MONETIZATION PROCEEDS AGREEMENT
Exhibit 99.3
Execution Copy
MONETIZATION PROCEEDS AGREEMENT
This Monetization Proceeds Agreement, dated as of October 22, 2015, is entered into by and between United Wireless Holdings, Inc. (“UWH”), a Delaware corporation, on the one hand, and Quest Patent Research Corporation (“QPRC”), a Delaware corporation, and its subsidiaries, Quest Licensing Corporation, a New York corporation, ▇▇▇▇ Technologies Inc., a New York corporation, Mariner IC Inc., a Texas corporation, Semcon IP Inc., a Texas corporation, and IC Kinetics Inc., a Texas corporation, together with QPRC, each such subsidiary a “Patent Owner” and collectively “Patent Owners”). (UWH and the other Patent Owners are collectively referred to herein as the “Parties” and each individually as a “Party.”)
RECITALS
WHEREAS, QPRC, directly or through its Patent Owner subsidiaries, is the owner of all right, title and interest to the United States patents and patent applications identified on Schedule A-1 and A-2 attached hereto and possesses or may possess certain Claims for which it intends to seek redress; and
WHEREAS, QPRC, the other Patent Owners and UWH are parties to that certain Securities Purchase Agreement dated as of the date hereof (as amended and in effect from time to time, the “Securities Purchase Agreement”); and
WHEREAS, it is a condition precedent to UWH’s purchasing the Notes, Shares and Purchase Option from QPRC under the Securities Purchase Agreement that QPRC and the Patent Owners execute and deliver to UWH an agreement in substantially the form hereof;
NOW, THEREFORE, in consideration for the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
| 1. | CONSTRUCTION |
1.1. For purposes of this Agreement, defined terms shall have the meanings set forth in Section 2 below. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided therefor in the Securities Purchase Agreement or the Security Agreement, as the case may be.
1.2. Headings are for information only and do not form part of the operative provisions of this Agreement.
1.3. References to this Agreement include references to the Recitals.
1.4. In this Agreement, unless a clear contrary intention appears: (a) words denoting the singular include the plural and vice versa; (b) words denoting any gender include all genders; (c) all references to”$” or dollars shall mean U.S. Dollars; (d) the word “or” shall include both the adjunctive and the disjunctive meaning thereof; and (e) the words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.”
1.5. The terms of this Agreement have been negotiated between the Parties in an arm’s length transaction, and shall not be construed for or against either Party by reason of the drafting or preparation hereof.
| 2. | DEFINITIONS The following terms shall have the meanings given below: |
2.1 “Adverse Claim” means any claim, cause of action, suit, or demand, including any counterclaim or third-party claim that is adverse to Patent Owner, Patent Owner’s Affiliates, Patent Owner’s Attorneys, UWH, any UWH Affiliate or UWH’ s interests pursuant to this Agreement; provided that “Adverse Claim” shall not include any non-monetary counterclaim relating directly to the Claims brought by a Defendant, including allegations regarding the invalidity, non-infringement, or unenforceability of any of the Patents, except to the extent that any such non-monetary counterclaim is in connection with, arises out of, or is otherwise related to any breach (or is based on or relates to facts or circumstances the existence of which would constitute a breach) of any representations or warranties or covenants made by Patent Owner in this Agreement or any other Transaction Document.
2.2 “Agreement” means, collectively, this Agreement, together with all exhibits, schedules and amendments hereto, including all documents expressly incorporated herein by reference.
2.3 “Affiliate” means as to any Person (i) any other Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person or its respective successors or (ii) if such Person is an individual, a spouse, parent, sibling, or descendant of such Person, or a trust over which such Person has sole investment and dispositive power for the benefit of such Person, spouse, parent, sibling, or descendant. The term “control” including the terms “controlling,” “controlled by,” and “under common control with” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting shares, by contract, or otherwise. Affiliates includes such entities whether now existing or later established by investment, merger, or otherwise, including the successors and assigns of such Person. In the case of the United States Government, Affiliates also includes departments or agencies of the United States Government.
2.4 “Assigned Rights” means the Net Proceeds Percentage of any and all of QPRC and Patent Owners’ rights in and to the Net Proceeds.
2.5 “Attorneys’ Fees” means the fees, hourly, contingent or otherwise, charged by Patent Owner’s Attorneys to maintain and prosecute the Patents and prosecute the Claims to completion, including pre-trial, trial, and collections of any settlements, judgments, and awards, and to defend any non-monetary counterclaims brought against the Patent Owner by any of the Defendants relating directly to the Claims, including allegations regarding invalidity, non-infringement, or unenforceability of the Patents.
2.6 “Claims” means all threatened or actual legal claims, actions, suits, arbitrations, causes of action, or proceedings before any supranational, national, state, municipal, or local entity or governmental authority, whether located within or without the United States, including any U.S. District Court, and demands asserted by Patent Owner or its Affiliates against one or more of the Defendants or against any other parties threatened with or added to a claim, action, suit, arbitration, cause of action, or proceeding brought against any of the Defendants relating to claims of patent infringement of any of the Patents that are or may be included by or on behalf of Patent Owner against the accused parties or included in any settlement or resolution of that Claim.
2.7 “Confidential Information” means all documents and information (whether written or oral), including all communications, contracts, and agreements, exchanged by the Parties related to the Parties' relationship, or the Claims. The term Confidential Information does not include information that: (i) becomes generally available to the public other than as a result of a breach by a Party of this Agreement, (ii) is already in the receiving Party's possession, provided that such information is not known by the receiving Party to be subject to a contractual or legal obligation of confidentiality to the disclosing Party, or (iii) becomes available to the receiving Party on a non-confidential basis from a source other than the disclosing Party, provided that such source is not known by the receiving Party to be bound by a contractual or legal obligation of confidentiality to the disclosing Party.
