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PATRIOT SCIENTIFIC CORP - 8-K - 20050615 - EXHIBIT_10
EXECUTION COPY
MASTER AGREEMENT
by and among
PATRIOT SCIENTIFIC CORPORATION
and
TECHNOLOGY PROPERTIES LIMITED INC.
and
CHARLES H. MOORE
Dated as of June 7, 2005
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................6
1.1 Definitions......................................................6
1.2 Index of Other Defined Terms.....................................8
ARTICLE II THE TRANSACTIONS.................................................10
2.1 Execution of Ancillary Agreements...............................10
2.2 Formation of Delaware Limited Liability Companies...............10
2.3 Patriot License to Intel........................................10
2.4 Stipulated Final Judgment.......................................10
2.5 Delivery of Intel Proceeds......................................10
2.6 Closing.........................................................10
2.7 Actions at Closing..............................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PATRIOT.......................11
3.1 Corporate Existence and Power...................................11
3.2 Authorization...................................................12
3.3 Governmental Authorization......................................12
3.4 Non-Contravention...............................................12
3.5 Absence of Certain Changes or Events............................12
3.6 Intellectual Property...........................................12
3.7 Litigation......................................................13
3.8 Advisory Fees...................................................13
3.9 Bulk Sales......................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TPL............................13
4.1 Organization and Existence......................................14
4.2 Corporate Authorization.........................................14
4.3 Governmental Authorization......................................14
4.4 Non-Contravention...............................................14
4.5 Absence of Certain Changes or Events............................14
4.6 Intellectual Property...........................................14
4.7 Litigation......................................................15
4.8 Advisory Fees...................................................15
4.9 Bulk Sales......................................................15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MOORE...........................15
5.1 Authorization...................................................15
5.2 Governmental Authorization......................................15
5.3 Non-Contravention...............................................16
5.4 Absence of Certain Changes or Events............................16
5.5 Intellectual Property...........................................16
5.6 Litigation......................................................17
5.7 Advisory Fees...................................................17
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ARTICLE VI COVENANTS OF PATRIOT.............................................17
6.1 Stipulated Final Judgment.......................................17
6.2 Retention of Rights; No Action With Respect to the
MSD Patents...................................................17
ARTICLE VII COVENANTS OF ALL PARTIES........................................18
7.1 Protection and Maintenance of the MSD Patents...................18
7.2 Commercialization Program.......................................18
7.3 Further Assurances..............................................18
7.4 Certain Filings.................................................18
7.5 Notification....................................................18
7.6 Public Announcements............................................19
7.7 No Interference.................................................19
7.8 No Transfer.....................................................20
7.9 Litigation Cooperation..........................................20
ARTICLE VIII CONDITIONS TO CLOSING..........................................20
8.1 Conditions to Obligations of Each Party.........................20
8.2 Conditions to Obligations of TPL................................21
8.3 Conditions to Obligations of Patriot............................21
ARTICLE IX INDEMNIFICATION..................................................22
9.1 Patriot Agreement to Indemnify..................................22
9.2 TPL Agreement to Indemnify......................................23
9.3 Moore Agreement to Indemnify....................................23
9.4 Survival of Representations, Warranties and Covenants...........23
9.5 Claims for Indemnification......................................23
9.6 Defense of Claims...............................................24
ARTICLE X TERMINATION.......................................................24
10.1 Grounds for Termination.........................................24
10.2 Effect of Termination...........................................26
ARTICLE XI MISCELLANEOUS....................................................27
11.1 Notices.........................................................27
11.2 Amendments; No Waivers..........................................28
11.3 Expenses........................................................29
11.4 Successors and Assigns..........................................29
11.5 Governing Law...................................................29
11.6 Counterparts; Effectiveness.....................................29
11.7 Entire Agreement................................................29
11.8 Captions........................................................29
11.9 Severability....................................................29
11.10 Construction....................................................29
11.11 Cumulative Remedies.............................................30
11.12 Specific Performance............................................30
11.13 Third-Party Beneficiaries.......................................30
11.14 No Liability of Intel...........................................30
11.15 No Punitive, Exemplary, or Consequential Damages................31
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EXHIBITS
EXHIBIT A Stipulated Final Judgment
EXHIBIT B Operating Agreement
EXHIBIT C Newco License
EXHIBIT D Commercialization Agreement
EXHIBIT E Escrow Agreement
EXHIBIT F-1 Consent and Release Agreement
EXHIBIT F-2 Consent and Release Agreement
EXHIBIT G Form of Merger Agreement
EXHIBIT H Patriot License to Intel
EXHIBIT I Form of Warrant
EXHIBIT J Form of Registration Rights Agreement
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AGREEMENT
This AGREEMENT (this "Agreement"), dated as of June 7, 2005, is by and
among PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation having its
principal offices located at 10989 Via Frontera, San Diego, CA 92127
("Patriot"), TECHNOLOGY PROPERTIES LIMITED INC., a California corporation having
its principal offices located at 21730 Stevens Creek Blvd., Suite 201,
Cupertino, CA 95014 ("TPL"), and Charles H. Moore, an individual whose principal
residence is in Sierra County, California ("Moore").
R E C I T A L S
WHEREAS, Patriot is engaged in the business of developing, marketing, and
selling microprocessors and microprocessor technology, as well as other
complementary products;
WHEREAS, TPL is engaged in the business of developing, managing, and
commercializing intellectual property assets and proprietary product technology;
WHEREAS, Patriot, TPL and Moore are involved in the Inventorship
Litigation (as defined below) with respect to the ownership of rights and
interests in certain microprocessor science and design patents identified on
Schedule 1 attached hereto (the "MSD Patents");
WHEREAS, Patriot has initiated the Infringement Litigation (as defined
below), which has been stayed pending the outcome of the Inventorship
Litigation;
WHEREAS, the Patriot security holders identified on Schedule 2 attached
hereto (the "Patriot Rights Holders") have certain rights with respect to the
transactions contemplated by this Agreement;
WHEREAS, to resolve the Inventorship Litigation and disagreements among
the parties, provide funds to Patriot to finance its operations, and provide for
the effective commercialization of the MSD Patents, the parties have agreed
that:
A. Patriot, TPL and Moore will enter into this Agreement; Patriot and TPL
will enter into the Operating Agreement attached hereto as Exhibit B (the
"Operating Agreement"); Patriot, TPL, and P-Newco will enter into the
Commercialization Agreement attached hereto as Exhibit D (the "Commercialization
Agreement"); Patriot and TPL will enter into the Warrant substantially in the
form attached hereto as Exhibit I (the "Warrant"), as well as the Registration
Rights Agreement substantially in the form attached hereto as Exhibit J (the
"Registration Rights Agreement") ; and Patriot and TPL will open an escrow
account (the "Escrow Account") and enter into an escrow agreement substantially
in the form attached hereto as Exhibit E (the "Escrow Agreement") to facilitate
the transactions contemplated by this Agreement;
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B. Patriot has entered into a license in respect of the MSD Patents with
Intel Corporation ("Intel"), attached hereto as Exhibit H (the "Patriot License
to Intel");
C. As soon as possible after the date hereof, Patriot, TPL and Moore will
settle all litigation among them pursuant to the Stipulated Final Judgment
substantially in the form attached hereto as Exhibit A (the "Stipulated Final
Judgment"), and will take any and all action necessary to cause the trade
secrets litigation currently pending between Patriot and TPL in Santa Clara
Superior Court (the "Trade Secrets Litigation") to be dismissed without
prejudice, and the Infringement Litigation involving Intel and Patriot shall be
dismissed with prejudice;
D. As soon as possible after the date hereof, TPL will request that Intel
deliver all of the unpaid Milestone Payments (as defined in the Intel Patent
License Agreement) pursuant to Section 3.2 of the Intel Patent License Agreement
to the account set forth on Exhibit A to the Escrow Agreement, and the rights of
Patriot and TPL with regard to the Milestone Payments shall thereafter be as set
forth in the Escrow Agreement;
E. Patriot will form a wholly owned subsidiary ("P-Newco"), and Patriot
and P-Newco will enter into a license with respect to certain of Patriot's
rights in the MSD Patents, substantially in the form attached hereto as Exhibit
C;
F. TPL will form a wholly owned subsidiary ("T-Newco"), and TPL and
T-Newco will enter into a license with respect to certain of TPL's rights in the
MSD Patents, substantially in the form attached hereto as Exhibit C
(collectively with the license entered into between Patriot and P-Newco
identified in Recital E above, the "Newco Licenses" );
G. Patriot, TPL, T-Newco and P-Newco will enter into an agreement and plan
of merger substantially in the form attached hereto as Exhibit G (the "Merger
Agreement") pursuant to which T-Newco will merge with and into P-Newco, with
P-Newco continuing as the surviving entity;
H. Upon the earlier of (a) the mutual agreement of Patriot, TPL, and
P-Newco, or (b) three months from the date hereof, P-Newco will grant to TPL its
rights in the MSD Patents (the "Grant") in furtherance of the commercialization
program contemplated by the Commercialization Agreement, in the form attached as
Exhibit 1 to the Commercialization Agreement;
I. TPL will cause the Patriot Cash Consideration (as defined below) to be
paid to Patriot at Closing from the funds in the Escrow Account pursuant to the
terms of the Escrow Agreement;
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J. TPL will cause One Million Dollars ($1,000,000) of TPL's funds in the
Escrow Account, and Patriot will cause at least One Million Dollars ($1,000,000)
of Patriot's funds in the Escrow Account, to be paid in cash at Closing, to the
Patriot Rights Holders in exchange for the Patriot Rights Holders entering into
a consent and release agreement substantially in one of the alternate forms
attached as Exhibits F-1 or F-2 hereto (the "Consent and Release Agreement");
K. TPL will cause * * * of TPL's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as TPL's first installment of the
Working Capital Contribution;
L. Patriot will cause * * * of Patriot's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as Patriot's first installment of the
Working Capital Contribution; and
M. P-Newco will allocate the proceeds generated from the commercialization
program to Patriot and TPL pursuant to the terms of the Commercialization
Agreement and the Operating Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises, and their
respective representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Applicable Law" means any domestic or foreign, federal, state or
local statute, law, common law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, permit or
other requirement of any Governmental Authority.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in San Diego, California are authorized or
required by law to close.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses (including reasonably foreseeable lost profits), damages,
costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties,
charges and amounts paid in settlement (net of insurance proceeds and proceeds
from related third party indemnification, contribution or similar claims
actually received), including (a) interest at a rate equal to 200 basis points
above the prime rate, as in effect from time to time, of Citibank, N.A., on cash
disbursements in respect of any of the foregoing, compounded quarterly, from the
date each such cash disbursement is made until the Person incurring the same
shall have been indemnified in respect thereof, (b) reasonable costs, fees and
expenses of such Person's Representatives and (c) any reasonable costs, fees and
expenses incurred in connection with investigating, defending against, or
settling any such claims.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Gross Cash Proceeds" means all cash proceeds received pursuant to
licenses, judgments, settlements and other payments with respect to the right to
make, use, sell and offer to sell products subject to the MSD Patents.
"Indemnifying Party" means: (a) with respect to any TPL Indemnitee
asserting a claim under Section 9.1, Patriot; (b) with respect to any Patriot
Indemnitee asserting a claim under Section 9.2, TPL; and (c) with respect to any
Patriot/TPL Indemnitee asserting a claim under Section 9.3, Moore.
"Indemnitee" means: (a) the TPL Indemnitees with respect to any
claim for which Patriot is an Indemnifying Party under Section 9.1; (b) the
Patriot Indemnitees with respect to claims for which TPL is an Indemnifying
Party under Section 9.2; and (c) the Patriot/TPL Indemnitees with respect to any
claim for which Moore is an Indemnifying Party under Section 9.3.
"Infringement Litigation" means the lawsuits filed by Patriot
against five electronics companies alleging infringement of certain U.S. Patents
and assigned the following case numbers: (a) Southern District of New York,
03CV10142; (b) Northern District of California, C035787; (c) Southern District
of New York, 03CV10180; (d) Eastern District of New York, CV036432; and (e)
District of New Jersey, 03CV06210, including the related claims of Intel against
Patriot.
"Intel Patent License Agreement" means that certain license
agreement by and among TPL Micro Ltd., TPL, Moore and Intel, dated June 28,
2004, as may be amended from time to time.
"Inventorship Litigation" means the lawsuit filed by Patriot on
February 13, 2004 in the United States District Court, Northern District of
California against TPL, Daniel E. Leckrone and Charles H. Moore, alleging claims
for declaratory judgment for determination and correction of inventorship and
assigned case number C040618JF(HRL).
"knowledge" means the actual knowledge of a Person and its
Representatives, after a reasonable investigation of the surrounding
circumstances.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person or is disclosed on any schedule to this Agreement.
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"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"Material Adverse Effect" means any circumstance, development,
event, condition, effect or change that, individually or when taken together
with all other circumstances, developments, events, conditions, effects and
changes that have occurred, had or has or, with the passage of time, would be
reasonably likely to have, a material adverse effect on, or a material adverse
change in, (a) the MSD Patents, (b) the anticipated benefits of the transactions
contemplated by this Agreement or (c) the ability of the parties hereto to
consummate the transactions contemplated hereby.
"Net Cash Proceeds" has the meaning set forth in Section 6.1(a)(v)
of the Operating Agreement.
"Patriot Cash Consideration" means Ten Million Dollars ($10,000,000)
minus * * * (which amount constitutes Patriot's first installment of the Working
Capital Contribution pursuant to Section 5.3(a) of the Operating Agreement)
minus Patriot's share of the Consent and Release Consideration, which represents
an allocation and sharing of proceeds to be received from Intel pursuant to
Section 3.2(c) of the Intel Patent License Agreement.
"Patriot Common Stock" means the common stock, par value $0.00001
per share, of Patriot.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, estate or other entity or
organization, including a Governmental Authority.
"Representatives" means the officers, directors, employees,
attorneys, accountants, advisors, representatives and agents of a Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Working Capital Contribution" shall have the meaning given to it in
the Operating Agreement.
1.2 Index of Other Defined Terms. In addition to those terms defined
above, the following terms shall have the respective meanings given thereto in
the sections indicated below:
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Defined Term Section Page
------------ ------- ----
Active Potential Licensees.............................6.2..................17
Agreement.........................................Preamble...................4
Closing Date...........................................2.6..................10
Closing................................................2.6..................10
Commercialization Agreement.......................Recitals...................4
Consent and Release Agreement.....................Recitals...................6
Consent and Release Consideration...................2.7(f)..................11
Escrow Account....................................Recitals...................4
Escrow Agreement..................................Recitals...................5
Grant.............................................Recitals...................5
Intel Parties........................................11.13..................30
Intel.............................................Recitals...................5
Merger Agreement..................................Recitals...................5
Moore.............................................Preamble...................4
MSD Patents.......................................Recitals...................4
Newco Licenses....................................Recitals...................5
Operating Agreement...............................Recitals...................4
Patriot Indemnitees....................................9.2..................22
Patriot License to Intel..........................Recitals...................5
Patriot Rights Holders............................Recitals...................4
Patriot...........................................Preamble...................4
Patriot/TPL Indemnitees................................9.3..................23
P-Newco...........................................Recitals...................5
Proceedings............................................3.7..................13
Registration Rights Agreement.....................Recitals...................4
Stipulated Final Judgment.........................Recitals...................5
Termination Date......................................10.1..................24
T-Newco...........................................Recitals...................5
TPL Indemnitees........................................9.1..................22
TPL...............................................Preamble...................4
Trade Secrets Litigation..........................Recitals...................5
Warrant...........................................Recitals...................4
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ARTICLE II
THE TRANSACTIONS
2.1 Execution of Ancillary Agreements. As soon as possible after the date
hereof, and in any event not later than the Closing Date, Patriot, TPL, Moore
and P-Newco shall enter into the following agreements, as the case may be:
(a) Patriot and TPL shall enter into the Operating Agreement;
(b) Patriot, TPL and P-Newco shall enter into the Commercialization
Agreement;
(c) Patriot and TPL shall enter into the Warrant and the
Registration Rights Agreement;
(d) Patriot, TPL and Premier Trust, Inc. as the Escrow Agent shall
enter into the Escrow Agreement to facilitate the transactions contemplated
hereby.
2.2 Formation of Delaware Limited Liability Companies. As soon as
possible, and to effect the transactions contemplated hereby:
(a) Patriot will form P-Newco, a wholly owned Delaware limited
liability company, and
(b) TPL will form T-Newco, a wholly owned Delaware limited liability
company.
2.3 Patriot License to Intel. Patriot has entered into the Patriot License
to Intel.
2.4 Stipulated Final Judgment. As soon as possible after the date hereof,
Patriot, TPL and Moore shall enter into the Stipulated Final Judgment and file
it promptly thereafter with the court.
2.5 Delivery of Intel Proceeds. As soon as possible after the date hereof,
TPL shall request that Intel deliver all of the unpaid Milestone Payments (as
defined in the Intel Patent License Agreement) pursuant to Section 3.2 of the
Intel Patent License Agreement to the account set forth on Exhibit A to the
Escrow Agreement, and the rights of Patriot and TPL with regard to the Milestone
Payments shall thereafter be as set forth in the Escrow Agreement.
2.6 Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Gibson, Dunn & Crutcher
LLP, 333 South Grand Avenue, Los Angeles, California 90071, on June 14, 2005 or,
if the conditions to Closing set forth in Article VIII (other than conditions
that by their terms can only be satisfied on the Closing Date) have not been
satisfied or waived by such date, then on the second Business Day after the last
of the conditions to Closing set forth in Article VIII (other than conditions
that by their terms can only be satisfied on the Closing Date) have been
satisfied or waived by the party entitled to waive the same or on any such other
date as to which TPL and Patriot may mutually agree in writing (the "Closing
Date").
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2.7 Actions at Closing. At Closing:
(a) Each of Patriot and TPL shall deliver to the other party
executed copies of this Agreement, the Escrow Agreement, the Operating
Agreement, the Commercialization Agreement, the Newco Licenses, the Merger
Agreement, and the Grant attached as Exhibit 1 to the Commercialization
Agreement;
(b) The Certificate of Merger shall be filed with the Secretary of
State of the State of Delaware;
(c) The officer's certificates contemplated by Sections 8.2(a)(iii)
and 8.3(a)(iii) shall be delivered by Patriot and TPL, respectively;
(d) Patriot shall deliver to TPL the Consent and Release Agreements
executed by all of the Patriot Rights Holders;
(e) TPL will cause One Million Dollars ($1,000,000) of TPL's funds
in the Escrow Account, and Patriot will cause at least One Million Dollars
($1,000,000) of Patriot's funds in the Escrow Account, to be paid in cash at
Closing to the Patriot Rights Holders set forth on Schedule 2 pursuant to the
terms of the Escrow Agreement (the "Consent and Release Consideration");
(f) TPL will cause * * * of TPL's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as TPL's first installment of the
Working Capital Contribution;
(g) Patriot will cause * * * of Patriot's funds in the Escrow
Account to be contributed in cash at Closing to P-Newco as Patriot's first
installment of the Working Capital Contribution; and
(h) TPL shall cause all Net Cash Proceeds generated pursuant to
Section 7.2(b), if any, to be paid to P-Newco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PATRIOT
As an inducement to TPL to enter into this Agreement and to consummate the
transactions contemplated herein, Patriot hereby represents and warrants to TPL
that:
3.1 Corporate Existence and Power. Patriot is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all corporate power to enter into this Agreement and consummate
the transactions contemplated hereby.
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3.2 Authorization. Except as set forth on Schedule 3.2, the execution,
delivery and performance by Patriot of this Agreement and the consummation by
Patriot of the transactions contemplated hereby are within the corporate powers
of Patriot and have been duly authorized by all necessary corporate action on
the part of Patriot. This Agreement has been duly and validly executed by
Patriot and constitutes the legal, valid and binding agreement of Patriot,
enforceable against Patriot in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to general
principles of equity.
3.3 Governmental Authorization. The execution, delivery and performance by
Patriot of this Agreement require no action by, consent or approval of, or
filing with, any Governmental Authority other than any actions, consents,
approvals or filings otherwise expressly referred to in this Agreement.
3.4 Non-Contravention. The execution, delivery and performance by Patriot
of this Agreement does not (a) contravene or conflict with the certificate of
incorporation or bylaws of Patriot, a true and correct copy of each of which has
been delivered to TPL; (b) contravene or constitute a default or breach under
any material agreement to which Patriot is a party; (c) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Patriot; or (d) result in the creation or imposition of
any Lien on the MSD Patents.
3.5 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 3.5(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against
Patriot that could reasonably be expected to result in a Material Adverse
Effect.
(b) Except as set forth on Schedule 3.5(b), and except as otherwise
contemplated by or disclosed in this Agreement, Patriot has not entered into any
contract or agreement in respect of the MSD Patents.
3.6 Intellectual Property.
(a) Except as set forth on Schedule 3.6(a), Patriot owns exclusively
all right, title and interest in and to the MSD Patents, free and clear of any
and all Liens, encumbrances or other adverse ownership claims, and Patriot has
not received any notice or claim challenging Patriot's ownership of the MSD
Patents or suggesting that any Person, other than TPL and Moore, has any claim
of legal or beneficial ownership with respect thereto, nor, to Patriot's
knowledge, is there a reasonable basis for any claim that Patriot does not have
such good and valid title to the MSD Patents.
(b) To the knowledge of Patriot, the MSD Patents are valid,
enforceable and subsisting. Except as disclosed in Schedule 3.6(b), Patriot has
not received any notice or claim challenging or questioning the validity or
enforceability of the MSD Patents or indicating an intention on the part of any
Person to bring a claim that the MSD Patents are invalid or unenforceable or
have been misused, and to Patriot's knowledge no reasonable basis exists for any
such claim.
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(c) To the knowledge of Patriot (i) Patriot has not taken any action
or failed to take any action (including the manner in which it has conducted its
business, or used or enforced, or failed to use or enforce, the MSD Patents)
that would result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents and (ii) subsequent to the
acquisition of its interest therein, Patriot has timely paid all filing,
examination, issuance, post registration and maintenance fees, annuities and the
like associated with or required with respect to the MSD Patents.
