Form 1023 (Appendix 21)

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This USC/ICANN TRANSITION AGREEMENT (this "Agreement") is made and entered into as of the Effective Date (as defined below) by and between the UNIVERSITY OF SOUTHERN CALIFORNIA, a California nonprofit public benefit corporation ("USC"), and the INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS, a California nonprofit public benefit corporation ("ICANN").

A. The Internet Assigned Numbers Authority ("IANA") coordinates the Internet's address allocation, domain names, and protocol parameter assignment, and plays a central role in the management of the Internet's root server system.

B. Pursuant the Teranode Network Technology contract (the "TNT Contract") awarded by the Defense Advanced Research Projects Agency ("DARPA") to the Information Sciences Institute ("ISI") of USC's School of Engineering, USC is operating IANA as a research project.

C. The National Telecommunications and Information Administration ("NTIA") has authorized IANA to transition from its current status under USC/ISI to a nonprofit corporation. ICANN has been formed as a nonprofit corporation with a board of directors representing the spectrum of Internet interests around the world to assume the functions previously performed by USC's IANA project. The NTIA has accepted a proposal pursuant to which ICANN will assume the IANA functions.

D. To effect the above referenced transition, the parties desire to enter into this Agreement to provide for USC's transferring to ICANN certain functions, responsibilities, assets, and personnel previously performed by USC as the IANA project, all under and pursuant to the terms of this Agreement and the other documents and instruments referred to herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, agree as follows:

1. ALLOCATION OF FUNCTIONS AND RESPONSIBILITIES. Effective on the Effective Date, under the authority of NTIA, IANA relinquishes and ICANN assumes the performance of the following functions and responsibilities previously performed by USC as the IANA project under the TNT Contract:

(a) Establishment, oversight, and implementation of policy for allocation and assignment of IP address blocks, including delegation of assignment responsibilities to regional address registries;

(b) Establishment, oversight, and implementation of policy for the Internet Domain Name System ("DNS"), including delegation of responsibilities to DNS registries and registrars;

(c) Assignment of technical protocol parameter numbers and maintenance of assigned values; and

(d) Oversight of the operation of the Internet root server system.

2. INTELLECTUAL PROPERTY.

2.1 Service Mark and Copyright Assignment. USC hereby assigns and transfers without warranty unto ICANN USC's entire right, title and interest in and to the following:

(a) the "Internet Assigned Numbers Authority" service mark pending registration, the "Internet Assigned Numbers Authority" common law service mark, the "IANA" service mark pending registration, the "IANA" common law service mark, and the common law service mark in the IANA logo shown in Exhibit "A" attached hereto (collectively, the "Service Marks"), and the goodwill associated with the Service Marks; and

(b) the copyright to, and all other exclusive rights to reproduce, distribute, prepare derivative works based on, display, and otherwise use, the IANA logo shown in Exhibit "A" attached hereto, pursuant to the terms and conditions of that certain Service Mark and Copyright Assignment attached hereto as Exhibit "B" (the "Service Mark and Copyright Assignment").

2.2 Intellectual Property License. Subject to the following terms, USC hereby grants ICANN a personal, indivisible and non-transferrable, non-exclusive license and consent without warranty to use the following:

(a) all intellectual property rights (including without limitation all patents, copyrights, trademarks, service marks, and trade secret rights) in those computer programs, data, documents, protocols, processes and other materials specified in Exhibit "C" attached hereto; and

(b) all intellectual property rights in all computer programs, data, documents, protocols, processes, and other materials created or received in IANA's operations on or after the Effective Date (collectively, the "Licensed IP Rights").

2.3 Disclaimer. Subject to the assignments and transfers made in Section 2.1 and the licenses and consents conveyed in Section 2.2, ICANN disclaims in favor of USC all right, title, and interest in all patents, copyrights, trademarks, service marks, trade secrets and other intellectual property rights utilized by IANA in its operations prior to the Effective Date.

2.4 Execution of Documents. USC will promptly execute such documents reflecting the assignments and transfers of intellectual property rights set forth in Section 2.1 as ICANN may reasonably request.

2.5 Use of Licensed IP Rights.

(a) ICANN shall use the Licensed IP Rights solely in connection with ICANN's operations as formerly provided by IANA (the "Licensed Services"). ICANN shall not use the Licensed IP Rights in connection with any other service or material unless ICANN first, at its own cost and expense, (i) provides USC with a detailed description of the proposed services to be offered or materials to be distributed in connection with the Licensed IP Rights and (ii) receives USC's written consent to such proposed use of the Licensed IP Rights.