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2.8 “Defendants” means any Persons against which Claims are threatened, alleged, or asserted by any Patent Owner under this Agreement.
2.9 “Disputes” has the meaning set forth in Section 6.3.
2.10 “Escrow Agent” means CKR Law LLP, as escrow agent under the Escrow Agreement.
2.11 “Escrow Agreement” means the Escrow Agreement dated the date hereof among each Patent Owner, UWH and the Escrow Agent.
2.12 “Gross Monetization Proceeds” means any and all gross, pre-Tax monetary recovery or the value of any other non-cash consideration received, or to be received, directly or indirectly, by QPRC or any other Patent Owner, its Affiliates, related Persons, or any of their permitted assigns as a direct or indirect result of, part of, in connection with, relating to, or arising from the Patents, including any sale, licensing, exchange or other realization of value from any Patent, any Royalties (including the Value of Royalties), monies, lump-sum payments, up-front payments, settlement amounts, distribution of property, securities, judgments, settlements, injunctions, contracts and contract rights, licenses or other cash and non-cash amounts paid, received, or to be received by (which shall include amounts being set off against or otherwise reducing any obligation of QPRC or any other Patent Owner or any of their Affiliates), transferred to, owed by, or inuring, directly or indirectly, to QPRC or any other Patent Owner or any of their Affiliates or related Persons, including, without limitation, any of the foregoing as a direct or indirect result of, as part of, arising from, in connection with, or relating to, (x) awards or payments of attorneys’ fees, costs and expenses, settlement (reached before and after the initiation of litigation, arbitration, mediation, or a complaint, but after the execution of this Agreement), voluntary dismissals, and awards of sanctions (as permitted by applicable law), license, judgment, order, voluntary dismissals, including any award of sanctions, as permitted by applicable law, or any resolution of the Claims (or any part of the Claims); or (y) contracts, licensing agreements, or royalty agreements from Defendants or from any other parties added to the same action against Defendants, and (z) interest received in connection therewith agreed in a settlement or awarded in a judgment. For the avoidance of doubt, Gross Monetization Proceeds shall be determined prior to deducting (and shall be gross of) any portion thereof that may be payable by QPRC or Patent Owner to any other party for any reason.
2.13 “Inter Partes Review Expenses” means attorneys’ fees and out-of-pocket expenses actually incurred by Patent Owner or Patent Owner’s Attorneys in connection with the defense of an inter partes review, covered business method patent review, post grant review or ex-parte reexamination of the Patents
2.14 “Litigation Funder” means any Person providing to QPRC or another Patent Owner Litigation Financing
2.15 “Litigation Financing” means capital provided to QPRC or another Patent Owner by a Litigation Funder for the sole purpose of funding the prosecution of one or more Claims.
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2.16 “Monetization Expenses” means reasonable out-of-pocket expenses actually incurred by Patent Owner or Patent Owner’s Attorneys in connection with realization of Gross Monetization Proceeds, including the prosecution of Claims and defending any nonmonetary counterclaims brought against the Patent Owner by any of the Defendants relating directly to the Claims, including allegations regarding invalidity, non-infringement, or unenforceability of the Patents. The reasonableness of expenses incurred by Patent Owner’s Attorneys will be determined in accordance with the commercially reasonable costs typically charged for such expenses. Monetization Expenses include reasonable and documented expert and consulting fees; local counsel fees; e-discovery vendors; litigation support services for audio and visual presentations; jury consultants; focus groups; photocopying; postage and delivery; computer-assisted research; filing fees; court reporters and other transcription services; and reasonable travel expenses. Monetization Expenses do not include Attorneys’ Fees, Inter Partes Review Expenses, or any fees or expenses relating to costs or damages awards against Patent Owner resulting from any Adverse Claim.
2.17 “Net Proceeds” means Gross Monetization Proceeds minus the sum of Monetization Expenses and Other Expenses.
2.18 “Net Proceeds Percentage” means fifteen percent (15%); provided, however, that upon the first Additional Note Failure (as defined in the Securities Purchase Agreement), the Net Proceeds Percentage will be reduced to seven and one-half percent (7.5%) with respect to any Net Proceeds of Patents identified on Schedule A-2 attached hereto (“A-2 Patents”) that accrue after the date of such first Additional Note Failure; and upon the second Additional Note Failure, the Net Proceeds Percentage will be reduced to zero (0%) with respect to any Net Proceeds of A-2 Patents that accrue after the date of such second Additional Note Failure. No Additional Note Failure will affect the Net Proceeds Percentage with respect to any Net Proceeds of Patents identified on Schedule A-1 attached hereto.
2.19 “Note Payments” means any payment of the Notes per Section 1 and 2 of the Note; a payment for which notice of intention to exercise the Prepayment Option, per Section 2(b) of the Note, has been received by UWH on or before the Received Proceeds Disbursement Notice (as defined below). For the avoidance of doubt, Note Payments are governed by the terms of the Note and realization by QPRC or any of its Subsidiaries of any portion of the Gross Monetization Proceeds as contemplated herein has no impact whatsoever on the payment obligations under the Note.
