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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
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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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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, the Licensor's Exercise Price shall
be adjusted based on a ratio of five to eight (5:8).
8. Relo






