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Exhibit 10.1
 
CONFIDENTIAL

PATENT LICENSING REPRESENTATIVE AGREEMENT

THIS AGREEMENT (“Agreement”) is made the 8th day of May, 2015 (“Effective Date”)

BETWEEN

(1) VIRNETX INC., a corporation existing and organized under the laws of
Delaware, United States of America, having its principal place of business at
308 Dorla Court, Zephyr Cove, Nevada (“VIRNETX”), and

(2) IPVALUE MANAGEMENT, INC., a corporation existing and organized under the
laws of the State of Delaware, United States of America, having offices at 3945
Freedom Circle, Suite 900, Santa Clara, CA 95054 (“IPVALUE”).

WHEREAS

VIRNETX wishes to realize economic benefit from licensing certain VIRNETX
patents to third parties on agreeable terms and conditions and in accordance
with its undertakings to relevant standards setting organizations;

VIRNETX is willing to work with IPVALUE to realize value from licensing of those
patents; and

IPVALUE has extensive expertise in licensing patents and is interested in
commercializing certain VIRNETX patents, and is willing to undertake diligent
efforts to realize value for VIRNETX from those patents and to earn certain
commissions for IPVALUE as set forth herein.

NOW IT IS AGREED as follows:

1. INTERPRETATION

1.1 The Agreement (including the recitals and the Schedules) shall, unless the
context otherwise requires, be interpreted in accordance with the definitions
set out in this Article 1, and the words and expressions set out herein shall
have the meaning assigned to them.

1.2 “VIRNETX Patents” means the patents and patent applications owned by VIRNETX
as of the Effective Date. VIRNETX may exclude patents and patent applications
from the definition of “VIRNETX Patents” after the Effective Date if at any time
they are no longer owned by VIRNETX or an Affiliate of VIRNETX or any consent of
or payment to a third party would be required in order to license them as
contemplated under this Agreement (“Conditional VIRNETX Patents”); provided,
however, that VIRNETX shall not exercise this exclusion right in bad faith for
the primary purpose of avoiding payment of Commissions to IPVALUE under this
Agreement.

 
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1.3 “VIRNETX LTE Patents” means those VIRNETX Patents that are or become, and
remain, Essential (as defined in Section 15 (Definitions) of the ETSI Rules of
Procedure dated 20 March 2013) with respect to the standards in the 3GPP LTE,
SAE project for which VIRNETX has submitted an IPR Licensing Declaration form to
ETSI (the “Standards”); provided that such VIRNETX Patents shall only be
considered VIRNETX LTE Patents during such time as such VIRNETX Patents remain
Essential with respect to the Standards.

1.4 “Affiliate” means, in relation to a company, any other company over which
that company has control, where “control” means the ability of a person to
ensure that the activities and business of that other company are conducted in
accordance with the wishes of that person, and a person shall be deemed to have
control of a company only if that person has beneficial ownership of the
majority of the issued share capital and has voting rights in that company. A
company will only be considered an Affiliate so long as such control exists.

1.5 “Approved Counterparty(ies)” means any prospective or actual licensee under
or of the VIRNETX Patents that is approved in writing by VIRNETX for IPVALUE to
pursue as a prospective licensee.

1.6 “Business Day” means a day (other than Saturday or Sunday) on which banks
are open for business in New York.

1.7 “Commercialization Activities” means any activities approved by VIRNETX that
are necessary or desirable to generate revenue from the VIRNETX Patents anywhere
in the world by means of VIRNETX granting a License to an Approved Counterparty.

1.8 “Commission” means any amounts payable by VIRNETX to IPVALUE under Schedule
1 attached to this Agreement.

1.9 “Excluded Field of Use” means any field of use other than the creation of
encrypted channels between two or more of the licensee’s own products. Without
limiting the generality of the following, “Excluded Field of Use” shall include
any field of use relating to the creation of (i) a centralized security
clearinghouse of secure domain names; (ii) a system or a service that validates
the request for access using a secure domain name and facilitates creation of
encrypted communication channels between two devices when, either, one
(heterogeneous environment) or none of the devices involved and/or its operating
system is manufactured by the licensee; or (iii) a system or a service that acts
as a broker for automatic creation of encrypted communication channels, upon
secure domain name lookup, between two devices not manufactured by the licensee.

1.10 “IPVALUE Competitor” means a person or entity (excluding law firms) who
provides patent licensing advice and negotiating services to owners of patent
portfolios on a commission basis.

 
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1.11 “IPVALUE Excluded Party(ies)” and “VIRNETX Excluded Party(ies)” shall have
the meaning ascribed to such terms in Section 2.11 and 6.2, respectively.

1.12 “License” means a non-exclusive license or grant of equivalent rights
(e.g., a covenant not to sue) under the VIRNETX Patents to an Approved
Counterparty or to any wholly owned subsidiary of an Approved Counterparty.

1.13 “Litigation Expenses” has the meaning set forth in Schedule 1.

1.14 “Minimum Success Event” shall mean that VIRNETX enters into a Transaction
on or before March 31, 2016.

1.15 “Performance Criteria” has the meaning set forth in Schedule 3.

1.16 “Revenue” has the meaning set forth in Schedule 1.

1.17 “Stop Notice” means a notice provided by VIRNETX for IPVALUE to stop
activities, in accordance with the provisions set forth in Article 6 of this
Agreement.

1.18 “Stop Notice Fee” means a fee to be paid to IPVALUE if VIRNETX issues a
Stop Notice, calculated in accordance with Schedule 2 of this Agreement.

1.19 “Third Party Expenses” has the meaning set forth in Schedule 1.

1.20 “Transaction” has the meaning set forth in Schedule 1.

2. APPOINTMENT AND ACTIVITIES

2.1 Subject to the terms and conditions of this Agreement, including without
limitation Section 2.2, VIRNETX hereby appoints IPVALUE to be VIRNETX’s
representative to negotiate or assist VIRNETX in negotiating Licenses (which may
include non-exclusive licenses, covenants not to sue, covenants not assert, and
the like) with Approved Counterparties. VIRNETX hereby authorizes IPVALUE,
during the term of this Agreement, in its reasonable discretion, to conduct
Commercialization Activities in support of the foregoing appointment, provided
that such activities are approved by VIRNETX in advance. Such authorization may
include, without limitation, the authority of IPVALUE to sign and send notice
letters to an Approved Counterparty regarding the VIRNETX Patents, provided that
such notice letters are approved in advance by VIRNETX.

