EXECUTION COPY
COMMERCIALIZATION AGREEMENT
by and among
P-NEWCO
and
TECHNOLOGY PROPERTIES LIMITED
and
PATRIOT SCIENTIFIC CORPORATION
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TABLE OF CONTENTS
Page
ARTICLE I
GRANT..........................................................1
ARTICLE II
COMMERCIALIZATION..............................................2
ARTICLE III
COVENANTS......................................................3
ARTICLE IV
PAYMENT........................................................4
ARTICLE V
TERM...........................................................5
ARTICLE VI
TERMINATION....................................................5
ARTICLE VII REPRESENTATIONS
AND WARRANTIES.................................6
ARTICLE VIII
GENERAL........................................................7
EXHIBIT A
GRANT
SCHEDULE 1 SCHEDULE
OF PATENTS
SCHEDULE 2 PROJECT
DESCRIPTION
SCHEDULE 3 SCHEDULE
OF OUTSTANDING ACTIVITIES/RIGHTS/CLAIMS
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COMMERCIALIZATION AGREEMENT
This Commercialization Agreement ("Commercialization Agreement")
is
entered into by and among [P-Newco], a
Delaware limited liability corporation
("P-Newco"), Patriot Scientific
Corporation, a Delaware corporation ("Patriot"),
having its principal place of business at
10989 Via Frontera, San Diego,
California 92127, and Technology Properties
Limited Inc., a California
Corporation ("TPL"), having its principal
place of business at 21730 Stevens
Creek Boulevard, Ste. 201, Cupertino,
California 95014. Capitalized terms used
but not defined herein shall have the
meanings given to such terms in that
certain agreement dated as of June 7, 2005
(the "Master Agreement").
WHEREAS, Patriot, TPL and Charles H. Moore ("Moore") collectively
hold
all rights with respect to certain
microprocessor implementation and
architecture patents set forth on Schedule
1 (the "MSD Patents");
WHEREAS, Moore has transferred complete authority for the
management of
Moore's rights to the MSD Patents to
TPL;
WHEREAS, Patriot, TPL and Moore have entered into the Master
Agreement,
pursuant to which Patriot and TPL are
entering into licenses with P-Newco and
T-Newco, respectively, with respect to
certain of their rights in the MSD
Patents (collectively, the "Newco
Licenses");
WHEREAS, Patriot, TPL, P-Newco and T-Newco have entered into a
Merger
Agreement, pursuant to which T-Newco merged
with and into P-Newco, with P-Newco
continuing as the surviving entity and
holding all of the rights with respect to
the MSD Patents formerly held by P-Newco
and T-Newco;
WHEREAS,
pursuant to the Master Agreement, P-Newco, Patriot and TPL are
entering into this Commercialization
Agreement providing for the
commercialization of P-Newco's interests in
the MSD Patents by TPL in return for
the commitment of TPL to diligently pursue
the commercialization; and
WHEREAS, concurrently herewith Patriot and TPL are entering into
that
certain Limited Liability Company Operating
Agreement of P-Newco (the "Operating
Agreement"), governing the rights and
obligations of Patriot and TPL with
respect to their membership interests in
P-Newco and the distribution of the
proceeds received from the
commercialization program contemplated by this
Commercialization Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants
herein
contained as well as other good and
valuable consideration the receipt and
sufficiency of which is hereby
acknowledged, the parties hereto covenant and
agree that:
ARTICLE I
GRANT
1.1 Pursuant to the
Master Agreement, P-Newco and TPL shall enter into
the grant attached hereto as Exhibit A (the
"Grant").
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ARTICLE II
COMMERCIALIZATION
2.1 TPL shall exert
reasonable best efforts to implement the
activities (the "Commercialization")
described at Schedule 2 and to conduct the
project described therein ("Project") in
accordance with the project description
(the "Project Description") including the
Business Plan then in effect.
(a) The first Business
Plan is made a part of the Project Description
as Attachment I to Schedule 2, and shall
remain in full force and effect until
replaced by agreement of P-Newco and
TPL.
(b) TPL shall have no
obligation to pursue or fund any effort to
prosecute, maintain, enforce or defend any
element of the MSD Patents other than
as specifically provided for in Schedule
2.
