MASTER AGREEMENT by and among PATRIOT SCIENTIFIC CORPORATION and TECHNOLOGY PROPERTIES LIMITED INC. and CHARLES H. MOORE Dated as of June 7, 2005
EXHIBIT
10.40
by
and among
PATRIOT
SCIENTIFIC CORPORATION
and
TECHNOLOGY
PROPERTIES LIMITED INC.
and
XXXXXXX
X. XXXXX
Dated
as of June 7, 2005
|
***
|
Indicates
material omitted pursuant to an application for confidential treatment
and
that material has been filed separately with the
Commission.
|
TABLE
OF CONTENTS
Page
|
ARTICLE
I
|
DEFINITIONS
|
3
|
|
1.1
|
Definitions
|
3
|
|
1.2
|
Index
of Other Defined Terms
|
5
|
|
ARTICLE
II
|
THE
TRANSACTIONS
|
5
|
|
2.1
|
Execution
of Ancillary Agreements
|
5
|
|
2.2
|
Formation
of Delaware Limited Liability Companies
|
6
|
|
2.3
|
Patriot
License to Intel
|
6
|
|
2.4
|
Stipulated
Final Judgment
|
6
|
|
2.5
|
Delivery
of Intel Proceeds
|
6
|
|
2.6
|
Closing
|
6
|
|
2.7
|
Actions
at Closing
|
6
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF PATRIOT
|
7
|
|
3.1
|
Corporate
Existence and Power
|
7
|
|
3.2
|
Authorization
|
7
|
|
3.3
|
Governmental
Authorization
|
7
|
|
3.4
|
Non-Contravention
|
7
|
|
3.5
|
Absence
of Certain Changes or Events.
|
8
|
|
3.6
|
Intellectual
Property.
|
8
|
|
3.7
|
Litigation
|
8
|
|
3.8
|
Advisory
Fees
|
9
|
|
3.9
|
Bulk
Sales
|
9
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES OF TPL
|
9
|
|
4.1
|
Organization
and Existence
|
9
|
|
4.2
|
Corporate
Authorization
|
9
|
|
4.3
|
Governmental
Authorization
|
9
|
|
4.4
|
Non-Contravention
|
9
|
|
4.5
|
Absence
of Certain Changes or Events.
|
10
|
|
4.6
|
Intellectual
Property.
|
10
|
|
4.7
|
Litigation
|
10
|
|
4.8
|
Advisory
Fees
|
11
|
|
4.9
|
Bulk
Sales
|
11
|
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES OF XXXXX
|
11
|
|
5.1
|
Authorization
|
11
|
|
5.2
|
Governmental
Authorization
|
11
|
|
5.3
|
Non-Contravention
|
11
|
|
5.4
|
Absence
of Certain Changes or Events.
|
11
|
|
5.5
|
Intellectual
Property.
|
11
|
|
5.6
|
Litigation
|
12
|
|
5.7
|
Advisory
Fees
|
12
|
-i-
|
ARTICLE
VI
|
COVENANTS
OF PATRIOT
|
12
|
|
6.1
|
Court
Approval of Stipulated Final Judgment
|
12
|
|
6.2
|
Retention
of Rights; No Action With Respect to the MSD Patents
|
12
|
|
ARTICLE
VII
|
COVENANTS
OF ALL PARTIES
|
13
|
|
7.1
|
Protection
and Maintenance of the MSD Patents
|
13
|
|
7.2
|
Commercialization
Program.
|
13
|
|
7.3
|
Further
Assurances
|
13
|
|
7.4
|
Certain
Filings
|
14
|
|
7.5
|
Notification
|
14
|
|
7.6
|
Public
Announcements
|
14
|
|
7.7
|
No
Interference
|
14
|
|
7.8
|
No
Transfer
|
15
|
|
7.9
|
Litigation
Cooperation
|
15
|
|
ARTICLE
VIII
|
CONDITIONS
TO CLOSING
|
15
|
|
8.1
|
Conditions
to Obligations of Each Party
|
15
|
|
8.2
|
Conditions
to Obligations of TPL
|
16
|
|
8.3
|
Conditions
to Obligations of Patriot
|
16
|
|
ARTICLE
IX
|
INDEMNIFICATION
|
17
|
|
9.1
|
Patriot
Agreement to Indemnify
|
17
|
|
9.2
|
TPL
Agreement to Indemnify
|
17
|
|
9.3
|
Xxxxx
Agreement to Indemnify
|
18
|
|
9.4
|
Survival
of Representations, Warranties and Covenants
|
18
|
|
9.5
|
Claims
for Indemnification
|
18
|
|
9.6
|
Defense
of Claims
|
18
|
|
ARTICLE
X
|
TERMINATION
|
19
|
|
10.1
|
Grounds
for Termination
|
19
|
|
10.2
|
Effect
of Termination.
|
21
|
|
ARTICLE
XI
|
MISCELLANEOUS
|
21
|
|
11.1
|
Notices
|
21
|
|
11.2
|
Amendments;
No Waivers.
|
23
|
|
11.3
|
Expenses
|
23
|
|
11.4
|
Successors
and Assigns
|
23
|
|
11.5
|
Governing
Law
|
23
|
|
11.6
|
Counterparts;
Effectiveness
|
23
|
|
11.7
|
Entire
Agreement
|
23
|
|
11.8
|
Captions
|
24
|
|
11.9
|
Severability
|
24
|
|
11.10
|
Construction
|
24
|
|
11.11
|
Cumulative
Remedies
|
24
|
|
11.12
|
Specific
Performance
|
24
|
|
11.13
|
Third-Party
Beneficiaries
|
24
|
|
11.14
|
No
Liability of Intel
|
24
|
|
11.15
|
No
Punitive, Exemplary, or Consequential Damages
|
25
|
-ii-
EXHIBITS
EXHIBIT
A Stipulated
Final Judgment
EXHIBIT
B Operating
Agreement (Exhibit 10.42)
EXHIBIT
C Newco
License
EXHIBIT
D Commercialization
Agreement (Exhibit 10.41) ***
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
-iii-
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 00000 Xxx Xxxxxxxx,
Xxx Xxxxx, XX 00000 (“Patriot”),
TECHNOLOGY PROPERTIES LIMITED INC., a California corporation having its
principal offices located at 00000 Xxxxxxx Xxxxx Xxxx., Xxxxx 000, Xxxxxxxxx,
XX
00000 (“TPL”), and Xxxxxxx X. Xxxxx, an individual whose principal residence is
in Sierra County, California (“Xxxxx”).
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 Xxxxx 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 Xxxxx 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;
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 Xxxxx 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 Xxxxx 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;
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 Two Million Dollars ($2,000,000) 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 Two Million Dollars ($2,000,000) 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.
“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,
Xxxxx.
“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 Xxxxx 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) Xxxxxxxx Xxxxxxxx xx Xxx Xxxx, 00XX00000; (b) Xxxxxxxx Xxxxxxxx xx
Xxxxxxxxxx, X000000; (c) Xxxxxxxx Xxxxxxxx xx Xxx Xxxx, 00XX00000; (d) Xxxxxxx
Xxxxxxxx xx Xxx Xxxx, XX000000; 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, Xxxxx 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, Xxxxxx X. Xxxxxxxx and
Xxxxxxx X. Xxxxx, 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.
“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 Two Million Dollars ($2,000,000)
(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:
| Defined Term Section |
Page
|
|
”Agreement”
Preamble,
|
3
|
|
”Closing
Date” 2.6,
|
9
|
|
”Closing”
2.6,
|
8
|
|
”Commercialization
Agreement” Recitals,
|
3
|
|
”Consent
and Release Agreement” Recitals
|
4
|
|
”Consent
and Release Consideration” 2.7(f)
|
9
|
|
”Escrow
Account” Recitals,
|
3
|
|
”Escrow
Agreement” Recitals,
|
3
|
|
”Grant”
Recitals,
|
4
|
|
”Intel
Parties” 11.13,
|
27
|
|
”Intel”
Recitals,
|
4
|
|
”Merger
Agreement” Recitals,
|
4
|
|
”Xxxxx”
Preamble,
|
3
|
|
”MSD
Patents” Recitals,
|
3
|
|
”Newco
Licenses” Recitals,
|
4
|
|
”Operating
Agreement” Recitals,
|
3
|
|
”Patriot
Indemnitees” 9.2,
|
20
|
|
”Patriot
License to Intel” Recitals,
|
4
|
|
”Patriot
Rights Holders” Recitals,
|
3
|
|
”Patriot/TPL
Indemnitees” 9.3,
|
20
|
|
”Patriot”
Preamble,
|
3
|
|
”P-Newco”
Recitals,
|
4
|
|
”Proceedings”
3.7,
|
11
|
|
”Registration
Rights Agreement” Recitals,
|
3
|
|
”Stipulated
Final Judgment” Recitals,
|
4
|
|
”Termination
Date” 10.1,
|
22
|
|
”T-Newco”
Recitals,
|
4
|
|
”TPL
Indemnitees” 9.1,
|
19
|
|
”TPL”
Preamble,
|
3
|
|
”Trade
Secrets Litigation” Recitals,
|
4
|
|
”Warrant”
Recitals, 3
|
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, Xxxxx 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 Xxxxx 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
Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, 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”).
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 Two Million Dollars ($2,000,000) 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 Two Million Dollars ($2,000,000) 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.
3.2 Authorization.
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 Xxxxx,
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.
(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:
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 Xxxxx. 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 Xxxxx,
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.
(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 XXXXX
5.1 Authorization.
This
Agreement has been duly and validly executed by Xxxxx and constitutes the
legal,
valid and binding agreement of Xxxxx, enforceable against Xxxxx 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 Xxxxx 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.
5.3 Non-Contravention.
The
execution, delivery and performance by Xxxxx of this Agreement does not:
(a) contravene or constitute a default or breach under any material
agreement to which Xxxxx is a party; (b) contravene or conflict with or
constitute a violation of any provision of any Applicable Law binding upon
or
applicable to Xxxxx; 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 Xxxxx 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, Xxxxx
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),
Xxxxx
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 Xxxxx has not received any notice or claim challenging Xxxxx’x ownership of
the MSD Patents or suggesting that any Person, other than TPL and Xxxxx,
has any
claim of legal or beneficial ownership with respect thereto, nor, to Xxxxx’x
knowledge, is there a reasonable basis for any claim that Xxxxx does not
have
such good and valid title to the MSD Patents.
(b) To
the
knowledge of Xxxxx, the MSD Patents are valid, enforceable and subsisting.
Except as disclosed on Schedule 5.5(b),
Xxxxx
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 Xxxxx’x knowledge no reasonable basis exists for any
such claim.
(c) To
the
knowledge of Xxxxx (i) Xxxxx 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) Xxxxx 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 Xxxxx, none of the activities or operations of Xxxxx 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. Xxxxx 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
Xxxxx’x 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 Xxxxx
to
any Person.
5.6 Litigation.
Except
as disclosed on Schedule 5.6
(i) there
are no Proceedings pending or, to the knowledge of Xxxxx, threatened, against
or
by Xxxxx or the MSD Patents or which seek to enjoin or rescind the transactions
contemplated by this Agreement, nor, to the knowledge of Xxxxx, is there
any
valid basis for any such Proceedings; and (ii) there are no existing
orders, judgments or decrees of any Governmental Authority naming Xxxxx as
an
affected party or otherwise affecting the MSD Patents or the performance
by
Xxxxx of the transactions contemplated by this Agreement, nor, to the knowledge
of Xxxxx, 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 Xxxxx 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.
ARTICLE
VII
COVENANTS
OF ALL PARTIES
7.1 Protection
and Maintenance of the MSD Patents.
Subject
to Section
7.7,
Patriot, TPL and Xxxxx, 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
Xxxxx
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 Xxxxx 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 Xxxxx 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;
(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, Xxxxx 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).
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 Xxxxx 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) are owned and controlled
by the transferring Person and (b) agree to be bound by this Section
7.8,
or (c)
in the case of Xxxxx, pursuant to a living trust, will or other estate planning
device, or via intestate succession, provided however that any transferee
of
Xxxxx’x interest in the MSD Patents under this Section 7.8(c)
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 Xxxxx 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 Xxxxx 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.
(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, Xxxxx 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.
(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, Xxxxx 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 Xxxxx 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 Xxxxxxx Xxxx, the law
firm of
Beatie & Xxxxxx LLP or any of its partners, members, associates, or
employees, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxx or Xxxxxx X.
Xxxxxxx; or
(e) any
Taxes
of Patriot.
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 Xxxxx
Agreement to Indemnify.
Xxxxx
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 Xxxxx of any covenant or agreement to be performed by
Xxxxx.
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
(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;
(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 Xxxxx 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;
(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.
(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
00000
Xxx
Xxxxxxxx
Xxx
Xxxxx, XX 00000
Attn:
President
Fax:
(000) 000-0000
with
a
copy to:
Xxxx,
Forward, Xxxxxxxx & Scripps LLP
000
Xxxx
Xxxxxxxx, Xxxxx 0000
Xxx
Xxxxx, XX 00000
Attn:
Xxxx X. Xxxxxxxx, Esq.
Fax:
(000) 000-0000
If
to
TPL:
Technology
Properties Limited Inc.
X.X.
Xxx
00000
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Chairman
Fax:
(000) 000-0000
with
a
copy to:
Xxxxxx,
Xxxx & Xxxxxxxx LLP
000
X.
Xxxxx Xxxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxxx X. Xxxxx, Esq.
Fax:
(000) 000-0000
If
to
Xxxxx:
Xxxxxxx
X. Xxxxx
00
Xxxxx
Xxxx
X.X.
Xxx
000
Xxxxxx
Xxxx, XX 00000
Fax:
(000) 000-0000
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.
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.
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 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]
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
Delaware corporation
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
TECHNOLOGY
PROPERTIES LIMITED INC., a
California corporation
California corporation
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
XXXXXXX
X. XXXXX, an individual
___________________________________________
EXHIBIT
A
XXXXXXXX
AND XXXXXXXX AND CREW LLP
XXXXX
X.
XXXX (State Bar No. 55208)
XXXX
X.
XXXXXX (State Bar No. 88413)
XXXX
XXXXXX MITRAKOS (State Bar No. 190162)
Two
Embarcadero Center, Xxxxxx Xxxxx
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attorneys
for Defendants Technology Properties, Ltd.
and
Xxxxxx X. Xxxxxxxx
XXXXXXXX
& XXXXXXXX
F.
XXXX
XXXXXXXX (State Bar No. 87686)
0000
Xxxxxxxxx Xxxx
X.X.Xxx
0000
Xxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attorney
for Defendant Xxxxxxx X. Xxxxx
UNITED
STATES DISTRICT COURT
FOR
THE
NORTHERN DISTRICT OF CALIFORNIA
SAN
XXXX
DIVISION
|
PATRIOT
SCIENTIFIC CORPORATION,
Plaintiff,
v.
XXXXXXX
X. XXXXX, TECHNOLOGY PROPERTIES LTD., and XXXXXX X. XXXXXXXX,
Defendants.
|
Xxxx
Xx. X
00 0000 XX (HRL)
E-FILING
CASE
STIPULATED
FINAL JUDGMENT
|
IT
IS
HEREBY ORDERED, ADJUDGED, and DECREED as follows:
Plaintiff
Patriot Scientific Corporation ("Patriot"), on one hand, and Defendants
Xxxxxxx
X. Xxxxx ("Xxxxx"), Technology Properties, Ltd. ("TPL") and Xxxxxx X. Xxxxxxxx
("Xxxxxxxx"), on the other hand, hereby stipulate and agree as
follows:
1. Patriot,
Xxxxx, and TPL, among others, have entered into a series of negotiated
agreements, pursuant to which Patriot, Xxxxx, and TPL have agreed to settle
all
litigation among them on the terms and conditions contained in that certain
Master Agreement by and among Patriot, TPL and Xxxxx, dated as of June 1,
2005.
2. Pursuant
to the terms of the Master Agreement referred to above, the settlement
of the
litigation among Patriot, Xxxxx, and TPL, as well as the transactions
contemplated by the Master Agreement, will not become effective unless
and until
this Stipulated Final Judgment is executed by all of the parties hereto
and
filed with the Court.
3. Patriot,
Xxxxx, and TPL desire to settle all litigation among them through this
Stipulated Final Judgment and the negotiated agreements, and have all right,
power, and authority to do so, as well as to enter into the Master Agreement
and
related documents and effectuate the transactions contemplated thereby
in
furtherance of the terms of this Stipulated Final Judgment and the negotiated
agreements.
4. In
connection therewith, Patriot's Third Amended Complaint seeking a declaration
as
to inventorship and ownership of United States Patent Number 5,809,336
(the
"'336 Patent") shall be and hereby is dismissed with prejudice.
5. Final
judgment shall be and hereby is entered in favor of Defendants Xxxxx, TPL
and
Xxxxxxxx on Defendants' Counterclaims for a declaration that Xxxxx is at
least a
co-inventor and TPL is at least a co-owner of the '336 Patent and U.S.
