EXHIBIT 10.4
BUSINESS/MANAGER LICENSE AGREEMENT
Private Business, Inc. (PBI) and First Security Bank of Lexington, Inc.
(Licensee) entered into this Agreement on July 24 , 1998.
The BUSINESS/MANAGER SYSTEM,(System), is a product offered by PBI which includes
software and marketing strategies which assist the Licensee with development of
its commercial customer base. PBI is not a franchiser and the sale of this
SYSTEM to Licensee is not intended to create a franchise relationship.
As developer of the System, and the accompanying Flex-O-Pay software, PBI is the
exclusive owner of all trademarks, trade names, copyrights, service marks,
source and/or object codes, updates and revisions, documentation, marketing
systems, supplies and other confidential and propriety materials associated with
the accounts receivable funding and billing systems known as BUSINESS/MANAGER
and Flex-O-Pay (software), respectively.
The parties agree as follows:
(1) GRANT OF LICENSE. Subject to the terms and conditions that follow,
PBI grants to Licensee:
(a) The right to offer the System to its customers and use the licensed
documentation throughout the term defined under this Agreement.
Licensee understands that the rights received under this Agreement are
neither exclusive nor transferable. The term "customer" includes all
customers of Licensee while specifically excluding other financial
institutions.
(b) The right to use PBI's software.
(c) The right to provide business owners the supplemental Business
Owner Benefits program (BOB) to each established customer of the System
free of charge.
(d) The right to attend PBI-sponsored seminars.
(e) The right to insure accounts who are using the System. To become
insured, Licensee must file a separate application with Private
Business Insurance, L.L.C. Once Licensee's application has been
approved Licensee must pay additional fees in accordance with the
payment schedule covered in Paragraph 8 of this Agreement. Licensee
understands that this additional amount does not constitute a premium,
as PBI pays all premiums on this insurance policy. Rather, these sums
represent payment made to PBI for the inclusion of Licensee as a
beneficiary under the PBI policy.
(f) The right to use Database Management Products offered by PBI to
assist Licensee in marketing the System.
(2) PROTECTION OF PRODUCT AND USE OF SERVICES. Licensee understands that
the System, and the software included in the System, are valuable trade
secrets and the exclusive property of PBI. As such, Licensee and its
agents may neither share the licensed materials or information
communicated to it by PBI with third parties nor use these materials in
ways not expressly incorporated into this license. Furthermore,
Licensee shall not attempt to hire or employ any current employee of
PBI without the prior written consent of PBI.
All materials used for the System shall at all times remain the
property of PBI. Upon termination of this Agreement, Licensee shall
immediately return all software, documentation, marketing materials,
and other property associated with the System and belonging to PBI.
(3) SOFTWARE MODIFICATION AND CODE. The Licensee agrees to use the software
as provided by PBI and understands that it cannot be modified without
the prior written approval of PBI. If such modifications are made by
Licensee or its agents, such alterations constitute derivative works
owned by PBI in which PBI has exclusive rights. As such, Licensee must
provide a copy of all derivative works to PBI along with the associated
source and object code. Licensee is prohibited from making duplicates
of the software in excess of that number required by the Licensee. In
the event PBI becomes bankrupt or is otherwise unable to perform its
services, the source code underlying the licensed software has been
deposited in escrow with Suntrust Bank, 5030 Thoroughbred Lane,
Brentwood, Tennessee, and will be made available to Licensee.
(4) WARRANTIES AND LIMITATION OF LIABILITIES. PBI warrants that the
software provided will perform substantially in accordance with the
accompanying written materials and will be free from defects in
materials and workmanship. However, PBI cannot warrant the software
from failure which is the result of accident, abuse or misapplication.
PBI will replace defective media or documentation free of charge
provided Licensee returns such items to PBI within 90 (ninety) days of
the date of delivery. If PBI is unable to replace defective media or
documentation within 90 (ninety) days following the receipt of returned
materials, PBI will refund the license fee and this Agreement will
terminate without further remedy. PBI provides this software on an "as
is" basis and disclaims all other warranties, to the extent permitted
by applicable law, both express and implied, including, but not limited
to, warranties of merchantability and fitness for a particular purpose.
In no event shall PBI be liable for any special, incidental, indirect,
or consequential damages whatsoever (including, without limitation,
damages for loss of business profits, business interruption, loss of
business information or other pecuniary loss) arising out of the use of
this product. If Licensee is ever faced with a claim as a result of
using any of the licensed tradenames or marks of PBI, PBI will
indemnify and hold harmless Licensee for any such claim.
