EXHIBIT 10.1
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MASTER SERVICES AGREEMENT
BETWEEN
ThinkFire Services USA, Ltd.
And
Network-1 Security Solutions, Inc.
For Consultation and Representation
Related to Patent Licensing
MASTER SERVICES AGREEMENT - CONSULTATION AND REPRESENTATION
RELATED TO PATENT LICENSING
This MASTER SERVICES AGREEMENT (this "AGREEMENT") is effective as of
November 30, 2004 (the "EFFECTIVE DATE") by and between Network-1 Security
Solutions, Inc., a Delaware corporation, having offices at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10022, United States of America, ("NETWORK-1"),
and ThinkFire Services USA, Ltd., a Delaware corporation, having offices at ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ Corporate Park III, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("ThinkFire").
WHEREAS, Network-1 is the legal owner of U.S. Patent 6,218,930 as
set forth in Appendix 3 (the "PATENT") which it acquired from Merlot
Communications, Inc. ("MERLOT") in November 2003; and
WHEREAS, ThinkFire has certain intellectual property consulting
expertise and capability in the evaluation of patents and the marketing,
management and commercial licensing of rights in patents; and
WHEREAS, Network-1 is interested in and ThinkFire desires to pursue
the licensing of the Patent to potential licensees to be identified by ThinkFire
in consultation with Network-1.
For good and valuable consideration, Network-1 and ThinkFire (the "PARTIES" and,
individually, a "PARTY") agree as follows:
"LICENSE AGREEMENT" shall mean a written agreement, entered into in
accordance with this Agreement, granting a license under the Patent to a
Licensee.
"LICENSEE" shall mean the Person identified as a party to and
receiving rights and assuming obligations under a License Agreement entered into
in accordance with this Agreement.
"PERSON" means any individual, corporation, partnership, firm,
association, joint venture, joint stock company, trust, unincorporated
organization or other entity, or any governmental body.
"RELATED COMPANIES" means, with respect to a named entity, any
Subsidiaries, parents and parent's Subsidiaries of each named entity.
"RELATED COMPANIES" of Network-1 means Network-1's Subsidiaries.
"SUBSIDIARY" of a company means a corporation or other legal entity
(i) the majority of whose shares or other securities entitled to vote for
election of directors (or other managing authority) is now or hereafter
controlled by such company either directly or indirectly; or (ii) which does not
have outstanding shares or securities but the majority of whose ownership
interest representing the right to manage such corporation or other legal entity
is now or hereafter owned and controlled by such company either directly or
indirectly; but any such corporation or
other legal entity shall be deemed to be a Subsidiary of such company only as
long as such control or ownership and control exists.
"TERM" shall have the meaning assigned in Section 2.1.
1. ThinkFire Appointment and Services
During the Term hereof and solely for a scope commensurate with each
Statement of Work hereunder, and subject to the provisions of Sections 4.2 and
4.3 of this Agreement, Network-1 hereby grants to ThinkFire an exclusive (except
for Network-1 and its Related Companies, and except as provided in 1.1(h)
below), nontransferable, worldwide right to negotiate License Agreements for the
Patent, solely with respect to those potential Licensees identified in a
Statement of Work, on behalf of Network-1 pursuant to this Agreement. No License
Agreement negotiated by ThinkFire hereunder shall be of any force or effect with
respect to a non-Party until approved by and executed in writing by Network-1.
With respect to any License Agreement executed in accordance with
this Agreement, nothing contained herein shall be construed to limit Network-1's
discretion in amending, replacing, terminating or modifying in any way a License
Agreement(s) for any reason, provided that the Fee paid to ThinkFire pursuant to
Section 3 hereof shall be calculated from the total compensation received by
Network-1 under the amended License Agreement, including any cash and
non-monetary consideration received by Network-1, including but not limited to
services, products, supply agreements, or otherwise. Further, the Parties agree
that any such amended License Agreement shall thereafter be subject to the terms
of this Agreement, as applicable.
1.1 STATEMENTS OF WORK
Network-1 and ThinkFire agree that any and all licensing efforts in
accordance with this Agreement shall be individually set forth in Statements of
Work, which shall be in a form substantially set forth in Appendix 4 to this
Agreement and incorporated herein. Each Statement of Work, when approved by
Network-1 and ThinkFire, will authorize ThinkFire to engage in specified
activities related to the licensing of the Patent to specified potential
Licensees. Network-1's obligations to pay any fees to ThinkFire shall be limited
to those potential Licensees identified in a Statement of Work that has been
approved by Network-1. A separate Statement of Work shall be prepared for each
prospective Licensee. Each Statement of Work will include one or more of the
following as appropriate for that Statement of Work:
(a) an initial view of each identified potential Licensee's
products or services that may be using the inventions covered by the Patent;
(b) terms and conditions approved for use by ThinkFire in
negotiating with each potential Licensee, including, but not limited to, a
minimum royalty revenue acceptable to Network-1 for entering into any License
Agreement.
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(c) an estimate (expressed as a range of royalty rates
multiplied by an estimated range of impacted revenue being realized by the
potential licensee from the sale of products that may be using the inventions
covered by the Patent) of potential royalties that might be realized from a
successfully negotiated License Agreement;
(d) the ThinkFire Rate (described below in Section 3) for each
potential Licensee;
(e) the Termination Fee (described below in Section 4.2) for
each potential Licensee;
(f) responsibilities for accomplishing the set of tasks to be
accomplished and deliverables to be provided under the Statement of Work, which
tasks and deliverables are identified in Section 1.2; and,
(g) projected timeline for the tasks to be undertaken.
(h) ThinkFire will identify whether the potential Licensee
that is the subject of the proposed Statement of Work has been or is currently a
client of ThinkFire's up to the time of the Parties' execution of the Statement
of Work. If, after entering into a Statement of Work, a potential Licensee that
is the subject of any executed Statement of Work becomes a potential client of
ThinkFire, ThinkFire shall - prior to entering into any client relationship with
such potential client - consult with Network-1 about the potential conflict of
interest that might be created. If, after such consultation, ThinkFire elects to
enter into a client relationship with such potential Licensee, Network-1 shall
have the right by written notice to terminate the Statement of Work related to
that potential Licensee and, in such event, shall have no obligation to pay
ThinkFire with respect to that terminated Statement of Work (i) the Termination
Fee; or (ii) the ThinkFire Fee as set forth in Section 4.3 below. Such
termination shall have no effect on Network-1's obligation to pay to ThinkFire
other Termination Fees or ThinkFire Fees associated with other Statements of
Work. Upon such termination, Network-1 or its representative shall be free to
pursue the licensing of the potential Licensee that is the subject of such
terminated Statement of Work.
New Statements of Work may be added to Appendix 4 from time to time
by agreement of the Parties and incorporated in this Agreement upon execution by
both Parties. Network-1 has provided ThinkFire with copies of all agreements
between Network-1 and Merlot with respect to Network-1's acquisition of the
Patent in November 2003, and copies of all license agreements related to the
Patent, so as to inform ThinkFire of potential existing "ENCUMBRANCES" relating
to the Patent, and in no event will Network-1 intentionally withhold information
relating to Encumbrances if any exist. Such Encumbrances shall include available
information regarding all licenses, reservations, grants or transfers of rights,
title, interest, or any other encumbrance or obligation. Subject to Section 4.2
and 4.3 below, the final decision whether to enter into any license agreement or
settle any litigation shall remain the sole right of Network-1.
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1.2 THINKFIRE SERVICES
Upon execution of this Agreement, ThinkFire will undertake a
detailed examination of the Patent, including a review of the file histories of
the Patent. In addition, ThinkFire will undertake a detailed analysis of product
or service types that are potentially using the inventions covered by the Patent
and, upon the identification of such product or service types, will identify
specific leading products or services (as determined by revenue) of each such
product or service type.