Patent
Nos. 6,598,148 ("'148 Patent"), 5,440,749 ("749 Patent"), 5,530,890 ("'890
Patent"), 5,604,915 ("'915 Patent"), 5,659,703 ("'703 Patent") and 5,784,584
("'584 Patent").
6. Patriot
waives any and all right to appeal from this Stipulated Final
Judgment.
7. Each
party shall bear its own attorneys' fees and costs in connection with this
action.
8. This
Court shall retain jurisdiction over this action for the purposes of enforcing,
construing, clarifying, and modifying this Stipulated Final
Judgment.
9. The
Clerk
of the Court is directed to give notice of entry of this Stipulated Final
Judgment pursuant to Rule 77(d) of the Federal Rules of Civil
Procedure.
[remainder
of page intentionally blank]
DATED:
June __,
2005
XXXXXXXX
and XXXXXXXX and CREW LLP
By:__________________________________________
Xxxxx
X.
Xxxx
Attorneys
for Defendants
Technology
Properties Ltd. and Xxxxxx X. Xxxxxxxx
DATED:
June __,
2005
XXXXXXXXX
& XXXXXXXX
By:__________________________________________
F.
Xxxx
Xxxxxxxx
Attorney
for Defendant Xxxxxxx X. Xxxxx
DATED:
June __, 2005
By:__________________________________________
Xxxxxxx
Xxxxxxx
Attorney
for Plaintiff
Patriot
Scientific Corporation
IT
IS SO
ORDERED
DATED:
June __, 2005
__________________________________________
UNITED
STATES DISTRICT COURT JUDGE
EXHIBIT
B
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
|
7
|
|
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
|
11
|
|
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
|
13
|
|
4.4
|
Officers
|
13
|
|
4.5
|
Liability
of Committee Members and Officers
|
14
|
|
4.6
|
Records,
Audits and Reports
|
14
|
|
|
||
|
ARTICLE
5
|
CAPITAL
CONTRIBUTIONS
|
15
|
|
5.1
|
Initial
Capital Contributions
|
15
|
|
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
|
17
|
|
6.1
|
Application
of Gross Cash Proceeds.
|
17
|
|
6.2
|
Allocation
of Net Profits
|
18
|
|
6.3
|
Allocation
of Net Losses
|
18
|
|
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
|
21
|
|
|
||
|
ARTICLE
7
|
INDEMNIFICATION
AND LIMITATION OF LIABILITY
|
21
|
|
7.1
|
Indemnification.
|
21
|
|
7.2
|
Limitation
of Liability
|
22
|
|
7.3
|
Savings
Clause
|
22
|
|
|
||
|
ARTICLE
8
|
DISSOLUTION
AND WINDING UP
|
23
|
|
8.1
|
Dissolution
|
23
|
|
8.2
|
Winding
Up
|
23
|
|
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
|
24
|
|
8.7
|
Certificate
of Cancellation
|
24
|
|
8.8
|
Effect
of Filing Certificate of Cancellation
|
24
|
|
|
||
|
ARTICLE
9
|
MISCELLANEOUS
|
24
|
|
9.1
|
Amendment
|
24
|
|
9.2
|
Governing
Law and Severability
|
25
|
|
9.3
|
Counterparts
|
25
|
|
9.4
|
Titles
and Subtitles
|
25
|
|
9.5
|
Notices
|
25
|
|
9.6
|
Entire
Agreement
|
25
|
|
9.7
|
Power
of Attorney
|
26
|
|
9.8
|
Related
Party Transactions
|
26
|
|
9.9
|
Dispute
Resolution
|
26
|
|
9.10
|
No
Partition
|
26
|
|
9.11
|
Bankruptcy
|
26
|
SCHEDULE
1 - INITIAL CAPITAL CONTRIBUTIONS
SCHEDULE
2 - PERCENTAGE INTERESTS
EXHIBIT
A
- CONSENT
OF XXXXXXX X. XXXXX TO LIMITED LIABILITY OPERATING AGREEMENT OF P-NEWCO,
A
DELAWARE LIMITED LIABILITY COMPANY
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.
§ 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:
“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.
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.
“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 Two Million Dollars ($2,000,000) payable by each of Patriot and TPL,
in the
aggregate amount of Four Million Dollars ($4,000,000), 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.
“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 May [27], 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);
(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.
“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 000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000, 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.
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
|
00000
Xxx Xxxxxxxx
Xxx
Xxxxx, Xxxxxxxxxx 00000
|
|
Technology
Properties Limited Inc.
|
00000
Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
Xxxxxxxxxx 00000
|
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.
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.
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 seventy-five percent (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 Judicial Arbitration
and
Mediation Service (“JAMS”)
in
Santa Xxxxx County, or the nearest county thereto, if necessary, for the
appointment of the Independent Manager, and JAMS 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 JAMS
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
|
Xxxxx
X. Xxxx
|
|
TPL
Appointee
|
Xxxxxx
X. Xxxxxxxx
|
|
Independent
Manager
|
Xxxxxx
X. Xxxxxxx
|
(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 seventy-two (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.
(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.
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.
The
Independent Manager may be removed at any time, with or without
cause, by
written consent of the Members holding at least seventy-five
percent (75%)
of the Percentage Interests.
|
|
(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:
(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, Xxxxxx X. Xxxxxxx 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 [__________].
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.
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 Two Million Dollars ($2,000,000), for an
aggregate Initial Working Capital Contribution of Four Million Dollars
($4,000,000).
(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
Eight
Million Dollars ($8,000,000), and then only to the extent necessary to
bring the
balance of the Working Capital Fund to Eight Million Dollars ($8,000,000),
provided,
however,
that
neither TPL nor Patriot shall be required to contribute more than Two Million
Dollars ($2,000,000) 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 One Million Dollars ($1,000,000) when due pursuant to Section 5.3,
ten
percent (10%) 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 twenty-five percent (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 twenty-five percent (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.
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.
(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
Eight
Million Dollars ($8,000,000);
|
|
(iv)
|
Next,
|
|
(1)
|
for
payment to Patriot of an amount equal to ten percent (10%) of
the Gross
Cash Proceeds until Patriot shall have received Twenty Million
Dollars
($20,000,000); and
|
|
(2)
|
for
payment to TPL of an amount equal to fifteen percent (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.
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).
(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.
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.
(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.
(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 seventy-five percent (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.
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 (3) 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.
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 seventy-five percent (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.
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
xxxxx, 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 Xxxxx County, California.
Within
fifteen (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 thirty (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 JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures. 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. This clause
shall
not preclude the parties from seeking provisional remedies in aid of
arbitration, including without limitation a temporary or preliminary injunctive
relief, from a court of appropriate jurisdiction. The arbitrator may, in
the
award, allocate all or part of the costs of the arbitration, including
the fees
of the arbitrator and the reasonable attorneys’ fees of the prevailing
party.
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 seventy-five percent (75%) of the Percentage Interests
of the Company.
[signature
page follows]
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 By:________________________________________
Its:________________________________________
|
|
TECHNOLOGY
PROPERTIES LIMITED INC.,
a California corporation By:________________________________________
Xxxxxx
X. Xxxxxxx
Its:
Chairman
|
SCHEDULE
1
INITIAL
CAPITAL CONTRIBUTIONS
|
MEMBER
|
CONTRIBUTIONS
|
AGGREGATE
FAIR MARKET VALUE OF CONTRIBUTIONS
|
||
|
Patriot
Scientific Corporation
|
· P-Newco
License
· $2,000,000
|
|||
|
Technology
Properties Limited Inc.
|
· T-Newco
License
· $2,000,000
|
SCHEDULE
2
PERCENTAGE
INTERESTS
|
MEMBER
|
PERCENTAGE
INTEREST
|
|
|
Patriot
Scientific Corporation
|
50%
|
|
|
Technology
Properties Limited Inc.
|
50%
|
EXHIBIT
A
CONSENT
OF XXXXXXX X. XXXXX
TO
LIMITED
LIABILITY OPERATING AGREEMENT
OF
P-NEWCO
A
DELAWARE LIMITED LIABILITY COMPANY
Xxxxxxx
X. Xxxxx (“Xxxxx”) does hereby affirm and acknowledge that:
(a) Xxxxx
has
read and reviewed the accompanying Limited Liability Company Operating
Agreement
(the “P-Newco Operating Agreement”) for P-Newco, a Delaware Limited Liability
Company (“P-Newco”) and is familiar with the contents thereof;
(b) Technology
Properties Limited Inc., a California Corporation, has full power and authority
to enter into the P-Newco Operating Agreement insofar as it affects the
interests of Xxxxx in the microprocessor science and design patents set
forth on
Schedule 1 to the Master Agreement, to which Xxxxx is a party;
and
(c) Xxxxx
consents to the P-Newco Operating Agreement.
IN
WITNESS WHEREOF, Xxxxx has executed this Consent as of the [__] day of
[__________], 2005.
XXXXXXX
X. XXXXX
________________________________________
EXHIBIT
C
NEWCO
LICENSE
This
License ("License") is entered into by and between ______________ (“___”) as the
Licensor on the one hand, and NewCo as the Licensee ("NewCo") on the
other hand,
as a part of that certain _________ ("__Ag”) entered into between the parties
contemporaneously herewith.
NOW
THEREFORE, for and in consideration of the mutual cove-nants herein
contained as
well as of other good and valuable consideration the receipt and sufficiency
of
which is hereby acknowledged, it is covenanted and agreed by and between
the
parties hereto that:
1. Subject
Matter.
1.1. The
patents described in the Schedule of Patents at Attachment I hereof,
sometimes
collectively referred to as the “Licensed Patents”.
2. Grant
of License.
2.1.
____
hereby grants unto NewCo an exclusive, personal, and non-transferable,
worldwide
right and license:
2.1.1.
To
grant sublicenses to make, have made, use, sell, and import products
utilizing
the Licensed Patents; and,
2.1.2.
To
xxx either in its own name or jointly with Licensor if required by
law, and to
pursue for the use and benefit of NewCo: (i) all remedies of whatsoever
kind or
nature with respect to the protection, use, and enforcement of the
Licensed
Patents; (ii) the collection of all claims for damages, profits, and
awards
relating to the past, present, or future use or ownership of the Licensed
Patents; and (iii) all equitable relief available in connection therewith.
2.2.
Provided, however, that ___ shall for all purposes be deemed to have
retained a
non-exclusive, worldwide, irrevocable right and license:
2.2.1
To
utilize the Licensed Patents on a royalty-free basis to make, have
made, use,
sell and/or import products that are designed, manufactured, and sold
by ___
under brand names currently owned or subsequently originated and owned
by ___;
and,
2.2.2.
To
utilize the Licensed Patents on a royalty-bearing basis to make, have
made, use,
sell and/or import products that are not designed, manufactured, and
sold by
___under brand names currently owned or subsequently originated and
owned by
___.
3. Royalty.
3.1.
___
shall be entitled to receive as a royalty under this License that certain
portion of the Net Recovery realized from the commercialization of
the Licensed
Patents which is provided for and payable under the terms of the __
Ag entered
into contemporaneously herewith.
3.2.
_____ shall pay to NewCo a royalty for all products described in section
2.2.2.
which is fair, reasonable, non-discriminatory, and within the terms
of NewCo's
standard licensing programs then in effect.
4.
Dispute
Resolution
4.1.
All
rights and obligations under this Agreement shall be resolved as if
all persons
and all transactions related to this Agreement had their legal residence,
situs,
and employment in Santa Xxxxx 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
the
Agreement. If the dispute is not resolved to the mutual satisfaction
of the
parties within 30 days after such notice, NewCo shall as requested
by ____,
either:
4.1.1.
Submit such dispute to expedited binding arbitration under the rules
of the
American Arbitration Association with discovery in general accordance
with the
Federal Rules of Civil Procedure. All costs related to such Arbitration
shall be
paid in advance by NewCo, including the cost of translating into English
all
discoverable materials, and of providing contemporaneous translation
of all live
testimony; or,
4.1.2.
Submit such dispute to the Superior Court of Santa Xxxxx
County, California, for resolution by Summary Judgment and/or trial
by jury as
directed by the said Court.
4.2.
At
______'s option, NewCo shall submit any issue of validity to the issuing
patent
office in a Petition for Reexamination or comparable proceeding. The
outcome
shall be binding on the parties unless appealed by _______.
4.3.
In
either case, all performances due hereunder by NewCo 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.
5.
General.
5.1. 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 party. Any attempted or purported assignment
without such consent shall be voidable at the option of the non-consenting
party.
5.2. 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.
5.3. Section
titles are intended only to aid and assist the reader as an index device
and are
not intended to be descriptive of the contents of the section or to
be used for
construction or interpretation.
5.4. 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.
5.5. 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 ______:
|
If
to NewCo:
|
|
______________________
|
______________________
|
|
(address)
|
(address)
|
5.5. This
Agreement together with its exhibits and attachments contains the entire
agreement between the parties and supersedes any and all other agreements
between them relating to the subject matter hereof.
6. Attachments.
6.1.
Attachment
I: Schedule of Patents
IN
WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the
date of the execution hereof by the last signatory hereto.
|
____________________________
|
NEWCO
|
|
by
____________________________
|
by
____________________________
|
|
___________________________
|
__________________________
|
|
date:
_________________________
|
date:
_______________________
|
ATTACHMENT
I (For ___Ag)
SCHEDULE
OF PATENTS
EXHIBIT
D
COMMERCIALIZATION
AGREEMENT
by
and among
P-NEWCO
and
TECHNOLOGY
PROPERTIES LIMITED
and
PATRIOT
SCIENTIFIC CORPORATION
|
***
|
Indicates
material omitted pursuant to an application for confidential treatment
and
that material has been filed separately with the
Commission.
|
TABLE
OF CONTENTS
Page
|
ARTICLE
1 GRANT
|
1
|
|
ARTICLE
2 COMMERCIALIZATION
|
2
|
|
ARTICLE
3 COVENANTS
|
3
|
|
ARTICLE
4 PAYMENT ***
|
4
|
|
ARTICLE
5 TERM
|
5
|
|
ARTICLE
6 TERMINATION
|
5
|
|
ARTICLE
7 REPRESENTATIONS AND WARRANTIES
|
6
|
|
ARTICLE
8 GENERAL
|
7
|
|
EXHIBIT
A
|
GRANT
& SCHEDULE OF PATENTS
|
|
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 00000 Xxx Xxxxxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, and Technology Properties Limited Inc., a California
Corporation (“TPL”),
having its principal place of business at 00000 Xxxxxxx Xxxxx Xxxxxxxxx,
Xxx.
000, Xxxxxxxxx, Xxxxxxxxxx 00000. 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 Xxxxxxx X. Xxxxx (“Xxxxx”)
collectively hold all rights with respect to certain microprocessor
implementation and architecture patents set forth on Schedule
1
(the
“MSD
Patents”);
WHEREAS,
Xxxxx has transferred complete authority for the management of Xxxxx’x rights to
the MSD Patents to TPL;
WHEREAS,
Patriot, TPL and Xxxxx 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”).
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
xxx in
the name of TPL, Xxxxx, 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
|
|
(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).
3.5 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 $500,000 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 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
|
|
(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 Xxxxx 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;
(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.
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
00000
Xxx
Xxxxxxxx
Xxx
Xxxxx, XX 00000
Attn:
President
Fax:
(000) 000-0000
with
a copy to:
Xxxx,
Forward, Xxxxxxxx & Scripps LLP
000
Xxxx
Xxxxxxxx, Xxxxx 0000
Xxx
Xxxxx, XX 00000
Attn:
Xxxx X. Xxxxxxxx, Esq.
Fax:
(000) 000-0000
If
to TPL:
Technology
Properties Limited
00000
Xxxxxxx Xxxxx Xxxx., Xxxxx 000X
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxx X. Xxxxxxxx, Chairman
Fax:
(000) 000-0000
with
a copy to:
Xxxxxx,
Xxxx & Xxxxxxxx LLP
000
X.
Xxxxx Xxxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxxx X. Xxxxx, Esq.
Fax:
(000) 000-0000
If
to P-Newco:
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.
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
Delaware corporation
__________________________________________
By:
Its:
TECHNOLOGY
PROPERTIES LIMITED, a California corporation
__________________________________________
By: Xxxxxx
X.
Xxxxxxxx
Its: Chairman
P-NEWCO,
a Delaware limited liability company
__________________________________________
By:
Its: Patriot
Member
__________________________________________
By:
Its: TPL
Member
EXHIBIT
A
GRANT
(NEWCO
TO TPL)
This
Grant (“Grant”) is entered into by and between Newco (sometimes “Newco”) on the
one hand, and Technology Properties Limited (“TPL”), on the other hand, and is
made and entered into for the purpose of implementing that certain
Commercialization Agreement (“ComAg”) entered into between the parties
contemporaneously herewith.
NOW
THEREFORE, for and in consideration of the mutual cove-nants herein contained
as
well as of other good and valuable consideration the receipt and sufficiency
of
which is hereby acknowledged, it is covenanted and agreed by and between
the
parties hereto that:
1. Subject
Matter.