(d) To the knowledge of Patriot, none of the activities or
operations of Patriot with respect to the MSD Patents infringes upon,
misappropriates, violates, dilutes or constitutes the unauthorized use of any
rights, interests, or property of any third party. Patriot has not received any
notice or claim asserting or suggesting that any such infringement,
misappropriation, violation, dilution or unauthorized use is or may be occurring
or has or may have occurred, nor, to Patriot's knowledge, is there any
reasonable basis therefor. The MSD Patents are not subject to any outstanding
order, judgment, decree or stipulation restricting the use, sale, transfer,
assignment or licensing thereof by Patriot to any Person.
3.7 Litigation. Except as disclosed in Schedule 3.7 (i) there are no
actions, suits, claims, hearings, arbitrations, proceedings (public or private)
or governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
or, to the knowledge of Patriot, threatened, against or by Patriot or the MSD
Patents or which seek to enjoin or rescind the transactions contemplated by this
Agreement, nor, to the knowledge of Patriot, is there any valid basis for any
such Proceedings; and (ii) there are no existing orders, judgments or decrees of
any Governmental Authority naming Patriot as an affected party or otherwise
affecting the MSD Patents or the performance by Patriot of the transactions
contemplated by this Agreement, nor, to the knowledge of Patriot, is there any
valid basis for any such order, judgment or decree.
3.8 Advisory Fees. Except as set forth in Schedule 3.8, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of Patriot who is entitled to any
fee, commission or reimbursement of expenses from Patriot, TPL or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
3.9 Bulk Sales. There are no bulk sales statutes or laws applicable to
Patriot or the MSD Patents in connection with the consummation of the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TPL
As an inducement to Patriot to enter into this Agreement and to consummate
the transactions contemplated herein, TPL hereby represents and warrants to
Patriot that:
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4.1 Organization and Existence. TPL is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of California
and has all corporate power to enter into this Agreement and consummate the
transactions contemplated hereby.
4.2 Corporate Authorization. The execution, delivery and performance by
TPL of this Agreement and the consummation by TPL of the transactions
contemplated hereby are within the corporate powers of TPL and have been duly
authorized by all necessary corporate action on the part of TPL. This Agreement
has been duly and validly executed by TPL and constitutes the legal, valid and
binding agreement of TPL, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and subject to general
principles of equity.
4.3 Governmental Authorization. The execution, delivery and performance by
TPL of this Agreement require no action by, consent or approval of, or filing
with, any Governmental Authority other than any actions, consents, approvals or
filings otherwise expressly referred to in this Agreement.
4.4 Non-Contravention. The execution, delivery and performance by TPL of
this Agreement does not (a) contravene or conflict with the certificate of
incorporation or bylaws of TPL, a true and correct copy of each of which has
been delivered to Patriot; (b) contravene or constitute a default or breach
under any material agreement to which TPL is a party; (c) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to TPL; or (d) result in the creation or imposition of any
Lien on the MSD Patents.
4.5 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 4.5(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against TPL
that could reasonably be expected to result in a Material Adverse Effect.
(b) Except as set forth on Schedule 4.5(b), and except as otherwise
contemplated by or disclosed in this Agreement, TPL has not entered into any
contract or agreement in respect of the MSD Patents.
4.6 Intellectual Property.
(a) TPL has a valid and subsisting license to the MSD Patents from
Moore. Except as disclosed on Schedule 4.6(a), TPL has not received any notice
or claim challenging TPL's rights with respect to the MSD Patents or suggesting
that any Person, other than Patriot and Moore, has any claim of legal or
beneficial ownership with respect thereto, nor, to TPL's knowledge, is there a
reasonable basis for any such claim.
(b) To the knowledge of TPL, the MSD Patents are valid, enforceable
and subsisting. Except as disclosed on Schedule 4.6(b), TPL has not received any
notice or claim challenging or questioning the validity or enforceability of the
MSD Patents or indicating an intention on the part of any Person to bring a
claim that the MSD Patents are invalid or unenforceable or have been misused,
and to TPL's knowledge no reasonable basis exists for any such claim.
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(c) To the knowledge of TPL, TPL has not taken any action or failed
to take any action (including the manner in which it has conducted its business,
or used or enforced, or failed to use or enforce, the MSD Patents) that would
result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents.
(d) To the knowledge of TPL, none of the activities or operations of
TPL with respect to the MSD Patents infringes upon, misappropriates, violates,
dilutes or constitutes the unauthorized use of any rights, interests, or
property of any third party. TPL has not received any notice or claim asserting
or suggesting that any such infringement, misappropriation, violation, dilution
or unauthorized use is or may be occurring or has or may have occurred, nor, to
TPL's knowledge, is there any reasonable basis therefor. To the knowledge of
TPL, the MSD Patents are not subject to any outstanding order, judgment, decree
or stipulation restricting the use, sale, transfer, assignment or licensing
thereof by TPL to any Person.
4.7 Litigation. Except as disclosed on Schedule 4.7 (i) there are no
Proceedings pending or, to the knowledge of TPL, threatened, against or by TPL
or the MSD Patents or which seek to enjoin or rescind the transactions
contemplated by this Agreement, nor, to the knowledge of TPL, is there any valid
basis for any such Proceedings; and (ii) there are no existing orders, judgments
or decrees of any Governmental Authority naming TPL as an affected party or
otherwise affecting the MSD Patents or the performance by TPL of the
transactions contemplated by this Agreement, nor, to the knowledge of TPL, is
there any valid basis for any such order, judgment or decree.
4.8 Advisory Fees. Except as set forth on Schedule 4.8, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of TPL who is entitled to any fee,
commission or reimbursement of expenses from TPL, Patriot or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
4.9 Bulk Sales. There are no bulk sales statutes or laws applicable to TPL
or the MSD Patents in connection with the consummation of the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MOORE
5.1 Authorization. This Agreement has been duly and validly executed by
Moore and constitutes the legal, valid and binding agreement of Moore,
enforceable against Moore in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
5.2 Governmental Authorization. The execution, delivery and performance by
Moore of this Agreement require no action by, consent or approval of, or filing
with, any Governmental Authority other than any actions, consents, approvals or
filings otherwise expressly referred to in this Agreement.
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5.3 Non-Contravention. The execution, delivery and performance by Moore of
this Agreement does not: (a) contravene or constitute a default or breach under
any material agreement to which Moore is a party; (b) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Moore; or (c) result in the creation or imposition of any
Lien on the MSD Patents.
5.4 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 5.4(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against Moore
that could reasonably be expected to result in a Material Adverse Effect.
(b) Except as set forth on Schedule 5.4(b), and except as otherwise
contemplated by or disclosed in this Agreement, Moore has not entered into any
contract or agreement in respect of the MSD Patents.
5.5 Intellectual Property.
(a) Except as set forth on Schedule 5.5(a), Moore owns exclusively
all right, title and interest in and to the MSD Patents, free and clear of any
and all Liens, encumbrances or other adverse ownership claims, and Moore has not
received any notice or claim challenging Moore's ownership of the MSD Patents or
suggesting that any Person, other than TPL and Moore, has any claim of legal or
beneficial ownership with respect thereto, nor, to Moore's knowledge, is there a
reasonable basis for any claim that Moore does not have such good and valid
title to the MSD Patents.
(b) To the knowledge of Moore, the MSD Patents are valid,
enforceable and subsisting. Except as disclosed on Schedule 5.5(b), Moore has
not received any notice or claim challenging or questioning the validity or
enforceability of the MSD Patents or indicating an intention on the part of any
Person to bring a claim that the MSD Patents are invalid or unenforceable or
have been misused, and to Moore's knowledge no reasonable basis exists for any
such claim.
(c) To the knowledge of Moore (i) Moore has not taken any action or
failed to take any action (including the manner in which it has conducted his
business, or used or enforced, or failed to use or enforce, the MSD Patents)
that would result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents and (ii) Moore has timely
paid all filing, examination, issuance, post registration and maintenance fees,
annuities and the like associated with or required with respect to the MSD
Patents.
(d) To the knowledge of Moore, none of the activities or operations
of Moore with respect to the MSD Patents infringes upon, misappropriates,
violates, dilutes or constitutes the unauthorized use of any rights, interests,
or property of any third party. Moore has not received any notice or claim
asserting or suggesting that any such infringement, misappropriation, violation,
dilution or unauthorized use is or may be occurring or has or may have occurred,
nor, to Moore's knowledge, is there any reasonable basis therefor. The MSD
Patents are not subject to any outstanding order, judgment, decree or
stipulation restricting the use, sale, transfer, assignment or licensing thereof
by Moore to any Person.
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5.6 Litigation. Except as disclosed on Schedule 5.6 (i) there are no
Proceedings pending or, to the knowledge of Moore, threatened, against or by
Moore or the MSD Patents or which seek to enjoin or rescind the transactions
contemplated by this Agreement, nor, to the knowledge of Moore, is there any
valid basis for any such Proceedings; and (ii) there are no existing orders,
judgments or decrees of any Governmental Authority naming Moore as an affected
party or otherwise affecting the MSD Patents or the performance by Moore of the
transactions contemplated by this Agreement, nor, to the knowledge of Moore, is
there any valid basis for any such order, judgment or decree.
5.7 Advisory Fees. Except as set forth on Schedule 5.7, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of Moore who is entitled to any
fee, commission or reimbursement of expenses from Patriot, TPL or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
ARTICLE VI
COVENANTS OF PATRIOT
6.1 Court Approval of Stipulated Final Judgment. Patriot shall use its
reasonable best efforts to obtain court approval of the Stipulated Final
Judgment as soon as possible after the date hereof.
6.2 Retention of Rights; No Action With Respect to the MSD Patents.
Patriot and TPL shall retain all of their respective rights with respect to the
MSD Patents, except those rights to the MSD Patents transferred by Patriot and
TPL to P-Newco pursuant to the Newco Licenses and the Merger Agreement. From the
date hereof until the termination of the Commercialization Agreement, neither
Patriot nor any of its Representatives shall take any action with respect to
those matters concerning which TPL is authorized to act on behalf of the parties
pursuant to the Commercialization Agreement and the Grant referred to therein,
including, but not limited to, contacting, pursuing litigation against, or
entering into discussions or negotiations with potential infringers, entering
into license agreements, settlement agreements, or other similar agreements with
respect to the MSD Patents, or selling or otherwise transferring any interest in
the MSD Patents. Notwithstanding the foregoing, subject to Section 7.7, Patriot
shall be entitled to take all actions contemplated by Section 7.1 of this
Agreement. From the termination of the Commercialization Agreement until one
year from the date thereof, Patriot shall not contact or enter into discussions
or negotiations with, or enter into license agreements, settlement agreements,
or other similar agreements with respect to the MSD Patents, or pursue any
litigation or other dispute resolution involving claims related to the MSD
Patents with regard to any potential licensee with whom TPL is engaged in active
negotiations at the time of the termination of the Commercialization Agreement
and identified in writing by TPL within five (5) days after such termination
("Active Potential Licensees").
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ARTICLE VII
COVENANTS OF ALL PARTIES
7.1 Protection and Maintenance of the MSD Patents. Subject to Section 7.7,
Patriot, TPL and Moore, as well as each of Patriot's and TPL's appointees to
P-Newco's Management Committee, shall use their respective best efforts to
protect and maintain the MSD Patents, including taking all actions necessary to
maintain the effectiveness of the MSD Patents.
7.2 Commercialization Program.
(a) From the date hereof, TPL shall use its commercially reasonable
best efforts to pursue the commercialization program on behalf of P-Newco,
substantially in the manner contemplated by the Commercialization Agreement,
with all proceeds therefrom to be allocated among the parties consistent with
the terms of the Commercialization Agreement and the Operating Agreement, and
Patriot and Moore shall provide all reasonable assistance and cooperation with
respect thereto.
(b) Upon receipt of any proceeds in connection with TPL's
commercialization efforts pursuant to Section 7.2(a) between the date hereof and
the earlier of (i) the Termination Date and (ii) the Closing, TPL shall cause
all Net Cash Proceeds generated as a result thereof to be paid to P-Newco at the
Closing to be retained and/or distributed by P-Newco pursuant to the terms of
the Operating Agreement.
(c) From the date hereof until the earlier of (i) the Termination
Date and (ii) the Closing, TPL agrees to provide Patriot prompt notice upon (A)
execution of any agreements relating to the MSD Patents, and (B) receipt by
P-Newco of any funds therefrom.
7.3 Further Assurances. TPL, Patriot and Moore agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be reasonably necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
7.4 Certain Filings. TPL and Patriot shall cooperate with one another in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
7.5 Notification. Patriot, TPL and Moore will promptly:
(a) notify the other parties in writing if it or he becomes aware of
any action, event, condition or circumstance, or group of actions, events,
conditions or circumstances, that results in, or could reasonably be expected to
result in, a Material Adverse Effect;
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(b) notify the other parties in writing of the commencement of any
Proceeding by or against it or him, or of becoming aware of any claim, action,
suit, inquiry, proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could be expected to result in a
Proceeding by or against it or him; and
(c) notify the other parties in writing of the occurrence of any
breach by it or him of any representation or warranty, or any covenant or
agreement, contained in this Agreement.
7.6 Public Announcements. From the date hereof until the earlier of the
Termination Date or the termination of the Commercialization Agreement, TPL and
Patriot agree to consult with each other before (a) issuing any press release,
(b) making any public statement with respect to this Agreement or the
transactions contemplated hereby (including, without limitation, with respect to
the consideration to be paid pursuant to this Agreement or any license agreement
pursuant to the Commercialization Agreement), or (c) making any SEC filing, and,
except as may be required by Applicable Law, will not issue any such press
release or public statement without the prior consent of the other party hereto.
In the event a party determines that a public statement is required by
Applicable Law, prior to making such statement or filing it shall provide to the
other party a copy of such proposed statement or filing at least two Business
Days prior to making such statement or filing and shall make such changes as may
be reasonably requested by the other party. With respect to any SEC filing
pursuant to Patriot's obligations under the Exchange Act or otherwise, Patriot
shall give TPL at least five Business Days advance notice of such filing (except
to the extent compliance with applicable law shall require a shorter period of
advance notice), and shall provide TPL a copy of the proposed filing for TPL's
review and comment, including all exhibits thereto, for purposes of determining
whether to make a confidential treatment request with respect to any exhibit
related to the transactions contemplated by this Agreement. Patriot agrees to
make all requests for confidential treatment reasonably requested by TPL and
consult with TPL regarding the requirement to make such a filing.
Notwithstanding the foregoing, the parties may, on a confidential basis, advise
and release information regarding the existence and content of this Agreement or
the transactions contemplated hereby to their Representatives in connection with
or related to the transactions contemplated by this Agreement.
7.7 No Interference. From the date hereof through the earlier of the
Termination Date or the termination of the Commercialization Agreement, Patriot,
Moore and P-Newco shall each avoid and refrain from any and all activity of any
kind or nature which may impede, impair, frustrate or otherwise interfere with
the activities of TPL in the execution of the commercialization program
contemplated by the Commercialization Agreement, and shall:
(a) Exert their respective reasonable best efforts to impose the
covenants of this Agreement, the Commercialization Agreement, and the
transactions contemplated hereby and thereby on their respective affiliates or
Representatives; and
(b) Be responsible hereunder for each and every failure in the good
and faithful performance of this Agreement and the Commercialization Agreement
by themselves and/or their respective affiliates or Representatives (other than
TPL).
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7.8 No Transfer. From the date hereof until one year after the termination
of the Commercialization Agreement, with the exception of the agreements and
transactions entered into pursuant to the commercialization program contemplated
by the Commercialization Agreement, Patriot, P-Newco, TPL and Moore shall not
transfer, assign, license, or otherwise convey any interest in, or grant any
security interest with respect to, any portion of their interest in the MSD
Patents without the written consent of all parties hereto, other than to
entities which (a)(i) are owned and controlled by the transferring Person and
(ii) agree to be bound by this Section 7.8, or (b) in the case of Moore,
pursuant to a living trust, will or other estate planning device, or via
intestate succession, provided however that any transferee of Moore's interest
in the MSD Patents under this Section 7.8(b) shall agree to be bound by this
Section 7.8; provided, however, that (A) after termination of the
Commercialization Agreement TPL may take any and all actions with respect to any
portion of its interest in the MSD Patents without the written consent of any of
the parties hereto, and (B) for the period beginning on the termination of the
Commercialization Agreement and ending one year after the termination of the
Commercialization Agreement, Patriot may take any and all actions with respect
to any portion of its interest in the MSD Patents only with any parties that are
not Active Potential Licensees without the written consent of any of the parties
hereto, provided that any transferee of Patriot's interest in the MSD Patents
under this Section 7.8 shall agree to be bound by this Section 7.8. Any transfer
pursuant to this Section 7.8 shall be subject to existing licenses in respect of
the MSD Patents.
7.9 Litigation Cooperation. Patriot, P-Newco and Moore agree to cooperate
in any litigation with respect to the MSD Patents, including providing any
reasonable assistance in connection with such litigation or joining as a party
thereto, as requested by TPL.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Each Party. The obligations of each of
TPL and Patriot to consummate the Closing are subject to the satisfaction of
each of the following conditions:
(a) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the transactions contemplated by this Agreement, or imposing Damages in respect
thereto, shall be in effect, and there shall be no pending or threatened actions
or proceedings by any Governmental Authority (or determinations by any
Governmental Authority).
(b) Patriot, TPL and Moore shall have agreed on and selected the
Independent Manager (as defined in the Operating Agreement) for P-Newco, and the
first Annual Business Plan for P-Newco shall have been approved.
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(c) Intel shall have disbursed to the Escrow Account all unpaid
Milestone Payments (as defined in the Intel Patent License Agreement) set forth
in Section 3.2 of the Intel Patent License Agreement.
8.2 Conditions to Obligations of TPL.
The obligations of TPL to consummate the Closing are subject to the
satisfaction of each of the following conditions:
(a) (i) Patriot shall have complied with, performed and satisfied
each of its agreements and covenants contained herein and required to be
performed and satisfied by it on or prior to the Closing, (ii) each of the
representations and warranties of Patriot contained in this Agreement, or in any
certificate or document delivered to TPL pursuant hereto, shall have been true
and correct in all material respects when made and shall contain no misstatement
or omission that would make any such representation or warranty materially
misleading when made and shall be true and correct in all material respects on,
and contain no misstatement or omissions that would make any such representation
or warranty materially misleading at and as of the Closing with the same force
and effect as if made as of the Closing except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), and (iii) TPL shall have
received certificates signed by a duly authorized executive officer of Patriot
to the foregoing effect and to the effect that the conditions specified within
this Section 8.2 have been satisfied.
(b) This Agreement, the Escrow Agreement, the Merger Agreement, the
Operating Agreement, the Commercialization Agreement, the Warrant, the
Registration Rights Agreement, and the Stipulated Final Judgment shall have been
executed and delivered by Patriot, Moore and P-Newco, as applicable.
(c) The Stipulated Final Judgment shall have been executed by
Patriot and delivered to TPL, with such changes as may be requested by the
court.
(d) The Trade Secrets Litigation shall have been dismissed without
prejudice.
8.3 Conditions to Obligations of Patriot.
The obligations of Patriot to consummate the Closing are subject to
the satisfaction of each of the following conditions:
(a) (i) TPL shall have complied with, performed and satisfied each
of its agreements and covenants contained herein and required to be performed
and satisfied by it on or prior to the Closing, (ii) each of the representations
and warranties of TPL contained in this Agreement, or in any certificate or
document delivered to Patriot pursuant hereto, shall have been true and correct
in all material respects when made and shall contain no misstatement or omission
that would make any such representation or warranty materially misleading when
made and shall be true and correct in all material respects on, and contain no
misstatement or omissions that would make any such representation or warranty
materially misleading at and as of the Closing with the same force and effect as
if made as of the Closing except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such particular date), and (iii) Patriot shall have received
certificates signed by a duly authorized executive officer of TPL to the
foregoing effect and to the effect that the conditions specified within this
Section 8.3 have been satisfied.
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(b) This Agreement, the Escrow Agreement, the Merger Agreement, the
Operating Agreement, the Commercialization Agreement, and the Stipulated Final
Judgment shall have been executed and delivered by TPL, Moore and P-Newco, as
applicable.
(c) The Infringement Litigation involving Intel and Patriot shall
have been dismissed with prejudice.
ARTICLE IX
INDEMNIFICATION
9.1 Patriot Agreement to Indemnify. Patriot shall indemnify and hold
harmless TPL and Moore and their respective affiliates and Representatives
(collectively, the "TPL Indemnitees") in respect of any and all Damages which
any of the TPL Indemnitees may incur or sustain, or to which any of the TPL
Indemnitees may be subjected, as a result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in this Agreement;
(b) any breach by Patriot of any covenant or agreement to be
performed by Patriot;
(c) any Proceeding brought by any Person, based upon or arising from
actions of Patriot prior or subsequent to the date hereof, including without
limitation: (i) any public disclosure made by Patriot, or any omission by
Patriot to disclose, in any filing with the SEC, press release, prospectus or
any oral or written communication; (ii) any alleged breach by Patriot or any of
Patriot's officers, directors, employees or agents of any duty to holders of
Patriot Common Stock or any other Patriot securities, or right or agreement to
purchase Patriot Common Stock or any other Patriot securities; or (iii) any
actions of Patriot or any predecessor in interest to Patriot with respect to the
MSD Patents (or any actual or alleged agreement pertaining thereto); provided,
however, that this Section 9.1(c) shall not apply to Proceedings related to
actions taken by Patriot in good faith pursuant to this Agreement and the
agreements contemplated hereby;
(d) any Proceeding brought by any current or former affiliate,
Representative, stockholder, creditor or stakeholder of Patriot based upon or
arising from the negotiation or consummation of the transactions contemplated by
this Agreement, including without limitation any action brought by Russell Fish,
the law firm of Beatie & Osborn LLP or any of its partners, members, associates,
or employees, Russell H. Beatie, Daniel A. Osborn, John E. Lynch or Willis E.
Higgins; or
(e) any Taxes of Patriot.
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9.2 TPL Agreement to Indemnify. TPL shall indemnify and hold harmless
Patriot and its Representatives (collectively, the "Patriot Indemnitees") in
respect of any and all Damages which any of the Patriot Indemnitees may incur or
sustain, or to which any of the Patriot Indemnitees may be subjected, as a
result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in this Agreement;
(b) any breach by TPL of any covenant or agreement to be performed
by TPL;
(c) any Damages in connection with any Proceeding brought by any
Person, other than Patriot's current or former Representatives, based upon or
arising from actions of TPL prior or subsequent to the date hereof, including
without limitation, any actions of TPL or any predecessor in interest to TPL
with respect to the MSD Patents (or any actual or alleged agreement pertaining
thereto); provided, however, that this Section 9.2(c) shall not apply to
Proceedings related to actions taken by TPL in good faith pursuant to this
Agreement and the agreements contemplated hereby; or
(d) any Taxes of TPL.