For each presented licensing opportunity ThinkFire will describe its
preliminary analysis for each proposed licensing activity, and provide Network-1
with a draft Statement of Work (as set forth above). Within ten business days
following each such presentation, Network-1 will either reject each presented
licensing opportunity or execute the Statement of Work authorizing ThinkFire to
initiate Services to pursue such licensing activity. If there are disagreements
between the Parties regarding the Statement of Work, the Parties agree to confer
to seek to resolve such disagreements and this shall extend by 10 days the time
period for Network-1 to execute or reject the Statement of Work.
Immediately following the execution of a Statement of Work in
substantially the form attached as Appendix 4, ThinkFire will initiate its
licensing activities related to that Statement of Work. Specifically, ThinkFire
will undertake the detailed planning, preparation, negotiation and
implementation of that licensing effort ("SERVICES"), in cooperation and subject
to the prior approval of Network-1, as specified in that Statement of Work. This
work includes:
o Detailed review of public information relating to
selected products and services of potential Licensee for
evidence of likely impact by the Patent;
o When required, acquisition and initial testing of
selected products and/or services for evidence of
infringement, using outside experts as necessary;
o Preparation of proof packages (including claim charts)
to support finding of use of the inventions covered by
the Patent by the selected products and services of the
potential Licensee;
o Initial notice of likely use of the Patent to the
potential Licensee;
o Meetings and correspondence with potential Licensee
relating to asserted use of the Patent by potential
Licensee, including at-table presentation of proof in
support of such asserted use;
o Preparation and presentation of all counter-rebuttals to
potential Licensee's rebuttals to the assertion (whether
invalidity, non-infringement, or some other defense),
and preparation and presentation of the rebuttal to any
counter-assertions made by the potential Licensee
(Network-1 hereby agrees to cooperate with ThinkFire in
preparing counter-assertion responses, making reasonably
available Network-1 personnel who possess knowledge of
the products to which
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the counter-assertions are directed). At ThinkFire's
expense, this shall include (i) review of file history
and documentary background of each of potential
Licensee's patent counter-asserted by potential
Licensee; (ii) gathering of additional background
materials related to each counter-asserted patent; (iii)
engagement of experts, if required, for development of
proofs in support of non-use of counter-asserted patent;
(iv) engagement of experts, if required, for development
of proofs of invalidity or non-assertability of
counter-asserted patent; and (v) preparation and
presentation of the rebuttal to all counter-assertions;
o Preparation of draft and final License Agreement
documents (subject to the review of Network-1 and its
counsel), as the case may be, to be executed by
Network-1 and the Licensee; and
o ThinkFire will bear the burden of all of the expenses
and disbursements that it incurs in carrying out these
activities.
At all times while pursuing a licensing opportunity, ThinkFire will
use accepted professional standards to avoid the filing of a declaratory
judgment action by the potential Licensee. Network-1 understands and agrees that
in spite of ThinkFire's observance of such standards, it is possible that a
potential Licensee may nonetheless file for such declaratory relief. In the
event this occurs while ThinkFire is pursuing a licensing opportunity under a
Network-1-approved Statement of Work, Network-1 and ThinkFire agree to cooperate
in opposing any such attempt by the potential Licensee to obtain a declaratory
judgment. Network-1 will be responsible for all reasonable legal fees associated
with this effort. All out of pocket expenses incurred with respect to such legal
proceeding (but not legal fees) including, without limitation, expert fees,
transcripts, etc., paid to third parties by Network-1 as a result of such
opposition will be reimbursed from the proceeds of royalties obtained from the
potential Licensee under a License Agreement, settlement or judgment obtained
pursuant to such licensing opportunity. Such reimbursements shall be deducted
from such royalties prior to the calculation and payment of ThinkFire's Fee
(described below).
Network-1 personnel may observe and participate in any and all
activities conducted by ThinkFire in accordance with this Agreement, if
Network-1 so chooses. ThinkFire personnel will be responsible for conducting the
actual negotiation consistent with maximizing the royalty payments to Network-1
and, absent the consent of Network-1, only Network-1 and ThinkFire personnel may
participate in such negotiation. Thinkfire, as Network-1's representative, has
no right or authority to bind Network-1 to any agreement or obligation of any
kind without the written agreement of Network-1.
ThinkFire will regularly report results of all ThinkFire Services to
the CEO and Chairman or counsel of Network-1. The Parties understand and agree
that certain of the information exchanged between them and counsel will be
subject to attorney-client privilege and/or attorney work product protection,
and will expend all reasonable efforts to preserve such privilege and/or work
product protection.
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2. TERM AND TERMINATION
2.1 TERM AND BENCHMARKS
(a) Unless earlier terminated as provided in Section 2.2, the
term of this Agreement (the "TERM") will begin on the Effective Date and end
upon the completion or termination of the last Statement of Work under this
Agreement. Unless expressly agreed otherwise by the Parties, upon the fifth
anniversary of the Effective Date (the "EXPIRATION DATE"), no new Statement of
Work shall be added to this Agreement.
(b) If within one year of the Effective Date, ThinkFire has
not presented claim charts to at least three potential licensees, and within two
years has not presented to Network-1 a license agreement with at least one
potential Licensee meeting the terms set forth in an approved Statement of Work
and absent pending litigation or any other legal proceeding involving the
Patent, Network-1 shall have the right to terminate this Agreement without
having any further obligations to ThinkFire.
2.2 Subject to the provisions of Sections 4.2 and 4.3 of this
Agreement, any Party may terminate this Agreement or any Statement of Work under
this Agreement for any reason upon sixty day's written notice. Termination of
this Agreement terminates all Statements of Work under this Agreement.
2.3 In the event of any uncured material breach of this Agreement by
ThinkFire or its Subsidiaries, Network-1 may, in addition to any other remedies
that it may have, at any time terminate all the rights and licenses granted by
Network-1 to ThinkFire under any Statements of Work in which a License Agreement
has not been entered into with the potential Licensee identified in the
Statement of Work, by not less than thirty (30) days written notice to ThinkFire
specifying any such breach, unless such breach specified therein shall have been
remedied. If there is termination by Network-1 for any uncured material breach
of this Agreement by ThinkFire, Network-1 shall have no further obligations to
ThinkFire except with respect to licensing agreements that have been executed
prior to the date of such termination.
In the event of any uncured material breach of this Agreement by
Network-1 or its Related Companies, ThinkFire may, in addition to any other
remedies that ThinkFire may have, at any time terminate all the rights and
licenses granted by ThinkFire to Network-1 hereunder by not less than thirty
(30) days written notice to Network-1 specifying any such breach, unless within
the period of such notice all breaches specified therein shall have been
remedied.
2.4 Except as otherwise provided herein, Section 3 (Fees), Section 4
(Payments), Section 7 (Proprietary Rights), Section 8 (Confidentiality) and
Section 10 (Miscellaneous) of this Agreement will survive the termination or
expiration of this Agreement or any Statements of Work under this Agreement.
Notwithstanding any termination or expiration of this Agreement, unless
otherwise provided herein or agreed by the Parties, the Parties will remain
obligated, subject to the terms of this Agreement, to make all payments
otherwise due under this Agreement or any Statement of Work under this
Agreement, including payments due for any License Agreement, settlement or
judgment executed or entered into as a result of ThinkFire's
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Services authorized by any Statement of Work. As applicable and subject to all
payment caps, the payment obligation will continue for the duration of any such
License Agreement, settlement or judgment.
