Document:

ex10_13.htm

 

EXHIBIT 10.1.3

Excess of Loss Reinsurance Agreement

By and Between

EMC Reinsurance Company

And

Employers Mutual Casualty Company

This Excess of Loss Reinsurance Agreement (the “XOL Agreement”) is hereby made by and between EMC Reinsurance Company ("EMC Re") and Employers Mutual Casualty Company ("EMCC").

WHEREAS, EMCC and EMC Re have been operating under the terms of a Quota Share Reinsurance Retrocessional Agreement between the parties, as amended from time to time, since January 1, 1981 (the “Agreement”) and a Restated Quota Share Reinsurance Retrocessional Agreement between the parties, as amended from time to time, since January 1, 2006 (the "Restated Agreement"); and

WHEREAS, the parties now desire to restate the terms and coverage of the Restated Agreement and to restructure the reinsurance relationship between the parties, and the written agreements related thereto, in a manner that which conforms more closely with industry practices; and

WHEREAS, the respective Inter-Company Committees of the boards of directors of EMCC and of EMC Insurance Group Inc. (collectively, the "Inter-Company Committees") have each approved the restructured reinsurance relationship between the parties and the reinsurance agreements between the parties necessary to accomplish the desire of the parties;

NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties hereto hereby agree as follows:

	
I.

	
AGREEMENT

	
  

	
1.

	
EMC Re shall cede, and EMCC shall accept as reinsurance, One Hundred Percent (100%) of all “Net Loss” incurred which is in excess of $3,000,000 for each “Occurrence” with an “Occurrence” date on or after January 1, 2011 arising out of “Subject to Cession” reinsurance contracts and reinsurance contracts written directly by EMC Re (the “Contract”).

	
  

	
2.

	
EMC Re shall also cede, and EMCC shall accept as premium, Ten and One-Half Percent (10.5%) of all “Net Written Premium” on the Contracts.

  

1

  

	
  

	
3.

	
All premium, loss, and expense shall be settled at least quarterly through the EMCC inter-company closing process, with settlement amounts due to be completed no later than forty-five (45) days after the end of the applicable quarter.

	
II.

	
DEFINITIONS

	
  

	
1.

	
“Allocated Loss Expense” shall have the same meaning as ascribed in the Contracts, or, in the absence of any definition in a Contract, shall mean:  (a) expenses sustained in connection with adjustment, defense, settlement and litigation of claims and suits, satisfaction of judgments, resistance to or negotiations concerning a loss (which shall include the expenses and the pro rata share of the salaries of the insurer's field employees according to the time occupied in adjusting such loss and the expenses of the insurer's employees while diverted from their normal duties to the service of field adjustment but shall not include any salaries of officers or normal overhead expenses of the insurer); (b) legal expenses and costs incurred in connection with coverage questions regarding specific claims and legal actions, including declaratory judgment actions, connected thereto; (c) all interest on judgments other than prejudgment interest except when included in “Net Loss”; and (d) expenses sustained to obtain recoveries, salvages or other reimbursements, or to secure the reversal or reduction of a verdict or judgment.

	
  

	
2.

	
“Extra-contractual Obligations” means those liabilities not covered under any other provision of this XOL Agreement, including, but not limited to, compensatory, consequential, punitive or exemplary damages, other than that which is a “Loss Excess of Contract Limits”, together with any legal costs and expenses incurred in connection therewith, paid as damages or in settlement or in judgment by EMC Re as a result of a demand, claim or an action by its insured, its insured's assignee, or other third party, which demand, claim or action alleges negligence, gross negligence, fraud, bad faith or other tortious behavior or conduct on the part of EMC Re in the handling, adjustment, rejection or settlement of a claim under a Contract or bond covered by this XOL Agreement.  An “Extra-contractual Obligation” shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the Contract.  Notwithstanding anything stated herein, this XOL Agreement shall not apply to any “Extra-contractual Obligation” incurred by EMC Re as a result of any fraudulent and/or criminal act directed against EMC Re by any officers or directors of EMC Re acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

	
  

	
3.

	
“Ex-gratia Settlements” shall mean payments made for which EMC Re has no legal obligation under the terms and conditions of any Contract, but which are made solely to maintain the good will of EMC Re.

  

2

  

 

	
  

	
4.

	
“Net Written Premium” is defined as written premium on Contracts assumed by and written directly by EMC Re, less any such written premium that is ceded by EMC Re, which is booked by EMC Re during the applicable calendar year.

	
  

	
5.

	
“Loss Excess of Contract Limits” means any amount of loss, together with any legal costs and expenses incurred in connection therewith, paid as damages or in settlement or in judgment by EMC Re in excess of its Contract limits, but otherwise within the coverage terms of the Contract, as a result of a demand, claim or an action by its insured, its insured's assignee, or other third party, which demand, claim or action alleges gross negligence, negligence, fraud, bad faith or other tortious behavior or conduct on the part of EMC Re in the handling of a claim under a Contract or bond covered by this XOL Agreement, in rejecting a settlement within the Contract limits, in discharging or failing to discharge a duty to defend or prepare the defense in the trial of an action against its insured, or in discharging or failing to discharge its duty to prepare or prosecute an appeal consequent upon such an action.  A “Loss Excess of Contract Limits” shall be deemed to have occurred on the same date as the loss covered or alleged to be covered under the Contract.  For the avoidance of doubt, the decision by EMC Re to settle a claim for an amount in excess of the Contract limit when EMC Re has reasonable basis to believe that it may have liability to its insured or assignee on the claim will be deemed a “Loss Excess of Contract Limits”.

	
  

	
6.

	
“Net Loss” means:

	
  

	
a.

	
The sum total of:

 

	
  

	
(1)

	
Contractual indemnity loss under the coverage terms of the Contracts that is reported to EMC Re;

	
  

	
(2)

	
Associated "Allocated Loss Expense";

	
  

	
(3)

	
“Extra-contractual Obligations” and “Loss Excess of Contract Limits” that is paid (or imminently payable) by EMC Re in settlement of claims or in satisfaction of judgments rendered on account of those claims, after deduction of all net subrogation, salvage and other recoveries; and

	
  

	
(4)

	
Any additional case reserves (ACRs) or additional incurred but not reported reserves (IBNR) established by EMC Re on the Contracts.

