Exhibit 10.98

SETTLEMENT AGREEMENT

This Settlement Agreement is entered into on February 10, 2006 between Castle
Creek Technology Partners LLC (“CC”) and Path 1 Network Technologies Inc. (“Path
1”). CC holds 492,307 shares of Path 1’s Series B 7% Convertible Preferred Stock
(“Series B Preferred Stock”) and 246,154 Path 1 common stock warrants, acquired
pursuant to a Securities Purchase Agreement dated April 26, 2005 among Path 1,
CC and others (the “Purchase Agreement”). This Settlement Agreement relates to
Path 1’s December 6, 2005 financing transactions (the “Transactions”) with
Laurus Master Fund Ltd. (“Laurus”), pursuant to which Path 1 issued to Laurus
(i) a Secured Convertible Note in the principal amount of $2,100,000 (the
“Laurus Note”), which Note is convertible into shares of Common Stock at a fixed
conversion price equal to $2.6316, and (ii) Warrants for the purchase of shares
of Common Stock (the “Laurus Warrants”), which Warrants have an exercise price
equal to $2.89 per share. Under the Laurus Note Path 1 must, in certain
circumstances, make scheduled payments of principal and interest in shares of
Common Stock. Any shares of Common Stock that may in the future be issued by
Path 1 to Laurus or Laurus’ assignees (i) upon conversion of the Laurus Note and
(ii) as payment of principal or interest then due with respect to the Laurus
Note are collectively referred to herein as the “Laurus Shares”, and together
with any shares of Common Stock that may in the future be issued by Path 1 to
Laurus or Laurus’ assignees upon exercise of the Laurus Warrants (the “Laurus
Warrant Shares”), the Laurus Note and the Laurus Warrants, the “Laurus
Securities”. On January 13, 2006, CC filed a lawsuit (Castle Creek Technology
Partners LLC vs. Path 1 Network Technologies Inc., No. 06 CH 00891 (Cook County,
Illinois, Circuit Court, Chancery Division) against Path 1 (the “Lawsuit”).

1. CC, on its own behalf and as the holder of a majority of Path 1’s outstanding
Series B Preferred Stock and as the holder of a majority in interest of the
outstanding Registrable Securities (on an as-converted/as-exercised basis, as
defined in the Purchase Agreement), hereby

(a) Consents under Section 10 of Path 1’s Series B Preferred Stock’s certificate
of designations (the “Certificate”) to the consummation of the Transactions and
the issuance of the Laurus Securities (including, without limitation, any Laurus
Shares and Laurus Warrant Shares issued in the future). It is understood that,
if and to the extent the consummation of the Transactions and the issuance of
the Laurus Securities require the consent of a majority of the Series B
Preferred Stock pursuant to the Certificate, this Settlement Agreement shall
constitute such consent. This consent is subject to Section 4(a) below.

(b) Waives, pursuant to Section 8.3 of the Purchase Agreement any application of
Section 3.7 of the Purchase Agreement to the Transactions and to the issuance of
the Laurus Securities (including, without limitation, any Laurus Shares and
Laurus Warrant Shares issued in the future). It is understood that, if and to
the extent the consummation of the Transactions and the issuance of the Laurus
Securities require the consent of a majority in interest of the outstanding
Registrable Securities (on an as-converted/as-exercised basis, as defined in the
Purchase Agreement) pursuant to the Purchase Agreement, this Settlement
Agreement shall constitute such consent. This waiver is subject to Section 4(a)
below.

(c) Waives and renounces any antidilution adjustments to which CC (or CC’s
assignees) may be entitled pursuant to CC’s Series B Preferred Stock and related
warrants (“Preferred Securities”) to the extent (and only to the extent) that
such antidilution adjustments are or may in the future be triggered by any of:

(i) the consummation of the Transactions and the issuance of the Laurus
Securities (including, without limitation, any Laurus Shares and Laurus Warrant
Shares issued in the future);

(ii) the extension of the new rights described herein to any of the other
holders of Preferred Securities;

(iii) the issuance of any new Path 1 securities to any of the other holders of
Preferred Securities pursuant to the terms and conditions hereof; and

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(iv) the potential or actual issuance of any new Path 1 securities to any
holders of other Path 1 derivative securities by virtue of any antidilution
adjustments occurring as a result of (i), (ii) or (iii) above.

This waiver and renunciation are subject to Section 4(a) below. Moreover, in the
event that a material amendment, modification or supplement is made in or to a
contract with or for the benefit of Laurus (or its assignees) relating to the
Transactions, without CC’s prior written consent, then this antidilution waiver
shall not apply from and after the time of such material amendment, modification
or supplement with regard to any issuance above and beyond issuances that would
have been called for by the Transactions documents as they stood immediately
before such material amendment, modification or supplement.

