EXHIBIT 10.1

SETTLEMENT AND LICENSE AGREEMENT

This Settlement and License Agreement (“Agreement”) dated May 25, 2011
(“Effective Date”), among Cisco Systems, Inc. (“CSI”), a California corporation
with its principal place of business at 170 West Tasman Drive, San Jose,
California 95134-1706, Cisco Consumer Products LLC (“Cisco-Linksys”), a
California limited liability corporation with its principal place of business at
17401 Armstrong Ave, Irvine, California 92614 (CSI and Cisco-Linksys
collectively (“Cisco”)), and Network-1 Security Solutions, Inc. (“Network-1”),
Corey Horowitz (“Horowitz”), and CMH Capital Management Corp. (“CMH”).

RECITALS

WHEREAS, Network-1 brought suit against CSI and Cisco-Linksys in a civil action
filed February 7, 2008 in the United States District Court for the Eastern
District of Texas entitled Network-1 Security Solutions, Inc. vs. Cisco Systems,
Inc. et al., Civil Action No. 6:08cv030 (the “Lawsuit”) alleging that CSI and
Cisco-Linksys infringe United States Patent No. 6,218,930 (the “Asserted
Patent”);
 
WHEREAS, CSI and Cisco-Linksys filed an Answer and Counterclaims in the Lawsuit
alleging, inter alia, that the Asserted Patent is invalid and not infringed;
 
WHEREAS, the Parties (as defined below) signed a Term Sheet on July 15, 2010
(the “Term Sheet”);
 
WHEREAS, the Term Sheet contemplated that the Parties would enter into a long
form agreement;
 
WHEREAS, the Parties settled all claims presented in the Lawsuit and all actions
or conduct that predated execution of this Agreement, fully, finally and without
making any admissions or concessions concerning their respective factual or
legal positions;
 
WHEREAS, Network-1 owns or controls certain patents to which Cisco and its
Affiliates desire a license and release from any claims of past infringement,
and Company (as defined below) may own or control, now or in the future, certain
patents to which Cisco and its Affiliates desire a license and release; and
 
WHEREAS, Network-1 may desire to obtain and license to third parties patents
related to power over Ethernet technology, and potentially obtain certain
patents related to power over Ethernet technology from Cisco.
 
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THEREFORE, in consideration of the promises and mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Cisco, Network-1, Horowitz, and CMH each on
behalf of themselves and their Affiliates, agree as follows:

AGREEMENT

Section 1.                       DEFINITIONS

1.1   “Acquire” or “Acquisition” shall mean (except where such terms are used as
part of other defined terms):

(a) If the Entity has voting shares or other voting securities, an acquisition
of an Entity in which more than fifty percent (50%) of the outstanding shares or
securities representing the right to vote for the election of directors or other
managing authority for such Entity becomes owned or controlled directly or
indirectly by another Entity; or

(b) If the Entity does not have voting shares or other voting securities, an
acquisition of an Entity in which more than fifty percent (50%) of the ownership
interest representing the right to make decisions for such Entity becomes owned
or controlled directly or indirectly by another Entity; or

(c) An acquisition of all or substantially all of the assets of an Entity
directly or indirectly by another Entity.

 
1.2           “Adverse Ruling” means a determination as part of any judicial,
regulatory or administrative proceeding that:
 
(a) claims 6 and 9 of the Asserted Patent are not valid;
 
(b) claims 6 and 9 of the Asserted Patent are unenforceable for any reason that
would apply in the same way to Cisco;
 
(c) Network-1, or any successor to the Asserted Patent, is estopped, enjoined,
or otherwise prevented from asserting claims 6 and 9 of the Asserted Patent
against Cisco; or
 
(d) a product or service accused of infringing claim 6 and/or claim 9 of the
Asserted Patent:
 
(i) does not satisfy at least one claim element of each asserted claim of claim
6 or claim 9 of the Asserted Patent for any reason that would apply in the same
way to Cisco if claim 6 or claim 9 were being asserted against Cisco;
 
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(ii) is covered by an implied license to the Asserted Patent that would apply in
the same way to Cisco;
 
(iii) is subject to patent exhaustion that would apply in the same way to Cisco;
or
 
(iv) does not infringe each asserted claim of claim 6 or claim 9 for some other
reason that would apply in the same way to Cisco.
 
The term “Adverse Ruling” additionally shall encompass a re-issue or
re-examination proceeding in which: (a) at least claims 6 and 9 of the Asserted
Patent are canceled; (b) at least claims 6 and 9 of the Asserted Patent are
amended such that a *** or *** would not infringe the claims as amended; or (c)
an office action or decision by the Board of Patent Appeals and Interferences
that rejects or invalidates at least claims 6 and 9 of the Asserted
Patent.  Office actions issued by the Patent Office in a reexamination
proceeding that are non-final (i.e., where prosecution before the Patent Office
examiner continues) are not “Adverse Rulings.”

1.3   “Affiliate(s)” of a Party shall mean any and all Entities, now or in the
future and for so long as the following ownership and control exists, that: (a)
own or control, directly or indirectly, the Party; (b) are owned or controlled
by, or under common control with, directly or indirectly, the Party; or (c) are
owned or controlled, directly or indirectly, by a Parent Company.  For purposes
of the preceding sentence, “own or control” shall mean the possession, directly
or indirectly, of the power to
 
(i) direct the management or policies of a corporation or other Entity,
 
(ii) influence to such an extent as to have the ability to control the
management or policy decisions of the corporation or other Entity, or
 
(iii) cause the direction of the management or policies of a corporation or
other Entity,
 
whether through ownership of voting securities, by contract, or otherwise. With
respect to Network-1, Horowitz, and CMH, “Affiliate” specifically includes any
Entities for which Network-1, Horowitz, or CMH have the right or power to direct
or control the decision making with respect to bringing or maintaining a patent
infringement lawsuit.

1.4           “Asserted Patent” means United States Patent No. 6,218,930.
 

 
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1.5           “Cisco Authorized Party” shall mean any Entity that is *** or ***
authorized by Cisco or its Affiliates to exercise any *** or to *** with respect
to a Licensed Product or a ***, including without limitation *** or *** and
***.  An Entity that sells a Third Party Product that operates, is designed to
operate, or is advertised to operate with a Licensed Product is not a Cisco
Authorized Party with respect to the sale of such Third Party Product.
 
1.6           *** shall mean:
 
(a) a *** of Licensed Products; and/or
 
(b) a *** of *** Licensed Products with ***, if the functionality, structure, or
other characteristics of the Licensed Product(s) satisfies, in whole or in part,
an *** in a Licensed Patent and the sale, use, or *** of such Licensed Products
would, absent this Agreement, constitute
 
(i) direct infringement of any Licensed Patent,
 
(ii) contributory infringement of any Licensed Patent (where the determination
of infringement in this subsection (ii) shall assume the existence of any
necessary knowledge or intent required to constitute contributory infringement,
and shall assume that such Licensed Products do not have any substantial
non-infringing uses), or
 
(iii) inducement of infringement of any Licensed Patent (where the determination
of infringement in this subsection (iii) shall assume the existence of any
necessary knowledge of the Licensed Patents); or

 
(c) a *** of *** Licensed Products with *** if Cisco or its Affiliates has given
a *** to such third party with respect to infringement of third party patent
rights arising from the sale or use of such ***.

1.7           “Company” shall mean Network-1 and Horowitz and any of their
present or future Affiliates, including without limitation CMH and any of its
present and future Affiliates.

1.8           “Entity” shall mean a corporation, association, partnership,
business trust, joint venture, limited liability company, proprietorship,
unincorporated association, individual or other entity that can exercise
independent legal standing.

 

 
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1.9           “Excluded Companies” shall mean ***.

1.10           “Expiration Date” shall mean the date on which the Asserted
Patent expires.