2.5 The termination of this Agreement for any reason shall not
affect the terms of any License Agreement, settlement or judgment executed or
entered into during the Term of the Agreement by Network-1, and all licenses
granted to or by Network-1 under such License Agreements hereunder shall survive
and continue after any termination of this Agreement.
3. FEES
In consideration for ThinkFire's performance of Services, Network-1
will pay ThinkFire a fee (the "THINKFIRE FEE") equal to the product of the
applicable rate as specifically set forth in the schedule set forth in the
applicable Statement of Work (the "THINKFIRE RATE") multiplied by the Net
Royalties. "NET ROYALTIES" shall mean all amounts paid to Network-1 under a
License Agreement, settlement or judgment, by way of a negotiated agreement,
litigation or otherwise, by each potential Licensee identified on a Statement of
Work (the "GROSS ROYALTIES") minus (i) any out of pocket disbursements (e.g.
expert fees, transcripts, travel expenses, etc.) Network-1 has paid to or
incurred from third parties that are directly related to that specific potential
Licensee and that are directly related to the enforcement of the Patent (but
specifically excluding legal fees paid (contingent or otherwise) to law firms or
others); and (ii) any withholdings or deductions only for royalty withholding
taxes actually withheld from Gross Royalties by a Licensee as required by a
governmental authority (except to the extent that Network-1 is able to utilize
any tax credit available to it from such withholdings or deductions). Such Net
Royalty amounts shall include royalties or other amounts received under
applicable License Agreements, settlement payments, amounts received under a
judgment, or other amounts received by Network-1 from that Licensee in
accordance with, or as a consequence of, an executed License Agreement,
settlement or judgment, by way of negotiated agreement, litigation or otherwise,
including the value of any non-monetary consideration received by Network-1 such
as in the form of services, products, supply agreements, or otherwise. If
Network-1 and ThinkFire are unable to agree on the appropriate value of such
non-monetary consideration, if any, the procedures provided in Section 9 hereof
shall apply to resolution of the fair market value of such non-monetary
consideration. The ThinkFire Rate shall be set forth in each Statement of Work
as a range of percentages, and in consideration of the substantial effort of
Network-1 in identifying potential licensees, and in further recognition of the
focused licensing effort surrounding the Patent, such ThinkFire Rate shall not
exceed twenty percent (20%), and may be set depending upon such factors as the
existence of litigation, expected reverse engineering requirements, particular
issues related to a potential Licensee, and such other factors that the Parties
may agree upon.
4. PAYMENTS
4.1 Licenses executed as a result of ThinkFire's Services hereunder
will provide for the Licensee to pay Network-1 the Gross Royalties less any
Related Taxes (as defined below) withheld or deducted by the Licensee (the
"COLLECTED ROYALTIES"). License Agreements executed as a result of ThinkFire's
Services will in any event include a term
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requiring the Licensee to provide to ThinkFire a royalty report detailing the
Gross Royalties and the Collected Royalties concurrently with making any payment
or report to Network-1. ThinkFire agrees that negotiation for inclusion of this
provision shall not jeopardize or delay the conclusion of a License Agreement.
In the event that the licensee fails for any reason to provide the royalty
report, Network-1 will provide a royalty report to ThinkFire if Network-1 has
received such a report or has received a royalty payment absent a report from
the Licensee. If for any reason ThinkFire receives an invoice or ▇▇▇▇ for
Related Taxes payable by Network-1, ThinkFire will forward to Network-1 the
invoice received by ThinkFire. If the invoice for Related Taxes has been issued
to ThinkFire, Network-1 agrees to immediately contact the taxing authority and
seek to have the invoice issued directly to Network-1. If this action by
Network-1 or the taxing authority does not occur and ThinkFire is required to
pay such invoice, Network-1 agrees to promptly reimburse ThinkFire for payment
of such Related Taxes upon receipt by Network-1 of an invoice reflecting such
payment by ThinkFire. In no event will ThinkFire be responsible or liable for
the Licensee's collection or withholding of Related Taxes. Network-1 will pay
the ThinkFire Fee without regard to any dispute between a Licensee and Network-1
regarding Related Taxes.
4.2 If, after approving a particular Statement of Work, Network-1
subsequently requests that ThinkFire stop its Services and/or licensing efforts
under such Statement of Work, or elects not to sign a License Agreement that is
substantially consistent with terms set forth in such Statement of Work, or
notifies ThinkFire that a particular potential Licensee is no longer subject to
ThinkFire's Services under this Agreement or an approved Statement of Work,
Network-1 will pay ThinkFire a Termination Fee (the "TERMINATION FEE") for its
actual time (calculated by multiplying the rates applicable to each ThinkFire
employee or consultant performing Services as set forth in the ThinkFire
Schedule of Hourly Professional Fees as set forth in the applicable Statement of
Work (which may be amended from time to time by ThinkFire) times the hours spent
by each such ThinkFire employee or consultant performing Services times 150%)
and reasonable out-of-pocket expenses incurred by ThinkFire directly related to
the licensing opportunity, as identified in written documentation thereof to
Network-1, up to a pre-agreed cap which will be set forth for each potential
Licensee in each Statement of Work.
If Network-1 notifies ThinkFire that the Patent is no longer subject
to ThinkFire's Services under this Agreement or an approved Statement of Work,
and the withdrawal of such Patent was not (a) approved in advance by ThinkFire
and (b) materially adversely impacts ThinkFire's ability to complete a license
transaction with a potential Licensee consistent with the terms set forth in the
applicable Statement of Work, or materially adversely impacts the potential
royalties from such a transaction, then Network-1 will pay ThinkFire the
Termination Fee (as set forth above) as if a termination had occurred.
4.3 Subject to the provisions of Sections 2.1 and 2.3, if Network-1
(i) terminates ThinkFire Services with respect to a specific potential Licensee
under a particular Statement of Work; or (ii) terminates this Agreement or all
licensing and sales efforts set forth in all Statements of Work executed
pursuant to this Agreement, Network-1 will nonetheless pay ThinkFire the
ThinkFire Fee for any License Agreement executed within four years of such
termination by Network-1 if such License Agreement is between Network-1 and a
Licensee who
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is identified as a potential Licensee in any approved Statement of Work under
which ThinkFire Services have been terminated and if:
(a) ThinkFire has invested, and provided written documentation
thereof to Network-1, substantial time and effort in preparing for licensing
discussions with such Licensee, or has engaged in substantial and material
licensing discussions with such Licensee; and
(b) Network-1 or any non-Party acting on behalf of Network-1
engages in litigation, settlement discussions or other negotiations with the
Licensee while such approved Statement of Work is in effect or within twenty
four months after termination by Network-1 of ThinkFire Services with respect to
the Patent or within twenty four months of terminating the Statement of Work
related to that Licensee.
Payments due to ThinkFire under the above portion of this Section
4.3 will be reduced by any payments paid to ThinkFire under the provisions of
Section 4.2 of this Agreement, but in no event shall the payment be less than
the Termination Fee.