9.3 Moore Agreement to Indemnify. Moore shall indemnify and hold harmless
Patriot and TPL and their respective affiliates or Representatives
(collectively, the "Patriot/TPL Indemnitees") in respect of any and all Damages
which any of the Patriot/TPL Indemnitees may incur or sustain, or to which any
of the Patriot/TPL Indemnitees may be subjected, as a result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in Article V of this Agreement; or
(b) any breach by Moore of any covenant or agreement to be performed
by Moore.
9.4 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants, agreements and obligations of each
Indemnifying Party contained in this Agreement and all claims of any TPL
Indemnitee or Patriot Indemnitee in respect of any breach of any representation,
warranty, covenant, agreement or obligation of any Indemnifying Party contained
in this Agreement, shall survive the Closing and all due diligence performed by
the respective parties.
9.5 Claims for Indemnification. If any Indemnitee shall believe that such
Indemnitee is entitled to indemnification pursuant to this Article IX in respect
of any Damages, such Indemnitee shall give the appropriate Indemnifying Party
prompt written notice thereof. Any such notice shall set forth in reasonable
detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure adversely affects the
right of the Indemnifying Party to assert all reasonable defenses to such claim.
Each such claim for indemnity shall expressly state that the Indemnifying Party
shall have only the thirty (30) calendar day period referred to in the next
sentence to dispute or deny such claim. The Indemnifying Party shall have thirty
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(30) calendar days following its receipt of such notice either (a) to acquiesce
in such claim and the responsibility to indemnify the Indemnitee in respect
thereof in accordance with the terms of this Article IX by giving such
Indemnitee written notice of such acquiescence or (b) to object to the claim by
giving such Indemnitee written notice of the objection. If the Indemnifying
Party does not object thereto within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have acquiesced in such claim and the
responsibility to indemnify the Indemnitee in respect thereof in accordance with
the terms of this Article IX.
9.6 Defense of Claims. In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice sent at any time to the relevant
Indemnitee, assume the defense of any such claim or Proceeding if the
Indemnifying Party with respect to such claim or Proceeding acknowledges to the
Indemnitee the Indemnitee's right to indemnity pursuant hereto in respect of the
entirety of such claim (as such claim may have been modified through written
agreement of the parties or arbitration hereunder) and provide assurances,
reasonably satisfactory to such Indemnitee, that the Indemnifying Party will be
financially able to satisfy such claim in full if such claim or Proceeding is
decided adversely. The Indemnifying Party shall select counsel reasonably
acceptable to such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps reasonably necessary in the defense or
settlement thereof and shall at all times diligently and promptly pursue the
resolution thereof. If the Indemnifying Party shall have assumed the defense of
any claim or Proceeding in accordance with this Section 9.6, the Indemnifying
Party shall not (without the written consent of each Indemnitee) consent to a
settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, unless such settlement or order shall provide for the unconditional
release of all Indemnitees. If the Indemnifying Party has so elected to assume
the defense, each Indemnitee shall be entitled to participate in (but not
control) the defense of any such action, with its own counsel and at its own
expense. Each Indemnitee shall, and shall cause each of its Representatives to,
cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this Section
9.6. If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section 9.6,
such Indemnitee may defend against such claim or Proceeding in such manner as it
may deem appropriate, provided that the Indemnitee may not settle such claim or
Proceeding without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed), and provided further that the
Indemnifying Party shall be obligated to pay Indemnitee's attorneys' fees and
costs promptly as they are incurred in the defense of such claim or Proceeding.
ARTICLE X
TERMINATION
10.1 Grounds for Termination. This Agreement may be terminated (except as
set forth in Section 10.2) and the transactions contemplated hereby abandoned at
any time prior to the Closing (the "Termination Date"):
(a) by mutual written agreement of TPL and Patriot;
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(b) by TPL upon written notice to Patriot of any one or more
inaccuracies or misrepresentations in or breaches of the representations or
warranties made by Patriot contained herein which have had or, if not cured
prior to the Closing Date could be reasonably expected to have, a Material
Adverse Effect when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties;
provided, however, that a termination pursuant to this clause (b) shall become
effective upon the earlier to occur of (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(c) by TPL at any time upon written notice to Patriot of the failure
by Patriot to perform and satisfy in all material respects any of its
obligations under this Agreement required to be performed and satisfied on or
prior to the Closing Date; provided, however, that a termination pursuant to
this clause (c) shall become effective upon the earlier to occur of (i) three
(3) days after such notice with respect to such a failure that is not capable of
being cured on or prior to the Closing Date, (ii) fifteen (15) days after such
notice with respect to such a failure that is capable of being cured on or prior
to the Closing Date, but is not cured, on or prior to such fifteenth (15th) day,
or (iii) immediately prior to the Closing with respect to such a failure that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(d) by Patriot at any time upon written notice to TPL of any one or
more inaccuracies or misrepresentations in or breaches of the representations or
warranties made by TPL or Moore contained herein which have had or, if not cured
prior to the Closing Date could be reasonably expected to have, a Material
Adverse Effect when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties;
provided, however, that a termination pursuant to this clause (d) shall become
effective upon the earlier to occur of (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(e) by Patriot at any time upon written notice to TPL of TPL's
failure to perform and satisfy in all material respects any of its obligations
under this Agreement required to be performed and satisfied on or prior to the
Closing Date; provided, however, that a termination pursuant to this clause (e)
shall become effective upon the earlier to occur of (i) three (3) days after
such notice with respect to such a failure that is not capable of being cured on
or prior to the Closing Date, (ii) fifteen (15) days after such notice with
respect to such a failure that is capable of being cured on or prior to the
Closing Date, but is not cured, on or prior to such fifteenth (15th) day, or
(iii) immediately prior to the Closing with respect to such a failure that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(f) by Patriot or TPL if the Closing shall not have been consummated
by November 30, 2005; provided, however, that Patriot or TPL may not terminate
this Agreement pursuant to this clause (f) if the Closing shall not have been
consummated within such time period by reason of the failure of that party or
any of its Representatives to perform in all material respects any of its or
their respective covenants or agreements contained in this Agreement;
25
(g) by Patriot if TPL has caused a Material Adverse Effect other
than any Material Adverse Effect caused by any proceeding brought by any current
or former affiliate, Representative, stockholder, creditor or stakeholder of
Patriot relating to any effect of the public announcement of this Agreement, the
transactions contemplated hereby or the consummation of such transactions;
(h) by TPL if Patriot has caused a Material Adverse Effect; and
(i) by any party hereto if any federal, state or foreign law or
regulation thereunder shall hereafter be enacted or become applicable that makes
the transactions contemplated hereby or the consummation of the Closing illegal
or otherwise prohibited, or if any judgment, injunction, order or decree
enjoining either party hereto from consummating the transactions contemplated
hereby is entered, and such judgment, injunction, order or decree shall become
final and nonappealable.
The party desiring to terminate this Agreement pursuant to clauses (b)
through (i) shall give written notice of such termination to the other party
pursuant to Section 11.1.
10.2 Effect of Termination.
(a) If this Agreement is terminated as permitted by Section 10.1,
such termination shall be without liability of any party to any other party to
this Agreement except as hereinafter expressly provided in this Section 10.2.
(b) If such termination shall result from the willful failure of
Patriot to fulfill a condition to the performance of the obligations of TPL, the
willful failure of Patriot to perform a covenant contained in this Agreement or
a willful breach by Patriot of its representations and warranties contained in
this Agreement, Patriot shall be fully responsible for all Damages incurred by
TPL as a result of such failure or breach by Patriot.
(c) If such termination shall result from the willful failure of TPL
to fulfill a condition to the performance of the obligations of Patriot, the
willful failure of TPL to perform a covenant contained in this Agreement or a
willful breach by TPL of its representations and warranties contained in this
Agreement, TPL shall be fully responsible for all Damages incurred by Patriot as
a result of such failure or breach by TPL.
(d) If such termination shall result for any reason other than (i)
the willful failure of Patriot to fulfill a condition to the performance of the
obligations of TPL; (ii) the willful failure of Patriot to perform a covenant
contained in this Agreement; or (iii) the willful breach by Patriot of its
representations and warranties contained in this Agreement, Patriot shall be
entitled to one-half of the Net Cash Proceeds generated by TPL from the period
beginning from the date hereof and ending on the date this Agreement is
terminated. It is expressly agreed and understood that Patriot shall not be
entitled to any of the Milestone Payments (as such term is defined in the Intel
Patent License Agreement), which shall only be distributed pursuant to the terms
of the Escrow Agreement. TPL shall pay Patriot, by wire transfer in immediately
available funds, to the account set forth on Exhibit E of the Escrow Agreement,
such funds within the later of (A) five (5) days after the termination of this
Agreement and (B) sixty (60) days of receipt thereof by TPL.
26
(e) The provisions of Article IX, as well as Sections 7.6, 11.1,
11.5, 11.9, 11.13 and 11.14 and this Section 10.2 shall survive any termination
of this Agreement pursuant to this Article X, and each party hereto shall be
fully responsible for any breach of any such provision, whether or not such
breach occurs prior to the termination of this Agreement. In addition, the
parties expressly agree that the Stipulated Final Judgment is severable and has
significance independent of this Agreement and any other agreements and
transactions contemplated hereby and thereby, and as such shall not be affected
or disturbed by the Termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (a) if
personally delivered, when so delivered, (b) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below, (c)
if given by fax, once such notice or other communication is transmitted to the
fax number specified below and the appropriate answer back or telephonic
confirmation is received, provided that a copy of such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (b) above or (d) of this Section 11.1, or (d) if sent through an
overnight delivery service in circumstances to which such service guarantees
next day delivery, the day following being so sent:
If to Patriot:
Patriot Scientific Corporation
10989 Via Frontera
San Diego, CA 92127
Attn: President
Fax: (858) 674-5004
with a copy to:
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, CA 92101
Attn: Otto E. Sorensen, Esq.
Fax: (619) 232-8311
27
If to TPL:
Technology Properties Limited Inc.
P.O. Box 20250
San Jose, CA 95160
Attn: Daniel E. Leckrone, Chairman
Fax: (408) 296-6637
with a copy to:
Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Attn: Andrew E. Bogen, Esq.
Fax: (213) 229-6159
If to Moore:
Charles H. Moore
40 Cedar Lane
P.O. Box 127
Sierra City, CA 96125
Fax: (413) 714-5590
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.2 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided, however, that any
amendment or waiver to Section 11.9, Section 11.13, Section 11.14 or this
Section 11.12(a) or any other amendment or waiver with respect to this Agreement
of the agreements referenced herein that adversely affects Intel shall be
effective only if such written amendment or waiver also has been executed and
delivered by Intel.
(b) No waiver by a party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
28
11.3 Expenses. All costs and expenses incurred in connection with this
Agreement and in closing and carrying out the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.
11.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the other party.
11.5 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws (without reference to choice or conflict of
laws) of the State of California.
11.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts and the signatures delivered by fax or other similar
means, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other parties hereto.
11.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference and the
other agreements executed simultaneously herewith) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement.
11.8 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.9 Severability. The failure of any provision of this Agreement by
virtue of its being construed as invalid or otherwise unenforceable shall render
the entire Agreement cancelable at the option of the party asserting the
enforceability of the said provision. Notwithstanding the foregoing, the parties
expressly agree that the Stipulated Final Judgment, Section 11.2(a), Section
11.13 and Section 11.14 are severable and have significance independent of this
Agreement and any other agreements and transactions contemplated hereby and
thereby, and as such shall not be affected or disturbed by the invalidity,
illegality or unenforceability of any such provision or provisions or of the
entirety of any such agreements.
11.10 Construction. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has beached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
29
11.11 Cumulative Remedies. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
11.12 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to
consummate the agreements contemplated hereby, will cause irreparable injury to
the other party, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief without bond by any court of competent jurisdiction to compel performance
of such party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder.
11.13 Third-Party Beneficiaries. Except as specifically provided in (a)
Article IX with respect to indemnification provided to the Indemnitees
identified therein, and (b) Section 11.14, no provision of this Agreement shall
create any third-party beneficiary rights in any Person, including any employee
or former employee of Patriot or any Representative thereof (including any
beneficiary or dependent thereof). Each of Intel and its present, former and
future direct and indirect distributors of Intel Licensed Products
(collectively, the "Intel Parties" ") shall be an express, intended third-party
beneficiary of Section 11.2(a), Section 11.9 and Section 11.14.
11.14 No Liability of Intel. Upon payment by Intel of all of the unpaid
Milestone Payments provided for at Section 3.2 of the Intel Patent License
Agreement to the account designated at Exhibit A to the Escrow Agreement
attached hereto as Exhibit E, each of Intel and the Intel Parties shall be
forthwith and without further or other action of any kind by anyone, released
from all potential liability with respect to Intel Licensed Products and based
upon the rights of Patriot in and to the Core Patents (as described in the Intel
Patent License Agreement). It is the intention of the parties to this Agreement
in executing this Agreement that the same shall be effective as a bar to each
and every claim, demand and cause of action hereinabove specified in this
Section 11.14. In furtherance of this intention, each of the parties to this
Agreement hereby expressly waives any and all rights and benefits conferred upon
him by the provisions of Section 1542 of the California Civil Code (or any
similar provision of any other applicable law) and expressly consents that this
Agreement shall be given full force and effect according to each and all of its
express terms and provisions, including those related to unknown and unsuspected
claims, demands and causes of action, if any, as well as those related to any
other claims, demands and causes of action hereinabove specified. Section 1542
of the California Civil Code provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST
HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
Each of the parties to this Agreement acknowledges that it or he may hereafter
discover claims or facts in addition to or different from those which it or he
now knows or believes to exist with respect to the subject matter of this
Agreement and which, if known or suspected at the time of executing this
Agreement, may have materially affected this release. Nevertheless, each of the
30
parties to this Agreement hereby waives any right, claim, or cause of action
that might arise as a result of such different or additional claims or facts.
Each of the parties to this Agreement acknowledges that it or he understands the
significance and consequence of the release set forth in this Section 11.14 and
such specific waiver of Section 1542 (and any other similar provisions of any
other applicable laws).
For the avoidance of doubt, the releases provided for in this Section 11.14
shall extend solely to the use and practice of the Core Patents with respect to
Intel Licensed Products.
11.15 No Punitive, Exemplary, or Consequential Damages. Except as
expressly set forth herein, the parties hereto understand and agree that under
no circumstances shall punitive, exemplary or consequential damages be available
to any party for breach of this Agreement.
[signature page follows]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation
By: /s/ DAVID H. POHL
------------------
Name: David H. Pohl
Title: Director
|
TECHNOLOGY PROPERTIES LIMITED INC.,
a California corporation
By: /s/ DANIEL E. LECKRONE
-----------------------
Name: Daniel E. Leckrone
Title: Chairman
|
CHARLES H. MOORE,
an individual
/s/ CHARLES H. MOORE
----------------------
|
[***] Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as ***. A complete version of this exhibit has
been filed separately with the Securities and Exchange Commission.
EXECUTION COPY
COMMERCIALIZATION AGREEMENT
by and among
P-NEWCO
and
TECHNOLOGY PROPERTIES LIMITED
and
PATRIOT SCIENTIFIC CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I GRANT..........................................................1
ARTICLE II COMMERCIALIZATION..............................................2
ARTICLE III COVENANTS......................................................3
ARTICLE IV PAYMENT........................................................4
ARTICLE V TERM...........................................................5
ARTICLE VI TERMINATION....................................................5
ARTICLE VII REPRESENTATIONS AND WARRANTIES.................................6
ARTICLE VIII GENERAL........................................................7
EXHIBIT A GRANT
SCHEDULE 1 SCHEDULE OF PATENTS
SCHEDULE 2 PROJECT DESCRIPTION
SCHEDULE 3 SCHEDULE OF OUTSTANDING ACTIVITIES/RIGHTS/CLAIMS
|
COMMERCIALIZATION AGREEMENT
This Commercialization Agreement ("Commercialization Agreement") is
entered into by and among [P-Newco], a Delaware limited liability corporation
("P-Newco"), Patriot Scientific Corporation, a Delaware corporation ("Patriot"),
having its principal place of business at 10989 Via Frontera, San Diego,
California 92127, and Technology Properties Limited Inc., a California
Corporation ("TPL"), having its principal place of business at 21730 Stevens
Creek Boulevard, Ste. 201, Cupertino, California 95014. Capitalized terms used
but not defined herein shall have the meanings given to such terms in that
certain agreement dated as of June 7, 2005 (the "Master Agreement").
WHEREAS, Patriot, TPL and Charles H. Moore ("Moore") collectively hold
all rights with respect to certain microprocessor implementation and
architecture patents set forth on Schedule 1 (the "MSD Patents");
WHEREAS, Moore has transferred complete authority for the management of
Moore's rights to the MSD Patents to TPL;
WHEREAS, Patriot, TPL and Moore have entered into the Master Agreement,
pursuant to which Patriot and TPL are entering into licenses with P-Newco and
T-Newco, respectively, with respect to certain of their rights in the MSD
Patents (collectively, the "Newco Licenses");
WHEREAS, Patriot, TPL, P-Newco and T-Newco have entered into a Merger
Agreement, pursuant to which T-Newco merged with and into P-Newco, with P-Newco
continuing as the surviving entity and holding all of the rights with respect to
the MSD Patents formerly held by P-Newco and T-Newco;
WHEREAS, pursuant to the Master Agreement, P-Newco, Patriot and TPL are
entering into this Commercialization Agreement providing for the
commercialization of P-Newco's interests in the MSD Patents by TPL in return for
the commitment of TPL to diligently pursue the commercialization; and
WHEREAS, concurrently herewith Patriot and TPL are entering into that
certain Limited Liability Company Operating Agreement of P-Newco (the "Operating
Agreement"), governing the rights and obligations of Patriot and TPL with
respect to their membership interests in P-Newco and the distribution of the
proceeds received from the commercialization program contemplated by this
Commercialization Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants herein
contained as well as other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto covenant and
agree that:
ARTICLE I
GRANT
1.1 Pursuant to the Master Agreement, P-Newco and TPL shall enter into
the grant attached hereto as Exhibit A (the "Grant").
1
ARTICLE II
COMMERCIALIZATION
2.1 TPL shall exert reasonable best efforts to implement the
activities (the "Commercialization") described at Schedule 2 and to conduct the
project described therein ("Project") in accordance with the project description
(the "Project Description") including the Business Plan then in effect.
(a) The first Business Plan is made a part of the Project Description
as Attachment I to Schedule 2, and shall remain in full force and effect until
replaced by agreement of P-Newco and TPL.
(b) TPL shall have no obligation to pursue or fund any effort to
prosecute, maintain, enforce or defend any element of the MSD Patents other than
as specifically provided for in Schedule 2.
2.2 By these presents, P-Newco appoints, authorizes, and directs TPL
to take any and all action for the term of this Commercialization Agreement,
with respect to all matters that are related to P-Newco's rights to the MSD
Patents, including without limitation:
(a) entering into settlement and/or license agreements related to the
MSD Patents which meet the Commercialization guidelines set forth in Section II
of Schedule 2;
(b) with the prior written consent of the P-Newco Management
Committee, entering into any settlement and license agreements related to the
MSD Patents which do not meet the guidelines set forth in Section II of Schedule
2;
(c) to sue in the name of TPL, Moore, Patriot and/or P-Newco and to
pursue for the use and benefit of the parties hereto as their respective
interests appear: (i) all remedies of whatsoever kind or nature with respect to
the protection, use, and enforcement of the MSD Patents; (ii) the collection of
all claims for damages, profits, and awards relating to the past, present, or
future use or ownership of the MSD Patents; and (iii) all equitable relief
available in connection therewith; and
(d) to otherwise manage and control by license, sublicense, or other
agreement the practice and/or use of the MSD Patents by third parties.
2.3. TPL may utilize the services of its various licensing personnel
who may be lawyers to implement the Commercialization of the MSD Patents. Such
services shall for no purpose be deemed to be legal services or to give rise to
a lawyer-client relationship between TPL and/or TPL affiliates or
Representatives on the one hand, and P-Newco and/or Patriot or any of their
respective affiliates or Representatives on the other hand. Without limiting the
foregoing, neither TPL nor any TPL Representative shall for any purpose be
deemed to have:
(i) Provided legal services or advice to;
(ii) Undertaken the representation of; or
2
(iii) Entered into a lawyer-client relationship with,
P-Newco, Patriot or any of P-Newco's or Patriot's respective affiliates or
Representatives.
ARTICLE III
COVENANTS
3.1 Within sixty (60) days after the close of each calendar quarter
TPL shall deliver to P-Newco: (i) an operating statement reflecting the
Project's financial activity over the past quarter; (ii) a calculation of the
Gross Cash Proceeds (as defined in the Operating Agreement) resulting from the
Project; and (iii) an itemization of all TPL Direct Reimbursable Expenses (as
defined below).
(a) Within thirty (30) days after P-Newco's receipt thereof,
Patriot shall deliver to TPL written notice detailing all objections to such
materials and calculations on an individual item-by-item basis. Any objection
not so noticed shall be deemed to be waived.
(b) Costs related to verifying reported time and expense charges
and/or auditing reports or activities shall be paid in advance by the entity
(either Patriot or TPL) supporting such request for verification or audit.
3.2 As requested by TPL, Patriot and P-Newco shall have a continuing
obligation to exert their respective reasonable best efforts to support the
Project, cooperate with TPL in the execution of its obligations, and to provide
such support in the manner described herein and in the Master Agreement.
3.3 Upon reasonable request, P-Newco and Patriot shall promptly
execute and deliver all documents, instruments, and things necessary or useful
in the conduct of TPL's activities hereunder, and Patriot and P-Newco agree to
cooperate in any litigation with respect to the MSD Patents, including providing
any reasonable assistance in connection with such litigation or joining as a
party thereto, as requested by TPL, provided that neither Patriot nor P-Newco
shall be required to provide financial support except as otherwise provided in
the Commercialization Agreement.