2.2 Subject to the terms and conditions of this Agreement, unless instructed
otherwise by VIRNETX, IPVALUE shall conduct Commercialization Activities only
with an Approved Counterparty. For so long as a third party remains an Approved
Counterparty, VIRNETX shall cooperate with IPVALUE to negotiate Licenses with
the Approved Counterparties hereunder on VIRNETX’s behalf. This Section 2.2 will
not be construed as restricting VIRNETX from engaging attorneys or advisors to
assist VIRNETX in conducting any licensing or enforcement activities with
respect to the VIRNETX Patents; however, except in the event that IPVALUE fails
to achieve the Minimum Success Event, before VIRNETX appoints an IPVALUE
Competitor as its representative to negotiate licenses for the VIRNETX Patents
with a third party other than an Approved Counterparty, VIRNETX will discuss the
opportunity with IPVALUE in good faith. The Parties contemplate that there may
be instances where a Court or standards setting organization may require that
VIRNETX negotiate directly with an Approved Counterparty (either with or without
IPVALUE) (hereinafter “VIRNETX Mandated Negotiations”), and agree that such
activity shall not be deemed to be an interference with IPVALUE’s
Commercialization Activities. If VIRNETX provides notice to IPVALUE of a VIRNETX
Mandated Negotiation and requests that IPVALUE cease any or all
Commercialization Activities with respect to such Approved Counterparty, (i)
IPVALUE shall immediately comply with such request, and (ii) VIRNETX agrees to
provide IPVALUE with status updates regarding such negotiations, but only to the
extent VIRNETX can do so without violating its commitments (e.g.,
confidentiality obligations) to a Court, standards setting organization or any
third party in connection with the VIRNETX Mandated Negotiations.

 
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2.3 IPVALUE hereby accepts the appointments under Section 2.1. In carrying out
such activities, IPVALUE shall at all times ensure that such activities are
performed by appropriately experienced, qualified and skilled personnel. IPVALUE
shall use commercially reasonable efforts in pursuit of Transactions, provided
that IPVALUE shall be entitled to exercise its professional judgment, skill and
sole discretion in matters of selecting strategy for engaging and conducting
negotiations with Approved Counterparties.

2.4 IPVALUE shall make reasonable efforts to refrain from and will not knowingly
engage in (i) any conduct that would violate VIRNETX’s undertakings to ETSI or
any other applicable standards setting organization, or (ii) activities or
making statements that would give rise to antitrust liability (including
anti-monopoly, price fixing, abuse of dominant position and refusal to deal) or
successful claims of unfair competition, legal or equitable estoppel, implied
license, patent misuse, or waiver; provided that no act by IPVALUE that has been
approved by VIRNETX may constitute a breach of this Section.

2.5 IPVALUE shall not approach a third party to license the VIRNETX Patents
until such third party becomes an Approved Counterparty. Subject to the
foregoing, IPVALUE may approach third parties as appropriate to generate
interest in licensing the VIRNETX Patents, and may share with such third parties
materials IPVALUE generates to demonstrate the value of the VIRNETX Patents.
Such materials must be pre-approved by VIRNETX in writing prior to being
provided to any third parties. Notice letters to an Approved Counterparty to
formally notify the Approved Counterparty of the VIRNETX Patents will not be
sent to the Approved Counterparty unless approved by VIRNETX in advance.

2.6 Except for VIRNETX Mandated Negotiations, IPVALUE will conduct or assist in
all negotiations with any Approved Counterparty regarding a potential
Transaction as approved by VIRNETX. VIRNETX may at any time attend the
negotiations. Upon VIRNETX’s request, IPVALUE shall submit materials to be used
to support negotiations to VIRNETX for VIRNETX’s approval and/or comments
thereto.

 
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2.7 IPVALUE will keep VIRNETX fully apprised of its Commercialization Activities
and communications with the Approved Counterparties in support of this
Agreement, and shall promptly provide VIRNETX with information in connection
therewith as may be requested by VIRNETX from time to time. IPVALUE shall
provide a report to VIRNETX within thirty (30) days after every calendar quarter
including the identity of Approved Counterparties contacted and the status of
discussions initiated by IPVALUE through the end of each calendar quarter.

2.8 VIRNETX acknowledges and understands that IPVALUE and its employees are not
acting as legal counsel for, or providing legal services to, VIRNETX under the
Agreement. However, the parties acknowledge that they have common interest in
certain legal issues relating to enforcement of VIRNETX patents and, from time
to time during the term of this Agreement, may exchange legally privileged
information with one another relating to such common legal interests. The
parties acknowledge and agree that the parties shall not have any obligation to
disclose any attorney-client privileged information or attorney work product
information, or information that may be subject to a similar legal privilege.
The parties further acknowledge and agree that, to the extent legally
permissible, any such disclosures of privileged information by either party are
made with the expectation that such disclosures do not waive any applicable
attorney client or attorney work product privilege. Any such privileged
information that the parties elect to disclose will be subject to the Common
Interest Agreement, dated December 18, 2006, by and between the parties in
addition to the confidentiality obligations set forth in this Agreement.

2.9 VIRNETX shall determine in its sole, good faith discretion the terms and
conditions for potential Transactions being pursued by IPVALUE and whether to
enter into any such Transaction. VIRNETX shall retain its own counsel, at
VIRNETX’s sole expense, to obtain any legal advice regarding the proposed
Transaction. IPVALUE understands that VIRNETX may require a License to include
an Excluded Field of Use, and, if required by VIRNETX, shall make such exclusion
known to potential licensees during license negotiations. If IPVALUE brings to
VIRNETX an offer that meets or exceeds all business and financial terms
previously communicated to IPVALUE in writing as acceptable to VIRNETX and does
not include any other terms objectionable to VIRNETX, and VIRNETX rejects the
offer and instructs IPVALUE to cease negotiations, IPVALUE may request (and
VIRNETX will not unreasonably withhold its consent) to treat such rejection as a
Stage 5 Stop Notice, in which case the applicable Stop Notice Fee shall be
payable to IPVALUE.

2.10 VIRNETX shall review any negotiated Transaction document (e.g., a draft
agreement for signature) and may discuss with IPVALUE any changes or amendment
required to be made to the Transaction document before VIRNETX will execute the
document; provided, however, that in no event shall VIRNETX be obligated to
disclose to IPVALUE any confidential or legally privileged information in
connection therewith.

 
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2.11 IPVALUE may remove a specific third party from the then-current list of
Approved Counterparties by thirty (30) days’ advance written notice to VIRNETX,
and each such third party shall be an IPVALUE Excluded Party (“IPVALUE Excluded
Party”) until such time as that third party is again added as an Approved
Counterparty in accordance with Section 5 of this Agreement. VIRNETX or its
Affiliates may license or assert the VIRNETX patents to or against any IPVALUE
Excluded Parties, and the consideration received by VIRNETX in connection
therewith (including payment for release of past infringement by such companies)
shall not be Revenue under this Agreement.

2.12 If IPVALUE fails to meet the Performance Criteria set forth in Schedule 3
for any Approved Counterparty, the parties will discuss in good faith whether to
remove the Approved Counterparty from the list of Approved Couterparties, and,
if so, the timing of the removal of the Approved Counterparty.

