EXHIBIT 10.10
-------------
PATENTS PURCHASE, ASSIGNMENT AND LICENSE AGREEMENT
This Patents Purchase, Assignment and License Agreement, entered
into on November 18, 2003 ("Effective Date"), is by and between MERLOT
COMMUNICATIONS, INC., with a principal place of business at 0 Xxxxxxxxx
Xxxxxxxxx, Xxxxxx, Xxxxxxxxxxx ("Seller"), and NETWORK-1 SECURITY SOLUTIONS,
INC., with a principal place of business at 000 Xxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, Xxx Xxxx, its successors and assigns ("Buyer").
WHEREAS, Seller represents that it owns all right, title, and
interest to, and wishes to sell and assign to Buyer all right, title and
interest in and to, the inventions, patents and patent applications specified on
Exhibit A annexed hereto and incorporated herein by reference (each of which
shall individually be referred to as a "Patent" and collectively as the
"Patents"), under the terms and conditions set forth herein; and
WHEREAS, Buyer wishes to purchase the Patents and accept such
assignment.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Patents
a. Seller hereby assigns to Buyer, and Buyer hereby accepts,
all of Seller's right, title and interest in and to, the Patents (including any
reissues, continuations-in-part, revisions, extensions, and reexaminations
thereof), all related documentation, including, without limitation, all related
copyrights, if any, and the exclusive right to enforce the Patents in the United
States and throughout the world in the sole name of Buyer, its successors or
assigns, including all rights to profits and damages
by reason of past infringement by any party or parties, including the right to
xxx and collect same for Buyer's and Buyer's successors and assigns own use and
benefit, free and clear of any and all liens, encumbrances, or third party
claims. Seller shall execute the form of Assignment for each of the Patents
annexed hereto as Exhibit B simultaneously with Seller's execution hereof.
b. Other than the rights expressly set forth herein, Seller
shall hereinafter have no further or continuing interest in the Patents. In
addition, Seller represents that it has no interest in any other patent or
technology related to the Patents.
c. Upon the closing hereof, Seller shall provide to Buyer the
original certificates reflecting the registrations of the Patents, as well as
all files in Seller's possession or under its control regarding the technology
embodied in the Patents including, without limitation, its work, design,
engineering and search files for each Patent, all of Seller's files regarding
the prosecution of the Patents, and all documentation, including without
limitation, instruction manuals, relating to the Patents.
d. Seller appoints Buyer and Buyer's successors and assigns as
its attorney-in-fact to act in Seller's name and place to execute, deliver and
record any document or instrument of assignment or conveyance necessary to
perfect, grant and confirm the rights granted in paragraph 1(a) hereof, and
Seller conveys to the Buyer the right to make application in, prosecute, receive
and enforce in its own behalf and name the Patents.
e. Seller further agrees at any time to execute and to deliver
upon request of the Buyer, at Buyer's expense, such additional documents, if
any, as are necessary or desirable to secure patent protection on said
inventions, discoveries and
2
applications throughout all countries of the world (including, without
limitation, all documents relating to any reexaminations or reissuances), and
otherwise to do the necessary to give full effect to and to perfect the rights
of the Buyer to the Patents under this Agreement, including the execution,
delivery and procurement of any and all further documents evidencing this
assignment, transfer and sale as reasonably may be necessary or desirable.
f. Seller hereby covenants that no assignment, sale, agreement
or encumbrance has been or will be made or entered into by Seller which would
conflict with this assignment.
g. Seller further covenants that Buyer will, upon its request
and at its expense, be provided promptly with all pertinent facts and documents
relating to said invention and said Patents and legal equivalents as may be
known and accessible to Seller and will testify at Buyer's expense as to the
same in any interference, litigation or proceeding related thereto.
2. Payments to Seller
a. Upon the execution hereof, Buyer shall pay or cause to be
paid to Seller the sum of One Hundred Thousand ($100,000) Dollars.
b. In addition to the sum set forth is paragraph 2(a) above,
for the term of each Patent Buyer shall pay Seller Twenty Percent (20%) of the
Net Income (as defined below) realized by Buyer from the sale or licensing of
the Patent, which shall be separately calculated for each Patent which comprises
the Patents, after the first Four Million ($4,000,000) Dollars of Net Income
realized by Buyer from the sale or licensing of each Patent.
