Exhibit 10.1
EXECUTION COPY
4350823.8
__________________________
FINJAN HOLDINGS, INC.
___________________________
SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT
___________________________
June 15, 2017
___________________________
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF THE WARRANT AND PREFERRED
STOCK............................................................................................................ 1
1.1 Sale and Issuance of Series A-1 Preferred Stock ............................................. 1
1.2 Closing; Delivery ............................................................................................. 1
1.3 Defined Terms Used in this Agreement ........................................................... 2
2. REPRESENTATIONS AND WARRANTIES OF THE
CORPORATION. .......................................................................................... 8
2.1 Organization and Standing; Subsidiaries ......................................................... 8
2.2 Corporate Power .............................................................................................. 8
2.3 Capitalization; Governance Matters ................................................................ 9
2.4 Authorization; No Conflicts ........................................................................... 10
2.5 SEC Documents ............................................................................................. 11
2.6 Related Parties ............................................................................................... 12
2.7 Compliance with Law; Permits ...................................................................... 12
2.8 Litigation ........................................................................................................ 12
2.9 Intellectual Property ....................................................................................... 13
2.10 Title to Properties and Assets; Liens.............................................................. 14
2.11 Financial Statements; No Undisclosed Liabilities ......................................... 14
2.12 Material Adverse Effect ................................................................................. 15
2.13 Employees ...................................................................................................... 15
2.14 Employee Benefit Plans ................................................................................. 16
2.15 Taxes .............................................................................................................. 17
2.16 Insurance ........................................................................................................ 17
2.17 Claims ............................................................................................................ 18
2.18 Negative Litigation Event .............................................................................. 18
2.19 Brokers or Finders .......................................................................................... 18
2.20 Offering .......................................................................................................... 18
2.21 Disclosure ...................................................................................................... 19
3. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER ............................................................................................... 19
3.1 Organization. .................................................................................................. 19
3.2 Authorization ................................................................................................. 19
3.3 Accredited Investor ........................................................................................ 19
3.4 Restriction on Resale ..................................................................................... 19
3.5 Legends .......................................................................................................... 20
3.6 Brokers or Finders .......................................................................................... 20
4. COVENANTS; PURCHASER RIGHTS ................................................... 20
4.1 Information Rights ......................................................................................... 20
4.2 Board of Directors Rights .............................................................................. 22
4.3 Board Observer Rights ................................................................................... 22
4.4 Preemptive Rights .......................................................................................... 23
TABLE OF CONTENTS
(continued)
4.5 Reporting Status ............................................................................................. 24
4.6 Public Disclosure of Transaction ................................................................... 24
4.7 Pursuit of the Claims ...................................................................................... 24
4.8 Preserve Accuracy of Representations and Warranties; Notification of
Certain Matters ............................................................................................... 24
4.9 Operations Prior to the Closing Date ............................................................. 25
4.10 Acquisition Proposals .................................................................................... 25
5. TRANSFER RESTRICTIONS ................................................................... 25
6. CONDITIONS TO THE PURCHASER’S OBLIGATIONS AT
CLOSING ..................................................................................................... 26
6.1 Representations and Warranties; Covenants .................................................. 26
6.2 Consents, Permits and Waivers...................................................................... 26
6.3 No Prohibitions .............................................................................................. 26
6.4 Blue Sky ......................................................................................................... 26
6.5 Certificate of Designation .............................................................................. 26
6.6 Other .............................................................................................................. 26
6.7 Schedules ....................................................................................................... 26
6.8 Closing Deliverables ...................................................................................... 26
6.9 Proceedings and Documents .......................................................................... 27
7. CONDITIONS TO THE CORPORATION’S OBLIGATIONS AT
CLOSING ..................................................................................................... 27
7.1 Representations and Warranties ..................................................................... 27
7.2 No Prohibitions .............................................................................................. 27
7.3 Closing Deliverables ...................................................................................... 27
8. TERMINATION OF THE AGREEMENT PRIOR TO CLOSING ....... 27
8.1 Termination Triggers. .................................................................................... 27
8.2 Effect of Termination ..................................................................................... 28
9. MISCELLANEOUS .................................................................................... 28
9.1 Indemnification .............................................................................................. 28
9.2 Survival of Warranties ................................................................................... 28
9.3 Successors and Assigns .................................................................................. 29
9.4 Governing Law and Jurisdiction .................................................................... 29
9.5 Counterparts; Facsimile or PDF ..................................................................... 29
9.6 Titles and Subtitles ......................................................................................... 29
9.7 Disclosure Schedules ..................................................................................... 29
9.8 Notices ........................................................................................................... 29
9.9 Expenses ........................................................................................................ 30
9.10 Origination Fee .............................................................................................. 30
9.11 Remedies; Attorneys’ Fees ............................................................................ 30
9.12 Amendments and Waivers ............................................................................. 30
9.13 Confidentiality ............................................................................................... 30
9.14 Severability .................................................................................................... 31
9.15 Delays or Omissions ...................................................................................... 31
TABLE OF CONTENTS
(continued)
9.16 Rights of Purchaser ........................................................................................ 31
9.17 Exchange of Certificates ................................................................................ 31
9.18 Entire Agreement ........................................................................................... 31
9.19 Interpretation .................................................................................................. 31
9.20 Further Assurances ......................................................................................... 32
TABLE OF CONTENTS
(continued)
Exhibit A - FORM OF WARRANT
Exhibit B - FORM OF CERTIFICATE OF DESIGNATION
SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A-1 PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”)
is made as of the 15th day of June, 2017 by and between Finjan Holdings, Inc., a Delaware
corporation (the “Corporation”), and Soryn HLDR Vehicle II LLC, a Delaware limited liability
company (the “Purchaser”).