1.1 The
patents described in the Schedule of Patents at Attachment I hereof, sometimes
collectively referred to as the “Project Patents.”
2. Grant.
2.1 Pursuant
to the provisions of section 2.1 of the Licenses made a part hereof as
Attachment I (PTSC to Newco) and Attachment II (TPL to Newco), Newco hereby
grants unto Technology Properties Limited the exclusive, personal and
non-transferable, worldwide right to:
2.1.1 To
grant
licenses and sub-licenses to make, have made, use, sell, and import products
and/or services utilizing the Project Patents, for all fields of use and
for all
applications;
2.1.2 To
xxx in
the name of Technology Properties Limited or jointly with Patriot Scientific
Corporation, Xxxxxxx X. Xxxxx and/or Newco if required by law, and to pursue
for
the use and benefit of Technology Properties Limited: (i) all remedies of
whatsoever kind or nature with respect to the protection, use, and enforcement
of the Project Patents; (ii) the collection of all claims for damages, profits,
and awards relating to the past, present, or future use or ownership of the
Project Patents; and (iii) all equitable relief available in connection
therewith; and,
2.1.3 To
otherwise manage and control by license, sublicense, or other agreement the
practice and/or use of the Project Patents by third parties.
Accordingly,
Newco divests itself of all rights with respect to the activities and/or
rights
described at 2.1.1., 2.1.2., and 2.1.3. above, and Newco retains no such
right.
2.2 The
grant
at Section 2.1 above shall be subject to (a) the terms and conditions of
the Patent License Agreement between Patriot and Intel Corporation, dated
as of
June 1, 2005, and (b) the rights retained by PTSC and TPL under the
provisions of section 2.2 of the said Attachments I and II,
respectively.
3. General.
3.1 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 party. Any attempted or purported assignment
without such consent shall be voidable at the option of the non-consenting
party.
3.2 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 or in the ComAg.
3.3 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.
3.4 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.
3.5 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
TPL:
Xxxxxx
X
Xxxxxxxx, Chm
00000
Xxxxxxx Xxxxx Xxxx
Xxxxxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
If
to
Newco:
Xxxxxx
X
Xxxxxxxx, Chm
00000
Xxxxxxx Xxxxx Xxxx
Xxxxxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
AND
Patriot
Scientific Corporation
00000
Xxx
Xxxxxxxx
Xxx
Xxxxx, XX 00000
Attn:
President
Fax:
(000) 000-0000
AND
Xxxxxx
X.
Xxxxxxx
Relational
Advisors LLC
00000
Xx
Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Fax:
(000) 000-0000
3.6 This
Agreement together with its exhibits and attachments contains the entire
agreement between the parties and supersedes any and all other agreements
between them relating to the subject matter hereof.
3.7 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.
IN
WITNESS WHEREOF, the parties have hereunto set their hands and seals as of
the
date of the execution hereof by the last signatory hereto.
|
NEWCO
By:__________________________________________
Xxxxxx
X. Xxxxxxx
Date:__________________________________________
|
TECHNOLOGY
PROPERTIES LTD.
By:__________________________________________
Xxxxxx
X. Xxxxxxxx, Chairman
Date:__________________________________________
|
Attachment
I - Schedule of Patents
(See
next
page)
EXHIBIT
A
SCHEDULE
OF PATENTS
A. PROJECT
PATENTS - US
|
NUMBER
|
NAME
|
FILED
|
ISSUED
|
EXPIRY
|
|||||
|
US
|
5,440,749
|
Hi
Perf, Lo cost Micro Arch
|
3
AUG 89
|
8
AUG 95
|
8
AUG 12
|
||||
|
US
|
5,530,890
|
Hi
Perf, Lo cost Micro Arch
|
7
JUN 95
|
25
JUN 96
|
25
JUN 13
|
||||
|
US
|
5,659,703
|
Micro
Sys with Hierarchical stack
|
7
JUN 95
|
19
AUG 97
|
19
AUG 14
|
||||
|
US
|
5,784,584
|
Multiple
Instructions within Groups
|
7
JUN 95
|
21
JUL 98
|
21
JUL 15
|
||||
|
US
|
5,809,336
|
Hi
Perf Variable Speed Sys Clock
|
7
JUN 95
|
15
SEP 98
|
15
SEP 15
|
||||
|
US
|
5,604,915
|
Load
Dependent Bus Timing
|
7
JUN 95
|
18
FEB 97
|
18
FEB 14
|
||||
|
US
|
6,598,148
|
Hi
Perf Microprocessor
|
29
JUL 98
|
22
JUL 03
|
3
AUG 09
|
||||
|
Having
Variable Speed Sys Clock
|
|||||||||
| SN 09/051,263 | RISC Microprocessor Architecture | 8 AUG 98 | _ _ _ _ | 3 AUG 09 |
C. PROJECT
PATENTS - NON US (Preliminary)
|
DE
|
69033568.7
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUN 00
|
2
AUG 10
|
||||
|
DE
|
69033568T2
|
Preisguenstiger
Hochleistungsmikro
|
2
AUG 90
|
1
MAR 01
|
-
-
- -
|
||||
|
DE
|
69033568C0
|
Preisguenstiger
Hochleistungsmikro
|
2
AUG 90
|
20
JUL 00
|
-
-
- -
|
||||
|
EP
|
0786730
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUN 00
|
2
AUG 10
|
||||
|
EP
|
786730A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
30
JUL 97
|
-
-
- -
|
||||
|
EP
|
497772A4
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
4
AUG 93
|
-
-
- -
|
||||
|
EP
|
497772A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
12
AUG 92
|
-
-
- -
|
||||
|
EP
|
0870226
|
RISC
Microprocessor Architecture
|
_
_
_ _
|
_
_
_ _
|
-
-
- -
|
||||
|
FR
|
0786730
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUL 00
|
-
-
- -
|
||||
|
XX
|
0000000
|
XXXX
Xxxxxxxxxxxxxx Arch
|
_
_
_ _
|
_
_
_ _
|
-
-
- -
|
||||
|
WO
|
9102311A3
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
21
MAR 91
|
-
-
- -
|
||||
|
WO
|
9102311A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
1
FEB 00
|
-
-
- -
|
||||
|
XX
|
0000000X0
|
_
_
_ _ _ _
|
2
AUG 90
|
15
APR 93
|
-
-
- -
|
||||
|
JP
|
2966085B2
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
13
AUG 99
|
2
AUG 10
|
||||
|
AU
|
6067290A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
11
MAR 91
|
-
-
- -
|
The schedule of Patents shall include the items listed above, as well as all progenitors and progeny thereof, and all additions, changes, amendments, modifications, actions, counterparts, continuations, continuations-in-part, extensions, reissues, divisionals and/or renewals of such items, progenitors, and/or progeny.
SCHEDULE
1
SCHEDULE
OF PATENTS
A. MSD
PATENTS - US
| Number | Name | Filed | Issued | Expiry | |||||||
|
US
|
5,440,749
|
Hi
Perf, Lo cost Micro Arch
|
3
AUG 89
|
8
AUG 95
|
8
AUG 12
|
||||||
|
US
|
5,530,890
|
Hi
Perf, Lo cost Micro Arch
|
7
JUN 95
|
25
JUN 96
|
25
JUN 13
|
||||||
|
US
|
5,659,703
|
Micro
Sys with Hierarchical stack
|
7
JUN 95
|
19
AUG 97
|
19
AUG 14
|
||||||
|
US
|
5,784,584
|
Multiple
Instructions within Groups
|
7
JUN 95
|
21
JUL 98
|
21
JUL 15
|
||||||
|
US
|
5,809,336
|
Hi
Perf Variable Speed Sys Clock
|
7
JUN 95
|
15
SEP 98
|
15
SEP 15
|
||||||
|
US
|
5,604,915
|
Load
Dependent Bus Timing
|
7
JUN 95
|
18
FEB 97
|
18
FEB 14
|
||||||
|
US
|
6,598,148
|
Hi
Perf Microprocessor
Having
Variable Speed Sys Clock
|
29
JUL 98
|
22
JUL 03
|
3
AUG 09
|
||||||
B. PROJECT
PATENT APPLICATIONS PENDING - US
|
Number
|
Name
|
Filed
|
Issued
|
Expiry
|
|
|
SN
|
09/051,263
|
RISC
Microprocessor Architecture
|
8
AUG 98
|
-
-
- -
|
3
AUG 09
|
C. MSD
PATENTS - NON US (Preliminary)
| Number | Name | Filed | Issued | Expiry | |||
|
DE
|
69033568.7
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUN 00
|
2
AUG 10
|
||
|
DE
|
69033568T2
|
Preisguenstiger
Hochleistungsmikro
|
2
AUG 90
|
1
MAR 01
|
-
-
- -
|
||
|
DE
|
69033568C0
|
Preisguenstiger
Hochleistungsmikro
|
2
AUG 90
|
20
JUL 00
|
-
-
- -
|
||
|
EP
|
0786730
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUN 00
|
2
AUG 10
|
||
|
EP
|
786730A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
30
JUL 97
|
-
-
- -
|
||
|
EP
|
497772A4
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
4
AUG 93
|
-
-
- -
|
||
|
EP
|
497772A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
12
AUG 92
|
-
-
- -
|
||
|
EP
|
0870226
|
RISC
Microprocessor Architecture
|
-
-
- -
|
-
-
- -
|
-
-
- -
|
||
|
FR
|
0786730
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
14
JUL 00
|
-
-
- -
|
||
|
WO
|
9715001
|
RISC
Microprocessor Arch
|
-
-
- -
|
-
-
- -
|
-
-
- -
|
||
|
WO
|
9102311A3
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
21
MAR 91
|
-
-
- -
|
||
|
WO
|
9102311A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
1
FEB 00
|
-
-
- -
|
||
|
XX
|
0000000X0
|
_
_
_ _ _ _
|
2
AUG 90
|
15
APR 93
|
-
-
- -
|
||
|
JP
|
2966085B2
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
13
AUG 99
|
2
AUG 10
|
||
|
AU
|
6067290A1
|
Hi
Perf, Lo Cost Micro
|
2
AUG 90
|
11
MAR 91
|
-
-
- -
|
||
The
schedule of Patents shall include the items listed above, as well as all
progenitors and progeny thereof, and all additions, changes, amendments,
modifications, actions, counterparts, continuations, continuations-in-part,
extensions, reissues, divisionals and/or renewals of such items, progenitors,
and/or progeny.
SCHEDULE
2
PROJECT
DESCRIPTION
I. OBJECTIVES
& ACTIVITIES
|
A.)
|
Develop
and execute a commercialization program for the rights to the MSD
Patents
transferred by Patriot and TPL to P-Newco pursuant to the Newco
Licenses
which:
|
|
i.)
|
Establishes
the MSD Patents as an income-producing, commercially valuable asset;
and
|
|
ii.)
|
Builds
long-term Project value; and
|
|
iii.)
|
Minimizes
risks to Project assets.
|
|
B.)
|
Promote
the commercialization program by encouraging the implementation
and use of
the MSD Patents through licenses, and various
relationships.
|
|
C.)
|
Transform
selected unauthorized use of the MSD Patents into strategically
and
commercially valuable authorized
use.
|
|
D.)
|
Pursue
licensing discussions with multiple simultaneous identified
prospects.
|
|
E.)
|
Pursue
parallel litigation on a selective strategic
basis.
|
|
F.)
|
Negotiate
and document agreements relating to the Project and the MSD
Patents.
|
|
G.)
|
***
|
|
H.)
|
***
|
|
I.)
|
***
|
II. COMMERCIALIZATION
GUIDELINES
|
A.)
|
***
|
III. ADDITIONAL
ACTIONS
|
A.)
|
***
|
|
B.)
|
***
|
|
C.)
|
***
|
IV. ***
***
V. BUSINESS
PLAN
|
A.)
|
A
Business Plan detailing the implementation of the Project is attached
hereto as Attachment I and will remain in full force and effect
until duly
amended or replaced.
|
ATTACHMENT
1 TO SCHEDULE 2
BUSINESS
PLAN
I. ***
SCHEDULE
3
SCHEDULE
OF OUTSTANDING ACTIVITIES/RIGHTS/CLAIMS
|
AGREEMENT
|
DATE
|
|
TPL
|
|
|
1.
Xxxxx - TPL Commercialization Agreement
|
22
OCT 02
|
|
2.
P-Newco - TPL - PTSC Commercialization Agreement
|
25
MAY 05
|
|
3.
TPL - Intel License Agree ment
|
28
JUN 04
|
|
PTSC
|
|
|
1.
PTSC - AMD License Agreement
|
_________
|
|
2.
P-Newco - TPL - PTSC Commercialization Agreement
|
25
MAY 05
|
|
3.
________________________
|
EXHIBIT
E
|
***
|
Indicates
material omitted pursuant to an application for confidential
treatment and
that material has been filed separately with the
Commission.
|
ESCROW
AGREEMENT
This
Escrow Agreement (this “Agreement”), dated as of June 7, 2005, is by and among
Patriot Scientific Corporation, a Delaware corporation (“Patriot”), Technology
Properties Limited Inc., a California corporation (“TPL”),
and
Premier Trust, Inc., a Nevada corporation (the “Escrow
Agent”).
RECITALS
WHEREAS,
concurrently herewith Patriot, TPL and Xxxxxxx X Xxxxx have executed delivered
that certain agreement dated as of June 7, 2005 (the “Master
Agreement”);
WHEREAS,
the parties hereto desire to enter into this Agreement to facilitate the
transaction contemplated by the Master Agreement; and
WHEREAS,
the Escrow Agent is willing to act as escrow agent pursuant to the terms
and
conditions of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the premises and intending to be legally
bound
hereby, the parties agree as follows:
1. Delivery
of Escrowed Cash.
As soon
as practicable, Patriot and TPL shall direct Intel Corporation to deliver
by
wire transfer in immediately available funds to the account set forth on
Exhibit
A hereto 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
(the “Escrowed Cash”). The Escrow Agent agrees to hold and safeguard the
Escrowed Cash during the Escrow Period in accordance with this Agreement,
separate and apart from the Escrow Agent’s assets.
2. Investment
of Escrowed Cash.
During
the Escrow Period, the Escrow Agent will hold and maintain the Escrowed
Cash in
an interest bearing deposit account at Xxxxxx Xxxxx Bank. Upon any distribution
to Patriot or TPL pursuant to Section
4
below,
Patriot or TPL, as the case may be, shall be entitled to receive interest
earned
on such amount to the date of disbursement. All other interest earned by
the
investment of the Escrowed Cash shall be the joint property of TPL and
Patriot
in equal parts, payable by the Escrow Agent to TPL and Patriot in equal
parts
upon the expiration of the Escrow Period (as defined below).
3. Escrow
Period.
The
period of Escrow (the “Escrow Period”) shall begin on the date hereof and end at
the earliest of (a) the Closing; or (b) the Termination Date.
4. Escrow
Disbursements.
The
Escrow Agent shall deliver the Escrowed Cash as follows:
1
(a) Immediately
upon receipt of the Escrowed Cash, $***
to TPL
in immediately available funds to the account set forth on Exhibit
B
hereto.
(b) Immediately
after the disbursement pursuant to subsection (a) above, $***
to
Relational Advisors in immediately available funds to the account set forth
on
Exhibit
C
hereto.
(c) Immediately
after the disbursement pursuant to subsection (a) above, $***
to
Xxxxxx, Xxxx & Xxxxxxxx LLP in immediately available funds to the account
set forth on exhibit D hereto.
(d) Upon
the
execution and delivery by Patriot of the Stipulated Final Judgment,
$***
to
Patriot by wire transfer in immediately available funds, to the account
set
forth on Exhibit
E
hereto.
(e) At
the
Closing, $***
to the
Patriot Rights Holders set forth on Exhibit
F
hereto,
by wire or check, as indicated, in the amounts and to the addresses or
accounts
appearing next to their names.
(f) At
the
Closing, $4,000,000 to P-Newco in immediately available funds to the account
set
forth on Exhibit
G
hereto,
or, in the event that the advance to TPL pursuant to Section
4(g)
has been
disbursed, then $2,000,000 to P-Newco in immediately available funds to
the
account set forth on Exhibit
E
hereto.
(g) If
the
Closing has not already occurred, then sixty (60) days after the execution
hereof, $2,000,000 to TPL by wire transfer in immediately available funds
to the
account set forth on Exhibit
B
hereto,
as an advance of the working capital amounts contemplated by Section 4.3
of the
Commercialization Agreement.
(h) Upon
the
Termination Date:
(1) $***,
plus
all interest earned on such amount to date, to TPL immediately available
funds
to the account set forth on Exhibit
B
hereto;
(2) $***,
plus
all interest earned on such amount to date, to Patriot in immediately available
funds to the account set forth on Exhibit
E
hereto;
(3) $2,000,000,
plus all interest earned on such amount to date, to TPL in immediately
available
funds to the account set forth on Exhibit
B
hereto
or, in the event that advance to TPL pursuant to Section
4(g)
has been
disbursed, then $***,
plus
all interest earned on such amount to date, to TPL in immediately available
funds to the account set forth on Exhibit
B
hereto;
(4) $2,000,000,
plus all interest earned on such amount to date, to Patriot in immediately
available funds to the account set forth on Exhibit
E
hereto
or, in the event that the advance to TPL pursuant to Section
4(g)
has been
disbursed, then $***,
plus
all interest earned on such amount to date, to Patriot in immediately available
funds to the account set forth on Exhibit
E
hereto.