3. REVENUE, COMMISSION AND COSTS

3.1 VIRNETX shall pay IPVALUE any and all Commissions as set forth in Schedule
1. The parties acknowledge that the Commissions are at a discount to IPVALUE’s
standard rates in recognition of the efforts that VIRNETX has already undertaken
to monetize and realize value from the VIRNETX Patents.

3.2 Except as expressly set forth otherwise in this Agreement (including
Schedule 1), each party shall bear its own costs with respect to its duties and
obligations pursuant to this Agreement, including without limitation any Third
Party Expenses incurred by such party.

3.3 VIRNETX shall pay any Stop Notice Fee due hereunder and shall do so within
thirty (30) days of receiving a proper invoice from IPVALUE for such Stop Notice
Fee, by wire transfer to an account designated by IPVALUE.

3.4 No amounts owed by a paying party may be offset or otherwise reduced by the
paying party as a result of other amounts owed by the receiving party to the
paying party without the consent of the receiving party, which shall not be
withheld for any undisputed amounts.

3.5 Each party acknowledges and agrees that the other party may assign its
respective right to receive and/or collect Revenue (or a portion of such
Revenue) with respect to any specific Transaction to a third party. In the event
IPVALUE makes any such assignment, it shall provide prompt written notice to
VIRNETX and shall identify the party to whom such rights are assigned and to
whom any amounts payable hereunder should be paid. In the event VIRNETX makes
any such assignment, it shall provide prompt written notice to IPVALUE and shall
identify the party to whom such rights are assigned and from whom any amounts
payable hereunder will be received.

 
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4. OTHER VIRNETX OBLIGATIONS

4.1 VIRNETX shall reasonably respond to informational requests regarding
technical, business and legal issues and will keep IPVALUE reasonably informed
of its patent declarations and licensing commitments that VIRNETX has to ETSI or
any other applicable standards setting organization, provided that in no event
shall VIRNETX be obligated to disclose to IPVALUE any information in connection
therewith that is legally privileged or subject to a confidentiality obligation
to a third party. Subject to the foregoing, upon reasonable request of IPVALUE
and to the extent VIRNETX has the right to do so: i) VIRNETX shall provide
information to IPVALUE regarding pre-existing licenses or encumbrances expressly
granted by VIRNETX under the VIRNETX Patents that may affect IPVALUE’s
activities hereunder; and ii) VIRNETX shall reasonably inform IPVALUE of any
contacts or communications between VIRNETX and Approved Counterparties that
involves the VIRNETX Patents or in which Licenses to the VIRNETX Patents are
discussed.

4.2 If VIRNETX, in good faith and not to avoid payment of Commissions to
IPVALUE, enters into a license of the VIRNETX Patents with a customer and/or
supplier of an Approved Counterparty after the Effective Date that (i) is of a
scope that covers all or substantially all of the products and services relevant
to the Approved Counterparty such that no license is needed by the Approved
Counterparty, and (ii) is entered into before a Transaction is entered into
between VIRNETX and the Approved Counterparty, then IPVALUE may request (and
VIRNETX will not unreasonably withhold its consent) to treat such license as a
Stop Notice with respect to the Approved Counterparty in which case (i) such
Approved Counterparty shall be deemed excluded from the then-current list of
Approved Counterparties, and (ii) IPVALUE shall be entitled to the applicable
Stop Notice Fee (but not any Commissions) with respect to the Approved
Counterparty. For avoidance of doubt, in such event, no Commissions or other
amounts will be required to be paid to IPVALUE with respect to that Approved
Counterparty under Section 9.5 or Schedule 2. For the further avoidance of
doubt, IPVALUE will not be entitled to any Commission on a license with a third
party that is not an Approved Counterparty.

4.3 If VIRNETX, in good faith and not to avoid payment of Commissions to
IPVALUE, enters into an agreement to sell or assign more than 50% of the VIRNETX
Patents to a non-Affiliate third party during the term of this Agreement, then
IPVALUE may request (and VIRNETX will not unreasonably withhold its consent) to
treat such sale or assignment as a Stop Notice with respect to the Approved
Counterparties who have not yet entered into a Transaction, in which case (i)
such Approved Counterparties shall be deemed excluded from the then-current list
of Approved Counterparties, (ii) IPVALUE shall be entitled to the applicable
Stop Notice Fees (but not any Commissions) with respect to such Approved
Counterparties, and (iii) this Agreement will terminate. For avoidance of doubt,
IPVALUE will not be entitled to any Commission on the sale or assignment of
VIRNETX Patents.

 
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4.4 Unless otherwise expressly set forth herein, and subject to VIRNETX’s
obligation to make payments to IPVALUE in accordance with the terms of this
Agreement, nothing in this Agreement shall restrict VIRNETX from licensing,
enforcing, selling, transferring, or conducting any other activities with
respect to the VIRNETX Patents in its sole discretion. The fairness and
reasonableness of the terms, as well as the benefits and risks, of any such
Transaction for VIRNETX shall be solely determined by, and be the sole
responsibility of, VIRNETX. Any litigation or other enforcement of the VIRNETX
Patents shall be in the sole discretion of VIRNETX.

4.5 VIRNETX shall in any case remain solely responsible for the costs of
defending and paying for any claims made against VIRNETX or its Affiliates by a
third party alleging that VIRNETX or its Affiliates infringes a patent of the
third party.

4.6 VIRNETX shall have sole discretion and control over the prosecution and
maintenance of the VIRNETX Patents. VIRNETX shall keep IPVALUE reasonably
apprised, from time to time during the term of this Agreement, of any newly
issued VIRNETX Patents or the expiration or abandonment of existing VIRNETX
Patents, as well as any changes in the validity or enforceability of the VIRNETX
Patents, provided that in no event shall VIRNETX be obligated to disclose to
IPVALUE any information in connection therewith that is legally privileged or
the subject of a confidentiality obligation to a third party.

4.7 VIRNETX shall have the right to modify or terminate any Transaction in a
manner which reduces or defers the expected Revenue under such Transaction;
provided, however, that (i) VIRNETX agrees not to do so in bad faith for the
primary purpose of avoiding payment of Commissions to IPVALUE under this
Agreement and (ii) if VIRNETX modifies or terminates the Transaction for its own
convenience, IPVALUE may request (and VIRNETX will not unreasonably withhold its
consent) the same Commission as IPVALUE would have received if VIRNETX had not
made such modifications or terminated the Transaction. For avoidance of doubt,
any modification or termination shall not be deemed to be at VIRNETX’s
convenience if it is done in connection with resolving a dispute with a third
party or obtaining payments that otherwise might be withheld or subject to
dispute or to facilitate another Transaction for which IPVALUE is entitled to a
Commission.

4.8 VIRNETX shall procure that any obligations of VIRNETX regarding payment of
Commissions shall also apply to and be binding upon any Affiliates of VIRNETX
who are entitled to receive Revenue to the extent necessary to effect the intent
of this Agreement.