RECITALS
WHEREAS, pursuant to this Agreement, the Corporation proposes to issue to the Purchaser
a common stock warrant, in substantially the form attached hereto as Exhibit A (the “Warrant”), to
purchase 2,000,000 shares of common stock, $0.0001 par value per share, of the Corporation (the
“Common Stock”) at the exercise price and upon the terms and conditions set forth therein;
WHEREAS, pursuant to this Agreement, the Corporation proposes to issue to the Purchaser
153,000 shares of its Series A-1 Preferred Stock (the “Shares”) in exchange for a purchase price of
$100 per Share (the “Purchase Price”); and
WHEREAS, the Corporation desires to issue and sell, and the Purchaser desires to purchase,
the Warrant and the Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises,
representations, warranties, and covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
1. Purchase and Sale of the Warrant and Preferred Stock.
1.1 Sale and Issuance of Series A-1 Preferred Stock.
(a) The Corporation has authorized the issuance and sale to the Purchaser
of the Shares, having the rights and preferences set forth in the Certificate of Designation of Series
A-1 Preferred Stock in the form of Exhibit B attached to this Agreement (the “Certificate of
Designation”). Immediately prior to the Closing, the Corporation shall adopt and file the Certificate
of Designation with the Secretary of State of the State of Delaware.
(b) At the Closing, subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of the Corporation set forth herein or in any
certificate or other document delivered pursuant hereto, the Purchaser agrees to purchase, and the
Corporation agrees to sell and issue to the Purchaser, free and clear of all Liens, in exchange for the
payment of the aggregate Purchase Price, 153,000 Shares.
1.2 Closing; Delivery.
(a) The purchase and sale of the Shares (the “Closing”) shall take place
remotely via the exchange of documents and signatures, within ten (10) Business Days of the
satisfaction (or waiver by the applicable party) of each of the conditions set forth in Section 6 and 7,
or at such other place or time or on such other date as shall be agreed to by the Corporation and the
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Purchaser. The time and date on which the Closing is actually held are sometimes referred to herein
as the “Closing Date.”
(b) At the Closing, subject to satisfaction or waiver of the conditions set
forth in Section 7, the Corporation shall (i) issue and deliver to the Purchaser, free and clear of all
Liens, a stock certificate, duly executed by the Corporation and registered in the Corporation’s stock
ledger in the Purchaser’s or its nominee’s name, evidencing the number of Shares to be purchased by
such Purchaser as set forth in Section 1.1(b) and (ii) deliver to the Purchaser the Warrant to purchase
2,000,000 shares of Common Stock at the exercise price and upon the terms and conditions as set
forth therein.
(c) Subject to satisfaction or waiver of the conditions set forth in Section 6
at Closing, as payment in full for the Shares being purchased by it under this Agreement, and against
delivery of the stock certificate(s) therefor as described in subparagraph (b) above and the Warrant,
at the Closing, the Purchaser shall pay the aggregate Purchase Price of $15,300,000 (less the
Purchaser Expenses and Origination Fee as set forth in Sections 9.9 and 9.10, respectively) for the
Purchaser’s Shares by wire transfer of immediately available funds, to the Corporation’s operating
bank account (the “Treasury Account”) designated by the Corporation at least two (2) Business
Days prior to Closing.
(d) The Corporation has authorized and has initially reserved and
covenants to continue to reserve, free of preemptive rights and other similar contractual rights of
stockholders, a number of its authorized but unissued shares of Common Stock at least equal to the
aggregate number of shares of Common Stock to effect the exercise of the Warrant in full. Any
shares of Common Stock issuable upon exercise of the Warrant (and such shares when issued) are
herein referred to as the “Warrant Shares”. The Warrant, the Warrant Shares and the Shares are
sometimes collectively referred to herein as the “Securities”.
1.3 Defined Terms Used in this Agreement. In addition to the terms defined
above and throughout this Agreement, the following terms used in this Agreement shall be construed
to have the meanings set forth or referenced below.
“Adverse Party” means the Defendants and their respective Affiliates as well as any
other party (i) subsequently named as a defendant in any Proceedings (including any litigation or
arbitration or any collection actions arising therefrom or connected to the Claims), (ii) who enters
into an arrangement or agreement that grants license or sublicense rights to any party that qualifies as
an Adverse Party pursuant clause (i) above, or (iii) with whom the Corporation, any Corporation
Subsidiary or any of their respective successor(s) in interest or assigns or Affiliates institutes or has
instituted legal action against, whether in the United States or internationally, on or before the date
hereof.
“Affiliate” means, with respect to any specified Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control with such Person,
including any general partner, managing member, officer or director of such Person or any venture
capital fund now or hereafter existing that is controlled by one or more general partners or managing
members of, or shares the same management company with, such Person.
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“Amended and Restated Certificate” means the Amended and Restated Certificate
of Incorporation of the Corporation dated July 10, 2014.
“Business Day” means a day banks in New York City are open for regular business.
“Bylaws” means the Amended and Restated Bylaws of the Corporation effective as of
July 10, 2014.
“Claims” means any and all claims, causes of action, rights, choses in action, and
entitlements, known or unknown, existing or later arising, in connection with the Litigation, the
Proceedings or the Patents, in favor of the Corporation, any Corporation Subsidiary and/or their
respective Affiliates, against any Adverse Party, including the Litigation and any claims, causes of
action, rights, choses in action, and entitlements, known or unknown, existing or later arising, in
connection therewith.
“Code” means the Internal Revenue Code of 1986.
