EXHIBIT 10.4
AMENDED AND RESTATED LIMITED LICENSE AGREEMENT
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THIS AMENDED AND RESTATED LIMITED LICENSE AGREEMENT (this "Agreement"),
dated June 27, 2005, by and between Debt Resolve, Inc., a Delaware corporation
formerly known as Lombardia Acquisition Corp. (the "Company"), having offices at
707 Westchester Avenue, Lobby Level, White Plains, New York 10604, on the one
hand, and James D. Burchetta, an individual residing at 210 Central Park South,
New York, New York 10019 ("Burchetta"), and Charles S. Brofman, an individual
residing at 4 Five Ponds Drive, Waccabuc, New York 10597 ("Brofman" and,
together with Burchetta, the "Licensors"), on the other hand.
WITNESSETH
WHEREAS, the parties hereto have heretofore entered into a Limited License
Agreement, dated February 20, 2003, Amendment No. 1 thereto, dated November 13,
2003, and Amendment No. 2 thereto, dated February 25, 2004 (collectively, the
"Initial Agreement"); and
WHEREAS, the Company and the Licensors wish to amend and restate the
Initial Agreement, as amended, in its entirety; and
WHEREAS, the Licensors warrant and represent that they are the owners of
the entire right, title and interest in and to certain inventions, creations,
ideas, and developments relating to a computerized blind bidding methodology and
U.S. Patent No. 6,330,551 granted on December 11, 2001 and entitled
"Computerized Dispute and Resolution System and Method;" and
WHEREAS, the Company is desirous of acquiring rights under said creations,
ideas, developments, patent and the other Intellectual Property Rights (as
defined below) in order to offer an online system for the settlement of
delinquent, defaulted or other types of credit card receivables and other
consumer debt incorporating same; and
WHEREAS, the parties believe it to be to their mutual benefit to enter into
an amended and restated agreement under the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained and for other good and valuable consideration which is set
forth herein, the Company and the Licensors hereby amended and restate, in its
entirety, the Initial Agreement, and agree as follows:
1. CERTAIN DEFINITIONS
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As used in this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "Gross Revenues" means only those revenues received by the
Company, and any subsidiaries and other sub-licensees, for or on account of the
Licensed Usage online, but also including without limitation the use, sale or
distribution of the System and/or Products. The term "Gross Revenues" shall not
include revenues received by the Company from any other source.
1.2 "Intellectual Property Rights" means all inventions and U.S. and
foreign patents, copyrights, whether or not copyrightable), trademarks, trade
secrets, know-how, and other intellectual property and proprietary rights
relating to U.S. Patent No. 6,330,551 issued by the U.S. Patent and Trademark
Office on December 11, 2001 for "Computerized Dispute Resolution System and
Method," and the exploitation thereof, together with all patents issuing
thereon, including re-issues, re-examinations, patents of addition and any
registration or confirmation patents corresponding thereto, divisions,
continuations, continuations-in-part, substitutions, and changes of applications
thereof including the continuation U. S. Patent No. 6,850,918 issued by the U.S.
Patent and Trademark Office on February 1, 2005 for "Computerized Dispute
Resolution System and Method" (collectively, the "Patent"), whether related to
said U.S. and foreign applications directly or through one or more intervening
applications, and whether or not registered or made the subject of any
applications for registration, and including all improvements and modifications
to the existing technology or methods made by either party, all of the foregoing
subject to the provisions herein concerning ownership of the Custom Materials
(as defined below).
1.3 "Licensed Usage" means the use of the Intellectual Property Rights
to create, make, modify, improve, sell, distribute and otherwise use Products
(as defined below) and Systems (as defined below) used solely for the settlement
and collection of delinquent, defaulted or other types of credit card
receivables and other consumer debt (and specifically excluding, without
limitation, the settlement and collection of insurance claims, taxes and other
municipal fees of all types, and those rights which have been previously
exclusively licensed to Cybersettle, Inc. in connection with its business), and
the use, marketing and distribution for a profit of the Products and System by
the Company in the Territory (as defined below).
