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
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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
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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
Software License Agreement
July 21, 2005
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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
