Joint Development & Marketing Agreement

JOINT DEVELOPMENT AND MARKETING AGREEMENT


This Agreement, made and entered into as of the 6th day of August, 1996, by and between CyberGuard Corporation, a Florida corporation ("CyberGuard"), whose address is 2101 West Cypress Creek Road, Fort Lauderdale, Florida 33309; and Information Resource Engineering, Inc., a Delaware corporation ("IRE"), whose address is 8029 Corporate Drive, Baltimore, Maryland 21236:


WHEREAS, CyberGuard designs, manufactures and markets network security products, including the CyberGuard(TM) Firewall, for Internet, intranet and commercial networking environments;


WHEREAS, IRE has developed, manufactures and markets encrypting modem-related hardware, software and documentation, and key management services through its SafeNet Security Center ("S/SC")(TM);


WHEREAS, CyberGuard and IRE desire to jointly develop and market a proposed product offering consisting of a combination of the CyberGuard Firewall and IRE SafeNet(TM) products in an interoperable centrally managed system configured for use with a virtual private network ("VPN") and in applications that combine VPNs with public Internet access and/or legacy network use;


NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, CyberGuard and IRE enter into this Agreement in order to provide for the initial phase of joint development and marketing activities for the proposed joint product offering.


1. Definitions


As used herein, the following words or phrases have the following meanings:


1.1 "CyberGuard Products" shall mean the software and manuals to be incorporated with an Intel-based personal computer to be supplied by a third party vendor.


1.2 "CyberGuard Property" means any and all Intellectual Property owned by CyberGuard as of the Effective Date or developed thereafter solely by or on behalf of CyberGuard, and expressly excludes any IRE Property.


1.3 "CyberGuard Firewall" shall mean a product comprised of an Intel-based personal computer to be supplied by a third party vendor and software and manuals supplied by CyberGuard.


1.4 "Effective Date" means August 6th, 1996.


1.5 "Hereof," "herein, and "hereunder" when used in this Agreement shall refer to the Agreement as a whole, unless the context otherwise requires.


1.6 "Intellectual Property" means any and all inventions, improvements, enhancements, methods, designs, know-how, trade secrets, software, hardware, circuits, products, documentation, mask works, layouts, ornamental designs, trademarks, service marks, trade dress, company names, brand names, logos, and fictitious names, together with any and all worldwide vested and/or inchoate rights in and to any or all of the foregoing under any issued, pending and/or later filed applications for patent or copyright registration, trademark and/or service mark registration, utility models and/or any other form of protection of various forms of intellectual and/or industrial


2 2 property recognized anywhere in the world including any and all rights of domestic and/or foreign priority, the right to sue and recover damages for infringements including, without limitation, any past infringements.


1.7 "IRE Property" means any and all Intellectual Property owned by IRE as of the Effective Date or developed thereafter solely by or on behalf of IRE, and expressly excludes any CyberGuard Property.


1.8 "IRE/SafeNet Products" shall consist of the SafeNet/Dial, SafeNet/LAN, SafeNet/Security Center and SafeNet/Security Services.


1.9 "Joint Developments" means any and all Intellectual Property written, invented, developed or otherwise created jointly by CyberGuard and IRE in the course of the Project during the Term of this Agreement. Joint Developments shall not include any CyberGuard Property or any IRE Property.


1.10 "Prepaid License Fee" shall have the meaning as set forth in Section of this Agreement.


1.11 "Product" or "Products" shall mean any combination of the CyberGuard Firewall and IRE/SafeNet Products, developed in accordance with this Agreement, having an interoperable centrally managed system configured for use with a VPN and for use in applications that combine VPNs with public Internet access and/or legacy network use and having the characteristics set forth in the Specifications.


1.12 "Project" means all activity relating to the design, development, implementation, testing, modification and/or improvement of any Product and/or components thereof, whether hardware, software, electronic, mechanical or otherwise.


1.13 "Proprietary Information" means proprietary rights in, and to, all computer programs, source code, algorithms, software routines, microcode and other similar data pertaining to CyberGuard Products, the IRE/SafeNet Products, or the Product, as the case may be.


1.14 "Specifications" means the criteria for and description of the Product set forth on Exhibit A hereto.


1.15 "Term" means the period from the Effective Date through the Termination Date.


1.16 "Termination Date" means any date upon which this Agreement shall terminate in accordance with the terms hereof, or two years from the Effective Date, whichever is earlier.


2. Joint Development; Prepaid License


2.1 Development of the Product. Subject to the terms and conditions of this Agreement, CyberGuard and IRE agree to cooperate with and assist each other in the joint design and development of the Product. The Product is intended to address the markets and include the functionalities in accordance with Exhibits A and B attached hereto.


2.2 Enhancements to the Product. IRE and CyberGuard each acknowledge that from time to time it may be advantageous to develop enhancements to their respective product offerings that are components of the Product. Each of the parties hereto agrees that, at the request of the other party, it will work with the other party to jointly develop enhancements or revisions to the CyberGuard Firewall and/or the IRE SafeNet products. In the event that the parties hereto fail to agree on the timing, extent or nature of such enhancements and/or revisions, or on the sharing of expense with respect to such enhancements and/or revisions, the party that does not wish to proceed with such enhancements and/or revisions shall provide to the other party a price quotation (on an actual time and materials basis) and schedule for implementing such enhancements or revision. Such enhancements and/or revisions shall be effectuated upon acceptance of such proposal by the party requesting the enhancements and/or revisions. In the event that such enhancements and/or revisions result in any new Intellectual Property, such Intellectual Property shall become the property of the party or parties which fund(s) the enhancements and/or revisions.