4.4 Notwithstanding the preceding portion of this Section 4,
ThinkFire will not be entitled to the ThinkFire Fee (including any Termination
Fee(s)) related to a potential Licensee under this Agreement if:
(a) ThinkFire pursued negotiations with the potential Licensee
based on the terms and conditions contained in a Statement of Work, but notified
Network-1 in writing that it was abandoning the licensing effort or effectively
abandons the licensing effort by (i) failing to actively pursue licensing
discussions with the prospective Licensee, provided Network-1 has given
ThinkFire thirty (30) days written notice of its decision to invoke this
subparagraph (a) unless ThinkFire immediately resumes and sustains active
licensing discussions with the potential Licensee; or (ii) failing to sustain
such active negotiations after receiving such notification from Network-1; or
(b) ThinkFire terminates a Statement of Work, or Network-1
terminates a Statement of Work pursuant to Section 1.1(h) above; or
(c) ThinkFire terminates this Agreement before Network-1
executes a License Agreement with the Licensee, unless such termination is the
result of Network-1's breach of this Agreement and such breach has not been
cured within thirty (30) days following written notice by ThinkFire to Network-1
of the existence of such a breach; or
(d) Network-1 terminates this Agreement for cause, which is
hereby defined as:
(i) ThinkFire ceases to exist, or files for bankruptcy
protection; or
(ii) ThinkFire breaches this Agreement, and such breach
is not cured within thirty (30) days following
written notice by Network-1 to ThinkFire of the
existence of such a breach.
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4.5 ThinkFire will use accepted professional efforts in the
licensing community to minimize the threat to Network-1 of litigation resulting
from ThinkFire's performance of Services. The decision of whether to litigate
any dispute with a third party will be at the sole discretion of Network-1.
Network-1 will immediately notify ThinkFire in writing of any decision to file
or respond to any litigation involving a potential Licensee identified in any
Statement of Work.
Unless otherwise agreed between ThinkFire and Network-1, subject to
the terms of any litigation contingency agreement that Network-1 enters into,
Network-1 will bear the cost of and manage any litigation relating to any
potential Licensee identified in any Statement of Work. This provision will not
apply to any dispute regarding this Agreement between Network-1 and ThinkFire,
which dispute will be resolved under the provisions of Section 9.
4.6 Network-1 will pay ThinkFire:
(a) any and all ThinkFire Fees no later than forty-five (45)
days after receipt by Network-1 of the royalties, purchase proceeds, settlement
payment or amount received under a judgment used in calculating such ThinkFire
Fees under Section 3 above; and
(b) any and all Termination Fees no later than forty-five (45)
days after receipt by Network-1 of a detailed invoice from ThinkFire.
(c) All other payments by Network-1 to ThinkFire required
under this Agreement shall be payable within forty-five (45) days following the
receipt of a ThinkFire invoice to Network-1 or within forty-five (45) days of
receipt by Network-1 of amounts to be paid to ThinkFire, whichever occurs first.
In the event any law or government regulation requires Network-1 to withhold
income taxes from any amounts due ThinkFire, Network-1 will deduct the minimum
allowable withholding amount from the amount due ThinkFire and provide to
ThinkFire payment equal to the amount due minus the withheld taxes, along with a
tax receipt issued in the name of ThinkFire Services USA Ltd. for the withheld
taxes. Any amount not paid to ThinkFire when due for any payment obligation by
Network-1 in this Agreement will bear interest until paid at the average monthly
Prime Rate plus 0.5% (6% annually) quoted by Citibank in New York City, New York
between the due date and the actual payment date.
4.7 Except as otherwise explicitly set forth in this Agreement,
ThinkFire will be responsible for its own costs and expenses related to
performance of its obligations under this Agreement, including costs for
consultants, reverse engineering or any other service, provided that those
services were requested by ThinkFire. Network-1 will be responsible for its own
costs and expenses related to performance of its obligations under this
Agreement, including costs for consultants, or any other service, provided those
services were requested by Network-1.
5. TAXES
5.1 Network-1 will bear the cost of any and all Related Taxes
arising from or imposed on or as a result of revenues associated with the
provision or license of the Patent set forth in any Statement of Work.
Network-1's obligations with respect to Related Taxes will not, however, apply
to any taxes that are based on or measured by ThinkFire's or its employees' net
income, or
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any indirect taxes that are associated with ThinkFire's rendering of Services
under this Agreement (excluding, for the avoidance of doubt, the Related Taxes
to be borne by Network-1 pursuant to the first sentence of this Section 5.1).
"RELATED TAXES" means any taxes, assessments, duties, permits, tariffs, fees and
other charges of any kind, however, assessed, charged or levied now or
hereafter, including without limitation sales, use, state, local, provincial,
property, gross receipts, excise, transaction, goods and services, value-added
or similar taxes, or other taxes or amounts of whatever nature or in lieu
thereof, and all fines, penalties, interest, additions to taxes (penalty in
nature) or similar liabilities imposed in connection therewith. This section
does not apply to any Related Taxes imposed by law or government regulation on
the Licensee of the Patent.
5.2 All reports and returns, required to be filed, with regard to
Related Taxes will be prepared and filed in a timely manner by either ThinkFire
or Network-1 as required by the applicable taxing authority to file the reports
and returns. If ThinkFire takes a position in support of a Network-1 position on
any form, in any return, on audit or otherwise at Network-1's request, Network-1
will bear the cost of and will pay or reimburse ThinkFire for the payment of any
and all expenses and liabilities, including without limitation Related Taxes,
costs, reasonable attorneys' and accountants' fees and other expenses or
disbursements arising out of, attributable to or in connection with any audit or
contest of such Related Taxes, or any claim or assessment claimed by any taxing
authority.
5.3 Network-1 and ThinkFire will reasonably cooperate with one
another in the minimization of taxes to the extent legally permissible.
6. AUDITS
6.1 At the request of a Party hereto, the other Party agrees to
permit an annual audit of the other Party's relevant accounting records to the
extent provided in this Section 6 to ensure compliance with the payment terms of
this Agreement.
6.2 An independent accounting firm selected by the Party requesting
the audit shall conduct the audit. Neither ThinkFire nor Network-1 will
compensate any auditor on a contingency basis. The auditors will be bound to
keep the audit, the audit results and all information received in the course of
performance of the audit confidential, under confidentiality terms as least as
restrictive as set forth in the Nondisclosure Agreement (NDA) referenced in
Section 8.1 of this Agreement, except as necessary to disclose discrepancies to
the Parties.
6.3 The auditors will conduct the audit during the normal business
hours of the audited party at the location of the audited Party's relevant
accounting records. The cost of an audit will be borne by the Party requesting
the audit unless the audit discloses a material discrepancy, in which case the
cost of the audit shall be borne by the audited Party. A discrepancy will be
deemed material if it involves an underpayment of more than ten percent of the
amount due in any calendar quarter. Audits will not unreasonably interfere with
the audited Party's business activities. An audit may cover more than a
twelve-month period, provided that, (a) the period has not previously been
audited, and (b) no audit may cover more than three years.
11
6.4 Upon completion of an audit that discloses an underpayment of
ten percent or more, the underpaying Party will promptly pay the underpayment,
interest due (but only if it can be demonstrated that such underpayment was due
to a willful or negligent act or inaction by the underpaying Party) at the
average monthly Prime Rate quoted by Citibank in New York City, New York between
the missed due date and the actual payment date and, if applicable, the cost of
the audit. In the event any audit discloses any overpayment by Network-1,
ThinkFire will promptly refund the full amount of any such overpayment to
Network-1. Further, independent of any such audit, ThinkFire will credit to
Network-1 the amount of any overpayment of Fees (including Termination Fees)
made in error which is identified and fully explained by Network-1 in a written
notice to ThinkFire delivered within twelve months after the due date of the
payment which included such alleged overpayment. ThinkFire shall have the right,
pursuant to the provisions of Section 6.3, to verify to its own satisfaction,
the existence and extent of the overpayment.
6.5 The Parties will keep all records, files, documents and
correspondence relating to the relevant accounting records for determining
payments in accordance with this Agreement available for audit for at least
three years following their date of creation.
7. PROPRIETARY RIGHTS
7.1 The following terms are defined as follows for purposes of this
Agreement:
(a) "PATENT" means U.S. Patent 6,218,930 and any foreign
counterparts, continuations, divisions, continuations-in-part, reissues thereof
or any other applications claiming priority thereto.
