EXECUTION COPY
MASTER AGREEMENT
by and among
PATRIOT SCIENTIFIC CORPORATION
and
TECHNOLOGY PROPERTIES LIMITED INC.
and
CHARLES H. MOORE
Dated as of June 7, 2005
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................6
1.1 Definitions......................................................6
1.2 Index of Other Defined Terms.....................................8
ARTICLE II THE TRANSACTIONS.................................................10
2.1 Execution of Ancillary Agreements...............................10
2.2 Formation of Delaware Limited Liability Companies...............10
2.3 Patriot License to Intel........................................10
2.4 Stipulated Final Judgment.......................................10
2.5 Delivery of Intel Proceeds......................................10
2.6 Closing.........................................................10
2.7 Actions at Closing..............................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PATRIOT.......................11
3.1 Corporate Existence and Power...................................11
3.2 Authorization...................................................12
3.3 Governmental Authorization......................................12
3.4 Non-Contravention...............................................12
3.5 Absence of Certain Changes or Events............................12
3.6 Intellectual Property...........................................12
3.7 Litigation......................................................13
3.8 Advisory Fees...................................................13
3.9 Bulk Sales......................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TPL............................13
4.1 Organization and Existence......................................14
4.2 Corporate Authorization.........................................14
4.3 Governmental Authorization......................................14
4.4 Non-Contravention...............................................14
4.5 Absence of Certain Changes or Events............................14
4.6 Intellectual Property...........................................14
4.7 Litigation......................................................15
4.8 Advisory Fees...................................................15
4.9 Bulk Sales......................................................15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MOORE...........................15
5.1 Authorization...................................................15
5.2 Governmental Authorization......................................15
5.3 Non-Contravention...............................................16
5.4 Absence of Certain Changes or Events............................16
5.5 Intellectual Property...........................................16
5.6 Litigation......................................................17
5.7 Advisory Fees...................................................17
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ARTICLE VI COVENANTS OF PATRIOT.............................................17
6.1 Stipulated Final Judgment.......................................17
6.2 Retention of Rights; No Action With Respect to the
MSD Patents...................................................17
ARTICLE VII COVENANTS OF ALL PARTIES........................................18
7.1 Protection and Maintenance of the MSD Patents...................18
7.2 Commercialization Program.......................................18
7.3 Further Assurances..............................................18
7.4 Certain Filings.................................................18
7.5 Notification....................................................18
7.6 Public Announcements............................................19
7.7 No Interference.................................................19
7.8 No Transfer.....................................................20
7.9 Litigation Cooperation..........................................20
ARTICLE VIII CONDITIONS TO CLOSING..........................................20
8.1 Conditions to Obligations of Each Party.........................20
8.2 Conditions to Obligations of TPL................................21
8.3 Conditions to Obligations of Patriot............................21
ARTICLE IX INDEMNIFICATION..................................................22
9.1 Patriot Agreement to Indemnify..................................22
9.2 TPL Agreement to Indemnify......................................23
9.3 Moore Agreement to Indemnify....................................23
9.4 Survival of Representations, Warranties and Covenants...........23
9.5 Claims for Indemnification......................................23
9.6 Defense of Claims...............................................24
ARTICLE X TERMINATION.......................................................24
10.1 Grounds for Termination.........................................24
10.2 Effect of Termination...........................................26
ARTICLE XI MISCELLANEOUS....................................................27
11.1 Notices.........................................................27
11.2 Amendments; No Waivers..........................................28
11.3 Expenses........................................................29
11.4 Successors and Assigns..........................................29
11.5 Governing Law...................................................29
11.6 Counterparts; Effectiveness.....................................29
11.7 Entire Agreement................................................29
11.8 Captions........................................................29
11.9 Severability....................................................29
11.10 Construction....................................................29
11.11 Cumulative Remedies.............................................30
11.12 Specific Performance............................................30
11.13 Third-Party Beneficiaries.......................................30
11.14 No Liability of Intel...........................................30
11.15 No Punitive, Exemplary, or Consequential Damages................31
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EXHIBITS
--------
EXHIBIT A Stipulated Final Judgment
EXHIBIT B Operating Agreement
EXHIBIT C Newco License
EXHIBIT D Commercialization Agreement
EXHIBIT E Escrow Agreement
EXHIBIT F-1 Consent and Release Agreement
EXHIBIT F-2 Consent and Release Agreement
EXHIBIT G Form of Merger Agreement
EXHIBIT H Patriot License to Intel
EXHIBIT I Form of Warrant
EXHIBIT J Form of Registration Rights Agreement
AGREEMENT
---------
This AGREEMENT (this "Agreement"), dated as of June 7, 2005, is by and
among PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation having its
principal offices located at 10989 Via Frontera, San Diego, CA 92127
("Patriot"), TECHNOLOGY PROPERTIES LIMITED INC., a California corporation having
its principal offices located at 21730 Stevens Creek Blvd., Suite 201,
Cupertino, CA 95014 ("TPL"), and Charles H. Moore, an individual whose principal
residence is in Sierra County, California ("Moore").
R E C I T A L S
---------------
WHEREAS, Patriot is engaged in the business of developing, marketing, and
selling microprocessors and microprocessor technology, as well as other
complementary products;
WHEREAS, TPL is engaged in the business of developing, managing, and
commercializing intellectual property assets and proprietary product technology;
WHEREAS, Patriot, TPL and Moore are involved in the Inventorship
Litigation (as defined below) with respect to the ownership of rights and
interests in certain microprocessor science and design patents identified on
Schedule 1 attached hereto (the "MSD Patents");
WHEREAS, Patriot has initiated the Infringement Litigation (as defined
below), which has been stayed pending the outcome of the Inventorship
Litigation;
WHEREAS, the Patriot security holders identified on Schedule 2 attached
hereto (the "Patriot Rights Holders") have certain rights with respect to the
transactions contemplated by this Agreement;
WHEREAS, to resolve the Inventorship Litigation and disagreements among
the parties, provide funds to Patriot to finance its operations, and provide for
the effective commercialization of the MSD Patents, the parties have agreed
that:
A. Patriot, TPL and Moore will enter into this Agreement; Patriot and TPL
will enter into the Operating Agreement attached hereto as Exhibit B (the
"Operating Agreement"); Patriot, TPL, and P-Newco will enter into the
Commercialization Agreement attached hereto as Exhibit D (the "Commercialization
Agreement"); Patriot and TPL will enter into the Warrant substantially in the
form attached hereto as Exhibit I (the "Warrant"), as well as the Registration
Rights Agreement substantially in the form attached hereto as Exhibit J (the
"Registration Rights Agreement") ; and Patriot and TPL will open an escrow
account (the "Escrow Account") and enter into an escrow agreement substantially
in the form attached hereto as Exhibit E (the "Escrow Agreement") to facilitate
the transactions contemplated by this Agreement;
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B. Patriot has entered into a license in respect of the MSD Patents with
Intel Corporation ("Intel"), attached hereto as Exhibit H (the "Patriot License
to Intel");
C. As soon as possible after the date hereof, Patriot, TPL and Moore will
settle all litigation among them pursuant to the Stipulated Final Judgment
substantially in the form attached hereto as Exhibit A (the "Stipulated Final
Judgment"), and will take any and all action necessary to cause the trade
secrets litigation currently pending between Patriot and TPL in Santa Clara
Superior Court (the "Trade Secrets Litigation") to be dismissed without
prejudice, and the Infringement Litigation involving Intel and Patriot shall be
dismissed with prejudice;
D. As soon as possible after the date hereof, TPL will request that Intel
deliver all of the unpaid Milestone Payments (as defined in the Intel Patent
License Agreement) pursuant to Section 3.2 of the Intel Patent License Agreement
to the account set forth on Exhibit A to the Escrow Agreement, and the rights of
Patriot and TPL with regard to the Milestone Payments shall thereafter be as set
forth in the Escrow Agreement;
E. Patriot will form a wholly owned subsidiary ("P-Newco"), and Patriot
and P-Newco will enter into a license with respect to certain of Patriot's
rights in the MSD Patents, substantially in the form attached hereto as Exhibit
C;
F. TPL will form a wholly owned subsidiary ("T-Newco"), and TPL and
T-Newco will enter into a license with respect to certain of TPL's rights in the
MSD Patents, substantially in the form attached hereto as Exhibit C