5. Fees
and Expenses of Escrow Agent.
The
Escrow Agent’s fee shall be $***,
plus
$25 per disbursement pursuant to Section 5, plus actual costs incurred
by the
Escrow Agent in the performance of its obligations hereunder, including
without
limitation the costs associated wiring the funds and other administrative
costs
(the “Escrow Fee”). Each of Patriot and TPL agree to pay the Escrow Agent
one-half of the Escrow Fee.
2
6. Liabilities
and Duties of Escrow Agent.
(a) The
duties and obligations of the Escrow Agent shall be determined solely by
the
express provisions of this Agreement and the Escrow Agent shall have no
implied
duties and shall not be liable except for the performance of such duties
and
obligations as are specifically set forth in this Agreement.
(b) Patriot
and TPL will indemnify the Escrow Agent for, arid hold it harmless against,
any
loss, liability or expense, including but not limited to, reasonable attorneys’
fees, occurred without gross negligence, bad faith, or willful misconduct
on the
part of the Escrow Agent arising out of or in connection with its acceptance
of,
or the performance of its duties and obligations under, this
Agreement.
(c) The
Escrow Agent shall be fully protected in acting and relying upon any written
notice, direction, request, waiver, consent, receipt or other paper or
document
which the Escrow Agent in good faith believes to be genuine and duly authorized
and to have been signed or presented by the proper party.
(d) The
Escrow Agent is hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person, excepting only
orders
or process of a court of law of competent jurisdiction. In the event the
Escrow
Agent obeys or complies with any such order, judgment, or decree of any
court,
the Escrow Agent shall not be liable to any of the parties hereto or to
any
other person by reason of such compliance, notwithstanding any such order,
judgment, or decree being subsequently reversed, modified, annulled, set
aside,
aside, vacated, or found to have been entered without jurisdiction or proper
authority.
(e) The
Escrow Agent shall not be liable for the expiration of any rights under
the
statute of limitations with respect to this Agreement.
(f) If
any
dispute or controversy arises between the parties to this Agreement the
matters
set forth in this Agreement, the Escrow Agent shall not be required to
determine
or decide the dispute or controversy or to take any action regarding the
same.
The Escrow Agent may in such event hold the Escrowed Cash in the Escrow
Account
and may wait for the settlement of any such dispute or controversy through
appropriate final legal proceedings. Furthermore, the Escrow Agent may,
in its
good faith discretion after seeking advice of counsel, file an action of
interpleader requiring the parties to answer and litigate any claims or
rights
among themselves. In connection with the interpleader proceeding, the Escrow
Agent is authorized to deposit with the clerk or other authorized agent
of the
court the Escrowed Cash. Upon initiating the interpleader proceeding, the
Escrow
Agent shall be fully released and discharged from any obligations with
respect
to the documents, cash or other matters subject or relating to the dispute
or
controversy.
(g) The
Escrow Agent may resign at any time upon at least 30 days written of notice
to
each Patriot and TPL; provided,
however,
that no
such resignation shall become effective until a successor escrow agent
has been
appointed by the Escrow Agent, subject to the approval of each of Patriot
and
TPL, which approval shall not be unreasonably withheld. The escrow agent
shall
execute and deliver an instrument accepting such appointment and it shall
thereupon be deemed the Escrow Agent hereunder and without further acts
shall be
vested with all the Escrowed Cash, as well as all the rights, powers, and
duties
of the predecessor Escrow Agent as if originally named as Escrow Agent.
Thereafter (and upon the delivery of all of the Escrow Cash to the successor
escrow agent), the predecessor Escrow Agent shall be discharged any further
duties and liabilities under this Agreement.
3
7. Notices.
All
notices and other communications hereunder shall be in writing. Any notice
or
other communication hereunder shall be deemed duly given (i) if personally
delivered, when so delivered, (ii) 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, (iii)
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 (ii) above or (iv) of this Section 7, or (iv) 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
00000
Xxx
Xxxxxxxx
Xxx
Xxxxx, XX 00000
Attn: President
Fax: (000)
000-0000
with
a copy to:
Xxxx
X.
Xxxxxxxx, Esq.
Xxxx,
Forward, Xxxxxxxx & Scripps LLP
000
Xxxx
Xxxxxxxx, Xxxxx 0000
Xxx
Xxxxx, XX 00000
Attn: Xxxx
X.
Xxxxxxxx, Esq.
Fax: (000)
000-0000
If
to TPL:
Technology
Properties Limited Inc.
X.X.
Xxx
00000
Xxx
Xxxx,
XX 00000
Atm: Xxxxxx
X.
Xxxxxxxx, Chairman
Fax: (000)
000-0000
with
a copy to:
Xxxxxx,
Xxxx & Xxxxxxxx LLP
000
X.
Xxxxx Xxxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx
X.
Xxxxx, Esq.
Fax: (000)
000-0000
4
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.
8. 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.
(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.
9. Expense.
Except
as provided herein, all costs and expenses incurred in connection with
this
Agreement shall be paid by the party incurring such cost or
expense.
10. Successors
and Assign.
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 lout the prior written approval of each other party.
11. 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
Delaware.
12. Counterparts;
Effectiveness.
This
Agreement may be signed in any number of counterparts and the signatures
delivered by fax, each of which shall be an original, with the 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.
13. Entire
Agreement.
This
Agreement (including the other agreements executed simultaneously herewith
arid
all Schedules and Exhibits thereto and hereto) 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.
Neither this Agreement nor any provision hereof is intended to confer upon
any
Person other than the parties hereto any rights or remedies
hereunder.
14. Captions
The
captions herein are included for convenience of reference only and shall
be
ignored in the construction or interpretation hereof. All references to
a
Section include all subparts thereof.
5
15. Third-Party
Beneficiaries.
No
provision of this Agreement shall create any third-party beneficiary rights
in
any Person (as defined in the Master Agreement).
16. No
Punitive, Exemplary, or Consequential Damages.
The
parties hereto expressly 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]
6
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:
_______________________________
Name:
_____________________________
Title:
______________________________
TECHNOLOGY
PROPERTIES LIMITED INC.,
a
California corporation
By:
_______________________________
Name:
_____________________________
Title:
______________________________
PREMIER
TRUST, INC.,
a
Nevada corporation
By:
_______________________________
Name:
_____________________________
Title:
______________________________
|
7
Exhibit
A
Escrow
Agent’s Wire Transfer Information
Xxxxxx
Xxxxx Bank
00000
Xx
Xxxxxx Xxxx
Xxx
Xxxxx, XX 00000
ABA/Routing
Number: 000000000
Beneficiary
Account Name: ***
Beneficiary
Account Number: ***
8
Exhibit
B
TPL’s
Wire Transfer Information
Acct
Name: ***
Acct
No:
***
Bank
Name: San
Xxxx
National Bank
0
Xxxxx
Xxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
ABA
No:
000000000
Contact:
Xxxx Xxxxxx, Manager
Wire
Transfer Dept
000-000-0000
9
Exhibit
C
Relational
Advisors’ Wire Transfer Information
Xxxxx
Fargo Bank for the benefit of:
***
Account
#
***
ABA
#:
000-000-000
Attn:
Xxxxxxx Xxxxxx
10
Exhibit
D
Gibson,
Xxxx & Crutcher’s Wire Transfer Information
Xxxxx
Fargo Bank
000
Xxxxx
Xxxxx Xxxxxx
Xxx
Xxxxxxx, XX. 00000-0000
Name
of
account: ***
Account
No: ***
ABA
No:
000000000
Attn:
Xxxxx Xxxxxxxx
Telephone:
(000) 000-0000
Fax:
(000)000-0000
11
Exhibit
E
Patriot’s
Wire Transfer Information
Silicon
Valley Bank, San Xxxx
Routing
#: 000000000
For
credit of: ***
Credit
Account #: ***
12
Exhibit
F
Patriot
Rights Holders
|
***
|
Chase
Manhattan Bank NYC
|
|
***
|
ABA
021 000 021
|
|
FBO:
Xxxxxxx Xxxxx Xxxxxx
|
|
|
a/c:
***
|
|
|
***
|
|
|
***
|
|
|
***
|
Chase
Manhattan Bank NYC
|
|
***
|
ABA
021 000 021
|
|
FBO:
Xxxxxxx Xxxxx Xxxxxx
|
|
|
a/c:
***
|
|
|
***
|
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
|
|
***
|
***
|
|
***
|
***
|
|
***
|
13
Exhibit
G
P-Newco’s
Wire Transfer Information
14
EXHIBIT
F-1
WAIVER,
CONSENT AND RELEASE AGREEMENT
This
WAIVER, CONSENT AND RELEASE AGREEMENT (this “Agreement”) is made and entered
into as of ______________, 2006, by and between PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation (the “COMPANY”), and ____________________, an _______
limited liability company (the “Rights Holder”).
RECITALS
A. WHEREAS,
the Rights Holder holds warrants to purchase shares of the common stock,
$_________ 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,
______________, a California corporation (“_____”) and ______________ (such
transactions referred to herein as the “Proposed Transactions”).
C. WHEREAS,
the Proposed Transactions will result in the creation of an entity (“________”)
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
______
(the “_________ Stock”) and will be entitled to receive an income stream from
_________ (the “_________ 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 _________ 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
2
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, __________
(____________) 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 ____________ (____________) Warrants
described on Exhibit
B
herein
will be reset to ____________ 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 barely releases its liens with regard to the
COMPANY’s intellectual property portfolio, including without limitation
________, 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 $____________ 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(l), 4(m) and 4(o) in their entirety, and such sections shall
be of no
further force or affect, 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.
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 boards of directors, and
one or more of the following occurs:
(1) COMPANY
sells, conveys, disposes of, spins off or assigns any or all of the NEWCO
Stock,
or any or all of its rights to receive the ____________ Income, to any
third
party, in each case without the Rights 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 ____ (__%) 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.__ 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.
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: ____________, ____________, ____________,
and ____________.
“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 Warrants 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 safety, and (iii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or
hereafter in effect, generally relating to creditors’ rights.
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.
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 | ||
| By: /s/ Xxxxx X. Xxxx | By: /s/___________________________ | |
| Xxxxx X. Xxxx | _____________________________(Name), | |
|
President
& CEO
|
_____________________________(Title) |
|
EXHIBIT
A
Warrants
Proposed to be Conveyed to Patriot Scientific
Corporation
by _______________
|
|
Warrants
Held in
Name
of
|
Warrant
Description
|
Issue
Date
|
Warrants
Held
|
Number
of Warrants to be conveyed back to PTSC
|
Current
Exercise Price as of ______
|
|
_____
|
____________
|
______
|
______
|
______
|
$______
|
|
TOTAL:
|
______
|
Initials
of _________________: ____________
Initials
of Patriot Scientific Corporation: ______
|
EXHIBIT
B
Warrants
of ______________
Proposed
to Be Reset to $______
|
|
Warrant
Description
|
Issue
Date
|
Number
of Warrants Held
|
Number
of Warrants being Reset to $0.___
|
Current
Exercise Price as of _______
|
|
Debenture
Warrant #
|
$______
|
|||
|
Debenture
Warrant #
|
$______
|
|||
|
Debenture
Warrant #
|
$______
|
|||
|
Debenture
Warrant #
|
$______
|
|||
|
Debenture
Warrant #
|
$______
|
|||
|
Debenture
Warrant #
|
$______
|
Initials
of ________________: ____________
Initials
of Patriot Scientific Corporation: ______
EXHIBIT
F-2
WAIVER,
CONSENT AND RELEASE AGREEMENT
This
WAIVER, CONSENT AND RELEASE AGREEMENT (this “Agreement”) is made and entered
into as of __________, 2006, by and between PATRIOT SCIENTIFIC CORPORATION,
a
Delaware corporation, (the “COMPANY”), and __________, an individual residing in
__________ County, State of __________ (the “Rights Holder”).
RECITALS
A. WHEREAS,
the Rights Holder holds warrants to purchase shares of the common stock,
$__________ par value per share, of the COMPANY (the “Warrants”), purchased
pursuant to that certain Securities Purchase Agreement, dated as of __________,
200__, 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,
__________, a __________ corporation (“__________”) and __________ (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 $__________ 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(1) in its entirety, and such section shall be of no further force
or
4. 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.
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 Rights Holder 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.
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
9.8. 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.
9.9. 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 | RIGHTS HOLDER | |
| By: /s/ Xxxxx X. Xxxx | By: /s/___________________________ | |
| Xxxxx X. Xxxx | _____________________________(Name) | |
|
President
& CEO
|
EXHIBIT
G
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
PATRIOT
SCIENTIFIC CORPORATION,
P-NEWCO
LLC
TECHNOLOGY
PROPERTIES LIMITED INC.
AND
TPL
NEWCO, LLC
This
Agreement and Plan of Merger (this “Merger
Agreement”)
is
made as of June 15, 2005, by and among PATRIOT SCIENTIFIC CORPORATION, a
Delaware corporation (“Patriot”),
P-NEWCO LLC, a Delaware limited liability company wholly owned by Patriot
(“P-Newco"),
TECHNOLOGY PROPERTIES LIMITED INC., a California corporation (“TPL”),
and
TPL NEWCO, LLC, a Delaware limited liability company wholly owned by TPL
(“T-Newco”).
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 by and among
Patriot, TPL and Xxxxxxx X. Xxxxx (“Xxxxx”)
(the
“Master
Agreement”).
WHEREAS,
Patriot, TPL and Xxxxx have entered into the Master Agreement which provides
for, among other things, the creation by Patriot and TPL of P-Newco and
T-Newco,
respectively, the respective licensing to P-Newco and T-Newco of certain
of
Patriot and TPL’s rights with respect to the MSD Patents, and the merger of
T-Newco with and into P-Newco, with P-Newco continuing as the surviving
entity
(the “Surviving
Entity”),
in
furtherance of the transactions contemplated by the Master
Agreement;
WHEREAS,
pursuant to the Delaware Limited Liability Company Act, the board of directors
of Patriot and TPL, the sole members of P-Newco and T-Newco, respectively,
have
adopted and recommended this Merger Agreement and determined that it is
advisable and in the best interests of P-Newco and T-Newco that T-Newco
merge
with and into P-Newco upon the terms and conditions provided herein (the
“Merger”).
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual agreements
herein contained and of the mutual benefits provided hereby, the parties
hereto
agree as follows:
1. Merger.
The
effective date of the Merger shall be June 15, 2005 (the “Effective
Date”).
On
the Effective Date, T-Newco shall be merged with and into P-Newco and the
separate existence of T-Newco shall thereupon cease. P-Newco shall continue
its
existence in the State of Delaware as the Surviving Entity.
2. Certificate
of Formation.
The
Certificate of Formation of P-Newco, as in effect immediately prior to
the
Effective Date, shall continue to be the Certificate of Formation of the
Surviving Entity until duly amended in accordance with the provisions of
the
laws of the State of Delaware.
3. Conversion
of Membership Interests.
Upon
the Effective Date, by virtue of the Merger and without any action on the
part
of TPL, TPL's membership interests in T-Newco
outstanding
immediately prior to the Merger shall automatically be cancelled, and a
fifty
percent membership interests in the Surviving Entity shall be issued to
TPL in
exchange therefor.
4. Subsequent
Action.
If at
any time after the Effective Date it shall be necessary or desirable to
take any
action or execute, deliver or file any instrument or document in order
to vest,
perfect or confirm of record in the Surviving Entity the title to any property
or any rights of T-Newco, or otherwise to carry out the provisions of this
Merger Agreement, the managers of the Surviving Entity are hereby authorized
and
empowered on behalf of T-Newco and in its name to take such action and
execute,
deliver and file such instruments and documents.
5. Rights
and Duties of Surviving Entity.
On the
Effective Date, the Surviving Entity shall thereupon and thereafter possess
all
rights, privileges, immunities, licenses, and permits (whether of a public
or
private nature) of T-Newco; and all property (real, personal and mixed),
all
debts due on whatever account, all choses in action, and all and every
other
interest of or belonging to or due to T-Newco shall continue and be taken
and
deemed to be transferred to and vested in the Surviving Entity, without
further
act or deed, and the Surviving Entity shall thenceforth be responsible
and
liable for all the liabilities and obligations of T-Newco.
6. Representations
and Warranties.
(a) Incorporation
of Representations and Warranties.
Patriot
and TPL hereby reaffirm the representations and warranties made in the
Master
Agreement as if such representations and warranties were set forth fully
herein.
(b) Existence
and Power.
Each of
Patriot and TPL represents and warrants that P-Newco and T-Newco, respectively,
is a Delaware limited liability company, duly formed and validly existing
under
the laws of the State of Delaware, and has all power and authority necessary
to
enter into this Merger Agreement and consummate the Merger.
