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EXHIBIT 10.4
SOFTWARE LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT ("Agreement") is entered into as of
the
2nd day of September, 1999 by Taurus TeleSYS Inc., a Virginia
corporation
("Licensor"), Global Travel Network LLC, a Delaware limited
liability company
("Licensee") and Etravnet.com, Inc., a Delaware corporation
("Parent").
RECITALS
A. Licensor has developed and is the sole owner of a
proprietary
computer software product called "T-Gate," a description of which
is set forth
on Exhibit A ("Software") that links computers through the
Internet, telephones
and facsimile machines.
B. Licensee is in the travel industry and is desirous of using
the
Software in its business.
NOW, THEREFORE, the parties hereto agree as follows:
1. License of Software. Subject to the terms and conditions set
forth
in this Agreement, Licensor grants to Licensee, and Licensee
accepts, a
worldwide, nontransferable, exclusive license (the "License") to
use the
Software and any derivations thereof, including any enhancements,
upgrades and
new versions, solely within the Field of Use. Licensee is not
granted any rights
with respect to the Software (or any derivations thereof) outside
of the Field
of Use. "Field of Use" is defined solely as those services normally
performed by
travel agencies as of the date of this Agreement, including
obtaining
reservations for the following: (a) hotel, motel and other
temporary
accommodation facilities for a period not to exceed thirty (30)
days; (b) rental
of automobiles for a period not to exceed thirty (30) days; (c)
travel on
aircraft, trains and boats; and (d) vacation packages, sightseeing
and other
travel destinations. Licensor reserves all rights not expressly
granted in this
Section 1.
2. Term and Termination.
(a) Initial Term and Renewal Term. Initial and renewal terms
are
subject to early termination of this Agreement pursuant to Section
2. The
initial term of this Agreement shall be for a period of four years
after the
date of notification by Licensor to Licensee that software is in a
form
available for use by Licensee. It is agreed and understood that
although the
initial term will begin when software is available for use,
Licensee will make
an initial deposit of Twenty Five Thousand Dollars ($25,000) with
signing of
Agreement. Additional payments due as part of minimum royalty would
be paid
based on the beginning date of the initial term as based on the
software being
available for use by Licensee. During the four-year initial term,
Licensee will
be required to make minimum royalty payments and in the event
percentage of
royalty on sales exceeds the minimum payment, then Licensee would
be required to
make these payments as well. The quota on royalty will not be
considered until
the parties enter the renewal term which are years five and six of
this
Agreement. During the renewal term, it is understood that annual
royalty income
paid to Licensor from transactions processed through T-Gate
Software must exceed
Fifty Thousand Dollars ($50,000) minimum royalty payment for at
least one or the
two year renewals. The renewal term, which consists of continuous
two-year
automatic renewals requires one of the two years that the Licensee
exceeds the
annual minimum royalty due. For example, if in year five royalty is
Fifty Five
Thousand Dollars ($55,000) earned, and in year six Forty Five
Thousand Dollars
($45,000) is earned, Licensee will have met his minimum quota and
would have the
right to renew for an additional two-year term. Licensee is
required to notify
Licensor sixty (60) days prior to the end of each term if he plans
to renew. In
the event
Software License Agreement
July 21, 2005 Page 1
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Licensee does not maintain minimum royalty as described herein,
additional
renewals will be at Licensor's discretion.
(b) Early Termination. Licensor or Licensee shall have the right
to
terminate this Agreement for a material breach of this Agreement
after (i)
providing the breaching party with thirty (30) days' prior written
notice
describing the nature of the material breach and (ii) the breaching
party fails
to cure the described breach before the expiration of the thirty
(30) day
period.
(c) Failure to Pay License Fees, Royalty or Support Fees.
