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EXHIBIT 10.4
TERMINATION/TRANSITION AGREEMENT
The following constitutes a License Termination and Transition Agreement
between Xxxxxxxxx Xxxxxxxxx d/b/a Enterprise Hospitality Solutions and
Enterprise Hospitality Solutions, Inc., (collectively, "EHS") on the one hand,
and MAI Systems Corporation, and all of its affiliates and subsidiaries
("MAI"), on the other hand, with respect to the Lodging Touch client server
software applications specified herein. This Agreement is being executed
concurrently on this date with an Exclusive Worldwide Software License
Agreement between these same parties. The parties hereby acknowledge and agree
as follows:
1. TERMINATION OF 1996 LICENSE AGREEMENT -- All parties jointly agree
and acknowledge that the October 1996 License Agreement between MAI
Systems Corporation and Xxxxxxxxx Xxxxxxxxx d/b/a Enterprise
Hospitality Solutions, and all amendments thereto, is hereby
terminated effective as of September 30, 1999.
2. ROYALTIES -- With respect to the royalties due in the 1st, 2nd and
3rd Quarter of 1999, MAI shall pay EHS based upon the "Net
Revenues" formula set forth under Existing License Agreement. If
MAI received any revenues prior to January 1, 1999, for any
properties which have been or will be installed in the 1st, 2nd and
3rd Quarters of 1999, then MAI shall pay EHS a 20% royalty on those
revenues as well.
3. STOCK -- With respect to the 110,638 restricted shares of MAI
common stock previously delivered to Xxxxxxxxx Xxxxxxxxx, MAI shall
provide a price guarantee at $2.75 per share subject to the
following conditions. Xxxxxxxxx Xxxxxxxxx shall agree not to sell
more than 40,000 shares per any 30 day period or 2,500 shares per
day. Guaranteed payments to be made monthly within 15 days of Xx.
Xxxxxxxxx submitting to MAI transaction records for MAI
verification purposes. If for any reason Rivadalla is unable to
sell all of his shares prior to December 31, 1999, the entire
balance of the price guarantee shall be paid in cash provided that
Rivadalla makes best efforts to sell stock through December 31,
1999. MAI agrees to take all steps necessary to ensure that the
stock is tradeable, under Rule 144 or otherwise.
4. DEVELOPMENT ISSUES -- EHS will inform MAI promptly whether it
intends to complete any existing development projects. If EHS
decides not to complete any projects, it will promptly refund all
prepaid amounts. Xxxxxxxxx Xxxxxxxxx agrees to perform consulting
services during the transition period, subject to his availability,
at the rate of $1,500.00 per day. Other development or bug fixing
work shall be provided during the transition period as specified in
the April 13, 1999 letter, a copy of which is attached hereto.
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5. INVOICES AND ROYALTIES - For the 1st and 2nd quarters of 1999, MAI
agrees to pay all outstanding royalties and invoices, subject to any reasonable
disputes, submitted by EHS prior to August 31, 1999. For the 3rd quarter, all
invoices and royalty payments will be made by October 31, 1999. EHS shall be
entitled to conduct one audit with respect to the transition period.(1)
6. EMPLOYEES - EHS shall provide MAI with a list of employees by September
17, 1999, who MAI will be free to thereafter solicit to work for MAI or any
affiliate company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of August 20, 1999.
MAI SYSTEMS CORPORATION
By: /s/ W. Xxxxx Xxxxxxxx
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W. Xxxxx Xxxxxxxx
Chief Executive Officer
XXXXXXXXX XXXXXXXXX d/b/a ENTERPRISE HOSPITALITY SOLUTIONS
By: /s/ C. Rivadalla
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Xxxxxxxxx Xxxxxxxxx
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(1) Royalty reports for the 1st, 2nd and 3rd Quarters of 1999 shall include
a listing of payments received at MAI offices, Branch Offices, including
distributors and subdistributors. The report will include a copy of the contract
for each payment listed. With respect to any partial payments and advance
deposits received, MAI shall first apply deposit payments to hardware line items
and then determine what percentage of the total remaining contract price is
comprised of software, and MAI shall pay royalties based upon that percentage.