(c) Authorization.
Each of
Patriot and TPL represents and warrants that the execution, delivery and
performance by P-Newco and T-Newco, respectively, of this Merger Agreement
and
the Merger contemplated hereby has been duly and validly authorized by
each of
Patriot and P-Newco, on the one hand, and each of TPL and T-Newco, on the
other
hand, under Applicable Law, and no other corporate proceedings on the part
of
Patriot and P-Newco, on the one hand, and TPL and T-Newco, on the other
hand,
are necessary to authorize or consummate this Merger Agreement or the Merger
contemplated hereby (other than the filing and recordation of the appropriate
documents with respect to the Merger in accordance with the laws of the
State of
Delaware).
(d) Capitalization.
Each of
Patriot and TPL represents and warrants that it is the sole shareholder
of
P-Newco and T-Newco, respectively.
(e) Valid
and Existing License; Sole Asset.
Patriot
and P-Newco, on the one hand, and TPL and T-Newco, on the other hand, represent
and warrant that the Newco Licenses, the form of which is attached as
Exhibit C to the Master Agreement, have been validly executed and delivered
pursuant to the terms of the Master Agreement, and that each of P-Newco
and
T-Newco has good and valid title to all rights with respect to the MSD
Patents
granted by Patriot and TPL to P-Newco and T-Newco, respectively, pursuant
to the
Newco Licenses. Patriot and
P-Newco,
on the one hand, and TPL and T-Newco, on the other hand, further represent
and
warrant that the Newco Licenses are the sole assets of P-Newco and
T-Newco.
(f) Purpose;
Absence of Changes.
Each of
Patriot and TPL represents and warrants that P-Newco and T-Newco, respectively,
were formed and have been utilized from the date of formation until the
date
hereof solely to effect the transactions contemplated by this Merger Agreement
and the Master Agreement, and that P-Newco and T-Newco have not engaged
in any
other activity whatsoever except entering into the Newco Licenses referred
to in
subsection (e) above, and taking any action necessary to facilitate the
Merger
in a manner consistent with the terms of this Merger Agreement and the
Master
Agreement.
(g) No
Liabilities.
Patriot
and P-Newco, on the one hand, and TPL and T-Newco, on the other hand, represent
and warrant that P-Newco and T-Newco do not now have, not have they ever
had,
any liabilities whatsoever, including but not limited to any tax liabilities
or
current or prospective litigation.
IN
WITNESS WHEREOF, the parties hereto have caused this Merger 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:______________________________________
Name:____________________________________
Title:_____________________________________
|
|
|
P-NEWCO
LLC, a
Delaware limited liability company
By:______________________________________
Name:____________________________________
Title:_____________________________________
|
|
|
TECHNOLOGY
PROPERTIES LIMITED INC.,
a California corporation By:______________________________________
Name:____________________________________
Title:_____________________________________
|
|
|
TPL
NEWCO, LLC, a
Delaware limited liability company
By:______________________________________
Name:____________________________________
Title:_____________________________________
|
|
EXHIBIT
H
|
***
|
Indicates
material omitted pursuant to an application for confidential
treatment and
that material has been filed separately with the
Commission.
|
PATENT
LICENSE AGREEMENT
This
PATENT LICENSE AGREEMENT (“Agreement”) is entered into by and between PATRIOT
SCIENTIFIC CORPORATION, a Delaware corporation (“Licensor”) having its principal
place of business at 00000 Xxx Xxxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, and
INTEL CORPORATION, a Delaware corporation, located at 0000 Xxxxxxx Xxxxxxx
Xxxx., Xxxxx Xxxxx, XX 00000 (“Intel”).
RECITALS
WHEREAS,
***
***
***
***
NOW,
THEREFORE, in consideration of the promises and the mutual promises and
covenants contained herein and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
DEFINITIONS
Capitalized
terms used in this Agreement that are not otherwise defined herein shall
have
the meaning assigned to them in the Intel PLA. For the avoidance of doubt,
the
term “License” in this Agreement shall refer to Patriot Scientific
Corporation.
Article
1. License
Grant
1.1 Subject
to the terms and conditions of this Agreement, Licensor hereby grants to
Licensee ***
1.2 Right
to
License. In the event Licensor does not have the right to grant a license
under
any particular patent right of the scope set forth herein, then the license
granted herein under such patent right shall be of the broadest scope which
Licensor has the right to grant. If Licensor
(a) owns
any
rights in any Patent; or
(b) has
the
right to enforce or control the enforcement of any rights in any Patent;
or
(c) can
exercise any significant influence over the enforcement of any rights in
any
Patent but Licenser does not have the right to license those rights as
broadly
as set forth in Section 1.1 to Licensee hereunder (“Restricted Patent
Rights”), then, if and to the extent that such Restricted Patent Rights would
have been licensed to the Licensee if Licensor had the right to license
such
Patents;
(d) Licenser
grants to the Licensee for Intel Licensed Products an immunity from suit
for
infringement of such Restricted Patent Rights of a scope identical to the
rights
that would have been granted hereunder if Licensor has the right to license
such
Restricted Patent Rights;
(e) Licensor
shall not give their assent irrespective of whether that assent is required
to
allow a third party entity to assert the Restricted Patent Rights against
the
Licensed Products of the Licensee; and
(f) Licensor
agrees to indemnify arid hold harmless Licensee against any monetary
compensation, including those for damages and/or royalties, paid or to
be paid
by Licensee as a result of actual or threatened assertion of rights by
the
holder of the Restricted Patent Rights against Intel Licensed Products
to the
extent attributable to such Restricted Patent Rights, but only to the extent
that such damage and/or royalty, directly or indirectly, benefits
Licenser.
1.3 Further
Assurances. To the extent Licenser does not have the right to grant any
or all
of the license rights granted in Section 1 of this Agreement or to the
extent this Agreement does not grant such license rights, Licenser hereby
grants
such licenses to the fullest extent of their rights under the Patents and
to the
fullest extent possible under the law, and shall execute whatever documents
are
necessary to effectuate such license grant.
1.4 “Patents”
shall mean all of the patents and patent applications listed on Appendix
1, and
any patent, patent application or patent right throughout the Territory
including, without limitation, any provisional, divisional, continuation,
continuation-in-part, substitute, renewal, reissue, extension, confirmation,
reexamination or registration thereof and any patent issuing therefrom
including
any substitute, renewal, reissue, extension, confirmation, reexamination
or
registration thereof
Article
2. Effective
Date of License Grants.
2.1. The
effective date of the license grant to each individual Patent licensed
to Intel
hereunder shall be the filing date of such Patent.
Article
3. Consideration.
3.1 As
full
consideration for the rights granted by Licensor to Licensee in Article I
hereunder, and notwithstanding any rights Intel may have ***
shall
become immediately due and payable upon the execution of this Agreement
by both
parties. Licensor hereby acknowledges the adequacy of this consideration
paid by
Licensee to Licensor in consideration for the rights granted by Licensor
in
Article 1 hereunder, including without limitation ***.
3.2 The
payment of the ***
receives
Notice of the triggering event by wire transfer to:
Xxxxxx
Xxxxx Bank
00000
Xx
Xxxxxx Xxxx
Xxx Xxxxx,
XX 00000
ABA/Routing
Number: 000000000
Beneficiary
Account Name: ***
Beneficiary
Account Number: ***
Article
4. Other
Intel PLA Provisions
4.1 All
provisions of Articles 4 through Article 9 are hereby incorporated
herein by this reference, provided only that
(a) Patriot
Scientific Corporation shall be substituted, mutatis
mutandis for
the
terms “***”
and
“Licensor” found throughout each of those provisions of the Intel
PLA;
(b) Notices
to Licensor shall be delivered to the following address or facsimile:
Patriot
Scientific Corporation
00000
Xxx
Xxxxxxxx
Xxx Xxxxx,
XX 00000
Attn: President
Fax: 000-000-0000
(c) Section 4.3
shall be deleted in its entirety and replaced with the following:
***
;
and
(d) Section 9.18
shall be deleted in its entirety and replaced with the following:
***
Article
5. ***
***
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
INTEL
CORPORATION
By:__________________________________
Name:
Title:
Date:
May 27, 2005
PATRIOT
SCIENTIFIC CORPORATION
By:__________________________________
Name:
Title:
Date:
May 27, 2005
***
***
By:__________________________________
Name:
***
Title:
***
Date:
May
25, 2005
***
By:__________________________________
Name:
***
Title:
***
Date:
May
25, 2005
XXXXXXX
X. XXXXX
By:__________________________________
Name:
Xxxxxxx X. Xxxxx
Date:
May
25, 2005
EXHIBIT
I
THIS
WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i)
A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION
FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS
MUST RELY
ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
|
Warrant
to Purchase
|
Warrant
Number _____
|
|
_______________
shares
|
Warrant
Agreement
and
Warrant
to Purchase Common Stock
of
PATRIOT
SCIENTIFIC CORP.
THIS
WARRANT AGREEMENT AND WARRANT TO PURCHASE COMMON STOCK (this “Warrant” or this
“Agreement”) CERTIFIES that _____________ or any subsequent holder hereof
(“Holder”) has the right to purchase from Patriot Scientific Corp., a Delaware
corporation (the “Company”), up to ___________ fully paid and non-assessable
shares, of the Company's common stock, $___________ par value per share
(“Common
Stock”), subject to adjustment as provided herein, at a price equal to the
Exercise Price as defined in Section 3 below, and in the amounts provided
in
Section 2 below, at any time beginning on the Date of Issuance (defined
below)
and ending at 5:00 p.m., New York, New York time, on the date that is
seven (7)
years after the Date of Issuance (the “Exercise Period”).
Holder
agrees with the Company that this Warrant is issued and all rights hereunder
shall be held subject to all of the conditions, limitations and provisions
set
forth herein.
1. Date
of Issuance and Term.
This
Warrant shall be deemed to be issued on ___________, 200_ (“Date of Issuance”).
The term of this Warrant is seven (7) years from the Date of
Issuance.
2. Exercise.
(a) Amount
of Exercise.
The
Holder hereof shall be entitled to exercise this Warrant at any time
and from
time to time in accordance with the following schedule:
(1) Upon
the
Closing (as defined herein), the Holder shall be entitled to exercise
this
Warrant to purchase ___________ shares of Common Stock.
(2) Upon
the
Trigger Price (as defined herein) reaching $_________, the Holder shall
be
entitled to exercise this Warrant to purchase an additional ___________
shares
of Common Stock.
(3) Upon
the
Trigger Price reaching $_________, the Holder shall be entitled to exercise
this
Warrant to purchase an additional ___________ shares of Common
Stock.
(4) Upon
the
Trigger Price reaching $________, the Holder shall be entitled to exercise
this
Warrant to purchase an additional ___________ shares of Common
Stock.
“Closing”
shall have the meaning given that term in the Master Agreement by and
among
Patriot, ___________, and ___________, dated as of ___________, 200_
(the
“Master Agreement”).
“Trading
Day” shall mean any day on which the Common Stock of the Company is traded
for
any period on the OTC-BB (as defined below), or on the principal securities
exchange or other securities market on which the Common Stock is then
being
traded.
“Trigger
Price” shall mean the closing price of the Company’s Common Stock on any Trading
Day as reported by, or based upon data reported by, Bloomberg Financial
Markets
or an equivalent reliable reporting service.
(b) Manner
of Exercise.
During
the Exercise Period, this Warrant may be exercised as to all or any lesser
number of full shares of Common Stock covered hereby in accordance with
the
provisions of this Section 2 (the “Warrant Shares”) upon surrender of this
Warrant, with the Exercise Form attached hereto as Exhibit A (the “Exercise
Form”) duly completed and executed, together with the full Exercise Price
(as
defined below) for each share of Common Stock as to which this Warrant
is
exercised, at the office of the Company, Patriot Scientific Corporation,
Attn:
Xxxxx X. Xxxx, CEO; 00000 Xxx Xxxxxxxx, Xxx Xxxxx, XX 00000; Telephone:
(000)
000-0000, Facsimile: (000) 000-0000 or at such other office or agency
as the
Company may designate in writing, by overnight mail, with an advance
copy of the
Exercise Form sent to the Company and its Transfer Agent by facsimile
(such
surrender and payment of the Exercise Price hereinafter called the “Exercise of
this Warrant”).
(c) Date
of Exercise.
The
“Date of Exercise” of the Warrant shall be defined as the date that the advance
copy of the completed and executed Exercise Form is sent by facsimile
to the
Company, provided that the original Warrant and Exercise Form are received
by
the Company as soon as practicable thereafter. Alternatively, the Date
of
Exercise shall be defined as the date the original Exercise Form is received
by
the Company, if Holder has not sent
advance
notice by facsimile. The Company shall not be required to deliver the
shares of
Common Stock to the Holder until the requirements of Section 2(b) above
are
satisfied.
(d) Cancellation
of Warrant.
This
Warrant shall be canceled upon the Exercise in full of this Warrant,
and, as
soon as practical after the Date of Exercise, Holder shall be entitled
to
receive Common Stock for the number of shares purchased upon such Exercise
of
this Warrant, and if this Warrant is not exercised in full, Holder shall
be
entitled to receive a new Warrant (containing terms identical to this
Warrant)
representing any unexercised portion of this Warrant in addition to such
Common
Stock.
(e) Holder
of Record.
Each
person in whose name any Warrant for shares of Common Stock is issued
shall, for
all purposes, be deemed to be the Holder of record of such shares on
the Date of
Exercise of this Warrant, irrespective of the date of delivery of the
Common
Stock purchased upon the Exercise of this Warrant. Nothing in this Warrant
shall
be construed as conferring upon Holder any rights as a stockholder of
the
Company.
3. Payment
of Warrant Exercise Price.
The
Exercise Price (“Exercise Price”) shall equal $___________ per
share.
Payment
of the Exercise Price may be made by either of the following, or a combination
thereof, at the election of Holder:
(i) Cash
Exercise:
cash,
bank or cashiers check or wire transfer; or
|
(ii)
|
Cashless
Exercise:
surrender of this Warrant at the principal office of the Company
together
with notice of cashless election, in which event the Company
shall issue
Holder a number of shares of Common Stock computed using the
following
formula:
|
X=Y
(A-B)/A
where:
X
= the number of shares of Common Stock to be issued to Holder.
Y
= the
number of shares of Common Stock for which this Warrant is being
exercised.
A
= the
Market Price of one (1) share of Common Stock (for purposes of this Section
3
(ii), where “MARKET PRICE,” as of any date, means the Volume Weighted Average
Price (as defined herein) of the Company's Common Stock during the ten
(10)
consecutive trading day period immediately preceding the date in
question.
As
used
herein, the “VOLUME WEIGHTED AVERAGE PRICE” for any security as of any date
means the volume weighted average sale price on the Over the Counter
Electronic
Bulletin Board (the
“OTC-BB”)
as reported by, or based upon data reported by, Bloomberg Financial Markets
or'
an equivalent, reliable reporting service mutually acceptable to and
hereafter
designated by holders of a majority in interest of the Warrants and the
Company
(“BLOOMBERG”) or, if the OTC-BB is not the principal trading market for such
security, the volume weighted average sale price of such security on
the
principal securities exchange or trading market where such security is
listed or
traded as reported by Bloomberg, or, if no volume weighted average sale
price is
reported for such security, then the last closing trade price of such
security
as reported by Bloomberg, or, if no last closing trade price is reported
for
such security by Bloomberg, the average of the bid prices of any market
makers
for such security that are listed in the “pink sheets” by the National Quotation
Bureau, Inc. If the Volume Weighted Average Price cannot be calculated
for such
security on such date in the manner provided above, the volume weighted
average
price shall be the fair market value as mutually determined by the Company
and
the holders of a majority in interest of the Warrants being exercised
for which
the calculation of the volume weighted average price is required in order
to
determine the Exercise Price of such Warrants. “TRADING DAY” shall mean any day
on which the Common Sock is traded for any period on the OTC-BB, or on
the
principal securities exchange or other securities market on which the
Common
Stock is then being traded.
B
= the
Exercise Price.
For
purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise
of this
Warrant in a cashless exercise transaction shall be deemed to have been
acquired
at the time this Warrant was issued. Moreover, it is intended, understood
and
acknowledged that the holding period for the Common Stock issuable upon
exercise
of this Warrant in a cashless exercise transaction shall be deemed to
have
commenced on the date this Warrant was issued.
4. Holder’s
Representations and Warranties.
Holder
represents and warrants to the Company that:
(a) Incorporation
of Representations and Warranties. The
representations and warranties of the Holder contained in the Master
Agreement
are hereby incorporated by reference as if fully set forth herein.
(b) Investment
Purpose.
As of
the date hereof, Holder is purchasing the Warrants and the Warrant Shares
(collectively, the “Securities”) for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the 1933 Act; PROVIDED,
HOWEVER,
that by making the
representations
herein, Holder does not agree to hold the Securities for any minimum
or other
specific term and reserves the right to dispose of the Securities at
any time in
accordance with or pursuant to a registration statement or an exemption
under
the 1933 Act and applicable state securities laws.
