Software License Agreement

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ESSENTUS SOFTWARE LICENSE AGREEMENT


THIS AGREEMENT WILL ENTER INTO EFFECT
UPON SIGNATURE OF BOTH PARTIES


McNAUGHTON APPAREL GROUP INC.


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ESSENTUS INTERNATIONAL INC.


Software License Agreement
Contents


1. Software License Agreement


2. Software License Terms And Conditions


3. Exhibit 1.3 - Software Applications


4. Exhibit 2.2 - Software Support Agreement


5. Exhibit 3.4 - Payment Schedule


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ESSENTUS INTERNATIONAL INC.


1430 Broadway, 14th Floor
New York, New York 10018


ESSENTUS SOFTWARE LICENSE AGREEMENT


The Licensee identified below ("Licensee") and Essentus International Inc. ("Essentus") have entered into this Software License Agreement (the "Agreement") as of the Effective Date set forth below.


Licensee Name: McNaughton Apparel Group Inc.
------------------------------------------ Billing/Notice Address: 463 Seventh Avenue
------------------------------------------
New York, NY 10018
------------------------------------------
Attn: Don George
------------------------------------------ Telephone/Fax: (212) 947-2960 ext. 350
------------------------------------------


Effective Date:
------------------------------------------


Agreement Reference Number : L-
-------


This Cover Page and the attached Software License Terms and any duly initialled Exhibits thereto (including without limitation Exhibit 1.3 - Licensed Applications and Fees; Exhibit 2.2 - Software Support Agreement and Exhibit 3.4 - - Payment Schedule) are incorporated into and made a part of this Agreement as of the Effective Date set forth above. In the event the Effective Date is not identified above, the Agreement shall be effective as of the last date of signature of the parties hereto. Additional documents, schedules, exhibits and addenda may be incorporated into and made a part of this Agreement upon the written consent of the parties.


The parties hereby acknowledge that they have read and understand this Agreement and all exhibits and addenda hereto, and agree to all terms and conditions stated herein and attached hereto.


ESSENTUS INTERNATIONAL INC.: LICENSEE: By: /s/ 'Scott Miller By: /s/ Amanda Bokman
---------------------------------- ------------------------------------ Name: Name:
---------------------------------- ------------------------------------ Title: Title:
---------------------------------- ------------------------------------ Date: Date:
---------------------------------- ------------------------------------


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ESSENTUS INTERNATIONAL INC.
SOFTWARE LICENSE AGREEMENT
TERMS AND CONDITIONS


1. DEFINITIONS


In this Agreement, unless there is something in the subject matter or context inconsistent therewith, the expressions following shall have the meanings indicated below:


1.1 "AGREEMENT" means this Essentus Software License Agreement,
including all exhibits and schedules hereto, and which may
hereafter be added hereto with the consent of Licensee and
Essentus.


1.2 "APPLICATION SPECIFIC THIRD PARTY SOFTWARE" means Third Party
Software license through Essentus which may solely be used by
Licensee in conjunction with the Essentus Software.


1.3 "DOCUMENTATION" means technical manuals and other
documentation relating to the use of the Software delivered to
Licensee with the Essentus Software by Essentus upon or
following execution hereof.


1.4 "EMPLOYEES" means employees, agents, subcontractors and
consultants of Essentus or Licensee, as the case may be.


1.5 "GRACE PERIOD" means the thirty (30) days following delivery
of the Essentus Software to Licensee.


1.6 "HARDWARE" means the computer hardware, peripherals and
operating system software provided by or for Licensee,
consisting of a single CPU or network of linked CPU's at a
single location.


1.7 "LICENSE" means the rights and licenses granted by Essentus
under Section 3.2.1, or 4.3.2, subject to the license
exclusions as set forth in Section 3.5.


1.8 "ESSENTUS SOFTWARE" means the software, that performs in
accordance with the Documentation and containing the Software
Applications listed on Exhibit 1.3. The Essentus Software
includes Documentation provided by Essentus.


1.9 "ESSENTUS SOFTWARE SPECIFICATIONS" means the system design
specifications for the Essentus Software. Title to copyright
in and all other rights to the Essentus Software
specifications are and remain with Essentus.