(5) SOFTWARE MAINTENANCE. As long as Licensee uses the System and related
software, Licensee shall pay PBI an annual software maintenance fee of
one thousand five hundred dollars ($1,500.00). Payment of this fee
entitles Licensee to all software updates, any necessary training, and
technical support. However, Licensee is responsible for the
installation of the software. PBI will not bill the initial maintenance
fee until the first anniversary date of this Agreement.
(6) OPERATION OF SERVICE. Licensee agrees to maintain qualified personnel
and adequate hardware to operate the System. To assist Licensee, PBI
will provide on-site training at the bank, hands-on software training
at PBI's national training center in Brentwood, Tennessee, help
Licensee solicit customers for the System, and designate a PBI Business
Development Manager (BDM) to work with Licensee. A BDM is a full-time
employee of PBI who is acceptable to the Licensee and will aid the
Licensee in developing customers for the System. PBI will have no
involvement with or responsibility for credit decisions made by
Licensee in purchasing receivables under the System. If Licensee and
its Customer agree, PBI may arrange alternative funding for customers
of Licensee who are denied the opportunity to participate in the
System. Licensee agrees to use its best efforts to actively promote the
System and will initiate an employee rewards program to promote it.
During the term of this Agreement, Licensee is prohibited from either
offering the system of any PBI competitor or engaging a factor to
purchase the accounts receivable of its customers.
(7) PROMOTIONAL AND OPERATING MATERIALS. Licensee agrees to market the
System to its commercial customers via letter and/or brochure mailing
at least one time per year. Specialized forms and promotional materials
for the System shall be purchased by Licensee from PBI, at a reasonable
cost, or from printers which have been granted the right to reproduce
the forms or materials for resale to PBI's Licensees. For the cost of
one dollar ($1.00), PBI agrees to license any reputable and competent
printer to reproduce these forms or materials for use by Licensee. Any
postage and shipping charge for materials sent to Licensee shall be
billed separately by PBI.
(8) FEE FOR SERVICES. The Licensee, for the rights received under this
Agreement, will pay PBI the sum of $14,950.00 when this Agreement is
executed. Of this sum, one thousand dollars ($1,000.00) satisfies the
software licensing fee and the balance represents consideration for
training, employee education, continuing support and marketing
programs. Licensee shall also pay or assign to PBI an amount equal to
1.9% (one and nine - tenths percent)of the total receivables purchased
by Licensee initially and through the first end-of-period processing
from each new System customer. After the initial fee is paid, Licensee
shall pay or assign to PBI a monthly ongoing fee equal to 35%
(thirty-five percent) of the total service charge or discount charged
(as defined in the customer's agreement with the Licensee) against the
receivables purchased from each System customer. Once Licensee's System
portfolio reaches two million dollars ($2,000,000.00) in cumulative
initial purchase balances, the ongoing percentage will be reduced to
30% (thirty percent)in each subsequent month for each System customer.
(9) REPORTING. No later than the fifth (5th) day of the month or at each
end-of-period, whichever comes first, Licensee will report the amount
of receivables purchased on the System during the preceding month to
PBI. Licensee shall remit payments to PBI based upon these reports no
later than the fifteenth (15th)day of the month following each
end-of-period. During the term of this Agreement, PBI may audit the
System at Licensee's site upon giving Licensee fifteen (15)days notice.
(10) TERM. Unless terminated as provided in Section 11, the term of this
Agreement shall be five (5) years from the date of its execution. On
the anniversary date marking the expiration of the initial five (5)
year term, this Agreement shall automatically renew unless either party
notifies the other in writing of their intent not to renew. To be
effective, such notice must be received one hundred and twenty (120)
days prior to the expiration of the prior term.
(11) TERMINATION WITH NOTICE. After providing written notice to the
offending party of a reason for termination, and allowing the offending
party thirty (30) days to cure, if the offending fails to cure the
default, this Agreement shall immediately terminate. If PBI is the
defaulting party, all obligations of the parties, except for those
pertaining to the return of proprietary information, will cease. If
Licensee is the defaulting party, the obligations of Section 12 still
apply. The events that warrant premature termination are:
(a) Licensee or PBI fails to perform or comply with a material term or
covenant contained in this Agreement.
(b) Licensee fails to pay PBI any fees due to PBI.
(c) Licensee or PBI becomes insolvent or seeks protection, voluntarily
or involuntarily, under any bankruptcy law. In the event of PBI's
bankruptcy, the provisions of Section 3 shall apply.
In the event of termination, PBI may:
(i) Declare all amounts owed to PBI immediately due and payable;
(ii) Require that the Licensee cease further use of the System or any
portion thereof and immediately return the licensed product,
documentation and copies thereof;
(iii)Cease performance of all of PBI's obligations without liability;
and
(iv) Exercise any other right or remedy available.