3.4 Patriot and P-Newco shall each avoid and refrain from any and all
activity of any kind or nature which may impede, impair, frustrate or otherwise
interfere with the activities of TPL in the execution the Project, and shall:
(a) Exert their respective reasonable best efforts to impose
the covenants of this Commercialization Agreement, the Master Agreement and the
transactions contemplated hereby and thereby on their respective directors,
officers, employees, consultants, attorneys, agents and other affiliates or
Representatives; and
(b) Be responsible hereunder for each and every failure in the
good and faithful performance of this Commercialization Agreement and
transaction by themselves and/or their respective directors, officers,
employees, consultants, attorneys, agents and other affiliates or
Representatives (other than TPL).
3
3.5 With the exception of the agreements and transactions entered into
pursuant to the Project, P-Newco, Patriot and TPL shall not transfer, assign,
license, or otherwise convey any interest in, or grant any security interest
with respect to, any portion of their interest in the MSD Patents during the
term of this Commercialization Agreement without the written consent of all
parties hereto, other than to entities which are owned and controlled by the
transferring Person and who assume and agree to pay and perform all of the
transferor's obligations hereunder.
3.6 Upon the termination of this Commercialization Agreement, Patriot
shall be entitled to receive a copy of third party "DeCaps" (as such term is
commonly understood to mean in the industry) related to the Commercialization
and third party expert analyses thereof; and TPL does hereby consent to the
deliveries thereof by such third party experts. In the event any of the
foregoing are not provided by such third parties, TPL will provide Patriot with
copies of such documents in its possession. In addition, a Patriot
Representative shall be entitled to view such "DeCaps" on a quarterly basis, but
shall not be entitled to make copies thereof. With the exception of TPL's
obligations pursuant to Section 3.1 and this Section 3.6, TPL shall not be
obligated to share any other materials related to the Commercialization,
including without limitation any attorney work product generated during the term
of this Commercialization Agreement or thereafter, which for all intents and
purposes shall be deemed to be privileged, proprietary and exclusive to TPL.
3.7. P-Newco and Patriot shall on a continuing basis provide TPL all
leads, information, and materials which Patriot encounters or discovers which
may relate to the rights to the MSD Patents transferred by Patriot and TPL to
P-Newco pursuant to the Newco Licenses, shall exert their respective reasonable
best efforts to support the Commercialization activities of TPL hereunder, and
shall refrain from all contact with third parties regarding the MSD Patents
except as is specifically approved and/or requested in writing by TPL. The
foregoing shall not affect the exercise of the retained rights of Patriot or TPL
under the Newco Licenses.
ARTICLE IV
PAYMENT
4.1 TPL shall cause all Gross Cash Proceeds generated from the
Commercialization efforts to be paid directly to P-Newco.
4.2 Upon the submission of customary and appropriate invoices and
other supporting documentation, P-Newco shall reimburse TPL for the payment of
all legal and third-party expert fees and other related third-party costs and
expenses, including without limitation those incurred in connection with patent
maintenance and prosecution and third party "DeCaps" and third party expert
analysis relating thereto (the "TPL Direct Reimbursable Expenses") incurred by
TPL in connection with the Project and in conformity with the applicable
Business Plan, as well as all TPL Direct Reimbursable Expenses not in conformity
with the applicable Business Plan, to the extent approved by the P-Newco
Management Committee. All such reimbursement shall be made prior to the due date
indicated on the invoice.
4.3 P-Newco shall make payment to TPL of $ *** no later than three
(3) days prior to the start of each fiscal quarter from the Working Capital Fund
to cover indirect and other expenses related to the Project which do not
constitute TPL Direct Reimbursable Expenses ("TPL Other Project Expenses").
Advances to TPL made pursuant to this Section 4.3 shall be nonaccountable and
nonrecoupable, but shall offset the amounts owed TPL pursuant to Section
6.1(a)(iv)(b) of the Operating Agreement in the manner contemplated by such
Section 6.1(a)(iv)(b). At such time as the Working Capital Fund exceeds
$ *** after the first $ *** has been generated pursuant to the
Commercialization, such quarterly payment shall be increased (but not decreased)
to one-eighth of the amount of the Working Capital Fund.
4
4.4 To the extent that P-Newco does not have sufficient funds from the
Working Capital Fund at the time any payment is due pursuant to this Article IV,
TPL shall refrain from enforcing any collection rights against P-Newco for such
payments until the earlier of (a) such time as funds become available in the
Working Capital Fund, or (b) termination of this Commercialization Agreement.
ARTICLE V
TERM
5.1 This Commercialization Agreement shall continue for the useful
life of the MSD Patents, which shall be deemed to be the greater of the period
of time during which any of the MSD Patents is either (i) susceptible to legal
protection, or (ii) reasonably perceived to have commercial value.
5.2 In the event that facts or events are discovered or occur which
materially reduce TPL's evaluation of the useful life or commercial value of the
MSD Patents, or the viability of the Project, TPL may reduce the term of this
Commercialization Agreement accordingly by providing P-Newco with ninety (90)
days written notice, provided that TPL shall not reduce the term of this
Commercialization Agreement to less than six (6) months.
5.3 After the expiration of the term provided for above, neither party
shall have any further obligation hereunder other than the administration of all
outstanding transactions as under Article VI below, and the obligations of
confidentiality undertaken by the parties.
ARTICLE VI
TERMINATION
6.1 TPL may terminate this Commercialization Agreement upon the
failure of Patriot or P-Newco to substantially perform any of their material
obligations to be performed hereunder, including without limitation the payment
obligations pursuant to Article IV of this Commercialization Agreement.
6.2 P-Newco may terminate this Commercialization Agreement if:
(a) TPL has failed to close transactions in accordance with
the Performance Milestones set forth in Section IV of Schedule 2, and
(i) there has been no material breach by Patriot or P-Newco
of this Commercialization Agreement, the Master Agreement, the Newco Licenses or
the Operating Agreement; and
5
(ii) there has been no event or occurrence which negatively
and materially impacts the viability or value of the MSD Patents; and
(iii) the failure of TPL is not reasonably attributable to
the conduct of P-Newco, Patriot and/or their respective affiliates or
Representatives (other than TPL); or
(b) TPL enters into a liquidation under Chapter 7 of the
United States Bankruptcy Code; or
(c) TPL enters into a reorganization under Chapter 11 of the
United States Bankruptcy Code, and TPL ceases to be a debtor in possession
during the pendency of such bankruptcy proceeding.
Each of the events referred to in Sections 6.1 and 6.2 shall be
referred to as a "Termination Event". In no event shall the conduct of Moore be
deemed to constitute a Termination Event.
6.3 Upon termination pursuant to this Article VI:
(a) All rights to the MSD Patents arising under the Grant or
this Commercialization Agreement shall be transferred to P-Newco subject to all
outstanding rights under licenses, agreements, or awards theretofore made and
entered into by or with TPL prior to such expiration or termination which, for
all purposes, shall continue and be administered by TPL under TPL's then current
reasonable hourly fee schedule as if this Commercialization Agreement were still
in full force and effect.
(b) All amounts due to TPL with respect to TPL Direct Project
Expenses and TPL Other Project Expenses shall be paid from Gross Cash Proceeds
as such funds are received.
(c) At the option of Patriot, TPL, or P-Newco, all of the rights
and privileges of whatsoever kind or nature granted by it shall immediately and
without further action whatsoever revert in their entirety to each of Patriot,
TPL, or P-Newco, as the case may be, and all licenses granting such rights and
privileges shall be deemed to be for all purposes cancelled.
(d) In the event of a termination by P-Newco or Patriot, all
claims for loss and/or damages shall be deemed to be liquidated and discharged
with respect to each party upon its completion of the dissolution, distributions
and the documentation and transfers contemplated by Article 8 of the Operating
Agreement, provided, however, that claims based on conduct which is intentional,
willful, or grossly negligent shall survive.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 P-Newco and Patriot acknowledge, represent, and warrant to TPL
that:
(a) TPL and its Representatives have prepared this
Commercialization Agreement at the request of P-Newco and Patriot and such
preparation by TPL shall not be used as basis for construing the terms hereof
against TPL or otherwise;
6
(b) Neither TPL nor its Representatives have for any purpose
undertaken the representation of or entered into a lawyer/client relationship
with Patriot or P-Newco or any of their Representatives;
(c) P-Newco and Patriot release, acquit, and agree to hold TPL
and its Representatives harmless with respect to all claims of whatsoever kind
or nature by or on behalf of P-Newco and Patriot and related to the preparation,
execution, and delivery of this Commercialization Agreement; and,
(d) P-Newco and Patriot have sought and received the advice of
independent counsel and are in no way relying on any advice or representations
of TPL or its Representatives.
7.2 Patriot and TPL each represent and warrant to one another that:
(a) It is the sole owner of all right, title and interest in and
to its portion of the MSD Patents, excepting only the rights reflected at the
Schedule of Outstanding Activities/Rights/Claims attached as Schedule 3; and
(b) There are no outstanding agreements, rights or interests
which are inconsistent with the provisions of this Commercialization Agreement
or which could give rise to such rights or interests.
7.3 P-Newco represents and warrants to TPL that:
(a) It is the sole owner, and for the term of this
Commercialization Agreement will remain the sole owner, of all right, title, and
interest in and to those certain rights to the MSD Patents transferred by
Patriot and TPL to P-Newco pursuant to the P-Newco License and T-Newco License;
and
(b) There are no outstanding agreements, rights or interests
which are inconsistent with the provisions of this Commercialization Agreement
or which could give rise to such rights or interests.
ARTICLE VIII
GENERAL
8.1 In no event shall any right, duty or privilege arising hereunder
be assigned by either party to an entity which it does not own and control
without the prior written consent of the other parties. Any attempted or
purported assignment without such consent shall be voidable at the option of the
non-consenting party.
8.2 Any covenant requiring a party to perform or provide an act or
service shall be construed to impose upon such party the burden of the cost
thereof unless otherwise provided for herein.
8.3 Section titles are intended only to aid and assist the reader and
are not intended to be descriptive of the contents of the section or to be used
for construction or interpretation.
7
8.4 The failure of any provision of this Commercialization Agreement
by virtue of its being construed as invalid or otherwise unenforceable shall
render the entire Commercialization Agreement cancelable at the option of the
party asserting the enforceability of the said provision.
8.5 All notices shall be in writing and effective upon delivery or
upon posting by certified mail, return receipt requested, addressed as follows
(or such other address as may be hereafter designated):
If to Patriot:
Patriot Scientific Corporation
10989 Via Frontera
San Diego, CA 92127
Attn: President
Fax: (858) 674-5005
with a copy to:
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, CA 92101
Attn: Otto E. Sorensen, Esq.
Fax: (619) 232-8311
If to TPL:
Technology Properties Limited
21730 Stevens Creek Blvd., Suite 201A
Cupertino, CA 95014
Attn: Daniel E. Leckrone, Chairman
Fax: (408) 296-6637
with a copy to:
Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Attn: Andrew E. Bogen, Esq.
Fax: (213) 229-6159
If to P-Newco:
8
8.6 This Commercialization Agreement together with its exhibits and
attachments, the Stipulated Final Judgment, the Master Agreement, the Newco
Licenses, the Operating Agreement and the Escrow Agreement contains the entire
agreement between the parties and supersedes any and all other agreements
between them relating to the subject matter hereof.
8.7 With the exception of the Grant attached hereto as Exhibit A and
the obligation to share certain materials pursuant to Section 3.6, this
Commercialization Agreement shall create no rights or licenses to any
intellectual property between or among the parties, nor shall it create any
obligation to share technology, trade secrets, know-how, show-how and other
proprietary developments and discoveries conceived or reduced to practice during
the course of the Project.
8.8 Any provision of this Commercialization Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by all parties hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
9
IN WITNESS WHEREOF, the parties have hereunto set their hands and seal
as of the date of the execution hereof by the last signatory hereto.
PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation
By:
Its:
TECHNOLOGY PROPERTIES LIMITED,
a California corporation
By: Daniel E. Leckrone
Its: Chairman
P-NEWCO, a Delaware limited
liability company
By:
Its: Patriot Appointee
By:
Its: TPL Appointee
EXECUTION COPY
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
[P-NEWCO],
A DELAWARE LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS..........................................................1
ARTICLE 2 FORMATION OF LIMITED LIABILITY COMPANY...............................7
2.1 Formation............................................................7
2.2 Name; Principal Place of Business....................................7
2.3 Registered Office and Registered Agent...............................7
2.4 Agreement; Effect of Inconsistencies With the Act or the Code........8
2.5 Business.............................................................8
2.6 Term.................................................................8
2.7 Qualification........................................................8
ARTICLE 3 MEMBERSHIP...........................................................8
3.1 Members..............................................................8
3.2 Representations and Warranties.......................................9
3.3 Incorporation of Representations and Warranties......................9
3.4 Resignation or Withdrawal of a Member...............................10
3.5 Effect of Certain Events on Membership..............................10
3.6 Restrictions on Transfers of Interests..............................10
3.7 No Authority as Agent...............................................10
ARTICLE 4 MANAGEMENT..........................................................11
4.1 Management of the Company by Management Committee...................11
4.2 Appointment of Management Committee.................................11
4.3 Responsibilities of the Management Committee........................12
4.4 Officers............................................................13
4.5 Liability of Committee Members and Officers.........................14
4.6 Records, Audits and Reports.........................................14
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ARTICLE 5 CAPITAL CONTRIBUTIONS...............................................14
5.1 Initial Capital Contributions.......................................14
5.2 Percentage Interests................................................15
5.3 Working Capital Contributions.......................................15
5.4 Failure to Make Contributions.......................................15
5.5 Capital Accounts....................................................16
ARTICLE 6 DISTRIBUTIONS, ALLOCATIONS AND TAX MATTERS..........................16
6.1 Application of Gross Cash Proceeds..................................16
6.2 Allocation of Net Profits...........................................17
6.3 Allocation of Net Losses............................................17
6.4 General Rules for Allocations.......................................18
6.5 Special Allocations to Capital Accounts.............................18
6.6 Tax Allocations; Section 704(c) of the Code.........................19
6.7 Tax Matters Member..................................................20
6.8 Section 754 Election................................................20
6.9 Returns and Other Elections.........................................20
6.10 Partnership Tax Treatment...........................................20
ARTICLE 7 INDEMNIFICATION AND LIMITATION OF LIABILITY.........................20
7.1 Indemnification.....................................................20
7.2 Limitation of Liability.............................................22
7.3 Savings Clause......................................................22
ARTICLE 8 DISSOLUTION AND WINDING UP..........................................22
8.1 Dissolution.........................................................22
8.2 Winding Up..........................................................22
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8.3 Reversion of Rights.................................................23
8.4 Order of Payment Upon Liquidation...................................23
8.5 Antecedent Activities...............................................23
8.6 Limitations on Payments Made in Dissolution.........................23
8.7 Certificate of Cancellation.........................................23
8.8 Effect of Filing Certificate of Cancellation........................24
ARTICLE 9 MISCELLANEOUS.......................................................24
9.1 Amendment...........................................................24
9.2 Governing Law and Severability......................................24
9.3 Counterparts........................................................24
9.4 Titles and Subtitles................................................24
9.5 Notices.............................................................24
9.6 Entire Agreement....................................................25
9.7 Power of Attorney...................................................25
9.8 Related Party Transactions..........................................25
9.9 Dispute Resolution..................................................25
9.10 No Partition........................................................26
9.11 Bankruptcy..........................................................26
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iii
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT FOR
[P-NEWCO],
A DELAWARE LIMITED LIABILITY COMPANY
This Limited Liability Company Operating Agreement (this "Operating
Agreement") of [P-Newco], a Delaware limited liability company (the "Company"),
is made as of June 7, 2005, by and between PATRIOT SCIENTIFIC CORPORATION, a
Delaware corporation ("Patriot"), and TECHNOLOGY PROPERTIES LIMITED INC., a
California corporation ("TPL") (collectively, the "Members").
RECITALS
WHEREAS, Patriot has formed the Company as a limited liability company
under the Delaware Limited Liability Company Act, 6 Del. C. ss. 18-101, et seq.,
as amended (the "Act"), for the purposes of effecting the transactions
contemplated by the Master Agreement (as defined below);
WHEREAS, prior to the capital contributions and the issuance of the
Percentage Interests described in Article 5 hereof, Patriot has been the sole
member of the Company;
WHEREAS, the Members wish to enter into this Operating Agreement to
provide for the structure, governance and operation of the Company.
AGREEMENT
NOW THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the meanings set forth below for
purposes of this Operating Agreement:
"AAA" has the meaning set forth in Section 4.2(c).
"Act" means the Delaware Limited Liability Company Act.
"Active Potential Licensees" has the meaning set forth in Section 6.2
of the Master Agreement.
"Adjusted Capital Account Deficit" means, with respect to any Member
for any taxable year or other period, the deficit balance, if any, in such
Member's Capital Account as of the end of such year or other period, after
giving effect to the following adjustments: (a) credit to such Capital Account
any amounts that such Member is obligated to restore or is deemed obligated to
restore as described in the penultimate sentence of Treasury Regulation Section
1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i); and (b) debit to
such Capital Account the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Adjusted Gross Cash Proceeds" means Gross Cash Proceeds minus TPL
Direct Reimbursable Expenses.
"Affiliate", with respect to any Person, means any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person. For purposes of this Operating Agreement, "control" (including with
correlative meanings, the terms "controlling", "controlled by" or "under common
control with") as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Annual Business Plan" means, for any Fiscal Year, the Company's annual
financial and operating plan and budget for such Fiscal Year as formally
approved by the Management Committee, as such financial and operating plan and
budget may be amended from time to time by the Management Committee.
"Antecedent Activities" means active negotiations with parties
identified as Active Potential Licensees pursuant to Section 6.2 of the Master
Agreement..
"Applicable Law" means any domestic or foreign, federal, state or local
statute, law, common law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, permit or
other requirement of any Governmental Authority.
"Book Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Book Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset (not
reduced by any associated liabilities), as agreed to by the contributing Member
and the Management Committee;
(b) The Book Value of the property of the Company shall be
adjusted to equal its gross fair market value, as determined by the Management
Committee, as of the following times: (i) the acquisition of an additional
Interest by any new or existing Member in exchange for more than a de minimis
Capital Contribution; (ii) the distribution by the Company to a Member of more
than a de minimis amount of property as consideration for an Interest; (iii) the
liquidation of the Company within the meaning of Treasury Regulations Section
1.704-1 (b)(2)(ii)(g); and (iv) any other instance in which such adjustment is
permitted under Treasury Regulation Section 1.704-1(b)(2)(iv); provided,
however, that adjustments pursuant to clauses (i), (ii), and (iv) above shall be
made only if the Management Committee reasonably determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and
(c) The Book Value of any property distributed to a Member
shall be adjusted to equal the gross fair market value of such asset on the date
of distribution as determined by the Management Committee.
2
The Book Value of any property which has been established or adjusted to reflect
gross fair market value hereunder shall thereafter be adjusted by depreciation
as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(g) and any other
adjustment to the value of such property other than depreciation or
amortization.
"Capital Account" means, with respect to any Member, the capital
account maintained by the Company for such Member in accordance with Section
5.5.
"Change of Control" means (a) the merger or consolidation of Patriot
with or into another corporation in which Patriot is not the surviving entity,
or a reverse triangular merger, or similar transaction, in which Patriot is the
surviving entity but the shares of Patriot's capital stock outstanding
immediately prior to the merger are converted into other property, whether in
the form of securities, cash, or otherwise, and as a result of which the
outstanding capital stock of Patriot prior to such transaction represents less
than a majority of the outstanding capital stock of Patriot or the acquirer or
successor following such transaction, (b) any sale or transfer of all or
substantially all of Patriot's assets to any other Person, or (c) the sale or
transfer of shares of Patriot's capital stock, warrants, options or instruments
convertible into capital stock of Patriot and as a result of which the
outstanding capital stock of Patriot on a fully diluted basis assuming
conversion of all outstanding instruments convertible into shares of Patriot's
capital stock prior to such transaction represents less than a majority of the
outstanding capital stock of Patriot or the acquirer or successor following such
transaction.
"Certificate of Formation" means the Certificate of Formation of the
Company as filed with the Secretary of State of the State of Delaware on June
[__], 2005, as the same may be amended or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor federal tax statute enacted after the date of this
Operating Agreement.
"Commercialization Agreement" means that certain Commercialization
Agreement, dated as of the date hereof, by and among Patriot, TPL and the
Company.
"Company" has the meaning set forth in the Preamble.
"Company Expenses" means any direct operating expenses of the Company
as may be approved by the Management Committee, including any fees or other
compensation payable to the Managers or for expenses related to the preparation
of Company financial statements, tax reporting and the maintenance of a bank
account in the name of the Company, and other similar administrative expenses.
"Company Minimum Gain" means "partnership minimum gain" as defined in
Treasury Regulation Section 1.704-2(d).
"Damages" means all demands, claims, actions or causes of action,
assessments, losses (including reasonably foreseeable lost profits), damages,
costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties,
charges and amounts paid in settlement (net of insurance proceeds and proceeds
from related third party indemnification, contribution or similar claims
actually received), including (a) interest at a rate equal to 200 basis points
above the prime rate, as in effect from time to time, of Citibank, N.A., on cash
disbursements in respect of any of the foregoing, compounded quarterly, from the
date each such cash disbursement is made until the Person incurring the same
shall have been indemnified in respect thereof, (b) reasonable costs, fees and
expenses of such Person's Representatives and (c) any reasonable costs, fees and
expenses incurred in connection with investigating, defending against, or
settling any such claims.
3
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean, with respect to the Initial Capital
Contributions, the fair market value of such asset as determined by the Members.
"Fiscal Year" means (i) any twelve (12) month period commencing on June
1 and ending on May 31, or (ii) any portion of the period described in clause
(i) of this sentence for which the Company is required to allocate Net Profits,
Net Losses and other items of Company income, gain, loss or deduction pursuant
to Article VI, as the case may be.
"Governmental Approval" means an authorization, consent, approval,
permit or license issued by, or a registration or filing with, any Governmental
Authority.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Gross Cash Proceeds" means all cash proceeds received pursuant to
licenses, judgments, settlements and other payments with respect to the right to
make, have made, use, sell, and import products utilizing the MSD Patents.
