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
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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
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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
rat