	
  

	
b.

	
Inter-company reinsurance with respect to the original ceding companies, not to include this XOL Agreement, shall be disregarded in calculating “Net Loss”.

	
  

	
c.

	
All subrogation, salvage, recoveries or payments recovered or received subsequent to a “Net Loss” settlement under this XOL Agreement shall be applied as if recovered or received prior to payment or settlement, and all necessary adjustments shall be made by the parties to this XOL Agreement.

  

3

  

 

	
  

	
d.

	
Nothing in this definition, however, shall be construed to mean that “Net Loss” is not recoverable from EMCC until the “Net Loss” of EMC Re has been absolutely ascertained.

	
  

	
7.

	
“Occurrence” is defined as follows:

	
  

	
a.

	
Except as otherwise provided herein, an “Occurrence” means an accident, disaster, casualty or happening, or series of accidents, disasters, casualties or happenings arising out of or following on one event, regardless of the number of interests insured or the number of Contracts responding or whether the claims arising out of the “Occurrence” are made under Contracts issued on an “occurrence” and/or “claims made” or other basis.  Except where specifically provided otherwise in this XOL Agreement, each “Occurrence” shall be deemed to take place in its entirety as of the earliest date of loss as determined by any Contract responding to the “Occurrence”.  Any claims made under an Extended Reporting Period Endorsement or any other extended reporting and/or discovery period under any Contract shall, for the purposes of this XOL Agreement, be considered to be made on the last day of the Contract period immediately preceding the extended reporting and/or discovery period.

	
  

	
b.

	
Continuous Or Repeated Injurious Exposure.  As respects liability (bodily injury and property damage) other than Automobile and Products-Completed Operations Hazard coverage liability under any Contract, and at the option of EMC Re, the term “Occurrence” shall also mean the sum of all damages for bodily injury and property damage sustained by each insured during a period of twelve (12) consecutive months arising out of a continuous or repeated injurious exposure to substantially the same general conditions.  For purposes of this definition, the date of loss shall be deemed to be the inception or renewal date of the Contract to which payment is charged.

	
  

	
c.

	
Aggregate Basis. With respect to Contracts written on an aggregate basis (not subject to an aggregate limit) and at the option of EMC Re, the term “Occurrence” shall also mean all loss or losses, whether or not related to or arising from the same event or occurrence, that are subject to and covered under an aggregate basis Contract (or, if such losses arise under two or more Contracts written on an aggregate basis), during the twelve (12) month policy period of that Contract (or if two or more such Contracts are issued to the same risk, during any twelve (12) month policy period of the Contract chosen by EMC Re).  The date of the “Occurrence” shall be the inception date of such new or renewal policy period (or if such losses arise under two or more Contracts, the inception, anniversary or renewal date of the Contract chosen by EMC Re).  The term “policy period” refers to each annual period of the Contract which is written on an aggregate basis. To be certain, EMC Re, at its option, shall be entitled to extract any “Net Loss” arising from an “Occurrence” as defined above from the provisions of this paragraph to apply the basic per occurrence reinsurance coverage of this XOL Agreement.

  

4

  

 

	
  

	
d.

	
Occupational Disease or Cumulative Injury.  Each case of Occupational Disease or Cumulative Injury suffered by an employee of an EMCC insured and covered by a Workers’ Compensation or similar Contract shall be deemed to be a separate and distinct “Occurrence”.  The date of such “Occurrence” shall be deemed to be the date of loss under the Contract as determined by EMC Re.

	
  

	
8.

	
“Subject to Cession” shall mean all voluntary assumed and ceded reinsurance contracts unless specifically coded by EMCC's Home Office Assumed Reinsurance Department as “not subject to cession” at the time the synopsis (coverage summary) is set up. “Subject to Cession” shall not include non-affiliated or involuntary contracts unless specifically coded by EMCC's Home Office Assumed Reinsurance Department as “subject to cession” at the time the synopsis (coverage summary) is set up.

III.           CONTINUOUS CONTRACT

This XOL Agreement is continuous until canceled by mutual agreement of the parties, but may be terminated by either party as of the end of any calendar year upon ninety (90) days prior written notice.

IV.           TERM

	
  

	
1.

	
This XOL Agreement shall take effect at 12:01 a.m., Central Standard Time, January 1, 2011, with respect to the accounting for Contracts booked after such time and date.

	
  

	
2.

	
At the expiration of this XOL Agreement, EMCC shall remain liable for all Contracts covered by this XOL Agreement that are in force at expiration, until the termination, expiration or renewal of such Contracts, whichever occurs first, plus any discovery or extended reporting periods.

	
  

	
3.

	
However, at the expiration of this XOL Agreement, EMC Re shall have the option to require a return of the ceded unearned premium, net of ceding commission, as of the date of expiration, on business in force at that date, in which event EMCC shall be released from liability for losses occurring or claims made, as applicable, after expiration.

	
  

	
4.

	
In the event this XOL Agreement expires on a run-off basis, EMCC’s liability hereunder shall continue if EMC Re is required by statute or regulation to continue coverage, until the earliest date on which EMC Re may cancel the Contract.

 

  

5

  

	
V.

	
TERRITORY

The territorial limits of this contract shall be identical with those of the original reinsurance contracts.

	
VI.

	
EXCLUSIONS

This XOL Agreement shall not apply to and specifically excludes:

	
  

	
1.

	
Liability of EMC Re arising by contract, operation of law, or otherwise from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund.  “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, however denominated, established or governed, that provides for any assessment of or payment or assumption by EMCC of part or all of any claim, debt, charge, fee or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

 

	
  

	
2.

	
Foreign exchange risk on Contracts incepting prior to January 1, 2006.

	
VII.