1.4 "Products" means software products and/or solutions, developed by
the Company and incorporating the Intellectual Property Rights, used solely for
the settlement and collection of delinquent, defaulted or other types of credit
card receivables and other consumer debt (and specifically excluding, without
limitation, the settlement and collection of insurance claims, commercial
claims, taxes and other municipal fees of all types, and those rights which have
previously been exclusively licensed to Cybersettle, Inc. in connection with its
business).
1.5 "System" means an automated system, developed by the Company and
incorporating the Intellectual Property Rights, used solely for the settlement
and collection of delinquent, defaulted or other types of credit card
receivables and other consumer debt (and specifically excluding, without
limitation, the settlement and collection of insurance claims, commercial
claims, taxes and other municipal fees of all types, and those rights which have
previously been exclusively licensed to Cybersettle, Inc. in connection with its
business).
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1.6 "Territory" means the entire world.
2. LICENSE AND OWNERSHIP PROVISIONS
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2.1 Grant of License. The Licensor hereby grants a limited, exclusive,
non-transferable license to the Company to utilize the Intellectual Property
Rights, in the Territory only, solely for the Licensed Usage. Except for
sublicenses: (i) to subsidiaries of the Company that the Company controls (by
security ownership, contract or otherwise), of which there are none presently
but which, as applicable in the future, the Company shall cause to become
parties to this Agreement as sub-licensees and (ii) necessary for the full use
by the Company of the license rights granted hereunder (e.g., to subcontractors
or other agents of the Company), the license granted herein shall not include
the right to sub-license without the prior written consent of the Licensors,
which consent may be withheld in the Licensors' sole discretion. Any
sub-licensee will be required to accept the terms of this Agreement and become a
party hereto; but the Company will continue to be fully responsible for all of
its original obligations under this Agreement, even though a sub-licensee may
assume some or all of them. The rights granted to the Company in this Section
2.1 do not extend to any individuals, employees, agents, contractors, parents,
affiliates or persons or entities otherwise related to or affiliated with the
Company, except as provided in Section 8.7 herein.
2.2 Ownership of Custom Materials. All right, title and interest
(including, without limitation, intellectual property rights) in and to the
computer code, software, programs and documentation developed or created
hereunder (including source code and object code), designs, products, drawings,
documentation, information, trade secrets, know-how, deliverables and other
materials made and developed in connection with this Agreement (the "Custom
Materials") shall be jointly owned by the Licensors and the Company, except that
the Licensors may not use, market, or distribute Custom Materials for the
Licensed Usage or services competitive with the Products or the System during
the term of this Agreement, such rights during such term being exclusive to the
Company.
2.3 Scope. The Licensors reserve for themselves all rights not
expressly granted to the Company hereunder. The Company expressly recognizes and
acknowledges that this Agreement does not confer on the Company any ownership
rights in the Intellectual Property Rights, subject only to the limited license
for the Licensed Usage and the joint ownership of Custom Materials as set forth
in this Agreement. Subject to the foregoing sentence, the Company agrees and
covenants that it shall not during the term of this Agreement or thereafter
challenge, contest, or take any actions inconsistent with the Licensors'
ownership of the Intellectual Property Rights, including without limitation the
Licensors' exclusive right to apply to register (or maintain any application or
registration for) any Intellectual Property Rights in any jurisdiction worldwide
in which the Licensors hold or maintain rights or registrations in the
Intellectual Property Rights. The Company, at the Licensors' request, will
require all employees, agents, and subcontractors performing services pursuant
to this Agreement to sign writings acknowledging that all right, title, and
interest in and to all Custom Materials created by them under this Agreement is
owned jointly by the Licensors and the Company. The Company will require all
employees, agents, affiliates, corporate parents and subsidiaries,
subcontractors, and any and all third parties creating Custom Materials pursuant
to this Agreement to sign writings acknowledging that all right, title, and
interest in and to all Custom Materials created by them under this Agreement is
owned jointly by the Licensors and the Company.