Notwithstanding any provision in this Agreement to the contrary, if
Licensee
fails to pay timely any Initial Term License Fee (defined below),
Renewal Term
License Fee (defined below), Royalty (defined below) or Support Fee
(defined
below) due pursuant to this Agreement, Licensor shall have the
right to
terminate this Agreement on five (5) days prior written notice to
Licensee, with
respect to the payment of any Initial Term License Fee, Renewal
Term License
Fee, Royalty or Support Fee, provided Licensee fails to cure the
breach within a
fifteen (15) day period.
3. License Fees and Royalty.
(a) Initial Term. Licensee shall pay to Licensor a
non-refundable
license fee ("First Year License Fee") of Fifty Thousand Dollars
($50,000) as
follows: (i) $25,000 in immediately available funds on or before
the date of
this Agreement; (ii) $12,500 in immediately available funds on or
before the
date six (6) months after the date Licensee is notified by Licensor
that the
software is available for Licensee's use ("Availability Date"); and
(iii)
$12,500 in immediately available funds on or before the date nine
(9) months
after the Availability Date. Licensee shall pay Licensor a
non-refundable
license fee ("Second Year License Fee") of Seventy Five Thousand
Dollars
($75,000) in immediately available funds, in four installments, on
or before the
tenth (10th) day of each calendar quarter after the end of the
first anniversary
of the Availability Date. Licensee shall pay Licensor a
non-refundable License
Fee ("Third Year License Fee") of Fifty Thousand Dollars ($50,000),
Licensee
shall pay Licensor a non-refundable License Fee ("Fourth Year
License Fee") of
Fifty Thousand Dollars ($50,000). First Year, Second Year, Third
Year and Fourth
Year, Licensee shall be referred to collectively as initial term
License Fee.
The Initial Term License Fee shall be treated as a non-refundable
prepaid credit
against any Royalty (defined below) due as set forth in Section
3(c).
(b) Renewal Terms. If Licensee elects to renew this Agreement
in
accordance with Section 2(a), Licensee shall pay Licensor an
annual,
non-refundable license fee ("Renewal Term License Fee") of Fifty
Thousand
Dollars ($50,000), payable in quarterly installments, in
immediately available
funds on or before the tenth (10th) day of each calendar quarter
during any
Renewal Term. The Renewal Term License Fee shall be treated as a
non-refundable
prepaid credit against any Royalty due as set forth in Section
3(c).
(c) Royalty.
(1) Calculation and Payment. During the Initial Term and any
Renewal Terms, Licensee shall pay to Licensor a royalty ("Royalty")
of Three and
75/100 percent (3.75%) of Licensee's Net Sales (defined below). The
Royalty
shall be paid monthly on or before the tenth (10th) day of each
month for the
previous month's Net Sales. The Initial Term License Fee or the
Renewal Term
License Fee, as the case may be, shall be applied against the
applicable Royalty
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July 21, 2005 Page 2
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such that no Royalty shall be due until the Royalty amount exceeds
the Initial
Term License Fee or any Renewal Term License Fee, as the case may
be.
(2) Audit. At its sole expense (except as provided in the last
sentence hereof), Licensor, or its designee, to verify calculation
of the
Royalty, may inspect and/or audit all business records of Licensee
no more
frequently than monthly during Licensee's regular business hours
upon seven (7)
days prior written notice. If an audit, as certified by an
independent auditor
reasonably acceptable to Licensee in the exercise of its reasonable
discretion,
discloses an understatement by Licensee of any monthly Royalty of
one percent
(1%) or more, Licensee shall immediately pay all deficiencies, plus
ten percent
(10%) annualized interest. If an audit by Licensor discloses an
understatement
of any monthly Royalty of five percent (5%) or more, Licensee shall
immediately
pay, in addition to the amount of the understatement and ten
percent (10%)
annualized interest, Licensor's reasonable fees and costs of such
audit.
(3) Net Sales Defined. For purposes of this Agreement, "Net
Sales" shall mean Licensee's gross revenues received by Licensee or
paid to
Licensee or its designee(s) or affiliate(s), as a result of any
transaction
processed using the Software or any derivation thereof, including
any upgrade or
enhancement of the Software or derivation thereof, less only: (a)
credit card
processing fees paid by Licensee to third parties as standard in
Licensee's
industry, (b) less any fees paid to third party providers of travel
services or
products made available to the customer, (c) sales, value added or
comparable
taxes collected and paid by Licensee, and (d) deductions for
returns,
cancellations, adjustments or refunds. Net Sales shall be
calculated using
generally accepted accounting principles, consistently applied.