"Indemnitees" means the Members, Managers, officers and employees of
the Company, as well as their respective Representatives, entitled to
indemnification by the Company pursuant to Article VII.
"Independent Manager" has the meaning set forth in Section 4.2(c).
"Initial Capital Contributions" has the meaning set forth in Section
5.1.
"Initial Working Capital Contribution" means the *** payable by
each of Patriot and TPL, in the aggregate amount of *** due upon the
execution of this Operating Agreement.
"JAMS" has the meaning set forth in Section 4.2(c).
"Liabilities" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person or is disclosed on any schedule to the Master Agreement or this Operating
Agreement.
4
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
"Liquidator" has the meaning set forth in Section 8.2.
"Management Committee" has the meaning set forth in Section 4.1.
"Manager" means a member of the Management Committee.
"Master Agreement" means that certain agreement, dated as of June 7,
2005, by and between Patriot and TPL.
"Member Minimum Gain" means the Company's "partner nonrecourse debt
minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2).
"Member Nonrecourse Debt" means "partner nonrecourse debt" as defined
in Treasury Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Deductions" means "partner nonrecourse deductions"
as defined in Treasury Regulation Section 1.704-2(i)(2).
"Members" has the meaning set forth in the Preamble.
"MSD Patents" means those microprocessor science and design patents
identified on Schedule 1 to the Master Agreement.
"Net Cash Proceeds" has the meaning set forth in Section 6.1(a)(v).
"Net Profit" or "Net Loss" means, for any Accounting Period, the
amount, computed as of the last day thereof, of the net income or loss of the
Company determined in accordance with federal income tax principles (but without
requiring any items to be stated separately pursuant to Code Section 703), with
the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax shall be included in the computation of Net Profit or Net Loss;
(b) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-l(b)(2)(iv)(i) shall be included in the
computation of Net Profit or Net Loss;
(c) Any adjustment in the Book Value of property in accordance
with this Agreement and pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(f) or (g) shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profit or Net Loss (to
the extent such adjustment is not already reflected in the Capital Accounts of
the Members);
5
(d) In any situation in which an item of income, gain, loss or
deduction is affected by the adjusted tax basis of property, the Book Value of
the property shall be used in lieu of adjusted basis (notwithstanding that the
adjusted tax basis of such property may differ from its Book Value), and in lieu
of depreciation, amortization and other cost recovery deductions taken into
account in computing taxable income or loss, there will be taken into account
depreciation for the taxable year or other period as determined in accordance
with Treasury Regulation Section 1.704-1(b)(2)(iv)(g); and
(e) Any items of income, gain, deduction and loss specially
allocated pursuant to Section 6.6 of this Agreement shall not be considered in
determining Net Profit or Net Loss.
"Newco Licenses" means the P-Newco License and the T-Newco License.
"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(1).
"Operating Agreement" has the meaning set forth in the Preamble.
"Patriot" has the meaning set forth in the Preamble.
"Patriot Appointee" has the meaning set forth in Section 4.2(a).
"Percentage Interest" means a Member's percentage interest in the
Company, as such Percentage Interest may be adjusted from time to time pursuant
to the terms of this Operating Agreement.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, estate or other entity or
organization, including a Governmental Authority.
"P-Newco License" means that certain license agreement entered into
between Patriot and the Company.
"Proceedings" means any actions, suits, claims, hearings, arbitrations,
proceedings (public or private) or governmental investigations that have been
brought by or against any Governmental Authority or any other Person.
"Recovery Event" means the moment at which payment is actually received
by Patriot, TPL, or the Company as a result of or in connection with any
Antecedent Activities.
"Regulatory Allocations" are those allocations contained in Section
6.5.
"Representatives" means the officers, directors, employees, attorneys,
accountants, advisors, representatives and agents of a Person.
6
"Securities Act" means the Securities Act of 1933, as amended.
"Tax Matters Member" means that Member appointed by the Management
Committee with the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue Service
relating to the determination of any item of Company income, gain, loss,
deduction or credit for federal income tax purposes.
"T-Newco" means a newly formed Delaware limited liability company,
wholly owned by TPL.
"T-Newco License" means that certain license agreement entered into
between TPL and T-Newco.
"TPL" has the meaning set forth in the Preamble.
"TPL Appointee" has the meaning set forth in Section 4.2(b).
"TPL Direct Reimbursable Expenses" has the meaning set forth in Section
4.2 of the Commercialization Agreement.
"Transfer" has the meaning set forth in Section 3.6.
"Treasury Regulations" means the proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the
Certificate of Formation and the corresponding sections of any regulations
subsequently issued that amend or supersede those regulations.
"Working Capital Contribution" means the amount payable to the Company
each Fiscal Year by each of the Members for the Company's working capital
requirements pursuant to Section 5.3
"Working Capital Fund" means the fund containing the Company's working
capital to be maintained pursuant to Section 5.3(b).
ARTICLE 2
FORMATION OF LIMITED LIABILITY COMPANY
2.1 Formation. Patriot caused the Certificate of Formation of the
Company to be filed with the Delaware Secretary of State on June [__], 2005.
2.2 Name; Principal Place of Business. Unless and until amended in
accordance with this Operating Agreement and the Act, the name of the Company is
"[__________]". The principal place of business of the Company shall be such
place or places as the Management Committee from time to time determines.
2.3 Registered Office and Registered Agent. The Company's initial
registered office shall be at the office of its registered agent at 160
Greentree Drive, Suite 101, Dover, Delaware 19904, and the name of its initial
registered agent at such address shall be National Registered Agents, Inc. The
registered agent may be changed from time to time by filing the address of the
new registered office and/or the name of the new registered agent with the
Secretary of State of the State of Delaware pursuant to the Act.
7
2.4 Agreement; Effect of Inconsistencies With the Act or the Code. It
is the express intention of the Members that this Operating Agreement, together
with the Exhibits and Schedules, shall be the sole source of agreement of the
parties with respect to the structure, governance and the operation of the
Company and, except to the extent a provision of this Operating Agreement
expressly incorporates federal income tax rules by reference to sections of the
Code or Treasury Regulations or is expressly prohibited or ineffective under the
Act, this Operating Agreement shall govern the structure and operation of the
Company, even when inconsistent with, or different than, the provisions of the
Act or any other law or rule. To the extent that any provision of this Operating
Agreement is prohibited or ineffective under the Act, this Operating Agreement
shall be deemed to be amended to the smallest degree possible in order to make
this Operating Agreement effective under the Act in accordance with the intent
of the parties. In the event the Act is subsequently amended or interpreted in
such a way to make any provision of this Operating Agreement that was formerly
invalid valid, such provision shall be considered to be valid from the effective
date of such interpretation or amendment. Each of the Members shall be entitled
to rely on the provisions of this Operating Agreement, and none of the Members
shall be liable to the Company or to any of the other Members for any action or
refusal to act taken in good faith reliance on the terms of this Operating
Agreement. The Members hereby agree that the duties and obligations imposed on
the Members as such shall be those set forth in this Operating Agreement, which
is intended to govern the relationship among and between the Company and the
Members, notwithstanding any provision of the Act or common law to the contrary.
2.5 Business. The purpose of the Company is to engage in any activity
for which a limited liability company may be organized under the Act.
2.6 Term. The term of the Company commenced upon the filing of the
Certificate of Formation with the Delaware Secretary of State on June [__], 2005
and shall continue until the Company's dissolution in accordance with Article
VIII of this Operating Agreement.
2.7 Qualification. The Management Committee shall cause the Company to
be qualified or registered, if and to the extent required, under the applicable
laws of any jurisdiction in which such registration may be required, and shall
be authorized to execute, deliver and file any certificates and documents
necessary to effect such qualification or registration.
ARTICLE 3
MEMBERSHIP
3.1 Members. The names and addresses of the Members are as follows:
Patriot Scientific Corporation 10989 Via Frontera
San Diego, CA 92127
Technology Properties Limited Inc. 21730 Stevens Creek Blvd.,
Suite 201
Cupertino, CA 95014
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8
3.2 Representations and Warranties. Each Member hereby represents and
warrants to the Company and the other Member as follows:
(a) Such Member is either an individual or a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation with all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now conducted;
(b) Such Member has all requisite power and authority to execute
and deliver this Operating Agreement and to perform its obligations hereunder.
The execution and delivery by such corporate Member of this Operating Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its part. This Operating
Agreement has been duly executed and delivered by such Member and constitutes
the legal, valid and binding obligations of such Member, enforceable against it
in accordance with its terms, except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally;
(c) The execution, delivery and performance by such Member of this
Operating Agreement and the consummation of the transactions contemplated hereby
do not and will not (i) violate the certificate of incorporation or bylaws of
such Member, in each case as amended through the date hereof, (ii) conflict
with, result in a breach of or constitute (or, with the giving of notice or
lapse of time, or both, constitute) a default under, or require the approval or
consent of any Person pursuant to, any material agreement, instrument or other
document to which such Member is a party or by which it or its properties or
assets is bound or (iii) violate any material provision of any statute, rule or
regulation applicable to such Member or binding on it or any of its assets or
(iv) except as set forth in the Newco Licenses, result in the creation or
imposition of any Lien on the MSD Patents.
(d) Such Member is acquiring its Percentage Interest for investment
purposes and not with a view to the resale or distribution thereof;
(e) Such Member understands and acknowledges that such Member's
Percentage Interest has not been registered under the Securities Act or any
state securities or blue sky laws and may not be sold unless registered under
the Securities Act and qualified under applicable state securities or blue sky
laws or such sale is made pursuant to an exemption from such registration and
qualification requirements;
(f) The limitations on Transfer contained in Section 3.6 create an
economic risk that such Member is capable of bearing; and
(g) Such Member is a "United States person" within the meaning of
Section 7701(a)(30) of the Code.
3.3 Incorporation of Representations and Warranties. Each of Patriot
and TPL hereby reaffirms the representations and warranties made by such Member
in the Master Agreement as if such representations and warranties were set forth
fully herein.
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3.4 Resignation or Withdrawal of a Member.
(a) No Member shall resign from membership in the Company or
withdraw their interest in the capital of the Company, except (i) in connection
with the dissolution of the Company pursuant to the provisions of Article VIII
or (ii) with the prior written consent of all of the other Members.
(b) The resignation of a Member shall not (i) relieve such Member
of any of its covenants, agreements, duties, obligations or liabilities under
this Operating Agreement whether arising prior to, on, or after the date of such
resignation (including, without limitation, any contingent obligations based on
acts or omissions occurring, or liabilities or obligations incurred, prior to,
on or after the date of such resignation) or (ii) directly or indirectly result
in the termination of, or relieve such Member (or any Affiliate thereof) of, or
otherwise affect, any of the covenants, agreements, duties, obligations or
liabilities of such Member (or any Affiliate thereof) under any other agreement
to which such Member is a party.
3.5 Effect of Certain Events on Membership.
(a) Bankruptcy, Foreclosure, or Other Similar Event. In the event
of a Member's bankruptcy, or the foreclosure upon or other similar proceeding
with respect to that Member's interest in the MSD Patents or that Member's
Percentage Interest:
(i) any and all rights that Member may have under Section 4.2
of this Operating Agreement shall automatically terminate; and
(ii) any and all rights that Member may have under Sections
2.2.1 and 2.2.2 of the P-Newco License or T-Newco License, as the case may be,
shall automatically and without further action by any of the parties thereto be
irrevocably transferred to the Company.
(b) Change of Control. In the event of a Change of Control of
Patriot or TPL:
(i) any and all rights Patriot or TPL may have under Section
4.2 of this Operating Agreement, as the case may be, shall automatically
terminate; and
(ii) Patriot or TPL's rights under Sections 2.2.1 and 2.2.2 of
the P-Newco License or T-Newco License, as the case may be, shall automatically
and without further action by any of the parties thereto be irrevocably
transferred to the Company.
3.6 Restrictions on Transfers of Interests. Except as provided in
Section 5.4, no Member shall sell, assign, pledge, mortgage or otherwise dispose
of or transfer (a "Transfer") its Percentage Interest in the Company, whether in
whole or in part, without the consent of the Management Committee, which consent
may be withheld for any or for no reason.
3.7 No Authority as Agent. Except as may be authorized by the
Management Committee, or as set forth in the Commercialization Agreement, no
Member shall have the authority in its or his capacity as a Member to enter into
any transaction on behalf of the Company or to otherwise bind the Company.
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ARTICLE 4
MANAGEMENT
4.1 Management of the Company by Management Committee. The business
and affairs of the Company shall be managed by a management committee (the
"Management Committee") consisting of three (3) Managers, which number may not
be changed without the written consent of the Members holding at least 75% of
the Percentage Interests.
4.2 Appointment of Management Committee.
(a) Patriot Appointment. Patriot shall have the right to appoint
one (1) Manager to the Management Committee (the "Patriot Appointee").
(b) TPL Appointment. TPL shall have the right to appoint one (1)
Manager to the Management Committee (the "TPL Appointee").
(c) Independent Manager. The Patriot Appointee and the TPL
Appointee shall work together in good faith to appoint a mutually acceptable
third Manager (the "Independent Manager"). In the event that the Patriot
Appointee and the TPL Appointee are unable to appoint a mutually acceptable
Manager within 10 days of the resignation or removal of the Independent Manager,
either party may apply to the American Arbitration Association ("AAA") in Santa
Clara County, or the nearest county thereto, if necessary, for the appointment
of the Independent Manager, and the AAA shall select the Independent Manager
from a list of no more than three persons submitted by each party. All costs
associated with the selection of the Independent Manager by the AAA pursuant to
this Section 4.2(c) shall be paid by the Company.
(d) Term of Service. Each Manager (other than the Independent
Manager) will serve until his or her death or resignation from the Management
Committee, or until his or her removal from the Management Committee by the
Member who appointed him or her. The Independent Manager shall serve a five (5)
year term (subject to earlier removal as provided below).
(e) Initial Managers.The initial Managers are as follows:
Patriot Appointee David H. Pohl
TPL Appointee Daniel E. Leckrone
Independent Manager Robert K. Neilson
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(f) Meetings; Place of Meetings; Telephonic Participation.
Meetings of the Management Committee may be held at such times and places within
or without the State of Delaware as the Management Committee may from time to
time designate or as shall be designated by the Manager or Managers calling the
meeting in the notice or waiver of notice of any such meeting. Regular meetings
of the Management Committee shall be held not less than once during every
calendar quarter. Special meetings of the Management Committee shall be held
whenever called by one or more Managers. Notice of the time, place and purpose
of each such special meeting shall be sent by facsimile transmission or
electronic mail or be delivered personally or mailed to and received by each
Manager not less than 72 hours before the time at which the meeting is to be
held. Notice of any meeting of the Management Committee shall not be required to
be given to any Manager who waives such notice in writing or who is present at
such meeting, except a Manager who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. At the request
of any Manager, any or all Managers may participate telephonically in any
meeting of the Management Committee so long as all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting. Any action required or permitted to be taken at any
meeting of the Management Committee may be taken without a meeting, without
prior notice and without a vote, if a consent in writing (including by
electronic transmission as permitted by Section 18-302 of the Act), setting
forth the action so taken, shall be signed or delivered by all Managers. Such
written (or electronically transmitted) consent shall be filed with the minutes
of proceedings of the Management Committee.
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(g) Quorum. Two (2) Managers must be present at a meeting of
the Management Committee to establish a quorum for the transaction of business.
(h) Majority Vote. All actions to be taken by the Management
Committee shall require the affirmative vote of at least two (2) of the three
(3) Managers.
(i) Resignation; Removal; Vacancies; Compensation.
(i) Resignation. A Manager may resign at any time by giving
written notice to the Members. The resignation of a Manager shall take effect
upon receipt of such notice or at such later time as shall be specified in the
notice. Unless otherwise specified in the notice, the acceptance of the
resignation shall not be necessary to make it effective.
(ii) Removal.
(A) Removal of the Patriot and TPL Appointees. The
Patriot Appointee to the Management Committee may be removed only by Patriot,
with or without cause. The TPL Appointee to the Management Committee may be
removed only by TPL, with or without cause.
(B) Removal of the Independent Manager.
(1) The Independent Manager may be removed at any
time by written consent of the Members holding at lease 75% of the Percentage
Interests.
(2) The Independent Manager many be removed by
either Patriot or TPL at any time for cause, provided, however that a decision
by either Patriot or TPL to remove the Independent Manager for cause pursuant to
this provision shall be deemed a dispute that must be resolved pursuant to
Section 9.9 hereof, and the Independent Manager may not be removed unless and
until such dispute has been resolved pursuant to Section 9.9. For purposes of
this provision, the term "cause" includes, but is not limited to:
(a) the Independent Manager's
insubordination, fraud, disloyalty, dishonesty, willful misconduct, or gross
negligence in the performance of the Independent Manager's duties under this
Operating Agreement;
(b) the Independent Manager's commission of
a crime against the Company or violation of any law, order, rule, or regulation
pertaining to the Company's business;
(c) the Independent Manager's inability,
whether due to death, disability, or other reason, to perform the job functions
and responsibilities in accordance with reasonable performance standards; and
(d) demonstrable favoritism toward the views
of one of the Members of the Management Committee, rather than the strategic
principles articulated in the then current Annual Business Plan.
(iii) Vacancies. Vacancies on the Management Committee shall
be filled by the Member who originally appointed the vacating Manager, or, in
the case of the Independent Manager, pursuant to Section 4.2(c) of this
Operating Agreement.
(iv) Compensation. No Manager other than the Independent
Manager (in the Members' discretion) shall be eligible to receive separate
compensation from the Company for his or her services on the Management
Committee; provided, however, that the Managers shall be reimbursed by the
Company for the reasonable and actual costs incurred in attending and
participating in any meetings of the Management Committee and other costs and
expenses reasonably related to fulfilling the duties and obligations of a
Manager hereunder.
4.3 Responsibilities of the Management Committee. The Management
Committee shall have the responsibility, on behalf of the Company:
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(a) To approve the Annual Business Plan, as well as any
modifications thereto.
(b) To make any distributions to Members pursuant to Article VI.
(c) To make any filings with any Governmental Authority on
behalf of the Company.
(d) To purchase liability and other insurance to protect the
Company's properties and business and to purchase liability insurance to
indemnify or otherwise protect the Members, Managers, officers and employees of
the Company.
(e) To make certain decisions regarding tax matters pursuant
to the terms of this Operating Agreement.
(f) To approve the execution by TPL pursuant to the
Commercialization Agreement of any license agreement, infringement claim
settlement or other agreement with respect to the MSD Patents, the proposed
terms of which do not fall within the guidelines for allowable license
agreements and infringement claim settlements set forth in Exhibit C to the
Commercialization Agreement.
(g) To approve any modifications, amendments or waivers of the
Commercialization Agreement, and any of the license or other agreements referred
to therein to which the Company is a party.
(h) To take or authorize such other actions on behalf of the
Company as are consistent with Applicable Law and the fiduciary duties of the
Managers and the Members.
4.4 Officers. The Company shall have a President and Treasurer and
such other officers as the Management Committee may determine. Any officer
except the President and the Treasurer may hold more than one office
concurrently. Except as set forth herein, the officers shall serve at the
pleasure of the Management Committee. The Management Committee may determine a
reasonable compensation to be paid to each officer so appointed. The officers
shall exercise such powers as shall be determined or delegated from time to time
by the Management Committee.
(a) President. The Company shall have a President with primary
responsibility for and active charge of the management and supervision of the
Company's business and affairs. The President may execute in the name of the
Company license agreements, settlement agreements, checks and other similar
documents and instruments to the extent that such execution is consistent with
and in furtherance of the Annual Business Plan, as well as such other documents
and instruments otherwise authorized for execution by the Management Committee.
For as long as the Commercialization Agreement is in effect, Robert K. Neilson
shall be President of the Company.
(b) Treasurer. The Company shall have a Treasurer as the
principal financial officer and principal accounting officer of the Company who
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Company. The initial treasurer shall be [__________].
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4.5 Liability of Committee Members and Officers. The Managers and the
officers shall not be liable to the Company or to any Member for any Damages
suffered or sustained by the Company or any Member, as the case may be, unless
the Damage results from the fraud, deceit, gross negligence, willful misconduct,
breach of fiduciary duty, a knowing violation of law by a specific Manager or
officer or a material breach of such Manager's or officer's obligations under
this Operating Agreement, in which event only the Manager or officer who engaged
in such conduct or behavior (and no other Manager or officer) shall be liable
for the full extent of Damages suffered or sustained to the full extent
permitted pursuant to this Agreement or provided by Applicable Law.
4.6 Records, Audits and Reports. At the expense of the Company, proper
and complete records and books of account shall be kept or shall be caused to be
kept by the Management Committee (or a designee thereof) in which shall be
entered fully and accurately all transactions and other matters relating to the
Company's business in the detail and completeness customary and usual for
businesses of the type engaged in by the Company. The books and records shall at
all times be maintained at the principal executive offices of the Company and
shall be open to the inspection and examination of the Members or their duly
authorized agents during business hours. At a minimum, the Company shall keep at
its principal place of business:
(a) A current list of the full name and last known business,
residence or mailing address of each Member and Manager;
(b) A copy of the Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which any amendment has been executed;
(c) Copies of the Company's federal, state and local income
tax returns and reports, if any, for the four most recent years;
(d) A copy of this Operating Agreement, as amended to date,
any correspondence relating to any Member's obligation to contribute cash,
property or services, and copies of any financial statements of the Company for
the three most recent years; and
(e) Minutes of every meeting of the Management Committee, or
any written consents of the Managers obtained in lieu of a meeting.
The Management Committee shall maintain and preserve, during the term
of the Company and for a period of five years thereafter, all accounts, books
and other relevant Company documents.
ARTICLE 5
CAPITAL CONTRIBUTIONS
5.1 Initial Capital Contributions. Concurrently with the execution
hereof, Patriot and TPL shall enter into the P-Newco License, TPL and T-Newco
shall enter into the T-Newco License, T-Newco shall merge with and into the
Company and each of the Members shall make the capital contributions set forth
on Schedule 1 hereto (collectively, the "Initial Capital Contributions"). The
Initial Capital Contributions to the Company of each Member shall be deemed to
have a Fair Market Value as set forth opposite such Member's name on Schedule 1
hereto.