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3. PATENT HOLDER OPTIONS
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3.1 Patent Holder Options. As consideration for the license granted to
the Company hereunder, the Company will grant to Burchetta and Brofman stock
options ("Patent Holder Options") to purchase shares of common stock, par value
$.001, of the Company, (the "Common Stock") in the amounts and in the timeframes
set forth below:
(i) the Company will grant, effective as of the date hereof, to
each of Burchetta and Brofman a Patent Holder Option to subscribe for and
purchase up to such number of shares of Common Stock such that the Patent Holder
Option, when added to the number of shares of Common Stock owned by each of
Burchetta and Brofman as of the date hereof or hereafter until such time, and in
combination with any shares owned by any of their respective immediate family
members and affiliates (as defined under the rules of the Securities and
Exchange Commission), will equal fourteen and six-tenths percent (14.6%) of the
total number of outstanding shares of Common Stock of the Company on a
fully-diluted basis as of the closing of an initial public offering of the
Company's Common Stock, assuming the exercise of such Patent Holder Option;
(ii) if, and upon, the Company (in combination with any
subsidiaries and other sub-licensees) reaching Ten Million dollars ($10,000,000)
in Gross Revenues in any given fiscal year, the Company will grant each of
Burchetta and Brofman such additional number of Patent Holder Options as will
equal one percent (1%) of the total number of outstanding shares of Common Stock
on a fully-diluted basis at such time;
(iii) if, and upon, the Company (in combination with any
subsidiaries and other sub-licensees) reaching Fifteen Million dollars
($15,000,000) in Gross Revenues in any given fiscal year, the Company will grant
each of Burchetta and Brofman such additional number of Patent Holder Options as
will equal one and one-half percent (1.5%) of the total number of outstanding
shares of Common Stock of the Company on a fully-diluted basis at such time; and
(iv) if, and upon, the Company (in combination with any
subsidiaries and other sub-licensees) reaching Twenty Million dollars
($20,000,000) in Gross Revenues in any given fiscal year, the Company will grant
each of Burchetta and Brofman such additional number of Patent Holder Options as
will equal two percent (2%) of the total number of outstanding shares of Common
Stock of the Company on a fully-diluted basis at such time.
3.2 Patent Holder Option Terms. The Patent Holder Options will vest
immediately upon grant, will have an exercise price of five dollars ($5.00) per
share of Company common stock, will be exercisable for ten (10) years from the
date of grant and may be transferable.
3.3 Gross Revenues Calculation. For purposes of Section 3.1, Gross
Revenues shall be calculated as of December 31st of each year during the term of
this Agreement, and shall be reported to the Licensors on or before 90 days
after each such December 31st date, together with a complete accounting of such
calculations. For purposes of Section 3.1, the Gross Revenues milestones shall
be measured for each fiscal year alone, without carryover from the previous
fiscal year, but if reached in any given fiscal year, are cumulative with
respect to the Patent Holder Options to be granted.
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3.4 Audit. The Company shall, and shall cause any subsidiaries and
other sub-licensees to, upon written request, during normal business hours, but
not more frequently than once each calendar year, provide access to pertinent
records (which records will be kept complete and accurate by the Company and any
subsidiaries and other sub-licensees) relating to revenue received and
calculation of Gross Revenues in connection with the grant of Patent Holder
Options, to an independent accounting firm chosen and compensated by the
Licensors, for purposes of audit. Such accounting firm shall be authorized to
report to the Licensors only the amount of Gross Revenues for the period
examined.
4. ENFORCEMENT OF INTELLECTUAL PROPERTY
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4.1 Third Party Infringement. In the event that the Company becomes
aware that any third party is infringing any of the Intellectual Property
Rights, the Company will have the right to control and prosecute against such
infringer and bring a legal action against the infringer, as the Company deems
appropriate, and will have the right to enforce and collect, or pay, any
judgment thereon. The Licensors shall, at the Company's request and expense,
take all appropriate or necessary actions to assist in the prosecution of such
action (including consenting to be joined as an additional party plaintiff in
such action). The Licensors shall have the right to monitor the Company's
actions in such case, and the Company shall keep the Licensors reasonably
informed of proceedings and developments. Without the Licensors' written
consent, which shall not be unreasonably withheld, conditioned or delayed, the
Company shall not make any pleading or enter into any settlement that will
adversely affect the Licensors' rights in and to the Intellectual Property
Rights.