(collectively with the license entered into between Patriot and P-Newco
identified in Recital E above, the "Newco Licenses" );
G. Patriot, TPL, T-Newco and P-Newco will enter into an agreement and plan
of merger substantially in the form attached hereto as Exhibit G (the "Merger
Agreement") pursuant to which T-Newco will merge with and into P-Newco, with
P-Newco continuing as the surviving entity;
H. Upon the earlier of (a) the mutual agreement of Patriot, TPL, and
P-Newco, or (b) three months from the date hereof, P-Newco will grant to TPL its
rights in the MSD Patents (the "Grant") in furtherance of the commercialization
program contemplated by the Commercialization Agreement, in the form attached as
Exhibit 1 to the Commercialization Agreement;
I. TPL will cause the Patriot Cash Consideration (as defined below) to be
paid to Patriot at Closing from the funds in the Escrow Account pursuant to the
terms of the Escrow Agreement;
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J. TPL will cause One Million Dollars ($1,000,000) of TPL's funds in the
Escrow Account, and Patriot will cause at least One Million Dollars ($1,000,000)
of Patriot's funds in the Escrow Account, to be paid in cash at Closing, to the
Patriot Rights Holders in exchange for the Patriot Rights Holders entering into
a consent and release agreement substantially in one of the alternate forms
attached as Exhibits F-1 or F-2 hereto (the "Consent and Release Agreement");
K. TPL will cause * * * of TPL's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as TPL's first installment of the
Working Capital Contribution;
L. Patriot will cause * * * of Patriot's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as Patriot's first installment of the
Working Capital Contribution; and
M. P-Newco will allocate the proceeds generated from the commercialization
program to Patriot and TPL pursuant to the terms of the Commercialization
Agreement and the Operating Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing premises, and their
respective representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Applicable Law" means any domestic or foreign, federal, state or
local statute, law, common law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, permit or
other requirement of any Governmental Authority.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in San Diego, California are authorized or
required by law to close.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses (including reasonably foreseeable lost profits), damages,
costs, expenses, liabilities, judgments, awards, fines, sanctions, penalties,
charges and amounts paid in settlement (net of insurance proceeds and proceeds
from related third party indemnification, contribution or similar claims
actually received), including (a) interest at a rate equal to 200 basis points
above the prime rate, as in effect from time to time, of Citibank, N.A., on cash
disbursements in respect of any of the foregoing, compounded quarterly, from the
date each such cash disbursement is made until the Person incurring the same
shall have been indemnified in respect thereof, (b) reasonable costs, fees and
expenses of such Person's Representatives and (c) any reasonable costs, fees and
expenses incurred in connection with investigating, defending against, or
settling any such claims.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Gross Cash Proceeds" means all cash proceeds received pursuant to
licenses, judgments, settlements and other payments with respect to the right to
make, use, sell and offer to sell products subject to the MSD Patents.
"Indemnifying Party" means: (a) with respect to any TPL Indemnitee
asserting a claim under Section 9.1, Patriot; (b) with respect to any Patriot
Indemnitee asserting a claim under Section 9.2, TPL; and (c) with respect to any
Patriot/TPL Indemnitee asserting a claim under Section 9.3, Moore.
"Indemnitee" means: (a) the TPL Indemnitees with respect to any
claim for which Patriot is an Indemnifying Party under Section 9.1; (b) the
Patriot Indemnitees with respect to claims for which TPL is an Indemnifying
Party under Section 9.2; and (c) the Patriot/TPL Indemnitees with respect to any
claim for which Moore is an Indemnifying Party under Section 9.3.
"Infringement Litigation" means the lawsuits filed by Patriot
against five electronics companies alleging infringement of certain U.S. Patents
and assigned the following case numbers: (a) Southern District of New York,
03CV10142; (b) Northern District of California, C035787; (c) Southern District
of New York, 03CV10180; (d) Eastern District of New York, CV036432; and (e)
District of New Jersey, 03CV06210, including the related claims of Intel against
Patriot.
"Intel Patent License Agreement" means that certain license
agreement by and among TPL Micro Ltd., TPL, Moore and Intel, dated June 28,
2004, as may be amended from time to time.
"Inventorship Litigation" means the lawsuit filed by Patriot on
February 13, 2004 in the United States District Court, Northern District of
California against TPL, Daniel E. Leckrone and Charles H. Moore, alleging claims
for declaratory judgment for determination and correction of inventorship and
assigned case number C040618JF(HRL).
"knowledge" means the actual knowledge of a Person and its
Representatives, after a reasonable investigation of the surrounding
circumstances.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and whether
or not the same is required to be accrued on the financial statements of such
Person or is disclosed on any schedule to this Agreement.
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"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"Material Adverse Effect" means any circumstance, development,
event, condition, effect or change that, individually or when taken together
with all other circumstances, developments, events, conditions, effects and
changes that have occurred, had or has or, with the passage of time, would be
reasonably likely to have, a material adverse effect on, or a material adverse
change in, (a) the MSD Patents, (b) the anticipated benefits of the transactions
contemplated by this Agreement or (c) the ability of the parties hereto to
consummate the transactions contemplated hereby.
"Net Cash Proceeds" has the meaning set forth in Section 6.1(a)(v)
of the Operating Agreement.
"Patriot Cash Consideration" means Ten Million Dollars ($10,000,000)
minus * * * (which amount constitutes Patriot's first installment of the Working
Capital Contribution pursuant to Section 5.3(a) of the Operating Agreement)
minus Patriot's share of the Consent and Release Consideration, which represents
an allocation and sharing of proceeds to be received from Intel pursuant to
Section 3.2(c) of the Intel Patent License Agreement.
"Patriot Common Stock" means the common stock, par value $0.00001
per share, of Patriot.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, estate or other entity or
organization, including a Governmental Authority.
"Representatives" means the officers, directors, employees,
attorneys, accountants, advisors, representatives and agents of a Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Working Capital Contribution" shall have the meaning given to it in
the Operating Agreement.
1.2 Index of Other Defined Terms. In addition to those terms defined
above, the following terms shall have the respective meanings given thereto in
the sections indicated below:
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Defined Term Section Page
- ------------ ------- ----
Active Potential Licensees.............................6.2..................17
Agreement.........................................Preamble...................4
Closing Date...........................................2.6..................10
Closing................................................2.6..................10
Commercialization Agreement.......................Recitals...................4
Consent and Release Agreement.....................Recitals...................6
Consent and Release Consideration...................2.7(f)..................11
Escrow Account....................................Recitals...................4
Escrow Agreement..................................Recitals...................5
Grant.............................................Recitals...................5
Intel Parties........................................11.13..................30
Intel.............................................Recitals...................5
Merger Agreement..................................Recitals...................5
Moore.............................................Preamble...................4
MSD Patents.......................................Recitals...................4
Newco Licenses....................................Recitals...................5
Operating Agreement...............................Recitals...................4
Patriot Indemnitees....................................9.2..................22
Patriot License to Intel..........................Recitals...................5
Patriot Rights Holders............................Recitals...................4
Patriot...........................................Preamble...................4
Patriot/TPL Indemnitees................................9.3..................23
P-Newco...........................................Recitals...................5
Proceedings............................................3.7..................13
Registration Rights Agreement.....................Recitals...................4
Stipulated Final Judgment.........................Recitals...................5
Termination Date......................................10.1..................24
T-Newco...........................................Recitals...................5
TPL Indemnitees........................................9.1..................22
TPL...............................................Preamble...................4
Trade Secrets Litigation..........................Recitals...................5
Warrant...........................................Recitals...................4
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ARTICLE II
THE TRANSACTIONS
2.1 Execution of Ancillary Agreements. As soon as possible after the date
hereof, and in any event not later than the Closing Date, Patriot, TPL, Moore
and P-Newco shall enter into the following agreements, as the case may be:
(a) Patriot and TPL shall enter into the Operating Agreement;
(b) Patriot, TPL and P-Newco shall enter into the Commercialization
Agreement;
(c) Patriot and TPL shall enter into the Warrant and the
Registration Rights Agreement;
(d) Patriot, TPL and Premier Trust, Inc. as the Escrow Agent shall
enter into the Escrow Agreement to facilitate the transactions contemplated
hereby.