1.10 "SOFTWARE" means the Essentus Software and the Third Party
Software, collectively.


1.11 "THIRD PARTY SOFTWARE" means the third party software programs
referred to in Section 4.3 and identified on Exhibit 1.3
hereof, in object code format only, including any accompanying
documentation.


1.12 "WARRANTY PERIOD" means the sixty (60) day period commencing
after the Grace Period.


2. DESCRIPTION OF SERVICES PROVIDED BY ESSENTUS


2.1 Review of Essentus Software


2.1.1 System design review, training, installation
assistance, and software developments, if any, requested by
Licensee to the Essentus Software are not covered by this
Agreement and no obligations on the part of Essentus to do or
provide any of the foregoing by Essentus are to be implied by
this Agreement. In the event services are provided by a third
party, notwithstanding any Essentus recommendation, referral
or introduction, Essentus has no liability with respect to any
claims relating to or arising from any and all services
provided by a third party to Licensee.


2.1.2 While Essentus can deliver the Essentus International
Software prior to December 31, 1999, Essentus does not
represent or warrant that:


2.1.2.1 The Essentus Software remedies Year 2000
compliance issues that may otherwise affect
Licensee's computer or information systems; or


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2.1.2.2 Any of the services to the Essentus Software
described in 2.1.1 above can be provided in time to
resolve or remedy Year 2000 compliance issues that
may be affecting some of Licensee's current computer
or software information systems.


Licensee assumes the risks associated with 2.1.2.1 and 2.1.2.2
above and assumes full responsibility for ensuring that an
alternative plan is in place in the event that the Essentus
Software is not functional on Licensee's system in time for
potential Year 2000 related issues.


2.2 Software Support Services


2.2.1 Essentus will provide and Licensee agrees to accept
software support services, as described in Exhibit 2.2, in
consideration of the annual maintenance fee set forth in
Exhibit 2.2. Licensee will be provided with object code only
for any updates delivered to Licensee as part of the software
support services.


3. TITLE, LICENSE AND LICENSE FEES


3.1 Title and Risk for Loss


3.1.1 All rights, title and interest in the Software (other
than the rights of Third Party Software suppliers), and in any
updates, modifications, enhancements, and software
developments and additions thereto, as may be provided from
time to time by Essentus, as well as all copyright, patents,
trade secrets and other intellectual property rights therein,
shall remain with Essentus and all risk for loss prior to
delivery shall be borne by Essentus. The Software is supplied
by Essentus F.O.B. Essentus premises. Upon the delivery of the
Software to a common carrier, Licensee shall have all
responsibility for all risk of loss of, or damage to the
Software and shall arrange for all policies of insurance in
respect thereof. Nothing in this Agreement shall be construed
as transferring to Licensee any rights, title or interest in
the Software other than pursuant to the License granted
herein.


3.2 License


3.2.1 Provided Licensee is not in default, Essentus hereby
grants Licensee a perpetual, non-exclusive, irrevocable (save
in the case of default), non-transferable license, without
right to sublicense, to use the Software in object code
format, subject to the provisions of this Agreement.


3.2.2 Licensee may use the Software for as long as it
desires for its intended use within its own company on the
initial Hardware or, with the written consent of Essentus, on
any upgraded or replacement hardware. Licensee shall take all
reasonable steps to protect the proprietary nature of the
Software and shall not copy, disclose or allow use of the
Software or any part thereof for any purpose whatsoever other
than as is necessary in the performance of its normal
business. Licensee shall not:


3.2.2.1 permit any third party to use the Software;


3.2.2.2 use the Software in the operation of a
service bureau or to assist any third party.


All applicable patents, copyrights, trademarks, trade
secrets and intellectual rights in the Software and any
updates, modifications or enhancements made by Licensee or
Essentus are and shall remain the property of Essentus.


3.2.3 Licensee shall not sell, transfer, distribute,
market, rent, lease, publish, display or otherwise make
available the Software or Documentation to others. Licensee
agrees to secure and protect the Software and Documentation
and copies in a manner consistent with the maintenance and
protection of Essentus's rights therein and to take
appropriate action by instruction or agreement with its
Employees or others who are permitted access to the Software
and to each program or software application. All copies of the
Software made by Licensee and other programs developed,
including all corrections, modifications, improvements,
enhancements or derivatives of the Software made by or for
Licensee, translations, compilations and partial copies, as
well as all copyright, patents, trade secrets and other
intellectual property rights therein are the property of
Essentus. Licensee is permitted to make copies of the Software
for back-up and archival purposes only.