4.2 Infringement of Third Party Rights. In the event that the Company
is accused by a third party of infringing the third party's patent or other
intellectual property rights as such may relate to the Intellectual Property
Rights, the Company will have the obligation to control and defend against such
accusation and bring a legal action against the third party, as appropriate, and
will have the right and obligation to enforce and collect, or pay, any judgment
thereon. Barring an agreement to the contrary, the Company and the Licensors
shall bear equally the expenses of such defense as well as the payment of any
related settlements or adverse judgments. The Licensors shall, at the Company's
request and expense, take all appropriate or necessary actions to assist in the
defense of such action. The Licensors shall have the right to monitor the
Company's actions in such case, and the Company shall keep the Licensors
reasonably informed of proceedings and developments. Without the Licensors'
written consent, which shall not be unreasonably withheld, conditioned or
delayed, the Company shall not make any pleading or enter into any settlement
that will adversely affect the Licensors' rights in and to the Intellectual
Property Rights.
5. TERM AND TERMINATION
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5.1 Term. This Agreement shall commence on the date hereof and
continue until the expiration of the last-to-expire patents included in the
Intellectual Property Rights, unless sooner terminated in accordance with the
terms of this Agreement.
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5.2 Termination by the Company. The Company may terminate this
Agreement upon the material breach or default by the Licensors in the
performance of any obligations to be performed by the Licensors hereunder, which
material breach or default is not cured within ninety (90) days after written
notice of default is given by the Company to the Licensors, and provided that
all Patent Holder Options due to the Licensors shall be granted in full prior to
such termination.
5.3 Events on Termination. Upon expiration or termination of the
entirety of this Agreement, all rights and privileges granted to the Company
hereunder shall automatically, without the need for further act or deed on the
part of the Licensors, revert to and vest in the Licensors. Upon expiration or
termination of this Agreement, the Company shall promptly cease the Licensed
Usage, including without limitation all use of all software, methods and
materials created pursuant to this Agreement, and the Company shall cooperate
fully with the Licensors to effect the orderly transfer of all of the Company's
books, records and files relating to the Licensed Usage to the Licensors or to
the Licensors' designated representative, and the orderly transfer of
responsibilities with respect to the Intellectual Property Rights. The Company
hereby agrees that, at the Licensors' request, it shall execute all documents
necessary to effect such orderly transfer.
5.4 Survival. Any provisions of this Agreement which must survive in
order to give effect to their meaning shall survive any termination or
expiration of this Agreement, including without limitation Sections 2.2 and 2.3
and all provisions pertaining to ownership of the Intellectual Property Rights.
Termination of this Agreement for any reason shall not release any party hereto
from any liability which at the time of such termination has already accrued to
any other party hereto.
6. REPRESENTATIONS, WARRANTIES, AND COVENANTS
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6.1 The Licensors represent and warrant to the Company that: (i) they
are the owners of the entire right, title and interest in and to the Patent and
the Intellectual Property Rights licensed to the Company hereunder, (ii) the
Patent (including the Licensed Usage) is valid and enforceable, (iii) the
Licensors' performance of their obligations under this Agreement is not in
conflict with, and will not result in a breach of or constitute a default under,
any other written agreement, contract, instrument, rule of law or order of any
court or governmental agency to which the Licensors are a party or by which the
Licensors or their property are bound and (iv) this Agreement constitutes a
legal, valid, and binding obligation of the Licensors and is enforceable against
the Licensors in accordance with its terms.