2.2 Formation of Delaware Limited Liability Companies. As soon as
possible, and to effect the transactions contemplated hereby:
(a) Patriot will form P-Newco, a wholly owned Delaware limited
liability company, and
(b) TPL will form T-Newco, a wholly owned Delaware limited liability
company.
2.3 Patriot License to Intel. Patriot has entered into the Patriot License
to Intel.
2.4 Stipulated Final Judgment. As soon as possible after the date hereof,
Patriot, TPL and Moore shall enter into the Stipulated Final Judgment and file
it promptly thereafter with the court.
2.5 Delivery of Intel Proceeds. As soon as possible after the date hereof,
TPL shall request that Intel deliver all of the unpaid Milestone Payments (as
defined in the Intel Patent License Agreement) pursuant to Section 3.2 of the
Intel Patent License Agreement to the account set forth on Exhibit A to the
Escrow Agreement, and the rights of Patriot and TPL with regard to the Milestone
Payments shall thereafter be as set forth in the Escrow Agreement.
2.6 Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Gibson, Dunn & Crutcher
LLP, 333 South Grand Avenue, Los Angeles, California 90071, on June 14, 2005 or,
if the conditions to Closing set forth in Article VIII (other than conditions
that by their terms can only be satisfied on the Closing Date) have not been
satisfied or waived by such date, then on the second Business Day after the last
of the conditions to Closing set forth in Article VIII (other than conditions
that by their terms can only be satisfied on the Closing Date) have been
satisfied or waived by the party entitled to waive the same or on any such other
date as to which TPL and Patriot may mutually agree in writing (the "Closing
Date").
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2.7 Actions at Closing. At Closing:
(a) Each of Patriot and TPL shall deliver to the other party
executed copies of this Agreement, the Escrow Agreement, the Operating
Agreement, the Commercialization Agreement, the Newco Licenses, the Merger
Agreement, and the Grant attached as Exhibit 1 to the Commercialization
Agreement;
(b) The Certificate of Merger shall be filed with the Secretary of
State of the State of Delaware;
(c) The officer's certificates contemplated by Sections 8.2(a)(iii)
and 8.3(a)(iii) shall be delivered by Patriot and TPL, respectively;
(d) Patriot shall deliver to TPL the Consent and Release Agreements
executed by all of the Patriot Rights Holders;
(e) TPL will cause One Million Dollars ($1,000,000) of TPL's funds
in the Escrow Account, and Patriot will cause at least One Million Dollars
($1,000,000) of Patriot's funds in the Escrow Account, to be paid in cash at
Closing to the Patriot Rights Holders set forth on Schedule 2 pursuant to the
terms of the Escrow Agreement (the "Consent and Release Consideration");
(f) TPL will cause * * * of TPL's funds in the Escrow Account to be
contributed in cash at Closing to P-Newco as TPL's first installment of the
Working Capital Contribution;
(g) Patriot will cause * * * of Patriot's funds in the Escrow
Account to be contributed in cash at Closing to P-Newco as Patriot's first
installment of the Working Capital Contribution; and
(h) TPL shall cause all Net Cash Proceeds generated pursuant to
Section 7.2(b), if any, to be paid to P-Newco.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PATRIOT
As an inducement to TPL to enter into this Agreement and to consummate the
transactions contemplated herein, Patriot hereby represents and warrants to TPL
that:
3.1 Corporate Existence and Power. Patriot is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all corporate power to enter into this Agreement and consummate
the transactions contemplated hereby.
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3.2 Authorization. Except as set forth on Schedule 3.2, the execution,
delivery and performance by Patriot of this Agreement and the consummation by
Patriot of the transactions contemplated hereby are within the corporate powers
of Patriot and have been duly authorized by all necessary corporate action on
the part of Patriot. This Agreement has been duly and validly executed by
Patriot and constitutes the legal, valid and binding agreement of Patriot,
enforceable against Patriot in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to general
principles of equity.
3.3 Governmental Authorization. The execution, delivery and performance by
Patriot of this Agreement require no action by, consent or approval of, or
filing with, any Governmental Authority other than any actions, consents,
approvals or filings otherwise expressly referred to in this Agreement.
3.4 Non-Contravention. The execution, delivery and performance by Patriot
of this Agreement does not (a) contravene or conflict with the certificate of
incorporation or bylaws of Patriot, a true and correct copy of each of which has
been delivered to TPL; (b) contravene or constitute a default or breach under
any material agreement to which Patriot is a party; (c) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Patriot; or (d) result in the creation or imposition of
any Lien on the MSD Patents.
3.5 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 3.5(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against
Patriot that could reasonably be expected to result in a Material Adverse
Effect.
(b) Except as set forth on Schedule 3.5(b), and except as otherwise
contemplated by or disclosed in this Agreement, Patriot has not entered into any
contract or agreement in respect of the MSD Patents.
3.6 Intellectual Property.
(a) Except as set forth on Schedule 3.6(a), Patriot owns exclusively
all right, title and interest in and to the MSD Patents, free and clear of any
and all Liens, encumbrances or other adverse ownership claims, and Patriot has
not received any notice or claim challenging Patriot's ownership of the MSD
Patents or suggesting that any Person, other than TPL and Moore, has any claim
of legal or beneficial ownership with respect thereto, nor, to Patriot's
knowledge, is there a reasonable basis for any claim that Patriot does not have
such good and valid title to the MSD Patents.
(b) To the knowledge of Patriot, the MSD Patents are valid,
enforceable and subsisting. Except as disclosed in Schedule 3.6(b), Patriot has
not received any notice or claim challenging or questioning the validity or
enforceability of the MSD Patents or indicating an intention on the part of any
Person to bring a claim that the MSD Patents are invalid or unenforceable or
have been misused, and to Patriot's knowledge no reasonable basis exists for any
such claim.
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(c) To the knowledge of Patriot (i) Patriot has not taken any action
or failed to take any action (including the manner in which it has conducted its
business, or used or enforced, or failed to use or enforce, the MSD Patents)
that would result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents and (ii) subsequent to the
acquisition of its interest therein, Patriot has timely paid all filing,
examination, issuance, post registration and maintenance fees, annuities and the
like associated with or required with respect to the MSD Patents.
(d) To the knowledge of Patriot, none of the activities or
operations of Patriot with respect to the MSD Patents infringes upon,
misappropriates, violates, dilutes or constitutes the unauthorized use of any
rights, interests, or property of any third party. Patriot has not received any
notice or claim asserting or suggesting that any such infringement,
misappropriation, violation, dilution or unauthorized use is or may be occurring
or has or may have occurred, nor, to Patriot's knowledge, is there any
reasonable basis therefor. The MSD Patents are not subject to any outstanding
order, judgment, decree or stipulation restricting the use, sale, transfer,
assignment or licensing thereof by Patriot to any Person.