(b) "THINKFIRE LICENSING MATERIALS" means (i) all materials
supplied by ThinkFire to Network-1 as a licensing proposal, whether or not a
Statement of Work results from those materials; (ii) all information that is
supplied to Network-1 by ThinkFire in Statements of Work; (iii) all supporting
documentation produced by ThinkFire in preparation for, or in the conduct of,
its Services, including, but not limited to, all claim charts, negotiation notes
and files, and royalty forecasts developed, prepared or created by ThinkFire in
furtherance of this Agreement and used in performing the Services except for
information provided by Network-1 to ThinkFire; (iv) all non-Network-1
confidential information associated with and/or contained in the materials
prepared by ThinkFire for Network-1 and made available to Network-1 except for
information provided by Network-1 to Thinkfire; and (v) any know-how
independently generated by ThinkFire and contained in the materials prepared by
ThinkFire for Network-1 and made available to Network-1.
7.2 ThinkFire will own all right, title and interest in and to the
ThinkFire Licensing Materials, and to all intellectual property rights created
or developed by ThinkFire in the course of conducting Services and incorporated
into the ThinkFire Licensing Materials. ThinkFire grants to Network-1 a limited,
nonexclusive, nontransferable, worldwide license to the ThinkFire Licensing
Materials for the sole use of Network-1 in meeting their obligations and
fulfilling the purposes as specifically set forth in this Agreement which shall
include, among other uses, use of the Licensing Materials in connection with any
litigation or proceeding at the U.S. Patent Office
12
pertaining to the Patent, and for no other purpose. The license includes the
right to copy and use copyrighted material for this allowed use.
8. CONFIDENTIALITY
8.1 Concurrently with the execution of this Agreement, the Parties shall enter
into a Non-Disclosure Agreement in the form attached to this Agreement as
Appendix 2.
8.2 Network-1 and ThinkFire agree that in anticipation of this
Agreement and while performing Services under this Agreement, ThinkFire has
prepared and will prepare numerous documents that may be disclosed to Network-1,
including documents prepared in anticipation of litigation. To the extent any
privilege or work product immunity exists in those documents, Network-1 and
ThinkFire intend that there shall be no waiver of such privilege or work product
status through their communications, and further agree that they will take all
reasonable actions to establish and maintain a community of interests between
us.
9. DISPUTE RESOLUTION
9.1 In the event of any dispute, controversy or claim of any kind or
nature arising under or in connection with this Agreement (a "DISPUTE"), any
Party may request in writing that such dispute be resolved as provided in this
Section 9. Upon making or receiving a Dispute resolution request, each Party
involved in the Dispute will immediately designate a senior business executive
who is not directly involved in the dispute to attempt to resolve the Dispute.
The executives will meet as often as they deem appropriate to gather and furnish
to each other relevant information with respect to resolution of the Dispute.
The executives will discuss the Dispute and will negotiate in good faith in an
effort to resolve the Dispute without the necessity of any formal proceeding. No
formal proceedings for the resolution of the Dispute under Section 9.2 may be
commenced until the earlier to occur of (a) a mutual good faith conclusion by
the executives that amicable resolution of the Dispute through continued
negotiation of does not appear likely, or (b) thirty days after the initial
request to negotiate the Dispute.
9.2 The Parties will resolve any Dispute not resolved in accordance
with Section 9.1 by final and binding arbitration conducted in accordance with
and subject to the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") then applicable. One arbitrator will be selected by the
mutual agreement of the Parties or, failing that, by the AAA, and the arbitrator
will allow such discovery as is appropriate, consistent with the purposes of
arbitration in accomplishing fair, speedy and cost effective resolution of
disputes. The arbitrator will reference the rules of evidence of the Federal
Rules of Civil Procedure then in effect in setting the scope of discovery,
except that no requests for admissions will be permitted and interrogatories
will be limited to identifying (a) persons with knowledge of relevant facts and
(b) expert witnesses, their opinions and the basis of their opinions. Judgment
upon the award rendered in any such arbitration may be entered in any court
having jurisdiction thereof.
9.3 The Arbitrator will, within fifteen calendar days after the
conclusion of the Arbitration hearing, issue a written award and statement of
decision describing the essential findings and conclusions on which the award is
based, including the calculation of any damages
13
awarded. The Arbitrator will be authorized to award compensatory damages, but
will NOT be authorized (i) to award non-economic damages, (ii) to award punitive
damages, except for damages arising from willful or intentional misconduct, or
(iii) to reform, modify or materially change this Agreement or any other
agreements contemplated hereunder; provided, however, that the damage
limitations described in parts (i) and (ii) of this sentence will not apply if
such damages are statutorily mandated. The Arbitrator also will be authorized to
grant any temporary, preliminary or permanent equitable remedy or relief he or
she deems just and equitable and within the scope of this Agreement, including,
without limitation, an injunction or order for specific performance.
9.4 Any arbitration conducted pursuant to this Section 9 will take
place in New York, New York, U.S.A. Each Party shall bear its own attorney's
fees, costs, and disbursements arising out of the arbitration, and will pay an
equal share of the fees and costs of the Arbitrator. Other than those matters
involving injunctive relief or any action necessary to enforce the award of an
arbitrator, the Parties agree that the provisions of this Section 9 are a
complete defense to any suit, action or other proceeding instituted in any court
or before any administrative tribunal with respect to any Dispute or the
performance of Services by ThinkFire. Nothing in this Section 9 prevents the
Parties from exercising their right to terminate this Agreement in accordance
with Section 2, but resolution of any Dispute arising out of this Agreement will
continue to be governed by the terms of this Section 9.
9.5 By agreeing to this binding arbitration provision, the Parties
understand that they are waiving certain rights and protections which may
otherwise be available if a claim between the Parties were determined by
litigation in court, including, without limitation, the right to seek or obtain
certain types of damages precluded by this provision, the right to a jury trial,
certain rights of appeal, and a right to invoke formal rules of procedure and
evidence.
10. MISCELLANEOUS
10.1 Network-1 represents and warrants to ThinkFire, and ThinkFire
represents and warrants to Network-1, that each has the right to enter into this
Agreement.
10.2 ThinkFire agrees that it shall not hold itself out as having
authority to execute or otherwise enter into any binding contracts or other
agreements for or on behalf of Network-1 or its Related Companies, nor shall
ThinkFire execute or otherwise enter into any binding contracts or other
agreements for or on behalf of Network-1 or its Related Companies.
10.3 LIMITATION OF LIABILITY
EACH PARTY ACKNOWLEDGES THAT THE NATURE OF THE ACTIVITIES AND THE
SERVICES TO BE PROVIDED BY THE OTHER PARTY ARE SUCH THAT THEIR
ULTIMATE OUTCOME IS UNCERTAIN AND THAT NO PARTY PROVIDES ANY
GUARANTEE OF ANY POSITIVE RESULT. ALL INTELLECTUAL PROPERTY,
INFORMATION, PRODUCTS AND SERVICES PROVIDED UNDER THIS AGREEMENT ARE
PROVIDED ON AN AS-IS BASIS. NO PARTY
14
PROVIDES ANY WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED. EACH PARTY
HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES AND GUARANTEES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
Other than for obligations pursuant to Section 3 (Fees), Section 4
(Payments), Section 5 (Taxes), or for intentional or willful misconduct,
(a) No Party (or its Related Companies) shall be liable for
special, incidental, consequential, indirect, punitive, extraordinary or
exemplary damages, including, but not limited to, loss of profits, loss of data
or loss of use damages arising out of this Agreement, even if it has been
advised of the possibility of such damage; and
(b) The Parties expressly acknowledge that the limitations and
exclusions set forth in this Section 10.3 have been the subject of active and
complete negotiation between the Parties. Such limitations and exclusions
represent the Parties' agreement, taking into account each Party's level of risk
associated with the performance or nonperformance of its obligations under this
Agreement and the payments and other benefits to be derived by each Party
hereunder. The provisions of this Section 10.3 will survive the expiration or
termination of this Agreement for any reason.