(b) ICANN shall not alter, modify, adapt, translate, rent, sublicense, assign, loan, distribute, or create derivative works based upon the Licensed IP Rights without the prior written consent of USC.

(c) ICANN acknowledges that USC is the owner of the Licensed IP Rights and ICANN agrees that it will do nothing inconsistent with such ownership and that use of the Licensed IP Rights by ICANN shall inure to the benefit of USC.

(d) ICANN shall promptly notify USC of any known use of Licensed IP Rights by others not duly authorized. Notification of such infringement shall include all details known by ICANN that would enable USC to investigate such infringement. Nothing in this Agreement shall require USC to bring suit for the infringement of any of the Licensed IP Rights. ICANN shall have no right to initiate an action of its own against an alleged infringer without first obtaining the prior express written approval of USC.

(e) ICANN agrees to fully cooperate with USC, at the expense of USC, in prosecution of any action against an infringer. In the event that USC should attempt to pursue any infringer and obtains a recovery from said infringer, whether by adjudication or settlement, USC shall be entitled to retain the entirety of any such recovery to the exclusion of ICANN.

2.6 Optional Acquisition of Licensed IP Rights. ICANN shall have the option to acquire USC's entire right, title and interest in and to the Licensed IP Rights upon (a) receiving written approval of such acquisition in form and substance acceptable to USC from the United States government and (b) licensing back to USC all such Licensed IP Rights on the basis of a fully paid up, nonexclusive license in perpetuity to use such Licensed IP Rights on the same terms under which those Licensed IP Rights are licensed to ICANN hereunder; provided that USC may use such Licensed IP Rights for any purpose whatsoever and shall not be obligated under the terms of Section 2.5(a) hereof.

2.7 Confidentiality. To the extent USC has agreed, prior to the Effective Date, to keep confidential materials submitted by third parties to IANA, ICANN hereby undertakes to maintain such confidentiality. This undertaking by ICANN is made for the benefit of USC only, and not for the benefit of such third parties.

3. EXPENSES. ICANN will pay all of its expenses, including expenses of incorporation, federal and state tax exemption filings, transacting business qualification as necessary and other corporate and tax filings. USC shall be responsible for all IANA?related operating expenses through the Effective Date and ICANN shall be responsible for all subsequent IANA?related operating expenses. ICANN does not assume the liabilities of IANA incurred prior to the Effective Date.

4. COMPUTER FACILITY ACCESS. USC will provide ICANN with access to its computer facility and other resources for a period of two (2) years after the Effective Date in consideration of ICANN's reimbursement of ICANN's proportional share of USC's fully loaded costs for such facility and resources. Thereafter, the period of such access shall extend automatically for successive renewal periods of one year each unless either party delivers written notice to the other party at least one hundred eighty (180) days prior to the last day of the then current renewal period of its election not to renew such right of access. ICANN's access to such facilities shall be undertaken (a) in such manner and times as shall not disrupt ISI's access to and use thereof and (b) pursuant to the confidentiality commitment of ICANN provided for in Section 4.2 below.

4.1 Payment. USC's current rates for access to its facility and resources as provided for in this Section 4 are set forth on Exhibit "D" attached hereto. ICANN shall pay USC for such access charges, as they may be changed from time to time upon notice from USC, no later than thirty (30) days following ICANN's receipt of USC's invoice therefor. All payments made under this Section 4 shall be paid in US dollars by check drawn on a US bank, and checks shall be made payable to the "University of Southern California."

4.2 Confidentiality. ICANN acknowledges that it may obtain access to certain nonpublic information as a result of its access to USC's computer facility under this Section 4 (the "Confidential Information"). ICANN hereby agrees not to disclose, use, reproduce or otherwise disseminate any such Confidential Information to any person, firm or corporation and to take such actions as may be reasonably required to prevent any such disclosure, use, reproduction or dissemination by any of ICANN's employees, contractors, officers or directors; provided, however, that ICANN's obligations under this Section 4.2 shall not apply to any such information to the extent:

(a) it can be established and documented that such information was rightfully in the possession of, or rightfully known by, ICANN at the time of execution of this Agreement other than through ICANN personnel previously or currently employed by USC;

(b) such information is obtainable by ICANN from other sources having the legal right to disclose the same;

(c) such information is generally available to the public without a breach of this Agreement; or

(d) as may be required by court order or any governmental agency; provided that ICANN shall notify USC of any such court order or governmental agency requirement promptly after receipt and shall cooperate with USC in seeking a protective order or other remedy to protect the confidential nature of the Confidential Information sought in such order or requirement.