3.7 Litigation. Except as disclosed in Schedule 3.7 (i) there are no
actions, suits, claims, hearings, arbitrations, proceedings (public or private)
or governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
or, to the knowledge of Patriot, threatened, against or by Patriot or the MSD
Patents or which seek to enjoin or rescind the transactions contemplated by this
Agreement, nor, to the knowledge of Patriot, is there any valid basis for any
such Proceedings; and (ii) there are no existing orders, judgments or decrees of
any Governmental Authority naming Patriot as an affected party or otherwise
affecting the MSD Patents or the performance by Patriot of the transactions
contemplated by this Agreement, nor, to the knowledge of Patriot, is there any
valid basis for any such order, judgment or decree.
3.8 Advisory Fees. Except as set forth in Schedule 3.8, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of Patriot who is entitled to any
fee, commission or reimbursement of expenses from Patriot, TPL or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
3.9 Bulk Sales. There are no bulk sales statutes or laws applicable to
Patriot or the MSD Patents in connection with the consummation of the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TPL
As an inducement to Patriot to enter into this Agreement and to consummate
the transactions contemplated herein, TPL hereby represents and warrants to
Patriot that:
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4.1 Organization and Existence. TPL is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of California
and has all corporate power to enter into this Agreement and consummate the
transactions contemplated hereby.
4.2 Corporate Authorization. The execution, delivery and performance by
TPL of this Agreement and the consummation by TPL of the transactions
contemplated hereby are within the corporate powers of TPL and have been duly
authorized by all necessary corporate action on the part of TPL. This Agreement
has been duly and validly executed by TPL and constitutes the legal, valid and
binding agreement of TPL, enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and subject to general
principles of equity.
4.3 Governmental Authorization. The execution, delivery and performance by
TPL of this Agreement require no action by, consent or approval of, or filing
with, any Governmental Authority other than any actions, consents, approvals or
filings otherwise expressly referred to in this Agreement.
4.4 Non-Contravention. The execution, delivery and performance by TPL of
this Agreement does not (a) contravene or conflict with the certificate of
incorporation or bylaws of TPL, a true and correct copy of each of which has
been delivered to Patriot; (b) contravene or constitute a default or breach
under any material agreement to which TPL is a party; (c) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to TPL; or (d) result in the creation or imposition of any
Lien on the MSD Patents.
4.5 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 4.5(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against TPL
that could reasonably be expected to result in a Material Adverse Effect.
(b) Except as set forth on Schedule 4.5(b), and except as otherwise
contemplated by or disclosed in this Agreement, TPL has not entered into any
contract or agreement in respect of the MSD Patents.
4.6 Intellectual Property.
(a) TPL has a valid and subsisting license to the MSD Patents from
Moore. Except as disclosed on Schedule 4.6(a), TPL has not received any notice
or claim challenging TPL's rights with respect to the MSD Patents or suggesting
that any Person, other than Patriot and Moore, has any claim of legal or
beneficial ownership with respect thereto, nor, to TPL's knowledge, is there a
reasonable basis for any such claim.
(b) To the knowledge of TPL, the MSD Patents are valid, enforceable
and subsisting. Except as disclosed on Schedule 4.6(b), TPL has not received any
notice or claim challenging or questioning the validity or enforceability of the
MSD Patents or indicating an intention on the part of any Person to bring a
claim that the MSD Patents are invalid or unenforceable or have been misused,
and to TPL's knowledge no reasonable basis exists for any such claim.
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(c) To the knowledge of TPL, TPL has not taken any action or failed
to take any action (including the manner in which it has conducted its business,
or used or enforced, or failed to use or enforce, the MSD Patents) that would
result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents.
(d) To the knowledge of TPL, none of the activities or operations of
TPL with respect to the MSD Patents infringes upon, misappropriates, violates,
dilutes or constitutes the unauthorized use of any rights, interests, or
property of any third party. TPL has not received any notice or claim asserting
or suggesting that any such infringement, misappropriation, violation, dilution
or unauthorized use is or may be occurring or has or may have occurred, nor, to
TPL's knowledge, is there any reasonable basis therefor. To the knowledge of
TPL, the MSD Patents are not subject to any outstanding order, judgment, decree
or stipulation restricting the use, sale, transfer, assignment or licensing
thereof by TPL to any Person.
4.7 Litigation. Except as disclosed on Schedule 4.7 (i) there are no
Proceedings pending or, to the knowledge of TPL, threatened, against or by TPL
or the MSD Patents or which seek to enjoin or rescind the transactions
contemplated by this Agreement, nor, to the knowledge of TPL, is there any valid
basis for any such Proceedings; and (ii) there are no existing orders, judgments
or decrees of any Governmental Authority naming TPL as an affected party or
otherwise affecting the MSD Patents or the performance by TPL of the
transactions contemplated by this Agreement, nor, to the knowledge of TPL, is
there any valid basis for any such order, judgment or decree.
4.8 Advisory Fees. Except as set forth on Schedule 4.8, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of TPL who is entitled to any fee,
commission or reimbursement of expenses from TPL, Patriot or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
4.9 Bulk Sales. There are no bulk sales statutes or laws applicable to TPL
or the MSD Patents in connection with the consummation of the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MOORE
5.1 Authorization. This Agreement has been duly and validly executed by
Moore and constitutes the legal, valid and binding agreement of Moore,
enforceable against Moore in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
5.2 Governmental Authorization. The execution, delivery and performance by
Moore of this Agreement require no action by, consent or approval of, or filing
with, any Governmental Authority other than any actions, consents, approvals or
filings otherwise expressly referred to in this Agreement.
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5.3 Non-Contravention. The execution, delivery and performance by Moore of
this Agreement does not: (a) contravene or constitute a default or breach under
any material agreement to which Moore is a party; (b) contravene or conflict
with or constitute a violation of any provision of any Applicable Law binding
upon or applicable to Moore; or (c) result in the creation or imposition of any
Lien on the MSD Patents.
5.4 Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 5.4(a), as of the date hereof
there has not been any change, circumstance, event or proceedings against Moore
that could reasonably be expected to result in a Material Adverse Effect.
(b) Except as set forth on Schedule 5.4(b), and except as otherwise
contemplated by or disclosed in this Agreement, Moore has not entered into any
contract or agreement in respect of the MSD Patents.
5.5 Intellectual Property.
(a) Except as set forth on Schedule 5.5(a), Moore owns exclusively
all right, title and interest in and to the MSD Patents, free and clear of any
and all Liens, encumbrances or other adverse ownership claims, and Moore has not
received any notice or claim challenging Moore's ownership of the MSD Patents or
suggesting that any Person, other than TPL and Moore, has any claim of legal or
beneficial ownership with respect thereto, nor, to Moore's knowledge, is there a
reasonable basis for any claim that Moore does not have such good and valid
title to the MSD Patents.
(b) To the knowledge of Moore, the MSD Patents are valid,
enforceable and subsisting. Except as disclosed on Schedule 5.5(b), Moore has
not received any notice or claim challenging or questioning the validity or
enforceability of the MSD Patents or indicating an intention on the part of any
Person to bring a claim that the MSD Patents are invalid or unenforceable or
have been misused, and to Moore's knowledge no reasonable basis exists for any
such claim.
(c) To the knowledge of Moore (i) Moore has not taken any action or
failed to take any action (including the manner in which it has conducted his
business, or used or enforced, or failed to use or enforce, the MSD Patents)
that would result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation or unenforceability of the MSD Patents and (ii) Moore has timely
paid all filing, examination, issuance, post registration and maintenance fees,
annuities and the like associated with or required with respect to the MSD
Patents.
(d) To the knowledge of Moore, none of the activities or operations
of Moore with respect to the MSD Patents infringes upon, misappropriates,
violates, dilutes or constitutes the unauthorized use of any rights, interests,
or property of any third party. Moore has not received any notice or claim
asserting or suggesting that any such infringement, misappropriation, violation,
dilution or unauthorized use is or may be occurring or has or may have occurred,
nor, to Moore's knowledge, is there any reasonable basis therefor. The MSD
Patents are not subject to any outstanding order, judgment, decree or
stipulation restricting the use, sale, transfer, assignment or licensing thereof
by Moore to any Person.