10.4 RIGHT TO ENGAGE IN OTHER ACTIVITIES
Subject to Section 1.1(h) above, Network-1 acknowledges and agrees
that ThinkFire may provide services for others similar to the Services provided
for Network-1. Subject to the confidentiality obligations set forth in the NDA
referenced in Section 8.1 of this Agreement, nothing in this Agreement will
impair ThinkFire's right to provide to any other party services similar to the
Services or to acquire, license, market, distribute, develop for itself or
others or have others develop for ThinkFire similar services to those
contemplated by this Agreement. Prior to the execution of an Statement Work or
at such time as conflicts may arise thereafter, ThinkFire shall advise Network-1
of any conflicts of interest with respect to its other clients and the provision
of Services under this Agreement.
10.5 INDEPENDENT CONTRACTORS
The Parties are independent contractors. This Agreement will not be
construed as constituting any Party as partner, joint-venturer or fiduciary of
the other or creating any other form of legal association that would impose
liability on one Party for the act or failure to act of the other, or as
providing any Party with the right, power or authority (express or implied) to
create any duty or obligation of the other.
10.6 ENTIRE AGREEMENT
This Agreement (including the NDA referenced in Section 8.1 of this
Agreement and any schedules, appendices or exhibits hereto, each of which is
hereby incorporated by reference)
15
constitutes the full and complete statement of the agreement of the Parties with
respect to the subject matter hereof and thereof and supersedes any previous or
contemporaneous agreements, understandings or communications, whether written or
oral, relating to such subject matter.
10.7 AMENDMENTS; WAIVER
Changes or modifications to this Agreement may not be made orally or
through a course of dealing, but only by a written amendment or revision signed
by the Parties. Any terms and conditions varying from this Agreement on any
order, invoice or other notification from any Party are not binding on the
others unless specifically accepted in writing by the others. Unless otherwise
expressly provided in this Agreement, neither a delay nor an omission by any
Party to exercise, or a course of dealing with respect to, any right or power
under this Agreement will be construed to be a waiver thereof. No waiver of any
breach of any provision of this Agreement will constitute a waiver of any prior,
concurrent or subsequent breach of the same or any other provision hereof.
10.8 BINDING NATURE; ASSIGNMENT
This Agreement will be binding on the Parties and their successors
and permitted assigns (it being understood and agreed that nothing contained in
this Agreement is intended to confer upon any party other than the Parties any
rights, benefits or remedies of any kind or character whatsoever under or by
reason of this Agreement). Except as noted below, ThinkFire may not, without the
written consent of Network-1, assign this Agreement or any part hereof.
ThinkFire may assign or provide a security interest in its rights to Network-1's
payments under this Agreement to a financial institution or other third party in
connection with any transaction entered into to provide financing related to
this Agreement to ThinkFire, and any party receiving such an assignment or
security interest may assign its rights thereunder in connection with such
financing. Any Party may assign this Agreement without the consent of the other
in connection with any merger, consolidation, acquisition or similar event (a
"MERGER EVENT"), provided that:
(a) the assignee is not a competitor or potential licensee of
any non-assigning Party;
(b) the assignee does not have a professional conflict of
interest with respect to any non-assigning Party;
(c) the assignee agrees to be bound by the terms and
conditions of this Agreement; and
(d) subject to the assigning Party's normal staffing practices
and normal industry personnel attrition, the assignee continues to staff its
obligations under this Agreement at substantially the same level before and
after any such assignment, and with a high degree of continuity respecting key
employees and with staff acceptable to the other Party. Consent to assignment of
this Agreement in such a Merger Event shall not be unreasonably withheld.
Notwithstanding the above, all of Network-1's rights, title and
interest in this Agreement and any licenses and rights granted to it (and
associated obligations thereto) hereunder may be
16
assigned to any Related Company of Network-1. Notwithstanding the above, all of
ThinkFire's rights, title and interest in this Agreement and any rights granted
to it (and associated obligations thereto) hereunder may be assigned to any
Related Company of ThinkFire.
10.9 NOTICES
All notices under this Agreement will be in writing and will be
deemed to have been duly given if delivered personally or by a commercial
courier service, faxed or mailed by registered or certified mail, return receipt
requested, postage prepaid, to the Party(s) being notified at the addresses set
forth in Appendix 1. Notices addressed as provided above will be effective, (a)
if delivered personally or by a commercial courier service, upon delivery, (b)
if delivered by facsimile, when confirmed and (c) if delivered by mail in the
manner described above, on the fifth business day after the day it is deposited
in a regular depository of a governmental mail service. Any Party from time to
time may change its address or designee for notification purposes by giving the
other Parties notice of the new address or designee and the date upon which such
change will become effective.
10.10 EXCUSED PERFORMANCE
No Party shall be held responsible for any delay or failure in
performance of any part of this Agreement to the extent such delay or failure is
caused by fire, flood, strike, civil, governmental or military authority, act of
God, or other similar causes beyond its control and without the fault or
negligence of the delayed or nonperforming Party or its subcontractors.
10.11 PUBLIC RELATIONS AND MARKETING REFERENCES
(a) Nothing in this Agreement shall be construed as conferring
upon any Party any right to include in correspondence, advertising, packaging or
other commercial activities, any reference to the other Party (or any of its
Related Companies), its trade names, trademarks or service marks in a manner
which would be likely to cause confusion or to indicate that the products or
services provided hereunder is in any way certified by any other Party hereto or
its Related Companies.
(b) The terms, but not the existence, of this Agreement and
all Statements of Work subject to this Agreement shall be treated as
confidential information by the Parties, and no Party shall disclose such terms
to any third party without the prior written consent of the other Parties;
provided however, that each Party may (i) represent to third parties that such
Party is licensed or authorized to act as provided by this Agreement; (ii)
disclose this Agreement and its terms to potential acquirers of, investors in or
lenders to such Party (including any representatives of the parties in such
transaction), or disclosures reasonably necessary in connection with the
divestiture of all or any portion of a Party's respective businesses, provided
such disclosure is made pursuant to a written confidentiality agreement binding
upon such potential acquirer, investor, lender or other parties which contains
confidentiality obligations which are no less protective than at least the same
degree of care the disclosing Party normally exercises to protect its own
proprietary information of a similar nature; (iii) disclose this Agreement and
its terms in any arbitration, mediation or other official dispute resolution
17
procedure pursuant to a written confidentiality agreement binding upon the
parties which contains confidentiality obligations which are no less protective
than at least the same degree of care the disclosing Party normally exercises to
protect its own proprietary information of a similar nature; and (iv) disclose
this Agreement and its terms which is requested pursuant to a judicial or
governmental request, requirement or order under law, provided that such Party
provides the other Party with sufficient prior notice in order to contest such
request, requirement or order or seek protective measures. In addition, this
Section shall not prevent a Party from making disclosures reasonably required by
law based on advice of counsel. In this regard, ThinkFire acknowledges that
Network-1 is required under the securities laws based on advice of counsel to
file a Form 8-K with the Securities and Exchange Commission pertaining to this
Agreement and file this Agreement as an Exhibit to the Form 8-K as well as issue
a press release regarding this Agreement (a copy of the press release which will
be provided to ThinkFire before its issuance).