For example, if 50% of the total contract price is comprised of software, then
MAI shall pay royalties with respect to 50% of the advance deposit or partial
payments received to EHS.
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ENTERPRISE HOSPITALITY SOLUTIONS, INC.
By: /s/ C. Rivadalla
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Xxxxxxxxx Xxxxxxxxx
President and Chief Executive Officer
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[MAI Systems Corporation Letterhead]
BY FACSIMILE AND FIRST CLASS MAIL
April 13, 1999
Xx. Xxxxxxxxx Xxxxxxxxx
c/o Enterprise Hospitality Solutions
0000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxx, XX 00000
Dear Xxxxx:
By this letter MAI and EHS hereby amend the License Agreement, dated October 1,
1996, ("the License Agreement") between the parties to memorialize our
agreement.
A. EHS Development Services
1. RESALE OF EHS DEVELOPMENT SERVICES. MAI will resell EHS's development
services on a commission basis. MAI will be paid a commission of 12% of the
total professional services billed to the customer. If the services are billed
by MAI, EHS will inform MAI of what the total amount will be for development
services, MAI can then elect to increase it by up to 12%. EHS or MAI will
work directly with the customer to determine the scope of the work, pricing
and delivery. EHS will provide MAI a copy of such specifications and pricing.
EHS or MAI will contract directly with the customer for such development work.
MAI will not be liable for the services EHS performs pursuant to the contract.
MAI's sole role will be to facilitate the finalization of such custom
development contracts. EHS shall retain the ability to continue to directly
market and sell its own development services. Any sales by EHS of its own
development services which are not referred to EHS by MAI shall not be eligible
for the commission set forth above herein. Development performed by EHS not
relating to, or connected with the Licensed Software shall not be subject to a
commission to MAI pursuant to this provision.
2. PROVISION OF DEVELOPMENT SERVICES TO MAI/HIS. Class 1 "material"
defects, defined in the PTR system as "BUG CRITICAL HIGH," will be corrected on
a "best efforts" basis under the warranty provisions of the License Agreement.
The determination that a defect "is BUG CRITICAL HIGH" shall be made pursuant to
the PTR Severity Classification, copy of such classification system is attached
hereto. All non-critical (e.g. Class 2, 3, and 4 bugs), if corrected by EHS,
shall be corrected at rate of $200 per day. This policy shall be reviewed on a
quarterly basis and MAI and EHS agree that if there are Class 2, 3 or 4 bugs
which are increasing MAI's support burden, or MAI's ability to be
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Letter to Xx. Xxxxxxxxx Xxxxxxxxx
04-13-99
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paid or to sell the Licensed Software, then such agreed-upon bugs shall be
fixed by EHS at no charge.
3. Provision of Customization Services to Third Part Licensees. EHS
proposed that the rate be set for customization services to be provided to
third parties under Section 8.3 of the License Agreement as $600 per person
day. All development work will be performed solely by EHS, MAI or authorized
EHS developers.
B. Agreement on MAI Distribution of Non-Licensed Products
MAI and EHS shall, on a quarterly basis, determine if there are EHS
products that previously MAI has chosen not to sell, install and support
directly but which may now be suitable for sale. Initially, it was agreed that
the Telephone Call Accounting System (TCA) and UMM/Direct Interfaces will be the
first products to fall into this category. The following conditions would apply
to this arrangement; (1) MAI will represent these products for a 20% commission;
(2) MAI will not install or support these products directly or indirectly; (3)
the products will be sold utilizing EHS documentation; (4) the customer is
directly contracting with EHS and EHS will be responsible for all warranty work
and follow-up with the customer; and (5) EHS shall have the right to make sales
of these designated products directly, and no payments shall be made by EHS and
MAI for any sales made by EHS without MAI involvement, so long as such sale is
not made to an MAI customer.
C. Sales Calls Involvement of Xxxxxxxxx Xxxxxxxxx -- Section 5 of License
Agreement
Section 5 of the License Agreement shall be eliminated completely.
D. Quarterly Royalty Reports and Payments
The License Agreement shall be amended to provide that the Minimum Annual
Royalty Targets, as set forth in the License Agreement, are guaranteed. MAI
shall use commercially reasonable efforts to make four, approximately equal
quarterly payments, the total of such payments shall not be less than the
applicable Minimum Royalty Target as set forth in the License Agreement for the
applicable period. The parties will attempt to determine a mutually acceptable
payment plan in which the minimum quarterly royalty payments are made in
installments throughout each quarter.