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5.6 Litigation. Except as disclosed on Schedule 5.6 (i) there are no
Proceedings pending or, to the knowledge of Moore, threatened, against or by
Moore or the MSD Patents or which seek to enjoin or rescind the transactions
contemplated by this Agreement, nor, to the knowledge of Moore, is there any
valid basis for any such Proceedings; and (ii) there are no existing orders,
judgments or decrees of any Governmental Authority naming Moore as an affected
party or otherwise affecting the MSD Patents or the performance by Moore of the
transactions contemplated by this Agreement, nor, to the knowledge of Moore, is
there any valid basis for any such order, judgment or decree.
5.7 Advisory Fees. Except as set forth on Schedule 5.7, there is no
investment banker, broker, finder or other intermediary or advisor that has been
retained by or is authorized to act on behalf of Moore who is entitled to any
fee, commission or reimbursement of expenses from Patriot, TPL or any of their
respective Representatives upon consummation of the transactions contemplated by
this Agreement or otherwise.
ARTICLE VI
COVENANTS OF PATRIOT
6.1 Court Approval of Stipulated Final Judgment. Patriot shall use its
reasonable best efforts to obtain court approval of the Stipulated Final
Judgment as soon as possible after the date hereof.
6.2 Retention of Rights; No Action With Respect to the MSD Patents.
Patriot and TPL shall retain all of their respective rights with respect to the
MSD Patents, except those rights to the MSD Patents transferred by Patriot and
TPL to P-Newco pursuant to the Newco Licenses and the Merger Agreement. From the
date hereof until the termination of the Commercialization Agreement, neither
Patriot nor any of its Representatives shall take any action with respect to
those matters concerning which TPL is authorized to act on behalf of the parties
pursuant to the Commercialization Agreement and the Grant referred to therein,
including, but not limited to, contacting, pursuing litigation against, or
entering into discussions or negotiations with potential infringers, entering
into license agreements, settlement agreements, or other similar agreements with
respect to the MSD Patents, or selling or otherwise transferring any interest in
the MSD Patents. Notwithstanding the foregoing, subject to Section 7.7, Patriot
shall be entitled to take all actions contemplated by Section 7.1 of this
Agreement. From the termination of the Commercialization Agreement until one
year from the date thereof, Patriot shall not contact or enter into discussions
or negotiations with, or enter into license agreements, settlement agreements,
or other similar agreements with respect to the MSD Patents, or pursue any
litigation or other dispute resolution involving claims related to the MSD
Patents with regard to any potential licensee with whom TPL is engaged in active
negotiations at the time of the termination of the Commercialization Agreement
and identified in writing by TPL within five (5) days after such termination
("Active Potential Licensees").
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ARTICLE VII
COVENANTS OF ALL PARTIES
7.1 Protection and Maintenance of the MSD Patents. Subject to Section 7.7,
Patriot, TPL and Moore, as well as each of Patriot's and TPL's appointees to
P-Newco's Management Committee, shall use their respective best efforts to
protect and maintain the MSD Patents, including taking all actions necessary to
maintain the effectiveness of the MSD Patents.
7.2 Commercialization Program.
(a) From the date hereof, TPL shall use its commercially reasonable
best efforts to pursue the commercialization program on behalf of P-Newco,
substantially in the manner contemplated by the Commercialization Agreement,
with all proceeds therefrom to be allocated among the parties consistent with
the terms of the Commercialization Agreement and the Operating Agreement, and
Patriot and Moore shall provide all reasonable assistance and cooperation with
respect thereto.
(b) Upon receipt of any proceeds in connection with TPL's
commercialization efforts pursuant to Section 7.2(a) between the date hereof and
the earlier of (i) the Termination Date and (ii) the Closing, TPL shall cause
all Net Cash Proceeds generated as a result thereof to be paid to P-Newco at the
Closing to be retained and/or distributed by P-Newco pursuant to the terms of
the Operating Agreement.
(c) From the date hereof until the earlier of (i) the Termination
Date and (ii) the Closing, TPL agrees to provide Patriot prompt notice upon (A)
execution of any agreements relating to the MSD Patents, and (B) receipt by
P-Newco of any funds therefrom.
7.3 Further Assurances. TPL, Patriot and Moore agree to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be reasonably necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
7.4 Certain Filings. TPL and Patriot shall cooperate with one another in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
7.5 Notification. Patriot, TPL and Moore will promptly:
(a) notify the other parties in writing if it or he becomes aware of
any action, event, condition or circumstance, or group of actions, events,
conditions or circumstances, that results in, or could reasonably be expected to
result in, a Material Adverse Effect;
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(b) notify the other parties in writing of the commencement of any
Proceeding by or against it or him, or of becoming aware of any claim, action,
suit, inquiry, proceeding, notice of violation, demand letter, subpoena,
government audit or disallowance that could be expected to result in a
Proceeding by or against it or him; and
(c) notify the other parties in writing of the occurrence of any
breach by it or him of any representation or warranty, or any covenant or
agreement, contained in this Agreement.
7.6 Public Announcements. From the date hereof until the earlier of the
Termination Date or the termination of the Commercialization Agreement, TPL and
Patriot agree to consult with each other before (a) issuing any press release,
(b) making any public statement with respect to this Agreement or the
transactions contemplated hereby (including, without limitation, with respect to
the consideration to be paid pursuant to this Agreement or any license agreement
pursuant to the Commercialization Agreement), or (c) making any SEC filing, and,
except as may be required by Applicable Law, will not issue any such press
release or public statement without the prior consent of the other party hereto.
In the event a party determines that a public statement is required by
Applicable Law, prior to making such statement or filing it shall provide to the
other party a copy of such proposed statement or filing at least two Business
Days prior to making such statement or filing and shall make such changes as may
be reasonably requested by the other party. With respect to any SEC filing
pursuant to Patriot's obligations under the Exchange Act or otherwise, Patriot
shall give TPL at least five Business Days advance notice of such filing (except
to the extent compliance with applicable law shall require a shorter period of
advance notice), and shall provide TPL a copy of the proposed filing for TPL's
review and comment, including all exhibits thereto, for purposes of determining
whether to make a confidential treatment request with respect to any exhibit
related to the transactions contemplated by this Agreement. Patriot agrees to
make all requests for confidential treatment reasonably requested by TPL and
consult with TPL regarding the requirement to make such a filing.
Notwithstanding the foregoing, the parties may, on a confidential basis, advise
and release information regarding the existence and content of this Agreement or
the transactions contemplated hereby to their Representatives in connection with
or related to the transactions contemplated by this Agreement.
7.7 No Interference. From the date hereof through the earlier of the
Termination Date or the termination of the Commercialization Agreement, Patriot,
Moore and P-Newco shall each avoid and refrain from any and all activity of any
kind or nature which may impede, impair, frustrate or otherwise interfere with
the activities of TPL in the execution of the commercialization program
contemplated by the Commercialization Agreement, and shall:
(a) Exert their respective reasonable best efforts to impose the
covenants of this Agreement, the Commercialization Agreement, and the
transactions contemplated hereby and thereby on their respective affiliates or
Representatives; and
(b) Be responsible hereunder for each and every failure in the good
and faithful performance of this Agreement and the Commercialization Agreement
by themselves and/or their respective affiliates or Representatives (other than
TPL).