5. ADDITIONAL DOCUMENTS

5.1 Deliveries by ICANN. On or before the Effective Date, ICANN shall deliver to USC certificates of insurance evidencing the insurance coverages required by Section 7.4 hereof.

5.2 Deliveries by USC. On or before the Effective Date, USC shall deliver to ICANN the Service Mark and Copyright Assignment.

5.3 Board Approval. This Agreement requires approval or ratification of the ICANN Board of Directors. ICANN shall use its best efforts to secure and deliver to USC such approval or ratification within one hundred eighty (180) days after the Effective Date.

5.4 Governmental Approval. "Governmental Approval" shall mean the receipt by either party of written approval of the transfer of functions and responsibilities contemplated in Section 1 of this Agreement, in form and substance satisfactory to both parties hereto, from the United States government.

5.5 Effective Date. Irrespective of the dates the approval or ratification required under Section 5.3 above occurs, USC and ICANN acknowledge and agree that the effective date and time of each of this Agreement and the Service Mark and Copyright Assignment (the "Effective Date"), shall be the later of (i) January 1, 1999 at 12:01 a.m. and (ii) the date upon which Governmental Approval is received.

6. REPRESENTATIONS AND OTHER COVENANTS

6.1 USC Representations. USC hereby represents and warrants to ICANN as follows:

(a) USC has full corporate power and authority to enter into the transactions contemplated by this Agreement; and

(b) This Agreement and the other documents and instruments contemplated hereby have been duly authorized and are legally binding upon and enforceable against USC in accordance with their respective terms, subject only to bankruptcy, reorganization, insolvency and other laws for the protection of debtors and to general principles of equity.

6.2 ICANN Representations. ICANN hereby represents and warrants to USC as follows:

(a) ICANN has filed the articles of incorporation attached hereto as Exhibit "E";

(b) ICANN has adopted the Bylaws attached hereto as Exhibit "F";

(c) A preliminary ICANN operating budget has been prepared, and ICANN has funds, funding commitments and reasonably projected funding sources sufficient to ensure ICANN's operations through June 30, 1999, based on the status of contributions to ICANN and other revenues and capital contribution received or committed, as listed on the Financial Report attached hereto as Exhibit "G";

(d) There are no suits, actions or other proceedings pending or, to ICANN's knowledge, threatened before any court or governmental agency seeking to restrain or prohibit or to obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, and to ICANN's knowledge there is no investigation underway that might eventuate in any such suit, action or proceeding;

(e) This Agreement and the other documents and instruments contemplated hereby have been duly authorized and are legally binding upon and enforceable against ICANN in accordance with their respective terms, subject only to bankruptcy, reorganization, insolvency and other laws for the protection of debtors and to general principles of equity; and

(f) ICANN has acquired all necessary approvals or consents of any third parties whose consent may be required in connection with the transactions contemplated by this Agreement.

6.3 Publicity. Promptly after the date of execution of this Agreement, USC and ICANN shall issue a joint press release, substantially in the form and substance attached hereto as Exhibit "H", concerning the transactions contemplated by this Agreement. Thereafter, USC and ICANN shall coordinate any public statements concerning the transactions contemplated by this Agreement.

6.4 Consents and Notifications. USC shall cooperate with ICANN in any reasonable manner in securing approvals and consents of any third parties whose consent may be required in connection with the transactions contemplated by this Agreement. Promptly after the date of execution of this Agreement, ICANN shall notify all such third parties to whom notice is required in connection with the transactions contemplated by this Agreement.

6.5 Fees and Expenses. USC and ICANN shall bear their respective expenses incurred in connection with the transactions contemplated by this Agreement, including without limitation the preparation, execution and performance of this Agreement, and all fees and expenses of counsel, accountants and other representatives or agents.

6.6 Additional Agreements; Cooperation. Subject to the terms and conditions herein provided, USC and ICANN agree to use their respective best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, and to cooperate with each other in connection with the foregoing.

7. RELEASES AND INDEMNIFICATION

7.1 Indemnification by ICANN. ICANN shall indemnify and hold USC harmless from and against any and all loss, damage, deficiency, cost, expense, liability or judgment incurred or suffered by USC, including without limitation interest, penalties and reasonable attorneys' fees, from or arising out of:

(a) The failure by ICANN to pay, perform or otherwise discharge any of its obligations or liabilities arising under this Agreement or any other document or instrument provided for in this Agreement;

(b) Any breach by ICANN of any representation, warranty, covenant, agreement or other obligation of ICANN contained in this Agreement or any of the documents or instruments provided for herein;

(c) All claims arising out of ICANN's operations after the Effective Date;

(d) All claims arising out of the use of any rights transferred or licensed to ICANN by USC; or

(e) Any claims arising out of the actions of USC's personnel while under the supervision and direction of ICANN.

