Suite 2800

Dallas, Texas 75201

Attention: I. Bobby Majumder, Esq.

Facsimile: (214) 939-5849




(b) If to HSOA:




Home Solutions of America, Inc.

Attention: Jeffrey M. Mattich, CFO

1500 Dragon Street, Suite B

Dallas, Texas 75207

Facsimile: (214) 333-9435



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.



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IN WITNESS WHEREOF, the parties to this Agreement have executed and delivered this Agreement
on the date first above written.



	 	 	 	 	 
	 	 	HOME SOLUTIONS OF AMERICA, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jeff Mattich
	 

	 	 	 	 
	 

	 	Name:
	 	Jeff Mattich
	 

	 	Title:
	 	Chief Financial Officer
	 
	 	 	 	 
	 	 	RG RISK MANAGEMENT, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ James A. Rea
	 

	 	 	 	 
	 

	 	Name:
	 	James A. Rea
	 

	 	Title:
	 	President






 



[Signature Page to Royalty Agreement]



 


 









 





SCHEDULE A




Patent application for “SYSTEM AND METHOD FOR PROVIDING INSURANCE” filed with the United States
Patent and Trademark Office on 04/29/2004, Patent Application Number: 10/836,076