3
c. For purposes of this Agreement, "Net Income" shall be
defined as gross income received from the licensing or sale of any Patent, less
the costs and expenses incurred by Buyer in licensing, selling, developing,
enforcing, and protecting said Patent. Buyer may not include its general
overhead in the calculation of "Net Income."
d. For the avoidance of doubt, there shall be no minimum
amounts due to Seller, nor is Buyer obligated to invest in, develop, or make any
use of the Patents. Notwithstanding the foregoing, during the first year after
the Closing, Buyer will incur a minimum of $200,000 in expenses in connection
with the development of the Patents, which shall include all expenses incurred
by Buyer in connection with the acquisition of rights hereunder.
e. Buyer shall make payment of Net Income to Seller on a
quarterly basis as follows: No later than forty five (45) days after the end of
each calendar quarter in which any payment is due to Seller, Buyer shall submit
to Seller a written report which shall include a written statement of Buyer's
Net Income during such quarterly period for each Patent, and showing a
calculation of the payment due based thereon. Each Quarterly Report shall be
accompanied by the remittance to Seller of the payment shown to be due on the
report.
f. Seller shall have the right to audit the books and records
of Buyer relating to Seller's Net Income upon reasonable advance notice to Buyer
at the place such books and records are normally maintained during normal
business hours not more than one time per year. Seller shall keep all
information to which it has access in any such audit strictly confidential.
4
g. Subject to the notice requirements set forth in paragraph 3
below, Seller may sell, transfer or assign its right to receive payments as set
forth in this paragraph 2 to any third party.
3. Notice of Intention To Transfer Rights. Each of the parties
hereto shall provide the other with no less then 30 days advance notice prior to
entering into any binding agreement for the sale, transfer, or assignment of any
of its rights hereunder which may be sold, transferred, or assigned. This shall
not apply to Buyer's licensing of any Patent rights on a nonexclusive basis.
4. License To Seller.
a. Buyer hereby grants to Seller, upon and subject to all the
terms and conditions of this Agreement, a nonexclusive, royalty free, license
for the term of each Patent to use the inventions, technologies and rights
embodied by the Patents in the development, manufacture, sale and offer for sale
of its own branded products for sale directly or indirectly (including through
authorized resellers) to end users.
b. Unless agreed to otherwise in writing by the Buyer and the
Seller, upon the sale of all or substantially all of the assets of Seller or
upon the acquisition of at least a controlling interest in Seller by any third
party which would itself or which has any affiliated entity which would, but for
the investment, require a license from the Buyer, the license granted in
paragraph 4(a) above shall automatically become a royalty bearing license
without further notice and without the need for any affirmative action by Buyer
or Seller, other than the negotiation of the royalty rate as set forth herein.
The royalty for such license shall be a commercially reasonable rate, which rate
shall be negotiated by Buyer and Seller in good faith.
5
c. Seller may not sell, transfer or sublicense any of the
rights licensed to it under this Agreement, except in connection with the
development, manufacture, sale or offer for sale of its products.
5. Buyer's Right To Terminate Payments To Seller . Commencing with
January 1, 2007 through March 31, 2007, and from each January 1 through March 31
thereafter, Buyer shall have the option to terminate Seller's right to receive
payments on Net Income for each Patent as set forth in section 2(b) above by
notifying Seller that it wishes to do so in writing by no later than March 31
each year (the "Notice"), and agreeing to pay Seller the greater of: (i) two
times the payments Seller would otherwise be due from Net Income for the twelve
(12) months immediately following the notice for that Patent, such payment to be
made in four (4) quarterly installments together with the regularly scheduled
payments under section 2 hereof during such twelve (12) month period; and (ii)
$3 million plus an additional 10% added at the beginning of each year starting
on the fourth year (January 1, 2008) after the closing hereof for each Patent.
For clarification, payments will continue during the notice year, but will be
credited against the final purchase price and the cash alternative referred to
in (ii) above shall be the applicable amount for the year in which the Notice is
given by the Buyer. After the payment of all amounts owed hereunder, Buyer will
have no further obligation to make payments as set forth in paragraph 2(b)
above, to provide reports as set forth in paragraph 2(e) above, to provide the
notice required by paragraph 3 above, or to meet with Seller as required by
paragraph 7 below.
6. Support By Seller. Seller shall provide Buyer reasonable access
to and assistance from Seller's employees and independent contractors as
requested by
6
Buyer at the sole cost and expense of Buyer to assist Buyer in creating or
filing enhancements to the Patents or any Patent, or in licensing or enforcing
the Patents or any Patent.
