EXHIBIT 10.2
XXXXXXX & XXXXXXXX
0000 X. Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
May 11, 2001
Xx. Xxxxxxxx Xxxxxx
Chief Executive Officer
Xxxxxxxx.xxx, Inc. d/b/a Digital Goods
Xxxx Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Re: Engagement Agreement
Dear Xxx:
In accordance with the Rules of Professional Conduct, which govern our providing
services as attorneys, this letter will confirm the basis on which Xxxxxxx &
Xxxxxxxx ("B&P") have been asked to represent Xxxxxxxx.xxx, Inc. d/b/a Digital
Goods ("Digital Goods") in connection with the sale or licensing of its patent
portfolio (the "Patent Portfolio"), and such other matters as you may request.
Our engagement will cover a period of up to two (2) years from the date of this
Engagement Agreement, and shall continue thereafter on a month-to-month basis,
subject to termination after six (6) months from the date hereof by either party
upon written notice. All compensation and arbitration provisions will survive
termination.
During the initial three (3) months of this engagement, we will undertake the
following tasks:
1. Preparing a new set of claims for filing by Digital Goods' patent
counsel, coordinating our efforts with patent counsel, and otherwise
working to put the Patent Portfolio in optimum condition for license
or sale;
2. Developing a list of prospects for the sale or license of the Patent
Portfolio;
3. Developing a strategy for the sale or license of the Patent
Portfolio, working with Digital Goods to determine whether the
strategy should be long-term or short-term;
4. Developing suitable marketing materials;
Xx. Xxxxxxxx Xxxxxx
Page 2
May 11, 2001
5. Contacting agreed-upon prospects and participating in negotiations
with those prospects; and
6. Participating in a license or sale program.
Tasks 1, 5 and 6 may well continue beyond the initial three-month period.
During this engagement, B&P will be the sole and exclusive representative of
Digital Goods as to the sale or license of the Patent Portfolio. B&P will not
have the right to obligate Digital Goods in any contract without your written
consent. All decisions as to strategy and business terms will be made by Digital
Goods.
During this engagement, B&P will keep detailed records of time spent on behalf
of Digital Goods and will xxxx you for our services, subject to (i) a
thirty-five percent (35%) discount from our regular billing rates, which are
$350 per hour for me and $250 per hour for Xxxxxx X. Xxxxxxxx, and (ii) a cap of
$7,500 per month on payments by Digital Goods (at the discounted rate);
provided, however, that B&P is not obligated to provide services in any month
valued at over $10,000 (at the discounted rate).
We will provide you with regular monthly bills, specifying time devoted to each
Digital Goods matter, and expect to be paid promptly after your receipt of our
bills.
This Engagement Agreement is subject to an evergreen retainer of $7,500. Upon
execution of this Engagement Agreement, Digital Goods will send $15,000 to B&P
by Federal Express, to be applied to its account. Whenever the account balance
falls below $7,500, Digital Goods will promptly make a payment to bring the
current balance back to $15,000.
In addition to the discounted fees, Digital Goods will pay B&P a success fee of
twelve-and-one-half percent (12 1/2%) of all "net revenues" received by Digital
Goods during or after the term of this Engagement Agreement, with respect to
transactions (including any patent infringement suits) involving all or any part
of the Patent Portfolio and entered into during the term of this Engagement
Agreement or within two (2) years thereafter ("net revenues" are gross revenues
minus out-of-pocket expenses of Digital Goods incurred in negotiating and
closing any transaction for the sale or license of the Patent Portfolio), except
that:
1. With respect to any patent infringement suit filed during the term
of this Engagement Agreement, involving one or more patents in the
Patent Portfolio, B&P's right to receive a success fee shall apply
when the suit is concluded by final and unappealable judgment or
settlement;
2. In the event of a transaction involving both the Patent Portfolio
and significant other assets of Digital Goods, the parties shall
endeavor in good faith to determine the relative contributions of
the Patent Portfolio and the other assets to the total consideration
paid in the transaction, and to adjust the success fee
proportionately;
Xx. Xxxxxxxx Xxxxxx
Page 3
May 11, 2001
provided, hwoever, that in such event, the success fee will be in
the range of 5% to 10%; and
3. Transactions during the two (2)-year post-termination period shall
have been with companies with which B&P participated in
presentations or other activities related to the sale or licensing
of the Patent Portfolio.
B&P will xxxx Digital Goods, on a monthly basis, for any out-of-pocket expenses
which we incur on your behalf, such as long-distance telephone calls,
photocopying, express delivery services, and travel expenses. We will not incur
any monthly expenses in excess of $500 without your consent. We may request
advance payment for substantial expenses.
Digital Goods hereby grants to B&P a first and prior lien on and security
interest in the Patent Portfolio and the proceeds thereof, to secure the
payments due and owing to B&P under this Engagement Agreement, and will execute
and deliver such documents as B&P may request to evidence this right. If any
future investors in Digital Goods require a security interest in the Patent
Portfolio, B&P shall share its security interest and the proceeds thereof on a
PARI PASSU basis. If requested, B&P and the investors shall enter into an
agreement under which one of the parties shall hold the security interest for
the benefit of all of the parties. The foregoing lien is subject to existing
liens, if any. Digital Goods has no knowledge of any such liens.
B&P are attorneys and will be called upon to perform legal services in advising
Digital Goods about and negotiating and drafting agreements as to the Patent
Portfolio. You are hereby advised that the Pennsylvania Code of Professional
Responsibility may require attorneys to disclose to clients a possible conflict
of interest inherent in performing legal services for a content fee or taking an
interest in a client asset. You acknowledge that you have consulted with
independent counsel in entering into this Engagement Agreement. You hereby waive
any present or future claim that Digital Goods does or may have that B&P has a
conflict of interest as a result of its performing services hereunder for a
contingent fee or taking a security interest in the Patent Portfolio.
Any dispute between us that cannot be resolved amicably shall be decided by
arbitration, conducted in New York, New York, by a single arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitrator shall have at least twenty-five (25) years of
experience in the intellectual property field, including at least ten years of
extensive patent licensing experience, and a degree in electrical engineering,
computer science, or physics. The arbitrator shall award the prevailing party
the amount of its attorneys fees and expenses, in addition to any other sums to
which the prevailing party shall be entitled. The fees and expenses of the
arbitrator shall initially be divided equally between the parties, but shall be
included in the arbitrator's award of fees and expenses to the prevailing party.
Notwithstanding the foregoing, if the only issue to be decided in the
arbitration is the percentage amount of the applicable success fee, each party
shall pay (i) its own attorneys fees and expenses and (ii) one-half (1/2) of the
fees and expenses of the American Arbitration Association and of the arbitrator.
Xx. Xxxxxxxx Xxxxxx
Page 4
May 11, 2001
This is the entire agreement between us as to the Patent Portfolio, and its
validity and interpretation shall be governed by Pennsylvania law.
If the terms of this proposal meet with your approval, please sign this
Engagement Agreement in the space below, and provide me with a signed return
copy.
We look forward very much to working with you.
Sincerely yours,
Xxxxxxx & Xxxxxxxx
By: /s/ XXXXXX X. XXXXXXX
----------------------------------
Xxxxxx X. Xxxxxxx
AGREED:
XXXXXXXX.XXX, INC. d/b/a
DIGITAL GOODS
By: /s/ XX. XXXXXXXX XXXXXX
----------------------------------
Xx. Xxxxxxxx Xxxxxx,
Chief Executive Officer
cc: Xxxxxxxx X. Xxxxx, Esq.