2.20 “Other Expenses” means (a) attorneys’ fees and out-of-pocket expenses such as patent maintenance fees actually and reasonably incurred by QPRC or a Patent Owner in respect of the maintenance of the Patent(s) or related to the realization of Gross Monetization Proceeds, including Inter Partes Review Expenses, Attorney Fees and any payments to a Litigation Funder in connection with a Litigation Financing, in each case to the extent not included in Monetization Expenses (and for the avoidance of doubt, not including (without limitation) any salaries, consultant fees, accountant fees, general corporate expenses, regulatory fees or filing costs, or other overhead, or any acquisition costs, or any other debt service) and (b) Note Payments.
2.21 “Patent Owner’s Attorneys” means any legal counsel engaged to represent any Patent Owner in connection with any Claim.
2.22 “Patents” means the United States patents and patent applications identified on Schedule A-1 and A-2 attached hereto and all patents and patent applications related thereto, and all patents and patent applications claiming benefit, in whole or in part, of any of their filing dates including, but not limited to, extensions, divisionals, continuations, continuations-in-part, reissues, reexaminations, substitutions and foreign counterparts of any of the foregoing, the inventions disclosed or claimed therein, including the right to make, use, practice and/or sell (or license or otherwise transfer or dispose of) the inventions disclosed or claimed therein, and the right (but not the obligation) to make and prosecute applications for such patents.
2.23 “Person” means any individual, firm, company, corporation, partnership, limited liability company, government, state, or agency, or subdivision of a state (or governmental entity), or any association, trust, joint venture, or consortium (whether or not having separate legal personality).
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2.24 “Representative” means the employees, officers, directors, partners, members, shareholders (other than shareholders of QPRC solely in their capacity as such), co-investors, potential co-investors, agents, advisors, consultants, accountants, attorneys, trustees, or authorized representatives a Party.
2.25 “Rights” means all rights, titles, claims, options, powers, privileges, and interests.
2.26 “Royalties” means any monies or cash payable, owed to, or inuring to Patent Owner, its Affiliates, or related Persons, or any of their permissible assigns, as a result of a settlement, license, royalties, or other resolution of the Claims, whether voluntary or ordered or adjudicated by the court or a jury, where such monies or cash are payable over a period greater than one year.
2.27 “Security” means a mortgage, charge, pledge, lien, or other security interest securing any obligation of any Person or any other agreement or arrangement having a similar effect.
2.28 “Taxes” means any non-U.S., U.S. federal, state, local, municipal, or other governmental taxes, duties, levies, fees, excises, or tariffs, arising as a result of or in connection with any amounts of property received or paid under this Agreement, including: (i) any state or local sales or use taxes; (ii) any import, value-added, consumption, or similar tax; (iii) any business transfer tax; (iv) any taxes imposed or based on or with respect to or measured by any net or gross income or receipts of any of the Parties; (v) any withholding or franchise taxes, taxes on doing business, gross receipts taxes or capital stock or property taxes; or (vi) any other tax now or hereafter imposed by any governmental or taxing authority on any aspect of this Agreement, the Gross Monetization Proceeds, the Investment or the Assigned Rights, and “pre-Tax” shall mean before deduction of any of the foregoing.
2.29 “Value of Royalties” shall mean the following: (a) The total cash value of the sum of all monies or cash payable to QPRC or Patent Owner, its Affiliates or related Persons or their assigns during the entire term of any settlement agreement or license agreement, to the extent UWH determines that it can reasonably calculate the cash value with certainty as of the effective date of such settlement agreement or license agreement; or (b) to the extent UWH determines that it cannot reasonably calculate such cash value with certainty as of the date of such settlement agreement or license agreement, the total cash value shall be calculated as the greater of five percent (5%) and the royalty rate specified in the settlement agreement, license agreement or as adjudicated by the court or jury (or if multiple royalty rates apply, the blended rate as determined by UWH); multiplied by the average of total net sales of the products, services or methods covered by the settlement agreement or the license agreement (the “Licensed Products”) for the three-year period preceding the effective date of such settlement agreement and/or license agreement; multiplied by the term of the settlement agreement or license agreement, expressed in years or fractional years; multiplied by a projected growth rate determined by UWH and based on sales of the Licensed Products over that three year period. If less than three years of data is available, UWH may calculate the average sales and the projected growth rate based on the available data. To the extent the settlement agreement or license agreement grants a term license with a right of renewal entitling Patent Owner, its Affiliates or related Persons or their assigns to additional Royalties, any subsequent renewals, including license re-negotiations if any, shall be subject to this Section for determining the Value of Royalties and Gross Monetization Proceeds owed to UWH under this Agreement.
| 3. | PROCEEDS. |
3.1 Assignment of an Interest in the Proceeds. QPRC and each Patent Owner hereby irrevocably assigns to UWH the Assigned Rights in perpetuity.
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3.2 Payment of Percentage of Net Proceeds. UWH shall be entitled to receive an amount equal to the Net Proceeds Percentage of all Net Proceeds, payable out of all Gross Monetization Proceeds received or entitled to be received by or transferred, paid or inuring to QPRC and any Patent Owner (or for their benefit), from whatever source (“Received Proceeds”).
3.3 Disbursement of Net Proceeds. (a) QPRC (i) shall cause its and any Patent Owner’s Attorneys, escrow agent, financing party or other Person holding any and all cash Received Proceeds payable or inuring to QPRC or any other Patent Owner to deliver such amounts directly to the Escrow Agent at the time otherwise required to be delivered to QPRC or any other Patent Owner, and (ii) shall deliver or cause any other Patent Owner or their Affiliates or Representatives to deliver all cash Received Proceeds received by any of them notwithstanding the preceding clause (i), immediately upon receipt, to the Escrow Agent, in each case pursuant to the Escrow Agreement, and such Received Proceeds shall be held and distributed in accordance with the Escrow Agreement.