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5.2 Percentage Interests. Upon making its Initial Capital
Contribution, and as a result of the merger contemplated by the Merger Agreement
(as defined in the Master Agreement), TPL shall be issued Percentage Interests
in the Company such that Patriot will no longer be the sole Member of the
Company and the Members shall have the Percentage Interests set forth on
Schedule 2 hereto. Percentage Interests shall for all purposes be personal
property. A Member has no interest in specific property of the Company.
5.3 Working Capital Contributions.
(a) Initial Working Capital Contribution. On the date hereof,
Patriot and TPL shall each make an Initial Working Capital Contribution to the
Company of *** for an aggregate Initial Working Capital Contribution
of *** .
(b) Future Working Capital Contributions. At any time during the
Fiscal Year at the discretion of the Management Committee, Patriot and TPL shall
be obligated to make Working Capital Contributions in equal amounts in order to
maintain a Working Capital Fund of not more than *** and then only to the
extent necessary to bring the balance of the Working Capital Fund to ***
provided, however, that neither TPL nor Patriot shall be required to contribute
more than *** in any Fiscal Year.
Except as provided in this Section 5.3, no Member shall be obligated to
make any contribution of capital to the Company.
5.4 Failure to Make Contributions. The failure of Patriot or TPL to
make Working Capital Contributions when due pursuant to Section 5.3 shall result
in the following adjustments to that Member's Percentage Interest:
(a) For each One Dollar ($1) that is not contributed by Patriot or
TPL when due pursuant to Section 5.3, one hundred thousandth of a percent
(0.00001%) of the outstanding Percentage Interests of the Company shall be
deducted from that Member's Percentage Interest and transferred to the other
Member. As an example, if a Member failed to contribute *** when due
pursuant to Section 5.3, *** of the outstanding Percentage Interests of
the Company would be deducted from that Member's Percentage Interest and
transferred to the other Member.
(b) In the event that Patriot's Percentage Interest falls below
25%, Patriot shall lose the right to appoint the Patriot Appointee pursuant to
Section 4.2(a), and TPL shall have the right to appoint the Patriot Appointee,
such that TPL shall have the right to appoint two (2) of the three (3) Managers.
In the event that TPL's Percentage Interest falls below 25%, TPL shall lose the
right to appoint the TPL Appointee pursuant to Section 4.2(b), and Patriot shall
have the right to appoint the TPL Appointee, such that Patriot shall have the
right to appoint two (2) of the three (3) Managers.
15
5.5 Capital Accounts. A separate Capital Account shall be established
and maintained for each Member.
(a) Each Member's Capital Account will be increased by:
(i) The Initial Capital Contribution by the Member to the
Company pursuant to Section 5.1;
(ii) The Working Capital Contributions by the Member to the
Company pursuant to Section 5.3; and
(iii) Each Member's pro rata allocation of the Company's and
each Member's contributions to the Working Capital Fund.
(b) Each Member's Capital Account will be decreased by:
(i) The amount of Net Cash Proceeds distributed to the
Member by the Company;
(ii) The Fair Market Value of property distributed to the
Member by the Company; and
(iii) Allocations to the Member of Net Losses.
(c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 5.5 is intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder.
If, in the opinion of the Management Committee after consultation with the
Company's accountants, the manner in which Capital Accounts are to be maintained
pursuant to the preceding provisions of this Section 5.5 should be modified to
comply with Section 704(b) of the Code and the Treasury Regulations thereunder,
then, notwithstanding anything to the contrary contained in the preceding
provisions of this Section 5.5, the method in which Capital Accounts are
maintained shall be so modified without any approval of the Management
Committee; provided, however, that any change in the manner of maintaining
Capital Accounts shall not materially alter the economic agreement between the
Members.
(d) No Member shall have any liability to restore all or any
portion of a deficit balance in the Member's Capital Account.
ARTICLE 6
DISTRIBUTIONS, ALLOCATIONS AND TAX MATTERS
6.1 Application of Gross Cash Proceeds.
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(a) Application of Gross Cash Proceeds. Within sixty (60) days
after the close of each of the Company's fiscal quarters, the Company shall
apply and distribute Gross Cash Proceeds in accordance with the following
schedule of priorities:
(i) First, for the payment to TPL (or, in the case of any
payment to satisfy the obligations of the Company under Section 4.2 of the
Commercialization Agreement, directly to the Person identified by TPL) in
satisfaction of the Company's payment obligations under Sections 4.2 and 4.3 of
the Commercialization Agreement;
(ii) Next, to the payment of any Company Expenses;
(iii) Next, for the Working Capital Fund until the Working
Capital Fund equals *** ;
(iv) Next,
(a) for payment to Patriot of an amount equal to 10% of
the Gross Cash Proceeds until Patriot shall have received Twenty Million Dollars
($20,000,000); and
(b) for payment to TPL of an amount equal to 15% of the
Adjusted Gross Cash Proceeds minus any amounts previously advanced to TPL (and
not previously credited against payments to TPL hereunder) pursuant to Section
4.3 of the Commercialization Agreement; and
(v) Finally, the remaining Gross Cash Proceeds (such
remaining amount, the "Net Cash Proceeds") to the Members according to their
respective Percentage Interests.
In the event that funds sufficient to satisfy the payments
required to be made pursuant to subsections (iv)(a) and (iv)(b) above are
unavailable, such payment obligations shall be pari passu, and any unpaid
amounts thereof shall be paid from Gross Cash Proceeds subsequently received by
the Company.
(b) Distribution of Company Property. Company property shall
be distributed only pursuant to Article VIII.
(c) Withholdings. All amounts withheld pursuant to the Code or
any provisions of state or local tax law with respect to any payment or
distribution to the Members from the Company shall be treated as amounts
distributed to the relevant Members pursuant to this Section 6.1.
6.2 Allocation of Net Profits. Subject to the provisions of Sections
6.4 and 6.5, Net Profits for any Fiscal Year or other period shall be allocated
to the Members according to their Percentage Interests.
6.3 Allocation of Net Losses. Subject to the provisions of Sections
6.4 and 6.5, Net Losses for any Fiscal Year or other period shall be allocated
to the Members according to their Percentage Interests.
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6.4 General Rules for Allocations. The rules of this Section 6.4 shall
govern all allocations under this Article:
(a) Except as otherwise provided in this Operating Agreement,
an allocation of Net Profits or Net Losses shall be treated as an allocation
between the Members of the same share of each item of income, gain, loss and
deduction that is taken into account in computing such Net Profits or Net
Losses, as the case may be.
(b) If any Member is deemed to have received imputed income with
respect to any property licensed or otherwise made available to the Company
pursuant to this Operating Agreement, the corresponding imputed expenses to the
Company arising out of such arrangement shall be specially allocated to such
Member.
(c) For purposes of determining the Net Profits or Net Losses
allocable to any period, the Net Profits and Net Losses shall be determined on a
daily, monthly or other basis, as determined by the Management Committee using
any permissible method under Section 706 of the Code and the Treasury
Regulations promulgated thereunder.
6.5 Special Allocations to Capital Accounts.
(a) Notwithstanding anything to the contrary contained in this
Article 6, if there is a net decrease in Company Minimum Gain or in any Member
Minimum Gain during any taxable year or other period, prior to any other
allocation pursuant hereto, such Member shall be specially allocated items of
income and gain for such year (and, if necessary, subsequent years) in an amount
and manner required by Treasury Regulation Sections 1.704-2(f) or 1.704-2(i)(4).
The items to be so allocated shall be determined in accordance with Treasury
Regulation Section 1.704-2.
(b) Nonrecourse Deductions for any taxable year or other
period shall be allocated (as nearly as possible) under Treasury Regulation
Section 1.704-2 to the Members, pro rata in proportion to their respective
Percentage Interests.
(c) Any Member Nonrecourse Deductions for any taxable year or
other period shall be allocated to the Member that made, or guaranteed or is
otherwise liable with respect to the loan to which such Member Nonrecourse
Deductions are attributable in accordance with principles under Treasury
Regulation Section 1.704-2(i).
(d) Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a negative balance
in his or its Capital Account shall be allocated items of income and gain
sufficient to eliminate such increase or negative balance caused thereby, as
quickly as possible, to the extent required by such Treasury Regulation.
(e) No allocation or loss or deduction shall be made to any
Member if, as a result of such allocation, such Member would have an Adjusted
Capital Account Deficit. Any such disallowed allocation shall be made to the
Members entitled to receive such allocation under Treasury Regulation Section
1.704 in proportion to their respective Percentage Interests. If losses or
deductions are reallocated under this subsection 6.5(e), subsequent allocations
of income and losses (and items thereof) shall be made so that, to the extent
possible, the net amount allocated under this subsection 6.5(e) equals the
amount that would have been allocated to each Member if no reallocation had
occurred under this subsection 6.5(e).
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(f) For purposes of Section 752 of the Code and the Treasury
Regulations thereunder, excess nonrecourse liabilities (within the meaning of
Treasury Regulations Section 1.752-3(a)(3)) shall be allocated to the Members
pro rata in proportion to their respective Percentage Interests.
(g) The allocations contained in Sections 6.5(a), 6.5(c), 6.5(d)
and 6.5(e) (the "Regulatory Allocations") are intended to comply with certain
requirements of Treasury Regulation Sections 1.704-1 and 1.704-2. The Regulatory
Allocations shall be taken into account in allocating Net Profit and Net Loss
and other items of income, gain, loss and deduction among the Members so that to
the extent possible, the allocations contained in this Agreement other than the
Regulatory Allocations and the Regulatory Allocations made to each Member shall
equal the net amount that would have been allocated to each Member had the
Regulatory Allocations not occurred. The Management Committee shall take account
of the fact that certain of the Regulatory Allocations will occur at a period in
the future for purposes of applying this Section 6.5(g).
6.6 Tax Allocations; Section 704(c) of the Code.
(a) Except as otherwise provided in this Section 6.6, for
income tax purposes, each item of income, gain, loss, and deduction of the
Company shall be allocated among the Members in accordance with the manner in
which the equivalent items of Net Profits and Net Losses were allocated under
the preceding sections of this Article VI.
(b) In the event the Book Value of a Company asset differs from
its adjusted federal income tax basis, then all allocations of income, gain,
loss and deduction with respect to such asset shall take into account any
variation between the adjusted tax basis of such asset and its Book Value. Such
allocations shall be made under the principles of Sections 704(b) and 704(c) of
the Code and the Treasury Regulations thereunder and are intended to eliminate,
to the extent possible, disparities that otherwise exist between the balances of
the Members' Capital Accounts, as maintained by the Company, and such balances
had the Capital Accounts been maintained in accordance with tax accounting
principles. It is intended, for example, that any taxable gain recognized by the
Company upon the disposition of property contributed by a Member to the Company
shall be allocated to the contributing Member to the extent that the property's
initial Book Value exceeded its adjusted income tax basis on the date of the
contribution, with any excess taxable gain being allocated to the Members
(including the contributing Member) in a manner that coincides with the
corresponding allocation of "book" gain. Any elections, accounting conventions
or other decisions relating to such allocations shall be made by the Management
Committee in a manner that (i) reasonably reflects the purposes and intention of
this Operating Agreement, and (ii) complies with Sections 704(b) and 704(c) of
the Code and the Treasury Regulations thereunder. The Management Committee shall
determine the method set forth in Treasury Regulation Section 1.704-3c to be
used for allocating such terms.
19
6.7 Tax Matters Member.
(a) At such time as it deems necessary, the Management Committee shall
elect the "Tax Matters Member" of the Company for purposes of Section 6231(a)(7)
of the Code. The Tax Matters Member shall have the power to manage and control,
on behalf of the Company, any administrative proceeding at the Company level
with the Internal Revenue Service relating to the determination of any item of
Company income, gain, loss, deduction or credit for federal income tax purposes.
(b) The Tax Matters Member shall, within ten (10) days of the receipt
of any notice from the Internal Revenue Service in any administrative proceeding
at the Company level relating to the determination of any Company item of
income, gain, loss, deduction or credit, mail a copy of such notice to the other
Members.
6.8 Section 754 Election. The Tax Matters Member may, in its
discretion, make, on behalf of the Company, an election in accordance with
Section 754 of the Code so as to adjust the basis of Company property in the
case of a distribution of property within the meaning of Section 734 of the
Code, and in the case of a transfer of a Member's Percentage Interest within the
meaning of Section 743 of the Code. Each Member shall, upon the request of the
Tax Matters Member, furnish such information as the Tax Matters Member shall
deem necessary or appropriate to give effect to such election.
6.9 Returns and Other Elections. The Chief Financial Officer shall
cause the preparation and timely filing all tax returns required to be filed by
the Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of
those returns, or pertinent information from the returns, shall be furnished to
the Members within a reasonable time after the end of the Company's fiscal year.
All elections permitted to be made by the Company under federal or state laws
shall be made by the Chief Financial Officer, provided that the Management
Committee may direct the Chief Financial Officer to make or refrain from making
any tax election.
6.10 Partnership Tax Treatment. The Members expect and intend that the
Company shall be treated as a partnership for all federal and state income tax
purposes, and the Members agree that they will not: (a) take a position on any
federal, state, local or other tax return, or otherwise assert a position,
inconsistent with such expectation and intent; or (b) elect for the Company to
be treated as an association for tax purposes or do any other act or thing which
could cause the Company to be treated as other than a partnership for federal
income tax purposes.
ARTICLE 7
INDEMNIFICATION AND LIMITATION OF LIABILITY
7.1 Indemnification.
(a) To the fullest extent permitted by the Act and by law, the
Members, Managers, officers and employees of the Company, as well as their
respective Representatives (collectively, "Indemnitees") shall, in accordance
with this Section 7.1, be indemnified, protected, held harmless and defended by
the Company from and against any and all Damages and Liabilities by reason of
their management of, or involvement in, the affairs of the Company, or rendering
of advice or consultation with respect thereto, or which relate to the Company,
its properties, business or affairs, if such Indemnitee acted in good faith and
in a manner such Indemnitee reasonably believed to be in, or not opposed to, the
best interests of the Company.
20
(b) If any Indemnitee shall believe that such Indemnitee is
entitled to indemnification pursuant to this Article 7 in respect of any Damages
or Liabilities, such Indemnitee shall give the Company prompt written notice
thereof. Any such notice shall set forth in reasonable detail and to the extent
then known the basis for such claim for indemnification. The failure of such
Indemnitee to give notice of any claim for indemnification promptly shall not
adversely affect such Indemnitee's right to indemnity hereunder except to the
extent that such failure adversely affects the right of the Company to assert
all reasonable defenses to such claim. Each such claim for indemnity shall
expressly state that the Company shall have only the thirty (30) calendar day
period referred to in the next sentence to dispute or deny such claim. The
Company shall have thirty (30) calendar days following its receipt of such
notice either (y) to acquiesce in such claim and the responsibility to indemnify
the Indemnitee in respect thereof in accordance with the terms of this Article 7
by giving such Indemnitee written notice of such acquiescence or (z) to object
to the claim by giving such Indemnitee written notice of the objection. If the
Company does not object thereto within such thirty (30) calendar day period, the
Company shall be deemed to have acquiesced in such claim and the responsibility
to indemnify the Indemnitee in respect thereof in accordance with the terms of
this Article 7.
(c) In connection with any claim which may give rise to indemnity
under this Article 7 resulting from or arising out of any claim or Proceeding
against an Indemnitee by a Person that is not a party hereto, the Company may
(unless such Indemnitee elects not to seek indemnity hereunder for such claim),
upon written notice sent at any time to the relevant Indemnitee, assume the
defense of any such claim or Proceeding if the Company with respect to such
claim or Proceeding acknowledges to the Indemnitee the Indemnitee's right to
indemnity pursuant hereto in respect of the entirety of such claim (as such
claim may have been modified through written agreement of the parties or
arbitration hereunder) and provide assurances, reasonably satisfactory to such
Indemnitee, that the Company will be financially able to satisfy such claim in
full if such claim or Proceeding is decided adversely. The Company shall select
counsel reasonably acceptable to such Indemnitee to conduct the defense of such
claim or Proceeding, shall take all steps reasonably necessary in the defense or
settlement thereof and shall at all times diligently and promptly pursue the
resolution thereof. If the Company shall have assumed the defense of any claim
or Proceeding in accordance with this Section 7, the Company shall not (without
the written consent of each Indemnitee) consent to a settlement of, or the entry
of any judgment arising from, any such claim or Proceeding, unless such
settlement or order shall provide for the unconditional release of all
Indemnitees. If the Company has so elected to assume the defense, each
Indemnitee shall be entitled to participate in (but not control) the defense of
any such action, with its own counsel and at its own expense. Each Indemnitee
shall, and shall cause each of its Representatives to, cooperate fully with the
Company in the defense of any claim or Proceeding being defended by the Company
pursuant to this Section 7. If the Company does not assume the defense of any
claim or Proceeding resulting therefrom in accordance with the terms of this
Section 7, such Indemnitee may defend against such claim or Proceeding in such
manner as it may deem appropriate, provided that the Indemnitee may not settle
such claim or Proceeding without the written consent of the Company (which
consent shall not be unreasonably withheld or delayed), and provided further
that the Company shall be obligated to pay Indemnitee's attorneys' fees and
costs promptly as they are incurred in the defense of such claim or Proceeding.
21
(d) The indemnification provided by this Section 7.1 shall not
be deemed to be exclusive of any other rights to which any Person may be
entitled under any agreement, or as a matter of law, or otherwise, both as to
action in a Person's official capacity and to action in another capacity.
(e) The Management Committee shall have power to purchase and
maintain insurance on behalf of the Company, the Managers, the Members,
officers, employees or agents of the Company and any other Indemnitees at the
expense of the Company, against any liability asserted against or incurred by
them in any such capacity whether or not the Company would have the power to
indemnify such Persons against such liability under the provisions of this
Operating Agreement.
7.2 Limitation of Liability. The debts, obligations and liabilities of
the Company shall be solely the debts, obligations and liabilities of the
Company; and, except as provided under the Act, no Manager or Member shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Manager or Member of the Company.
7.3 Savings Clause. If this Article 7 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, the Company
shall nevertheless indemnify and hold harmless each Indemnitee or any other
person indemnified pursuant to this Article 7 as to costs, charges and expenses
(including, without limitation, reasonable attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, to the full extent
permitted by any applicable portion of this Article 7 that shall not have been
invalidated and to the fullest extent permitted by applicable law.
ARTICLE 8
DISSOLUTION AND WINDING UP
8.1 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
(a) The written agreement of Members holding at least 75% of the
Percentage Interests to dissolve the Company; or
(b) The entry of a decree of judicial dissolution under Section
18-802 of the Act.
Except for the foregoing, the Company shall not dissolve on the
occurrence of any other event.
8.2 Winding Up. Upon the occurrence of any event specified in Section
8.1, the Management Committee promptly shall notify each of the Members, and the
Company shall continue solely for the purpose of, and immediately begin the
process of, winding up its affairs in an orderly manner, liquidating its assets,
and satisfying the claims of its creditors. The Management Committee shall
promptly appoint a Person to act as the liquidator of the Company (the
"Liquidator") who shall be responsible for overseeing the winding up and
liquidation of the Company pursuant to the terms of this Operating Agreement.
The Liquidator shall give written notice of the commencement of winding up by
mail to all known creditors and claimants whose addresses appear on the records
of the Company.
22
8.3 Reversion of Rights. Upon the occurrence of any event specified in
Section 8.1, or upon the valid termination of the Commercialization Agreement by
the Company, all of the rights granted by each of Patriot and TPL to the Company
pursuant to the P-Newco License and T-Newco License, respectively, shall
immediately and without further action by any of the parties thereto revert in
their entirety to each of Patriot and TPL, respectively.
8.4 Order of Payment Upon Liquidation. Immediately after the reversion
of rights contemplated by Section 8.3 above, payment shall be made in the manner
contemplated by Section 6.1.
8.5 Antecedent Activities.
(a) The occurrence of any Recovery Event within twelve (12) months
of a Termination Event, as defined in Section 6.2 of the Commercialization
Agreement, shall entitle each of the Members to payment of the proceeds of such
Recovery Event in accordance with Section 6.1.
(b) The entitlements set forth in Section 8.5(a) shall vest in
the Members without further action. All proceeds and incidents of any such
Recovery Event shall be transferred by the Member receiving such proceeds within
three Business Days (as defined in the Master Agreement) after receipt of such
proceeds directly into an independent escrow account approved by Patriot and TPL
for distribution pursuant to the terms of this Operating Agreement and the joint
instructions of Patriot and TPL.
8.6 Limitations on Payments Made in Dissolution. Each Member shall only
be entitled to look to the assets of the Company for the return of its Initial
Capital Contribution, Working Capital Contribution and positive Capital Account
balance and shall have no recourse for its Initial Capital Contribution, Working
Capital Contribution, positive Capital Account balance and/or share of Gross
Cash Proceeds (upon dissolution or otherwise) against the Management Committee
or any other Member in the event the assets of the Company remaining after
payment of or due provision for all debts, liabilities and obligations of the
Company are insufficient to return such Member's Initial Capital Contribution
and positive Capital Account balance.
8.7 Certificate of Cancellation. When all debts, liabilities and
obligations have been paid and discharged or adequate provisions have been made
therefor and all of the remaining property and assets have been distributed to
the Members, a certificate of cancellation shall be executed in duplicate and
verified by all three (3) Managers, which certificate shall set forth the
information required by the Act. Duplicate originals of the certificate of
cancellation shall be delivered to the Secretary of State of the State of
Delaware.
23
8.8 Effect of Filing Certificate of Cancellation. Upon the issuance of
the certificate of cancellation, the existence of the Company shall cease. The
Management Committee shall have the authority to distribute any Company property
discovered after dissolution and take such other action as may be necessary on
behalf of and in the name of the Company.
ARTICLE 9
MISCELLANEOUS
9.1 Amendment. The Management Committee shall have the duty and
authority to amend the Certificate of Formation as and to the extent necessary
to reflect any and all changes or corrections necessary or appropriate as a
result of any action taken by the Members in accordance with the terms of this
Operating Agreement. Members holding at least 75% of the Percentage Interests
shall have the authority to amend this Operating Agreement. Notwithstanding
anything to the contrary set forth herein, neither the Management Committee nor
the Members may amend the Certificate of Formation or this Operating Agreement
to decrease the Percentage Interest of a Member, increase the Working Capital
Contributions of a Member or the liability of a Member with respect to the
Company without the consent of each Member affected thereby.