“Confidential Information” means any information relating to the Corporation or
any Corporation Subsidiary provided to Purchaser or any Affiliate of Purchaser (or any advisor
thereof), under or in connection with any Transaction Documents, including any information
provided orally and any document, file or any other way of representing or recording information
which contains or is derived from such information other than: (a) information that is or becomes
public knowledge other than as a result of a breach of Section 8.12 (Confidentiality) by Purchaser or
any Affiliate of Purchaser (or any advisor thereof); (b) information previously known by or in the
possession of Purchaser or any Affiliate of Purchaser (or any advisor thereof); or (c) information
lawfully obtained by Purchaser or any Affiliate of Purchaser (or any advisor thereof) from a third
party not reasonably known to Purchaser to be bound by a duty of confidentiality to the Corporation.
“Contract” means all contracts, agreements, commitments, understandings and
arrangements, whether written or oral.
“Corporation” has the meaning set forth in the introductory paragraph.
“Defendants” means, collectively, (i) FireEye, Inc., (ii) Blue Coat Systems, Inc.,
(iii) Symantec Corporation, (iv) Palo Alto Networks, Inc., (v) ESET, LLC et al, (vii) Cisco Systems,
Inc. and (vi) any other party with whom the Corporation, any Corporation Subsidiary or any of their
respective successor(s) in interest or assigns or Affiliates institutes or has instituted legal action
against with respect to patent, trademark or copyright infringement or trade secret matters, whether
on before or after the date hereof.
“Exchange Act” means the Securities Exchange Act of 1934.
“Fiscal Year” means for financial accounting purposes, January 1 to December 31.
“GAAP” means generally accepted accounting principles as applied in the United
States.
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“Governmental Entity” means any court or tribunal or administrative, governmental
or regulatory body or agency (whether foreign, federal, state, local or other).
“Indebtedness” means, with respect to any Person, all indebtedness of such Person
for borrowed money, including (i) all indebtedness evidenced by notes, debentures, bonds or similar
instruments; (ii) all capital lease obligations; (iii) all obligations issued or assumed as the deferred
purchase price of property or services (other than trade payables incurred in the ordinary course of
business); (iv) all obligations (whether fixed or contingent) to reimburse any bank or other Person in
respect of amounts paid or payable under a standby letter of credit; (v) all guarantees of obligations
of the type described in clauses (i) through (iv) of this definition of another Person; and (vi) all
obligations under any acquisition agreements pursuant to which such Person is responsible for any
earn out, note payable or other contingent payments.
“Intellectual Property Rights” means all (i) inventions (whether or not patentable),
patent disclosures, patents, patent applications, and all divisions, continuations and continuations–
in–part, and any renewals, extensions, reexaminations and reissues thereof, (ii) trademarks, service
marks, trade dress, trade names, URL’s, logos and corporate names and registrations and applications
for registration thereof, together with all of the goodwill associated therewith, (iii) copyrights
(registered or unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works, financial and marketing plans and customer
and supplier lists and information), (vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
“Knowledge” including the phrase “to the Corporation’s knowledge,” shall mean
the knowledge after reasonable inquiry of each of the officers of the Corporation or any Corporation
Subsidiary.
“Liens” means any mortgage, pledge, security interest, encumbrance, lien, claim or
charge of any kind (including any conditional sale or other title retention agreement or lease in the
nature thereof), any sale of receivables with recourse against the Corporation, any Corporation
Subsidiary or any of their respective Affiliates, any filing or agreement to file a financing statement
as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Corporation under a lease that is not in the nature of a
conditional sale or title retention agreement, or any subordination arrangement in favor of another
Person (other than any subordination arising in the ordinary course of business).
“Litigation” means, collectively, those Claims set forth on Annex A.
“Material Adverse Effect” means any material and adverse effect on the assets,
liabilities, condition, business, results of operations, prospects, management or affairs of the
Corporation and the Corporation Subsidiaries, taken as a whole.
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“Minimum Treasury Amount” means $6,000,000.
“NASDAQ” means The NASDAQ Capital Market.
“Negative Litigation Event” means the occurrence of any of the following: (a) any
subsequent decision (after the Date of Issuance) by the United States Court of Appeals for the
Federal Circuit or the District Court for the Northern District of California that has the effect of
setting the damages amount owed to the Corporation or the Corporation Subsidiaries by Blue Coat
Systems Inc. in Case No. 5:13-cv-03999-BLF (N.D. Cal) at fifty percent (50%) or less of the
damages awarded on August 4, 2015 (the “Awarded Damages”), or (b) the decision of any
Governmental Entity materially affecting the ability of the Corporation or the Corporation
Subsidiaries to collect more than fifty percent (50%) of the Awarded Damages from Blue Coat
Systems, Inc., as reasonably determined in good faith by holders of more than fifty percent (50%) of
the Shares or (c) Symantec Corporation (or any successor thereto) experiences a bankruptcy,
liquidation, receivership or assignment for benefit of creditors.
“Negative Treasury Event” means any consecutive 60 day period of time during
which the balance of cash and cash equivalents in the Treasury Account (excluding amounts
applicable to the Aggregate Exercise Price (as defined in the Warrant)) is less than the Minimum
Treasury Amount.