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7.8 No Transfer. From the date hereof until one year after the termination
of the Commercialization Agreement, with the exception of the agreements and
transactions entered into pursuant to the commercialization program contemplated
by the Commercialization Agreement, Patriot, P-Newco, TPL and Moore shall not
transfer, assign, license, or otherwise convey any interest in, or grant any
security interest with respect to, any portion of their interest in the MSD
Patents without the written consent of all parties hereto, other than to
entities which (a)(i) are owned and controlled by the transferring Person and
(ii) agree to be bound by this Section 7.8, or (b) in the case of Moore,
pursuant to a living trust, will or other estate planning device, or via
intestate succession, provided however that any transferee of Moore's interest
in the MSD Patents under this Section 7.8(b) shall agree to be bound by this
Section 7.8; provided, however, that (A) after termination of the
Commercialization Agreement TPL may take any and all actions with respect to any
portion of its interest in the MSD Patents without the written consent of any of
the parties hereto, and (B) for the period beginning on the termination of the
Commercialization Agreement and ending one year after the termination of the
Commercialization Agreement, Patriot may take any and all actions with respect
to any portion of its interest in the MSD Patents only with any parties that are
not Active Potential Licensees without the written consent of any of the parties
hereto, provided that any transferee of Patriot's interest in the MSD Patents
under this Section 7.8 shall agree to be bound by this Section 7.8. Any transfer
pursuant to this Section 7.8 shall be subject to existing licenses in respect of
the MSD Patents.
7.9 Litigation Cooperation. Patriot, P-Newco and Moore agree to cooperate
in any litigation with respect to the MSD Patents, including providing any
reasonable assistance in connection with such litigation or joining as a party
thereto, as requested by TPL.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Each Party. The obligations of each of
TPL and Patriot to consummate the Closing are subject to the satisfaction of
each of the following conditions:
(a) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the transactions contemplated by this Agreement, or imposing Damages in respect
thereto, shall be in effect, and there shall be no pending or threatened actions
or proceedings by any Governmental Authority (or determinations by any
Governmental Authority).
(b) Patriot, TPL and Moore shall have agreed on and selected the
Independent Manager (as defined in the Operating Agreement) for P-Newco, and the
first Annual Business Plan for P-Newco shall have been approved.
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(c) Intel shall have disbursed to the Escrow Account all unpaid
Milestone Payments (as defined in the Intel Patent License Agreement) set forth
in Section 3.2 of the Intel Patent License Agreement.
8.2 Conditions to Obligations of TPL.
The obligations of TPL to consummate the Closing are subject to the
satisfaction of each of the following conditions:
(a) (i) Patriot shall have complied with, performed and satisfied
each of its agreements and covenants contained herein and required to be
performed and satisfied by it on or prior to the Closing, (ii) each of the
representations and warranties of Patriot contained in this Agreement, or in any
certificate or document delivered to TPL pursuant hereto, shall have been true
and correct in all material respects when made and shall contain no misstatement
or omission that would make any such representation or warranty materially
misleading when made and shall be true and correct in all material respects on,
and contain no misstatement or omissions that would make any such representation
or warranty materially misleading at and as of the Closing with the same force
and effect as if made as of the Closing except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such particular date), and (iii) TPL shall have
received certificates signed by a duly authorized executive officer of Patriot
to the foregoing effect and to the effect that the conditions specified within
this Section 8.2 have been satisfied.
(b) This Agreement, the Escrow Agreement, the Merger Agreement, the
Operating Agreement, the Commercialization Agreement, the Warrant, the
Registration Rights Agreement, and the Stipulated Final Judgment shall have been
executed and delivered by Patriot, Moore and P-Newco, as applicable.
(c) The Stipulated Final Judgment shall have been executed by
Patriot and delivered to TPL, with such changes as may be requested by the
court.
(d) The Trade Secrets Litigation shall have been dismissed without
prejudice.
8.3 Conditions to Obligations of Patriot.
The obligations of Patriot to consummate the Closing are subject to
the satisfaction of each of the following conditions:
(a) (i) TPL shall have complied with, performed and satisfied each
of its agreements and covenants contained herein and required to be performed
and satisfied by it on or prior to the Closing, (ii) each of the representations
and warranties of TPL contained in this Agreement, or in any certificate or
document delivered to Patriot pursuant hereto, shall have been true and correct
in all material respects when made and shall contain no misstatement or omission
that would make any such representation or warranty materially misleading when
made and shall be true and correct in all material respects on, and contain no
misstatement or omissions that would make any such representation or warranty
materially misleading at and as of the Closing with the same force and effect as
if made as of the Closing except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such particular date), and (iii) Patriot shall have received
certificates signed by a duly authorized executive officer of TPL to the
foregoing effect and to the effect that the conditions specified within this
Section 8.3 have been satisfied.
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(b) This Agreement, the Escrow Agreement, the Merger Agreement, the
Operating Agreement, the Commercialization Agreement, and the Stipulated Final
Judgment shall have been executed and delivered by TPL, Moore and P-Newco, as
applicable.
(c) The Infringement Litigation involving Intel and Patriot shall
have been dismissed with prejudice.
ARTICLE IX
INDEMNIFICATION
9.1 Patriot Agreement to Indemnify. Patriot shall indemnify and hold
harmless TPL and Moore and their respective affiliates and Representatives
(collectively, the "TPL Indemnitees") in respect of any and all Damages which
any of the TPL Indemnitees may incur or sustain, or to which any of the TPL
Indemnitees may be subjected, as a result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in this Agreement;
(b) any breach by Patriot of any covenant or agreement to be
performed by Patriot;
(c) any Proceeding brought by any Person, based upon or arising from
actions of Patriot prior or subsequent to the date hereof, including without
limitation: (i) any public disclosure made by Patriot, or any omission by
Patriot to disclose, in any filing with the SEC, press release, prospectus or
any oral or written communication; (ii) any alleged breach by Patriot or any of
Patriot's officers, directors, employees or agents of any duty to holders of
Patriot Common Stock or any other Patriot securities, or right or agreement to
purchase Patriot Common Stock or any other Patriot securities; or (iii) any
actions of Patriot or any predecessor in interest to Patriot with respect to the
MSD Patents (or any actual or alleged agreement pertaining thereto); provided,
however, that this Section 9.1(c) shall not apply to Proceedings related to
actions taken by Patriot in good faith pursuant to this Agreement and the
agreements contemplated hereby;
(d) any Proceeding brought by any current or former affiliate,
Representative, stockholder, creditor or stakeholder of Patriot based upon or
arising from the negotiation or consummation of the transactions contemplated by
this Agreement, including without limitation any action brought by Russell Fish,
the law firm of Beatie & Osborn LLP or any of its partners, members, associates,
or employees, Russell H. Beatie, Daniel A. Osborn, John E. Lynch or Willis E.
Higgins; or
(e) any Taxes of Patriot.
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9.2 TPL Agreement to Indemnify. TPL shall indemnify and hold harmless
Patriot and its Representatives (collectively, the "Patriot Indemnitees") in
respect of any and all Damages which any of the Patriot Indemnitees may incur or
sustain, or to which any of the Patriot Indemnitees may be subjected, as a
result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in this Agreement;
(b) any breach by TPL of any covenant or agreement to be performed
by TPL;
(c) any Damages in connection with any Proceeding brought by any
Person, other than Patriot's current or former Representatives, based upon or
arising from actions of TPL prior or subsequent to the date hereof, including
without limitation, any actions of TPL or any predecessor in interest to TPL
with respect to the MSD Patents (or any actual or alleged agreement pertaining
thereto); provided, however, that this Section 9.2(c) shall not apply to
Proceedings related to actions taken by TPL in good faith pursuant to this
Agreement and the agreements contemplated hereby; or
(d) any Taxes of TPL.
9.3 Moore Agreement to Indemnify. Moore shall indemnify and hold harmless
Patriot and TPL and their respective affiliates or Representatives
(collectively, the "Patriot/TPL Indemnitees") in respect of any and all Damages
which any of the Patriot/TPL Indemnitees may incur or sustain, or to which any
of the Patriot/TPL Indemnitees may be subjected, as a result of:
(a) any inaccuracy or misrepresentation in or breach of any
representation or warranty contained in Article V of this Agreement; or
(b) any breach by Moore of any covenant or agreement to be performed
by Moore.