4. Support.
(a) Generally. Licensor shall provide Licensee with technical
development and integration support to enable Licensee to implement
the Licensed
Software ("Development Support"). In no event shall Licensor be
obligated to
provide support, technical assistance, warranty service or
maintenance of any
type to any party other than Licensee. Licensor shall provide
Licensee with
ongoing maintenance and technical support ("Maintenance
Support").
(b) Support Fee.
(1) Budget. Licensee will provide Licensor with funding for all
licensor's direct and indirect costs ("Support Fees") of
Development Support and
Maintenance Support in accordance with a budget ("Budget")
developed by Licensor
and submitted to Licensee semi-annually. Each Budget shall include,
without
limitation, cost estimates for hardware, software, subcontractor,
administrative
and overhead expenses related to the Software and Development
Support and
Maintenance Support to Licensee. Each Budget shall include salaries
and benefits
to be paid to Licensor's employees and fees to be paid to
consultants and other
independent contractors. Each Budget shall be submitted in writing
by Licensor
to Licensee for written approval. No expenses shall be incurred by
Licensor
without prior written approval by Licensee. Licensee shall approve
(or provide
written exceptions to) each Budget in writing within ten (10) days
of receipt.
Licensee agrees to approve a Budget that in its judgment is
reasonably necessary
to maintain the core competency necessary for Licensor to run,
manage, and
maintain all systems and personnel related to the Software during
the Initial
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July 21, 2005 Page 3
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Term and any Renewal Terms of this Agreement. The first Budget
submitted by
Licensor to Licensee is attached hereto as Exhibit B.
(2) Payment of Support Fees. Licensee shall reimburse to
Licensor
that part of the support fees actually incurred by Licensor as
reflected on
written invoices submitted to Licensee on a bi-weekly basis.
Payment shall be
made within fourteen (14) days of Licensee's receipt of the
invoices. Licensee
requests in writing for additional work not covered in the Budget
shall be paid
upon submission of invoices and documentation of Licensor'
costs.
5. Private Labeling. Subject to Section 13, Licensee may use
the
Software in accordance with this Agreement using Licensee's own
trademarks and
other identifying marks ; provided, however, such use shall in no
way (a) effect
a reduction in any Royalty paid by Licensee to Licensor under the
terms of this
Agreement or (b) require any increase in the level of Maintenance
Support or
Development Support provided by Licensor without appropriate
Support Cost
compensation defined in writing under the terms of this
Agreement.
6. Finder's Fee. If Licensor introduces Licensee to any person
or
entity that purchases a master franchise from Licensee within
twelve (12) months
from the date of introduction anywhere outside the United States,
Licensee
agrees to pay Licensor a one-time finder's fee equal to the greater
of
Twenty-Five Thousand Dollars ($25,000) or 20% of the cash payment
(or the
equivalent in cash if Licensee accepts other or in-kind
remuneration)
accepted/paid upon the commencement of the agreement with the
franchisee. Any
further relationship or compensation may be determined between
Licensor and the
master franchisee.
7. Warrant to Purchase Shares of Licensee Common Stock. Parent
hereby
grants Licensor, its shareholders, or Licensor's designees, a
warrant (the
"Warrant"), in the form attached hereto as Exhibit C to purchase
two percent
(2%) or 100,000 shares, whichever is greater, of the issued and
outstanding
shares of Parent's common stock on the date of grant, subject to
anti-dilution
provisions. The Warrants shall have a term of five (5) years and
the Exercise
Price of the Warrant shall be $5.00 per share of common stock. If
the
price-per-share of common stocks offered to investors is less than
the
Licensor's Warrant price of $5.00 per share,
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