AGREEMENT WITH REGARD TO EXERCISE PRICE RESETS
AND 4.99% LIMITATION
THIS AGREEMENT WITH REGARD TO EXERCISE PRICE RESETS AND 4.99% LIMITATION
(the "Agreement") is entered into as of February 9, 2006, by and among Patriot
Scientific Corporation, a corporation duly organized and existing under the laws
of the State of Delaware (the "Company" or "Patriot") and Swartz Private Equity,
LLC (hereinafter referred to as "SPE" or the "Investor").
RECITALS:
Whereas, PATRIOT and SPE have each entered into certain agreements,
including but not limited to the following agreements and agreements related to
such agreements:
- Investment Agreement, dated May 2, 2000 ("Equity Line #2"),
- Investment Agreement, dated September 17, 2001 ("Equity Line #3"),
- Amended Loan Advance Agreement, dated March 12, 2002
- Antidilution Agreement and Addendum to Warrants, dated March 19,
2003,
- Securities Purchase Agreement, dated March 23, 2004,
- Debenture in the amount of $723,167.28, dated March 23, 2004 (the
"SPE Debenture");
- Amendment to Warrants dated as of March 24, 2004 (the "First
Amendment to Warrants");
- Amendment to Agreements and Second Amendment to Warrants dated
November 17, 2004; and
- the SPE Warrants (as defined below).
Whereas, any warrants to purchase common stock of PATRIOT that have been
issued to SPE by Patriot for any reason at any time in the past up through and
including the date hereof, including but not limited to the Outstanding SPE
Warrants (as defined below), are referred to herein as the "SPE Warrants;"
Whereas, any agreements that have been entered into between Patriot and
SPE at any time up through and including the date hereof, including but not
limited to the above listed agreements, and any Debentures and Warrants issued
by the Company to SPE, including but not limited to the SPE Debenture and the
SPE Warrants, are collectively referred to herein as the "SPE Agreements;"
1
Whereas, pursuant to agreements between the parties, PATRIOT issued to
SPE, among other warrants, the following warrants (the "Outstanding SPE
Warrants"), each of which remain outstanding as of the date hereof:
Holder Description Date of Issuance Warrant # Fixed Price
------ ----------- ---------------- --------- -----------
SPE Snapshot Warrant #7 1/1/2004 3,051,299 $0.015
SPE EL #2 Put #10 Pur Wrrnt 11/9/2001 375,000 $0.0319
SPE EL #2 Put #5 Pur Wrrnt 5/2/2001 108,300 $0.033
SPE EL #2 Put #9 Put Wrrnt 9/26/2001 225,000 $0.033
SPE EL #1 Put #2 Pur Wrrnt 12/23/1999 267,696 $0.0363
SPE EL #2 Pur #2 Pur Wrrnt 10/19/2000 125,310 $0.0385
SPE EL #2 Put #3 Pur Wrrnt 12/28/2000 23,583 $0.0385
SPE EL #2 Put #4 Pur Wrrnt 3/6/2001 266,430 $0.0396
SPE Rollover Note Warrant 3/23/2004 8,035,192 $0.0399
SPE Snapshot Warrant #6 10/1/2003 1,557,653 $0.04
SPE Snapshot Warrant #8 4/1/2004 5,240,211 $0.04
SPE Note Wrrnt #12 2/15/2002 206,250 $0.0407
SPE Make-Up Warrant 2/1/2006 7,000,000 $0.0775
Whereas, the PARTIES mutually desire to enter into this Agreement.
2
TERMS:
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged:
1. LOWEST RESET PRICE. For purposes hereof, "Fixed Price" shall have the meaning
set forth in the above table in the fourth recital to this Agreement, with
respect to each Warrant listed on such table and shall mean $.0399 with respect
to the SPE Debenture.
2. RESET PROVISION IN THE SPE WARRANTS. Each SPE Warrant is hereby amended to
add the following language to the end of last sentence of the first paragraph of
Section 3 thereof:
" provided that, after February 1, 2006, the "Lowest Reset Price" shall
equal the Fixed Price, as defined in that certain Agreement With Regard to
Exercise Price Resets And 4.99% Limitation (the "Reset Fixing Agreement")
entered into as of February 9, 2006, by and among Patriot Scientific
Corporation and Swartz Private Equity, LLC taking into account, as
appropriate, any adjustments made pursuant to Section 5 hereof."
3. RESET PROVISION IN THE SPE DEBENTURE. The SPE Debenture is hereby amended to
add the following language to the end of Section 1.2(b) thereof:
"Notwithstanding the above, after February 1, 2006, the "Conversion Price"
shall be reset to equal the Fixed Price, as defined in that certain
Agreement With Regard to Exercise Price Resets and 4.99% Limitation (the
"Reset Fixing Agreement") entered into as of February 9, 2006, by and
among Patriot Scientific Corporation and Swartz Private Equity, LLC
(subject to equitable adjustments for stock splits, stock dividends or
rights offerings by the Borrower relating to the Borrower's securities or
the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and
similar events), and shall not be reset thereafter except for the above
specified equitable adjustments"
3
4. EXPANSION OF 4.99% PROVISIONS TO 9.99%. To the extent that any provision in
any of the SPE Agreements limits the ability of SPE, through the exercise of
warrants, the conversion of debentures, or otherwise, to acquire shares of the
Common Stock of the Company, so that SPE cannot at any time be the beneficial
owner of more than 4.99% of the Common Stock of the Company, any and all such
provisions are hereby amended to substitute the figure 9.99% for the figure
4.99%.
5. NO FURTHER MODIFICATION. Except as set forth in this Agreement and in the
Waiver and Agreement entered into by the parties concurrently with this
Agreement, all of the terms and provisions of the SPE Agreements in effect as of
the date of this Agreement shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 9th day of February, 2006.
PATRIOT SCIENTIFIC CORP. SWARTZ PRIVATE EQUITY, LLC
By: By:
------------------------------------ -----------------------------
David H. Pohl Eric S. Swartz, Manager
Chief Executive Officer
By:
------------------------------------
Thomas J. Sweeney
Chief Financial Officer
4