	
LOSS SETTLEMENTS

All loss settlements made by EMC Re within the terms of this XOL Agreement or by way of compromise, including any “Ex-gratia Settlements”, shall be binding upon EMCC, and EMCC agrees to pay or allow, as the case may be, its share of each such settlement in accordance with this XOL Agreement.

	
VIII.

	
SALVAGE AND SUBROGATION

	
  

	
1.

	
Salvages and all recoveries, including recoveries under all reinsurances that inure to the benefit of this XOL Agreement (whether recovered or not), shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

	
  

	
2.

	
All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.

	
IX.

	
NO THIRD PARTY RIGHTS

This XOL Agreement is solely between EMC Re and EMCC, and in no instance shall any insured, claimant or other third party have any rights under this XOL Agreement except as may be expressly provided otherwise herein.

	
X.

	
INSOLVENCY

	
  

	
1.

	
In the event of insolvency and the appointment of a conservator, liquidator or statutory successor of EMC Re, the portion of any risk or obligation assumed by EMCC shall be payable to the conservator, liquidator or statutory successor on the basis of claims allowed against the insolvent EMC Re by any court of competent jurisdiction or by any conservator, liquidator or statutory successor of EMC Re having authority to allow such claims, without diminution because of that insolvency, or because the conservator, liquidator or statutory successor has failed to pay all or a portion of any claims.

  

6

  

 

	
  

	
2.

	
Payments by EMCC as above set forth shall be made directly to EMC Re or to its conservator, liquidator or statutory successor, except where the contract of insurance or reinsurance specifically provides another payee of such reinsurance or except as provided by applicable law and regulation (such as subsection (a) of section 4118 of the New York Insurance laws) in the event of the insolvency of EMC Re.

	
  

	
3.

	
In the event of the insolvency of EMC Re, the liquidator, receiver, conservator or statutory successor of EMC Re shall give written notice to EMCC of the pendency of a claim against the insolvent EMC Re on the Contract or Contracts reinsured within a reasonable time after such claim is filed in the insolvency proceeding and, during the pendency of such claim, any reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it may deem available to EMC Re or its liquidator, receiver, conservator or statutory successor.

	
  

	
4.

	
Where two or more reinsurers are involved in the same claim and a majority in interest elects to interpose a defense to such claim, the expense shall be apportioned in accordance with the terms of this XOL Agreement as though such expense had been incurred by EMC Re.

	
  

	
5.

	
The original insured or policyholder shall not have any rights against EMCC which are not specifically set forth in this XOL Agreement, or in a specific agreement between EMCC and the original insured or policyholder.

	
XI.

	
DISPUTES

Any disputes arising out of the interpretation of this XOL Agreement shall be submitted to the respective Inter-Company Committees pursuant to the terms of the charter of the Inter-Company Committees then in effect for final and binding resolution.

	
XII.

	
JURISDICTION

If EMCC, as the assuming insurer, fails to perform its obligations under the terms of the XOL Agreement, then EMCC, at EMC Re's request, shall agree (a) to submit itself to the jurisdiction of any court of competent jurisdiction in any state of the United States, (b) to comply with all requirements necessary to give the court jurisdiction, and (c) to abide by the final decision of the court or any appellate court if there is an appeal.  For the purpose of achieving authorized reinsurer status in North Carolina pursuant to North Carolina General Statute 58-7-21(b)(3), or any successor provision, EMCC further designates the Insurance Commissioner (or equivalent elected or appointed official) of the State of North Carolina, or his or her designated attorney, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding begun by or on behalf of EMC Re, as the ceding company under this XOL Agreement.

  

7

  

 

	
XIII.

	
OFFSET

EMC Re and EMCC shall have the right to offset any balance or amounts due from one party to the other under the terms of this XOL Agreement; the 100% Quota Share Reinsurance Retrocessional Agreement between the parties effective January 1, 2011; the Agreement; and the Restated Agreement.  The party asserting the right of offset may exercise such right any time whether the balances due are on account of premiums or losses or otherwise. In the event of the insolvency of any party, offset shall be as permitted by applicable law.

	
XIV.

	
ERRORS AND OMISSIONS

Inadvertent delays, errors or omissions made by EMC Re in connection with this XOL Agreement (including the reporting of claims) shall not relieve EMCC from any liability which would have attached had such error or omission not occurred, provided always that such error or omission shall be rectified as soon as possible. This Article XIV shall not apply to a commutation made in connection with this XOL Agreement.

In WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have executed this XOL Agreement on the dates recorded below.

	
EMC Reinsurance Company

	  	
Employers Mutual Casualty Company

	  	  	  
	
By: /s/ Ronnie D. Hallenbeck

	  	
By: /s/ Bruce G. Kelley

	
Ronnie D. Hallenbeck

	  	
Bruce G. Kelley

	
President

	  	
President & CEO

	  	  	  
	
Date:  December 21, 2010

	  	
Date:  December 21, 2010

This Excess of Loss Reinsurance Agreement, effective January 1, 2011, was approved by the Inter-Company Committees on September 30, 2010.

  

8

  

 

Amendment to the

Excess of Loss Reinsurance Agreement

By and Between

EMC Reinsurance Company

And

Employers Mutual Casualty Company

The Excess of Loss Reinsurance Agreement (the “XOL Agreement”), executed by and between EMC Reinsurance Company, an Iowa corporation ("EMC Re"), and Employers Mutual Casualty Company, an Iowa corporation (“EMCC”), on December 21, 2010, is amended, effective as of January 1, 2011, by modifying Section I.2, to read as follows:

	
I.

	
AGREEMENT

	
  

	
2.

	
EMC Re shall also cede, and EMCC shall accept as premium, Ten Percent (10%) of all “Net Written Premium” on the Contracts.

In WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers, have executed this Amendment to the Excess of Loss Reinsurance Agreement on the dates recorded below.