 
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5. PROPOSAL PROCESS

5.1 The parties shall work together to identify, within fifteen (15) business
days of the Effective Date, up to ten (10) potential licensees to be approved by
VIRNETX in writing as Approved Counterparties. Upon approval in writing by
VIRNETX, each such potential licensee will be an Approved Counterparty. The
parties further agree to update the list of Approved Counterparties from time to
time to reflect the then current list of Approved Counterparties that have been
approved in writing by VIRNETX.

5.2 Each party may at any time during the term of this Agreement submit a
written proposal to the other party to add an Approved Counterparty to the list
of Approved Counterparties.

5.3 Each party shall promptly review all such proposals submitted by the other
party and shall advise the other party whether it approves or rejects each such
proposal or amendment within thirty (30) Business Days after receipt of the
proposal. If the other party has not received a response within such time, the
proposal shall be deemed to have been rejected on such date. If the other party
approves of the proposal, it shall provide written notice of such approval to
the proposing party, in which case the proposed Approved Counterparty shall
become an Approved Counterparty.

6. STOP NOTICES

6.1 VIRNETX shall have the right, at any time and subject to the payment to
IPVALUE of the Stop Notice Fee, to direct IPVALUE to cease any work or effort
with respect to any Approved Counterparty, by written notice to IPVALUE ("Stop
Notice"). Such Stop Notice shall become effective five (5) Business Days after
receipt of such Stop Notice by IPVALUE. Either party may request a meeting with
the other party to discuss the Stop Notice.

6.2 Representatives of IPVALUE and VIRNETX shall meet (in person or
telephonically) within five (5) Business Days of a request by either party for a
meeting to discuss a Stop Notice. In the event either party proposes an
amendment to the strategy to license the Approved Counterparty, the other party
shall give due consideration to the same and may accept or reject such
amendment. Within two (2) days after such meeting, VIRNETX shall either withdraw
or confirm the Stop Notice by providing written notice of the Stop Notice to
IPVALUE, and if VIRNETX confirms the Stop Notice, IPVALUE shall cease efforts to
license the Approved Counterparty; such third party shall be a VIRNETX Excluded
Party (“VIRNETX Excluded Party”) and deemed excluded from the then-current list
of Approved Counterparties until such time as that third party is again added as
an Approved Counterparty in accordance with Section 5 of this Agreement; and, if
not yet paid, VIRNETX shall pay the applicable Stop Notice Fee. Nothing herein
prevents VIRNETX or its Affiliates from licensing or asserting the VIRNETX
patents to or against any VIRNETX Excluded Parties.

 
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7. AUDIT AND VERIFICATION

7.1 Each party shall keep records adequate to verify each report and payment to
be made pursuant to this Agreement for three (3) full years following the
submission of each such report and payment. The records shall be prepared and
maintained on the basis of generally accepted accounting principles,
consistently applied.

7.2 Each party shall also permit its books and records related to the amounts
payable to the other party under this Agreement to be examined once during each
calendar year upon reasonable notice during regular business hours at the
location at which such books and records are usually kept by an independent
auditor selected and paid for by the other party. The audited party shall render
reasonable cooperation in the conduct of such audit. Such independent auditor
shall not disclose to the other party any information other than that relating
solely to the correctness of, or the necessity for, the reports and payments to
be made pursuant to this Agreement.

7.3 In the event such audit discloses an underpayment due the party requesting
the audit of more than ten percent (10%) for such audited period, the audited
party shall pay to the other party in addition to the additional fees or sums
due and any interest accrued thereon, the actual costs of the audit which shall
not exceed the standard billing rates for the personnel performing such audit,
as documented by the independent auditor's invoices to the party who requested
the audit.

8. LIABILITY AND WARRANTIES

8.1 NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT OR
CONSEQUENTIAL LOSS OR DAMAGE OF WHATEVER NATURE AS A RESULT OF THIS AGREEMENT OR
BREACH HEREOF, WHETHER ANY SUCH DAMAGES ARE BASED ON CONTRACT, TORT OR ANY OTHER
LEGAL THEORY, AND WHETHER OR NOT SUCH OTHER PARTY HAS BEEN INFORMED OF THE
POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR EITHER PARTY’S INDEMNITY OBLIGATIONS
HEREUNDER, AND EXCEPT FOR AMOUNTS PAYABLE BY EITHER PARTY UNDER ARTICLE 3
(INCLUDING BUT NOT LIMITED TO PAYMENT OF STOP NOTICE FEES), THE TOTAL LIABILITY
OF EITHER PARTY TO THE OTHER FOR DAMAGES AS A RESULT OF BREACH OF THIS AGREEMENT
SHALL NOT EXCEED TWO MILLION UNITED STATES DOLLARS ($2,000,000). NOTWITHSTANDING
ANYTHING TO THE CONTRARY, THE FOREGOING LIMITATIONS ON A PARTY’S LIABILITY SHALL
NOT APPLY IN THE EVENT OF SUCH PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

8.2 EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, NEITHER PARTY GIVES ANY
WARRANTY OR REPRESENTATION OR AGREES TO UNDERTAKE ANY OBLIGATION, EXPRESS OR
IMPLIED (BY STATUTE, COURSE OF DEALING, INSOLVENCY PRACTICE OR OTHERWISE). ALL
SUCH WARRANTIES AND OBLIGATIONS ARE HEREBY EXCLUDED TO THE MAXIMUM PERMITTED BY
LAW.

 
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8.3 Each party represents and warrants to the other party that it is duly
incorporated or organized and validly existing as an entity under the laws of
its jurisdiction or incorporation and has the requisite power and authority to
enter into and perform this Agreement.

8.4 IPVALUE represents and warrants to VIRNETX that IPVALUE will perform all
Commercialization Activities in accordance with applicable laws and the
standards and practices of care, skill and diligence customarily observed by
similar firms under similar circumstances.

8.5 IPVALUE represents and warrants that IPVALUE (i) will not make any
representations, warranties, or guarantees regarding the VIRNETX Patents that
have not been pre-approved by VIRNETX in writing, and (ii) will not enter into
any agreements that purport to grant any rights under any VIRNETX Patents.
IPVALUE agrees to defend, hold harmless, and indemnify VIRNETX for any claims
made by any third party against VIRNETX to the extent such claims arise from a
breach by IPVALUE of this Section 8.5 or a willful, knowing or grossly negligent
breach of Section 2.4.

8.6 VIRNETX agrees to defend, hold harmless, and indemnify IPVALUE for any
claims made by an Approved Counterparty against IPVALUE where the claim arises
from a breach or misrepresentation by VIRNETX or its Affiliates in any
Transaction.

9. TERM AND TERMINATION

9.1 This Agreement shall commence on the Effective Date and continue in full
force for three (3) years thereafter, unless extended or earlier terminated by
mutual agreement of the parties. This Agreement will automatically renew for
additional successive 1-year periods unless at least thirty (30) days before the
end of the then-current term either party provides written notice to the other
party that it does not want to renew.