This provision does not alter the restrictions on the disclosure of
confidential information set forth in the NDA referenced in Section 8.1 of this
Agreement and, subject to the provisions of such NDA, will not be construed so
as to delay or restrict any Party from disclosing any information required to be
disclosed in order to comply with any applicable laws, rules or regulations.
Notwithstanding the foregoing, but subject to any applicable laws, rules or
regulations, all Parties will be entitled to list the names of the other
Parties, to make general references to the basic nature of the relationship
between the Parties under this Agreement and to generally describe the Services
without identifying potential Licensees.
10.12 SEVERABILITY
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired, and such provision will
be deemed to be restated to reflect the original intentions of ThinkFire and
Network-1 as nearly as possible in accordance with applicable law.
10.13 COUNTERPARTS
This Agreement may be executed in multiple counterparts, each of
which will be deemed an original and all of which taken together will constitute
one instrument.
10.14 GOVERNING LAW
The laws of the State of New York, U.S.A. will govern this
Agreement, without giving effect to any choice-of-law rules that result in the
application of another jurisdiction's laws.
10.15 THINKFIRE -- NOT THE PRACTICE OF LAW
Network-1 and ThinkFire expressly acknowledge that they have been
fully and adequately represented by legal counsel of their own choosing in the
preparation and negotiation of this Agreement. All communications between
ThinkFire and Network-1 will be with counsel for Network-1 and will be treated
as materials prepared in accordance with and under the work product doctrine in
recognition by the Parties of the likelihood for litigation to occur. Further,
18
neither the performance under this Agreement nor the writings, statements or
other acts or omissions of any consultant, agent, employee, in-house legal
counsel or non-employee legal counsel engaged by or acting for or on behalf of
ThinkFire shall be deemed to constitute the providing of legal advice nor the
practice of law on behalf of or for the benefit of Network-1. All legal matters
for or on behalf of Network-1 will be the sole and exclusive responsibility of
Network-1. All Parties will avail itself themselves of legal counsel or
representation of its choosing as it deems appropriate to represent its
interests.
10.16 NON-SOLICITATION
To the extent permitted by law, during the Term of this Agreement,
and for one year thereafter, all Parties agree not to solicit for employment
purposes the employees of the other Parties or any of their Related Companies.
[Remainder of page intentionally left blank]
19
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of
the Effective Date:
NETWORK-1 SECURITY SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman and CEO
Date: 11/30/04
-------------
THINKFIRE SERVICES USA, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and CEO
Date: 11/30/04
-------------
20
APPENDIX 1
ADDRESSES FOR NOTICES RELATED TO
THE MASTER SERVICES AGREEMENT
--------------------------------------------------------------------------------
Network-1 Security Solutions, Inc. ThinkFire Services USA, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman
and CEO For Overnight Express Delivery:
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ThinkFire Services USA, Ltd.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Corporate Park,
Perryville III
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
APPENDIX 2
NON-DISCLOSURE AGREEMENT
This NON-DISCLOSURE AGREEMENT (the "NDA") is made and entered into
as of November __, 2004 (the "Effective Date") between ThinkFire Services USA
Ltd. ("ThinkFire") and Network-1 Security Solutions, Inc. ("Network-1").
WHEREAS, ThinkFire and Network-1 desire to disclose to each other
Proprietary Information (as defined below) for the purpose of implementing a
Master Services Agreement (the "Agreement") between the parties having the same
Effective Date as this NDA and to facilitate ThinkFire Services to be provided
to Network-1 thereunder (the "Purpose").
1. ThinkFire and Network-1 agree as follows:
1.1 ThinkFire and Network-1 each agree to employ reasonable efforts
to keep in confidence and prevent the disclosure to any person(s) outside their
respective organizations or any person(s) within their organizations not having
a need to know, all information received by a receiving party from the other
(disclosing) party which is designated in writing or by appropriate stamp or
legend to be of a proprietary nature, as well as any information or data
generated by the receiving party that evidences, records or is derived from such
information (hereafter "Proprietary Information") and neither will use
Proprietary Information for purposes other than the Purpose of this Agreement.
All information to be treated as Proprietary Information shall be in written or
other tangible graphic form (hereinafter "written material," or "writing") at
the time of disclosure. Notwithstanding any other provision in this agreement,
neither party will be liable for disclosure or use of such information that is:
(a) in the public domain at the time of disclosure, or
is subsequently made available to the general public without
restriction by the disclosing party;
(b) known to the receiving party at the time of
disclosure without restrictions on its use or independently
developed by the receiving party without the breach of this
Agreement;
(c) used or disclosed with the prior written approval of
the disclosing party; or
(d) disclosed without restriction to the receiving party
from a source other than the disclosing party who is not under any
obligation of confidentiality with respect to such information.
1.2 In the event any governmental or judicial order requires the
disclosure of Proprietary Information by a receiving party, the receiving party
shall promptly, but in any event prior to such disclosure, notify the disclosing
party of the requirement and provide reasonable aid and assistance if the
disclosing party indicates in a writing to the
receiving party that it intends to oppose such governmental or judicial order.
The receiving party shall not be liable for any disclosure of Proprietary
Information made pursuant to such governmental or judicial order if it has
complied with the provisions of this paragraph.
1.3 No part of any written material will be labeled by a disclosing
party as Proprietary Information that is not, in good faith, believed to contain
Proprietary Information. A receiving party will have no obligation with respect
to any portion of any written material, which is not so labeled. Any information
received other than in a writing need not be treated as Proprietary Information
unless it is identified by the disclosing party at time of disclosure as being
Proprietary Information and a written summary of such disclosed information,
specifically identifying the items of Proprietary Information, is furnished to
the receiving party within thirty (30) business days after the non-written
disclosure.
1.4 If any portion of an item or collection of disclosed information
is free from any obligation to be treated as Proprietary Information under any
of the above exceptions, the remaining portion of that item or collection will
continue to be subject to the prohibitions and restrictions of this NDA.
2. Each party shall protect the Proprietary Information of the other
party using the same degree of care, but no less than a reasonable degree of
care, to prevent the unauthorized use, dissemination or publication of the
Proprietary Information as that party uses to protect its own Proprietary
Information of comparable importance.
3. The agents of the parties authorized to receive written
Proprietary Information are:
ThinkFire: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and CEO, or other person(s)
designated by him;
Network-1: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman and CEO, or other person(s)
designated by him;
4. Prior to disclosure of Proprietary Information to any employee or
contractor, each party shall fully advise such employee or contractor that he or
she is required to hold in confidence all Proprietary Information and that such
Proprietary Information is not to be disclosed to persons outside his or her
organization or to any employee or contractor not directly concerned with
furthering the Purpose of the Agreement. The parties shall maintain between
themselves and their officers, employees and consultants duly binding agreements
by such persons as may be necessary to fulfill their obligations under this NDA.
5. This NDA may be terminated at any time by either party giving a
thirty-day (30-day) prior written notice to the other party. Unless earlier
terminated, this NDA and the exchange of Proprietary Information hereunder shall
expire at the termination of the Agreement and any information exchanged after
such termination or expiration shall
not be considered Proprietary Information. The parties' obligation to protect
Proprietary Information shall survive any such expiration or termination for a
period of two (2) years.