	
EMC Reinsurance Company

	  	
Employers Mutual Casualty Company

	  	  	  
	
By: /s/ Ronnie D. Hallenbeck

	  	
By: /s/ Bruce G. Kelley

	
Ronnie D. Hallenbeck

	  	
Bruce G. Kelley

	
President

	  	
President & CEO

	  	  	  
	
Date:  January 28, 2011

	  	
Date:  January 28, 2011

9ex10_1.htm

Exhibit 10.1

CONFIDENTIAL –

FRE RULE 408

Execution Copy

 

SETTLEMENT AND LICENSE AGREEMENT

 

 This SETTLEMENT AND LICENSE AGREEMENT (together with all Exhibits attached hereto, the “Agreement”), is made and entered into as of May 14, 2010 (the “Effective Date”), by and among Microsoft Corporation, a Washington corporation (Microsoft Corporation together with its Affiliates, “Microsoft”), on the one hand, and VirnetX Inc., a Delaware corporation (VirnetX Inc. together with its Affiliates, “VirnetX”), on the other hand. As used herein, “Party” refers to any of VirnetX or Microsoft individually, and “Parties” refers to VirnetX and Microsoft collectively. 

 

 RECITALS 

 

	
 A. 

	
 VirnetX Inc. has accused Microsoft of infringing U.S. Patent Nos. 6,502,135 B1 and 7,188,180 B2 (the “Patents-In-Suit”) in actions filed in the U.S. District Court for the Eastern District of Texas (“the Court”), designated Civ. Action No. 6:07CV80 (LED) and Civ. Action No. 6:10CV94 (LED) (“the Actions”). 

 

	
 B. 

	
 Microsoft Corporation has denied any such infringement of the Patents-in-Suit and challenged the validity thereof. Microsoft has also challenged the enforceability of the Patents-in-Suit to the extent allowed pursuant to the Order dated January 15, 2010 in Civ. Action No. 6:07CV80 (LED), Docket No. 274 (“the January 15, 2010 Order”). 

 

	
 C. 

	
 Microsoft admits no liability with respect to any of the claims asserted in the Actions. 

 

 NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 

 

 AGREEMENT 

 

 1.      Compromise Only. This Agreement is entered into for purposes of settlement and compromise only. Nothing contained in this Agreement, or done or omitted in connection with this Agreement, is intended as or shall be construed as an admission of or by any Party, or on behalf of any Microsoft Released Party (as hereinafter defined), of any fault, liability or wrongdoing whatsoever, or an admission of or by any Microsoft Released Party that any Licensed Patents (as hereinafter defined) are infringed, valid or enforceable. 

 

 2.      Definitions. 

 

 “Licensed Patents” shall mean all VirnetX patents and patent applications in existence and owned by or assigned to VirnetX Inc. or its current Affiliates as of the Effective Date (including, without limitation, the Patents-In-Suit and the patents and applications set forth on Exhibit A) and all patents and applications related to such patents and applications (including, without limitation, parents, continuations, continuations in part, and divisionals). 

 

 “Affiliate” means any entity that Controls, is Controlled by or under common Control with Microsoft Corporation or VirnetX Inc. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 “Control” means direct or indirect ownership of at least fifty percent (50%) of the voting power, capital or other securities of an entity. 

 

 “Licensees” means Microsoft’s distributors and customers, but only to the extent such third parties exploit any Microsoft software which (i) has been licensed, created or developed by Microsoft and (ii) is licensed under this Agreement. 

 

 3.      Releases 

 

	
    

	
 3.1 

	
 VirnetX, on behalf of itself and its predecessors, successors, assigns, attorneys, directors, shareholders, employees, and officers (collectively with VirnetX, the “VirnetX Releasing Parties”), hereby voluntarily, irrevocably and unconditionally fully and forever releases, discharges, covenants not to sue, and holds harmless Microsoft and its predecessors, successors, assigns, attorneys, insurers, agents, servants, subcontractors, officers, directors, shareholders, representatives, employees, and Licensees (collectively, the “Microsoft Released Parties”) from and for any and all rights, claims, debts, liabilities, demands, obligations, promises, damages, causes of action and claims for relief of any kind, manner, nature and description, known or unknown (collectively, “Claims”), which any of the VirnetX Releasing Parties have, may have had, might have asserted, may now have or assert, or may hereafter have or assert against the Microsoft Released Parties, or any of them, arising, accruing or occurring, in whole or in part, at any time prior to the Effective Date, including, without in any way limiting the generality of the foregoing, any claims or causes of action arising out of or related to any of the facts, transactions, matters or occurrences giving rise to or alleged, or that could have been alleged in or discovered in, the Actions or under any of the Licensed Patents. 

 

	
    

	
 3.2 

	
 Microsoft, on behalf of itself and its predecessors, successors, assigns (collectively with Microsoft, the “Microsoft Releasing Parties”), hereby voluntarily, irrevocably and unconditionally fully and forever releases, discharges, covenants not to sue, and holds harmless VirnetX and its predecessors, successors, assigns, attorneys, insurers, agents, servants, subcontractors, officers, directors, representatives, and employees (collectively, the “VirnetX Released Parties”) from and for any and all Claims which any of the Microsoft Releasing Parties have, may have had, might have asserted, or may now have or assert prior to the Effective Date arising out of or related to any of the facts, transactions, matters or occurrences giving rise to or alleged, or that could have been alleged in or discovered in, the Actions as to VirnetX’s assertion of the Patents-in-Suit, except that Microsoft does not release or discharge (or grant a covenant or hold harmless as to) its Claims that the Licensed Patents are invalid, unenforceable, and/or not infringed by Microsoft. 

 

	
    

	
 3.3 

	
 The VirnetX Releasing Parties and Microsoft Releasing Parties expressly waive any and all statutes, legal doctrines and other similar limitations upon the effect of general releases. By way of example, and without limitation, the foregoing parties waive the benefit of California Civil Code Section 1542, which states 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 VirnetX Releasing Parties and Microsoft Releasing Parties, with the advice of their counsel, waive any rights and/or benefits that they, or any of them, might otherwise have under Civil Code Section 1542 and any and all other statutes, legal doctrines and/or principles of similar effect in California, Washington, and any other state, federal or foreign jurisdiction, to the full extent that such rights and benefits may be waived. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

  

    

    

    

 4.      Grant of Licenses and Covenant 

 

	
    

	
 4.1 

	
 [***], VirnetX hereby grants to Microsoft, and Licensees, a worldwide, irrevocable, nonexclusive, non-sublicensable fully paid up license and covenant not to sue under the Licensed Patents. 

