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EXHIBIT 10.16
SETTLEMENT AND LICENSE AGREEMENT
This Settlement and License Agreement (the "Agreement") sets forth the terms
upon which Crossroads Systems, Inc., a Texas Corporation ("Crossroads") and
Advanced Digital Information Corporation, a Washington corporation, and its
majority owned subsidiaries including Pathlight Technology, Inc. ("Pathlight"),
a Delaware corporation and a wholly-owned subsidiary of Advanced Digital
Information Corporation (collectively, "ADIC"), agree to settle the litigation
currently pending before the U.S. District Court of the Western District of
Texas, Austin Division, captioned Crossroads Systems, (Texas), Inc. vs.
Pathlight Technology, Inc. Civil Action No. A-00CA-248-SS (the "Patent
Litigation"). This Agreement shall be effective as of the last execution date
set forth below (the "Effective Date").
BACKGROUND
Crossroads is the owner of all right, title and interest in and to the `972
Patent. On or about April 10, 1999, Crossroads filed a complaint in the Patent
Litigation alleging the Accused Products infringe the `972 Patent and demanding
judgment against Pathlight for such infringement. During the Patent Litigation,
Advanced Digital Information Corporation acquired Pathlight. It is now the
desire and intention of Crossroads and ADIC to settle and resolve all disputes,
differences and claims which exist in the Patent Litigation. To that end,
Crossroads grants ADIC a license under the `972 Patent to develop, manufacture,
use, and sell Licensed Product(s) in exchange for a lump sum payment from ADIC
and acknowledgement by ADIC of both the validity of the `972 Patent and
infringement of the `972 Patent by the Accused Products.
In consideration of the mutual promises contained herein, and other good and
valuable consideration, the adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS
1.1 "'972 PATENT" means (i) U.S. Patent No. 5,941,972 issued to
Crossroads and (ii) for purposes of the license grant in
Paragraph 3.1 only, any claims in a patent that issues from
any continuation, divisional, reissue, reexamination or
foreign counterpart applications of U.S. Patent No. 5,941,972
that are directed to a system, apparatus or method that
provides connectivity between fibre channel and SCSI.
1.2 "ACCUSED PRODUCTS" mean any Pathlight SAN Router and Pathlight
SAN Gateway products made, used, sold, or offered for sale or
imported by Pathlight or ADIC.
1.3 "LICENSED PRODUCT(S)" means any product, or part thereof, the
manufacture, use, sale, offer for sale or import of which is
or would be covered by any claim of the `972 Patent.
1.4 "PAST DAMAGES PAYMENT" means the portion of the lump sum
payment from ADIC to Crossroads that is allocated to the
damages incurred by
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Crossroads based on Pathlight's infringement of the `972
Patent due to its manufacture, use, sale and/or import of the
Accused Products. Past Damages shall be equal to five million
dollars ($5,000,000).
1.5 "PRE-PAID ROYALTIES" means the portion of the lump sum payment
from ADIC to Crossroads that is allocated to an up-front
royalty paid by ADIC to Crossroads in exchange for the license
rights in the `972 Patent granted by Crossroads to ADIC under
this Agreement. Pre-Paid Royalties shall be equal to ten
million dollars ($10,000,000).
2. DISMISSAL AND RELEASE
As soon as reasonably possible after receipt of the Lump Sum Payment
pursuant to Paragraph 4 of this Agreement, counsel for Crossroads will
cause to be filed with the U.S. District Court of the Western District
of Texas, Austin Division a consent judgment that includes (i) a
request for dismissal with prejudice all claims and counterclaims in
the Patent Litigation lawsuit and (ii) an acknowledgement by ADIC that
the Accused Products infringe the `972 Patent and that the `972 Patent
is valid and enforceable. Crossroads does hereby release ADIC,
including its customers, dealers, distributors (to the extent such
customers, dealers and distributors use, sell or import ADIC products),
from all past and future claims for infringement, including
contributory infringement and inducement of infringement, of the '972
Patent.
3. LICENSE OF `972 PATENT
3.1 Upon receipt of payment pursuant to Paragraph 4 of this
Agreement, Crossroads hereby grants and ADIC, including its
customers, dealers, distributors (to the extent such
customers, dealers and distributors use, sell or import ADIC
products), hereby accepts a paid up, non-exclusive,
non-sublicensable, perpetual license to and under the `972
Patent to make, use, sell, offer for sale and import Licensed
Product(s).