1.11           “Licensed Patents” shall mean (a) the *** Patents (if acquired by
Network-1 pursuant to Section 6 below), (b) the Asserted Patent, (c) any and all
classes and types of patents, patent applications, and patent rights recognized
anywhere in the world having a filing date or priority date on or before five
(5) years from the Effective Date, for which Company owns, has, or acquires, now
or in the future, the title or right to enforce or grant licenses, rights,
releases, covenants, or immunities, and (d) all patents related to those set
forth in categories (a), (b), and (c) and all patents claiming benefit, in whole
or in part, of any of their filing dates including, but not limited to,
extensions, divisionals, continuations, continuations-in-part, reissues,
reexaminations, substitutions and foreign counterparts of any of the foregoing.

1.12           “Licensed Products” shall mean *** and *** and *** of or provided
by (directly or indirectly) Cisco or its Affiliates, including any portions
thereof.

1.13           “*** Patents” means U.S. Patent Nos. *** and *** and U.S. Patent
Application No. ***, and including all foreign counterparts claiming priority
from any of U.S. Patent Nos. *** and *** and U.S. Patent Application No. ***.

1.14           “Parent Company” shall mean any Entity that owns or controls
(directly or indirectly) more than fifty percent (50%) of the outstanding shares
or securities representing the right to vote for the election of directors or
other managing authority of a Party.

1.15           “Party” or “Parties” shall mean Cisco, Network-1, Horowitz, and
CMH, alone or collectively, as the context indicates.

1.16           “PoE Portfolio” means the Asserted Patent and the *** Patents.

1.17           “PoE Standard” means the Power over Ethernet (PoE) IEEE Standard
802.3 af-2003 and 802.3 at-2009, and any future standard that requires detection
of whether a *** can accept remote power from a *** in a manner substantially
similar to that required by the PoE IEEE Standard 802.3 af-2003 and 802.3
at-2009.

 

 
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1.18           *** shall mean ***.
 
1.19           *** or *** means any apparatus, device, equipment, or product
that receives *** in a PoE system in compliance with the PoE Standard.

1.20           *** or *** means any equipment that supplies power to *** in a
PoE system in compliance with the PoE Standard.

1.21           “Program” shall mean a plurality of instructions capable of being
interpreted or executed by a product, whether or not such instructions are in a
machine-readable form and whether or not such instructions require some
processing (such as assembly or compilation) prior to interpretation or
execution and whether or not such instructions are implemented in hardware or
software.

1.22           *** refers to a *** product made, used, offered for sale, or sold
within the United States or imported into the United States prior to the
Expiration Date.  As used in this Agreement, *** shall not encompass: (a) any
apparatus, device, equipment or product that exclusively uses ***; and (b) any
apparatus, device, equipment or product that is used only for (i) Cisco’s
internal purposes (e.g., labs, test beds, interoperability testing, customer and
product support related purposes), (ii) Cisco’s demonstration for training and
marketing purposes, or (iii) Cisco’s distribution to and external use by its
Authorized Third Parties for development, interoperability testing,
demonstrations, evaluations, beta test, field trials, prototype labs, marketing,
training, support, or non-production environment related purposes.

1.23           *** refers to a *** product made, used, offered for sale, or sold
within the United States or imported into the United States prior to the
Expiration Date.  As used in this Agreement, *** shall not encompass (a) any
apparatus, device, equipment or product that exclusively uses *** to ***; and
(b) any apparatus, device, equipment or product that is used only for (i)
Cisco’s internal purposes (e.g., labs, test beds, interoperability testing,
customer and product support related purposes), (ii) Cisco’s demonstration for
training and marketing purposes, or (iii) Cisco’s distribution to and external
use by its Authorized Third Parties for development, interoperability testing,
demonstrations, evaluations, beta test, field trials, prototype labs, marketing,
training, support, or non-production environment related purposes.

1.24           *** means *** or *** of *** in a *** not *** for ***.

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1.25           “Term Sheet” means the Term Sheet between the Parties signed on
July 15, 2010.

1.26           “Third Party Products” means any products and services that are
not Licensed Products.

1.26           “Third Party Licensed Products” means any *** or *** of a third
party that is made, used, offered for sale, or sold within the United States or
imported into the United States that is covered under a license with respect to
the Asserted Patent.

1.27           “Unlicensed Third Party” shall mean any Entity that is not a
licensee under all patents in the PoE Portfolio.

Section 2.                       RELEASES

2.1 Company Release.  Network-1, Horowitz, and CMH, on behalf of themselves, and
their Affiliates, successors, and assigns, hereby release, acquit and forever
discharge Cisco and its Affiliates, and all of their respective current and
former predecessors, successors, and all officers, employees, agents, directors,
shareholders, and owners of Cisco and its Affiliates, but only to the extent
they were acting on behalf or for the benefit of Cisco or its Affiliates,
(collectively “Cisco Released Parties”) from any and all actions, causes of
action, claims or demands, liabilities, losses, damages, attorneys’ fees, court
costs, or any other form of claim or compensation for known and unknown acts,
including without limitation any claim of infringement of patents, that occurred
prior to the Effective Date.  For the avoidance of doubt, a third party that
(outside of Cisco’s distribution chain) provides to another third party an
unlicensed product that is not a Licensed Product *** that may integrate with a
Licensed Product *** is not, based on providing such unlicensed product to such
other third party and integrating such product with the Licensed Product, acting
on behalf of or for the benefit of Cisco.  Network-1, Horowitz, and CMH, on
behalf of themselves and their Affiliates, covenant not to sue or threaten to
sue (or cooperate with, instruct, or encourage a third party to sue or threaten
to sue) any Cisco Released Party on account of any such released claim.

 

 

 

 
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2.2 ***.  In the event of an *** of an *** other than an *** (“***”) by *** or
its ***, then ***, ***, and ***, on behalf of themselves and their Affiliates,
successors, and assigns shall *** and *** and ***, and all of ***, but only to
the extent they were acting on behalf or for the benefit of such *** or making,
using or selling products or services provided by or on behalf of such ***, from
any and all *** to the *** date of such ***.  The *** in this paragraph does not
extend to any *** that is, from six months prior to an *** (as defined below)
and through the ***, in a litigation that *** accuses such *** of ***. “***”
means the later of (a) the date on which either *** or its Affiliates announces
to the general or investing public that it intends to *** an ***, provided that
the *** becomes an *** of *** thereafter without any intervening announcement
that the *** has been canceled, or (b) the *** of an ***, if no earlier *** is
made.

 
2.3   Cisco Authorized Parties.  Network-1, Horowitz, and CMH, on behalf of
themselves, their Affiliates, successors and assigns, hereby release, acquit,
and forever discharge Cisco Authorized Parties and their Affiliates,
predecessors, successors, officers, employees, agents, directors, shareholders,
owners, users, customers, suppliers, distributors, retailers, (including
value-added resellers), manufacturers (including original equipment and device
manufacturers), assemblers, replicators, and integrators (collectively “Other
Released Parties”) from any and all actions, causes of action, claims or
demands, liabilities, losses, damages, attorneys’ fees, court costs, or any
other form of claim or compensation for known and unknown acts for any
infringement that occurred prior to the Effective Date of (i) patents by
Licensed Products, and (ii) of patents, other than the Asserted Patent, by ***;
with respect to such ***, the release does not apply to the extent any
infringement claim can be made against Third Party Products without use of or
reference to Licensed Products.  Network-1, Horowitz, and CMH, on behalf of
themselves and their Affiliates covenant not to sue or threaten to sue (or
cooperate with, instruct, or encourage a third party to sue or threaten to sue)
any Other Released Parties on account of any such released claim.  For the
avoidance of doubt, this Section does not release Other Released Parties from
claims based on products that are not Licensed Products.  Notwithstanding the
foregoing, the release contained in this Section 2.3 shall not apply to the
Excluded Companies.