 

	
    

	
 4.2 

	
 Notwithstanding the foregoing, (i) the license granted under this Section 4 [***] and (ii) the covenant not to sue granted under this Section 4 [***] 

 

	
    

	
 4.3 

	
 The license and covenant not to sue granted herein [***] 

 

	
    

	
 4.4 

	
 Definitions [***] 

 

 5.      Consideration. 

 

	
    

	
 5.1. 

	
 Dismissals. VirnetX shall dismiss with prejudice (and cause Science Applications International Corporation (“SAIC”) to join in such dismissal) all claims in the Actions, and Microsoft shall dismiss with prejudice all counterclaims in the Actions (except Microsoft’s affirmative defenses and counterclaims of (i) non-infringement and invalidity shall be dismissed without prejudice and (ii) unenforceability shall be dismissed without prejudice but continue to be subject to the January 15, 2010 Order), by filing (and VirnetX causing SAIC to file) on or before May 21, 2010, Stipulations of Dismissal that provide that each of VirnetX Inc., Microsoft Corporation and SAIC will bear its own costs, expenses and attorney’s fees in connection with the Actions. In addition, VirnetX Inc. and Microsoft Corporation agree to execute such additional papers and motions as may be necessary to cause the Court to effect a disposal of all issues before it and a dismissal of the Actions. 

 

	
    

	
 5.2 

	
 Payment. In full and complete settlement of all claims asserted against Microsoft in the Actions, and in full and complete consideration of the licenses, releases, waivers, and other covenants and rights in this Agreement, Microsoft Corporation shall within twenty (20) business days after the later of the Effective Date or the provision by VirnetX Inc. and its counsel of an IRS Form W-9 and a letter on its letterhead with payment instructions consistent with this paragraph pay to VirnetX Inc., in U.S. dollars, a total payment of two hundred million U.S. Dollars (US$ 200,000,000) by wire transfer into the following account: 

 

 Account Name: Texas IOLTA Trust Account -McKool Smith 

 Bank Name and Address: Bank of America, N.A., 100 Crescent Court, Dallas, TX 75201 

 Beneficiary Name: VirnetX Inc. 

 

 6.      Term. This Agreement shall remain in full force and effect until six years after the expiration of the last to expire of the Licensed Patents. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 7.      Miscellaneous. 

 

	
    

	
 7.1 

	
 Confidentiality. The mere existence of this Agreement (including, without limitation, the identification of the Parties and any Licensed Patents) is not confidential. On or after a mutually agreed time, the Parties agree to issue the joint press release in the form attached as Exhibit B. Subject to the foregoing, no Party may issue a press release or otherwise affirmatively attempt to publicize the terms or existence of this Agreement. The Parties further agree that the terms and conditions of this Agreement are confidential and shall not be disclosed by any Party to any other person except (a) as may be required by law (including, without limitation, SEC reporting requirements, or any other United States or foreign regulatory requirements) or stock exchange rule (after prior written notice to the other Party with opportunity to comment on the disclosure), (b) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the confidential information of the litigating Party, which includes designating the Agreement under the highest available level of protection under a protective order; (c) in confidence to the professional legal, advisory, and financial counsel representing or auditing such Party; (d) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement; (e) in confidence, in connection with a merger or acquisition or proposed merger or acquisition of a Party, or the like; (f) in confidence by Microsoft to Licensees and any third parties covered by the terms of this Agreement; (g) in confidence, to potential acquirers of all or substantially all of VirnetX; (h) in confidence to the insurers and third party claim administrators of Microsoft; (i) in confidence to any person covered by the releases, licenses, waivers or other covenants and rights granted herein; or (j) as otherwise agreed in writing by the Parties executing this Agreement. Prior to any disclosure by VirnetX pursuant to the foregoing subsection (a), VirnetX will provide Microsoft with a draft copy of the proposed disclosure or filing (including, without limitation, any filing with the SEC) at least twenty-four (24) hours before such disclosure or filing is made, and the Parties will consult in good faith with respect to the content of the proposed disclosure and the potential for VirnetX to request confidential treatment with respect to portions of the Agreement that VirnetX reasonably believes must be disclosed or filed. 

 

	
    

	
 7.2 

	
 Representations and Warranties. VirnetX represents, warrants, and covenants to Microsoft that: 

 

 (a) VirnetX Inc. is the sole, exclusive, and lawful owner of the Licensed Patents (including, without limitation, the Patents-in-Suit) and has all rights to enforce and license them and, thus the right to enter into this Agreement and grant all of the releases, licenses, waivers, and other covenants and rights under this Agreement. 

 

 (b) Subject to its Patent License and Assignment Agreement between VirnetX Inc. and SAIC, dated August 15, 2005 (and the amendments thereto as of November 2, 2006 and March 12, 2008), VirnetX Inc. is the sole, exclusive, and lawful owner of all interest in and to the Licensed Patents (including, without limitation, the Patents-in-Suit). 

 

 (c) No Claim released herein, and no portion of any such Claim, has been assigned or otherwise transferred by VirnetX to any other person or entity, either directly, indirectly, or by subrogation or operation of law. VirnetX has not filed, commenced, served, or otherwise instituted (in each case, either on its own, or in conjunction with any third party) any complaints, claims, causes of action, or demands against Microsoft other than those asserted in connection with the Actions. 

 

 (d) During the term of this Agreement any consideration required to be paid to any other person, corporation, or entity if any, on account of any or all of the releases, licenses, waivers, or other covenants or rights granted under this Agreement to any Microsoft Released Parties shall be paid by VirnetX, and no additional consideration shall be required of any of the Microsoft Released Parties. VirnetX has not granted and will not grant any licenses, covenants, and/or other rights, under the Licensed Patents and/or otherwise, that would conflict with, impair, and/or prevent any or all of the releases, licenses, waivers, or other covenants or rights granted under this Agreement. VirnetX Inc. will cause its Affiliates to comply with the terms and conditions of this Agreement. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 (e) VirnetX has been represented by competent and independent counsel of its own choice throughout all negotiations preceding the execution of the Agreement, and has executed this Agreement upon the advice of said competent and independent counsel regarding the meaning and legal effect of this Agreement, and regarding the advisability of making the agreements provided for herein, and fully understands the same. 