(c) Reliance
On Exemptions.
Holder
understands that the Securities are being offered and sold to it in reliance
upon specific exemptions from the registration requirements of United
States
federal and state securities laws and that the Company is relying upon
the truth
and accuracy of, and Holder's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Holder set forth herein
in
order to determine the availability of such exemptions and the eligibility
of
Holder to acquire the Securities.
(d) Governmental
Review.
Holder
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation
or
endorsement of the Securities.
(e) Transfer
or Re-sale.
Holder
understands that (i) except as provided in the Registration Rights Agreement,
the sale or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the Securities
may not be transferred or resold unless (a) the Securities are sold pursuant
to
an effective registration statement under the 1933 Act, (b) Holder shall
have
delivered to the Company an opinion of counsel (which opinion shall be
in form,
substance and scope reasonably satisfactory to counsel to the Company)
to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (c) the Securities are
sold or
transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) (“RULE 144”) of the Holder who agrees to sell or
otherwise transfer the Securities only in accordance with this Section
2(f) and
who is an Accredited Investor, or (d) the Securities are sold pursuant
to Rule
144; and (ii) any sale of such Securities made in reliance on Rule 144
may be
made only in accordance with the terms of said Rule and further, if said
Rule is
not applicable, any re-sale of such Securities under circumstances in
which the
seller (or the person through whom the sale is made) may be deemed to
be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations
of the
SEC thereunder. Notwithstanding the foregoing or anything else contained
herein
to the contrary, the Securities may be pledged as collateral in connection
with
a bona
fide
margin
account or other lending arrangement.
(f) Legends.
Holder
understands that the Warrants and, until such time as the Warrant Shares
have
been registered under the 1933 Act as contemplated by the Registration
Rights
Agreement or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then
be
immediately sold, the Warrant Shares, may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):
The
securities represented by this certificate have not been registered under
the
Securities Act of 1933, as amended, or applicable state securities laws.
The
securities may not be sold, transferred or assigned in the absence of
an
effective registration
statement
for the securities under said Act, or an opinion of counsel, in form,
substance
and scope reasonably satisfactory to counsel to the Company, that registration
is not required under said Act or unless sold pursuant to Rule 144 under
said
Act.
Upon
the
request of any holder and the surrender of certificates, the legend set
forth
above shall be removed and the Company shall issue a certificate without
such
legend to the holder of any Security upon which it is stamped, if (a)
such
Security is registered for sale under an effective registration statement
filed
under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any
restriction as to the number of securities as of a particular date that
can then
be immediately sold, or (b) such holder provides the Company with an
opinion of
counsel, in form, substance and scope reasonably satisfactory to counsel
to the
Company, to the effect that a public sale or transfer of such Security
may be
made without registration under the 1933 Act and such sale or transfer
is
effected or (c) such holder provides the Company with reasonable assurances
that
such Security can be sold pursuant to Rule 144. Holder agrees to sell
all
Securities, including those represented by a certificate(s) from which
the
legend has been removed, in compliance with applicable prospectus delivery
requirements, if any.
(g) Knowledge
and Experience. Holder
has such knowledge and experience in financial and business matters that
it is
capable of evaluating the merits and risks of the investment in the
Securities.
5. Company’s
Representations and Warranties.
The
Company represents and warrants to Holder that, except as set forth on
the
Company's disclosure schedules to the Master Agreement:
(a) Incorporation
of Representations and Warranties.
The
representations and warranties of the Company contained in the Master
Agreement
are hereby incorporated by reference as if fully set forth herein.
(b) Issuance
of Shares.
Upon
issuance upon exercise of the Warrants in accordance with their terms,
the
Warrant Shares will be validly issued, fully paid and non-assessable,
and free
from all taxes, liens, claims and encumbrances and shall not be subject
to
preemptive rights or other similar rights of stockholders of the Company
and
will not impose personal liability upon the holder thereof.
(c) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its
or their
behalf, has directly or indirectly made any offers or sales of any security
or
solicited any offers to buy any security under circumstances that would
require
registration under the 1933 Act of the issuance of the Securities to
Holder. The
issuance of the Securities to Holder will not be integrated with any
other
issuance of the Company's securities (past, current or future) for purposes
of
any stockholder approval provisions applicable to the Company or its
securities.
(d) Insurance.
The
Company and each of its subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts
as
management of the Company believes to be prudent and customary in the
businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has any reason to believe that it will not be able
to renew
its existing insurance coverage as and when such coverage expires or
to obtain
similar coverage from similar insurers as may be necessary to continue
its
business at a cost that would not have a Material Adverse Effect (as
defined in
the Master Agreement).
(e) Solvency.
The
Company (both before and after giving effect to the transactions contemplated
by
this Agreement) is solvent (i.e., its assets have a fair market value
in excess
of the amount required to pay its probable liabilities on its existing
debts as
they become absolute and matured) and currently the Company has no information
that would lead it to reasonably conclude that the Company would not
have the
ability to, nor does it intend to take any action that would impair its
ability
to, pay its debts from time to time incurred in connection therewith
as such
debts mature. The Company did not receive a qualified opinion from its
auditors
with respect to its most recent fiscal year end and does not anticipate
or know
of any basis upon which its auditors might issue a qualified opinion
in respect
of its current fiscal year.
(f) No
Investment Company.
The
Company is not, and upon the issuance and sale of the Securities as contemplated
by this Agreement will not be an "investment company" required to be
registered
under the Investment Company Act of 1940 (an “INVESTMENT COMPANY”). The Company
is not controlled by an Investment Company.
6. Covenants.
(a) Form
D; Blue Sky Laws.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to Holder promptly after such
filing.
The Company shall, on or before the Closing Date, take such action as
the
Company shall reasonably determine is necessary to qualify the Securities
for
sale to Holder at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or
to obtain
an exemption from such qualification), and shall provide evidence of
any such
action so taken to Holder on or prior to the Closing Date.
(b) Reservation
of Shares.
The
Company represents that it has at least 500,000,000 authorized shares
and
covenants that it will initially reserve (the “INITIAL SHARE RESERVATION”) from
its authorized and unissued Common Stock a number of shares of Common
Stock
equal to at least 100% of the Warrant Shares, to provide for the issuance
of
Common Stock upon the exercise of the Warrants. The Company further covenants
that, beginning on the date hereof, and continuing throughout the period
the
conversion right exists, the Company shall at all times have authorized,
and
reserved (the “ONGOING SHARE RESERVATION REQUIREMENT”) for the purpose of
issuance, a sufficient number of shares of Common Stock to provide for
the full
exercise of the Warrants and issuance of the Warrant Shares in connection
therewith. The Company shall not reduce the number of shares of Common
Stock
reserved for issuance upon exercise of or otherwise pursuant to the Warrants
without the consent of Holder. The Company shall use its best efforts
at all
times to maintain the number of shares of Common Stock so reserved for
issuance
at no less than 100% of the number that is then actually issuable upon
full
exercise of the Warrants. If at any time the number of shares of Common
Stock
authorized and reserved for issuance is below the number of Warrant
Shares
issued or issuable upon exercise of or otherwise pursuant to the Warrants,
the
Company will promptly take all corporate action necessary to authorize
and
reserve a sufficient number of shares, including, without limitation,
calling a
special meeting of stockholders to authorize additional shares to meet
the
Company's obligations under this Section 6(b), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares.
(c) Listing.
The
Company shall use its best efforts to promptly secure the listing of
the Warrant
Shares upon each national securities exchange or automated quotation
system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and, so long as Holder owns any of the Securities,
shall
maintain, so long as any other shares of Common Stock shall be so listed,
such
listing of all Warrant Shares from time to time issuable upon exercise
of or
otherwise pursuant to the Warrants. The Company will use its best efforts
to
obtain and, so long as Holder owns any of the Securities, maintain the
listing
and trading of its Common Stock on the OTC-BB, the Nasdaq National Market
(the
“NNM”), the Nasdaq SmallCap Market (the “NASDAQ SMALLCAP”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in
all respects with the Company's reporting, filing and other obligations
under
the bylaws or rules of the National Association of Securities Dealers
(“NASD”)
and such exchanges, as applicable. The Company shall promptly provide
to Holder
copies of any notices it receives from the OTC-BB and any other exchanges
or
quotation systems on which the Common Stock is then listed regarding
the
continued eligibility of the Common Stock for listing on such exchanges
and
quotation systems.
(d) Corporate
Existence. So
long
as Holder beneficially owns any Warrants, the Company shall maintain
its
corporate existence and shall not merge, consolidate or sell all or
substantially all of the Company's assets, except in the event of a merger
or
consolidation or sale of all or substantially all of the Company's assets,
where
the successor or acquiring entity assumes the Company's obligations under
this
Agreement.
(e) No
Integration.
The
Company shall not make any offers or sales of any security (other than
the
Securities) under circumstances that would require registration of the
Securities being offered or sold hereunder under the 1933 Act or cause
the
offering of the Securities to be integrated with any other offering of
securities by the Company for the purpose of any stockholder approval
provision
applicable to the Company or its securities.
(f) Irrevocable
Transfer Agent Instructions.
Within
ten (10) business days after the Closing Date, the Company agrees to
deliver to
Holder the Irrevocable Transfer Agent Instructions (as defined below),
in form
and substance satisfactory to Holder, which instructions shall be acknowledged
in writing by the Company's Transfer Agent.
(g) Confidentiality.
The
Company agrees to keep all information disclosed to the Company by Holder
or its
representatives pursuant to or in connection with this Agreement, the
Registration Rights Agreement entered into as of the date hereof, or
the
transactions contemplated hereby and thereby, confidential, and shall
not
disclose any such information without first obtaining the written consent
of
Holder, except as required by applicable law.
7. Transfer
Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent to
issue
certificates, registered in the name of Holder or its nominee for the
Warrant
Shares in such amounts as specified from time to time by Holder to the
Company
upon exercise of the Warrants in accordance with their terms (the “IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS”). Prior to registration of the Warrant Shares under
the 1933 Act or the date on which the Warrant Shares may be sold pursuant
to
Rule 144 without any restriction as to the number of securities as of
a
particular date that can then be immediately sold, all such certificates
shall
bear the restrictive legend specified in Section 4(h) of this Agreement.
The
Company warrants that no instruction other than the Irrevocable Transfer
Agent
Instructions referred to in this Section 7, and stop transfer instructions
to
give effect to Section 2(g) hereof (in the case of the Warrant Shares,
prior to
registration of the Warrant Shares under the 1933 Act or the date on
which the
Warrant Shares may be sold pursuant to Rule 144 without any restriction
as to
the number of securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records
of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the
Holder's
obligations and agreement set forth in Section 2(g) hereof to comply
with all
applicable prospectus delivery requirements, if any, upon re-sale of
the
Securities. If Holder provides the Company with (i) an opinion of counsel
in
form, substance and scope customary for opinions in comparable transactions,
to
the effect that a public sale or transfer of such Securities may be made
without
registration under the 1933 Act and such sale or transfer is effected
or (ii)
Holder provides reasonable assurances that the Securities can be sold
pursuant
to Rule 144, the Company shall permit the transfer, and, in the case
of the
Warrant Shares, promptly instruct its transfer agent to issue one or
more
certificates, free from any restrictive legend, in such name and in such
denominations as specified by Holder.
8. Transfer
and Registration.
(a) Transfer
Rights.
Subject
to the provisions of Section 12 of this Warrant, this Warrant may be
transferred
on the books of the Company, in whole or in part, in person or by attorney,
upon
surrender of this Warrant properly completed and endorsed. This Warrant
shall be
canceled upon such surrender and, as soon as practicable thereafter,
the person
to whom such transfer is made shall be entitled to receive a new Warrant
or
Warrants as to the portion of this Warrant transferred, and Holder shall
be
entitled to receive a new Warrant as to the portion hereof
retained.
(b) Registrable
Securities.
The
Common Stock issuable upon the exercise of this Warrant has registration
rights
pursuant to that certain Registration Rights Agreements between the Company
and
Technology Properties Limited Inc. dated of even date herewith.
9. Anti-Dilution
Adjustments.
(a) Stock
Dividend.
If the
Company shall at any time declare a dividend payable in shares of Common
Stock,
then Holder, upon Exercise of this Warrant after the record date for
the
determination of holders of Common Stock entitled to receive such dividend,
shall be entitled to receive upon Exercise of this Warrant, in addition
to the
number of shares of Common Stock as to which this Warrant is exercised,
such
additional shares of Common Stock
as
such
Holder would have received had this Warrant been exercised immediately
prior to
such record date and the Exercise Price will be proportionately
adjusted.
(b) Distribution.
If
at any
time after the Issue Date hereof, the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) or shares
of its
capital stock (other than Common Stock) to Holders of Common Stock of
the
Company as a partial liquidating dividend, by way of return of capital
or
otherwise (including any dividend or distribution to the Company's shareholders
in cash or shares or rights to acquire shares of capital stock of any
other
public or private company, including but not limited to a subsidiary
or spin-off
of the Company (a “Distribution”)), then the Holders of this Warrant shall be
entitled, to immediately receive the amount of such distribution (in
kind) which
would have been payable to the Holder with respect to the shares of Common
Stock
issuable upon a full exercise of this Warrant (without regard to any
contractual, legal or regulatory limitations on the amount of such conversion),
had such Holder been the holder of such shares of Common Stock on the
record
date for determination of shareholders entitled to such
Distribution.
(c) Recapitalization
or Reclassification.
If the
Company shall at any time effect a recapitalization, reclassification
or other
similar transaction of such character that the shares of Common Stock
shall be
changed into or become exchangeable for a larger or smaller number of
shares,
then upon the effective date thereof, the number of shares of Common
Stock which
Holder shall be entitled to purchase upon Exercise of this Warrant shall
be
increased or decreased, as the case may be, in direct proportion to the
increase
or decrease in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of
shares,
proportionally increased. The Company shall give Holder the same notice
it
provides to holders of Common Stock of any transaction described in this
Section
9(c).
(d) Intentionally
Left Blank.
(e) Notice
of Consolidation or Merger.
In the
event of a merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of
Common
Stock shall be changed into the same or a different number of shares
of the same
or another class or classes of stock or securities or other assets of
the
Company or another entity or there is a sale of all or substantially
all the
Company's assets (a “Corporate Change”), then this Warrant shall be exerciseable
into such class and type of securities or other assets as Holder would
have
received had Holder exercised this Warrant immediately prior to such
Corporate
Change; provided, however, that Company may not affect any Corporate
Change
unless it first shall have given thirty (30) business days notice to
Holder
hereof of any Corporate Change.
(f) Exercise
Price Adjusted.
As used
in this Warrant, the term “Exercise Price” shall mean the purchase price per
share specified in Section 3 of this Warrant, until the occurrence of
an event
stated in subsection (a), (b), (c) or (d) of this Section 9, and thereafter
shall mean said price as adjusted from time to time in accordance with
the
provisions of said subsection. No such adjustment under this Section
9 shall be
made unless such adjustment would
change
the Exercise Price at the time by $.01 or more; provided, however, that
all
adjustments not so made shall be deferred and made when the aggregate
thereof
would change the Exercise Price at the time by $.__ or more. No adjustment
made
pursuant to any provision of this Section 9 shall have the net effect
of
increasing the Exercise Price in relation to the split adjusted and distribution
adjusted price of the Common Stock. The number of shares of Common Stock
subject
hereto shall increase proportionately with each decrease in the Exercise
Price.
(g) Adjustments:
Additional Shares, Securities or Assets.
In the
event that at any time, as a result of an adjustment made pursuant to
this
Section 9, Holder shall, upon Exercise of this Warrant, become entitled
to
receive shares and/or other securities or assets (other than Common Stock)
then,
wherever appropriate, all references herein to shares of Common Stock
shall be
deemed to refer to and include such shares and/or other securities or
assets;
and thereafter the number of such shares and/or other securities or assets
shall
be subject to adjustment from time to time in a manner and upon terms
as nearly
equivalent as practicable to the provisions of this Section 9.
10. Fractional
Interests.
No
fractional shares or scrip representing fractional shares shall be issuable
upon
the Exercise of this Warrant, but on Exercise of this Warrant, Holder
may
purchase only a whole number of shares of Common Stock. If, on Exercise
of this
Warrant, Holder would be entitled to a fractional share of Common Stock
or a
right to acquire a fractional share of Common Stock, such fractional
share shall
be disregarded and the number of shares of Common Stock issuable upon
exercise
shall be the next higher number of shares.
11. Reservation
of Shares.
From
and
after the date hereof, the Company shall at all times reserve for issuance
such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient
for the
Exercise of this Warrant and payment of the Exercise Price. If at any
time the
number of shares of Common Stock authorized and reserved for issuance
is below
the number of shares sufficient for the Exercise of this Warrant and
payment of
the Exercise Price (based on the Exercise Price in effect from time to
time),
the Company will promptly take all corporate action necessary to authorize
and
reserve a sufficient number of shares, including, without limitation,
calling a
special meeting of stockholders to authorize additional shares to meet
the
Company's obligations under this Section 11, in the case of an insufficient
number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares
of
Common Stock issuable upon such exercise shall be duly and validly issued,
fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
12. Restrictions
on Transfer.