(b) QPRC shall provide written notice to UWH (the “Received Proceeds Disbursement Notice") within five (5) Business Days of receipt of any Received Proceeds by the Escrow Agent, QPRC, any other Patent Owner or Affiliates or Representatives, which Received Proceeds Disbursement Notice will include the following:
(i) The amount of the Received Proceeds;
(ii) The sum of all Monetization Expenses and Other Expenses related to the Patent or Patents underlying the Received Proceeds;
(iii) The amounts required to be paid to all Persons from Gross Monetization Proceeds from which the received Proceeds are derived, including Litigation Funders, Patent Owner’s Attorneys and any other party or payee;
(iv) The accrued and unpaid principal and interest on the Notes through the date the Received Proceeds were received (for the avoidance of doubt, no amount of accrued and unpaid principal and interest on the Notes is required to be paid by Patent Owners solely as a result of receipt of any Received Proceeds under this Agreement);
(v) The Net Proceeds Percentage of Net Proceeds to be paid to UWH under this Agreement.
(c) UWH shall have five (5) Business Days from receipt of a Received Proceeds Disbursement Notice to review and approve the calculations and proposed disbursements set forth therein.
(i) If UWH approves the proposed disbursements set forth in a Received Proceeds Disbursement Notice, UWH and QPRC shall jointly instruct the Escrow Agent in writing, in accordance with the terms of the Escrow Agreement, to disburse the Received Proceeds in accordance with the proposed disbursements set forth in the Received Proceeds Disbursement Notice.
(ii) If UWH objects to any calculation or proposed disbursement set forth in a Received Proceeds Disbursement Notice, UWH shall notify QPRC, in writing (an “Objection Notice”), within five (5) Business Days from receipt of the Received Proceeds Disbursement Notice, specifying in detail its objections to the calculations. The parties shall work together in good faith to resolve any objections set forth in the Objection Notice, and if the parties are able to agree on a resolution of any such objections within ten (10) Business Days from the delivery of the Objection Notice, they shall jointly instruct the Escrow Agent in writing, in accordance with the terms of the Escrow Agreement, to disburse the Received Proceeds (or any portion thereof) as so agreed; if they are not able to so agree (or with respect to any portion of Received Proceeds not so agreed), the parties shall submit the dispute to arbitration in accordance with Sections 6.3 and 6.4 hereof.
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3.4 Non-Cash Net Proceeds. (a) Any Received Proceeds that do not consist of cash shall be received by QPRC, any other Patent Owner and their Affiliates and Representatives and held by them in trust for the benefit of UWH until disbursed or distributed upon written notice from UWH to liquidate, disburse or distribute the non-cash Received Proceeds. For purposes of calculating Net Proceeds: any Received Proceeds consisting of securities listed on an exchange or traded in an over-the-counter market shall be valued at last sale price or closing bid price, respectively, for such security on the principal exchange or market on which the security is listed or traded on the date of any written notice from UWH to liquidate, disburse or distribute the non-cash Received Proceeds, or, if no last sale price or closing bid price, respectively, is reported for such security, the average of the ask prices, or the bid prices, respectively, of any market makers for such security on such day; any Received Proceeds consisting of other assets with a readily determinable market value shall be valued at such market value as of the date of any written notice from UWH to liquidate, disburse or distribute the non-cash Received Proceeds; any other Received Proceeds that do not consist of cash shall be valued at the fair market value as mutually determined by UWH and QPRC; if UWH and QPRC are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Sections 6.3 and 6.4 hereof.
(b) Promptly after the determination as provided above of the value of any Received Proceeds that do not consist of cash, QPRC shall deliver or cause any other Patent Owner or their Affiliates or Representatives in possession thereof to deliver to UWH the portion of such assets representing the Net Proceeds Percentage of the Net Proceeds.
(c) Notwithstanding the foregoing, if so agreed by UWH and QPRC, any Received Proceeds that consist of patents, patent licenses or other patent rights may be retained by QPRC or another Patent Owner and included within the definition of “Patents” hereunder, upon execution and delivery of amendments to the Patent Security Agreement any other Transaction Document reasonably required by and in form reasonably satisfactory to UWH.
3.5 Net Proceeds Shortfall. In the event that cash Received Proceeds with respect to any Claim distributed to UWH pursuant to the Escrow Agreement are less than the Net Proceeds Percentage of all cash Net Proceeds of that Claim (a “Monetization Shortfall”), QPRC shall within three (3) Business Days after such distribution pay the difference in cash to UWH. If QPRC is unable or fails to do so, in whole or in part (a “Monetization Shortfall Default”), it will automatically be deemed to have issued to UWH a Monetization Shortfall Additional Note in a principal amount equal to the amount of the Monetization Shortfall not so paid by QPRC to UWH (the “Monetization Shortfall Default Amount”), as provided in Section 1(b)(v) of the Securities Purchase Agreement. To the extent that the aggregate original principal amount of all Monetization Shortfall Additional Notes and all Working Capital Additional Notes issued exceeds one million dollars ($1,000,000.00), any further Monetization Shortfalls that are not paid or caused to be paid by QPRC to UWH within three (3) Business Days after the date of the relevant distribution under the Escrow Agreement (the “Distribution Date”) shall each be deemed to be a loan by UWH to QPRC with a maturity date that is six (6) months after the Distribution Date, bearing interest at a rate of 10% per annum, payable at maturity. Such loans shall have the same Events of Default and remedies of QPRC as the Notes. For avoidance of doubt, such loans shall be deemed Obligations and Secured Obligations as defined in the Security Agreement and the Pledge Agreement, respectively.