7.2 Indemnification by USC. USC shall indemnify and hold ICANN harmless from and against any and all loss, damage, deficiency, cost, expense, liability or judgment incurred or suffered by ICANN, including without limitation interest, penalties and reasonable attorneys' fees, from or arising out of:

(a) The failure by USC to pay, perform or otherwise discharge any of its obligations or liabilities arising under this Agreement or any other document or instrument provided for in this Agreement; or

(b) Any breach by USC of any representation, warranty, covenant, agreement or other obligation of USC contained in this Agreement or any of the documents or instruments provided for herein.

7.3 Procedure. Each party entitled to indemnification pursuant to Sections 7.1 and 7.2 (the "Indemnified Party") shall give prompt written notice to the other party hereto (the "Indemnifying Party") in the event it obtains knowledge of any claim or event which could give rise to a claim by the Indemnified Party against the Indemnifying Party pursuant to such indemnity, stating the nature and basis of such claim or event and the amount thereof, and the Indemnifying Party shall have the obligation to defend against each such claim, provided, however, that the failure to so notify shall not relieve the Indemnifying Party of its responsibilities hereunder except to the extent the Indemnifying Party has been prejudiced in a material respect. During the course of any third?party claim or proceeding defended against by the Indemnifying Party, the Indemnifying Party shall keep the Indemnified Party fully informed with regard to such claim or proceeding, use all reasonable efforts to defend such claim or proceeding and present any reasonable defense and employ any reasonable tactic suggested by the Indemnified Party, its counsel or its accounts. The Indemnified Party shall have the right to be represented at any such claim or proceeding by legal counsel and accountants of its choosing. The Indemnifying Party shall have the right at any time, without the consent of the Indemnified Party, to settle or compromise any claim or proceeding by any third party, provided, however, that no settlement or compromise which would have any effect upon the assets, operations, reputation or goodwill of the Indemnified Party shall be made without the prior written consent of the Indemnified Party. The Indemnifying Party and the Indemnified Party agree to use their respective best efforts to cooperate with each other in connection with the defense of any claim or proceeding contemplated by this Section.

7.4 Insurance. ICANN shall, throughout the term of this Agreement, obtain and maintain at its own cost and expense from a Best's rated A, class 10 or better insurance company and which is licensed to do business in the state of California, liability insurance, including general comprehensive liability, property, professional liability and directors and officers liability in amounts satisfactory to USC. ICANN shall name USC as an additional insured under its policies of general and professional liability insurance for so long as ICANN utilizes any facilities furnished by, or any rights licensed from, USC and shall preclude termination of coverage without thirty (30) days' prior written notice to USC. ICANN shall from time to time upon request of USC furnish USC with certificates of insurance evidencing such insurance.

8. TERMINATION

8.1 Termination.

(a) This Agreement may be terminated at any time as follows:

(i) By mutual agreement in writing of both parties hereto;

(ii) By USC, if ICANN shall fail, neglect or refuse to fulfill its obligations under Section 4.1 hereof or under Section 2 of the USC/ICANN Loanout Agreement for a period of ten (10) or more days after receipt of notice thereof; or

(iii) By USC, if ICANN shall fail, neglect or refuse to fulfill any of its obligations to USC under any other provision of this Agreement or the USC/ICANN Loanout Agreement for a period of thirty (30) or more days after receipt of notice thereof.

(b) Either party may terminate the parties' obligations under Section 4 hereof except for those obligations set forth in Section 4.2 hereof upon one hundred eighty (180) days' prior written notice to the other party.

8.2 Effect of Termination. The termination of this Agreement shall have the following consequences:

(a) If the Agreement fails to receive the requisite approval or ratification required in Section 5.3 above within one hundred eighty (180) days after the Effective Date,

(i) All documents and instruments delivered pursuant to this Agreement shall be returned to the party which executed and delivered the document or instrument, and shall have no further force or effect; and

(ii) This Agreement shall become void and have no effect, with no liability on the part of either party or its officers, directors, members, agents or employees in respect thereof, except for Sections 2.7, 4.2 and 7 hereof, which shall fully survive any termination of this Agreement.