3.3 No Rights Prior to Payment


3.3.1 Notwithstanding the foregoing, Licensee shall have
no right to use, other than for purposes of testing and


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training, any component of the Software until it has paid for
such component in accordance with the provisions of this
Agreement.


3.4 License Fees and Limitations On Use


3.4.1 Licensee shall pay the License fees in the amounts
set forth in Exhibit 1.3, and at the times set forth in
Exhibit 3.4 hereto.


3.4.2 All amounts owed under this Agreement shall be due
and payable within thirty (30) days of the date of Essentus's
invoice other than the amounts stipulated in Exhibit 3.4,
Sections 1(a) and 2(a), which shall be due and payable upon
execution hereof. Overdue payments shall bear interest at the
lesser of one and one-half percent (1.5%) per month, or the
maximum rate allowed under applicable law.


3.4.3 Essentus reserves the right to include means within
the Software to limit Licensee's use of the Software to the
Licensed number of users. Licensee shall maintain records
regarding Licensee's use of the Software and shall make such
information available to Essentus upon request and such
records shall be subject to audit by Essentus on reasonable
notice to Licensee.


3.5 License Exclusions


3.5.1 Except as expressly authorized herein, Licensee shall
not:


3.5.1.1 reverse compile, reverse assemble,
disassemble, translate or otherwise reverse engineer
all or any portion of the Software;


3.5.1.2 disclose the results of Software performance
benchmarks to any third party without Essentus's
prior written consent;


3.5.1.3 use or permit the use of the Software by
more than the maximum number of users in respect of
which Licensee is paying License fees contemplated by
Exhibit 1.3.


4. GENERAL


4.1 Parallel Run


4.1.1 The installation of a new data processing system
requires that for each new application being
implemented, the old system be run in parallel until
such time that Licensee's management is satisfied
with the accuracy of the new system. It is the
responsibility of Licensee's management to satisfy
itself that the Software is satisfactory and suitable
for its business purposes before the Software is run
in a live environment. The period during which the
parallel runs take place creates an extra work load
on Licensee's staff and could result in overtime and
extra staff costs.


4.2 Internal Controls


4.2.1 It is Licensee's responsibility to exercise all the
internal control procedures required in a computer
environment. Internal control procedures must be
exercised over such areas as computer input, computer
output, segregation of duties, approval, etc.
Licensee acknowledges that internal control cannot
totally eliminate the possibility of fraud or
embezzlement.


4.3 Third Party Software


4.3.1 Third Party Software products are software products
other than those elements of software developed by
Essentus. Notwithstanding any Essentus
recommendation, referral or introduction, Licensee
will have sole responsibility for determining
suitability for use and obtaining proper license
rights of Third Party Software products. Essentus has
no liability with respect to any claims relating to
or arising from the use by Licensee of Third Party
Software or any other third party products or
software.


4.3.2 For certain Third Party Software licensed through
Essentus, Essentus grants Licensee a limited use,
non-exclusive, non-transferable License without right
to sublicense to use the Third Party Software within
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own company on the Hardware, which License licensee
hereby accepts. Essentus may, upon payment of
appropriate Third Party support fees as set forth in
Exhibit 1.3, billed on an annual basis, payable in
advance, provide first line technical support and
update services. This would include:


4.3.2.1 Distribution of software updates as may be
generally provided by the Third Party Software
supplier to supported licensees and, at an additional
fee, distribution of software upgrades available by
the Third Party Software supplier for its licensees.
Additional charges may be required for installation
of software or related services.


4.3.2.2 Assisting with problems with the Third Party
Software if they should occur and working with the
Third Party Software suppliers to attempt to obtain
corrections to these problems.


4.4 Substitutions and Modifications


4.4.1 Essentus reserves the right to make substitutions and
modifications to the Software that do not materially adversely
affect the performance of the Software.