2. Path 1 agrees that Path 1 shall no later than March 1, 2006 pay, and
thereafter, so long as CC continues to hold any Series B Preferred Stock, shall
pay on each July 27 and January 27 an amount equal to all then-accrued dividends
on the Series B Preferred Stock held by CC on such respective dates. Such
payments are settlement payments and are not in fact dividends; however, CC
hereby waives, effective upon each such payment by Path 1, all dividends accrued
on CC’s Series B Preferred Stock to an extent equal to the amount of such
respective payment. Such payments, or any such payment, shall be paid in cash,
or, if Path 1 so elects, in common stock. If Path 1 elects to pay in the form of
common stock, the amount of common stock shall be calculated using the same
method as is called for by the provisions set forth in the Certificate for
calculating the number of shares of common stock to be included in a Series B
Preferred Stock dividend paid in the form of common stock. In the event that any
of the foregoing actions require board or stockholder approval, Path 1 shall, at
its sole cost and expense, use its best efforts to obtain all such approvals as
promptly as practicable.

3. Path 1 shall

(a) unless and until the Certificate is amended to reduce the Conversion Price
of the Series B Preferred Stock to $2.6316 or lower, or until by operation of
the Certificate as it stands the Conversion Price is reduced to $2.6316 or
lower, treat (as to CC) the Conversion Price as being $2.6316 in the following
manner: when and if CC converts any of its Series B Preferred Stock in
accordance with the Certificate), then, if (i) the number of new shares of Path
1 Common Stock issued in such conversion is less than (ii) the number of new
shares of Path 1 Common Stock which would have been issued to CC upon conversion
of the same number of shares of Series B Preferred Stock if the Conversion Price
in the Certificate were $2.6316, then Path 1 shall promptly also issue to CC
that exact number of new shares of Path 1 Common Stock that equals the
difference between (i) above and (ii) above (all subject to adjustments for any
stock splits, reverse stock splits, stock dividends on or recapitalizations of
the Series B Preferred Stock).

(b) promptly notify CC in writing of each issuance of Laurus Shares, specifying
the quantity and the price-per-share, as further described in the following
paragraph. If, at any time within 20 calendar days following receipt by CC of
written notice (the “Notice”) from Path 1 that any Laurus Shares have been
issued in such issuance at a price per share (the “Laurus Price”) that is, at
the time of such issuance, below the Conversion Price then in effect with
respect to CC’s Series B Preferred Stock (including any deemed Conversion Price
under Section 3(a) above), CC converts its Series B Preferred Stock in one
transaction or a series of related transactions (the official date of such
conversion to be determined in accordance with the Certificate), then, to the
extent that the quotient of (a) the product of (i) the number of shares of Path
1 Common Stock issued to CC upon such conversion (the “Purchaser Amount”) and
(ii) the Conversion Price then in effect (including any deemed Conversion Price
under Section 3(a) above), (such product, the “Purchaser Principal”), divided by
(b) the product of (A) the number of Laurus Shares so issued, (B) the Laurus
Price, and (C) CC’s Pro Rata Share, is less than or equal to 1.5, Path 1 shall
promptly issue to CC that exact number of new shares of Path 1 Common Stock that
equals the difference between (x) the quotient of (i) the Purchaser Principal
divided by the (ii) the Laurus Price, and (y) the Purchaser Amount. CC’s “Pro
Rata Share” is the quotient of CC’s number of shares as of the date hereof of
Series B Preferred Stock divided by

 

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792,306. To the extent both Section 3(a) and Section 3(b) are applicable to a
conversion, Section 3(a) shall be applied first and then Section 3(b) shall be
applied.

4. (a) CC agrees to forthwith dismiss the Lawsuit without prejudice, and
furthermore agrees and covenants not to refile in any court the Lawsuit, nor to
file any litigation which includes any Lawsuit Claims (as defined below), unless
CC has first revoked prospectively this Settlement Agreement. CC shall be
entitled to revoke prospectively this Settlement Agreement if and only if
(i) Path 1 breaches any of its obligations under this Settlement Agreement
before February 10, 2008, and (ii) CC gives notice to Path 1 before February 10,
2008 of its election to revoke prospectively this Settlement Agreement. The
parties agree that, if CC so revokes prospectively this Settlement Agreement, if
CC then refiles the Lawsuit or files any litigation involving Lawsuit Claims,
then for the purposes of that litigation (as between CC and Path 1) the consent,
waiver, and waiver and renunciation given by CC in Section 1(a), 1(b) and 1(c),
respectively, of this Settlement Agreement shall be disregarded and treated as
if they had not been given.

(b) Effective February 10, 2008, if but only if CC has not previously revoked
prospectively this Settlement Agreement pursuant to Section 4(a), (i) CC agrees
never under any circumstance to refile in any court the Lawsuit, nor file any
litigation which includes any Lawsuit Claims (as defined below), and (ii) CC
releases Path 1 and its officers, directors, employees, agents, attorneys,
stockholders, lenders, affiliates, insurers, successors and assigns, from all
causes of action, lawsuits, claims, demands, charges, liabilities or complaints
of whatever kind, present or future, known or unknown, which arise out of or in
any way relate to the conduct, omissions, events or transactions alleged in (or
related to the conduct, omissions, events or transactions alleged in) the
Lawsuit (the “Lawsuit Claims”). CC acknowledges that it may hereafter discover
facts different from, or in addition to, those which it now knows or believes to
be true with respect to all or any of the Lawsuit Claims. Nevertheless, CC
agrees that the release set forth herein shall (as of such time and subject to
such condition) be and remain effective in all respects, notwithstanding the
discovery of such additional or different facts.