 

 

 

 

 

 

 
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2.4   Cisco Release.  Cisco, on behalf of itself, its Affiliates, successors and
assigns, hereby releases, acquits and forever discharges Company, and all of
their respective current and former predecessors, successors, officers,
employees, agents, directors, shareholders, and owners, but only to the extent
they were acting on behalf or for the benefit of Company, (collectively “Company
Released Parties”) from any and all actions, causes of action, claims or
demands, liabilities, losses, damages, attorneys’ fees, court costs, or any
other form of claim or compensation for claims that were or could have been
asserted in the Lawsuit.  Cisco, on behalf of itself and its Affiliates,
covenants not to sue any Company Released Party on account of any such claim.
 
2.5   Release of Unknown Claims.  Each release contained in this Agreement
extends to claims to which Network-1, Horowitz, CMH, Cisco, and their Affiliates
do not know or suspect to exist in their favor, which if known by them, would
have materially affected their decision to enter into the releases contained in
this Agreement.  Network-1, Horowitz, CMH, and Cisco, on behalf of themselves
and their Affiliates, acknowledge that they are familiar with Section 1542 of
the Civil Code of the State of California, which is quoted as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW, OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

The Parties expressly waive their right under Section 1542 as to any unknown
claims within the scope of the releases under this Agreement.

2.6 ***.  ***, on behalf of themselves and their Affiliates, *** (or *** a third
party to *** or ***) *** or its Affiliates for a *** from the Effective Date
(“***”) for ***.  *** shall not *** during this *** and *** shall not ***
accrued during this *** in any later proceeding. Any actual or constructive
notice of *** of any *** provided by *** to *** or its Affiliates during the ***
shall not be deemed received or effective until after the *** .

 

 

 

 

 
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2.7   The obligations of the Parties created by this Settlement Agreement are
not released by this Section 2.
 

Section 3.                       DISMISSAL AND PAYMENT

3.1   Dismissal.   As contemplated by the Term Sheet, on August 5, 2010,
Network-1 and Cisco filed an Agreed Motion to Dismiss (Docket No. 532).  On
August 6, 2010, the Court dismissed the Lawsuit against Cisco (Docket No. 533).
 
3.2   Payment.  On August 9, 2010, as contemplated by the Term Sheet, Cisco paid
Network-1 $26,000,000 (the “Initial Payment”).  This Initial Payment is
non-contingent and is not refundable under any circumstances, independent of any
events, including any Adverse Ruling, except with respect to those circumstances
detailed in Section 6 should Network-1 accept the *** Patents pursuant to
Section 6.1.
 
3.3   Costs and Expenses.  The Parties agree that each Party shall be
responsible for its own costs and expenses relating to the Lawsuit (including
attorney and expert fees and expenses).
 
3.4   Payment Instructions.  Cisco shall make all payments to Network-1 in
performance of any obligation of Cisco defined in this Agreement in United
States Dollars by bank wire as instructed by Network-1.  Network-1 may, in its
discretion, provide Cisco with written notice of alternative methods of payment.

3.5   Taxes.  Network-1 will be responsible for any duties, taxes, and/or levies
to which it is subject as a result of any payment under this Agreement.

 
Section 4.                       GRANT OF RIGHTS

4.1   License.  Subject to the terms and conditions contained herein, Network-1,
Horowitz, and CMH, on behalf of themselves and their Affiliates, grant to Cisco
and its Affiliates a nonexclusive, worldwide, irrevocable, and perpetual
license, under all Licensed Patents:

(a) To make (including the right to use any apparatus and practice any method in
making), use, sell, offer for sale, lease, export, import, or otherwise dispose
of Licensed Products; and/or

 
(b) To have Licensed Products made or otherwise provided by one or more third
parties for the use, sale, offer for sale, lease, exportation, importation, or
disposal by Cisco or its Affiliates.

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4.2   Cisco Authorized Parties. Cisco Authorized Parties shall be licensed under
the Licensed Patents to make, use, sell, offer for sale, lease, export, import,
or otherwise dispose of a Licensed Product.  Cisco Authorized Parties shall be
licensed under the Licensed Patents, other than the Asserted Patent, to make,
use, sell, offer for sale, lease, export, import, or otherwise dispose of a
***.  For the avoidance of doubt, the license under this Section 4.2 does not
apply to Third Party Products to the extent any infringement claim can be made
against such Third Party Products without use of or reference to Licensed
Products.
 
4.3   Limitations. To the extent Company has or acquires less than full rights
with respect to any Licensed Patents, the license or other rights granted by
Company under such Licensed Patents shall be for as much of such terms as, and
to the maximum extent that Company has the right to grant.
 
4.4   Third Party Lawsuits. To the extent that Company owns or controls a patent
that, in the absence of a grant of licenses or other rights under such patent to
a third party by Company, would otherwise qualify as a Licensed Patent, Company
covenants not to sue or threaten to sue (or cooperate with, instruct, or
encourage a third party to sue or threaten to sue) Cisco, its Affiliates, or
Cisco Authorized Parties for infringement of such patent but only to the same
extent that such parties would have been licensed or released under this
Agreement had Company not granted licenses, releases, covenants, or other rights
to the third party.

4.5 ***.  If an *** ceases to be an *** after the Effective Date ***, any
licenses, rights, covenants, releases and other immunities provided to the ***
under this Agreement shall continue for the life of the Licensed Patents
provided, however, that the *** complies with its obligations under this
Agreement, including the obligation to pay applicable royalties.  If ***, any
licenses, rights, covenants, releases and other immunities provided under this
Agreement shall continue for the life of the Licensed Patents with respect to
such *** and all future *** and new *** directly derived from such ***,
provided, however, that the *** such *** complies with its obligations under
this Agreement, including the obligation to pay applicable
royalties.  Applicable royalties in this section refer to the royalties based on
the schedule set forth in Section 5.1 below, and are to be paid according to the
terms set forth in Section 5.3 below.  For the avoidance of doubt, any Entity
that *** a *** does not obtain a release under this Section 4.5 for any products
that such Entity made, used, sold, or offered for sale prior to *** of the ***.

 

 

 
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Section 5.                       ROYALTY
 
5.1   Royalty.  Cisco agrees to pay Network-1, for each *** on a *** or *** sold
in the United States by Cisco or its Affiliates to a third party on or after
January 1, 2011 and ending on the Expiration Date, a royalty as set forth below
(the “Royalty Rates”).  Subject to the other terms of this Agreement and
potential extinguishment of royalty obligations as set forth in this Agreement,
each year beginning in 2011, Cisco shall pay Network-1 quarterly royalties per
*** sold in the United States according to the following schedule.

Cumulative Total *** Sold In a Calendar Year
Royalty per ***
***
$***
***
$***
***
$***
***
$***
***
$***

For example, if Cisco sells *** in a given year, Cisco shall pay Network-1:
 
              *** x $***
+           *** x $***
+           *** x $***
+           *** x $***
______________________
= ***.

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5.2   Royalty Cap.  The royalty due under Section 5.1 does not have a minimum
total dollar value, but the total royalty payable to Network-1 under Section 5.1
on an annual basis shall not exceed a “Royalty Cap” (that is, the total paid by
Cisco and its Affiliates under Section 5.1 for any calendar year shall not
exceed the Royalty Cap).  The Royalty Cap shall be $8,000,000 per calendar year
for calendar year 2011 through and including calendar year 2015, $9,000,000 per
calendar year for calendar year 2016 through and including calendar year 2019,
and for calendar year 2020, $9,000,000 multiplied by the percentage of the year
2020 that the Asserted Patent is effective.  Notwithstanding the foregoing, the
Royalty Cap shall be subject to adjustment in accordance with Section 6.4 should
Network-1 accept the *** Patents pursuant to Section 6.1.
 