(12) POST-TERMINATION PROCEDURES. Upon termination of this Agreement,
Licensee shall immediately discontinue use of the System and all trade
names, trademarks, copyrights, software programs, signs and forms of
advertising indicative of the System and return all proprietary
materials to PBI immediately. If Licensee refuses or fails to comply
with these provisions, Licensee will reimburse PBI for all costs,
including reasonable attorney's fees and other expenses incurred to
enforce such provisions.
In the event Licensee terminates this Agreement, and in recognition of PBI's
business strategy, proprietary information and experience required to establish
and maintain the System, Licensee agrees that if it elects to continue an
accounts receivable or factoring program similar to the System, the new program
must be developed independently and without reference to any of PBI's
proprietary information covered by this Agreement.
Following termination, Licensee is no longer obligated to pay PBI for new
customers placed on any new accounts receivable program subsequently established
by Licensee. However, Licensee shall continue to pay PBI ongoing fees for all
accounts originally established on Licensee's System that are later transferred
to the new accounts receivable program for a period of forty-eight (48) months
following termination in accordance with the fee schedule described in Section
8. As before, Licensee shall provide PBI monthly reports and fees on a monthly
basis as outlined in Paragraph (9) above.
(13) GENERAL PROVISIONS. This Agreement shall become effective when executed
by an authorized officer of PBI in Brentwood, Tennessee, and shall be
binding upon the parties, their successors and assigns. This Agreement
manifests the entire agreement between the parties regarding the
subject matter hereof and supersedes all prior understandings,
writings, proposals, representations or communications, oral or
written, of either party. This Agreement may be modified by a written
amendment signed by authorized representatives of both parties. If any
provision of this Agreement or its application to any person or
circumstance is held invalid, such invalidity does not affect other
provisions or applications of this Agreement which can be given effect
without the invalid provision or application, and to this end the
provisions are severable.
(14) ASSIGNMENT. This Agreement may not be assigned by Licensee absent
written authorization by PBI. Any unauthorized attempt at assignment
shall be deemed invalid.
(15) APPLICABLE LAW. This Agreement shall be deemed executed in the State of
Tennessee. As such, the rights and duties of the contracting parties
shall be governed, controlled, interpreted and defined in accordance
with the laws of the State of Tennessee. Any disputes arising with
respect to this Agreement, shall either be heard by the applicable
court in Williamson County, Tennessee or if mutually agreeable, settled
through binding arbitration in Nashville, Tennessee, pursuant to the
rules of the American Arbitration Association.
(16) CONFIDENTIALITY. The Licensee agrees to retain in confidence the terms
of this Agreement and all Addendums attached hereto. Said
confidentiality agreement extends to Licensee's employees, agents,
representatives, Board of Directors and Officers. Licensee acknowledges
that the terms of this Agreement and the attached Addendums are
confidential information not to be communicated to third parties.
By Sales Representative: Tom Moltini by JRA
LICENSE
First Security Bank of Lexington, Inc.
Name of Financial Institution
400 East Main Street, Lexington, KY 40507
Address
/s/Julian E. Beard
By/Title
Julian E. Beard, Chairman and President
PRIVATE BUSINESS, INC.
Lea Hoffman
Accepted by
VP & General Counsel
Title
The foregoing Agreement is hereby approved by the undersigned, at the executive
office of PBI, on this 11th day of August, 1998 at Brentwood Tennessee.
REFUND ADDENDUM
The licensing fee of $14,950.00 is fully refundable for twelve (12) months from
date of the execution of the Business/Manager Licensing Agreement if Licensee
cooperates* in promoting and supporting the Business/Manager SYSTEM, but is not
successful in putting two businesses on the program or $100,000.00 in cumulative
purchase balances.
*Minimum Cooperation (defined):
o Bank will participate in the Network Marketing through Database Management
program sponsored by PBI.
o Bank will conduct a minimum of one (1) Business Development day per month.
o Bank selects suitable Program Director (Respected bank officer who leads by
example, and is positive and enthusiastic about Business/Manager.)
o Bank selects qualified Operations Director/Process Coordinator (Strong PC
background and people skills who is teachable, and enjoys new challenges.)
o The Program Director and Operations Director or Process Coordinator will
attend a scheduled training program in Brentwood, TN at Private Business, Inc.
in order to learn the proper operation of Business/Manager.
o All bank personnel involved in Business/Manager will attend initial "kick-off"
meeting in the bank represented by Private Business, Inc.
o Bank will offer a Business/Manager incentive (or an equivalent) program for
bank personnel participating in Business/Manager that specifically applies to
cooperation with Private Business, Inc.'s Business Development efforts.
July 24, 1998
Date
First Security Bank of Lexington, Inc.
By: /s/ Julian E. Beard
President and CEO
Name/Title (Bank Representative)
/s/ Thomas C. Martin
Name/Title (PBI Representative)