“New Securities” means any equity securities of the Corporation or any Corporation
Subsidiary issued after the date hereof, whether or not now authorized, and rights, options or
warrants to purchase such equity securities of any type whatsoever that are, or may by their terms
become, convertible into or exchangeable for such equity securities; provided that, notwithstanding
the foregoing, “New Securities” shall not include the following: (i) equity securities of the
Corporation or any Corporation Subsidiary or other securities issued on a pro rata basis as a dividend
or distribution on, or in connection with a split of or recapitalization of, any of equity securities of
the Corporation or any Corporation Subsidiary; (ii) shares of Common Stock issued pursuant to
awards issued under the Corporation’s equity incentive plans to employees, directors or consultants
of the Corporation or any Corporation Subsidiary; (iii) shares of any Corporation Subsidiary in which
following such issuance, such Corporation Subsidiary is directly or indirectly a wholly-owned
subsidiary of the Corporation; (iv) equity securities of the Corporation issued in an offering for cash
for the account of the Company which offering is registered with the Securities and Exchange
Commission under the Securities Act; (v) shares of Common Stock issued or issuable pursuant to the
acquisition of another unrelated entity by the Corporation by merger, purchase of substantially all of
the assets or other reorganization or to Persons in connection with a joint venture agreement or
strategic alliance with such Person, provided, that such issuances are approved by the Corporation’s
Board of Directors; (vi) shares of Common Stock issued or issuable in connection with any
settlement of any action, suit, proceeding or litigation approved by the Corporation’s Board of
Directors; (vii) shares of Common Stock issued or issuable in or under a transaction for which the
holders of at least a majority of the then outstanding Shares consent or approve as not being
considered New Securities; and (viii) the Warrant and the Warrant Shares.
“Patents” means, collectively, the patents set forth on Annex B as revised from time
to time.
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“Person” means any individual, corporation, partnership, trust, limited liability
company, association or other entity.
“Proceedings” means (i) the Claims (and other proceedings relating thereto,
including dispute resolution proceedings), (ii) any and all related pre- and post-trial proceedings or
processes in or in connection with the Claims; (iii) all appellate proceedings and proceedings on
remand, as well as enforcement, ancillary, parallel or alternate dispute resolution proceedings and
processes arising out of or related to the acts or occurrences alleged in the Claims; (iv) re-filings or
parallel filings relating to the Claims and any other legal, diplomatic or administrative proceedings or
processes founded on the underlying facts giving rise to or forming a basis for the Claims, in which
the Corporation, any Corporation Subsidiary or any of their respective successor(s) in interest or
assigns or Affiliates is a party; (v) ancillary or enforcement proceedings related to the facts or Claims
alleged from time to time; and (vi) all arrangements, settlements, negotiations, or compromises made
between the Corporation or any Corporation Subsidiary or any of their respective Affiliates or
representatives and any Adverse Party having the effect of resolving any of the Claims against any
Adverse Party.
“Proceeds” means (A) any and all pre-Tax monetary award, damages, fees,
recoveries, judgments or other property or value recovered by or on behalf of the Corporation or any
Corporation Subsidiary or their respective Affiliates on account or as a result or by virtue (directly or
indirectly) of the Claims or the Proceedings, whether by negotiation, litigation, arbitration,
mediation, diplomatic efforts, lawsuit, settlement, decree, judgment or otherwise and whether against
the Defendants or any other Adverse Party (including any Person unrelated to the Defendants who
may infringe on the Patents), and includes all of the Corporation’s and each Corporation Subsidiary’s
legal and/or equitable rights, title and interest in and/or to any of the foregoing, whether in the nature
of ownership, lien, security interest or otherwise, plus (B) any actually and successfully recovered
interest, penalties, lawyer’s fees and costs in connection with any of the foregoing, plus (C) any
consequential, actual, moral, punitive, exemplary, special, incidental, lost profits or treble damages
awarded and actually and successfully recovered on account thereof, plus (D) any interest actually
and successfully awarded or later accruing on any of the foregoing, plus (E) any recoveries from
actions commenced by the Corporation or any Corporation Subsidiary against lawyers, accountants,
experts or officers in connection with any of the foregoing or the pursuit of the Proceedings. For the
avoidance of doubt, “Proceeds” includes cash, real estate, negotiable instruments, choses in action,
contract rights, membership rights, subrogation rights, annuities, future revenue streams (including
milestone and royalty payments), claims, refunds, and any other rights to payment of cash and/or
transfer(s) of things of value or other property (including property substituted therefor), whether
delivered or to be delivered in a lump sum or in installments, in relation to any claim or negotiation
with any Person in relation to the Proceedings, and shall include any award of rescissionary, punitive,
consequential, treble or exemplary damages or penalties assessed against any Adverse Party from
time to time.
“Requirements of Laws” means any applicable United States federal, state and local,
and any non-U.S., laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Entity, including, if and to the extent the Corporation is subject
thereto, any applicable listing requirements and rules and regulations of NASDAQ and any other
stock exchange or interdealer quotation system.
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“Restricted Securities” means (i) the Shares issued hereunder, (ii) any securities
issued with respect to the Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other reincorporation (iii) the
Warrant, and (iv) the Warrant Shares. As to any particular Restricted Securities, such securities shall
cease to be Restricted Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them, (b) been distributed
to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act or become eligible for sale pursuant to Rule 144(b) (or any
similar provision then in force) under the Securities Act, or (c) been otherwise transferred and new
certificates for them not bearing the Securities Act legend set forth in Section 5.1 have been
delivered by the Corporation. Whenever any particular securities cease to be Restricted Securities,
the holder thereof shall be entitled to receive from the Corporation, without expense, new securities
of like tenor not bearing a Securities Act legend of the character set forth in Section 5.1.
“SEC” means the Securities and Exchange Commission, including any Governmental
Entity or agency succeeding to the functions thereof.
“Securities Act” means the Securities Act of 1933.
“Side Letter” means that certain letter agreement between the Corporation and the
Purchaser dated as of the date of this Agreement.