5.3   Royalty Payments.  Beginning in calendar year 2011 and ending on the
Expiration Date, Cisco shall make quarterly royalty payments to Network-1 (up to
the Royalty Cap in aggregate for the year) within forty-five (45) days after the
end of each quarter for each *** sold in the United States during the quarter
according to the Royalty Rates.  Cisco will provide to Network-1 a report within
thirty (30) days after the end of each calendar quarter, substantially in the
form below, showing the quantity of *** subject to royalty shipped in the
previous quarter.

 
CISCO SYSTEMS
   
<YEAR>
   
<QUARTER(S)>
         
Cisco Product ID
*** Sold
Royalty
Xxxxx
0
$0.0
Xxxxx (returned)
0
$0.0
Xxxxx (net ***)
0
$0.00
Yyyyy
0
$0.0
Yyyy (returned)
0
$0.0
Yyyy (net ***)
0
$0.0
TOTALS:
           
TOTAL PAYMENT:
$0.0
     

 
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5.4   Cisco Authorized Parties.  If Network-1 or any successor of rights in the
Asserted Patent (an “Asserter”), sues or threatens to sue (or instructs or
affirmatively encourages a third party to sue or threaten to sue) any Cisco
Authorized Party for infringement of the Asserted Patent by Licensed Products
and/or *** (collectively referred to as an “Assertion”), then (i) no further
royalty payments shall be due under Section 5.1, (ii) Network-1 and any
successor of rights in the Asserted Patent agrees to indemnify and hold Cisco
and its Affiliates harmless from any and all actions, causes of action, claims
or demands, liabilities, losses, damages, attorneys’ fees, court costs, or any
other form of claim or loss arising out of such Assertion, (iii) Network-1 and
any successor of rights in the Asserted Patent shall release and hereby do
release Cisco Authorized Parties for infringement of the Asserted Patent by
Licensed Products and/or ***, and (iv) Cisco Authorized Parties shall be
licensed under the Asserted Patent, to make, use, sell, offer for sale, lease,
export, import, or otherwise dispose of a ***.  Notwithstanding the foregoing,
with respect to ***, (i) through (iv) of the preceding sentence does not apply
to the extent any infringement claim can be made against Third Party Products
without use of or reference to Licensed Products.  Notwithstanding the
foregoing, if an Asserter unknowingly pursues an Assertion and cures such
Assertion within thirty (30) days of receiving notice from Cisco, then
subsections (i) through (iv) of the preceding sentence will not apply to such
Assertion.

5.5   Most Favored Royalty Rate.

(a) Network-1 represents and warrants that the Royalty Rates set forth above in
Section 5.1 are lower than any royalty rate granted to or in effect for any
other Entity with a license or similar right to the Asserted Patent as of the
Effective Date (“Pre-existing License”).  A royalty rate in a Pre-existing
License is lower than the Royalty Rates set forth in Section 5.1 of this
Agreement if Cisco and its Affiliates would have paid less in royalties to
Network-1 under the royalty rate(s) and structure set forth in the Pre-existing
License than Cisco and its Affiliates would have paid to Network-1 under the
Royalty Rates set forth in Section 5.1 of this Agreement based on sales of ***
and *** by Cisco or its Affiliates during any comparable one-year period of
time.  For example, if Cisco and its Affiliates, based on their sales of *** and
***, would have paid Network-1 (i) $7,000,000 as an aggregate payment for the
one-year period prior to the Effective Date calculated using the Royalty Rates
set forth in Section 5.1, and (ii) $5,000,000 as an aggregate payment for that
same one-year period calculated using the royalty rate(s) and structure set
forth in a Pre-existing License, the royalty rate in the Pre-existing License
would be lower than the Royalty Rates set forth in Section 5.1 of this
Agreement.  For purposes of this Section 5.5, the following agreements shall not
be considered a Pre-existing License or an Other License (defined below): (i)
the *** agreement (and subsequent amendment) between *** and *** in which ***
purchased *** patents (including ***), and (ii) the *** Agreement in which ***
and *** cross-licensed the rights to each other’s patents.
 
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(b) If Network-1, or any successor to the Asserted Patent, grants or has granted
a license or similar right to the Asserted Patent to any other Entity, including
any Preexisting License, with a lower royalty rate (the “Other License”), then
Cisco shall be entitled to obtain the benefit of such lower royalty rate as of
the effective date of the Other License if Cisco agrees in writing to the
material terms of the Other License.  A royalty rate in an Other License is a
lower royalty rate if Cisco and its Affiliates would have paid less in royalties
to Network-1 under the royalty rate(s) and structure set forth in the Other
License than Cisco and its Affiliates would have paid to Network-1 under the
Royalty Rates set forth in Section 5.1 of this Agreement based on sales of ***
and *** by Cisco or its Affiliates during any comparable one-year period of
time.  For example, with respect to an Other License with an effective date
after the Effective Date of this Agreement, if Cisco and its Affiliates, based
on their sales of *** and *** during the one-year period prior to the effective
date of the Other License, would have paid Network-1 (i) $7,000,000 as an
aggregate payment for that one-year period calculated using the Royalty Rates
set forth in Section 5.1, and (ii) $5,000,000 as an aggregate payment for that
one-year period calculated using the royalty rate(s) and structure set forth in
an Other License, the royalty rate in the Other License would be lower than the
Royalty Rates set forth in Section 5.1 of this Agreement.  Any license with an
Excluded Company or other Entity for which the payment is only a *** may not be
considered as an Other License; any license with an Excluded Company or other
Entity for which the payment terms are on a *** basis in whole or in part may be
considered an Other License.  Notwithstanding the preceding sentence, any
license that is agreed to with an Entity that is structured to include *** based
on the *** but is restructured into a *** may be considered an Other License
where the royalty rate is deemed to be the *** agreed to as the license was
originally structured.
 
(c) Should a lower royalty rate be discovered as the result of an audit under
Section 5.7 and Cisco agrees in writing to the other material terms of the Other
License, then Cisco shall offset any difference between (i) the payments
actually made by Cisco under Section 5.1 of this Agreement, and (ii) the
payments that Cisco would have made to Network-1 under the terms of the Other
License from the effective date of the Other License to the date that the lower
royalty rate is discovered, *** (the “Difference”), against the quarterly
payment made by Cisco following the discovery of the lower royalty rate.  If the
quarterly payment following the discovery of the lower royalty rate is not
sufficient to offset the Difference, Network-1 shall, within thirty (30) days of
receiving the royalty report corresponding to that quarterly payment, pay Cisco
the difference between the Difference and the amount of the offset deducted from
quarterly payment.  If a lower royalty rate is discovered after the Expiration
Date, Network-1 shall pay Cisco the Difference within thirty (30) days after the
conclusion of the audit.  Cisco shall not receive the benefit of any lower
royalty rate for any period prior to the effective date of the Other License.
 

 
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(d) Network-1 shall reimburse Cisco for the reasonable cost of any audit if (a)
the audit finds that a royalty rate granted to or in effect for another Entity
in an Other License is more than 10% less than the Royalty Rates set forth in
Section 5.1, and (b) Cisco agrees to the material terms of the Other License.
 
(e) Network-1, or any successor to the Asserted Patent, shall, within thirty
(30) days of entering into an agreement that grants a license or similar right
to the Asserted Patent, provide Cisco with all material financial terms of such
agreement, provided that Cisco first agrees in writing to maintain such
financial terms in confidence.
 