9.2 Governing Law and Severability. This Operating Agreement shall, in
all respects, be construed in accordance with and governed by the laws of the
State of Delaware as applied to agreements among Delaware residents entered into
and to be performed entirely within Delaware. If any provision of this Operating
Agreement becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the extent necessary to conform to
applicable law so as to be valid and enforceable or, if such provision cannot be
so amended without materially altering the intention of the parties, then such
provision shall be stricken and the remainder of this Operating Agreement shall
continue in full force and effect. Should there ever occur any conflict between
any provision contained in this Operating Agreement and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but the provision of this
Operating Agreement affected thereby shall be curtailed and limited only to the
extent necessary to bring it into compliance with the law. All the other terms
and provisions of this Operating Agreement shall continue in full force and
effect without impairment or limitation.
9.3 Counterparts. This Operating Agreement may be executed
simultaneously in multiple counterparts and by facsimile, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument.
9.4 Titles and Subtitles. The headings of this Operating Agreement are
inserted for convenience only and shall not constitute a part of this Operating
Agreement in construing or interpreting any provision hereof.
9.5 Notices. All notices and other communications required or
permitted under this Operating Agreement shall be delivered to the parties at
the address appearing on the books of Company, or at such other address that
they designate by notice to all other parties in accordance with this section.
All notices and communications shall be deemed to have been received unless
otherwise set forth herein: (a) in the case of personal delivery, on the date of
such delivery; (b) in the case of facsimile transmission, on the date on which
the sender receives confirmation by facsimile transmission that such notice was
received by the addressee, provided that a copy of such transmission is
additionally sent by mail as set forth in (d) below; (c) in the case of
overnight air courier, on the second business day following the day sent, with
receipt confirmed by the courier; and (d) in the case of mailing by first class
certified or registered mail, postage prepaid, return receipt requested, on the
fifth business day following such mailing.
24
9.6 Entire Agreement. This Operating Agreement, as well as the
Stipulated Final Judgment, Master Agreement, Commercialization Agreement and
Newco Licenses, constitutes the entire agreement and understanding of the
parties with respect to the terms and conditions of the transactions referred to
herein and therein and supersede all prior and contemporaneous agreements and
understandings, oral or written, between the parties relating to such subject
matter, other than as provided herein and therein.
9.7 Power of Attorney. By signing this Operating Agreement, each
Member designates and appoints the Management Committee as their true and lawful
attorney, in his name, place and stead, to make, execute, sign and file such
instruments, documents or certificates which may from time to time be required
by the laws of the United States of America and the State of Delaware and any
political subdivision thereof or any other state or political subdivision in
which the Company shall do business to carry out the purposes of this Operating
Agreement, except where such action requires the express approval of a Member
hereunder. The Management Committee shall provide to the Members copies of all
documents executed pursuant to the power of attorney contained in this Section
9.7.
9.8 Related Party Transactions. The Company shall not, without the
approval of the Management Committee, engage in any loans, leases, contracts or
other transactions with any Manager, officer or key employee of the Company, any
member of any such person's immediate family, including the parents, spouse,
children and other relatives of any such person, or any Person controlled by
such person, with the exception of the payments to be made to TPL pursuant to
Article IV of the Commercialization Agreement.
9.9 Dispute Resolution. All rights and obligations under this Operating
Agreement shall be resolved as if all persons and all transactions related to
this Operating Agreement had their legal residence, situs, and employment in
Santa Clara County, California. Within 15 days after written notice of the
dispute, members of the most senior management of the parties shall meet and
exercise their best efforts to resolve any dispute under this Operating
Agreement. If the dispute is not resolved to the mutual satisfaction of the
parties within 30 days after such notice, the Company, Patriot and TPL shall
submit such dispute to expedited binding arbitration before a single arbitrator.
The arbitration shall be administered by the AAA. Judgment on the award,
including without limitation injunctive relief, may be entered in any court
having jurisdiction. All costs related to such arbitration shall be paid in
advance by the Company, including the cost of translating into English all
discoverable materials, and of providing contemporaneous translation of all live
testimony. All performances due hereunder by the Company, Patriot and TPL shall
continue unabated throughout the entire process and a final adjudication in
accordance with the terms hereof has been made from which no appeal or review
can be undertaken.
25
9.10 No Partition. No Member nor any legal successor of a Member shall
have the right to partition the property of the Company or any part thereof or
interest therein, or to file a complaint or institute any proceeding at law or
in equity to partition the property of the Company or any part thereof or
interest therein. Each Member, for such Member and such Member's legal
successor, hereby waives any such rights. The Members intend that, during the
term of this Operating Agreement, the rights of the Members and their successors
in interest, as among themselves, shall be governed solely by the terms of this
Operating Agreement and by the Act.
9.11 Bankruptcy. Neither the Management Committee, nor any Manager or
Member of the Company, shall be permitted to file a bankruptcy petition on
behalf of the Company unless the filing of the bankruptcy petition shall first
have been approved in writing by Members holding at least 75% of the Percentage
Interests of the Company.
[signature page follows]
26
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the day and year first above written.
PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation
/s/ DAVID H. POHL
--------------------------
By: David H. Pohl
Its: Director
|
TECHNOLOGY PROPERTIES LIMITED INC.,
a California corporation
/s/ DANIEL E. LECKRONE
-------------------------------
By: Daniel E. Leckrone
Its: Chairman
|
WAIVER, CONSENT AND RELEASE AGREEMENT
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made
and entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC
CORPORATION, a Delaware corporation, (the "COMPANY"), and LINCOLN VENTURES, LLC,
an Arizona limited liability company (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.0000l par value per share, of the COMPANY (the "Warrants"), as
well as a debenture convertible into shares of the common stock of the COMPANY
(the "Debenture") purchased pursuant to certain Securities Purchase Agreements,
by and between the COMPANY and the RIGHTS HOLDER (collectively, the "Securities
Purchase Agreements").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Proposed Transactions will result in the creation of an
entity ("NEWCO") which will hold and manage the subject intellectual property of
the COMPANY. As a part of the Proposed Transactions, the COMPANY will receive
stock of NEWCO (the "NEWCO Stock") and will be entitled to receive an income
stream from NEWCO (the "NEWCO Income") as specified in the Master Agreement.
D. WHEREAS, the Securities Purchase Agreements, the Warrants and the
Debenture include provisions which may be implicated by the Proposed
Transactions, and which may give the Rights Holder certain rights with respect
to the Proposed Transactions.
E. WHEREAS, the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) or NEWCO that are specifically authorized by
the Master Agreement shall be referred to herein as the "Approved Actions."
F. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
described in Section 7 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and the Approved Actions, each
subject to Section 9 below.
2. Conveyance of Warrants. Effective upon the receipt by the Rights Holder of
the consideration described in Section 7 of this Agreement, the Rights Holder
hereby sells, transfers and conveys to the COMPANY, free and clear of any and
all liens or other adverse claims thereto, Three Million (3,000,000) Warrants
described on Exhibit A hereto. The Rights Holder agrees to execute any documents
and take any other action that may be required to effect and memorialize such
transfer of the Warrants to the COMPANY pursuant to this Section 2.
3. Warrant Price Reset. Effective upon receipt by the Rights Holder of the
consideration pursuant to Section 7 of this Agreement, the exercise price of the
Twenty One Million, Six Hundred Twenty Five Thousand, Eight Hundred Seventy Two
(21,625,872) Warrants described on Exhibit B hereto will be reset to 0.015
dollars per share.
4. Waiver of Right of First Refusal, Limitation of Sale or Disposition of
Intellectual Property and Redemption Upon Major Transaction. Effective upon the
receipt by the Rights Holder of the consideration described in Section 7 of this
Agreement, the Rights Holder hereby waives any right of first refusal or any
right to limit the sale or disposition of the COMPANY's intellectual property,
including but not limited to those rights set forth in Sections 4(l) and 4(m) of
the Securities Purchase Agreements, and waives its right to redemption upon a
Major Transaction as set forth in Section 4(o) of the Securities Purchase
Agreements, in each case to the extent necessary to allow the Proposed
Transactions and the Approved Actions to occur, or any future transaction in
which the Company may engage, all subject to Section 9 below.
5. Waiver of Redemption Right. Effective upon the receipt by the Rights Holder
of the consideration pursuant to Section 7 of this Agreement, the Rights Holder
waives any right to require any warrant redemption as a consequence of the
Proposed Transactions or any future transaction in which the Company may engage,
subject to Section 9 below.
6. Release of Lien. Effective upon the receipt by the Rights Holder of the
consideration pursuant to Section 7 of this Agreement, the Rights Holder hereby
releases its liens with regard to the COMPANY's intellectual property portfolio,
including without limitation the MSD Patents, and agrees to take any and all
action necessary to cause all UCC financing statements, USPTO filings and other
filings or documents evidencing such lien to be terminated, provided that the
debts underlying such liens shall remain intact.
7. Payment to Rights Holder. In consideration of the covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $993,305
pursuant to the Escrow Agreement upon the closing of the Proposed Transactions.
The Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
8. Amendment of Securities Purchase Agreements. Effective as of the receipt of
consideration pursuant to Section 7 of this Agreement, the Securities Purchase
Agreements shall be amended to remove Sections 4(1), 4(m) and 4(o) in their
entirety, and such sections shall be of no further force or effect, all subject
to Section 9 below. The COMPANY and the Rights Holder hereby acknowledge and
agree that this Agreement meets all of the requirements for amendment of the
Securities Purchase Agreements provided in Section 8(e) thereof.
2
9. Redemption. Notwithstanding anything to the contrary herein, in the event
that any one or more of the following occur (each, a "Redemption Trigger"), the
Rights Holder, at its option, may require the COMPANY to effect a Warrant
Redemption (as defined below) of any or all (at the Rights Holders' option) of
the Rights Holders' Warrants (as defined below):
A. The COMPANY merges into or is bought out by another company, or
becomes a private company that does not have publicly traded common
stock, or sells all or substantially all of the COMPANY's assets, or
B. Common stock of the COMPANY is tendered, purchased or exchanged
pursuant to a tender offer, purchase offer or exchange offer, or
C. There is a Change of Control (as defined below) of the COMPANY's
board of directors, and one or more of the following occurs:
(1) COMPANY sells, conveys, disposes of, spins off or assigns
any or all of its NEWCO Stock, or any or all of its rights to
receive the NEWCO Income, to any third party, in each case
without the Right Holder's written consent.
(2) The COMPANY issues or sells, or agrees to issue or sell
Variable Equity Securities (as defined below), for cash in
private capital raising transactions or any securities of the
Company pursuant to an equity line structure or format without
obtaining the prior written approval of the Rights Holder,
with the exception of any such agreements, transactions or
equity lines existing as of the date hereof. For purposes
hereof, the following shall be collectively referred to herein
as, the "Variable Equity Securities": any debt or equity
securities (or securities pursuant to an equity line structure
or similar structure) which are convertible into, exercisable
or exchangeable for, or carry the right to receive additional
shares of Common Stock either (i) at any conversion, exercise
or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for Common
Stock at any time after the initial issuance of such debt or
equity security, or (ii) with a fixed conversion, exercise or
exchange price that greater than a thirty percent (30%)
discount to the then prevailing market or is subject to being
reset at some future date at any time after the initial
issuance of such debt or equity security due to a change in
the market price of the Company's Common Stock since date of
initial issuance.
If a Redemption Trigger has occurred and the Rights Holder elects a
redemption, then any of the Rights Holders' Warrants selected by the Rights
Holder for such redemption shall be redeemed ("Warrant Redemption") by the
Company as of the record date for such Redemption Trigger at a price per share
(that is, per share of common stock represented by the warrants) for each Rights
Holder Warrant equal to the "Redemption Price," which shall be defined as the
greater of (A) $0.50 per share, less the Exercise Price per share in effect for
that Rights Holder Warrant on the trading day immediately preceding the record
date of the Redemption Trigger (each subject to adjustment to account for any
forward or reverse stock splits), or (B) the applicable Warrant Redemption
Market Value (as defined below). For purposes hereof, the "Warrant Redemption
Market Value" shall equal the aggregate of the highest Warrant Market Values (as
defined below) for all of the Right Holders' Warrants being so redeemed
calculated on any date during the thirty (30) business day period ending on the
record date for the Redemption Trigger.
3
For purposes hereof,
"Change in Control" shall mean any change in the makeup of the
COMPANY's board of directors such that the remaining board members from the
following group do not constitute a majority of the board: Gloria Felcyn, David
Pohl, Helmet Faulk, Lowell Giffhorn and Carlton Johnson, Jr.
"Rights Holders' Warrants" shall mean all warrants to purchase common
stock that have been issued from the Company to the Rights Holder for any reason
at any time in the past up through the date hereof.
"Warrant Market Value" shall equal the number of shares that would be
issuable in a "cashless exercise" on the date in question, under the terms of
the warrant (without regard to any contractual, legal, or regulatory
restrictions on such exercise and issuance, if any, and without regard to
whether or not a sufficient number of shares are authorized and reserved to
effect any such exercise and issuance), multiplied by the Closing Price of the
Company's common stock for the preceding trading day.
"Closing Price" shall mean the closing price on the O.T.C. Bulletin
Board, Nasdaq Small Cap Market, the National Market System ("NMS"), the New York
Stock Exchange, or if no longer traded on the Nasdaq Small Cap Market, the
National Market System ("NMS"), the New York Stock Exchange, or the O.T.C.
Bulletin Board, the "Closing Bid Price" shall equal the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange or other market on
which the Common Stock is so traded.
10. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
10.1 Full Knowledge. The Rights Holder acknowledges and agrees that it
is fully aware of all of the terms and conditions of the Proposed
Transactions, and that its representatives have had an opportunity to
discuss such terms and conditions with COMPANY representatives, and to
ask any questions the Rights Holder has deemed necessary.
10.2 Compliance with Law. The execution, delivery and performance by
the Rights Holder of this Agreement and the consummation of the
transactions contemplated hereby, will not cause the Rights Holder to
violate or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, or (iii) any order, writ,
judgment, injunction, decree, determination or award, to which he is
subject.
10.3 Authorization. When executed and delivered by the Rights Holder,
this Agreement will constitute a valid and legally binding obligation
of the Rights Holder enforceable in accordance with its terms, except
as may be limited by (i) judicial principles respecting election of
remedies or limiting the availability of specific performance,
injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, generally relating to
creditors' rights.
4
11. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
Rights Holder as follows:
11.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions
contemplated hereby, will not cause COMPANY to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which it is subject.
11.2 Authorization. When executed and delivered by COMPANY, this
Agreement will constitute a valid and legally binding obligation of
COMPANY enforceable in accordance with its terms, except as may be
limited by (i) judicial principles respecting election of remedies or
limiting the availability of specific performance, injunctive relief
and other equitable remedies, (ii) judicial principles with respect to
provisions contrary to public policy, and (iii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, generally relating to creditors' rights.
12. Taxes. Each party shall be responsible for all taxes incurred by it
as a result of any transaction contemplated by this Agreement.
13. Cooperation. COMPANY and Rights Holder acknowledge that it may be
necessary to execute documents other than those specifically referred to herein
in order to consummate the transactions contemplated herein. COMPANY and Rights
Holder agree to cooperate with each other by executing such other documents and
taking such other action as may be reasonably necessary to complete the
transactions in accordance with the intent of the parties as evidenced in this
Agreement.
14. General Provisions.
14.1 Survival of Representations and Warranties. All representations
and warranties of the parties made in, pursuant to or in connection
with this Agreement shall survive the execution and delivery of this
Agreement.
14.2 Entire Agreement. With reference to the subject matter hereof,
this Agreement is the complete and exclusive statement of all terms of
the agreement between the parties and supersedes and cancels all prior
and contemporaneous negotiations, agreements and representations, and
constitutes the entire agreement between the parties. There are no
representations, inducements, promises or agreements, oral or
otherwise, with reference to the subject matter hereof, other than as
expressly set forth herein. No modification, alteration, amendment or
waiver of any provision hereof shall be effective unless in writing and
signed by both parties.
5
14.3 Successors Bound; Limited Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permissible assigns, except that neither
party shall, without prior written consent of the other, delegate,
assign, transfer, encumber or otherwise dispose of any of its rights,
duties or interests under this Agreement or any part thereof.
14.4 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
14.5 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of
law, shall govern the validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the
parties, as such laws are applied to agreements between California
residents entered into and to be performed entirely within California.
14.6 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of
an alleged dispute, breach or misrepresentation in connection with or
arising under this Agreement, any court of competent jurisdiction in
San Diego County shall be the sole and exclusive forum for such cause
of action, lawsuit or proceeding, and the prevailing party in any such
action, lawsuit or proceeding shall be entitled to recover, in addition
to any remedy at law or equity available to any prevailing party, all
reasonable costs and expenses incurred or sustained by such prevailing
party in connection with such action, lawsuit or proceeding, including,
without limitation, attorneys' fees and court costs.
14.7 Counterparts. This Agreement may be executed in two or more
counterparts and by the different parties hereto in separate
counterparts with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first written above.
PATRIOT SCIENTIFIC CORPORATION LINCOLN VENTURES, LLC
By: /s/ DAVID H. POHL By: /s/ ROY A. ADAMS
-------------------------------- -------------------------------
Roy A. Adams, Manager
Name: David H. Pohl
----------------------------
Title: Director
----------------------------
|
6
WAIVER, CONSENT AND RELEASE AGREEMENT
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made
and entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC
CORPORATION, a Delaware corporation, (the "COMPANY"), and SWARTZ PRIVATE EQUITY,
LLC, a Georgia limited liability company (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.0000l par value per share, of the COMPANY (the "Warrants"), as
well as a debenture convertible into shares of the common stock of the COMPANY
(the "Debenture") purchased pursuant to certain Securities Purchase Agreements,
by and between the COMPANY and the RIGHTS HOLDER (collectively, the "Securities
Purchase Agreements").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Proposed Transactions will result in the creation of an
entity ("NEWCO") which will hold and manage the subject intellectual property of
the COMPANY. As a part of the Proposed Transactions, the COMPANY will receive
stock of NEWCO (the "NEWCO Stock") and will be entitled to receive an income
stream from NEWCO (the "NEWCO Income") as specified in the Master Agreement.
D. WHEREAS, the Securities Purchase Agreements, the Warrants and the
Debenture include provisions which may be implicated by the Proposed
Transactions, and which may give the Rights Holder certain rights with respect
to the Proposed Transactions.
E. WHEREAS, the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) or NEWCO that are specifically authorized by
the Master Agreement shall be referred to herein as the "Approved Actions."
F. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
described in Section 7 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and the Approved Actions, each
subject to Section 9 below.
2. Conveyance of Warrants. Effective upon the receipt by the Rights Holder of
the consideration described in Section 7 of this Agreement, the Rights Holder
hereby sells, transfers and conveys to the COMPANY, free and clear of any and
all liens or other adverse claims thereto, Nine Million (9,000,000) Warrants
described on Exhibit A hereto. The Rights Holder agrees to execute any documents
and take any other action that may be required to effect and memorialize such
transfer of the Warrants to the COMPANY pursuant to this Section 2.
3. Warrant Price Reset. Effective upon receipt by the Rights Holder of the
consideration pursuant to Section 7 of this Agreement, the exercise price of the
Thirteen Million, Three Hundred Seventy Four Thousand, One Hundred Twenty Eight
(13,374,128) Warrants described on Exhibit B hereto will be reset to 0.015
dollars per share.
4. Waiver of Right of First Refusal, Limitation of Sale or Disposition of
Intellectual Property and Redemption Upon Major Transaction. Effective upon the
receipt by the Rights Holder of the consideration described in Section 7 of this
Agreement, the Rights Holder hereby waives any right of first refusal or any
right to limit the sale or disposition of the COMPANY's intellectual property,
including but not limited to those rights set forth in Sections 4(l) and 4(m) of
the Securities Purchase Agreements, and waives its right to redemption upon a
Major Transaction as set forth in Section 4(o) of the Securities Purchase
Agreements, in each case to the extent necessary to allow the Proposed
Transactions and the Approved Actions to occur, or any future transaction in
which the Company may engage, all subject to Section 9 below.
5. Waiver of Redemption Right. Effective upon the receipt by the Rights Holder
of the consideration pursuant to Section 7 of this Agreement, the Rights Holder
waives any right to require any warrant redemption as a consequence of the
Proposed Transactions or any future transaction in which the Company may engage,
subject to Section 9 below.
6. Release of Lien. Effective upon the receipt by the Rights Holder of the
consideration pursuant to Section 7 of this Agreement, the Rights Holder hereby
releases its liens with regard to the COMPANY's intellectual property portfolio,
including without limitation the MSD Patents, and agrees to take any and all
action necessary to cause all UCC financing statements, USPTO filings and other
filings or documents evidencing such lien to be terminated, provided that the
debts underlying such liens shall remain intact.
7. Payment to Rights Holder. In consideration of the covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $896,346
pursuant to the Escrow Agreement upon the closing of the Proposed Transactions.
The Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
8. Amendment of Securities Purchase Agreements. Effective as of the receipt of
consideration pursuant to Section 7 of this Agreement, the Securities Purchase
Agreements shall be amended to remove Sections 4(1), 4(m) and 4(o) in their
entirety, and such sections shall be of no further force or effect, all subject
to Section 9 below. The COMPANY and the Rights Holder hereby acknowledge and
agree that this Agreement meets all of the requirements for amendment of the
Securities Purchase Agreements provided in Section 8(e) thereof.
2
9. Redemption. Notwithstanding anything to the contrary herein, in the
event that any one or more of the following occur (each, a "Redemption
Trigger"), the Rights Holder, at its option, may require the COMPANY to effect a
Warrant Redemption (as defined below) of any or all (at the Rights Holders'
option) of the Rights Holders' Warrants (as defined below):
A. The COMPANY merges into or is bought out by another company,
or becomes a private company that does not have publicly traded common
stock, or sells all or substantially all of the COMPANY's assets, or
B. Common stock of the COMPANY is tendered, purchased or exchanged
pursuant to a tender offer, purchase offer or exchange offer, or
C. There is a Change of Control (as defined below) of the COMPANY's
board of directors, and one or more of the following occurs:
(1) COMPANY sells, conveys, disposes of, spins off or assigns
any or all of its NEWCO Stock, or any or all of its rights to
receive the NEWCO Income, to any third party, in each case
without the Right Holder's written consent.