 

	
    

	
 7.3. 

	
 Representations and Warranties. Microsoft represents, warrants, and covenants to VirnetX that: 

 

 (a) No Claim released herein, and no portion of any such Claim, has been assigned or otherwise transferred by Microsoft to any other person or entity, either directly, indirectly, or by subrogation or operation of law. Microsoft has not filed, commenced, served, or otherwise instituted (in each case, either on its own, or in conjunction with any third party) any complaints, claims, causes of action, or demands against VirnetX other than those asserted in connection with the Actions or the current reexamination proceedings of the Patents-In-Suit. 

 

 (b) Microsoft has been represented by competent and independent counsel of its own choice throughout all negotiations preceding the execution of the Agreement, and has executed this Agreement upon the advice of said competent and independent counsel regarding the meaning and legal effect of this Agreement, and regarding the advisability of making the agreements provided for herein, and fully understands the same. 

 

	
    

	
 7.4 

	
 Mutual Representations and Warranties. Each Party and each person signing this Agreement on behalf of a Party represents and warrants to the other that: 

 

 (a) Such Party has not entered this Agreement in reliance upon any promise, inducement, agreement, statement, or representation other than those contained in this Agreement. 

 

 (b) Such Party has the full right and power to enter into this Agreement, and the person executing this Agreement has the full right and authority to enter into this Agreement on behalf of such Party and the full right and authority to bind such Party to the terms and obligations of this Agreement. 

 

	
    

	
 7.5 

	
 Notices. All notices and requests which are required or permitted to be given in connection with this Agreement shall be in writing and shall be deemed given as of the day they are received either by messenger, delivery service, or in the United States of America mails, postage prepaid, certified or registered, return receipt requested, and addressed as follows, or to such other address as the Party to receive the notice or request so designates by written notice to the other: 

 

 If to VirnetX Inc.: 

 

 Attn: Kendall Larsen, Chief Executive Officer VirnetX Inc. 5615 Scotts Valley Drive, Suite 110 Scotts Valley, California 95066 Facsimile: (831) 438-3078 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 with a copy to: 

 

 Samuel F. Baxter McKool Smith, P.C. 300 Crescent Court, Suite 1500 Dallas, TX 75201 Fax: (214) 978-4044 

 

 If to Microsoft Corporation: 

 

 Attn: Director of Licensing, LCA Patent Group Microsoft Corporation One Microsoft Way Redmond, WA 98052 Fax: (425) 936-7329 

 with a copy to: Attn: Law & Corporate Affairs Microsoft Corporation One Microsoft Way Redmond, Washington 98052 Fax: (425) 936-7329 

 

	
    

	
 7.6 

	
 Governing Law; Venue. This Agreement shall be construed and controlled by the internal laws of the State of Texas (excluding conflict of laws principles) and applicable federal laws. The sole and exclusive venue for any lawsuit arising out of or relating to this Agreement shall be the United States District Court for the Eastern District of Texas. 

 

	
    

	
 7.7. 

	
 Costs. Each Party shall bear its own costs, expenses and attorneys’ fees incurred in connection with the Actions, the making of this Agreement, and its performance under this Agreement. Each Party expressly waives any claim of costs and attorneys’ fees from or against the other Party. 

 

	
    

	
 7.8. 

	
 Successors and Assigns. The terms, covenants, conditions, provisions and benefits of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. 

 

	
    

	
 7.9. 

	
 No Construction Against Drafter. This Agreement results from negotiations between the Parties and their respective legal counsel, and each Party acknowledges that it has had the opportunity to negotiate modifications to the language of this Agreement. Accordingly, each Party agrees that in any dispute regarding the interpretation or construction of this Agreement, no statutory, common law or other presumption shall operate in favor of or against any Party by virtue of his, her or its role in drafting or not drafting the terms and conditions set forth herein. 

 

	
    

	
 7.10. 

	
 Captions. Captions or headings used in this Agreement are for the convenience of the Parties only, and shall not be considered part of this Agreement or used to construe the terms of this Agreement. 

 

	
    

	
 7.11. 

	
 Construction. If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable or otherwise in conflict with law, the remaining provisions shall remain in full force and effect. If any provisions of this Agreement are deemed not enforceable, they shall be deemed modified to the extent necessary to make them enforceable. Provisions shall apply, as applicable, to current and successive events, parties, and transactions. 

 

	
    

	
 7.12. 

	
 Counterparts. This Agreement may be executed in any number of counterparts and by the different Parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Execution of this Agreement may be accomplished by signing this Agreement and transmitting the signature page to opposing counsel by facsimile or email. The Parties so executing and delivering shall promptly thereafter deliver signed originals of at least the signature page(s), but no failure to do so shall affect the validity or enforceability of this Agreement. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 

	
    

	
 7.13. 

	
 Waiver. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver unless expressly stated in writing by the Party making the waiver. No waiver of any provision shall be binding in any event unless executed in writing by the Party making the waiver. 

 

	
    

	
 7.14. 

	
 Entire Agreement. This Agreement (including, without limitation, all Exhibits attached hereto) constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous written or oral agreements, memorandums of understanding (including the Memorandum of Understanding between Microsoft Corporation and VirnetX Inc. dated May 12, 2010), or communications as to such subject matter, all of which are superseded, merged and fully integrated into this Agreement. It shall not be modified except by a written agreement dated subsequent to the date of this Agreement and signed on behalf of the Parties by their respective duly authorized representatives. 

 

	
    

	
 7.15 

	
 Declaratory Judgment Action.  Subject to VirnetX’s compliance with the releases, licenses and covenants set forth in this Agreement, Microsoft agrees not to file a declaratory judgment action challenging the Licensed Patents against VirnetX for thirty (30) months following the Effective Date. 