5.6 Audit by Network-1.  Cisco shall maintain for a period of *** after the end
of the Cisco fiscal year to which they pertain, *** and *** of the Licensed
Products manufactured and sold by Cisco or its Affiliates to the extent
necessary to calculate Cisco's royalty obligations hereunder.  Upon reasonable
prior notice, Network-1 will have the right, exercisable not more than ***, to
appoint an independent accounting firm or other agent reasonably acceptable to
Cisco, at Network-1’s expense, to examine such *** and *** directly pertaining
to the Licensed Products.  Such audit shall be for the sole purpose of verifying
the royalties due by Cisco to Network-1 herein.  The audit shall not cover any
period earlier than two years from the date of the audit request from Network-1.
The audit shall be conducted during Cisco’s normal business hours and subject to
execution of Cisco’s standard confidentiality agreement by the accounting firm
or agent provided, however, that execution of such agreement will not preclude
such auditor from reporting its results to Network-1.  In the event such audit
discloses an overpayment or underpayment of royalties due hereunder, the
appropriate Party will promptly remit the amounts due to the other Party;
provided, however, that any such payment shall be limited to the amount of such
overpayment or underpayment.  Cisco shall reimburse Network-1 for the reasonable
cost of any audit if the audit discloses an underpayment greater than *** for
the audited period.

 

 

 

 

 

 

 

 

 

 

 
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5.7 Audit by Cisco.  Network-1 shall maintain, for a period of *** after the end
of each calendar year to which they pertain, books and records regarding
licensing of the Asserted Patent, including other license agreements and royalty
reports adequate to accurately determine the material terms and conditions of
any other licenses of the Asserted Patent.  Upon reasonable prior notice, Cisco
will have the right, exercisable not more than ***, to appoint an independent
accounting firm or other agent reasonably acceptable to Network-1, at Cisco’s
expense, to examine such books and records.  Audits under this Section 5.7 may
be used by Cisco for verification and enforcement of the provisions of this
Section 5 and, if Network-1 takes ownership of the *** Patents, for verification
and enforcement of the provisions of Section 6.  The auditor shall enter into an
appropriate nondisclosure agreement with Network-1 and any necessary third
parties, provided, however, that execution of such agreement will not preclude
such auditor from reporting its results to Cisco.  In the event such audit
discloses an overpayment or underpayment of amounts due hereunder, the
appropriate Party will promptly remit the amounts due to the other Party;
provided, however, that any such payment shall be limited to the amount of such
overpayment or underpayment.  Network-1 shall reimburse Cisco for the reasonable
cost of any audit if the audit discloses an overpayment greater than *** for the
audited period.

 
5.8 Returns; Third Party Licensed Products.  Only one royalty will be paid for
the sale of any given Licensed Product subject to royalty in this
Agreement.  Royalties for sales of Licensed Products shall be net of returns,
including without limitation returns for warranty defects and stock rotation,
but only to the extent (a) Cisco credits or refunds the customer returning
Licensed Products an amount equal to or greater than fifty percent (50%) of the
amount originally invoiced for the Licensed Products, and (b) the Licensed
Products were initially sold after the Effective Date.  Cisco will not owe any
royalty payment for Third Party Licensed Products sold by Cisco or under Cisco’s
brand.  Cisco shall be entitled to credit for returns of Licensed Products for
which royalties were paid.  At the discretion of Cisco, credit will be offset
against or deducted from royalties due to Network-1 or will be refunded to Cisco
within forty-five (45) days of request.

 

 

 

 

 
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5.9   Adverse Ruling.  Subject to the exceptions set forth below in this Section
5.9, no further royalties shall be due under Section 5.1 in the event of any
Adverse Ruling.  Network-1 shall provide Cisco with written notice of any
Adverse Ruling as soon as reasonably practicable.  In the event that an Adverse
Ruling is overturned (such that no Adverse Ruling remains), including by way of
a ruling of the United States Court of Appeals for the Federal Circuit, or other
higher court of competent jurisdiction (an “Overturned Adverse Ruling”), Cisco’s
obligations to pay royalties will be reinstated and Cisco shall owe the
royalties that would have been paid but for such Adverse Ruling ***.  For any
Overturned Adverse Ruling, if appeals or other proceedings remain such that the
Adverse Ruling may be reinstated, then Cisco shall pay any royalty amounts due
under this Agreement into escrow, and any escrowed royalties shall be released
to Network-1 only upon final confirmation of the Overturned Adverse Ruling after
exhaustion of all opportunities for appeal or review.  If such Adverse Ruling
later is reinstated by a subsequent competent appellate, judicial, or
administrative body, then no further royalties shall be due under Section 5.1
and any royalties paid by Cisco into escrow shall be retained by Cisco unless
and until such ruling reinstating the Adverse Ruling is overturned by a
subsequent competent appellate, judicial, or administrative body, in which case
Cisco shall pay any royalty amounts due with interest as set forth above.  If
the Parties disagree as to the effect an Adverse Ruling has on Cisco’s
obligation to pay royalties under this Agreement, the Parties may submit the
issue of whether the Adverse Ruling would be applicable to Cisco’s products to a
mutually agreed upon mediator for mediation followed, if necessary, by a one day
binding arbitration before an arbitration panel pursuant to the rules of
JAMS.  In the event that Cisco’s royalty obligations under Section 5.1 are
terminated under this Section 5.9, all licenses, covenants, releases, and other
rights granted by Company under this Agreement shall remain in full force and
effect.

 
5.10   Limitations on Challenges.  Cisco agrees not directly to challenge or
affirmatively encourage others to challenge the validity or infringement of the
Asserted Patent; provided, however, that Cisco and its Affiliates may assert any
and all defenses (including challenges to validity and infringement) in any
action asserting any claims of the Asserted Patent against Cisco, its
Affiliates, or Cisco Authorized Parties based on alleged infringement of
Licensed Products or ***.

 

 

 
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Section 6.                       POE PORTFOLIO

6.1   *** Patents.  For the 90 days after July 15, 2010 (the “Diligence
Period”), Network-1 shall conduct due diligence on the *** Patents.  Cisco shall
cooperate with Network-1 in obtaining permission for Network-1 to review any
relevant *** agreements subject to suitable confidentiality provisions.  On or
before the last day of the Diligence Period, Network-1 shall in writing either
confirm or decline to accept the *** Patents.  If Network-1 confirms to accept
the *** Patents, then Cisco will cause the *** Patents to be assigned to
Network-1, subject to Cisco retaining a fully paid up and irrevocable license to
the *** Patents of the full scope as granted in Section 4 of this Agreement, and
the provisions of Sections 6.2, 6.3, 6.4, 6.5, and 6.6 shall be effective.  If
Network-1 declines to accept the *** Patents, then the provisions of Sections
6.2, 6.3, 6.4, 6.5, and 6.6 shall not be effective but all other provisions of
this Agreement shall remain in full force and effect.
 
6.2   Network-1 Licensing Efforts.  After the Diligence Period, Network-1 shall
use good faith efforts to license the PoE Portfolio to Unlicensed Third
Parties.  In the event that Network-1 or its successor to the PoE Portfolio
fails to use good faith efforts to license the PoE Portfolio to Unlicensed Third
Parties during the term of this Agreement, no further royalty payments shall be
due from Cisco under Section 5.1, but all licenses and rights granted by
Network-1 under this Agreement shall remain in full force and effect.

 

 

 

 

 
 

 

 

 

 

 

 
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6.3   PoE Licensing Reports.  Within forty-five (45) days of the conclusion of
each calendar year starting with 2010 and continuing during the term of any of
the patents in the PoE Portfolio, Network-1 shall provide a report to Cisco
indicating licensing activity with respect to the PoE Portfolio during that year
and indicating the net dollar amount of any payments, royalties, or fees (less
reasonable expenses, which may include reasonable costs and fees, including
reasonable attorneys’ fees, associated with litigation, other than the Lawsuit,
involving any patents in the PoE Portfolio) received by Company during that year
based on all licenses granted to any of the patents in the PoE Portfolio (“PoE
Licensing Revenue”).  PoE Licensing Revenue shall exclude any royalties received
by Company that Company can show, based on written documentation, to result
solely from licensing of the Asserted Patent and that in no way flow or result
from Company’s rights in the *** Patents.  Such reports shall indicate the
manner of calculating the PoE Licensing Revenue, including the gross revenue,
expenses deducted, and any deductions for licensing revenue attributable solely
to the Asserted Patent along with written documentation for such
deductions.  Such reports shall also identify any new licensees under any of the
patents in the PoE Portfolio and any new or revised licenses involving rights in
any of the patents in the PoE Portfolio.  In calculating PoE Licensing Revenue,
Network-1 shall not deduct any fees, costs, or expenses associated with the
Lawsuit.  PoE Licensing Revenue shall include any payments, royalties, or fees
received from defendants in the Lawsuit.
 