9.2 The following early termination provisions shall apply:

(A) If either party materially breaches this Agreement, the other party may
terminate this Agreement by giving thirty (30) days’ prior written notice,
provided that the matters set forth in such notice are not cured to the other
party’s reasonable satisfaction within such thirty (30) day period.

(B) VIRNETX may terminate this Agreement upon thirty (30) days’ notice upon a
change of control of VIRNETX, including without limitation by way of a merger,
acquisition, or sale of all or substantially all of VIRNETX’s assets to which
this Agreement relates, provided that VIRNETX shall terminate under this
subsection (B) if VIRNETX in good faith determines, as a result of such change
of control, to discontinue pursuing licensing of the VIRNETX Patents under this
Agreement;

 
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(C) VIRNETX may terminate this Agreement immediately upon notice if IPVALUE has
failed to achieve the Minimum Success Event; however, this termination right
shall end once there is a Transaction.

(D) Either party may terminate this Agreement without cause upon sixty (60)
days’ notice and without further liability, except as set forth in this section
9.3 below.

9.3 With regard to termination of this Agreement pursuant to Section 9.2 above,
the parties hereto agree as follows:

(A) Upon any termination of this agreement, IPVALUE shall immediately cease all
Commercialization Activities.

(B) If VIRNETX terminates this Agreement pursuant to Section 9.2(B), IPVALUE may
elect to treat such termination as a Stop Notice with respect to all
then-current Approved Counterparties who have not yet entered into a
Transaction, in which case the associated Stop Notice Fee as calculated under
this Agreement as of the date of such termination shall be payable to IPVALUE.
The foregoing represents VIRNETX’s sole liability and IPVALUE’s sole and
exclusive compensation in the event VIRNETX terminates this Agreement pursuant
to Sections 9.2(B), other than surviving Commissions payable to IPVALUE for
Transactions closed prior to such termination. For avoidance of doubt, in such
event, no Commissions or other amounts will be required to be paid to IPVALUE
under Section 9.5 or Schedule 2 in the event VIRNETX or any of its Affiliates
enters into any Transaction with an Approved Counterparty after the termination
of this Agreement.

(C) If VIRNETX terminates this Agreement pursuant to Sections 9.2(C) or 9.2(D),
IPVALUE may elect to treat such termination as a Stop Notice with respect to all
then-current Approved Counterparties who have not yet entered into a
Transaction, in which case the associated Stop Notice Fee as calculated under
this Agreement shall be payable to IPVALUE. The foregoing represents VIRNETX’s
sole liability and IPVALUE’s sole and exclusive compensation in the event
VIRNETX terminates this Agreement pursuant to Sections 9.2(C) or 9.2(D). For
avoidance of doubt, in such event, no Commissions or other amounts will be
required to be paid to IPVALUE under Section 9.5.

9.4 Except as expressly set forth herein, including without limitation Section
9.3 above, expiration or termination of this Agreement shall not affect the
rights of the parties which have accrued prior to the date of expiration or
termination (including but not limited to payment obligations accrued prior to
expiration or termination for Transactions closed prior to expiration or
termination). The following provisions shall survive expiration or termination
of this Agreement for any reason: Articles 3, 7, 8, 10 (provided that the
provisions of Article 10 shall expire five years after such expiration or
termination of the Agreement), 11, 12 and 13, Section 4.5, 4.7, 9.3, 9.4 and
9.5, and Schedules 1 and 2. For the avoidance of doubt, IPVALUE’s right to
continue receiving Commissions payable to IPVALUE for Transactions closed prior
to termination will survive.

 
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9.5 Within one (1) year of the expiration of this Agreement, if VIRNETX or any
of its Affiliates enters into any Transaction (including post-term Transactions)
with an Approved Counterparty without any prior litigation with the Approved
Counterparty and IPVALUE was actively involved in negotiations with that
Approved Counterparty prior to such expiration, then such post-term Transaction
shall be deemed a Transaction, and IPVALUE shall be entitled to its Commissions
to which IPVALUE would have been entitled if the Agreement were still in force
less any Stop Notice Fee paid to IPVALUE with respect to that Approved
Counterparty.

10. CONFIDENTIALITY

10.1 Each party (the “discloser”) may from time to time communicate certain
confidential information to the other party (the “recipient”). The recipient
shall not use or disclose any such confidential information, save as may be
necessary to perform its rights and obligations pursuant to this Agreement.

10.2 The recipient shall not disclose any confidential information of the
discloser to any third party without the discloser’s express approval, except to
recipient’s employees, agents, and sub-contractors who have a need to know for
purposes of this Agreement (and provided that any agents or sub-contractors of
IPVALUE under this Agreement are approved in advance by VIRNETX). Recipient
shall ensure that recipient’s employees, agents, and sub-contractors to whom any
confidential information is disclosed are bound by confidentiality agreements to
observe and perform the obligations set out in this Article 10. Each party shall
be solely responsible for its employees’, agents’, and sub-contractors’
compliance with such obligations.

10.3 The obligations imposed by this Article 10 shall not apply to confidential
information:

(A) which is in or comes into the public domain through no fault of the
recipient or its agents;

(B) which is already known to the recipient at the time of disclosure by the
disclosing party;

(C) which the recipient lawfully learns or receives from some source other than
directly or indirectly from the other party; or

 
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(D) which the recipient can demonstrate has been independently developed by that
party without reference to any confidential information of the other party.

10.4 Notwithstanding the other provisions of this Article 10, a party may
disclose confidential information:

(A) if and to the extent required by law or ordered by any judicial,
quasi-judicial or regulatory authority (including without limitation relevant
stock exchange or exchanges) and in such case that party shall consult with the
other party in advance of such disclosure and on the manner of such disclosure;
and

(B) to its professional advisers, investors, auditors and bankers provided that
in the case of all such parties save for retained lawyers, such disclosure is
subject to obligations of confidentiality no less onerous than those set out in
this Article 10.

10.5 Notwithstanding the other provisions of this Article 10, each party shall
be permitted to:

(A) disclose the existence of this Agreement to any Approved Counterparty;

(B) disclose the existence of this Agreement to any current or prospective
client of IPVALUE;

(C) refer to the existence of this Agreement in any marketing or other
promotional information relating to such party's business; and

(D) represent, solely to an Approved Counterparty, that IPVALUE has the right to
conduct the activities contemplated by this Agreement, subject to the terms of
this Agreement.

11. NOTICES

11.1 Any notice required or authorized to be given under this Agreement shall be
served personally or be sent by FedEx Next Day or equivalent service to the
relevant address as set out below for the attention of the individual as set out
below; provided, however, that except for notices provided or required pursuant
to Section 9.2, notice provided by E-mail to the relevant address as set out
below shall be sufficient to constitute notice if and when the recipient
acknowledges receipt of such notice by E-mail:

     
Name
Address
E-mail
For IPVALUE:
Keith Wilson,
Sr. Vice President, Legal,
IPVALUE Management,
Inc.
 