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3.6 Access. During the term of this Agreement, each Patent Owner shall provide UWH and its auditors, legal counsel, and other authorized representatives complete and unlimited access on reasonable notice and during normal business hours to inspect, investigate and audit all non-privileged information relating to the Claims, including (i) corporate documents, (ii) documents related to the business, operations, assets, liabilities, and obligations of Patent Owner, (iii) non-privileged communications, and (iv) contracts of Patent Owner. In addition, each Patent Owner shall cooperate and promptly respond to all due diligence inquiries. Each Patent Owner shall consult independent legal counsel in order to protect privileged communications as disclosure of privileged communications could result in waiver of the attorney-client privilege, thus potentially adversely affecting the Claims. If Patent Owner is aware of material privileged communications that could affect UWH’s decision to invest under the Securities Purchase Agreement or its monitoring of its investment, Patent Owner, after consulting independent legal counsel, will disclose the existence, but not the substance, of such communications.
3.7 Matter Monitoring. Each Patent Owner shall keep UWH informed of the progress of the prosecution of the Claims and provide to UWH all information and documentation provided to any Litigation Funder related to the prosecution of the Claims. In no event shall Patent Owner be obligated to disclose any privileged information related to the prosecution of the Claims at any time or for any purpose. Notwithstanding the preceding sentence, if Patent Owner is aware of information that it reasonably believes could affect UWH’s decision to invest under the Securities Purchase Agreement, and Patent Owner is prohibited from disclosing such information because it is privileged, Patent Owner is required to disclose to UWH the fact that such information exists and Patent Owner’s assessment, after consultation with counsel, of such information and its effect, if any, on the claims and defenses, even if it cannot disclose the substance of that information. All information provided by Patent Owner shall be in consultation with its counsel, and all such information shall be true and accurate in all material respects as of the date provided.
3.8 Concerning Disclosure. Nothing in this Agreement shall be construed to require the Company to publicly disclose material non-public information not required to be publicly disclosed pursuant to the Securities Purchase Agreement or another Transaction Document.
| 4. | REPRESENTATIONS AND WARRANTIES |
4.1. Patent Owners’ Representations and Warranties. Each Patent Owner makes the representations, warranties, and Covenants set out in this Section as of the date of this Agreement, each Closing Date and for the duration of this Agreement, except as may be disclosed in writing to UWH for events that arise subsequent to the date of this Agreement:
(a) The Patents are, or will be upon closing of the Intellectual Ventures Agreement, exclusively owned by QPRC or the Patent Owners.
(b) No third party has the right to grant any licenses in and to any of the Patents.
(c) There are no inventorship challenges, opposition, reexamination, or nullity proceedings or interferences declared, commenced or provoked, or to the knowledge of QPRC or any Patent Owner, threatened, with respect to any Patents. Each Patent Owner has complied with its duty of candor and disclosure to the United States Patent and Trademark Office and any relevant foreign patent or trademark office with respect to the Patents and have made no material misrepresentation with respect to such Patents. No Patent has been intentionally abandoned. Neither QPRC nor any Patent Owner has any knowledge of any information that would preclude any applicable Patent Owner from having clear title to the Patents or affecting their patentability, validity, or enforceability.
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(d) QPRC and each Patent Owner acknowledges that it has superior knowledge regarding the Claims, due at least in part to its involvement and familiarity with the facts underlying the Claims. Moreover, QPRC and each Patent Owner acknowledges that it will have access to privileged information regarding the prosecution of the Claims that is not available to UWH. In connection with entering into this Agreement, QPRC and the Patent Owners have provided (or have caused Patent Owner’s Attorneys to provide) certain information to UWH, including information pertaining to the Claims and potential defenses thereto, and material factual information underlying the Claims. All such information has been provided by QPRC and the Patent Owners in consultation with their counsel, and QPRC and each of the Patent Owners hereby warrants that all such information was true and accurate in all material respects as of the date it was provided and as of each Closing Date. QPRC and each Patent Owner acknowledges that UWH has relied on the accuracy and completeness of this information in agreeing to make UWH’s Commitment. QPRC and each Patent Owner confirms that it has disclosed, and will continue to disclose, all non-privileged material facts in their possession that QPRC or the Patent Owner reasonably believes could affect UWH’s decision to make (or to withdraw) UWH’s Commitment.
4.2. No Practice of Law. UWH and its Affiliates and its and their Representatives are not a law firm and do not provide legal advice. No attorney-client relationship is intended, sought, or created by or through the execution of this Agreement. UWH and its Affiliates and its and their Representatives have not provided, nor will provide at any time in the future, legal advice to any Patent Owner regarding or in conjunction with this Agreement or the Claims.
4.3. Independent Decisions. UWH will not seek to influence the professional judgment of QPRC or any Patent Owner’s legal counsel or otherwise exert control over any threatened or actual litigation. Further, UWH will not constrain, coerce, or otherwise pressure QPRC or any Patent Owner to take any action relating to the Patents or Claims that it believes is adverse to QPRC or Patent Owner’s interests.