6.4   Royalty Cap Reduction.  For each calendar year beginning with calendar
year 2011 and continuing through the year following expiration or termination of
the Asserted Patent, the Royalty Cap shall be reduced by thirty-five percent
(35%) of PoE Licensing Revenue received during the immediately preceding
calendar year.  If in any year the calculation of the adjusted Royalty Cap would
result in a negative Royalty Cap, Network-1 shall reimburse to Cisco the amount
by which the Royalty Cap would be negative.  Alternatively, if Cisco’s
obligation to pay royalties under Section 5.1 is terminated prior to the
Expiration Date, Network-1 shall reimburse to Cisco thirty-five percent (35%) of
PoE Licensing Revenue received after the date that Cisco’s royalty obligation
terminated.  Network-1 shall have no obligation to reimburse Cisco under this
Section 6.4 for PoE Licensing Revenue that becomes owed to Network-1 after the
later of (a) the Expiration Date and (b) the date the last royalty payment under
Section 5.1 is received from Cisco.  In no event shall Network-1 reimburse Cisco
more than the Initial Payment in aggregate reimbursements under this Section 6.4
(reimbursements shall not include reductions to the Royalty Cap).  Network-1
shall make reimbursement payments to Cisco within forty-five (45) days after the
end of each calendar year (provided that a reimbursement is due).
 
 

 

 

 
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6.5   Network-1 Records.  Network-1 agrees to keep books and records regarding
licensing of the PoE Portfolio, including other license agreements and royalty
reports adequate to accurately determine the material terms and conditions of
any other licenses of the Asserted Patent or other patents included in the PoE
Portfolio.  Network-1 shall retain such books and records for at least two (2)
years after the delivery of any royalty report to which such records pertain.
 
6.6   Effect of Transfer.  Network-1 agrees that any assignment or transfer of
rights in any of the patents in the PoE Portfolio to any other Entity (“PoE
Portfolio Assignee”) shall be subject to such PoE Portfolio Assignee assuming
all obligations with respect to such PoE Portfolio patents, including the
obligations set forth in this Section 6.  If Network-1 retains any rights in any
of the patents in the PoE Portfolio, then all obligations in this Section 6
shall apply to both Network-1 and the PoE Portfolio Assignee.
 
 
Section 7.                       TERM AND TERMINATION
 
7.1   Term.  The term of the licenses granted under this Agreement shall be from
the Effective Date until the last of the Licensed Patents expire.  Other than as
provided for in Section 7.2, the Parties to this Agreement may terminate this
Agreement only by mutual written agreement.  Except for Section 2.6, all other
provisions in this Agreement including, but not limited to, the releases,
immunities and covenants not to sue shall continue in perpetuity.
 
7.2   Termination for Breach.  If Company materially breaches the Agreement and
does not cure within thirty (30) days, then no further payments will be due from
Cisco under Section 5.1 and all licenses granted by Company under this Agreement
become fully paid-up, royalty-free, and irrevocable.  If the Parties cannot
agree whether Company has materially breached, the issue will be determined by
Judge *** in a private session.
 
7.3   Breach of Confidentiality.  Without regard to whether other breaches may
be material, the Parties agree that a violation by Company of Section 9 of this
Agreement shall be a material breach of this Agreement that cannot be cured.  If
the Parties cannot agree whether a breach of Section 9 of this Agreement has
occurred, the issue will be determined by Judge *** in a private session.

 

 
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7.4   Dissolution.  If Network-1 or any successor to rights in the Licensed
Patents files for bankruptcy or insolvency, seeks reorganization of its business
under any law relating to bankruptcy or insolvency, appoints a receiver for all
or substantially all of its property, makes an assignment for the benefit of
creditors, or institutes any proceedings for the liquidation, dissolution, or
winding up of the business or termination of its corporate charter, then no
further payments will be due from Cisco under Section 5.1 and all licenses
granted by Company under this Agreement become fully paid-up, royalty-free, and
irrevocable.

 
Section 8.                       REPRESENTATIONS AND WARRANTIES

8.1   Authority.  Network-1, Horowitz, CMH, and Cisco, on behalf of themselves
and their Affiliates, represent and warrant that the individuals signing this
Agreement have full authority or authorization to execute this Agreement for,
and on behalf of, and to bind Network-1, Horowitz, CMH, Cisco, and their
respective Affiliates, and that, when signed, this Agreement will be binding and
enforceable according to its terms.
 
8.2   No Conflicts. Network-1, Horowitz, CMH, and Cisco, on behalf of themselves
and their Affiliates, represent and warrant that neither them, nor any of their
Affiliates, have entered into any other agreement in conflict with the
provisions contained in this Agreement.

 

 

 

 

 

 

 

 

 
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8.3   Right and Title.  Network-1 represents and warrants to Cisco that, with
the exception of the *** Patents, as of the Effective Date: (a)  Network-1  owns
all rights, title, and interest in and to the Licensed Patents, and that no
other third party owns any right to recover for infringement of or to assert any
rights in the Licensed Patents; (b) Network-1 has the right to grant the
licenses, rights, releases, covenants, and immunities of the full scope set
forth in this Agreement with respect to all Licensed Patents; (c) Network-1 has
not granted and will not grant any licenses or other rights, under the Licensed
Patents or otherwise, that would conflict with or prevent the licenses and
rights granted to Cisco hereunder; (d) there are no liens, conveyances,
mortgages, assignments, encumbrances, or other agreements that would prevent or
impair the full and complete exercise of the terms of this Agreement; and (e)
there are no patents or patent applications or foreign counterparts related to
the Asserted Patent, nor does Company own any patent or patent application
claiming or disclosing any PoE technology except the Asserted Patent.  Company
agrees to indemnify and hold Cisco harmless from any claim brought by a third
party asserting rights in the Licensed Patents.  Company shall not grant or
assign any rights under the Licensed Patents, unless such grants or assignments
either (a) do not affect the rights granted in this Agreement, or (b) if they do
affect the rights granted in this Agreement, are made subject to the rights
granted in this Agreement.

8.4           No Patent Circumvention.  Network-1, Horowitz, and CMH, on behalf
of themselves and their Affiliates, represent and warrant that they have not
entered into any transaction since the filing date of the Lawsuit, where an
objective of Company was to remove any patents, patent applications, or patent
rights from the definition of Licensed Patents.  Network-1, Horowitz, and CMH,
on behalf of themselves and their Affiliates, represent and warrant that there
has been no transfer of any patents or patent rights by Company to any third
party since the filing date of the Lawsuit and that all patents or patent rights
owned or controlled by Company as of the filing date of the Lawsuit are included
in the definition of Licensed Patents.

8.5   Control of Patents.  Network-1 hereby represents and warrants to Cisco
that, as of the Effective Date, Network-1 does not have any Parent Company.

 

 

 

 

 
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8.6   U.S. *** Sales.  Cisco represents and warrants that, in its reasonable
estimation, the total number of *** that Cisco will sell in the United States in
calendar year 2010 will be approximately ***.
 
8.7   DISCLAIMER. OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED.  EACH
PARTY AND ITS AFFILIATES EXPRESSLY DISCLAIM ANY WARRANTIES OF VALIDITY,
ENFORCEABILITY, SCOPE, PERFECTION OR DOMINANCE OF THE LICENSED PATENTS.