7. Regular Updates. The parties agree that they shall regularly
meet, either in person or telephonically, on dates and at times to be mutually
agreed upon but no less then at one time per calendar quarter to discuss the
status of the Patents, and Buyer's licensing and enforcement efforts.
8. Confidential Information. The parties hereto shall regard and
preserve as confidential all Confidential Information (defined below) related to
the business of the other party, except that information which is public
knowledge, which may be obtained by it from any source as a result of this
Agreement, or otherwise. The parties agree that they shall not and they shall
cause their employees, representatives, agents and licensees not to divulge,
furnish or make accessible to anyone such Confidential Information, except as
may be necessary from time to time in performance of their duties hereunder on a
limited "need to know" basis. This provision shall survive the termination of
this Agreement. "Confidential Information" shall be written information marked
confidential and oral information designated confidential and confirmed as such
in writing delivered not later than ten (10) days after such disclosure, and
shall include this Agreement, customer/account lists, and marketing plans,
whether or not marked as confidential or confirmed as such in writing.
9. Choice of Law and Jurisdiction. This Agreement shall be deemed to
have been made and delivered in New York City and will be governed as to
validity,
7
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York without giving effect the conflict of laws.
10. Arbitration. Any controversy or claim arising under or in
relation to this Agreement, or the breach thereof, or the relations between
Buyer and Seller shall be submitted to arbitration by a panel of three
arbitrators (unless the amount in dispute is less than Twenty-Five Thousand
Dollars ($25,000) in which case there shall be only one arbitrator) in the City
of New York, New York, administered by the American Arbitration Association
under the then applicable Commercial Rules, and judgment on the award rendered
by the arbitrator(s) may be entered in any court having jurisdiction thereof;
provided however, that the arbitrator(s) shall be bound by the laws of the State
of New York and, regarding any questions related thereto, the trademark statutes
of the United States of America, and shall have no power to extend this
Agreement beyond its termination date, nor to order reinstatement or other
continuation of the parties' relationship after termination, nor to award
punitive, consequential, multiple, incidental or any other damages in excess of
the economic damages actually sustained by the claimant. If, and only if, the
arbitrator(s) shall determine that either party's position in arbitration was
not maintained in good faith, then the arbitrators shall award the other party a
reasonable attorney's fee.
11. Notices. Notices to either party shall be in writing and shall
be deemed delivered when served in person or within three (3) business days
after being deposited in the mail, first class certified mail, postage prepaid
return receipt requested or one (1) business day after being dispatched by a one
day express courier service addressed as follows:
8
to: Seller
Xxxxxx Xxxxxx
Chief Executive Officer
Merlot Communications, Inc.
0 Xxxxxxxxx Xxxx., Xxxxxxxxx Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
to: Buyer
Xxx Xxxxxxxx, Esq.
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
12. Miscellaneous
a. Waiver of Rights. The failure of a party to insist upon
strict adherence to any provision of this Agreement on any occasion shall not be
considered or deemed to be a waiver nor considered or deemed to deprive that
party of the right thereafter to insist upon strict adherence to that provision
or any other provision of this Agreement. Any waiver must be in writing.
b. Currency. All calculations and payments required under this
Agreement shall be in United States Dollars.
c. Complete Agreement & No Oral Modification. This Agreement
is a complete statement of all agreements among the parties with respect to the
subject matter hereof. Any amendment, modification, alteration or change must be
in writing signed by the parties.
d. Warranties of Fitness. The parties each warrant the
following: (1) that the delivery of this Agreement has been duly authorized; (2)
that the execution and delivery of this Agreement does not contravene any
contract or commitment to which it is a party or by which it is bound; and (3)
that it is not a party to
9
any suit, action, administrative proceeding, or investigation which, if
successful, would have a material, adverse effect on its properties, financial
conditions or business.
e. Construction and Headings. This Agreement's terms and
conditions were freely negotiated. The language shall be interpreted without
regard to any rule, law or presumption requiring the language to be construed,
interpreted or applied for or against either party. The headings contained in
this Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.
f. Independent Parties. The parties hereto acknowledge that
the relationship created between them by this Agreement is that of independent
contractors. As a result of this Agreement, no agency relationship or
association or partnership is created between them. Neither party is authorized
to and shall not incur any liability for the other. Neither party may become
directly, indirectly or contingently liable for nor shall it hold itself out as
having authority to represent or act for the other in any capacity whatsoever.