“Subsidiary” means, with respect to any Person, any other Person of which a
majority of the outstanding shares or other equity interests having the power to vote for directors or
comparable managers are owned, directly or indirectly, by the first Person.
“Tax Return” means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including any information return, claim for
refund, amended return or declaration of estimated Tax.
“Taxes” means any federal, foreign, state, county and local income, gross receipts,
excise, import, property, franchise, ad valorem, license, sales or use tax or other withholding, social
security, Medicare, unemployment compensation or other employment-related tax, or any other
charge, together with all deficiencies, penalties, additions, interest, assessments, and other
governmental charges with respect thereto.
“Transaction Documents” means this Agreement, the Common Interest Agreement,
the Certificate of Designation, the Side Letter, the Warrant and any other agreements, instruments or
documents entered into in connection with this Agreement.
Each of the following terms is defined in the Section set forth opposite such term:
Balance Sheet Section 2.3(h)
Board of Directors Section 2.12
Certificate of Designation Section 1.1(a)
Closing Section 1.2(a)
Closing Date Section 1.2(a)
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Common Stock Section 2.3
Corporation Introductory paragraph
Corporation Subsidiary Section 2.1(b)
Disclosure Schedules Section 2
ERISA Section 2.13
Exercise Period Section 4.4(b)
Indemnified Party/Parties Section 9.1(a)
Losses Section 9.1(a)
Nominee Section 4.2(a)
Observer Section 4.3
Preemptive Right Notice Section 4.4(b)
Preferred Stock Section 2.3(a)
Purchase Expenses Section 9.9
Purchase Price Recitals
Purchaser Introductory paragraph
SEC Documents Section 2.5
Shares Recitals
2. Representations and Warranties of the Corporation. As an inducement to the
Purchaser to enter into this Agreement and to purchase the Securities, except as set forth in the
Disclosure Schedules attached hereto (the “Disclosure Schedules”) specifically identifying the
subsection of this Section 2 to which such exception relates, the Corporation hereby represents and
warrants to the Purchaser, as follows:
2.1 Organization and Standing; Subsidiaries.
(a) The Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be conducted. The
Corporation is duly qualified or licensed to transact business as a foreign corporation and is in good
standing in each of the jurisdictions listed in Schedule 2.1(a), which jurisdictions are the only ones in
which the ownership or leasing of its assets or the conduct of its business requires such qualification
or licensing. No other jurisdiction has demanded, requested or otherwise indicated that the
Corporation is required to so qualify.
(b) Each of the Subsidiaries of the Corporation is set forth on
Schedule 2.1(b) (collectively, the “Corporation Subsidiaries”). Each Corporation Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has all requisite power and authority to carry on its business as
presently conducted and as proposed to be conducted. Each of the Corporation Subsidiaries is duly
qualified or authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification or authorization is required.
2.2 Corporate Power. The Corporation has all requisite power and authority to
execute and deliver this Agreement and each of the other Transaction Documents, to issue, sell and
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deliver the Securities, and to carry out and perform its obligations under the terms of this Agreement
and each of the other Transaction Documents.
2.3 Capitalization; Governance Matters.
(a) The authorized capital stock of the Corporation consists, immediately
prior to the Closing, of:
(i) 80,000,000 shares of common stock, $0.0001 par value per
share (the “Common Stock”), the number of shares of which (A) are issued and outstanding
or (B) reserved for issuance to employees, consultants and directors pursuant to the Finjan
Holdings, Inc. 2013 Global Share Option Plan, the Finjan Holdings, Inc. 2014 Incentive
Compensation Plan, and the Finjan Holdings, Inc. Israeli Appendix to the 2014 Incentive
Compensation Plan upon the exercise of outstanding stock options or other awards held by
Corporation employees thereunder, are as set forth on Schedule 2.3;
(ii) 10,000,000 shares of Preferred Stock, $0.0001 par value per
share (the “Preferred Stock”), of which (A) 102,000 have been designated Series A
Preferred Stock, and none of which are issued and outstanding, and (B) 153,000 have been
designated Series A-1 Preferred Stock, and none of which are issued and outstanding.
(b) All issued and outstanding shares of Common Stock (i) have been duly
authorized, (ii) were validly issued in compliance with Requirements of Law, including all federal
and state securities laws, (iii) are fully paid and nonassessable, and (iv) were not issued in violation
of any preemptive or similar rights.
(c) The Amended and Restated Certificate (which, as of the Closing, shall
be as supplemented by the Certificate of Designation) is in full force and effect. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and
series of authorized capital stock of the Corporation, including the Shares, are as set forth in the
Amended and Restated Certificate (which, as of the Closing, shall be as supplemented by the
Certificate of Designation) and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable (except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally and by general equitable principles) and in accordance with all Requirements of
Law. The Shares and the Warrant Shares, when issued and delivered and paid for in compliance
with the provisions of this Agreement and the Amended and Restated Certificate (which, as of the
Closing, shall be as supplemented by the Certificate of Designation), will be validly issued, fully
paid and non-assessable. When issued, sold and delivered in accordance with the terms of this
Agreement, the Shares and the Warrant Shares will be (i) free of any Liens, other than any Liens
created by or through the Purchaser and restrictions on transfer under U.S. state and/or federal
securities laws and as set forth herein, and (ii) issued in compliance with all Requirements of Law
including state and federal securities laws.