Section 9.                       CONFIDENTIALITY

9.1   Nondisclosure.  Except as provided in Sections 9.2 and 9.3, each Party, on
behalf of itself and its Affiliates, agrees not to disclose this Agreement, the
terms or conditions contained herein, information exchanged between Cisco and
Network-1 during settlement discussions regarding the Lawsuit, the Term Sheet,
the terms and conditions contained in that Term Sheet, or information relating
to this Agreement (collectively “Confidential Information”) to any third party
(other than its Affiliates) without the prior written consent of the other
Party.
 
9.2   Exceptions.  A Party or its Affiliates may disclose Confidential
Information only:

(a) Any information set forth in the single press release, dated July 19, 2010,
regarding the settlement between the Parties, the content of which was approved
by the Parties, can be disclosed by either Party;
 
(b) By Cisco, on a confidential basis and only with respect to non-monetary
terms, to advise its actual or potential Cisco Authorized Parties that they are
licensed under the Licensed Patents and the extent to which they are licensed;

(c) If required by court order, governmental agency or as otherwise may be
required by law, provided the Party required to disclose gives the other Party
written notice at least ten (10) days prior to disclosure to enable the other
Party to seek a protective order, and reasonable steps are taken by the
disclosing Party to maintain the confidentiality of the Confidential
Information;

 

 

 
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(d) If required to enforce rights under this Agreement, and reasonable steps are
taken by the disclosing Party to maintain the confidentiality of the
Confidential Information;

(e) To the extent reasonably necessary, on a confidential basis, to: (i) its
accountants, attorneys, and financial advisors; (ii) its present or future
providers of venture capital and/or potential investors in or acquirers of such
Party; (iii) any governmental body having jurisdiction and calling therefore;
(iv) legal counsel representing a Party or representing an Entity proposing to
merge with or acquire the Party or one of its Affiliates; (v) a Party’s insurer;
or (vi) third parties in connection with financing or potential Acquisition
activities; provided that, in the situations described in (ii) through (vi),
such Party exercises reasonable efforts, consistent with industry norms, to
obligate such third parties to maintain the confidentiality of the Confidential
Information; or

(f) By Network-1 (or its successor), on a confidential basis and only with
respect to non-monetary terms, to parties negotiating a potential license with
Network-1 for the Asserted Patent or have licensed the Asserted Patent.

 
9.3   Disclosure Requirements.  Network-1 believed and believes, based on advice
of counsel, that in order to comply with its obligations under the securities
laws, in addition to issuing the mutually agreed upon July 19, 2010 press
release regarding the settlement, Network-1 was required  to file with the SEC a
Form 8-K (that was filed on  July 20, 2010) and included a copy of the Term
Sheet as an exhibit (“Initial 8-K”), and will also be required  to file with the
SEC an additional Form 8-K following the execution of this Agreement including
filing this Agreement as an exhibit to the Form 8-K (“Second 8-K”).  Network-1
agrees that, except as otherwise required by applicable SEC disclosure rules,
Network-1 will only disclose the amount of the payment received from Cisco under
this Agreement in the aggregate with payments received from third parties
(unless Network-1 has received payments only from Cisco during the relevant
reporting period).  As was the case with respect to the initial Form 8-K, with
respect to the Second 8-K, Network-1 agrees to seek confidential treatment under
SEC rules of certain provisions (as the Parties mutually agree in good faith) of
the Agreement.    Nothing in this Agreement shall preclude Network-1 from
complying with its disclosure obligations under applicable securities laws.

 
Section 10.                       ASSIGNMENT

10.1   No Assignment.  Except as otherwise provided for in this Agreement,
neither Party shall assign or delegate this Agreement in whole or in part, or
any of the licenses, rights, covenants, immunities, releases, or duties under
this Agreement, by agreement, merger, reorganization, sale of all or
substantially all of its assets, operation of law or otherwise, including in
connection with the insolvency or bankruptcy of the Party, without the prior
written consent of the other Party.  Notwithstanding the foregoing, the Parties
may (a) assign their rights and delegate their duties under this Agreement to
any of their Affiliates, and (b) assign their rights and delegate their duties
to (i) an acquirer of all or substantially all of the equity or assets of their
business to which this Agreement relates or (ii) the surviving Entity in any
merger, consolidation, equity exchange, or reorganization of their business to
which this Agreement relates.
 
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10.2   Assignment of Patents.  Company may assign or grant any exclusive right
under any of its Licensed Patents but only provided that such assignment or
grant is made subject to the terms, including all licenses, rights, covenants,
immunities, releases, and duties, of this Agreement.   Immediately prior to any
such assignment or grant, Company: (a) agrees to grant and hereby does grant a
license to Cisco Authorized Third Parties under the Licensed Patents to make,
use, sell, offer for sale, lease, export, import, or otherwise dispose of a
Licensed Product and/or a ***; and (b) agrees to release, acquit, and forever
discharge, and hereby does release, acquit, and forever discharge, Other
Released Parties from any and all actions, causes of action, claims or demands,
liabilities, losses, damages, attorneys’ fees, court costs, or any other form of
claim or compensation for known and unknown acts for any infringement of patents
by Licensed Products and/or *** that occurred prior to any such assignment or
grant.  For the avoidance of doubt, the license grant and release in the
preceding sentence does not apply to Third Party Products to the extent any
infringement claim can be made against such Third Party Products without use of
or reference to Licensed Products.  The mere assignment of a Licensed Patent to
an assignee does not transform such assignee into an Affiliate.
 
10.3   Noncompliance.  Any assignment failing to comply with the terms and
conditions of this Agreement shall be null and void.

 
 

 

 
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10.4   Acquisition of Network-1.  Notwithstanding any provision in this
Agreement to the contrary, if Network-1 or any rights in any Licensed Patents
are acquired by a third party Entity, the third party Entity is subject to the
terms, including all licenses, rights, covenants, immunities, releases,
obligations, and duties of this Agreement.  For any such assignment or
acquisition to be effective, (a) Network-1 must provide Cisco written notice at
least thirty (30) days after to such assignment or acquisition, with such
written notice identifying the rights to be assigned or acquired and the
identity of the third party Entity acquiring those rights; and (b) such third
party Entity must agree in writing, prior to any such assignment or acquisition,
to be bound by all terms of this Agreement.  Subject to the next sentence, this
Agreement shall not provide for or govern any licenses, rights, covenants,
immunities, or releases with respect to any rights, patents, or other
intellectual property that any Entity Acquiring Network-1 (i) owned prior to the
time of the Acquisition, or (ii) acquired after such Acquisition, other than
with respect to the Licensed Patents owned or acquired by Network-1 prior to
such Acquisition.  Notwithstanding the foregoing sentence, an Entity (and any
Affiliates of such Entity immediately prior to the consummation of any such
Acquisition) shall not be a Network-1 Acquirer if: (a) such Entity results from
a reorganization or restructuring of Network-1; or (b) such Entity, directly or
indirectly, Acquires Network-1 in any transaction or series of related
transactions where a purpose of such transactions is to impair rights granted to
Cisco and its Affiliates under this Agreement.  Notwithstanding any other
provision to the contrary and subject to prior written approval of Cisco (such
approval not to be unreasonably withheld), Network-1 shall have the right to
assign the payments due from Cisco under this Agreement to a third party.
 
 
Section 11.                       MISCELLANEOUS
 
11.1   No Admission.  Neither the negotiation, execution, nor performance of
this Agreement or the Term Sheet, or anything contained therein, constitutes an
admission by Cisco or its Affiliates or Cisco Authorized Parties of liability,
infringement or validity of the Asserted Patent.

11.2   Other Rights.  Nothing contained in this Agreement shall be construed as
limiting the rights that the Parties or their Affiliates have outside the scope
of the licenses, covenants, immunities, and releases granted hereunder, or
contractually restricting the right of either Party or any of its Affiliates to
make, have made, use, lease, license, sell, offer for sale, import, distribute
or otherwise dispose of any particular product, including products not herein
subject to the licenses, releases, immunities or covenants.