6.2 The Company represents and warrants to Licensors that: (i) the
Company's performance of its obligations under this Agreement is not in conflict
with, and will not result in a breach of or constitute a default under, any
other written agreement, contract, instrument, rule of law or order of any court
or governmental agency to which the Company is a party or by which the Company
or its property is bound and (ii) this Agreement constitutes a legal, valid, and
binding obligation of the Company and is enforceable against the Company in
accordance with its terms.
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6.3 EXCEPT AS SPECIFICALLY CONTAINED IN THIS AGREEMENT, THE PARTIES
EACH DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
FITNESS FOR A PARTICULAR PURPOSE, THE IMPLIED WARRANTY OF MERCHANTABILITY, ANY
WARRANTIES ARISING FROM A COURSE OF DEALING AND ANY WARRANTIES THAT THE
INTELLECTUAL PROPERTY RIGHTS (INCLUDING WITHOUT LIMITATION U.S. PATENT NO.
6,330,551) ARE SUFFICIENT TO PROTECT OR ASSERT FOR ANY PURPOSE OR IN ANY FORM
ANY EXCLUSIVE OR NON-EXCLUSIVE RIGHTS IN THE SYSTEM AND/OR PRODUCTS BEING
DEVELOPED, MARKETED, AND DISTRIBUTED BY THE COMPANY PURSUANT TO THIS AGREEMENT.
6.4 The Licensors hereby represent, warrant and covenant to the
Company that: (i) their performance of their obligations under this Agreement,
and the Company's realization of the benefit of such performance by the
Licensors under and as contemplated by this Agreement, does not and will not
infringe, violate or misappropriate any copyright, trademark, service mark,
trade secret, know-how, patent or any other intellectual property right or
proprietary right of any third party and (ii) as of the date thereof, and except
for pleadings made by the defendant in the National Arbitration Forum case
brought by the Licensors, there are no claims against the Intellectual Property
Rights that the Licensors are aware of.
6.5 Each party hereto hereby covenants to the other party hereto that,
during the term of this Agreement, it shall not knowingly take any action or
omit to take any action the taking or omitting of which would render any of its
representations and warranties set forth in this Agreement materially inaccurate
at any time during the term of this Agreement.
7. INDEMNIFICATION.
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7.1 Each party agrees to indemnify and hold harmless the other from
and against and in respect of any and all third-party claims, suits, actions,
proceedings (formal or informal), investigations, judgments, deficiencies,
damages, settlements, liabilities, and legal and other expenses (collectively,
"Losses") as and when incurred, arising out of, in connection with or based upon
any act or omission, or alleged act or alleged omission of the indemnifying
party in connection with the acceptance of, or the performance or
non-performance by the indemnifying party of any of its obligations under this
Agreement; provided, however, that any Losses arising out of or relating to any
gross negligence or willful misconduct on the part of the party seeking
indemnification shall not be subject to the indemnification obligations of this
Section.
7.2 The party seeking indemnification shall give the indemnifying
party prompt notice of any claim asserted or threatened on the basis of which
indemnification is being sought from the indemnifying party as herein permitted;
however, the obligations of the indemnifying party under this Section shall not
be conditioned upon prompt receipt of such notice.
8. MISCELLANEOUS
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8.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the United States and the State of New York,
without recourse to conflicts of law provisions.
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8.2 Equitable Remedies, Consent to Jurisdiction. The parties recognize
that the unauthorized use, misuse and exploitation or other forms of
infringement by the Company of the Intellectual Property Rights shall result in
immediate, substantial, and irreparable damage to the Licensors as to which
there may be no adequate remedy at law. Accordingly, the parties agree that,
notwithstanding anything to the contrary in this Agreement, either party shall
be entitled to seek equitable relief to enforce and protect their rights and
properties and/or to seek specific performance of the other party's obligations
hereunder. Each of the parties hereby submits to the exclusive personal
jurisdiction of, and venue and situs in, the United States District Court for
the Southern District of New York (White Plains, New York division) or, if
jurisdiction in such court is lacking, then in the Supreme Court of the State of
New York, County of Westchester, in respect of any action brought pursuant to
this Section.