 

	
    

	
 7.16 

	
 Reexamination. [***] Microsoft will also cause to be filed with the United States Patent and Trademark Office notifications in the current reexamination proceedings of the Patents-In-Suit indicating that Microsoft Corporation will not participate in those reexamination proceedings. 

 

 [***] Indicates portions of this exhibit that have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 

 

    

    

    

 

 IN WITNESS WHEREOF, VirnetX Inc. and Microsoft Corporation, being fully authorized and empowered to bind themselves to this Agreement, have caused this Agreement to be made and executed by duly authorized officers as of the Effective Date. 

	
 VIRNETX INC. 

	    	
 MICROSOFT CORPORATION 

	    	    	    	    	    	    	    
	
 Name: 

	    	
 /s/ Kendall Larsen 

	    	
  Name: 

	    	
 /s/ Frank H Brod 

	    	    	    	    	    	    	    
	    	    	
  Title: President, Chairman and CEO 

	    	    	    	
 Title: Corp Vice President 

	    	    	
  Date: 5/14/2010 

	    	    	    	
 Date: 5-14-2010 

	    	    	    	    	    	    	    
	    	    	    	    	    	    	    

 

    

    

    

 

 Exhibit A Certain Licensed Patents 

 

	
 Country 

	    	
 App. No. 

	    	
 Filing date 

	    	
 Patent No. 

	    	
 Issue Date 

	
 WO 

	    	
 PCT/US99/25325 

	    	
 10/29/1999 

	    	    	    	    
	
 AU 

	    	
 00/14553 

	    	
 10/29/1999 

	    	
 761,388 

	    	
 09/18/2003 

	
 CA 

	    	
 2,349,519 

	    	
 10/29/1999 

	    	    	    	    
	
 EP 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-GB 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-DE 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-FR 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-IT 

	    	
 46406/BE/2009 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 JP 

	    	
 2000-580350 

	    	
 10/29/1999 

	    	
 4,451,556 

	    	
 02/05/2010 

	
 JP 

	    	
 2009-246033 

	    	
 10/29/1999 

	    	    	    	    
	
 US 

	    	
 09/429,643 

	    	
 10/29/1999 

	    	
 7,010,604 

	    	
 03/07/2006 

	
 US 

	    	
 10/401,551 

	    	
 03/31/2003 

	    	
 7,133,930 

	    	
 11/07/2006 

	
 US 

	    	
 11/301,022 

	    	
 12/13/2005 

	    	    	    	    
	
 US 

	    	
 11/839,937 

	    	
 08/16/2007 

	    	    	    	    
	
 US 

	    	
 09/429,643 

	    	
 02/15/2000 

	    	
 6,502,135 

	    	
 12/31/2002 

	
 WO 

	    	
 PCT/US01/04340 

	    	
 02/12/2001 

	    	    	    	    
	
 EP 

	    	
 01910528.7 

	    	
 02/12/2001 

	    	    	    	    
	
 JP 

	    	
 2001-560062 

	    	
 02/12/2001 

	    	    	    	    
	
 US 

	    	
 10/082,164 

	    	
 02/26/2002 

	    	
 6,618,761 

	    	
 09/09/2003 

	
 US 

	    	
 10/401,888 

	    	
 03/31/2003 

	    	
 6,907,473 

	    	
 06/14/2005 

	
 US 

	    	
 10/082,285 

	    	
 02/26/2002 

	    	
 6,834,310 

	    	
 12/21/2004 

	
 US 

	    	
 10/259,494 

	    	
 09/30/2002 

	    	
 7,490,151 

	    	
 02/10/2009 

	
 US 

	    	
 11/839,969 

	    	
 08/16/2007 

	    	    	    	    
	
 US 

	    	
 11/924,460 

	    	
 10/25/2007 

	    	    	    	    
	
 WO 

	    	
 PCT/US99/25323 

	    	
 10/29/1999 

	    	    	    	    
	
 AU 

	    	
 00/16003 

	    	
 10/29/1999 

	    	
 765914 

	    	
 01/15/2004 

	
 CA 

	    	
 2,349,520 

	    	
 10/29/1999 

	    	    	    	    
	
 EP 

	    	
 99958693.6 

	    	
 10/29/1999 

	    	    	    	    
	
 JP 

	    	
 2000-580354 

	    	
 10/29/1999 

	    	    	    	    
	
 US 

	    	
 09/558,209 

	    	
 04/26/2000 

	    	    	    	    
	
 WO 

	    	
 PCT/US01/13261 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 01932629.7 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 06014499.5 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 06014500.0 

	    	
 04/25/2001 

	    	    	    	    
	
 HK 

	    	
 07109112.7 

	    	
 08/21/2007 

	    	    	    	    
	
 HK 

	    	
 07109113.6 

	    	
 08/21/2007 

	    	    	    	    
	
 JP 

	    	
 2001-583006 

	    	
 04/25/2001 

	    	    	    	    
	
 US 

	    	
 10/702,486 

	    	
 11/07/2003 

	    	
 7,188,180 

	    	
 03/06/2007 

	
 US 

	    	
 11/679,416 

	    	
 02/27/2007 

	    	    	    	    
	
 US 

	    	
 11/839,987 

	    	
 08/16/2007 

	    	    	    	    
	
 US 

	    	
 10/702,522 

	    	
 11/07/2003 

	    	
 6,839,759 

	    	
 01/04/2005 

	
 US 

	    	
 10/702,580 

	    	
 11/07/2003 

	    	
 6,826,616 

	    	
 11/30/2004 

	
 US 

	    	
 09/558,210 

	    	
 04/26/2000 

	    	    	    	    
	
 WO 

	    	
 PCT/US01/13260 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 01932628.9 

	    	
 04/25/2001 

	    	
 1284079 

	    	
 01/18/2006 

	
 EP CH 

	    	
 01932628 9 

	    	
 04/25/2001 

	    	
 1284079 

	    	
 01/18/2006 

	    	    	    	    	    	    	    	    	    

 

    

    

    

 

	
 Country 

	    	
 App. No. 