2.2 By these presents,
P-Newco appoints, authorizes, and directs TPL
to take any and all action for the term of
this Commercialization Agreement,
with respect to all matters that are
related to P-Newco's rights to the MSD
Patents, including without limitation:
(a) entering into
settlement and/or license agreements related to the
MSD Patents which meet the
Commercialization guidelines set forth in Section II
of Schedule 2;
(b) with the prior
written consent of the P-Newco Management
Committee, entering into any settlement and
license agreements related to the
MSD Patents which do not meet the
guidelines set forth in Section II of Schedule
2;
(c) to sue in the name
of TPL, Moore, Patriot and/or P-Newco and to
pursue for the use and benefit of the
parties hereto as their respective
interests appear: (i) all remedies of
whatsoever kind or nature with respect to
the protection, use, and enforcement of the
MSD Patents; (ii) the collection of
all claims for damages, profits, and awards
relating to the past, present, or
future use or ownership of the MSD Patents;
and (iii) all equitable relief
available in connection therewith; and
(d) to otherwise
manage and control by license, sublicense, or other
agreement the practice and/or use of the
MSD Patents by third parties.
2.3. TPL may utilize the services of its various licensing
personnel
who may be lawyers to implement the
Commercialization of the MSD Patents. Such
services shall for no purpose be deemed to
be legal services or to give rise to
a lawyer-client relationship between TPL
and/or TPL affiliates or
Representatives on the one hand, and
P-Newco and/or Patriot or any of their
respective affiliates or Representatives on
the other hand. Without limiting the
foregoing, neither TPL nor any TPL
Representative shall for any purpose be
deemed to have:
(i) Provided
legal services or advice to;
(ii) Undertaken the
representation of; or
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(iii) Entered into a lawyer-client relationship with,
P-Newco, Patriot or any of P-Newco's or
Patriot's respective affiliates or
Representatives.
ARTICLE III
COVENANTS
3.1 Within sixty (60)
days after the close of each calendar quarter
TPL shall deliver to P-Newco: (i) an
operating statement reflecting the
Project's financial activity over the past
quarter; (ii) a calculation of the
Gross Cash Proceeds (as defined in the
Operating Agreement) resulting from the
Project; and (iii) an itemization of all
TPL Direct Reimbursable Expenses (as
defined below).
(a) Within thirty (30)
days after P-Newco's receipt thereof,
Patriot shall deliver to TPL written notice
detailing all objections to such
materials and calculations on an individual
item-by-item basis. Any objection
not so noticed shall be deemed to be
waived.
(b) Costs related to
verifying reported time and expense charges
and/or auditing reports or activities shall
be paid in advance by the entity
(either Patriot or TPL) supporting such
request for verification or audit.
3.2 As requested by
TPL, Patriot and P-Newco shall have a continuing
obligation to exert their respective
reasonable best efforts to support the
Project, cooperate with TPL in the
execution of its obligations, and to provide
such support in the manner described herein
and in the Master Agreement.
3.3 Upon reasonable
request, P-Newco and Patriot shall promptly
execute and deliver all documents,
instruments, and things necessary or useful
in the conduct of TPL's activities
hereunder, and Patriot and P-Newco agree to
cooperate in any litigation with respect to
the MSD Patents, including providing
any reasonable assistance in connection
with such litigation or joining as a
party thereto, as requested by TPL,
provided that neither Patriot nor P-Newco
shall be required to provide financial
support except as otherwise provided in
the Commercialization Agreement.
3.4 Patriot and
P-Newco shall each avoid and refrain from any and all
activity of any kind or nature which may
impede, impair, frustrate or otherwise
interfere with the activities of TPL in the
execution the Project, and shall:
(a) Exert their
respective reasonable best efforts to impose
the covenants of this Commercialization
Agreement, the Master Agreement and the
transactions contemplated hereby and
thereby on their respective directors,
officers, employees, consultants,
attorneys, agents and other affiliates or
Representatives; and
(b) Be responsible
hereunder for each and every failure in the
good and faithful performance of this
Commercialization Agreement and
transaction by themselves and/or their
respective directors, officers,
employees, consultants, attorneys, agents
and other affiliates or
Representatives (other than TPL).
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3.5 With the exception
of the agreements and transactions entered into
pursuant to the Project, P-Newco, Patriot
and TPL shall not transfer, assign,
license,