| 5. | ADDITIONAL COVENANTS AND TAXES |
5.1. Covenants. For so long as QPRC or any Patent Owner holds Patents or Claims exist, any amount is outstanding, or obligation of Patent Owner is remaining under this Agreement, or the other Transaction Documents, QPRC and each Patent Owner shall (unless it has obtained prior written consent from UWH to the contrary), at its sole cost and expense:
(a) obtain, comply with and use commercially reasonable efforts to do all that is necessary to remain solvent and carry on its business;
(b) prosecute, and to the best of its ability take all necessary actions to ensure that it prosecutes, the Claims with all due skill and care, including maintaining the appointment of Patent Owner’s Attorneys to act on the behalf of Patent Owner with respect to the prosecution of the Claims;
(c) not, except as permitted under the other Transaction Documents, accept or deploy the capital of any third-party lender or capital source other than UWH in connection with the prosecution of the Claims;
(d) not, except as permitted under the other Transaction Documents, grant or create or allow any other Person other than UWH to hold any Security or Adverse Claim over the Patents, the Claims, or the Gross Monetization Proceeds, or any rights thereto; notwithstanding the foregoing, in the event that the Patent Owners wish to grant a subordinate security interest in the Gross Monetization Proceeds, Patent Owners may do so with the prior written approval of UWH, such approval not to be unreasonably withheld and if such obligations being secured thereby have been expressly subordinated in right of payment to all obligations of Patent Owners to UWH hereunder by the execution and delivery of a subordination agreement, in form and substance satisfactory to UWH in its sole discretion;
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(e) not, except as permitted under the other Transaction Documents, transfer, sell, assign, or otherwise dispose of any of its Rights in or under any of the contracts or agreements relating to the Claims or the Gross Monetization Proceeds; notwithstanding the foregoing, in the event that the Patent Owners wish to grant a subordinate security interest in the Gross Monetization Proceeds, Patent Owners may do so with the prior written approval of UWH, such approval not to be unreasonably withheld and if such obligations being secured thereby have been expressly subordinated in right of payment to all obligations of Patent Owners to UWH hereunder by the execution and delivery of a subordination agreement, in form and substance satisfactory to UWH in its sole discretion;
(f) not, except as permitted under the other Transaction Documents, transfer, sell, assign, or otherwise dispose of any of the Patents;
(g) take all actions required or necessary to maintain the Patents in force and not allow any of the Patents to lapse or expire, including but not limited to diligently prosecuting all pending patent applications and paying all maintenance or renewal fees as required by the United States Patent and Trademark Office and other patent offices and administrative agencies around the world; notwithstanding the foregoing, the decision whether or not to continue to prosecute any pending patent application shall be made based upon the advice of the Patent Owner’s Attorneys;
(h) keep and maintain books and records currently in its possession and essential to the prosecution of the Claims; and
(i) timely file all tax returns with the appropriate taxing authority and timely pay all Taxes due, whether or not shown on such tax returns;
provided, however, that nothing in this Section 5.1 shall be construed to require QPRC to use or apply the proceeds payable to QPRC or any Patent Owner for any specific purpose
5.2. Taxes. All Taxes shall be the financial responsibility of the Party obligated to pay such Taxes as determined by applicable law and neither Party is or shall be liable at any time for any of the other Party’s Taxes incurred in connection with or related to amounts paid under this Agreement. No Tax shall be withheld on any Gross Monetization Proceeds or other amounts payable to UWH hereunder unless required by law. If any applicable law requires the deduction or withholding of any tax from any such payment to UWH, then the Patent Owner shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant taxing authority in accordance with applicable law and the sum payable to UWH shall be increased as necessary so that, after such deduction or withholding has been made, UWH receives an amount equal to the sum it would have received had no such deduction or withholding been made. Each Party shall indemnify, defend and hold the other Party harmless from and against any Taxes owed by or assessed against the other Party that are the obligations of such Party and from any claims, causes of action, costs, expenses, reasonable attorneys’ fees, penalties, assessments and any other liabilities of any nature whatsoever related to such Taxes.
5.3. Conduct of Business. QPRC and each Patent Owner shall conduct its business in the regular and ordinary course, consistent with past practices. QPRC and Each Patent Owner shall keep UWH timely apprised of material commitments and material changes in their respective business, operations, and financial condition, and material developments with respect to the Claims.
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| 6. | GOVERNING LAW; WAIVER OF SPECIFIC DEFENSES; DISPUTES |
6.1. Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed by the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule, and shall be construed and enforced in accordance with the law.
6.2. Specific Waivers. To the greatest extent permissible by law, each Patent Owner irrevocably waives and forever and unconditionally releases, discharges and quitclaims any claims, counterclaims, defenses, causes of action, remedies, or rights it or its successors in interest has or may in the future have arising from any doctrine, rule, or principle of law or equity that this Agreement, or the relationships or transactions contemplated by this Agreement (i) are against the public policy of any jurisdiction with which Patent Owner has a connection, or (ii) are unconscionable, or (iii) constitute champerty, maintenance, barratry, or any impermissible transfers, assignments or splitting of property, fees or causes of action, or (iv) violate the rules of professional ethics applicable to Patent Owner, UWH, or any of their lawyers.
6.3. Arbitrable Claims. All actions, disputes, claims and controversies under common law, statutory law, rules of professional ethics, or in equity of any type or nature whatsoever, whether arising before or after the date of this Agreement, and directly relating to: (a) this Agreement or any amendments and addenda hereto, or the breach, invalidity or termination hereof; (b) any previous or subsequent agreement between UWH and QPRC or a Patent Owner related to the subject matter hereof to the extent set forth in Section 8.2; (c) any act or omission committed by UWH or its Representatives with respect to this Agreement, or by any member, employee, agent, or lawyer of UWH with respect to this Agreement, whether or not arising within the scope and course of employment or other contractual representation of UWH (provided that such act arises under a relationship, transaction or dealing between UWH and QPRC or a Patent Owner); or (d) any act or omission committed by QPRC or a Patent Owner with respect to this Agreement, or by any employee, agent, partner or lawyer of QPRC or a Patent Owner with respect to this Agreement whether or not arising within the scope and course of employment or other contractual representation of QPRC or a Patent Owner (provided that such act arises under a relationship, transaction or dealing between UWH and QPRC or a Patent Owner) (collectively, the “Disputes”), will be subject to and resolved by binding arbitration under this Section 6.3 and Section 6.4 below. The Parties agree that the arbitrators have exclusive jurisdiction, to the exclusion of any court (except as specifically provided with regard to prejudgment, provisional, or enforcement proceedings in Section 6.5), to decide all Disputes.