The relationship between the parties shall not be construed as a co-partnership
or joint venture or that of agent and principal.
g. Severability. In the event that any part of this Agreement
should be declared illegal for any reason by any legally constituted court or
government authority, the remaining portions shall not be invalidated on account
thereof and shall remain in full force and effect provided, however, that if as
a result of a declaration of illegality of a party of this Agreement the
essential purposes of this Agreement cannot be fulfilled, the Agreement shall
terminate forthwith, and all provisions of this Agreement relating to or
governing termination thereof shall come into effect.
10
h. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between Buyer and Seller, and supersedes and cancels
any and all previous negotiations, representations, undertakings, understanding
and agreements heretofore made between them with respect to the subject matter
hereof.
i. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
j. Use of Counsel. The parties hereto represent that they have
each consulted with counsel of their own choosing in connection with the
negotiation and execution of this Agreement or have knowingly chosen not to do
so.
IN WITNESS WHEREOF, the parties hereto are duly authorized to and do
hereby execute this Agreement as of the Effective Date.
MERLOT COMMUNICATIONS, INC.
By: /s/Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx
Title: President
Date: November 18, 2003
NETWORK-1 SECURITY SOLUTIONS, INC.
By: /s/Xxxxxx Xxxxx
---------------------
Name: Xxxxxx Xxxxx
Title: Interim Chief Executive Officer
Date: November 18, 2003
11
EXHIBIT A
1. 6,577,631: Communication switching module for the transmission and control of
audio, video, and computer data over a single network fabric
2. 6,574,242: Method for the transmission and control of audio, video, and
computer data over a single network fabric
3. 6,570,890: Method for the transmission and control of audio, video, and
computer data over a single network fabric using Ethernet packets
4. 6,539,011: Method for initializing and allocating bandwidth in a permanent
virtual connection for the transmission and control of audio, video, and
computer data over a single network fabric
5. 6,218,930: Apparatus and method for remotely powering access equipment over a
10/100 switched Ethernet network
6. 6,215,789: Local area network for the transmission and control of audio,
video, and computer data
12
EXHIBIT B
ASSIGNMENT
WHEREAS, Merlot Communications Inc. ("Assignor"), a Delaware
corporation with an office at 0 Xxxxxxxxx, Xxxx., Xxxxxxxxx Xxxxxxxxx Xxxx,
Xxxxxx, XX 00000, owns or has rights to United Status Patent No. [ ],
issued [ ].
WHEREAS, Network-1 Security Solutions, Inc. ("Assignee"), a Delaware
corporation with a headquarters mailing address at 000 Xxxx Xxxxxx, Xxxxx 0000,
Xxx Xxxx, X.X. 00000, wishes to acquire full rights and ownership of United
Status Patent No. [ ], issued [ ]
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor grants, conveys, assigns
and transfers to the Assignee and the Assignee's successors and assigns,
Assignor's entire right, title and interest in and to United States Patent No
[ ], including all corresponding applications such as continuations,
continuations-in-part, divisionals, provisionals, renewals, revivals, reissues,
reexaminations, extensions, and foreign counterparts thereof, along with the
subject matter of any and all claims which may be obtained in the
aforementioned, in the United States and every foreign country, including all
rights to profits and damages by reason of past infringement by any party or
parties, either the right to xxx and collect same for Assignee's, and Assignee's
successors and assigns own use and benefit.
UPON SAID CONSIDERATION, Assignor appoints Assignee and Assignee's
successors and assigns as its attorney-in-fact to act in Assignor's name and
place to execute, deliver and record any document or instrument of assignment or
conveyance necessary to perfect, grant and confirm the rights granted herein,
and Assignor conveys to the Assignee the right to make application in,
prosecute, receive and enforce in its own behalf and name United States Patent
No.[ ] , Issued [ ].
IN WITNESS WHEREOF, Assignor has caused its Assignment to be duly
executed by one of its officers on the date shown below.
MERLOT COMMUNICATIONS INC. NETWORK-1 SECURITY
SOLUTIONS, INC.
------------------------- -------------------------
BY BY
------------------------- -------------------------
XXXXXX XXXXXX XXXXX X. XXXXXXXX
PRESIDENT AND CEO
DATE: DATE:
------------ ------------