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11.3   Other Intellectual Property.  Except for the potential assignment of the
*** Patents, nothing contained in this Agreement shall be construed as
conferring any right or license to or to otherwise use any copyright, patent,
patent application, trademark, service name, service mark, trade dress, trade
secret or other intellectual property belonging to Cisco, Cisco Authorized
Parties, or their Affiliates.

11.4   Notices.  Notices and other communications shall be sent by facsimile
(with confirmation of transmission), or by express courier (with tracking
capabilities and costs prepaid) to the following addressees and addresses (or
such other addressee and address as shall be designated by a Party in writing)
and shall be effective upon delivery.  However, if a Party provides incorrect
contact information or fails to update its contact information, notice shall be
deemed effective as of the date that the other Party attempted to provide notice
to all of the most recent contact addresses specified.

For Company:
Name: Corey M. Horowitz
Title: Chairman and CEO
Address: 445 Park Avenue, Suite 1018
New York, NY 10022
Fax: (212) 829-5771
 
For Cisco:
Neal Rubin
Vice President, Litigation
Cisco Systems, Inc.
170 W. Tasman Drive
San Jose, CA 95134
United States of America
And copy to:
Sean Luner
Dovel & Luner
201 Santa Monica Blvd, Suite 600
Santa Monica, CA 90401
e-mail:  sean@dovellaw.com
 
And a copy to:
General Counsel
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
United States of America

11.5 Publicity and Use of Name.  Subject to the exceptions in Sections 9.2 and
9.3, neither Party, nor any of its Affiliates, shall, without the prior written
consent of the other Party, refer to this Agreement or any of its provisions in
any statements to the press or public.  Nothing contained in this Agreement
shall be construed as conferring any right to use in advertising, publicity or
otherwise any trademark, trade name or names or any contraction, abbreviation or
simulation thereof, of either Party or its Affiliates.

11.6 Condition of Binding Agreement; Amendments.  This Agreement shall not be
binding upon the Parties or their Affiliates until it has been signed below by
or on behalf of each Party.  No amendment or modification hereof shall be valid
or binding upon the Parties or their Affiliates unless made in writing and
signed as aforesaid, except that either Party may amend its address by written
notice to the other Party.

 
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11.7   Severability.  If any section of this Agreement is found by competent
authority to be invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of such section in every other respect
and the remainder of this Agreement shall continue in effect so long as the
Agreement still expresses the intent of the Parties.  However, if the intent of
the Parties cannot be preserved, this Agreement shall be either renegotiated or
terminated.

11.8   Choice of Law.  This Agreement shall be construed, and the legal
relations between the Parties shall be determined, in accordance with the
federal law of the United States and the laws of the state of New York, USA,
without regard to any conflict of law provisions thereof, as such law applies to
contracts signed between residents of New York and fully performed in New York.

11.9   Remedies and Attorney Fees.  The remedy for breach of this Agreement
shall be limited to damages and/or injunctive relief, as appropriate, for breach
of contract and shall not include remedies for patent infringement.  The
prevailing Party in any dispute arising under this Agreement shall be awarded
reasonable attorney fees and costs, in addition to any other relief to which
such Party may be entitled.
 
11.10   No Liability.  IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY
OR ANY OTHER PERSON OR ENTITY (UNDER CONTRACT, STRICT LIABILITY, NEGLIGENCE, OR
OTHER THEORY) FOR SPECIAL, INDIRECT, EXEMPLARY, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING LOST PROFITS, OPPORTUNITIES OR SAVINGS, ARISING OUT OF OR
RELATED TO THE SUBJECT MATTER OF THIS LICENSE AGREEMENT.
 
11.11   Circumvention of the Agreement.  The Parties agree not to act through or
in conjunction with third parties to circumvent or frustrate the purposes of
this Agreement, and further agree not to structure future transactions where the
effect of such transaction is to limit the licenses, rights, releases,
covenants, or immunities provided for under this Agreement.
 
11.12   Bankruptcy.  The Parties acknowledge and agree that the Licensed Patents
are “intellectual property” as defined in section 101(35A) of the United States
Bankruptcy Code (the “Code”), as the same may be amended from time to time, that
have been licensed hereunder in a contemporaneous exchange for value.  Company
acknowledges that if Company, as a debtor in possession or a trustee in
bankruptcy in a case under the Code, rejects this Agreement, Cisco may elect to
retain its rights under this Agreement as provided in section 365(n) of the
Code.  Upon written request from Cisco to Company or the bankruptcy trustee of
Company’s election to proceed under section 365(n), Company or the bankruptcy
trustee shall comply in all respects with section 365(n), including, without
limitation, by not interfering with the rights of Cisco as provided by this
Agreement.
 
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11.13   Interpretation.  The headings and designated sections of this Agreement
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.  All uses of
“include” or “including” shall not be limiting.  The Parties participated
jointly in the negotiation of this Agreement.  In the event an ambiguity or
question of intent or interpretation arises, the Agreement shall be construed as
if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring the Parties by virtue of the authorship of any of
the provisions of this Agreement.

11.14   Integration.  This Agreement contains the entire and only understanding
between the Parties and their Affiliates with respect to the subject matter
hereof and supersedes any prior or collateral agreements, negotiations and
communications in connection with the subject matter covered herein, whether
oral or written, and any warranty, representation, promise, or condition in
connection therewith not incorporated herein shall not be binding upon either
Party or its Affiliates.
 
11.15   No Joint Venture.  Nothing herein shall be deemed to constitute the
Parties or their Affiliates as joint venturers, partners or agents of each
other.  Neither Party nor its Affiliates shall be liable for any debts,
accounts, obligations or other liabilities of the other Party or its
Affiliates.  Neither Party nor its Affiliates is authorized to incur any debts
or other obligations of any kind on the part of or as agent for the other,
except as may be specifically authorized in writing.

11.16   Waiver.  No relaxation, forbearance, delay or negligence by any Party in
enforcing any of the terms and conditions of this Agreement, or the granting of
time by any Party to another, shall operate as a waiver or prejudice, affect or
restrict the rights, powers or remedies of any Party.

11.17   Counterparts and Facsimile.  This Agreement may be executed on facsimile
or scanned copies in two counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same Agreement.

11.18   Dispute Resolution.  Unless otherwise provided for in this Agreement,
all disputes arising directly under the express terms of this Agreement or the
grounds for termination thereof shall be resolved as follows.  First, both
Parties shall meet to attempt to resolve such disputes.  If the Parties cannot
resolve the disputes, either Party may make a written demand for formal dispute
resolution.  Within sixty (60) days after such written demand, the Parties agree
to meet for one day with an impartial mediator and consider dispute resolution
alternatives other than litigation.  If an alternative method of dispute
resolution is not agreed upon within sixty (60) days after the one-day
mediation, either Party may begin litigation proceedings.
 
11.19           Successors and Permitted Assigns.  This Agreement is binding
upon and inures to the benefit of the Parties, their successors and permitted
assigns
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement through their duly
authorized representatives as of the Effective Date set forth above:

                                                                           

CISCO SYSTEMS, INC.   NETWORK-1 SECURITY SOLUTIONS, INC.           By: /s/ Ned
Hooper  
By: /s/ Corey M. Horowitz
            Name: Ned Hooper  
Name: Corey M. Horowitz
            Title: SVP, Chief Strategy Officer  
Title: CEO
                               
CISCO CONSUMER PRODUCTS LLC
 
CMH CAPITAL MANAGEMENT CORP.
                      By:   /s/ Ned Hooper  
By: /s/ Corey M. Horowitz
            Name:Ned Hooper  
Name: Corey M. Horowitz
            Title:   GM  
Title: President
                                     
COREY HOROWITZ
                 
By: /s/ Corey M. Horowitz
 
 
       

 
 
 
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