6.4. Administrative Body; Situs. Any Dispute arising out of or relating to this Agreement, including the breach, termination, enforcement, interpretation or validity thereof, or the determination of the scope or applicability of this Agreement to arbitrate, shall be determined by arbitration in Austin, Texas, before a panel of three arbitrators. The arbitration shall be administered using the arbitration rules of the American Arbitration Association (“AAA”) current at the time the Dispute is brought, which rules are deemed to be incorporated herein by reference. Each Party shall, upon written request, promptly provide the other Party with copies of all information on which the producing party may rely in support of or in opposition to any claim or defense and a report of any expert whom the producing Party may call as a witness in the arbitration hearing. Moreover, in the event of a Dispute, Patent Owner waives any objection to the production of privileged information relating to the underlying litigation and the Claims, with any material non-public information to be delivered pursuant to a non-disclosure agreement.
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6.5. Prejudgment and Provisional Remedies. Either Party may commence judicial proceedings only for the purpose(s) of: (i) enforcement of the arbitration provisions; (ii) obtaining appointment of arbitrator(s); (iii) preserving the status quo of the Parties pending arbitration as contemplated herein; (iv) preventing the disbursement by any Person of disputed funds; (v) preserving and protecting the rights of either Party pending the outcome of the arbitration, or (vi) seeking injunctive relief for breach of the confidentiality provisions contained in Section 7. Any such action or remedy will not waive a Party’s right to compel arbitration of any Dispute, and any Party may also file court proceedings to have judgment entered on the arbitration award. In any action for prejudgment or provisional relief, any court in which such relief is sought shall determine the availability of such relief without regard to any defenses that may be asserted by the other Party, and any such defenses shall be referred to the exclusive jurisdiction of the arbitrators under Section 6.3. The Parties further agree that a court shall not defer or delay granting prejudgment or provisional relief while any such arbitration takes place. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.6. Attorneys’ Fees. If any of QPRC, any Patent Owner or UWH brings any other action for judicial relief with respect to any Dispute (other than those precisely described in Section 6.5), the Party bringing such action will be liable for and immediately pay all of the other Party’s costs and expenses (including attorneys’ fees) incurred to stay or dismiss such action and remove or refer such Dispute to arbitration. If any of QPRC, any Patent Owner or UWH brings or appeals an action to vacate or modify an arbitration award and such Party does not prevail, such Party will pay all costs and expenses, including attorneys’ fees, incurred by the other Party in defending such action.
6.7. Enforcement. Any award rendered under this Section shall not be subject to appeal and shall be enforceable in any and all jurisdictions, including the State of Texas and the State of New York.
6.8. Confidentiality of Awards. All arbitration proceedings, including testimony or evidence at hearings, will be kept confidential, although any award or order rendered by the arbitrator(s) pursuant to the terms of this Agreement may be confirmed as a judgment or order in any state or federal or other national court of competent jurisdiction where proceedings are necessary or appropriate to enforce any award or order. This Agreement concerns transactions involving commerce among several state and foreign countries.
6.9. Indemnification. QPRC and each Patent Owner agrees to indemnify, defend, and hold harmless, UWH, its Affiliates and their respective Representatives from and against all claims by third parties relating to, or arising out of, this Agreement including, without limitation, all claims threatened, alleged or asserted by QPRC or Patent Owner’s Attorneys. For the avoidance of any doubt, QPRC and each Patent Owner agrees to advance to UWH its Affiliates and their respective Representatives all defense costs, including attorneys’ fees and expenses, for any third-party claim relating to, or arising out of, this Agreement or any related Transaction Documents.
| 7. | CONFIDENTIALITY |
7.1. Confidential Information. The Parties shall limit the distribution and disclosure of Confidential Information to their Representatives who have a “need to know” to such information. The Party disclosing the Confidential Information to its Representatives shall ensure that such Representatives adhere to, and comply with, all terms and obligations of confidentiality, use and protection of the Confidential Information as accepted by the Parties under this Agreement.
7.2. Limitations on Disclosure of Confidential Information. The Parties and their Representatives shall not disclose Confidential Information, or the fact that the Parties entered into this Agreement, unless: (i) the Parties agree in writing that such disclosure is acceptable, (ii) such disclosure is required in connection with the enforcement or protection of a Party’s rights with respect to this Agreement, or (iii) such disclosure is required by law or regulation, governmental or regulatory authority, court order or judicial process; provided, that each Party agrees to give the other Party (to the extent not prohibited by applicable law, regulation, governmental or regulatory authority, court order or judicial process) written notice of any required disclosure and cooperate in obtaining a protective order or similar protection to preserve the confidential nature of the Confidential Information.