 
3945 Freedom Circle, Suite 900, Santa Clara, CA 95054
 
 
keith.wilson@IPVALUE.com
     
For VIRNETX:
 
Sameer Mathur
 
Vice President, Corporate
Development and
Marketing
 
 
308 Dorla Court, Zephyr Cove, Nevada
 
 
 
 
Sameer_Mathur@virnetx.com

 
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provided that a party may change its notice details by giving notice to the
other party in accordance with this Section.

12. DISPUTE RESOLUTION

12.1 The parties shall, in good faith, attempt to resolve any dispute or
difference which may arise between them under this Agreement (“Dispute”) by
meeting to discuss and identify a resolution of the Dispute. The above meeting
shall be held in a timely matter after one party has given written notice to the
other party that a Dispute has arisen. If the Dispute has not been resolved
within forty (40) Business Days of the meeting, either party may initiate
binding arbitration as provided in this Section. For purposes of clarity, a
dispute concerning the validity, scope, infringement or essentiality of a
VIRNETX Patent or a patent claim thereof shall not be deemed a dispute arising
under this Agreement and shall not be required to be resolved in accordance with
this Section 12. For further clarity, any such dispute will not be required to
be resolved by binding arbitration, and matters concerning the validity, scope,
infringement or essentiality of any VIRNETX Patent or a patent claim will not be
the subject of any discovery, testimony, or hearing in any arbitration.

12.2 Unless otherwise agreed, any arbitration of any Dispute shall be conducted
on a confidential basis under the then current commercial Arbitration Rules of
the American Arbitration Association. The arbitration shall be conducted before
a panel of three arbitrators in San Jose, California, pursuant to the
substantive law of the State of New York (excluding the conflicts of laws
principles of that State). Each party shall appoint an arbitrator; the two
appointed arbitrators together shall select the third arbitrator who shall be
the panel chairperson. The determinations of the arbitrators in such arbitration
shall be binding on the parties. All arbitration fees and costs shall be shared
equally by the parties. The judgment upon the award rendered by the arbitrators
may be entered and enforced in any court of competent jurisdiction and the
parties agree to make themselves subject to that jurisdiction for the limited
purpose of enforcing the judgment.

 
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12.3 Notwithstanding anything in this Agreement, no party shall be precluded
from seeking provisional remedies in the courts of any jurisdiction including,
but not limited to, temporary restraining orders and preliminary injunctions, to
protect its rights and interests, but such proceedings shall not be used as a
means of delaying or avoiding the dispute resolution process set out in this
Agreement.

13. MISCELLANEOUS

13.1 To the extent permissible under applicable law, VIRNETX agrees, during the
term of this Agreement and for one (1) year thereafter, that VIRNETX shall not
directly or indirectly solicit or entice away from the employment of IPVALUE any
of the employees of IPVALUE directly involved in the provision of the services
to VIRNETX under this Agreement, except for those that answer a public
advertisement which is not specifically aimed at the employees of IPVALUE.
Without limiting the foregoing, to the extent permissible under applicable law,
if VIRNETX hires an employee of IPVALUE during the term of this Agreement who is
directly involved in the provision of the services to VIRNETX under this
Agreement, then IPVALUE may request VIRNETX to pay fair compensation to IPVALUE
and the parties agree to discuss such compensation in good faith.

13.2 Any amount properly due from one party to the other pursuant to this
Agreement and remaining unpaid after the date when payment was due shall bear
interest. The interest shall accrue monthly and shall be calculated (whether
before or after judgment) at the rate per annum equal to LIBOR plus 4% (four
percent) from the date when payment was due until the amount due is actually
received by the payee.

13.3 Each party shall co-operate with the other and make commercially reasonable
efforts to execute and deliver to the other such instruments and documents and
take such other actions as may be reasonably requested from time to time in
order to evidence and confirm the rights of the requesting party and to enable
the requesting party to carry out such party’s obligations under this Agreement.

13.4 No exercise or failure to exercise a right under this Agreement or
otherwise or to invoke a remedy will constitute a waiver of that right and
remedy by the relevant party.

13.5 No party shall assign or transfer any or all of its rights or obligations
under this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld. Any attempt to assign this Agreement
without such consent will be null and void. Notwithstanding the foregoing,
VIRNETX may assign this Agreement and the rights and obligations hereunder
without the prior written consent of IPVALUE in connection with a merger,
acquisition, or sale of all or substantially all of VIRNETX’s assets to which
this Agreement relates or the VIRNETX Patents.

13.6 If any one or more of the provisions contained in this Agreement shall be
declared or become unenforceable, invalid or illegal for any reason whatsoever,
the other terms and provisions of this Agreement shall remain in full force and
effect as if this Agreement had been executed without such part and the parties
shall negotiate in good faith to agree on an enforceable, valid and legal
replacement part that most nearly effects the parties’ original intent with
respect to the provision declared or that became unenforceable, invalid or
illegal.

 
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13.7 The parties acknowledge and agree that as to each other they are
independent contractors. Nothing set forth in this Agreement shall be construed
or claimed as constituting the parties as partners, joint-venturers or create
any fiduciary relationship or other form of legal association except as
expressly set forth in this Agreement. Unless otherwise expressly provided in
this Agreement, IPVALUE shall be entitled to perform its obligations and
exercise its powers pursuant to this Agreement in such a manner as it may
decide.

13.8 The headings in this Agreement are for convenience only and shall not
affect its interpretation. The Schedules form part of this Agreement and shall
have the same force and effect as if expressly set out in the body of this
Agreement, and any reference to this Agreement shall include the Schedules. Any
list or examples following the word "including" shall be interpreted without
limitation to the generality of the preceding words.

13.9 This Agreement (including the Schedules) constitutes the entire
understanding between the parties in respect of the subject matter of this
Agreement and supersedes and extinguishes all prior undertakings,
representations, warranties and arrangements of any nature whatsoever, whether
or not in writing relating thereto. No party shall have any liability in respect
of any representations or undertakings relating thereto (unless fraudulently
made) which are not expressly set out or referred to in this Agreement.

13.10 No amendment or modifications of this Agreement or waiver of the terms or
conditions thereof shall be binding upon any party unless agreed upon in writing
and signed by authorized representatives of all parties.

13.11 This Agreement may be executed in any number of counterparts, and by the
parties on separate counterparts, but shall not be effective until each party
has executed at least one counterpart. Each counterpart shall constitute an
original of this Agreement, but all the counterparts shall together constitute
but one and the same instrument. Such counterparts may be exchanged by fax, or
scanned and exchanged by electronic mail, but shall be effective upon receipt of
fax/electronic mail as applicable. The Parties agree that facsimile or
electronic copies of signatures shall be deemed originals for all purposes
hereof and that either Party may produce such copies, without the need to
produce original signatures, to prove the existence of this Agreement in any
proceeding brought hereunder.