(d) No Person is entitled to any pre-emptive right or right of first refusal
with respect to the issuance of any capital stock of the Corporation, including the Shares and the
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Warrant Shares. The issuance of the Shares and the Warrant Shares will not trigger any anti-dilution
provisions of any outstanding securities of the Corporation. Other than as set forth on Schedule
2.3(d) or as contemplated by this Agreement, there are no options, warrants or other rights (including
conversion or preemptive rights and rights of first refusal) to purchase any of the Corporation’s
authorized and unissued capital stock or any securities convertible or exchangeable into any of the
Corporation’s capital stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Corporation. To the Corporation’s Knowledge,
there are no voting trusts, proxies, or other agreements or understandings with respect to the voting
of any equity securities of the Corporation, except in connection with proxies in connection with the
Corporation’s 2016 Annual Meeting of Stockholders.
(e) Except as provided by this Agreement or as set forth in
Schedule 2.3(e), the Corporation is not a party to any agreement with the holder of any of its
securities that requires the Corporation to purchase any of such securities from their holder under any
circumstances.
(f) The Corporation has no Indebtedness other than as set forth in
Schedule 2.3(f).
(g) Except for the Corporation Subsidiaries, the Corporation does not own
any capital stock, membership interests, security or other interest in any other Person. Except as set
forth in Schedule 2.3(g), neither the Corporation nor any of the Corporation Subsidiaries has any
understanding or agreement to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any other Person. All of the issued and outstanding equity
securities of each of the Corporation Subsidiaries have been duly authorized and are validly issued.
The Corporation holds of record and owns beneficially 100% of the outstanding equity securities of
each Corporation Subsidiary free and clear of any Liens, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands. Except as set forth on Schedule 2.3(g), there
are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require the Corporation or any
of the Corporation Subsidiaries to sell, transfer, or otherwise dispose of any equity securities of any
of the Corporation Subsidiaries or that could require any Corporation Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own equity securities. There are no outstanding
stock appreciation, phantom stock, profit participation, or similar rights with respect to any
Corporation Subsidiary. There are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of any equity securities of any Corporation Subsidiary.
(h) Effective as of immediately before the Closing, the number of directors
of the Corporation’s Board of Directors (the “Board of Directors”) is seven (7) persons, although
eight (8) persons have been authorized.
2.4 Authorization; No Conflicts.
(a) All corporate action on the part of the Corporation, its officers,
directors and stockholders necessary for the authorization, execution, delivery and performance by
the Corporation of this Agreement and the other Transaction Documents and all obligations and
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transactions contemplated hereby and thereby, the filing of the Certificate of Designation and the
authorization, sale, issuance and delivery of the Shares and the Warrant, has been taken. When the
Warrant Shares are issued and paid for in accordance with the terms of this Agreement and as set
forth in the Warrant, such Warrant Shares will be duly authorized by all corporate action necessary
for the authorization, sale, issuance and delivery of the Warrant Shares. This Agreement and the
other Transaction Documents, when executed and delivered by the Corporation, shall constitute valid
and binding obligations of the Corporation, enforceable against the Corporation in accordance with
their terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and by general equitable principles.
The Corporation (a) is not required to obtain the approval of the owners or holders of its Common
Stock in order to authorize and consummate the transactions contemplated by this Agreement or any
of the other Transaction Documents and (b) has obtained the approvals of all Persons necessary to
authorize and consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
(b) Neither the execution and delivery of this Agreement or any of the
other Transaction Documents or the consummation of any of the transactions contemplated hereby or
thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof
will:
(i) conflict with, result in a breach or violation of the terms,
conditions or provisions of, or constitute a default, an event of default or an event creating
rights of acceleration, termination or cancellation or a loss of rights under, or result in the
creation or imposition of any Lien upon any of the assets or properties of the Corporation or
any Corporation Subsidiary, under (A) the Amended and Restated Certificate or the Bylaws,
(B) any note, instrument, contract, agreement, mortgage, lease, license, franchise, permit or
other authorization, right, restriction or obligation to which the Corporation or any
Corporation Subsidiary is a party or any of its assets or properties is subject or by which the
Corporation or any Corporation Subsidiary is bound, (C) any order, injunction, temporary
restraining order, judgment, award, decree or ruling of any Governmental Entity to which the
Corporation or any Corporation Subsidiary is a party or any of its assets or properties is
subject or by which the Corporation or any Corporation Subsidiary is bound, (D) any rule or
regulation of NASDAQ or other Requirements of Law; or
(ii) require the approval, consent, authorization or act of, or the
making by the Corporation or any Corporation Subsidiary of any declaration, filing or
registration with, any Person (except for, with respect to the offer and sale of the Securities,
(a) any required filings under state securities laws and (b) routine post-Closing notice filings
with the SEC and under state corporation and securities laws, each of which have been or
will be filed timely within the applicable period therefor).
2.5 SEC Documents. The Common Stock is registered pursuant to Section 12(g)
of the Exchange Act and the Corporation has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including all such annual, quarterly and current reports, proxy information,
solicitation statement and registration statements, and amendments thereto required to have been
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filed (all of the foregoing and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being referred to herein as the “SEC
Documents”). As of the date of filing of such SEC Documents, the SEC Documents complied in all
material respects with the applicable requirements of the regulations of the Exchange Act and the
rules and regulations promulgated thereunder and other Federal, state and local laws, rules and
regulations applicable to such SEC Documents. None of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading. The SEC Documents contain all material information concerning the
Corporation, and no event or circumstance has occurred prior to the date hereof that would require
the Corporation to disclose such event or circumstance in order to make the statements in the SEC
Documents not misleading but which has not been so disclosed. The Corporation is not required to
file and will not be required to file any Contract entered into prior to the date hereof and to which the
Corporation is a party or by which the Corporation is bound that has not been previously filed as an
exhibit to its reports filed with the SEC under the Exchange Act.