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7.3. Public Disclosure. Neither UWH nor QPRC or any Patent Owner shall issue any press release or make any public statement with respect to the existence of this Agreement or the transaction contemplated hereby, except as may be required by applicable law, regulation, governmental, or regulatory authority, judicial process, or court order (in which case the party seeking to issue such press release or make such public statement will, to the extent not prohibited by applicable law, regulation, governmental or regulatory authority, court order, or judicial process, consult the other and obtain the other’s approval, which shall not be unreasonably withheld, before issuing any such press release or otherwise making any such public statement). QPRC and each Patent Owner shall keep this Agreement confidential and not disclose it, or any part of it, or any drafts of it, to third parties, except as may be required by applicable law, regulation, governmental or regulatory authority, judicial process, or court order.
| 8. | MISCELLANEOUS |
8.1. Privileged Information. Subject to the provisions of Sections 4.1(d) and 3.6 and 3.7, UWH will not request from QPRC or any Patent Owner, and they are not required to provide to UWH, documents and information protected by the attorney-client privilege. QPRC and each Patent Owner understands and acknowledges that in the event its Representatives provide privileged information to UWH, such disclosure may be deemed waiver of the applicable privilege. In the event that QPRC or any Patent Owner inadvertently provides privileged information to UWH, UWH will return such information to QPRC or such Patent Owner without reviewing the information.
8.2. Entire Agreement and Amendments. This Agreement and the other Transaction Documents constitute the entire agreement between the Parties with respect to the matters covered herein and supersede all prior agreements, promises, representations, warranties, statements, and understandings with respect to the subject matter hereof as between QPRC, the Patent Owners and UWH. This Agreement may not be amended, altered, or modified except by an amendment or supplement to this Agreement executed by all Parties hereto.
8.3. Partial Invalidity; Severability. If, at any time, any provision of this Agreement or of the other Transaction Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provisions under the law of any other jurisdiction shall in any way be affected or impaired.
8.4. Remedies and Waivers. No failure to exercise, nor any delay in exercising, on the part of UWH, QPRC or any Patent Owner, of any right or remedy under this Agreement or the other Transaction Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law. No provision of this Agreement may be waived except in writing signed by the party granting such waiver.
8.5. Assignment. This Agreement shall inure to the benefit of, and be binding upon the respective successors and assigns of the Parties. Neither QPRC nor any Patent Owner shall assign or delegate its rights or obligations under this Agreement or the other Transaction Documents without the prior written consent of UWH, which shall not be unreasonably withheld.
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8.6. Notices. All notices, reports and other communications required or permitted under this Agreement shall be in writing and shall be as provided in the Securities Purchase Agreement.
8.7. Survival After Termination. The provisions of Sections 1, 2 (with respect to applicable defined terms), Section 3.2 through 3.5, 6, 7, and 8 shall survive the termination of this Agreement.
8.8. Costs and Expenses. The Parties shall be solely responsible for and bear the costs and expenses, including attorneys’ fees, expenses of accountants, brokers, financial advisors, and other representatives and advisors, each incurs at any time in connection with pursuing, or consummating the transaction contemplated by, this Agreement and the other Transaction Documents.
8.9. No Presumption against Drafter. This Agreement has been negotiated by the Parties and their respective counsel and will be fairly interpreted in accordance with its terms and without any strict construction in favor of or against a Party.
8.10. Counterparts. This Agreement may be executed in counterparts which, when read together, shall constitute a single instrument, and this has the same effect as if the signatures on the counterparts were on a single copy hereof. A composite copy of this Agreement may be compiled comprising a single copy of the text of this Agreement and one or more copies of the signature pages containing collectively the signatures of all Parties. A facsimile or an electronic mail signature shall be considered due execution and shall be binding upon the signatories hereto with the same force and effect as if the signature were an original, not a facsimile signature.
8.11. No Third-Party Beneficiaries. Except as otherwise set forth in Section 6.9, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, it being acknowledged and agreed, for the avoidance of doubt, that Patent Owner’s Attorneys are not third-party beneficiaries of this Agreement.
[Signature pages follow]
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IN WITNESS WHEREOF, the Parties execute this Agreement effective as of the date first set forth above.
| QUEST PATENT RESEARCH CORPORATION | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| QUEST LICENSING CORPORATION | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| ▇▇▇▇ TECHNOLOGIES INC. | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| MARINER IC INC. | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| SEMCON IP INC. | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| IC KINETICS INC. | ||
| By: | /s/ ▇▇▇ ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: | Chief Executive Officer | |
| UNITED WIRELESS HOLDINGS, INC. | ||
| By: | /s/ ▇▇▇▇▇▇ ▇. Fiton | |
| Name: | ▇▇▇▇▇▇ ▇. Fiton | |
| Title: | Chief Executive Officer | |
SCHEDULE A-1
| Segment | Type | Number | ||
| Power Management | US Patent | 7,100,061 | ||
| Power Management | US Patent | 7,596,708 | ||
| Power Management | US Patent | 8,566,627 | ||
| Power Management | US Patent | 8,806,247 | ||
| Power Management | US Patent | 7,100,061C1 | ||
| Power Management | PCT | PCT/US2001/001684 | ||
| Anchor | US Patent | 5,650,666 | ||
| Anchor | US Patent | 5,846,874 | ||
| Bus Controller | US Patent | 5,978,876 | ||
| Diode on Chip | US Patent | 7,118,273 | ||
| Diode on Chip | US Patent | 7,108,420 | ||
| Diode on Chip | US Patent Application | 11/524,526 | ||
| Diode on Chip | US Patent Application | 13/243,976 |
SCHEDULE A-2
| Segment | Type | Number | ||
| Financial Data | US Patent | RE38,137 | ||
| Mobile Data | US Patent | 7,194,468 | ||
| Mobile Data | US Patent Application | 12/617,373 | ||
| Mobile Data | US Patent Application | 13/832,012 |