3.2 ADIC agrees that the license granted in Paragraph 3.1 shall
not restrict in any way Crossroads' use of the `972 Patent, or
Crossroads' manufacture, use, sale, offering for sale or
importation of any product, service, process, or method
covered by the claims of the `972 Patent, for its own purposes
or in collaboration with third parties.
4. LUMP SUM PAYMENT
In consideration for Crossroads' agreements set forth in this
Agreement, including Paragraphs 2 and 3 above, ADIC will pay Crossroads
the sum of fifteen million dollars ($15,000,000) which represents the
total of the Past Damages Payment and the Pre-paid
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Royalties. This sum shall be paid to Crossroads in a lump sum amount,
and shall be paid by wire transfer upon the execution of this Agreement
to Crossroads' account as follows:
Chase Manhattan Bank, NYC, NY
ABA 021000021
FBO SalomonSmithBarney A/C 066-198038
for further credit to 781-06626-14-403
The parties acknowledge and agree that the release contained in
Paragraph 2 and the license grant contained in Paragraph 3 shall only
become effective upon completion and acknowledgement of the wire
transfer of the Lump Sum Payment into the above-identified account.
5. INFRINGEMENT BY OTHERS
5.1 ADIC shall have no right to institute any lawsuit or
action against any third party based on actual or
potential infringement of the `972 Patent.
5.2 Crossroads shall not be obligated to take any actions
to prevent unauthorized use or infringement of the
`972 Patent.
6. PUBLICITY
ADIC and Crossroads will coordinate with respect to the timing of
issuing their respective press releases announcing this settlement of
the Patent Litigation so that such press releases are issued by each
party at substantially the same time. Notwithstanding the foregoing,
each party acknowledges and agrees that the other party may issue press
releases and public announcements regarding the settlement of the
Patent Litigation within twenty-four hours of the execution of the
consent judgment by the court. The parties acknowledge and agree that
any such press releases or public announcements shall not contain any
information that is inconsistent with this Agreement or the consent
judgment.
7. ACKNOWLEDGEMENT OF INFRINGEMENT AND VALIDITY
ADIC and Pathlight each will and hereby does acknowledge that the
Accused Products are within the claims and therefore infringed the `972
Patent prior to this Agreement. ADIC and Pathlight will and hereby does
further acknowledge that the `972 Patent is valid and fully
enforceable. ADIC stipulates to the consent judgment presented to the
court by Crossroads in which ADIC (i) acknowledges the `972 Patent is
valid and enforceable, and (ii) acknowledges that Accused Products
infringe the `972 Patent.
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8. NEGATION OF WARRANTIES
8.1 Nothing in this Agreement is or shall be construed
as:
8.1.1 A warranty or representation that anything
made, used, sold, or otherwise disposed of
under any license granted in this Agreement
is or will be free from infringement of
patents, copyrights, or other rights of
third parties;
8.1.2 An obligation to bring or prosecute actions
or suits against third parties for
infringement;
8.1.3 Granting by implication, estoppel, or
otherwise any licenses or rights under
patents or other rights of Crossroads or
other persons other than under the `972
Patent, regardless of whether such patents
or other rights are dominant or subordinate
to the `972 Patent; or
8.1.4 An obligation to furnish any technology,
technological information or other support.
8.2 Except as expressly set forth in this Agreement,
CROSSROADS MAKES NO REPRESENTATIONS AND EXTENDS NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED.
THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
OR THAT THE USE OF THE LICENSED PRODUCT(S) WILL NOT
INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER
RIGHTS OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.
8.3 NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY
INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL
OR OTHER DAMAGES WHATSOEVER, WHETHER IN TORT, STRICT
LIABILITY, CONTRACT OR OTHERWISE ARISING OUT OF THIS
AGREEMENT. CROSSROADS SHALL NOT HAVE ANY
RESPONSIBILITIES OR LIABILITIES WHATSOEVER WITH
RESPECT TO THE LICENSED PRODUCTS.
9. INDEMNITY
ADIC agrees to indemnify, hold harmless, and defend Crossroads and its
directors, officers, employees, and agents against any and all claims
for death, illness, personal injury, property damage, and improper
business practices arising out of the manufacture, use, sale, offer for
sale or other disposition of any Licensed Product or other tangible or
intangible covered by the `972 Patent by ADIC or any of its customers,
dealers or distributors.