(a) Registration
or Exemption Required.
This
Warrant has been issued in a transaction exempt from the registration
requirements of the Act by virtue of Regulation D and
exempt
from state registration under applicable state laws. The Warrant and
the Common
Stock issuable upon the Exercise of this Warrant may not be pledged,
transferred, sold or assigned except pursuant to an effective registration
statement or an exemption to the registration requirements of the Act
and
applicable state laws.
(b) Assignment.
If
Holder can provide the Company with reasonably satisfactory evidence
that the
conditions of (a) above regarding registration or exemption have been
satisfied,
Holder may sell, transfer, assign, pledge or otherwise dispose of this
Warrant,
in whole or in part. Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit
B,
indicating the person or persons to whom the Warrant shall be assigned
and the
respective number of warrants to be assigned to each assignee. The Company
shall
effect the assignment within ten (10) days, and shall deliver to the
assignee(s)
designated by Holder a Warrant or Warrants of like tenor and terms for
the
appropriate number of shares.
13. Benefits
of this Warrant.
Nothing
in this Warrant shall be construed to confer upon any person other than
the
Company and Holder any legal or equitable right, remedy or claim under
this
Warrant and this Warrant shall be for the sole and exclusive benefit
of the
Company and Holder.
14. Arbitration:
Governing Law.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York applicable to agreements made in and wholly to be performed
in
that jurisdiction, except for matters arising under the Act or the Securities
Exchange Act of 1934, which matters shall be construed and interpreted
in
accordance with such laws. Any controversy or claim arising out of or
related to
this Agreement or the breach thereof, shall be settled by binding arbitration
in
New York, New York in accordance with the Expedited Procedures (Rules
53-57) of
the Commercial Arbitration Rules of the American Arbitration Association
(“AAA”). A proceeding shall be commenced upon written demand by Company or
any
Lender to the other. The arbitrator(s) shall enter a judgment by default
against
any party, which fails or refuses to appear in any properly noticed arbitration
proceeding. The proceeding shall be conducted by one (1) arbitrator,
unless the
amount alleged to be in dispute exceeds _____ dollars ($__), in which
case three
(3) arbitrators shall preside. The arbitrator(s) will be chosen by the
parties
from a list provided by the AAA, and if they are unable to agree within
ten (10)
days, the AAA shall select the arbitrator(s). The arbitrators must be
experts in
securities law and financial transactions. The arbitrators shall assess
costs
and expenses of the arbitration, including all attorneys' and experts'
fees, as
the arbitrators believe is appropriate in light of the merits of the
parties'
respective positions in the issues in dispute. Each party submits irrevocably
to
the jurisdiction of any state court sitting in New York, New York or
to the
United States District Court sitting in New York for purposes of enforcement
of
any discovery order, judgment or award in connection with such arbitration.
The
award of the arbitrator(s) shall be final and binding upon the parties
and may
be enforced in any court having jurisdiction. The arbitration shall be
held in
such place as set by the arbitrator(s) in accordance with Rule 55. With
respect
to any arbitration proceeding in accordance with this section, the prevailing
party's reasonable attorney's fees and expenses shall be borne by the
non-prevailing party.
Although
the parties, as expressed above, agree that all claims, including claims
that
are equitable in nature, for example specific performance, shall initially
be
prosecuted in the binding arbitration procedure outlined above, if the
arbitration panel dismisses or otherwise fails to entertain any or all
of the
equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, .then, in only that event, will the parties have the right
to
initiate litigation respecting such equitable claims or remedies. The
forum for
such equitable relief shall be in either a state or federal court sitting
in New
York, New York. Each party waives any right to a trial by jury, assuming
such
right exists in an equitable proceeding, and irrevocably submits to the
jurisdiction of said New York court. New York law shall govern the proceeding
as
well as the interpretation and construction of this Agreement and the
transaction as a whole.
15. Loss
of Warrant.
Upon
receipt by the Company of evidence of the loss, theft, destruction or
mutilation
of this Warrant, and (in the case of loss, theft or destruction) of indemnity
or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall execute
and
deliver a new Warrant of like tenor and date.
16. Notice
or Demands.
Notices
or demands pursuant to this Warrant to be given or made by Holder to
or on the
Company shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, until
another
address is designated in writing by the Company, to the address set forth
in
Section 2(b) above. Notices or demands pursuant to this Warrant to be
given or
made by the Company to or on Holder shall be sufficiently given or made
if sent
by certified or registered mail, return receipt requested, postage prepaid,
and
addressed, to the address of Holder set forth in the Company's records,
until
another address is designated in writing by Holder.
IN
WITNESS WHEREOF, the undersigned have executed this Warrant as of the
__th day
of __, 2005.
|
PATRIOT
SCIENTIFIC CORPORATION,
a
Delaware corporation
By:__________________________________
Name:________________________________
Title:_________________________________
|
|
|
____________________________________,
a
_______________ corporation
By:__________________________________
Name:________________________________
Title:_________________________________
|
EXERCISE
FORM FOR WARRANT
TO:
PATRIOT SCIENTIFIC CORP.
The
undersigned hereby irrevocably exercises the right to purchase ________________
of the shares of Common Stock (the “Common Stock”) of Patriot Scientific Corp.,
a Delaware corporation (the “Company”), evidenced by the attached warrant (the
“Warrant”), and herewith makes payment of the exercise price with respect to
such shares in full, all in accordance with the conditions and provisions
of
said Warrant.
1. The
undersigned agrees not to offer, sell, transfer or otherwise dispose
of any of
the Common Stock obtained on exercise of the Warrant, except in accordance
with
the provisions of Section 8(a) of the Warrant.
2. The
undersigned requests that stock certificates for such shares be issued
free of
any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the
name of the
undersigned and delivered to the undersigned at the address set forth
below:
Dated:_________________
Signature
Print
Name
Address
NOTICE
The
signature to the foregoing Exercise Form must correspond to the name
as written
upon the face of the attached Warrant in every particular, without alteration
or
enlargement or any change whatsoever.
EXHIBIT
B
ASSIGNMENT
(To
be
executed by the registered holder
desiring
to transfer the Warrant)
FOR
VALUE
RECEIVED, the undersigned holder of the attached warrant (the “Warrant”) hereby
sells, assigns and transfers unto the person or persons below named the
right to
purchase ________ shares of the Common Stock of Patriot Scientific Corp.,
evidenced by the attached Warrant and does hereby irrevocably constitute
and
appoint ______________________ attorney to transfer the said Warrant
on the
books of the Company, with full power of substitution in the
premises.
Dated:_____________ __________________________
Signature
Fill
in
for new registration of Warrant:
_____________________________________
Name
_____________________________________
Address
_____________________________________
Please
print name and address of assignee
(including
zip code number)
________________________________________________________________________
NOTICE
The
signature to the foregoing Assignment must correspond to the name as
written
upon the face of the attached Warrant in every particular, without alteration
or
enlargement or any change whatsoever.
________________________________________________________________________
EXHIBIT
J
REGISTRATION
RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this “Agreement”), dated as of ________, 200__, by and between
PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (The “Company”), and
_______, a _________ corporation (the “Buyer” or “____”).
WHEREAS:
A. In
connection with the transactions contemplated by the Master Agreement by
and
among the Company, ___, and _______, dated as of ________, 200__ (the “Master
Agreement”), the company has agreed, upon the terms and subject to the
conditions contained in the Master Agreement and the Warrant Agreement between
the Company and ___, dated as of the date hereof (the “Warrant Agreement”), to
issue to ___ warrants (the “Warrants”) to purchase ________ shares of common
stock of the Company, par value of $_____ (the “Common Stock”); and
B. To
induce
_____ to execute and deliver the Master Agreement and the Warrant Agreement,
the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “1933 Act”), and applicable state
securities laws;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and _________ hereby agree
as
follows:
1. DEFINITIONS.
a. As
used
in this Agreement, the following terms shall have the following
meanings:
(i) “BUSINESS
DAY” shall have the meaning set forth in the Master Agreement.
(ii) “BUYER”
shall mean ____ or any transferee pursuant to Section 9 herein.
(iii) “REGISTER,”
“REGISTERED,” and “REGISTRATION” refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the
1933
Act and pursuant to Rule 3415 under the 1933 Act or any successor rule providing
for offering securities on a continuous as basis (“RULE 415”), and the
declaration or ordering of effectiveness of such Registration statement by
the
United States Securities and Exchange Commission (the “SEC”).
(iv) “REGISTRATION
SECURITIES” means (a) any shares of Common Stock (the “Warrant Shares”) issued
or issuable upon exercise of or otherwise pursuant to the Warrants and (b)
any
shares of capital stock or issuable as a dividend on or in exchange for or
otherwise with respect to the foregoing.
1
(v) “REGISTRATION
STATEMENT(S)” means a registration statement(s) of the Company under the 1933
Act.
2. REGISTRATION.
a. MANDATORY
REGISTRATION.
The
Company shall prepare and, on or prior to ________, 200__ (the “FILING DATE”)
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is
not
then available, on such form of Registration Statement as is then available
to
effect a registration of the Registrable Securities, subject to the consent
of
the Buyer, which consent will not be unreasonably withheld) covering the
resale
of the Registrable Securities, which Registration Statement, to the extent
allowable under the 1933 Act and the rules and regulations promulgated
thereunder (including Rule 415), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock
as
may become issuable upon exercise of or otherwise pursuant to the Warrants
to
prevent dilution resulting from stock splits, stock dividends or similar
transactions. The number of shares of Common Stock initially included in
such
Registration Statement shall be no less than 100% of the aggregate number
of
Warrant Shares that are then issuable upon exercise of or otherwise pursuant
to
the Warrants, without regard to any limitation on the Buyer’s ability to
exercise the Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon exercise of or otherwise
pursuant to the Warrants. Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the approval of) the Buyer and its counsel
prior to its filing or other submission.
b. [INTENTIONALLY
OMITTED].
c. PAYMENTS
BY THE COMPANY.
The
Company shall use its best efforts to obtain effectiveness of the Registration
Statement or as soon as practicable, but in any event not later than __________,
200__ (the “REGISTRATION DEADLINE”). If (i) the Registration Statement covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not declared effective by the SEC by the Registration
Deadline, or (ii) after the Registration Statement has been declared effective
by the SEC, sales of all of the Registrable Securities cannot be made pursuant
to the Registration Statement, or (iii) the Common Stock is not listed or
included for quotation on the Over the Counter Electronic Bulletin Board
(the
“OTC-BB”), the Nasdaq National Market (“NNM”), the Nasdaq Small Cap Market
(“NASDQ SMALL CAP”), the New York Stock Exchange (the “NYSE”) or the American
Stock Exchange (the “AMEX”), then the Company will make payments to the Buyer in
such amounts and at such times as shall be determined pursuant to this Section
2(c) as partial relief for the damages to the Buyer by reason of any such
delay
in or reduction of its ability to sell the Registrable Securities (which
remedy
shall not be exclusive of any other remedies available at law or in equity).
The
Company shall pay to the holder of the Warrants an amount equal to the
aggregate, exercise price paid for such Registrable Securities upon exercise
of
the Warrants (“OUTSTANDING AMOUNT”) multiplied by the Applicable Percentage (as
defined below) times the number of months (prorated for partial months) after
the Registration Deadline and prior to the date the Registration Statement
is
declared effective by the SEC.
2
The
term
“APPLICABLE PERCENTAGE” means ________ (___). (For example, if the Registration
Statement becomes effective one (1) month after the Registration Deadline,
the
Company would pay $________ for each $________ of Outstanding Amount. If
thereafter, sales of all of the Registrable Securities could not be made
pursuant to the Registration Statement for an additional period of one (1)
month, the Company would pay an additional $________ for each $________
Outstanding Amount. Such amounts shall be paid in cash within five (5) days
after the end of each period that gives rise to such obligations, PROVIDED
that,
if any such period extends for more than thirty (30) days, interim payments
shall be made for each such thirty (30) day period.
d. PIGGY-BACK
REGISTRATIONS.
If at
any time prior to the expiration of the Registration Period (as hereinafter
defined) the Company shall determine to file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the 1933 Act of any of its equity securities (other than on Form S-4
or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send the Buyer written notice of such determination
and, if within fifteen (15) days after the effective date of such notice,
the
Buyer shall so request in writing, the company shall include in such
Registration Statement all or any part of the Registrable Securities the
Buyer
requests to be registered, except that if, in connection with any underwritten
public offering for the account of the Company, the managing underwriter(s)’
thereof shall impose a limitation on the number of shares of Common Stock
which
may be included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary
to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which the Buyer has requested inclusion hereunder
as
the underwriter shall permit;
PROVIDED,
HOWEVER, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of
which
are not entitled by contract to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and
PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the contractual right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement
by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which
the
Buyer is entitled to registration under this Section 2(d) is an underwritten
offering, then the Buyer shall, unless otherwise agreed by the Company, offer
and sell such Registrable Securities in an underwritten offering using the
same
underwriter or underwriters and, subject to the provisions of this Agreement,
on
the same terms and conditions as other shares of Common Stock include in
such
underwritten offering. Notwithstanding anything to the contrary set forth
herein, the registration rights of the Buyer pursuant to this Section 2(d)
shall
only be available in the event the Company fails to timely file, obtain
effectiveness or maintain effectiveness of any Registration Statement to
be
filed pursuant to Section 2(a) in accordance with the terms of this
Agreement.
3
e. ELIGIBILITY
FOR FORM SB-2.
The
Company represents and warrants that it meets the registrant eligibility
and
transaction requirements for the use of Form SB-2 for registration of the
sale
by the Buyer of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner
so
as to maintain such eligibility for the use of Form SB-2.
3. OBLIGATION
OF THE COMPANY.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
a. The
Company shall prepare promptly, and file with the SEC as soon as practicable
after the date of the Closing under the Master Agreement (the “CLOSING DATE”)
(but no later than the Filing Date), a Registration Statement with respect
to
the number of Registrable Securities provided in Section 2(a), and thereafter
use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as possible after such
filing
(but in no event later than the Registration Deadline), and keep the
Registration Statement effective pursuant to Rule 415 at all times until
such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Buyer) may be immediately sold to the public
without registration or restriction (including without limitation as to volume
by each holder thereof) under the 1933 Act (the “REGISTRATION PERIOD”), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein not misleading.
b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements
and
the prospectus used in connection with the Registration Statements as may
be
necessary to keep the Registration Statements effective at all times during
the
Registration Period, and, during such period, comply with the provisions
of the
1933 Act with respect to the disposition of all Registrable Securities of
the
Company covered by the Registration Statements until such time as all of
such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event that on any Business Day (the
“REGISTRATION TRIGGER DATE”) the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of
the
Registrable Securities issued or issuable upon exercise of or otherwise pursuant
to the Warrants, without giving effect to any limitations on the Buyer’ ability
to exercise the Warrants, the Company shall amend the Registration Statement,
or
file a new Registration Statement (on the short form available therefore,
if
applicable), or both, so as to cover ________ (_____ %) of all of the
Registrable Securities so issued or issuable (without giving effect to any
limitations on exercise contained in the Warrants) as of the Registration
Trigger Date, in each case, as soon as practicable, but in any event within
twenty (20) Business Days after the necessity therefore arises (based on
the
market price of the Common Stock and other relevant factors on which the
Company
reasonably elects to rely), provided, however that the Company shall have
a
sufficient number of authorized and unissued shares. In the event the Company
does not have a sufficient number of authorized and unissued shares, the
Company
shall use its best efforts to obtain all necessary shareholder approvals
and to
make all necessary filings to increase its authorized shares as promptly
as
practicable and, within twenty (20) Business Days after the necessary increase
in its authorized shares shall become effective, amend the Registration
Statement or file a new Registration Statement as set forth above. The Company
shall use its best efforts to cause such amendments and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof, but in any event within sixty (60) days of the Registration Trigger
Date or as promptly as practicable in the even the Company is required to
increase its authorized shares. The provisions of Section 2(c) above shall
be
applicable with respect to the Company’s obligations under this Section
3(b).
4
c. The
Company shall furnish to the Buyer and its legal counsel (i) promptly after
the
same is prepared and publicly distributed, filed with the SEC, or received
by
the Company, one copy of each Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in Section
2(a), each letter written by or on behalf of the Company to the SEC or the
staff
of the SEC, and each item of correspondence from the SEC or the staff of
the
SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as the Buyer may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by the Buyer.