13.12 The validity, construction, and performance of this Agreement and any
dispute between the parties relating thereto shall be governed by and
interpreted and determined in accordance with the laws of the State of New York
(excluding the conflicts of laws principles thereof).

 
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representative and to be made as
of the Effective Date, intending to be fully bound thereby.

VIRNETX INC.
 
IPVALUE MANAGEMENT, INC.
     
By
/s/ Sameer Mathur                                        
 
By
/s/ Paul A. Seaman
     
Name: Sameer Mathur
 
Name: Paul A. Seaman
Title: VP of Corporate Development & Product Marketing
 
Title: Sr. Vice President
Date: May 8, 2015
 
Date: May 8, 2015

 
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SCHEDULE 1
Treatment of Costs and Revenues

“Deemed Revenue” means the value of any valuable non-cash consideration provided
by a third party pursuant to a Transaction, but solely if such non-cash
consideration and the value thereof has been mutually agreed to in writing
between VIRNETX and IPVALUE prior to entering into such Transaction.

“Litigation Expenses” means legal fees, expenses and costs incurred by VIRNETX
or their Affiliates to pursue or support any lawsuit, arbitration, or legal
proceedings (including without limitation any patent office proceedings or ITC
actions) to enforce one or more of the VIRNETX Patents or any Licenses with an
Approved Counterparty. Litigation Expenses include, by way of example, attorney
fees and costs, expert witness fees, and transportation expenses.

 “Revenue” means any cash or cash equivalents received by, or credited to,
VIRNETX (including any Affiliate of VIRNETX) pursuant to any Transaction
granting a License under VIRNETX Patents to an Approved Counterparty, that are
specifically attributable to the royalties or other fees or payments for such
License and excluding amounts (i) attributable to any products, services, or
rights other than the License included in the Transaction; or (ii) that are
withheld by the counterparty to the Transaction on account of taxes (e.g.
withholding taxes). “Revenue” also includes Deemed Revenue to the extent that
the parties mutually agree in writing to include such Deemed Revenue as Revenue
under this Agreement prior to entering into the Transaction. The phrase
“received by” as used in this Section includes, without limitation, where
VIRNETX requires or permits the counterparty to the Transaction to make or
provide the payments or credits to a person or entity other than VIRNETX. In
determining Revenue, the following will be taken into account as set forth
below:

(a) VIRNETX is not required to include Conditional VIRNETX Patents (as defined
in Section 1.2) as part of the VIRNETX Patents Licensed in a Transaction under
this Agreement. If VIRNETX nonetheless includes Conditional VirnetX Patents in
such Transaction, the payments for the license to the Conditional VirnetX
Patents will be included for purposes of determining Revenue for that
Transaction other than amounts paid to a third party in order to include any
Conditional VirnetX Patents that may be added to this Agreement by VIRNETX after
the Effective Date (if any).

(b) Transactions do not include, and Commissions shall not apply to, the sales
of VIRNETX Patents by VIRNETX. However, if a Transaction that is primarily a
License includes the incidental sale or grant of exclusive rights for a VIRNETX
Patent to the Approved Counterparty, then such sale or grant of exclusive rights
will not be used as a basis for reducing the Revenue attributable to the License
for such Transaction unless such reduction has been mutually agreed to in
writing between VIRNETX and IPVALUE prior to entering into such Transaction.
 
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(c) If a Transaction also includes a license or equivalent rights under the
VIRNETX Patents to Affiliates of an Approved Counterparty or includes a release
for past infringement of the VIRNETX Patents to an Approved Counterparty or its
Affiliates, those rights will be considered part of the License for purposes of
determining Revenue attributable to the License for that Transaction.

“Third Party Expenses” means third party expenses, other than Litigation
Expenses, incurred by IPVALUE or its Affiliates in support of its activities
under this Agreement, including without limitation reverse engineering expenses,
outside expert fees and expenses, and travel expenses.

“Transaction” means any definitive written agreement or related set of
definitive written agreements, between VIRNETX (or its designee) and an Approved
Counterparty (or its wholly owned subsidiary), that has been duly executed and
delivered by both VIRNETX (or its designee) and the Approved Counterparty (or
its wholly owned subsidiary), that expressly grants a License to the Approved
Counterparty and generates Revenue or Deemed Revenue as a result of granting the
License, provided that such transaction or agreement or related set of
agreements is entered into during the term of this Agreement or is entered into
within one year after the term of this Agreement if Section 9.5 or Schedule 2 of
this Agreement provides for such post-term transaction or agreement or set of
agreements to be deemed a Transaction.

Section S1.1       Within thirty (30) Business Days after VIRNETX receives any
Revenue, and unless VIRNETX has paid the Stop Notice Fee with respect to the
applicable Approved Counterparty, VIRNETX shall distribute such funds as
follows:

(i) If the Revenue is generated as part of settlement of patent enforcement
litigation against an Approved Counterparty or its Affiliate, then VIRNETX shall
deduct any amounts, including without limitation any reimbursable costs, that
are payable to Science Applications International Corporation.(“SAIC”) or its
designees based on such Revenue pursuant to the existing agreement between SAIC
and VIRNETX, a copy which agreement shall be provided to IPVALUE within thirty
(30) days after the Effective Date; as used in this Schedule 1, “litigation”
includes without limitation any action, suit or proceeding (including without
limitation any ITC action or district court action, but excluding patent office
proceedings);

(ii) If the Transaction is entered into after the commencement of any litigation
between VIRNETX or its Affiliate and the Approved Counterparty or its Affiliate,
then VIRNETX shall also deduct any Litigation Expenses incurred by VIRNETX and
its Affiliates with respect to such litigation through the date of receipt of
the Revenue, and then reimburse IPVALUE for any reasonable expenses incurred by
IPVALUE in responding to third-party subpoenas with respect to such litigation;

(iii) Out of any remaining Revenue,:

 
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(1)            if the Transaction is entered into without any prior litigation
with the Approved Counterparty, and

(A)            the Transaction is entered into on or before the one-year
anniversary of this Agreement, then VIRNETX shall pay to IPVALUE a Commission
equal to twenty-five percent (25%) of such remaining Revenue;

(B)            the Transaction is entered into after the one-year anniversary
but on or before the two-year anniversary of the date the Approved Counterparty
is added to the list of Approved Counterparties that has been approved in
writing by VIRNETX, then VIRNETX shall pay to IPVALUE a Commission equal to
twenty percent (20%) of such remaining Revenue; and

(C)            the Transaction is entered into after the two-year anniversary of
the date the Approved Counterparty is added to the list of Approved
Counterparties that has been approved in writing by VIRNETX, then VIRNETX shall
pay to IPVALUE a Commission equal to fifteen percent (15%) of such remaining
Revenue;

(2)            if the Transaction is entered into after the commencement of any
litigation between VIRNETX or its Affiliate and the Approved Counterparty or its
Affiliate, then VIRNETX shall pay to IPVALUE a Commission equal to ten percent
(10%) of the portion of such remaining Revenue that is cash or cash equivalents
received by VIRNETX (or its Affiliates).