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10. MARKING
ADIC agrees to mark Licensed Product(s) (or their containers or labels)
within a reasonable time period which are made, used, sold, imported or
otherwise disposed of by it under the license granted in this Agreement
with the marking "U.S. Patent No. 5,941,972". Crossroads agrees that
such marking by ADIC of the Licensed Products shall not require any
specific reference to Crossroads.
11. NAMES AND MARKS
Each party agrees not to make any statements in any press releases,
public announcements, promotional advertising or other promotional
materials that expressly or implicitly indicate that the other party in
any manner endorses or sponsors any such products or services. Each
party further agrees not to use the name of any employee or any
trademark, service mark, trade name, or symbol of the other party to
market any product or service (other than comparative advertising in
compliance with U.S. law) without such other party's prior written
consent.
12. TERM AND TERMINATION
12.1 The term of this Agreement shall be from the
Effective Date until the expiration of the `972
Patent, unless earlier termination pursuant to this
Paragraph 12.
12.2 Crossroads may terminate this Agreement if ADIC:
12.2.1 Is in material breach of any
provision hereof; or
12.2.2 Voluntarily or involuntarily files
a petition in bankruptcy or has a
receiver appointed on its behalf.
and ADIC fails to remedy any such breach or
bankruptcy within thirty (30) days after written
notice thereof by Crossroads.
12.3 Any cause of action or claim of Crossroads having to
do with any uncured breach or default by ADIC and the
provisions of Paragraphs 1, 7, 8 and 9 shall survive
the termination of this Agreement.
13. SUCCESSORS AND ASSIGNMENT
ADIC may not assign this Agreement or any of its rights and obligations
herein. Notwithstanding the foregoing, the rights granted to ADIC,
including the license in Paragraph 3 above, may be assigned by ADIC to
any successor in interest in ADIC's storage network business, including
purchasers of substantially all the assets relating to the production
or sale of the accused products lines in the Patent Litigation,
provided, however, that the benefits of the license granted in
Paragraph 3.1 shall inure to such successor in interest only in
connection with the products and assets purchased from
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ADIC and the natural expansion thereof, and the license would not apply
to any pre-existing products, services or liabilities of such successor
in interest or any products, services or liabilities developed
independently of the purchased business. , Upon such permitted
assignment, ADIC shall become unlicensed under the `972 Patent. Any
attempted assignment in derogation of the foregoing shall be void. This
Agreement shall be binding upon and inure to the benefit of the
parties, permitted assigns and legal representatives.
14. NOTICES
All notices under this Agreement shall be deemed to have been fully
given when done in writing and deposited in the United States mail,
registered or certified, and addressed as follows:
To CROSSROADS:
Crossroads Systems, Inc.
8300 N. MoPac Expressway
Austin, TX 78759
Attention: General Counsel
To ADIC: Advanced Digital Information Corporation_
11431 Willows Road N.E.
Redmond, WA 98052
Attention: General Counsel
Either party may change its address upon written notice to the other
party.
15. RELATIONSHIP OF PARTIES
Nothing in this Agreement shall be construed as creating a partnership,
joint venture, or agency relationship between the parties, or as
authorizing either party to act as agent for the other.
16. ENTIRE AGREEMENT; MODIFICATIONS
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior
negotiations and agreements, whether written or oral. This Agreement
may not be altered or amended except by an instrument in writing
executed by both parties. No waiver of or amendment to any of the terms
hereof subsequent to the execution hereof claimed to have been made by
any representative of either party shall have force or effect unless in
a writing signed by duly authorized representatives of the parties.
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17. CONSTRUCTION
The language of this Agreement shall be construed as a whole according
to its fair meaning, and not strictly for or against either of the
parties.
18. GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas.
19. INADMISSIBILITY OF PAYMENT TERMS
The parties acknowledge and agree that the lump sum payment (the
Pre-paid Royalties and Past Damages Payment) shall not be used by
either party against the other in any future litigation or arbitration
for the purpose of establishing a "reasonable royalty" rate.
Notwithstanding the foregoing, and unless Crossroads provides contrary
instructions, the parties agree that vis-a-vis third parties, the lump
sum payment (the Pre-paid Royalties Past Damages Payment) shall be
considered a reasonable royalty rate for a license of the `972 Patent.
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Crossroads Systems, Inc.
By: /s/ Brian R. Smith
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Name: Brian Smith
Its: Chairman and Chief Executive Officer
Date: June, 12, 2001
Advanced Digital Information Corporation
By: /s/ Linda Schoemaker
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Name: Linda Schoemaker
Its: Senior Vice President and General Counsel
Date: June, 12, 2001
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