9.4 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants, agreements and obligations of each
Indemnifying Party contained in this Agreement and all claims of any TPL
Indemnitee or Patriot Indemnitee in respect of any breach of any representation,
warranty, covenant, agreement or obligation of any Indemnifying Party contained
in this Agreement, shall survive the Closing and all due diligence performed by
the respective parties.
9.5 Claims for Indemnification. If any Indemnitee shall believe that such
Indemnitee is entitled to indemnification pursuant to this Article IX in respect
of any Damages, such Indemnitee shall give the appropriate Indemnifying Party
prompt written notice thereof. Any such notice shall set forth in reasonable
detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure adversely affects the
right of the Indemnifying Party to assert all reasonable defenses to such claim.
Each such claim for indemnity shall expressly state that the Indemnifying Party
shall have only the thirty (30) calendar day period referred to in the next
sentence to dispute or deny such claim. The Indemnifying Party shall have thirty
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(30) calendar days following its receipt of such notice either (a) to acquiesce
in such claim and the responsibility to indemnify the Indemnitee in respect
thereof in accordance with the terms of this Article IX by giving such
Indemnitee written notice of such acquiescence or (b) to object to the claim by
giving such Indemnitee written notice of the objection. If the Indemnifying
Party does not object thereto within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have acquiesced in such claim and the
responsibility to indemnify the Indemnitee in respect thereof in accordance with
the terms of this Article IX.
9.6 Defense of Claims. In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice sent at any time to the relevant
Indemnitee, assume the defense of any such claim or Proceeding if the
Indemnifying Party with respect to such claim or Proceeding acknowledges to the
Indemnitee the Indemnitee's right to indemnity pursuant hereto in respect of the
entirety of such claim (as such claim may have been modified through written
agreement of the parties or arbitration hereunder) and provide assurances,
reasonably satisfactory to such Indemnitee, that the Indemnifying Party will be
financially able to satisfy such claim in full if such claim or Proceeding is
decided adversely. The Indemnifying Party shall select counsel reasonably
acceptable to such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps reasonably necessary in the defense or
settlement thereof and shall at all times diligently and promptly pursue the
resolution thereof. If the Indemnifying Party shall have assumed the defense of
any claim or Proceeding in accordance with this Section 9.6, the Indemnifying
Party shall not (without the written consent of each Indemnitee) consent to a
settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, unless such settlement or order shall provide for the unconditional
release of all Indemnitees. If the Indemnifying Party has so elected to assume
the defense, each Indemnitee shall be entitled to participate in (but not
control) the defense of any such action, with its own counsel and at its own
expense. Each Indemnitee shall, and shall cause each of its Representatives to,
cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this Section
9.6. If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section 9.6,
such Indemnitee may defend against such claim or Proceeding in such manner as it
may deem appropriate, provided that the Indemnitee may not settle such claim or
Proceeding without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed), and provided further that the
Indemnifying Party shall be obligated to pay Indemnitee's attorneys' fees and
costs promptly as they are incurred in the defense of such claim or Proceeding.
ARTICLE X
TERMINATION
10.1 Grounds for Termination. This Agreement may be terminated (except as
set forth in Section 10.2) and the transactions contemplated hereby abandoned at
any time prior to the Closing (the "Termination Date"):
(a) by mutual written agreement of TPL and Patriot;
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(b) by TPL upon written notice to Patriot of any one or more
inaccuracies or misrepresentations in or breaches of the representations or
warranties made by Patriot contained herein which have had or, if not cured
prior to the Closing Date could be reasonably expected to have, a Material
Adverse Effect when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties;
provided, however, that a termination pursuant to this clause (b) shall become
effective upon the earlier to occur of (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(c) by TPL at any time upon written notice to Patriot of the failure
by Patriot to perform and satisfy in all material respects any of its
obligations under this Agreement required to be performed and satisfied on or
prior to the Closing Date; provided, however, that a termination pursuant to
this clause (c) shall become effective upon the earlier to occur of (i) three
(3) days after such notice with respect to such a failure that is not capable of
being cured on or prior to the Closing Date, (ii) fifteen (15) days after such
notice with respect to such a failure that is capable of being cured on or prior
to the Closing Date, but is not cured, on or prior to such fifteenth (15th) day,
or (iii) immediately prior to the Closing with respect to such a failure that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(d) by Patriot at any time upon written notice to TPL of any one or
more inaccuracies or misrepresentations in or breaches of the representations or
warranties made by TPL or Moore contained herein which have had or, if not cured
prior to the Closing Date could be reasonably expected to have, a Material
Adverse Effect when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties;
provided, however, that a termination pursuant to this clause (d) shall become
effective upon the earlier to occur of (i) fifteen (15) days after such notice
with respect to such a misrepresentation or breach that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a misrepresentation or breach that is capable of being
cured, but is not cured, on or prior to the Closing Date;
(e) by Patriot at any time upon written notice to TPL of TPL's
failure to perform and satisfy in all material respects any of its obligations
under this Agreement required to be performed and satisfied on or prior to the
Closing Date; provided, however, that a termination pursuant to this clause (e)
shall become effective upon the earlier to occur of (i) three (3) days after
such notice with respect to such a failure that is not capable of being cured on
or prior to the Closing Date, (ii) fifteen (15) days after such notice with
respect to such a failure that is capable of being cured on or prior to the
Closing Date, but is not cured, on or prior to such fifteenth (15th) day, or
(iii) immediately prior to the Closing with respect to such a failure that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(f) by Patriot or TPL if the Closing shall not have been consummated
by November 30, 2005; provided, however, that Patriot or TPL may not terminate
this Agreement pursuant to this clause (f) if the Closing shall not have been
consummated within such time period by reason of the failure of that party or
any of its Representatives to perform in all material respects any of its or
their respective covenants or agreements contained in this Agreement;
25
(g) by Patriot if TPL has caused a Material Adverse Effect other
than any Material Adverse Effect caused by any proceeding brought by any current
or former affiliate, Representative, stockholder, creditor or stakeholder of
Patriot relating to any effect of the public announcement of this Agreement, the
transactions contemplated hereby or the consummation of such transactions;
(h) by TPL if Patriot has caused a Material Adverse Effect; and
(i) by any party hereto if any federal, state or foreign law or
regulation thereunder shall hereafter be enacted or become applicable that makes
the transactions contemplated hereby or the consummation of the Closing illegal
or otherwise prohibited, or if any judgment, injunction, order or decree
enjoining either party hereto from consummating the transactions contemplated
hereby is entered, and such judgment, injunction, order or decree shall become
final and nonappealable.
The party desiring to terminate this Agreement pursuant to clauses (b)
through (i) shall give written notice of such termination to the other party
pursuant to Section 11.1.
10.2 Effect of Termination.
(a) If this Agreement is terminated as permitted by Section 10.1,
such termination shall be without liability of any party to any other party to
this Agreement except as hereinafter expressly provided in this Section 10.2.
(b) If such termination shall result from the willful failure of
Patriot to fulfill a condition to the performance of the obligations of TPL, the
willful failure of Patriot to perform a covenant contained in this Agreement or
a willful breach by Patriot of its representations and warranties contained in
this Agreement, Patriot shall be fully responsible for all Damages incurred by
TPL as a result of such failure or breach by Patriot.
(c) If such termination shall result from the willful failure of TPL
to fulfill a condition to the performance of the obligations of Patriot, the
willful failure of TPL to perform a covenant contained in this Agreement or a
willful breach by TPL of its representations and warranties contained in this
Agreement, TPL shall be fully responsible for all Damages incurred by Patriot as
a result of such failure or breach by TPL.