2.6 Related Parties.
(a) Except as disclosed in Schedule 2.6(a), none of the officers, directors,
or to the Corporation’s Knowledge, any key employee of the Corporation or any Corporation
Subsidiary or any members of their immediate families or other Affiliates, has any direct or indirect
ownership interest in any firm or corporation with which the Corporation or any Corporation
Subsidiary is affiliated or with which the Corporation or any Corporation Subsidiary has a business
relationship, or any firm or corporation which competes with the Corporation, other than passive
investments in publicly traded companies (representing less than 1% of such company). No
employee, officer, director or other Affiliate of the Corporation or member of his or her immediate
family is indebted to the Corporation, nor is the Corporation indebted (or committed to make loans
or extend or guarantee credit) to any of them.
(b) To the Knowledge of the Corporation, except for (i) this Agreement
and the other Transaction Documents and (ii) the agreements set forth on Schedule 2.6(b), there are
no other agreements, understandings or proposed transactions between the Corporation and any of its
officers, directors, or holders of the Corporation’s outstanding capital stock or any Affiliate thereof,
including spouses, or family members of any such officer, director or holders of such stock, or that
would otherwise be required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC.
2.7 Compliance with Law; Permits. The Corporation and each of the Corporation
Subsidiaries is in compliance with all material Requirements of Law. The Corporation and the
Corporation Subsidiaries have all material franchises, permits, licenses and any similar authority
necessary for the conduct of their respective businesses as now being conducted by them and believe
they can obtain, without undue burden or expense, any similar authority for the conduct of their
respective business as planned to be conducted. Neither the Corporation nor any Corporation
Subsidiary is in default in any material respect under any such franchises, permits, licenses or similar
authority.
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2.8 Litigation. Except for the patent challenges disclosed in the SEC Documents,
there are no actions, suits, proceedings, arbitrations, charges, complaints or investigations pending
against the Corporation or any Corporation Subsidiaries or their respective properties nor, to the
Knowledge of the Corporation, is there any basis for any of the foregoing (nor has the Corporation or
any Corporation Subsidiary received notice of any threat thereof). The foregoing includes any
actions, suits, proceedings, arbitrations, charges, complaints or investigations that questions the
validity of this Agreement or the other Transaction Documents or the right of the Corporation to
enter into any of such agreements, or to consummate the transactions contemplated hereby or
thereby, or which could reasonably be expected to result, either individually or in the aggregate, in
any material adverse effect upon the Corporation or any Corporation Subsidiary or any change in the
current equity ownership of the Corporation or any Corporation Subsidiary. Neither the Corporation
nor any Corporation Subsidiary is a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or Governmental Entity or instrumentality. Except for (i) the
Litigation or (ii) as set forth on Schedule 2.8, there is no action, suit, proceeding, arbitration, charge,
complaint or investigation by the Corporation or any Corporation Subsidiary currently pending or
which the Corporation or any Corporation Subsidiary intends to initiate.
2.9 Intellectual Property.
(a) Schedule 2.9(a) contains a complete and accurate list of all (i)
patented, issued or registered Intellectual Property Rights owned or used by the Corporation or any
Corporation Subsidiaries, in each case identifying the patent or registration number, the applicable
jurisdiction, the owner, and the registration date, (ii) pending patent applications and applications for
registrations of other Intellectual Property Rights filed by the Corporation or any Corporation
Subsidiaries, in each case identifying the application number, the applicable jurisdiction, the owner,
and the filing date, (iii) unregistered trade names and corporate names owned or used by the
Corporation or any Corporation Subsidiaries, and (iv) unregistered trademarks and service marks
owned or used by the Corporation or any Corporation Subsidiaries. Schedule 2.9(a) also contains a
complete and accurate list of all licenses granted by the Corporation or any Corporation Subsidiaries
to any third party with respect to any Intellectual Property Rights and all licenses and other rights
granted by any third party to the Corporation or any Corporation Subsidiaries with respect to any
Intellectual Property Rights, in each case identifying the subject Intellectual Property Rights. The
Corporation or the Corporation Subsidiaries owns all right, title and interest to, or has the right to use
pursuant to a valid license, all Intellectual Property Rights necessary for the operation of the business
of the Corporation and each of the Corporation Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens. The Intellectual Property Rights set forth on
Schedule 2.9(a) are subsisting, valid and enforceable and no such items are subject to any
outstanding injunction, judgment, order, decree, ruling or charge. The loss or expiration of any
Intellectual Property Right or related group of Intellectual Property Rights owned or used by the
Corporation or any Corporation Subsidiaries has not had a material adverse effect, and no such loss
or expiration is threatened, pending or reasonably foreseeable. The Corporation and the Corporation
Subsidiaries have taken reasonable actions to maintain and protect the Intellectual Property Rights
that any such entity owns and uses, including causing its employees or contractors to execute
invention assignment, non-disclosure and confidentiality agreements. In each case where an item of
issued, registered, or pending Intellectual Property Rights is owned by the Corporation or any
Corporation Subsidiary (i) the Corporation and the Corporation Subsidiaries are currently in
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compliance with all legal requirements and the Corporation or the applicable Corporation Subsidiary
has paid all filing, registration, maintenance and renewal fees for any issued, registered or pending
Intellectual Property Rights with the relevant patent, copyright, or trademark office including the
U.S. Patent and Trademark Office, and (ii) there are no defects in the filing or prosecution of such
items. In each case where an item of issued, registered, or pending Intellectual Property Rights is
owned by the Corporation or the Corporation Subsidiaries by assignment, the assignment has been
duly recorded with the proper patent, copyright, or trademark office including the U.S. Patent and
Trademark Office.