4.5 Taxes


4.5.1 Licensee shall pay or reimburse Essentus upon demand
for any and all applicable state, federal, and/or local taxes
howsoever designated arising from or based upon the fees
charged by Essentus including any sales and/or use tax, value
added tax, property tax, (excluding only taxes based on
Essentus's taxable income) and related interest and penalties,
if any, imposed by any taxing authority at any time.


4.6 Confidentiality


4.6.1 Essentus and Licensee agree to treat and to cause
Essentus Employees and auditors and Licensee's Employees and
auditors respectively to treat as confidential any and all
information which they may communicate to one another from
time to time during the term of this Agreement regarding the
conduct of their respective businesses including but not
limited to the terms and conditions of this Agreement and any
Addendum, Amendment, Exhibit, Schedule and documentation
thereto and each of Essentus and Licensee undertakes not to
use for itself or disclose any such information to any other
person, firm or corporation.


4.7 Essentus Employees


4.7.1 Licensee agrees not to hire, directly or indirectly,
any Essentus Employees during the project or for a period of
one year after the last work is completed on the project. If
Licensee does employ, either directly or indirectly any such
individual, then in order to compensate Essentus for the costs
of training and acquiring such personnel, Licensee agrees to
pay to Essentus a fee equivalent to one year compensation of
the Essentus Employees so hired. Such sum will be by way of
liquidated damages and shall be due and payable upon the
termination of such person's employment or service with
Essentus.


4.8 Binding Effect


4.8.1 This Agreement shall be binding upon and shall enure
to the benefit of the parties hereto and their respective
heirs, representatives, successors, executors, administrators
and permitted assigns.


5. WARRANTIES AND LIMITATIONS OF ESSENTUS LIABILITY


5.1 Specific Warranties and Limitation of Warranties


5.1.1 EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5,
ESSENTUS MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE
FOLLOWING WARRANTIES ARE IN LIEU OF THOSE ARISING BY STATUTE
OR OTHERWISE IN LAW OR FROM A COURSE OF DEALING OR USAGE OF
TRADE.


5.1.2 Essentus cannot guarantee a specific result, an error
free system or a specific cost saving. Essentus does not
warrant that the operation of the Software will be
uninterrupted or error free or that all Software errors will
be corrected.


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Licensee agrees to assume these risks as to the result
including the responsibility for testing and implementing the
Software.


5.1.3 In the event that, during the Warranty Period, any
Essentus Software errors shall appear, provided such errors
are a deficiency of the Essentus Software to perform
materially in accordance with the Documentation. Essentus will
use commercially reasonable efforts to correct any such
deficiencies.


5.1.4 Essentus does not warrant the Software against faulty
performance due to operator errors, power failures, file
overflows, equipment malfunctions, failure of operating
systems, failure of compilers or interpreters, failure of
utilities or of software not authored (written) by Essentus or
any other causes beyond the reasonable control of Essentus.
Licensee shall pay Essentus's standard rates for services
performed by Essentus to correct such data and/or program
defects.


5.1.5 The responsibility of Essentus under this Agreement
shall be limited to commercially reasonable efforts to correct
program defects in the Essentus Software if informed of
defects by Licensee during the Warranty Period. Any claim by
Licensee that a defect exists in the Software shall not excuse
Licensee from the performance of its obligations under this
Agreement.


5.1.6 ESSENTUS DISCLAIMS ANY AND ALL LIABILITY FOR
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES INCLUDING LOSS
OF PROFITS, REVENUE, DATA, OR USE INCURRED BY LICENSEE OR ANY
THIRD PARTY ARISING OUT OF THE USE OR OPERATION OF THE
SOFTWARE PROVIDED TO LICENSEE WHETHER IN AN ACTION FOUNDED IN
CONTRACT, TORT OR OTHERWISE, EVEN IF THE OTHER PARTY OR ANY
OTHER PERSON HAS ADVISED ESSENTUS OF THE POSSIBILITY OF SUCH
DAMAGES. ESSENTUS'S LIABILITY FOR DAMAGES HEREUNDER FOR ANY
CAUSE WHATSOEVER SHALL IN NO EVENT EXCEED THE AMOUNTS RECEIVED
FROM LICENSEE WITH RESPECT TO THE ...