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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8655
Experience:  30 years of corporate, litigation and international law
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IF THE PERPETUAL LICENSE IS EXERCISED WHAT DOES IT MEAN FOR

Resolved Question:

IF THE PERPETUAL LICENSE IS EXERCISED WHAT DOES IT MEAN FOR ABC AND WHAT IF XYZ
STOPS PAYING FOR SERVICES.


2.3 Perpetual License Option. ABC hereby grants XYZ an option to receive perpetual rights of
use with respect to the Software Product (the "Perpetual License Option"), exercisable at anytime by XYZ's
providing written notice of such exercise to ABC ("Exercise Notice") no later than the last day of the Initial
Term. The Perpetual License Option will expire ifnot exercised before the last day of the Initial Term, regardless of
whether the Term is extended under Section 7.2. If XYZ timely delivers an Exercise Notice, the supplements
and modifications to this Agreement specified in Schedule H will automatically become effective five (5) calendar
days thereafter without further action by either party.
If XYZ delivers an Exercise Notice under Section 2.3 of the Agreement, from and after five (5) days following
such exercise, the following supplements and modifications to the Agreement will, without further action by either
party, become effective notwithstanding any provisions of the Agreement to the contrary. The date on which the
Exercise Notice is delivered is referred to herein as the "Exercise Date."
Perpetual License Consideration. "Perpetual License Consideration" means the sum of the following three
payments. Promptly after the Exercise Date, ABC will invoice XYZ for
($. On the first anniversary of the Exercise Date, ABC will invoice XYZ for
Dollars ($ ("Second Payment"). On the second anniversary of the Exercise Date, ABC will
invoice XYZ for $ ("Third Payment").
Termination of Royalties. XYZ will have no obligation to pay royalties under Section 6.6 or any other
amounts under the Agreement except for the Perpetual License Consideration described above, the Referral
Royalties described above and, so long as the Term may be extended on a month-to-month basis under
Section 7.2, the Service Fees.
7.2 Renewal at Expiration. XYZ has the option to extend this Agreement for an additional one
year period by providing express, written notice of such extension to ABC at anytime before the scheduled date of
the expiration of the Initial Term. Thereafter, XYZ has the option to extend this Agreement for additional one
year periods (the initial one-year extension and subsequent one-year extensions are referred to herein as "Renewal
Periods") by providing express, written notice of such extension to ABC at least ninety (90) days before the
scheduled date of the expiration of the applicable Renewal Period. Notwithstanding the foregoing to the contrary,
during each Renewal Period, ABC's obligation to offer Development and/or Support Services, and ABC's
obligations of exclusivity under Section 4, will continue at XYZ's option on a month-to-month basis, but not
longer than five (5) years from the Effective Date, and only so long as XYZ elects to continue to pay Services
Fees in accordance with Section 6.1. The Initial Term of this Agreement, together with any Renewal Period(s), is
referred to herein as the "Term."

Term; Renewal. Sections 7.1, 7.2 and 7.6 will be replaced in their entirety as follows:
"7.1 Term. The initial term of this Agreement shall begin on the Acceptance Date and shall continue
until the one year anniversary of the Exercise Date ('Initial Term'), unless earlier terminated
pursuant to this Section 7."
"7.2 Renewal at Expiration. Following the Initial Term, the effectiveness of this Agreement will
continue at XYZ's option on a month-to-month basis so long as XYZ elects to continue to
pay Services Fees in accordance with Section 6.1. The Initial Term of this Agreement, together
with any such extension, is referred to herein as the 'Term. ",
"7.5 Effect of Termination. Termination of this Agreement is without prejudice to any other right or
remedy of the parties. Termination of this Agreement for any reason does not release either party
from any liability which, at the time of termination, has already accrued to the other party, or which
may accrue in respect of any act or omission prior to termination or from any obligation that is
expressly stated to survive the termination. Upon termination or expiration of this Agreement for
any reason, (i) the license granted to XYZ pursuant to Section 2 shall survive such termination
or expiration, without further payment of any fees, in perpetuity; (ii) XYZ shall have no further
obligations in respect of payment of fees, except for any pro rata portion of the monthly Service
Fees due upon termination and any accrued and unpaid Referral Fees owed to ABC as of the date
of termination, subject to Section 6.4; (iii) XYZ will have no obligation to remove portions of
the Software Product from any XYZ Products; and (iv) licenses to XYZ Customers of
Software Product or ABC Stand-Alone Software Product distributed before such termination will
remain in effect in accordance with their terms. "
Submitted: 5 years ago.
Category: Business Law
Expert:  Richard - Bizlaw replied 5 years ago.

If the perpetual license is exercised ABC continues to provide servicing per the agreement and receives the monthly license fee. Once XYZ ceases paying in violation of the agreement, then it loses its rights, and ABC ceases providing services. If this is not responsive let me know.

 

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Customer: replied 5 years ago.

If XYZ ceases paying the monthly fee what rights does it lose. Does it breach the contract or can the contine making the yearly payments for the perpetual software license. Also, if they exercise the perpetual license how soon do we have to deliver the software. After we receive the first payment?

Expert:  Richard - Bizlaw replied 5 years ago.
One of the difficulties in responding clearly to your question is that I only see part of the agreement. I take it there is a perpetual license fee that is paid in three payments. I assume but it is not clear that payment of those three payments replaces any royalty payments. There is a right to get development and ongoing service so long as the month to month fee payments are made. If they chose to terminate the month to month payments that does not necessarily terminate the perpetual license for which they are paying. As to when the software is to be delivered, I cannot answer that without a complete agreement. The agreement should indicate when the software is to be delivered. I would expect the software to be delivered at or shortly after the first payment is made unless the software has to be developed.
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 8655
Experience: 30 years of corporate, litigation and international law
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