(b) If the Agreement is terminated for any reason under Section 8.1(a), the parties shall have no further obligations hereunder after the effective date of termination, other than under Sections 2.7, 4.2 and 7 hereof; provided that such termination shall have no effect upon the obligations of either party accrued as of the effective date of termination.

9. MISCELLANEOUS

9.1 Severability. If any term or provision of this Agreement is for any reason held to be invalid, such invalidity shall not affect any other term or provision, and this Agreement shall be interpreted as if such term or provision had never been contained in this Agreement.

9.2 Waiver. No waiver of any of the terms of this Agreement shall be valid unless in writing and signed by both parties. Failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of such rights, and a waiver by either party of a default in one or more instances shall not be construed as a continuing waiver or as a waiver in other instances.

9.3 Assignment. ICANN shall not directly or indirectly assign, transfer, convey or encumber any of its rights under this Agreement without the prior written consent of USC, which shall not be unreasonably withheld if ICANN assigns any of its rights under this Agreement to another non?profit corporation organized for the same or similar purposes as ICANN and performing the same functions as ICANN. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of USC and ICANN. USC shall have the absolute, unfettered right to transfer this Agreement and its rights and obligations hereunder to any third party upon notice to ICANN.

9.4 Governing Law. This Agreement shall be construed in accordance with and all disputes hereunder shall be governed by the laws of the State of California.

9.5 Controversy. All controversies, claims and disputes arising in connection with this Agreement shall be settled by mutual consultation between the parties in good faith as promptly as possible, but failing an amicable settlement shall be settled finally by arbitration in accordance with the provisions of this Section. Such arbitration shall be conducted in Los Angeles, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA").

(a) Exclusivity. The parties hereto hereby agree that the arbitration procedure provided for herein shall be the sole and exclusive method of resolving any and all of the aforesaid controversies, claims or disputes.

(b) Decision by Arbitrator. The parties shall each submit a list of ten (10) proposed arbitrators to the other party hereto within thirty (30) days after receipt of notice of arbitration of any dispute hereunder. Thereafter the parties shall have an additional thirty (30) days in which to agree upon a single arbitrator to conduct the arbitration, taken from the lists so submitted. If the selected arbitrator is otherwise unavailable or if the parties cannot agree upon an arbitrator, one will be selected by the AAA. The arbitrator so selected shall make a final decision and award according to the terms and provisions of this Agreement and applicable law. Said decision shall set forth findings of fact and conclusions of law upon which the award is based. The arbitrator may select counsel to provide advice in preparation of such findings and conclusions, and on any point of law arising in the course of arbitration. Judgment upon the award may be entered in any court which has jurisdiction over such matter in accordance with the provisions of Section 9.4 hereof.

(c) Costs and Expenses. The costs and expenses of the arbitration, including without limitation attorneys' fees, shall be borne by the parties in the manner determined by the arbitrator.

(d) Judicial Action. Legal action for (i) entry of judgment upon any arbitration award or (ii) adjudication of any controversy, claim or dispute arising from a breach or alleged breach of Sections 9.5(a), (b) or (c) hereof may be heard or tried only in the courts of the State of California for the County of Los Angeles or the Federal District Court for the Central District of California. Each of the parties hereto hereby waives any defense of lack of in personam jurisdiction of said courts and agrees that service of process in such action may be made upon each of them by mailing it certified or registered mail to the other party at the address provided for in Section 9.7 hereof. Both parties hereby submit to the jurisdiction of the court so designated, to the exclusion of any other courts which might have had jurisdiction apart from this Section 9.5, and agree that the prevailing party shall be entitled to recover from the non?prevailing party reasonable expenses, including without limitation attorney's fees.

9.6 Headings. The headings herein are for reference purposes only and shall not constitute a part hereof or be deemed to limit or expand the scope of any provision of this Agreement.

9.7 Notice. All notices to be given under this Agreement (which shall be in writing) shall be given at the respective addresses of the parties as set forth above their respective signatures to this Agreement, unless notification of a change of address is given in writing. Any notice required by this Agreement shall be deemed to have been properly received when delivered in person or when mailed by registered or certified first class mail, return receipt requested, or by Federal Express to the address as given herein, or such addresses as may be designated from time to time during this term of this Agreement.

9.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

9.9 Entire Agreement. This Agreement fully supersedes any and all prior agreements or understandings between the parties hereto or any of their respective affiliates with respect to the subject matter hereof, and no change in, modification of or addition, amendment or supplement to this Agreement shall be valid unless set forth in writing and signed and dated by both parties hereto subsequent to the execution of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their duly authorized representatives and to become effective as of the Effective Date.