8.3 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed facsimile transmission, if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth in the preamble to this Agreement or
at such other address as such party may designate by ten (10) days' advance
written notice to the other parties hereto.
8.4 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and constitutes the complete, final and exclusive
embodiment of their agreement with respect to the subject matter hereof, and
shall supersede any and all prior oral or written representations, conditions,
warranties, understandings, proposals or agreements between the parties
regarding the subject matter hereof.
8.5 Amendment and Waiver. No provision of this Agreement may be
amended or waived except by a writing signed by all parties hereto. Any delay or
failure on the part of either party to enforce its rights hereunder to which it
may be entitled shall not be construed as a waiver of the right and privilege to
do so at any subsequent time, and no custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of such party's right
to demand strict compliance by the other party with the terms hereof. Waiver by
any party of any particular default by the other party shall not impair such
party's right with respect to any subsequent default of the same or of a
different nature.
8.6 Severability. Any invalidity, in whole or in part, of any
provision of this Agreement shall not affect the validity of any other provision
of this Agreement.
8.7 Assignment. The Licensors may freely transfer or assign their
rights and obligations under this Agreement; provided, however, that any
transferee or assignee will be required to accept the terms of this Agreement
and become a party hereto and the Licensors will continue to be fully
responsible for all of their original obligations under this Agreement, even
though a transferee or assignee may assume some or all of them. The Company may
not assign any of its rights or obligations under this Agreement without the
express prior written consent of the Licensors, which consent may be withheld in
the Licensors' sole discretion; provided, however, that, in the event of a
corporate entity change by way of a merger or the sale of all or substantially
all of the Company's assets, the Company may assign its rights under this
Agreement to such new entity without the Licensors' written consent.
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8.8 Successors. Subject to the prohibitions against assignment
contained herein, this Agreement shall inure to the benefit of and shall be
binding on the parties hereto and their respective successors and permitted
assigns.
8.9 Confidentiality. Any information received by one party hereto from
any other party hereto in the course of the party's exercise of rights and
performance of responsibilities under this Agreement shall be considered as
proprietary to the party furnishing such information, and shall not be disclosed
by the other party to any third party except to the extent that such information
is in or becomes publicly available, was lawfully in possession of the receiving
party prior to its disclosure by the disclosing party, or to the extent either
party may be required to disclose such information to any government agency,
court of law, administrative tribunal or instrumentality.
8.10 Freedom of Action. This Agreement shall not be construed to limit
the Licensors' right to grant to third parties any exclusive or nonexclusive
right or license in the Intellectual Property Rights, subject only to the
limited license for the Licensed Usage granted herein. Other than as expressly
provided herein, the Company shall have no right or interest whatsoever in the
Intellectual Property Rights or any service or product of the Licensors, whether
such service or product is conceived or developed by the Licensors before,
during or after the course of the Licensors' performance of this Agreement.
8.11 Unanimous Approvals by Licensors. Any and all decisions, notices
and actions with respect to or under this Agreement to be made by the Licensors
shall require the unanimous approval of both Burchetta and Brofman.
8.12 Independent Contractors. The relationship of the Company and the
Licensors established by this Agreement is that of independent contractors.
Nothing in this Agreement shall be construed to constitute, create, give effect
to or otherwise imply a joint venture, partnership, principal-agent or formal
business organization of any kind between or among the parties hereto. No party
hereto shall have any right, power or authority to assume, create or incur any
expense, liability or obligation, express or implied, on behalf of any other
party hereto solely by virtue of this Agreement.
8.13 Headings. Headings included herein are for convenience only, do
not form a part of this Agreement and shall not be used in any way to construe
or interpret this Agreement.
8.14 Counterparts. This Agreement may be executed in counterparts,
each of which may be delivered by facsimile transmission and each of which shall
be deemed an original, but which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DEBT RESOLVE, INC.
By: /s/ Michael S. Harris
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Name: Michael S. Harris
Title: Senior Vice President and General Counsel
LICENSORS:
/s/ James D. Burchetta
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James D. Burchetta
/s/ Charles S. Brofman
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Charles S. Brofman
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