	    	
 Filing date 

	    	
 Patent No. 

	    	
 Issue Date 

	
 WO 

	    	
 PCT/US99/25325 

	    	
 10/29/1999 

	    	    	    	    
	
 AU 

	    	
 00/14553 

	    	
 10/29/1999 

	    	
 761,388 

	    	
 09/18/2003 

	
 CA 

	    	
 2,349,519 

	    	
 10/29/1999 

	    	    	    	    
	
 EP 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-GB 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-DE 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-FR 

	    	
 99971606.1 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 EP-IT 

	    	
 46406/BE/2009 

	    	
 10/29/1999 

	    	
 1125419 

	    	
 08/26/2009 

	
 JP 

	    	
 2000-580350 

	    	
 10/29/1999 

	    	
 4,451,556 

	    	
 02/05/2010 

	
 JP 

	    	
 2009-246033 

	    	
 10/29/1999 

	    	    	    	    
	
 US 

	    	
 09/429,643 

	    	
 10/29/1999 

	    	
 7,010,604 

	    	
 03/07/2006 

	
 US 

	    	
 10/401,551 

	    	
 03/31/2003 

	    	
 7,133,930 

	    	
 11/07/2006 

	
 US 

	    	
 11/301,022 

	    	
 12/13/2005 

	    	    	    	    
	
 US 

	    	
 11/839,937 

	    	
 08/16/2007 

	    	    	    	    
	
 US 

	    	
 09/429,643 

	    	
 02/15/2000 

	    	
 6,502,135 

	    	
 12/31/2002 

	
 WO 

	    	
 PCT/US01/04340 

	    	
 02/12/2001 

	    	    	    	    
	
 EP 

	    	
 01910528.7 

	    	
 02/12/2001 

	    	    	    	    
	
 JP 

	    	
 2001-560062 

	    	
 02/12/2001 

	    	    	    	    
	
 US 

	    	
 10/082,164 

	    	
 02/26/2002 

	    	
 6,618,761 

	    	
 09/09/2003 

	
 US 

	    	
 10/401,888 

	    	
 03/31/2003 

	    	
 6,907,473 

	    	
 06/14/2005 

	
 US 

	    	
 10/082,285 

	    	
 02/26/2002 

	    	
 6,834,310 

	    	
 12/21/2004 

	
 US 

	    	
 10/259,494 

	    	
 09/30/2002 

	    	
 7,490,151 

	    	
 02/10/2009 

	
 US 

	    	
 11/839,969 

	    	
 08/16/2007 

	    	    	    	    
	
 US 

	    	
 11/924,460 

	    	
 10/25/2007 

	    	    	    	    
	
 WO 

	    	
 PCT/US99/25323 

	    	
 10/29/1999 

	    	    	    	    
	
 AU 

	    	
 00/16003 

	    	
 10/29/1999 

	    	
 765914 

	    	
 01/15/2004 

	
 CA 

	    	
 2,349,520 

	    	
 10/29/1999 

	    	    	    	    
	
 EP 

	    	
 99958693.6 

	    	
 10/29/1999 

	    	    	    	    
	
 JP 

	    	
 2000-580354 

	    	
 10/29/1999 

	    	    	    	    
	
 US 

	    	
 09/558,209 

	    	
 04/26/2000 

	    	    	    	    
	
 WO 

	    	
 PCT/US01/13261 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 01932629.7 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 06014499.5 

	    	
 04/25/2001 

	    	    	    	    
	
 EP 

	    	
 06014500.0 

	    	
 04/25/2001 

	    	    	    	    
	
 HK 

	    	
 07109112.7 

	    	
 08/21/2007 

	    	    	    	    
	
 HK 

	    	
 07109113.6 

	    	
 08/21/2007 

	    	    	    	    
	
 JP 

	    	
 2001-583006 

	    	
 04/25/2001 

	    	    	    	    

    

    

    

 

 Exhibit B 

 

 Press Release 

 FOR IMMEDIATE RELEASE 

 

 MICROSOFT AND VIRNETX SETTLE PATENT INFRINGEMENT CASES 

 

 REDMOND, WA and SCOTTS VALLEY, CA – May 14 2010 – VirnetX Holding Corp. (AMEX:VHC) and Microsoft Corp. today announced that they have settled the patent infringement cases brought by VirnetX before the U.S. District Court for the Eastern District of Texas. Pursuant to the settlement, both lawsuits will be dismissed. 

 

 As part of the settlement, Microsoft takes a license to the VirnetX patents for Microsoft’s products and will make a one-time payment of $200 million to VirnetX. All other aspects of the settlement and license were not disclosed. 

 

 “This Agreement highlights the need for VirnetX’s Secure Domain Name Initiative, and we believe that this successful resolution of our litigation with Microsoft will allow us to focus on the upcoming pilot system that will showcase VirnetX’s automatic Virtual Private Network technology,”said Kendall Larsen, Chief Executive Officer and Chairman of VirnetX Holding Corp. “We look forward to our continued work with our Secure Domain Name Initiative partners in that effort.” 

 

 “We are pleased to work with VirnetX to bring these cases to a successful resolution through this settlement,” said Tom Burt, corporate vice president and deputy general counsel, Microsoft Corporation. “We look forward to VirnetX’s continued progress as it develops its technologies.” 

 

 About Microsoft Founded in 1975, Microsoft (Nasdaq ‘MSFT’) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. 

 About VirnetX 

 

 VirnetX Holding Corporation, an Internet security software and technology company, is engaged in commercializing its patent portfolio, developed from work done for the Central Intelligence Agency, by developing a licensing program as well as developing software products designed to create a secure environment for real-time communication applications such as instant messaging, VoIP, smart phones, eReaders and video conferencing. The Company’s patent portfolio includes over 48 U.S. and international patents and pending applications that were recently declared as essential for 4G security specifications and provide the foundation for the Company’s unique GABRIEL Connection Technology. For more information, please visit www.virnetx.com.

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