The License Agreement shall be amended to provide that MAI is to present to
EHS an estimated quarterly royalty payment plan worksheet ("the Worksheet"),
before the commencement of each quarter. This worksheet shall show in reasonable
detail, and to the best of MAI's knowledge at that point, a schedule of expected
Net Revenues for the forthcoming quarter and pursuant thereto set forth a
monthly payment schedule by which MAI shall make estimated royalty payments to
EHS based thereon. Such estimated monthly payments are to be made within 5
business days after the end of the applicable month. The parties acknowledge
that events may occur during a quarter which render the previously submitted
Worksheet materially inaccurate, and in that eventuality MAI may submit a
revised Worksheet to have effect for the balance of the
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Letter to Xx. Xxxxxxxxx Xxxxxxxxx
04/13/99
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quarter (including amending the estimated payment to be made for the
immediately preceding month to reflect actual net revenues for such month).
Notwithstanding the preceding paragraph, MAI is required to provide a "Royalty
Report" at the conclusion of the quarter (as set forth in the License
Agreement) and, to the extent the sum of estimated payments previously made
during such quarter is less than shown on the applicable Royalty Report, to
make a final quarterly payment (which itself is subject to adjustment based on
the findings, if any, arising from the review of the quarterly Royalty Report by
EHS). If the end of quarter Royalty Reports and payments are not provided on
the respective due dates under the License Agreement (the 60th day following
the end of the quarter) a financial penalty will be imposed. Such penalty shall
be set at five percent (5%) of the amount of the final quarterly royalty
payment due (i.e. total for the quarter less estimated payments, credits for
prior period overpayments and other items agreed to by the parties). These
penalties will be due and owing regardless of the receipt of formal notice of
default from EHS. To avoid the necessity for EHS to send notice except in the
case where royalty payments or reports are seriously delinquent, EHS will only
be required to notify MAI of an event of default under the License Agreement
where such end of quarter Royalty Reports or payment are 25 calendar days
overdue, and then MAI would have five (5) business days from receipt of notice
to cure the default. This would cover those defaults that MAI believes will be
strictly due to "mechanical" failure, where the mail has failed to arrive or
get to the appropriate party at EHS.
If royalty payments as set forth in MAI's end of quarter Royalty Report
are later adjusted upward MAI agrees to pay Interest at the rate of 7% per
annum, calculated on a daily basis, on any underpayment, calculated from the
date the royalty payment was initially due (the 60th day following the end of
the quarter) under the License Agreement. If no Royalty Report is presented to
EHS on the 60th day following the end of quarter, then MAI shall pay EHS a
penalty of 7% per annum, calculated on a daily basis applied to the number of
days between the 60 day and the date final payment is made on the difference
between the royalty payments made for the quarter and the amount shown on the
final report. Conversely, any overpayment (i.e. the total of quarterly
estimated payments was, in fact, in excess of the total per the end of quarter
Royalty Report) would be applied as a credit, without interest, to future
payments.
E. Notice of Default
Notice of Default shall be sent by certified mail or other recognized
courier which provides for tracking of packages, such as Federal Express, only,
and not by facsimile, to avoid any further issues of transmission and receipt.
Furthermore, the only party authorized to receive Notice would be Xx. Xxxxxxxxx
for EHS and to the Chief Financial Officer (currently Xx. Xxxxxxx for MAI).
Notice may be given by counsel for the parties, Xxxxxxxxx Xxxxxxxxx, the Chief
Executive Officer or Chief Financial Officer of MAI, or other executive of
either party as designated by the Chief Executive Officer of that party.
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Letter to Xx. Xxxxxxxxx Xxxxxxxxx
04/13/99
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F. Tradewinds Account designated EHS named account
MAI hereby agrees to add Tradewinds Hotels to Exhibit B, Section 2, of the
License Agreement.
Sincerely,
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
President
GGB:jc
Agreed on behalf of EHS:
/s/ C. Rivadalla
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Xxxxxxxxx Xxxxxxxxx
President
EHS