(d) If such termination shall result for any reason other than (i)
the willful failure of Patriot to fulfill a condition to the performance of the
obligations of TPL; (ii) the willful failure of Patriot to perform a covenant
contained in this Agreement; or (iii) the willful breach by Patriot of its
representations and warranties contained in this Agreement, Patriot shall be
entitled to one-half of the Net Cash Proceeds generated by TPL from the period
beginning from the date hereof and ending on the date this Agreement is
terminated. It is expressly agreed and understood that Patriot shall not be
entitled to any of the Milestone Payments (as such term is defined in the Intel
Patent License Agreement), which shall only be distributed pursuant to the terms
of the Escrow Agreement. TPL shall pay Patriot, by wire transfer in immediately
available funds, to the account set forth on Exhibit E of the Escrow Agreement,
such funds within the later of (A) five (5) days after the termination of this
Agreement and (B) sixty (60) days of receipt thereof by TPL.
26
(e) The provisions of Article IX, as well as Sections 7.6, 11.1,
11.5, 11.9, 11.13 and 11.14 and this Section 10.2 shall survive any termination
of this Agreement pursuant to this Article X, and each party hereto shall be
fully responsible for any breach of any such provision, whether or not such
breach occurs prior to the termination of this Agreement. In addition, the
parties expressly agree that the Stipulated Final Judgment is severable and has
significance independent of this Agreement and any other agreements and
transactions contemplated hereby and thereby, and as such shall not be affected
or disturbed by the Termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (a) if
personally delivered, when so delivered, (b) if mailed, two Business Days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid and addressed to the intended recipient as set forth below, (c)
if given by fax, once such notice or other communication is transmitted to the
fax number specified below and the appropriate answer back or telephonic
confirmation is received, provided that a copy of such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (b) above or (d) of this Section 11.1, or (d) if sent through an
overnight delivery service in circumstances to which such service guarantees
next day delivery, the day following being so sent:
If to Patriot:
--------------
Patriot Scientific Corporation
10989 Via Frontera
San Diego, CA 92127
Attn: President
Fax: (858) 674-5004
with a copy to:
--------------
Luce, Forward, Hamilton & Scripps LLP
600 West Broadway, Suite 2600
San Diego, CA 92101
Attn: Otto E. Sorensen, Esq.
Fax: (619) 232-8311
27
If to TPL:
----------
Technology Properties Limited Inc.
P.O. Box 20250
San Jose, CA 95160
Attn: Daniel E. Leckrone, Chairman
Fax: (408) 296-6637
with a copy to:
--------------
Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, California 90071
Attn: Andrew E. Bogen, Esq.
Fax: (213) 229-6159
If to Moore:
------------
Charles H. Moore
40 Cedar Lane
P.O. Box 127
Sierra City, CA 96125
Fax: (413) 714-5590
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.2 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective; provided, however, that any
amendment or waiver to Section 11.9, Section 11.13, Section 11.14 or this
Section 11.12(a) or any other amendment or waiver with respect to this Agreement
of the agreements referenced herein that adversely affects Intel shall be
effective only if such written amendment or waiver also has been executed and
delivered by Intel.
(b) No waiver by a party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
28
11.3 Expenses. All costs and expenses incurred in connection with this
Agreement and in closing and carrying out the transactions contemplated hereby
shall be paid by the party incurring such cost or expense.
11.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of the other party.
11.5 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws (without reference to choice or conflict of
laws) of the State of California.
11.6 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts and the signatures delivered by fax or other similar
means, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other parties hereto.
11.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference and the
other agreements executed simultaneously herewith) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement.
11.8 Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.9 Severability. The failure of any provision of this Agreement by
virtue of its being construed as invalid or otherwise unenforceable shall render
the entire Agreement cancelable at the option of the party asserting the
enforceability of the said provision. Notwithstanding the foregoing, the parties
expressly agree that the Stipulated Final Judgment, Section 11.2(a), Section
11.13 and Section 11.14 are severable and have significance independent of this
Agreement and any other agreements and transactions contemplated hereby and
thereby, and as such shall not be affected or disturbed by the invalidity,
illegality or unenforceability of any such provision or provisions or of the
entirety of any such agreements.
11.10 Construction. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has beached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
29
11.11 Cumulative Remedies. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
11.12 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to
consummate the agreements contemplated hereby, will cause irreparable injury to
the other party, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief without bond by any court of competent jurisdiction to compel performance
of such party's obligations and to the granting by any court of the remedy of
specific performance of its obligations hereunder.
11.13 Third-Party Beneficiaries. Except as specifically provided in (a)
Article IX with respect to indemnification provided to the Indemnitees
identified therein, and (b) Section 11.14, no provision of this Agreement shall
create any third-party beneficiary rights in any Person, including any employee
or former employee of Patriot or any Representative thereof (including any
beneficiary or dependent thereof). Each of Intel and its present, former and
future direct and indirect distributors of Intel Licensed Products
(collectively, the "Intel Parties" ") shall be an express, intended third-party
beneficiary of Section 11.2(a), Section 11.9 and Section 11.14.
11.14 No Liability of Intel. Upon payment by Intel of all of the unpaid
Milestone Payments provided for at Section 3.2 of the Intel Patent License
Agreement to the account designated at Exhibit A to the Escrow Agreement
attached hereto as Exhibit E, each of Intel and the Intel Parties shall be
forthwith and without further or other action of any kind by anyone, released
from all potential liability with respect to Intel Licensed Products and based
upon the rights of Patriot in and to the Core Patents (as described in the Intel
Patent License Agreement). It is the intention of the parties to this Agreement
in executing this Agreement that the same shall be effective as a bar to each
and every claim, demand and cause of action hereinabove specified in this
Section 11.14. In furtherance of this intention, each of the parties to this
Agreement hereby expressly waives any and all rights and benefits conferred upon
him by the provisions of Section 1542 of the California Civil Code (or any
similar provision of any other applicable law) and expressly consents that this
Agreement shall be given full force and effect according to each and all of its
express terms and provisions, including those related to unknown and unsuspected
claims, demands and causes of action, if any, as well as those related to any
other claims, demands and causes of action hereinabove specified. Section 1542
of the California Civil Code provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST
HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
Each of the parties to this Agreement acknowledges that it or he may hereafter
discover claims or facts in addition to or different from those which it or he
now knows or believes to exist with respect to the subject matter of this
Agreement and which, if known or suspected at the time of executing this
Agreement, may have materially affected this release. Nevertheless, each of the
30
parties to this Agreement hereby waives any right, claim, or cause of action
that might arise as a result of such different or additional claims or facts.
Each of the parties to this Agreement acknowledges that it or he understands the
significance and consequence of the release set forth in this Section 11.14 and
such specific waiver of Section 1542 (and any other similar provisions of any
other applicable laws).
For the avoidance of doubt, the releases provided for in this Section 11.14
shall extend solely to the use and practice of the Core Patents with respect to
Intel Licensed Products.
11.15 No Punitive, Exemplary, or Consequential Damages. Except as
expressly set forth herein, the parties hereto understand and agree that under
no circumstances shall punitive, exemplary or consequential damages be available
to any party for breach of this Agreement.
[signature page follows]
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PATRIOT SCIENTIFIC CORPORATION,
a Delaware corporation
By: /s/ DAVID H. POHL
------------------
Name: David H. Pohl
Title: Director
TECHNOLOGY PROPERTIES LIMITED INC.,
a California corporation
By: /s/ DANIEL E. LECKRONE
-----------------------
Name: Daniel E. Leckrone
Title: Chairman
CHARLES H. MOORE,
an individual
/s/ CHARLES H. MOORE
----------------------
[***] Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as ***. A complete version of this exhibit has
been filed separately with the Securities and Exchange Commission.