(2) The COMPANY issues or sells, or agrees to issue or sell
Variable Equity Securities (as defined below), for cash in
private capital raising transactions or any securities of the
Company pursuant to an equity line structure or format without
obtaining the prior written approval of the Rights Holder, with
the exception of any such agreements, transactions or equity
lines existing as of the date hereof. For purposes hereof, the
following shall be collectively referred to herein as, the
"Variable Equity Securities": any debt or equity securities (or
securities pursuant to an equity line structure or similar
structure) which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional
shares of Common Stock either (i) at any conversion, exercise or
exchange rate or other price that is based upon and/or varies
with the trading prices of or quotations for Common Stock at any
time after the initial issuance of such debt or equity security,
or (ii) with a fixed conversion, exercise or exchange price that
greater than a thirty percent (30%) discount to the then
prevailing market or is subject to being reset at some future
date at any time after the initial issuance of such debt or
equity security due to a change in the market price of the
Company's Common Stock since date of initial issuance.
If a Redemption Trigger has occurred and the Rights Holder elects a
redemption, then any of the Rights Holders' Warrants selected by the Rights
Holder for such redemption shall be redeemed ("Warrant Redemption") by the
Company as of the record date for such Redemption Trigger at a price per share
(that is, per share of common stock represented by the warrants) for each Rights
Holder Warrant equal to the "Redemption Price," which shall be defined as the
greater of (A) $0.50 per share, less the Exercise Price per share in effect for
that Rights Holder Warrant on the trading day immediately preceding the record
date of the Redemption Trigger (each subject to adjustment to account for any
forward or reverse stock splits), or (B) the applicable Warrant Redemption
Market Value (as defined below). For purposes hereof, the "Warrant Redemption
Market Value" shall equal the aggregate of the highest Warrant Market Values (as
defined below) for all of the Right Holders' Warrants being so redeemed
calculated on any date during the thirty (30) business day period ending on the
record date for the Redemption Trigger.
3
For purposes hereof,
"Change in Control" shall mean any change in the makeup of the
COMPANY's board of directors such that the remaining board members from the
following group do not constitute a majority of the board: Gloria Felcyn, David
Pohl, Helmet Faulk, Lowell Giffhorn and Carlton Johnson, Jr.
"Rights Holders' Warrants" shall mean all warrants to purchase common
stock that have been issued from the Company to the Rights Holder for any reason
at any time in the past up through the date hereof.
"Warrant Market Value" shall equal the number of shares that would be
issuable in a "cashless exercise" on the date in question, under the terms of
the warrant (without regard to any contractual, legal, or regulatory
restrictions on such exercise and issuance, if any, and without regard to
whether or not a sufficient number of shares are authorized and reserved to
effect any such exercise and issuance), multiplied by the Closing Price of the
Company's common stock for the preceding trading day.
"Closing Price" shall mean the closing price on the O.T.C. Bulletin
Board, Nasdaq Small Cap Market, the National Market System ("NMS"), the New York
Stock Exchange, or if no longer traded on the Nasdaq Small Cap Market, the
National Market System ("NMS"), the New York Stock Exchange, or the O.T.C.
Bulletin Board, the "Closing Bid Price" shall equal the closing price on the
principal national securities exchange or the over-the-counter system on which
the Common Stock is so traded and, if not available, the mean of the high and
low prices on the principal national securities exchange or other market on
which the Common Stock is so traded.
10. Representations and Warranties of Rights Holder. In order to induce
the COMPANY to enter into this Agreement, the Rights Holder represents and
warrants to the COMPANY as follows:
10.1 Full Knowledge. The Rights Holder acknowledges and agrees that it
is fully aware of all of the terms and conditions of the Proposed
Transactions, and that its representatives have had an opportunity to
discuss such terms and conditions with COMPANY representatives, and to
ask any questions the Rights Holder has deemed necessary.
10.2 Compliance with Law. The execution, delivery and performance by
the Rights Holder of this Agreement and the consummation of the
transactions contemplated hereby, will not cause the Rights Holder to
violate or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, or (iii) any order, writ,
judgment, injunction, decree, determination or award, to which he is
subject.
10.3 Authorization. When executed and delivered by the Rights Holder,
this Agreement will constitute a valid and legally binding obligation
of the Rights Holder enforceable in accordance with its terms, except
as may be limited by (i) judicial principles respecting election of
remedies or limiting the availability of specific performance,
injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, generally relating to
creditors' rights.
4
11. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
Rights Holder as follows:
11.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions
contemplated hereby, will not cause COMPANY to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which it is subject.
11.2 Authorization. When executed and delivered by COMPANY, this
Agreement will constitute a valid and legally binding obligation of
COMPANY enforceable in accordance with its terms, except as may be
limited by (i) judicial principles respecting election of remedies or
limiting the availability of specific performance, injunctive relief
and other equitable remedies, (ii) judicial principles with respect to
provisions contrary to public policy, and (iii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, generally relating to creditors' rights.
12. Taxes. Each party shall be responsible for all taxes incurred by it
as a result of any transaction contemplated by this Agreement.
13. Cooperation. COMPANY and Rights Holder acknowledge that it may be
necessary to execute documents other than those specifically referred to herein
in order to consummate the transactions contemplated herein. COMPANY and Rights
Holder agree to cooperate with each other by executing such other documents and
taking such other action as may be reasonably necessary to complete the
transactions in accordance with the intent of the parties as evidenced in this
Agreement.
14. General Provisions.
14.1 Survival of Representations and Warranties. All representations
and warranties of the parties made in, pursuant to or in connection
with this Agreement shall survive the execution and delivery of this
Agreement.
14.2 Entire Agreement. With reference to the subject matter hereof,
this Agreement is the complete and exclusive statement of all terms of
the agreement between the parties and supersedes and cancels all prior
and contemporaneous negotiations, agreements and representations, and
constitutes the entire agreement between the parties. There are no
representations, inducements, promises or agreements, oral or
otherwise, with reference to the subject matter hereof, other than as
expressly set forth herein. No modification, alteration, amendment or
waiver of any provision hereof shall be effective unless in writing and
signed by both parties.
5
14.3 Successors Bound; Limited Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permissible assigns, except that neither
party shall, without prior written consent of the other, delegate,
assign, transfer, encumber or otherwise dispose of any of its rights,
duties or interests under this Agreement or any part thereof.
14.4 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do
not constitute a part of this Agreement.
14.5 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of
law, shall govern the validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the
parties, as such laws are applied to agreements between California
residents entered into and to be performed entirely within California.
14.6 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of
an alleged dispute, breach or misrepresentation in connection with or
arising under this Agreement, any court of competent jurisdiction in
San Diego County shall be the sole and exclusive forum for such cause
of action, lawsuit or proceeding, and the prevailing party in any such
action, lawsuit or proceeding shall be entitled to recover, in addition
to any remedy at law or equity available to any prevailing party, all
reasonable costs and expenses incurred or sustained by such prevailing
party in connection with such action, lawsuit or proceeding, including,
without limitation, attorneys' fees and court costs.
14.7 Counterparts. This Agreement may be executed in two or more
counterparts and by the different parties hereto in separate
counterparts with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day and year first written above.
PATRIOT SCIENTIFIC CORPORATION SWARTZ PRIVATE EQUITY, LLC
By: /s/ DAVID H. POHL By: /s/ ERIC S. SWARTZ
------------------------- -----------------------------
Eric S. Swartz, Manager
Name: David H. Pohl
----------------------
Title: Director
---------------------
|
6
WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-45
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and Victor Gabourel, an individual
residing in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
November 16, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
pursuant to Section 2 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) in connection with the Proposed Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $96,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
4.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
4.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
4.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
5. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
5.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
5.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
6. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
7. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
2
8. General Provisions.
8.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
8.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
8.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
8.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
8.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
8.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
-----------------------
|
WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-46
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and James & Joe Zolin, individuals
residing in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
November 16, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
pursuant to Section 2 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) in connection with the Proposed Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $96,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
4.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
4.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
4.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
5. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
5.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
5.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
6. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
7. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
2
8. General Provisions.
8.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
8.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
8.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
8.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
8.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
8.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
----------------------- ------------------------------
Name:
------------------------
|
WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-47
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and Dan Nunes, an individual residing
in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
November 16, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the
consideration pursuant to Section 2 of this Agreement, the Rights Holder hereby
consents to, approves and ratifies the Proposed Transactions and any and all
actions taken before, as of, or after the date hereof by the COMPANY (and any
person acting for or on behalf of the COMPANY) in connection with the Proposed
Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $30,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Amendment of Warrant. Effective as of the receipt of consideration pursuant
to Section 2 of this Agreement, the Rights Holder's Warrants shall be amended to
increase the number of shares issuable upon exercise thereof by 96,774.
5. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
5.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
5.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
5.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
6. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
6.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
6.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
7. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
2
8. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
9. General Provisions.
9.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
9.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
9.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
9.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
9.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
9.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
9.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
-----------------------
|
WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-48
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and Stan Caplan, an individual residing
in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
December 9, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
pursuant to Section 2 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) in connection with the Proposed Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $60,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Amendment of Warrant. Effective as of the receipt of consideration pursuant
to Section 2 of this Agreement, the Rights Holder's Warrants shall be amended to
increase the number of shares issuable upon exercise thereof by 193,548.
5. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
5.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
5.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
5.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
6. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
6.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
6.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
7. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
2
8. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
9. General Provisions.
9.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
9.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
9.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
9.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
9.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
9.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
9.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
----------------------- ------------------------------
Name:
------------------------
|
WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-49
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and Wayne Opperman, an individual
residing in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
November 16, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
pursuant to Section 2 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) in connection with the Proposed Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $96,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
4.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
4.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
4.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
5. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
5.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
5.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
6. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
7. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
2
8. General Provisions.
8.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
8.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
8.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
8.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
8.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
8.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
-----------------------
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WAIVER, CONSENT AND RELEASE AGREEMENT Ex 10-50
This WAIVER, CONSENT AND RELEASE AGREEMENT (this "Agreement") is made and
entered into as of June 1, 2005, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation, (the "COMPANY"), and Richard Daniel, an individual
residing in San Diego County, California (the "Rights Holder").
RECITALS
A. WHEREAS, the Rights Holder holds warrants to purchase shares of the
common stock, $0.00001 par value per share, of the COMPANY (the "Warrants"),
purchased pursuant to that certain Securities Purchase Agreement, dated as of
November 16, 2004, by and among the COMPANY and the RIGHTS HOLDER (the
"Securities Purchase Agreement").
B. WHEREAS, the COMPANY desires to enter into the transactions
contemplated by that certain Master Agreement dated as of the date hereof, by
and among the COMPANY, Technology Properties Limited, Inc., a California
corporation ("TPL") and Charles H. Moore (such transactions referred to herein
as the "Proposed Transactions").
C. WHEREAS, the Securities Purchase Agreement and the Warrants include
provisions which may be implicated by the Proposed Transactions, and which may
give the Rights Holder certain rights with respect to the Proposed Transactions.
D. WHEREAS, the COMPANY and the Rights Holder desire to facilitate the
Proposed Transactions by entering into this Agreement.
NOW, THEREFORE, in consideration of the respective promises,
representations, warranties, covenants and conditions contained in this
Agreement, the parties hereby agree as follows:
1. Consent. Effective upon the receipt by the Rights Holder of the consideration
pursuant to Section 2 of this Agreement, the Rights Holder hereby consents to,
approves and ratifies the Proposed Transactions and any and all actions taken
before, as of, or after the date hereof by the COMPANY (and any person acting
for or on behalf of the COMPANY) in connection with the Proposed Transactions.
2. Payment to Rights Holder. In consideration of his covenants, promises, and
agreements set forth in this Agreement, the Rights Holder shall be paid $60,000
by check to the address below upon the closing of the Proposed Transactions. The
Rights Holder hereby acknowledges that such consideration constitutes good,
valid and sufficient consideration in exchange for the covenants, promises, and
agreements of the Rights Holder set forth in this Agreement..
3. Amendment of Securities Purchase Agreement. Effective as of the receipt of
consideration pursuant to Section 2 of this Agreement, the Securities Purchase
Agreement shall be amended to remove Section 4(l) in its entirety, and such
section shall be of no further force or effect. The COMPANY and the Rights
Holder hereby acknowledge and agree that this Agreement meets all of the
requirements for amendment of the Securities Purchase Agreement provided in
Section 8(e) thereof.
4. Representations and Warranties of Rights Holder. In order to induce the
COMPANY to enter into this Agreement, the Rights Holder represents and warrants
to the COMPANY as follows:
4.1 Full Knowledge. The Rights Holder acknowledges and agrees that he is
fully aware of all of the terms and conditions of the Proposed Transactions, and
that he has had an opportunity to discuss such terms and conditions with COMPANY
representatives, and to ask any questions he has deemed necessary.
4.2 Compliance with Law. The execution, delivery and performance by the
Rights Holder of this Agreement and the consummation of the transactions
contemplated hereby, will not cause the Rights Holder to violate or contravene
(i) any provision of law, (ii) any rule or regulation of any agency or
government, or (iii) any order, writ, judgment, injunction, decree,
determination or award, to which he is subject.
4.3 Authorization. When executed and delivered by the Rights Holder, this
Agreement will constitute a valid and legally binding obligation of the Rights
Holder enforceable in accordance with its terms, except as may be limited by (i)
judicial principles respecting election of remedies or limiting the availability
of specific performance, injunctive relief and other equitable remedies, (ii)
judicial principles with respect to provisions contrary to public policy, and
(iii) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, generally relating to creditors' rights.
5. Representations and Warranties of COMPANY. In order to induce the Rights
Holder to enter into this Agreement, COMPANY represents and warrants to the
RightsHolder as follows:
5.1 Compliance with Law. The execution, delivery and performance by
COMPANY of this Agreement and the consummation of the transactions contemplated
hereby, will not cause COMPANY to violate or contravene (i) any provision of
law, (ii) any rule or regulation of any agency or government, or (iii) any
order, writ, judgment, injunction, decree, determination or award, to which it
is subject.
5.2 Authorization. When executed and delivered by COMPANY, this Agreement
will constitute a valid and legally binding obligation of COMPANY enforceable in
accordance with its terms, except as may be limited by (i) judicial principles
respecting election of remedies or limiting the availability of specific
performance, injunctive relief and other equitable remedies, (ii) judicial
principles with respect to provisions contrary to public policy, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, generally relating to creditors' rights.
6. Taxes. Each party shall be responsible for all taxes incurred by it as a
result of any transaction contemplated by this Agreement.
7. Cooperation. COMPANY and Rights Holder acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to consummate the transactions contemplated herein. COMPANY and Rights Holder
agree to cooperate with each other by executing such other documents and taking
such other action as may be reasonably necessary to complete the transactions in
accordance with the intent of the parties as evidenced in this Agreement.
2
8. General Provisions.
8.1 Survival of Representations and Warranties. All representations and
warranties of the parties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement.
8.2 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court only to the extent necessary and
possible to make such provision enforceable, and such modified provision and all
other provisions of this Agreement and of each other agreement entered into
pursuant to this Agreement shall be given effect separately from the provision
or portion thereof determined to be illegal or unenforceable and shall not be
affected thereby.
8.3 Entire Agreement. With reference to the subject matter hereof, this
Agreement is the complete and exclusive statement of all terms of the agreement
between the parties and supersedes and cancels all prior and contemporaneous
negotiations, agreements and representations, and constitutes the entire
agreement between the parties. There are no representations, inducements,
promises or agreements, oral or otherwise, with reference to the subject matter
hereof, other than as expressly set forth herein. No modification, alteration,
amendment or waiver of any provision hereof shall be effective unless in writing
and signed by both parties.
8.4 Successors Bound; Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permissible assigns, except that neither party shall, without
prior written consent of the other, delegate, assign, transfer, encumber or
otherwise dispose of any of its rights, duties or interests under this Agreement
or any part thereof.
8.5 Headings. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.6 Governing Law. It is the intention of the parties that the laws of
California, including such jurisdiction's principles of conflict of law, shall
govern the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties, as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.
8.7 Forum; Expenses. In the event that any cause of action, lawsuit or
other proceeding is brought by any party of this Agreement because of an alleged
dispute, breach or misrepresentation in connection with or arising under this
Agreement, any court of competent jurisdiction in San Diego County shall be the
sole and exclusive forum for such cause of action, lawsuit or proceeding, and
the prevailing party in any such action, lawsuit or proceeding shall be entitled
to recover, in addition to any remedy at law or equity available to any
prevailing party, all reasonable costs and expenses incurred or sustained by
such prevailing party in connection with such action, lawsuit or proceeding,
including, without limitation, attorneys' fees and court costs.
3
Counterparts. This Agreement may be executed in two or more counterparts and by
the different parties hereto in separate counterparts with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the
day and year first written above.
PATRIOT SCIENTIFIC CORPORATION RIGHTS HOLDER
By:
--------------------------- ------------------------------
Name: Name:
------------------------ ------------------------
Title:
-----------------------
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Parties End Ownership Litigation
TPL Group to Manage Licensing Program
SAN DIEGO, June 7, 2005 -- In a move that will expedite the licensing of a
series of fundamental microprocessor patents that are at the heart of a global
$200 billion-plus microprocessor end-use market, intellectual properties firms
Patriot Scientific (OTC Bulletin Board: PTSC) and The TPL Group announced today
an agreement to unify their interests in key microprocessor patents originally
filed in 1989 and granted in 1998. Under the terms of this agreement, The TPL
Group is granted full responsibility and authority for the commercialization and
licensing of the unified patents portfolio.
This significant joint accord ends years of litigation between Patriot
Scientific and The TPL Group over title to the patents. Previously, each
corporation had licensed these core technology patents separately. Earlier this
year Patriot Scientific had successfully licensed this core technology to AMD
(NYSE: AMD). Under terms of this new agreement, Patriot Scientific and TPL will
receive certain payments in addition to sharing in future revenues generated by
a licensing program exclusively implemented by TPL.
This ten-patent portfolio contains core building blocks for today's
microprocessor implementation and architecture. Editor of the Gilder Technology
Report, Dr. Nick Tredennick, named a Fellow of the IEEE for his contributions to
microprocessor design, said, "Chuck Moore's architectural insight is impressive.
Over fifteen years ago he conceived designs that appear to be fundamental to
modern microprocessor design," adding, "it is likely that a broad range of
today's microprocessor-based products rely on concepts described in these
patents."
Roger Cook, a senior patent litigator with the highly regarded law firm of
Townsend and Townsend and Crew LLP, has been instrumental in licensing the
portfolio to one of the world's pre-eminent microprocessor manufacturers. Cook
said, "This portfolio appears to be a patent litigator's dream."
TPL and Patriot believe at least three of the ten patents are elemental to
virtually every microprocessor design. The three most significant of these
patents are as follows:
* U.S. 5,809,336: Clocking CPU and I/O Separately
* U.S. 6,598,148: Use of Multiple Cores and Embedded Memory
* U.S. 5,784,584: Multiple Instruction Fetch
Both The TPL Group and Patriot Scientific believe these now-unified patents,
which were granted in 1998 and which don't expire until 2015, have long been
essential to the design of modern high-speed microprocessors. These now-allied
firms are now in position to maximize the value of this patent portfolio. Global
sales by potential licensees of products applying technologies protected by the
jointly owned patents are estimated to be greater than $200 billion annually.
As an active intellectual property company specializing in microprocessor
technology, Patriot Scientific retains rights to make and market array
microprocessor products and technologies under its current IGNITE(TM) and
INFLAME(TM) brands, as well as a range of other products and technologies not
utilizing the patents covered by this new agreement.
"This accord represents an important milestone for our company," said Jeff
Wallin, president and CEO of Patriot Scientific. "This agreement replaces costly
ongoing litigation with a win-win scenario that supports our efforts to license
and protect our company's intellectual property on a broader scale. The TPL
Group is well-positioned to aggressively license these core technology patents,
freeing Patriot Scientific to focus on our equally innovative IGNITE and INFLAME
array microprocessor core technologies, as well as other innovations currently
in our development pipeline."
TPL Group Chairman Dan Leckrone, reaffirmed his company's longstanding
philosophy to encourage cooperation instead of litigation. "Since TPL began
managing intellectual property more than 15 years ago, our business strategy has
always been driven by relationship building and constructive cooperation. Our
agreement with Patriot Scientific is a good example of this strategy at work."
The TPL Group announced that the licensing program for the patents will be
managed by Alliacense, a core group of senior TPL Group executives directly
responsible for the development and commercialization of the firm's patent
portfolios.
About The TPL Group
Founded in 1985, Cupertino California-based TPL Group has a solid track record
in delivering a complete suite of intellectual property management services. In
addition to optimizing IP Portfolio value and protecting assets from
infringement, the company is also well versed in converting portfolio value into
a maximum cash return for its owner(s). Through Alliacense, a cadre of its
senior executives, the TPL Group manages IP Licensing Programs across a broad
array of industries.
About Patriot Scientific
Patriot Scientific has emerged as an intellectual property company, developing
and marketing innovative and proprietary semiconductor technologies into the
fast-growing handheld wireless and smart card markets. The company's portfolio
of patents encompasses what is believed to be fundamental microprocessor
technology and includes additional patents pending to protect its technology and
architecture.
An investment profile on Patriot Scientific may be found at
http://www.hawkassociates.com/patriot/profile.htm.
Detailed information about Patriot Scientific can be found on the website
http://www.ptsc.com. Copies of Patriot Scientific press releases, current price
quotes, stock charts and other valuable information for investors may be found
on the websites http://www.hawkassociates.com and http://www.hawkmicrocaps.com.
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: Statements in this news release looking forward in time involve risks and
uncertainties, including the risks associated with the effect of changing
economic conditions, trends in the products markets, variations in the company's
cash flow, market acceptance risks, technical development risks, seasonality and
other risk factors detailed in the company's Securities and Exchange Commission
filings.
Alliacense is a trademark of TPL Group.
IGNITE and INFLAME are trademarks of Patriot Scientific Corporation.
CONTACTS:
Patriot Media Relations Patriot Investor Relations
Daryl Toor Frank Hawkins/Julie Marshall
Attention Group Hawk Associates Inc
(770) 777-9489 (305) 451-1888
dtoor@attentiongroup.com info@hawkassociates.com
The TPL Group
Tom Rigoli
Mindpik
(650)-969-5986
rigoli@mindpik.com
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