The
Company will immediately notify the Buyer by facsimile of the effectiveness
of
each Registration Statement or any post-effective amendment. The Company
will
promptly respond to any and all comments received from the SEC, with a view
towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable, but no later than three (3)
business days (the “ACCELERATION REQUEST DEADLINE”), following the resolution or
clearance of all SEC comments or, if applicable, following notification by
the
SEC that any such Registration Statement or any amendment thereto will not
be
subject to review.
d. The
Company shall use reasonable efforts to (i) register and qualify the Registrable
Securities covered by the Registration Statements under such other securities
or
“blue sky” laws of such jurisdictions in the United States to which the Buyer is
subject, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof
during
the Registration Period, (iii) take such other actions as may be necessary
to
maintain such registrations and qualifications in effect at all times during
the
Registration Period, and (iv) take all other actions reasonably necessary
or
advisable to qualify the Registrable Securities for sale in such
jurisdictions;
e. [INTENTIONALLY
OMITTED].
5
f. As
promptly as practicable after becoming aware of such event, the Company shall
notify the Buyer of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material
fact or
omits to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and use its best efforts promptly
to
prepare a supplement or amendment to any Registration Statement to correct
such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to the Buyer as the Buyer may reasonably request;
provided that, for not more than twenty (20) consecutive days (or a total
of not
more than sixty (60) days in any twelve (12) month period), the Company may
delay the disclosure of material non-public information concerning the Company
(as well as prospectus or Registration Statement updating) the disclosure
of
which at the time is not, in the good faith opinion of the Company, in the
best
interests of the Company (an “ALLOWED DELAY”); provided, further, that the
Company shall promptly (i) notify the Buyer in writing of the existence of
(but
in no event, without the prior written consent of the Buyer, shall the Company
disclose to the Buyer any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay and (ii) advise the
Buyer
in writing to cease all sales under such Registration Statement until the
end of
the Allowed Delay, provided the above actions are consistent with the
requirements of the 1933 Act and/or the Securities Exchange Act of 1934,
as
amended (the “1934 Act”) or other applicable law. Upon expiration of the Allowed
Delay, the Company shall again be bound by the first sentence of this Section
3(f) with respect to the information giving rise thereto.
g. The
Company shall use its least efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of any Registration Statement, and, if
such an
order is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify the Buyer who holds Registrable Securities being sold
(or,
in the event of an underwritten offering, the managing underwriters) of the
issuance of such order and the resolution thereof.
h. The
Company shall permit a single firm of counsel designated by the Buyer to
review
such Registration Statement and all amendments and supplements thereto (as
well
as all requests for acceleration of effectiveness thereof) a reasonable period
of time prior to their filing with the SEC (not less than three (3) Business
Days but not more then five (5) Business Days) and not file any document
in a
form to which such counsel reasonably objects and will not request acceleration
of such Registration Statement without prior notice to such
counsel.
i. The
Company shall make generally available to its security holders as soon as
practicable, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of
Rule 158 under the 0000 Xxx) covering a twelve-month period beginning not
later
than the first day of the Company’s fiscal quarter next following the effective
date of the Registration Statement.
j. At
the
request of the Buyer participating in an underwritten offering pursuant to
Section 2(d), the Company shall furnish, on the date that Registrable Securities
are delivered to an underwriter for sale in connection with any Registration
Statement pursuant to Section 2(d), (i) an opinion, dated as of such date,
from
counsel representing the Company for purposes of such Registration Statement,
in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters, if any, and the Buyer and (ii) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and the Buyer.
6
k. The
Company shall make available for inspection by (i) the Buyer, and (ii) one
firm
of attorneys and one firm of accountants or other agents retained by the
Buyer
(collectively, the “INSPECTORS”) all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively,
the
“RECORDS”), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company’s officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due
diligence;
PROVIDED,
HOWEVER,
that
each Inspector shall hold in confidence and shall not make any disclosure
(except to the Buyer) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena
or
other order from a court or government body of competent jurisdiction, or
(c)
the information in such Records has been made generally available to the
public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in
such
Records to any Inspector until and unless such Inspector shall have entered
into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this
Section
3(k). The Buyer agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and the Buyer) shall be deemed to limit the Buyer’s ability to sell
Registrable Securities in a manner which is otherwise consistent with applicable
laws and regulations.
l. The
Company shall hold in confidence and not make any disclosure of information
concerning the Buyer provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws,
(ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of
such information is ordered pursuant to a subpoena or other order from a
court
or governmental body of competent jurisdiction, or (iv) such information
has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon
learning that disclosure of such information concerning the Buyer is sought
in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Buyer prior to making such disclosure, and
allow the Buyer, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.
m. The
Company shall use its best efforts to (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is
then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on the NNM or, if not eligible
for the NNM on the Nasdaq Small Cap or, if not eligible for the Nasdaq Small
Cap, on the Over the Counter electronic bulletin board and, without limiting
the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. (“NASD”) as
such with respect to such Registrable Securities.
7
n. The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date
of the
Registration Statement.
o. The
Company shall cooperate with the Buyer who holds Registrable Securities being
offered and the managing underwriter or underwriters, if any, to facilitate
the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to such
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters,
if
any, or the Buyer may reasonably request and registered in such names as
the
managing underwriter or underwriters, if any, or the Buyer may request, and,
within three (3) business days after a Registration Statement which includes
Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver,
to
the transfer agent for the Registrable Securities (with copies to the Buyer)
an
appropriate instruction and an opinion of such counsel in the form required
by
the transfer agent in order to issue the Registrable Securities free of
restrictive legends.
p. At
the
request of the holders of a majority-in-interest of the Registrable Securities,
the Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
any
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
q. The
Company shall not, and shall not agree to, allow the holders of any securities
of the Company to include any of their securities in any Registration Statement
under Section 2(a) hereof or any amendment or supplement thereto under Section
3(b) hereof without the consent of the holders of a majority-in-interest
of the
Registrable Securities. In addition, the Company shall not offer any securities
for its own account or the account of others in any Registration Statement
under
Section 2(a) hereof or any amendment or supplement thereto under Section
3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
r. The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Buyer of Registrable Securities pursuant to
a
Registration Statement.
s. The
Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including
without limitation the 1933 Act and the 1934 Act and the rules and regulations
promulgated by the SEC).
8
4. OBLIGATIONS
OF THE BUYER.
In
connection with the registration of the Registrable Securities, the Buyer
shall
have the following obligations:
a. It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of the Buyer that the Buyer shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as
shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as
the
Company may reasonably request. At least three (3) business days prior to
the
first anticipated filing date of the Registration Statement, the Company
shall
notify the Buyer of the information the Company requires from each the
Buyer.
b. The
Buyer, by the Buyer’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder,
unless
the Buyer has notified the Company in writing of the Buyer’s election to exclude
all of the Buyer’s Registrable Securities from the Registration
Statements.
c. In
the
event of an underwritten offering pursuant to Section 2(d) in which any
Registrable Securities are to be included, the Buyer agrees to enter into
and
perform the Buyer’s obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and
contribution obligations, with the managing underwriter of such offering
and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of the Registrable Securities, unless the Buyer
has
notified the Company in writing of the Buyer’s election to exclude all of the
Buyer’s Registrable Securities from such Registration Statement.
d. The
Buyer
agrees that, upon receipt of any notice from the Company of the happening
of any
event of the kind described in Section 3(f) or 3(g), the Buyer will immediately
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until the Buyer’s receipt of the
copies of the supplemented or amended prospectus contemplated by Section
3(f) or
3(g) and, if so directed by the Company, the Buyer shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in the Buyer’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.
e. No
Buyer
may participate in any underwritten registration hereunder unless the Buyer
(i)
agrees to sell the Buyer’s Registrable Securities on the basis provided in any
underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay
its
pro rata share of all underwriting discounts and commissions and any expenses
in
excess of those payable by the Company pursuant to Section 5 below.
9
5. EXPENSES
OF REGISTRATION.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements
of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Buyer pursuant to Sections 2(b) and 3(h) hereof shall
be
borne by the Company.
6. INDEMNIFICATION.
In
the
event any Registrable Securities are included in a Registration Statement
under
this Agreement:
a. To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) the Buyer, (ii) the directors, officers, partners, managers, members,
employees, agents and each person who controls any Buyer within the meaning
of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the “1934
ACT”), if any, (iii) any underwriter (as defined in the 0000 Xxx) for the Buyer
in connection with an underwritten offering pursuant to Section 2(d) hereof,
and
(iv) the directors, officers, partners, employees and each person who controls
any such underwriter within the meaning of the 1933 Act or the 1934 Act,
if any
(each, an “INDEMNIFIED PERSON”), against any joint or several losses, claims,
damages, liabilities or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, “CLAIMS”) to which any of
them may become subject insofar as such Claims arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement of a material fact in
a
Registration Statement or the omission or alleged omission to state therein
a
material fact required to be stated or necessary to make the statements therein
not misleading; (ii) any untrue statement or alleged untrue statement of
a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein
were
made, not misleading; or (iii) any violation or alleged violation by the
Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation thereunder relating to the
offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(i)
through (iii) being, collectively, “VIOLATIONS”). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses
are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i)
shall
not apply to a Claim arising out of or based upon a Violation which occurs
in
reliance upon and in conformity with information furnished in writing to
the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall
not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not
be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
such corrected prospectus was timely made available by the Company pursuant
to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer
of
the Registrable Securities by the Buyer pursuant to Section 9.
10
b. [Intentionally
Omitted].
c. Promptly
after receipt by an Indemnified Person under this Section 6 of notice of
the
commencement of any action (including any governmental action), such Indemnified
Person shall, if Claim in respect thereof is to be made against any the Company
under this Section 6, deliver to the Company a written notice of the
commencement thereof, and the Company shall have the right to participate
in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnified
Person, as the case may be.
PROVIDED,
HOWEVER,
that an
Indemnified Person shall have the right to retain its own counsel with the
fees
and expenses to be paid by the Company, if, in the reasonable opinion of
counsel
retained by the Company, the representation by such counsel of the Indemnified
Person and the Company would be inappropriate due to actual or potential
differing interests between such Indemnified Person and any other party
represented by such counsel in such proceeding. The Company shall pay for
only
one separate legal counsel for the Indemnified Persons, and such legal counsel
shall be selected by Buyer, if the Buyer is entitled to indemnification
hereunder. The failure to deliver written notice to the Company within a
reasonable time of the commencement of any such action shall not relieve
the
Company of any liability to the Indemnified Person under this Section 6,
except
to the extent that the Company is actually prejudiced in its ability to defend
such action. The indemnification required by this Section 6 shall be made
by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is
due
and payable.
7. CONTRIBUTION.
To
the
extent any indemnification by the Company is prohibited or limited by law,
the
Company agrees to make the maximum contribution with respect to any amounts
for
which it would otherwise be liable under Section 6 to the fullest extent
permitted by law.
11
8. REPORTS
UNDER THE 1934 ACT.
With
a
view to making available to the Buyer the benefits of Rule 144 promulgated
under
the 1933 Act or any other similar rule or regulation of the SEC that may
at any
time permit the Buyer to sell securities of the Company to the public without
registration (“RULE 144”), the Company agrees to:
a. make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b. file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Securities Purchase
Agreement) and the filing of such reports and other documents is required for
the applicable provisions of Rule 144; and
c. furnish
to the Buyer so long as the Buyer owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has complied with
the
reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a
copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Buyers to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT
OF REGISTRATION RIGHTS.
The
rights under this Agreement shall be automatically assignable by the Buyers
to
any transferee of all or any portion of Registrable Securities if: (i) the
Buyer
agrees in writing with the transferee or assignee to assign such rights,
and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after
such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act
and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence,
the
transferee or assignee agrees in writing with the Company to be bound by
all of
the provisions contained herein, and (v) such transfer shall have been made
in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. AMENDMENT
OF REGISTRATION RIGHTS.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company, the Buyer (to the
extent such Buyer still owns Registrable Securities) and Buyers who hold
a
majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon the Buyer
and
the Company.
12
11. MISCELLANEOUS.
a. A
person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more
persons
or entities with respect to the same Registrable Securities, the Company
shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b. Any
notices required or permitted to be given under the terms hereof shall be
sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company: To the address set forth immediately below such Company’s name on the
signature pages hereto.
With
copy
to:
Xxxx
Xxxxxxxx, Esq.
Xxxx,
Forward, Xxxxxxxx and Scripps, LLP
000
Xxxx
Xxxxxxxx, Xxxxx 0000
Xxx
Xxxxx, XX 00000
Tel
(000)
000-0000
Fax
(000)
000-0000
If
to a
Buyer: To the address set forth immediately below such Buyer’s name on the
signature pages hereto.
Each
party shall provide notice to the other party of any change in
address.
c. Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate
as a
waiver thereof.
d. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York. Any controversy or claim arising out of or
related to this Debenture or the breach thereof, shall be settled by binding
arbitration in New York, NY in accordance with the Expedited Procedures (Rules
53-57) of the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”). A proceeding shall be commenced upon written demand by
Company or the Buyer to the other. The arbitrator(s) shall enter a judgment
by
default against any party, which fails or refuses to appear in any properly
noticed arbitration proceeding. The proceeding shall be conducted by one
(1)
arbitrator, unless the amount alleged to be in dispute exceeds ________
($________), in which case three (3) arbitrators shall preside. The
arbitrator(s) will be chosen by the parties from a list provided by the AAA,
and
if they are unable to agree within ten (10) days, the AAA shall select the
arbitrator(s). The arbitrators must be experts in securities law and financial
transactions. The arbitrators shall assess costs and expenses of the
arbitration, including all attorneys’ and experts’ fees, as the arbitrators
believe is appropriate in light of the merits of the parties’ respective
positions in the issues in dispute. Each party submits irrevocably to the
jurisdiction of any state court sitting in New York, NY or to the United
States
District Court sitting in New York for purposes of enforcement of any discovery
order, judgment or award in connection with such arbitration. The award of
the
arbitrator(s) shall be final and binding upon the parties and may be enforced
in
any court having jurisdiction. The arbitration shall be held in such place
as
set by the arbitrator(s) in accordance with Rule 55. With respect to any
arbitration proceeding in accordance with this section, the prevailing party’s
reasonable attorney’s fees and expenses shall be borne by the non-prevailing
party.
13
Although
the parties, as expressed above, agree that all claims, including claims
that
are equitable in nature, for example specific performance, shall initially
be
prosecuted in the binding arbitration procedure outlined above, if the
arbitration panel dismisses or otherwise fails to entertain any or all of
the
equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in New
York, NY. Each party waives any right to a trial by jury, assuming such right
exists in an equitable proceeding, and irrevocably submits to the jurisdiction
of said New York court. New York law shall govern both the proceeding as
well as
the interpretation and construction of the Debenture and the transaction
as a
whole.
e. This
Agreement and the Securities Purchase Agreement (including all schedules
and
exhibits thereto) constitute the entire agreement among the parties hereto
with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
to
herein and therein. This Agreement and the Securities Purchase Agreement
supersede all prior agreements and understandings among the parties hereto
with
respect to the subject matter hereof and thereof.
f. Subject
to the requirements of Section 9 hereof, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties
hereto.
g. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
14
j. Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Buyer pursuant to this Agreement shall be made by Buyers holding a majority
of the Registrable Securities, determined as if the all of the Debentures
then
outstanding have been converted into for Registrable Securities.
k. The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for breach of its obligations hereunder will be inadequate
and
agrees, in the event of a breach or threatened breach by the Company of any
of
the provisions hereunder, that the Buyer shall be entitled, in addition to
all
other available remedies in law or in equity, to an injunction or injunctions
to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being
required.
l. The
language used in this Agreement will be deemed to be the language chosen
by the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
m. In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
n. The
initial number of Registrable Securities included in any Registration Statement
and each increase to the number of Registrable Securities included therein
shall
be allocated pro rata among the Buyers based on the number of Registrable
Securities held by the Buyer at the time of such establishment or increase,
as
the case may be. In the event an Buyer shall sell or otherwise transfer any
of
such holder’s Registrable Securities, each transferee shall be allocated a pro
rata portion of the number of Registrable Securities included in a Registration
Statement for such transferor. Any shares of Common Stock included on a
Registration Statement and which remain allocated to any person or entity
which
does not hold any Registrable Securities shall be allocated to the remaining
Buyers, pro rata based on the number of shares of Registrable Securities
then
held by the Buyers. For the avoidance of doubt, the number of Registrable
Securities held by a Buyer shall be determined as if all the Debentures and
Warrants then outstanding and held by a Buyer were converted into or exercised
for Registrable Securities.
o. There
shall be no oral modifications or amendments to this Agreement. This Agreement
may be modified or amended only in writing.
[INTENTIONALLY
LEFT BLANK]
15
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the ____ day of ________,
200__.
|
PATRIOT
SCIENTIFIC CORPORATION
|
________________________________
|
|
By:
_____________________________
|
By:
_____________________________
|
|
(Name & Title)
|
(Name & Title)
|
ADDRESS:
|
PATRIOT
SCIENTIFIC CORPORATION
|
_____________________________ |
|
10989
Via Frontera
|
_____________________________ |
|
Xxx
Xxxxx, Xxxxxxxxxx 00000
|
_____________________________ |
|
Telephone
No. (000) 000-0000
|
_____________________________ |
|
Facsimile
No. (000) 000-0000
|
_____________________________ |
16