2 3 2.3 Prepaid License. CyberGuard acknowledges that IRE, on the Effective Date, has paid to CyberGuard a prepaid license fee in the amount of $1 million ("Prepaid License Fee"). The Prepaid License Fee shall represent a prepayment of the amounts that will become due under Section hereof, and shall be credited to the account of IRE on a dollar-for-dollar basis against such amounts that otherwise would become due to CyberGuard under Section hereof. In the event that this Agreement is terminated prior to such credit aggregating the $1 million, then CyberGuard shall repay to IRE the balance of the $1 million prepaid license fee within one year of the date of such termination, with interest at the prime rate of interest as is in effect as of the date of such termination and announced by The Chase Bank, N.A.


3. Manufacture and Assembly


3.1 Delivery of CyberGuard Products to IRE.


3.1.1 Subject to the terms and conditions hereof, CyberGuard shall use
commercially reasonable efforts to supply to IRE such number of
CyberGuard Products as may be required during the term of this
Agreement to fill orders for the Product.


3.1.2 CyberGuard shall sell CyberGuard Products, F.O.B. CyberGuard's
place of business in Fort Lauderdale, Florida, at the prices set forth
on Exhibit C. Payment terms are net 30 days from the date of IRE
shipment to its customers for CyberGuard Products sold.


3.1.3 All prices quoted by CyberGuard are exclusive of all excise,
sales and similar taxes of whatever jurisdiction and of any other
taxes, customs, duties, fees or charges that may be imposed on the
sale of CyberGuard Products to IRE.


3.2 Manufacture of the Product. IRE shall assemble and configure the Product by integrating the CyberGuard Firewall and IRE/SafeNet Products in accordance with the Specifications, as such Specifications may be modified or supplemented in a writing agreed to by the parties hereto from time to time. The parties agree that the PC platform and the vendor that will supply the platform will be selected by IRE, from time to time, so long as such selection meets the technical requirements of CyberGuard. The parties agree that for this purpose the Intel-based PC platform manufactured by Advanced Logic Research, Inc. is acceptable to both IRE and CyberGuard.


3.3 Costs of Manufacture. All costs and expenses, including taxes, related to the assembly and configuration as described in Section of the Product shall be borne solely by IRE.


3.4 No License Fee. Except for the Prepaid License Fee, the fees payable in accordance with Section 3.1.2 hereof and a fee payable under the license described in Exhibit D hereto, no license fee under this Agreement shall be payable by either IRE or CyberGuard with respect to CyberGuard Products or IRE/SafeNet Products incorporated into the Product for sale in accordance with this Agreement.


4. Marketing and Sales


4.1 Terms and Conditions of Sales. The parties agree to negotiate in good faith and to reach agreement on the following matters within 15 days after the Effective Date: the initial List Prices for the Product, the discounts that will be available to the various sales channels, the other terms and conditions of the sales of the Product to third parties, and the terms, conditions and pricing under which CyberGuard will act as reseller of the Product. IRE and CyberGuard agree to cooperate in the future to establish different List Prices and discounts as needed to address cost changes or market conditions. All other terms and conditions of sales of the Product that are not addressed in the mutually agreed-to terms shall be set by IRE.


4.2 Marketing Assistance/Assignment of Sales Personnel. IRE and CyberGuard shall cooperate in marketing and selling the Product. For each sales lead generated by or becoming known to a party hereto, the parties agree that for a preliminary time period to be agreed upon by IRE and CyberGuard, each of them will use reasonable best efforts to jointly assign a sales team consisting of a representative from each corporation (consisting of a sales representative from one corporation and a customer support representative from the other) to pursue such leads


3 4 with a view toward generating a sale.


4.3 Marketing Fees. In consideration of the sales support to be provided by CyberGuard under Section hereof, for each Product sold, in addition to the payment for CyberGuard Products as set forth in Section hereof, IRE shall pay CyberGuard a marketing fee as set forth in Exhibit C hereto. The marketing fee shall be paid monthly based upon payments received by IRE from the purchasers of the Product during the previous month.


4.4 Order Flow and Fulfillment. Orders for the Product, whether generated by CyberGuard or IRE, shall be submitted to IRE for fulfillment. IRE shall have the sole discretion to determine whether to extend credit to any potential purchaser of a Product. IRE shall process orders for shipment in accordance with commercially reasonable standards. IRE shall submit invoices to purchasers for products shipped and shall be responsible for collection of such invoices. IRE shall provide to CyberGuard written monthly reports that describe the identity of the purchasers, the Products sold, quantities, discounts and prices for all sales of Products. Revenue from sales of Product shall be considered solely the revenue of IRE for all accounting and other purposes.


4.5 Compliance With Laws and Business Practices. It is expressly understood and agreed that this Agreement, and any exports, sales, transfers, or any other disposition of CyberGuard Products or IRE/SafeNet Products, to the extent incorporated in the Product, are subject to the laws and regulations of the United States. Specifically, contracts and orders placed for the Product may require advance U.S. Government Export approval or licensing, and, therefore all such contracts and orders are subject to the receipt of any necessary approvals and licenses. The parties hereto agree to solicit orders, and IRE agrees to process and ship orders, in accordance with all applicable laws and regulations.


5. Customer Support


5.1 Initial Contact. IRE shall be the initial point of contact for customer support of the Product and shall establish and maintain support facilities sufficient to provide primary support for the Product. Primary support requires that IRE provide all necessary resources to provide initial diagnosis of both hardware and software problems and providing reasonable assistance to purchasers to resolve problems with the Product.


5.2 Maintenance. Following receipt of support requests from a customer and an assessment by IRE of the customer's additional support requirements, if it is determined that the customer requires ma ...