(c) Each party shall bear its own expenses in connection with the Lawsuit and in
connection with this Settlement Agreement, except as set forth in the final
sentence of this subsection. The Circuit Court of Cook County, Illinois shall
retain jurisdiction for the purpose of adjudicating any dispute regarding, and
enforcing the terms of, this Settlement Agreement. The parties agree that if
either of them breaches the terms of this Settlement Agreement, the other party
would be irreparably injured, and in the event of such breach the other party
shall be entitled to temporary, preliminary and permanent injunctive relief,
specific performance and other equitable remedies, in addition to any and all
remedies at law for such breach (unless CC has revoked prospectively this
Settlement Agreement pursuant to Section 4(a) above, in which case CC shall be
entitled to no remedies for such breach other than the right to prospectively
revoke). The parties agree that in the event of any litigation arising from,
based upon or to interpret the provisions of this Settlement Agreement, the
prevailing party shall be entitled to recover its litigation attorneys fees,
costs and expenses, from the other party, in addition to any and all other
relief to which it may be entitled.

(d) CC represents that it has not previously assigned, and covenants that it
never will assign, any Lawsuit Claims to anybody.

5. This Settlement Agreement shall be governed by and construed in accordance
with California law. This Agreement cannot be amended, terminated or waived
except in a writing signed by both parties. Each party represents and warrants
that no promise, inducement or agreement not expressed herein has been made to
it in connection with this Settlement Agreement. This Settlement Agreement
contains the entire agreement between the parties with respect to the subject
matter of the Lawsuit and the Lawsuit Claims and supersedes any previous
agreement between the parties to the extent, and only to the extent, that this
Settlement Agreement conflicts with or modifies any such previous agreement. In
every other respect, the parties’ previous agreements, including but not limited
to, the Purchase Agreement and the Certificate, remain in full force and effect.

 

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6. Each respective other holder of Series B Preferred Stock is, to the extent
set forth in this Section 6, a direct and intended third-party beneficiary of
this Settlement Agreement. Each respective other holder of Series B Preferred
Stock is entitled, as a third-party beneficiary of this Settlement Agreement, to
receive all the same benefits of CC under this Settlement Agreement (other than
under Section 7), as if the references to CC in this Settlement Agreement were
references to such holder, by sending a written notice to Path 1 that it wishes
to receive the same benefits as CC (other than under Section 7) and be subject
to the same burdens as CC as set forth in this Settlement Agreement, as if the
references to CC in this Settlement Agreement were references to such holder.
However, even if a holder does not do so, its rights can nonetheless be affected
by waivers and consents given by CC herein in its capacity as a majority holder.

7. Path 1 and CC hereby establish the following special contractual rule
applicable only to an amendment, modification or supplement to be made in or to
a contract with or for the benefit of Laurus (or its assignees) relating to the
Transactions: the Company agrees not to enter into any such amendment,
modification or supplement with or for the benefit of Laurus (or its assignees)
relating to the Transactions, without the prior written consent of CC (so long
as CC continues to hold a majority in interest of the then-outstanding Series B
Preferred Stock). CC agrees not to unreasonably withhold its prior written
consent to any such amendment, modification or supplement with or for the
benefit of Laurus (or its assignees) relating to the Transactions.

8. The parties disagree as to whether issuance of the Laurus Securities, and
particularly the Laurus Note, in the Transactions required consent of a majority
of Path 1’s outstanding Series B Preferred Stock pursuant to Section 10(iii) of
the Certificate. The parties desire to compromise now as to such disagreement as
to the Transactions, while each reserving their rights and respective
interpretations under the Certificate should any similar situation ever recur.
This Settlement Agreement will not for any purpose be deemed an admission by
either party; provided, however, CC agrees that for the purpose of determining
whether the Stock Payment Condition as defined in the Certificate (and in Path
1’s 7% Convertible Preferred Stock certificate of designations) has been met,
the Transactions shall be deemed not to have resulted in a Fundamental Change
(as defined therein).

9. This Settlement Agreement shall be binding upon, and inure to the benefit of,
the parties hereto, their assigns, heirs, predecessors and successors.

10. This Settlement Agreement and all provisions hereof, including all
representations and warranties contained herein, are contractual and not a mere
recital and shall survive the termination of the agreement, and shall continue
in full force and effect thereafter.

11. This Settlement Agreement may be executed in counterparts.

 

PATH 1 NETWORK TECHNOLOGIES INC. By:  

/s/ Tom Tullie

 

Tom Tullie

 

Chief Executive Officer

CASTLE CREEK TECHNOLOGY PARTNERS LLC

By:

 

Castle Creek Partners, LLC,

Investment Manager

 

By:

 

/s/ Dan Asher

   

Dan Asher

   

Investment Manager

 

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