(3)            For each fifty million US dollars ($50,000,000 USD) of such
remaining Revenue aggregated across all Transactions, VIRNETX shall also pay
IPVALUE a performance bonus of two million five hundred thousand US dollars
($2,500,000 USD).

Section S1.2       IPVALUE shall provide a report to VIRNETX within thirty (30)
days after every calendar quarter including expenses incurred in responding to
third-party subpoenas through the end of the calendar quarter, and shall account
for any reimbursement of such amounts that have been made.

Section S1.3       Commissions shall be payable to IPVALUE when monies are
received by VIRNETX (e.g., if the Approved Counterparty makes installment
payments to VIRNETX, IPVALUE will be paid its Commission within thirty (30) days
after VIRNETX receives each installment payment). No Commissions shall be due
for a Transaction entered into more than one year after the termination of the
Agreement. Any performance bonus payable under Section S1.1(3) shall be payable
within thirty (30) days from the date VIRNETX’s revenue collections across all
Transactions exceed the relevant $50 million threshold.
 
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Section S1.4       Except as expressly set forth above, IPVALUE shall bear its
own expenses (including any and all Third Party Expenses incurred by IPVALUE)
and the payment of the Commission or the Stop Notice Fee, as applicable, shall
be IPVALUE’s sole compensation under the Agreement.
 
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SCHEDULE 2
Stop Notice Fee

The Stop Notice Fee shall consist of the sum of the First Termination Fee
Component and the Second Termination Fee Component (each as defined below).

The first component (the “First Termination Fee Component”) shall consist of any
Third Party Expenses actually incurred by IPVALUE and directly attributable to
the pursuit of a Transaction with the relevant Approved Counterparty, multiplied
by 125% (adjusted to deduct Shared Expenses already reimbursed).

The second component (the “Second Termination Fee Component”) shall be a
multiple of the Base Termination Fee. The “Base Termination Fee” means the
actual internal cost of IPVALUE incurred in furtherance of and directly
attributable to the efforts to license such Approved Counterparty (including
without limitation time expended to assess the opportunity, mine the VIRNETX
portfolio, develop claim charts, conduct negotiations, etc.) that have been
reasonably incurred for activities approved by VIRNETX, but excluding any
amounts attributable to licensing efforts with respect to any other third party.
The Second Termination Fee Component shall be as determined based upon the
status of the work and negotiations relating to the Approved Counterparty at the
time IPVALUE is first directed in writing by VIRNETX to cease pursuing such
Approved Counterparty.

IPVALUE shall keep records adequate to verify the amounts of the Third Party
Expenses and internal costs incurred for three (3) full years following the date
such costs or expenses were incurred. IPVALUE shall report to VIRNETX, upon
reasonable request, complete records of the Third Party Expenses and the costs
comprising the basis of the Second Termination Fee Component for each Approved
Counterparty, as well as the ‘multiplier’ that would be applicable, based on the
stage. The applicable stage generally shall be as reported by IPVALUE to VIRNETX
pursuant to IPVALUE’s reporting obligations under the Agreement.

For purposes of determining the Base Termination Fee, IPVALUE shall use the
following rates for its personnel: a) three hundred dollars ($300) per hour for
each negotiator or attorney; and b) two hundred dollars ($200) per hour for any
other professional personnel (e.g. technical staff and financial researchers and
analysts).

For purposes of clarity, the Stop Notice Fees with respect to any given Approved
Counterparty are not cumulative, i.e., IPVALUE shall only be entitled to the
Stop Notice Fee corresponding to the highest applicable stage and not any other
stage. By way of example, if IPVALUE is entitled to Stage 5 Stop Notice Fee for
an Approved Counterparty, then IPVALUE shall not also be entitled to Stop Notice
Fees corresponding to Stages 1 through 4 with respect to that Approved
Counterparty.
 
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Stage
Activity
Compensation
1.
After proposal approved by VIRNETX
First Termination Fee Component plus Base Termination Fee
     
2.
First Draft Technical Presentation evidencing Use of Patent (“claim chart”)
Delivered to and approved by VIRNETX
First Termination Fee Component plus 2 times the Base Termination Fee
     
3.
First letter sent to Approved Counterparty
First Termination Fee Component plus 2 times the Base Termination Fee
     
4.
Received first financial proposal from Approved Counterparty
First Termination Fee Component plus 3 times the Base Termination Fee)
     
5.
Received first financial offer from Approved Counterparty in excess of the
minimum pricing guidelines previously provided to IPVALUE by VIRNETX
First Termination Fee Component plus 4 times the Base Termination Fee)
     
6.
Agreement reached on all material terms and VIRNETX actually enters into a
Transaction on those terms prior to or within one (1) year after the issuance of
the Stop Notice
 
Commission that would have been paid to IPVALUE if no Stop Notice had been
issued with respect to that Approved Counterparty as set forth in the last
paragraph of this Schedule 2, less any Stop Notice Fee paid to IPVALUE with
respect to that Approved Counterparty

 
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Notwithstanding the foregoing, except with respect to a Stage 6 Stop Notice, the
maximum Stop Notice Fee for a Stop Notice for any single Approved Party shall be
five hundred thousand United States Dollars (US$500,000) (“Maximum Stop Notice
Fee”), unless VIRNETX has previously agreed in writing to a higher maximum for
the Stop Notice Fee.

Notwithstanding the issuance of a Stop Notice, if IPVALUE was actively involved
in negotiations with that Approved Counterparty prior to the Stop Notice and
such negotiations had at least reached to Stage 4 as set forth in this Schedule
2, IPVALUE shall be entitled to its Commission on any Transaction (including
post-term Transactions) entered into within one (1) year after the issuance of
the Stop Notice with the Approved Counterparty that is the subject of the Stop
Notice (less any Stop Notice Fee paid in connection with the Stop Notice).
 
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Schedule 3
Performance Criteria

For each Approved Counterparty of this Agreement:

1. By the four-month anniversary of the party being added to the list of
Approved Counterparties, a notice letter has been sent to the Approved
Counterparty

2. By the six-month anniversary of the party being added to the list of Approved
Counterparties, IPVALUE has contacted the Approved Counterparty to initiate
license discussions

3. By the one-year anniversary of the party being added to the list of Approved
Counterparties, IPVALUE has shared a first financial proposal with the Approved
Counterparty and begun technical and business discussions

4. By the two-year anniversary of the party being added to the list of Approved
Counterparties, IPVALUE has received a financial proposal from the Approved
Counterparty

 

 
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