6. No rights or obligations other than those expressly recited
herein are to be implied from this NDA. The disclosure of Proprietary
Information hereunder shall not be construed as granting either a license under
any Patent or Patent application or any right of use or ownership in said
Proprietary Information. Nor shall such disclosure constitute any
representation, warranty, assurance, guarantee or inducement by the disclosing
party with respect to infringement of Patent or rights of third parties. NO
WARRANTY OR REPRESENTATION AS TO THE ACCURACY, COMPLETENESS OR TECHNICAL OR
SCIENTIFIC QUALITY OF ANY PROPRIETARY INFORMATION IS PROVIDED HEREIN. WITHOUT
RESTRICTING THE GENERALITY OF THE FOREGOING, THE PARTIES MAKE NO REPRESENTATION
OR WARRANTY AS TO THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY
PROPRIETARY INFORMATION DISCLOSED HEREUNDER.
7. All documents, drawings and writings disclosing Proprietary
Information and all copies thereof shall be returned promptly by a party to the
other party upon receipt of a request therefore or following termination or
expiration of this NDA, except that recipient may keep one archival copy for
evidentiary purposes only.
8. Other than the Agreement, this NDA merges all prior discussions
and is the entire understanding and agreement of the parties relating to the
protection of Proprietary Information in the course of performance under the
Agreement; neither party shall be bound by any additional or other
representation, condition, or promise except as subsequently set forth in a
writing signed by the party to be bound. This NDA does not merge any part of the
Agreement, or otherwise affect the scope, operation or performance under the
Agreement.
9. Neither party shall make any announcement or communicate any
information to any third party concerning the terms of this NDA or the
discussions pursuant hereto without the prior written approval of the other
party.
10. The parties shall adhere to any applicable U.S. and foreign
export control laws and regulations and shall not export or re-export any
technical data or products received hereunder, nor export or re-export the
direct product of such technical data, except in compliance with the applicable
export control laws and regulations of the U.S. and any foreign country.
11. The validity and interpretation of this NDA shall be governed by
the laws of the State of New York, U.S.A., applicable to agreements made and to
be performed wholly within such jurisdiction, without regard to its conflicts of
laws provisions.
12. The terms of confidentiality under this NDA shall not be
construed to limit either party's right to independently develop or acquire
products without use of the other party's Proprietary Information, or to work
with persons or entities that have independently developed information or
materials similar to Proprietary Information
received under this NDA. The disclosing party acknowledges that the receiving
party may currently or in the future be developing information internally, or
receiving information from other parties, that is similar to Proprietary
Information received under this NDA. Accordingly, nothing in this NDA will be
construed as a representation or agreement that the receiving party will not
develop or have developed for it products, concepts, systems or techniques that
are similar to or compete with the products, concepts, systems or techniques
contemplated by or embodied in Proprietary Information received under this NDA,
provided that the receiving party does not violate any of its obligations under
this NDA in connection with such development.
13. To the extent that there is a conflict between the terms of this
NDA and the Agreement, the terms of the Agreement shall control.
IN WITNESS WHEREOF, duly authorized representatives of the
undersigned parties have executed this NDA as of the Effective Date.
THINKFIRE SERVICES USA LTD.
By: _____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and CEO
NETWORK-1 SECURITY SOLUTIONS, INC.
By: _____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and CEO
APPENDIX 3
DESCRIPTION OF PATENT
U.S. Patent No. 6,218,930, entitled "Apparatus and method for remotely powering
access equipment over a 10/100 switched Ethernet network", and any foreign
counterparts, continuations, divisions, continuations-in-part, reissues thereof
or any other applications claiming priority thereto.
APPENDIX 4
STATEMENT OF WORK
================================================================================
(a) STATEMENT OF WORK (SOW) No. A-01
================================================================================
Subject to Master Services Agreement (MSA), effective November 30, 2004, between
ThinkFire Services USA, Ltd. ("ThinkFire") and Network-1 Security Solutions,
Inc. ("Client").
[_] This is an amendment to SOW No.
--------------------------------------------------------------------------------
(b) THINKFIRE IS HEREBY AUTHORIZED TO:
[X] Undertake Negotiations for Patent License(s) Covering Client's Worldwide
Patent Portfolio
[_] Negotiate Sales of Intellectual Property Assets of Client
--------------------------------------------------------------------------------
(c) WITH THIS/THESE POTENTIAL LICENSEE(S) AND CORRESPONDING THINKFIRE RATES AND
TERMINATION FEE CAPS:
Potential Licensee Termination Fee Cap ThinkFire Rate (%)
Company Z $xxx,000.00 (US Dollars) See Schedule 1 (attached)
--------------------------------------------------------------------------------
(d) INITIAL VIEW OF POTENTIAL LICENSEE'S PRODUCTS IMPACTED BY THE CLIENT'S
PATENTS:
Potential Licensee Initial View
Company Z 1.
--------------------------------------------------------------------------------
(e) THE TERMS THINKFIRE IS APPROVED TO NEGOTIATE WITH EACH POTENTIAL LICENSEE:
Potential Licensee Terms
Company Z ThinkFire is approved to negotiate a
reasonable license based on mutually
agreeable terms guided by the advice of
an independent expert retained by
ThinkFire and approved by Network-1.
--------------------------------------------------------------------------------
STATEMENT OF WORK
SCHEDULE 1
ThinkFire Rates for Calculation of Fees
--------------------------------------------------------------------------------
1 Licenses and settlements xx% of Net Royalties1 for the 1st $xx
obtained prior to the million in Gross Royalties;
commencement of any
litigation against a xx% of Net Royalties for the 2nd $xx
potential Licensee million in Gross Royalties;
identified in any Statement
of Work xx% of Net Royalties for the 2nd $xx
million in Gross Royalties;
xx% of Net Royalties for the 3rd $xx
million in Gross Royalties;
xx% of Net Royalties for when the
cumulative Gross Royalties exceed $xx
million in Gross Royalties
--------------------------------------------------------------------------------
2 If litigation is commenced xx% if litigation is commenced, but
against a potential settlement occurs prior to initiation of
Licensee identified on ▇ ▇ ▇▇▇▇▇▇▇ hearing;
Statement of Work, with
respect to any settlement, xx% if settlement occurs after ▇▇▇▇▇▇▇
judgment, or license hearing is commenced, but prior to final
entered into with such judgment;
potential Licensee
xx% of all settlement, judgment or
license amounts reached or entered into
following verdict
o If multiple defendants are present
in a single case, rates apply to
the aggregate settlement, judgment
and license amounts for that case,
regardless of whether all
defendants were listed as potential
Licensees in a Statement of Work
--------------------------------------------------------------------------------
3 After the first litigation xx% of Net Royalties for the 1st $xx
has commenced against any million in Gross Royalties;
potential Licensee
identified on any Statement xx% of Net Royalties for the 2nd $xx
of Work, with respect to million in Gross Royalties
each license, settlement,
or judgment obtained xx% of Net Royalties for the 2nd $xx
thereafter for a potential million in Gross Royalties;
Licensee identified on any
Statement of Work: xx% of Net Royalties for the 3rd $xx
million in Gross Royalties;
a) if litigation is
required, the rates in row xx% of Net Royalties for when the
2 shall apply; cumulative Gross Royalties exceed $xx
million in Gross Royalties
b) if no litigation is
required, the following
rates shall apply
--------------------------------------------------------------------------------
--------
1 Net Royalties are calculated on a cumulative basis from all Statements of
Work.
STATEMENT OF WORK
SCHEDULE 2
THINKFIRE SCHEDULE OF HOURLY PROFESSIONAL FEES
Hourly Rates for Professional Services
CEO............................................ $xxx per hour
Vice President ................................ $xxx per hour
Senior Patent Attorney ........................ $xxx per hour
Patent Attorney................................ $xxx per hour
Managing Director ............................. $xxx per hour
Director ...................................... $xxx per hour
Senior Associate............................... $xxx per hour
Associate ..................................... $xxx PEr hour