(b) Except as indicated on Schedule 2.9(b), (i) there have been no claims
or demands of any kind pertaining to, or any proceeding (including any court, or administrative
proceeding at the U.S. Patent and Trademark Office) which is pending or threatened against the
Corporation or any Corporation Subsidiary asserting or alleging the invalidity, misuse or
unenforceability of any of such Intellectual Property Rights listed on Schedule 2.9(a), and to the
Corporation’s Knowledge, there are no grounds for the same, (ii) neither the Corporation nor any
Corporation Subsidiaries has received any written notices of, and neither the Corporation nor any
Corporation Subsidiaries is aware of any facts that indicate a reasonable likelihood of, any
infringement or misappropriation by, or conflict with, any third party with respect to such Intellectual
Property Rights (including any demand or request that the Corporation or any Corporation
Subsidiaries license any rights from a third party or indemnify any third party), (iii) to the
Corporation’s Knowledge, the conduct of the Corporation’s or any Corporation Subsidiaries’
business has not infringed, misappropriated or conflicted with and does not infringe, misappropriate
or conflict with any Intellectual Property Rights of third parties, and (iv) to the knowledge of the
Corporation, except as indicated on Schedule 2.9(b)(iv), the Intellectual Property Rights owned by or
licensed to the Corporation or any Corporation Subsidiaries have not been infringed, misappropriated
or violated by third parties.
2.10 Title to Properties and Assets; Liens. The Corporation has good and
marketable title to, or good and valid leasehold interests in, its properties and assets, tangible and
intangible, in each case free and clear of any Liens, other than (i) for liens for current taxes not yet
due and payable, (ii) for liens imposed by law and incurred in the ordinary course of business for
obligations not past due and which are not material, (iii) for liens in respect of pledges or deposits
under workers’ compensation laws or similar legislation, and (iv) minor liens, encumbrances and
defects in title which do not in any case materially detract from the value of the property subject
thereto or materially impair the operations of the Corporation, and which have not arisen otherwise
than in the ordinary course of business.
2.11 Financial Statements; No Undisclosed Liabilities.
(a) The financial statements (including, in each case, any related notes) of
the Corporation included in the SEC Documents are complete and accurate in all material respects
and complied as to form and substance in all material respects with applicable accounting
requirements of the SEC and the published rules and regulations of the SEC or other applicable
national securities exchange or inter-dealer quotation system rules or regulations with respect thereto.
Such financial statements were prepared in accordance with GAAP, applied consistently, during the
periods involved (except in the case of unaudited interim statements, to the extent that they may
15
include footnotes, may be condensed or summary statements) and fairly presented in all material
respects, the financial position of the Corporation and the Corporation Subsidiaries as of the
respective dates thereof and the results of operations and cash flows for the periods indicated.
(b) Except (i) to the extent shown or reserved for in the Balance Sheet, (ii)
liabilities and/or obligations incurred after the date of the Balance Sheet in the ordinary course of
business or (iii) obligations to perform under contracts which are not required under GAAP to be
reflected in the financial statements of the Corporation, the Corporation has not and is not subject to
any liabilities or obligations of any nature (including unasserted claims, whether known or
unknown), whether or not accrued, contingent or otherwise.
2.12 Material Adverse Effect. Since the date of the balance sheet included in the
most recently filed SEC Documents (the “Balance Sheet”), no event has occurred that has had or
would be reasonably likely to have a Material Adverse Effect.
2.13 Employees. Except as disclosed on Schedule 2.13, to the Corporation’s
Knowledge, no employee or officer of, nor any consultant to, the Corporation or any Corporation
Subsidiary is in violation of any term of any employment or consulting contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of such employee or
consultant with the Corporation or any Corporation Subsidiary or any other party because of the
nature of the business conducted or proposed to be conducted by the Corporation or any Corporation
Subsidiary. Each employee and officer of the Corporation and each Corporation Subsidiary has
executed the Corporation’s standard employee proprietary information and invention assignment
agreement and each current and former consultant to the Corporation or any Corporation Subsidiary
has executed a written agreement with the Corporation or such Corporation Subsidiary containing
invention assignment and confidentiality provisions in the Corporation’s customary form. To the
Corporation’s Knowledge, none of its or any Corporation Subsidiary’s employees, officers or
consultants are in violation of such agreements, and no current or former officer, employee or
consultant has excluded works or inventions made prior to his or her relationship with the
Corporation or any Corporation Subsidiary that are relevant to the business of the Corporation or any
Corporation Subsidiary as conducted or as proposed to be conducted. To the Corporation’s
Knowledge, none of its or any Corporation Subsidiary’s employees are obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would interfere with the use of
his or her best efforts to promote the interests of the Corporation and the Corporation Subsidiaries or
that would conflict with the Corporation’s or the Corporation Subsidiaries’ business as conducted or
as proposed to be conducted. Except as disclosed in Schedule 2.13, the Corporation does not believe
it is or will be necessary to utilize any inventions of any of its or any Corporation Subsidiary’s
employees (or prospective employees) or consultants made prior to their employment by the
Corporation or any Corporation Subsidiary or prior to entering into a consulting agreement with the
Corporation or any Corporation Subsidiary, as applicable. Except as disclosed in Schedule 2.13, the
employment of each officer and employee of the Corporation and any Corporation Subsidiary is
terminable at the will of the Corporation or the applicable Corporation Subsidiary without liability
for any severance payments upon termination. To the Corporation’s Knowledge there is no
impending resignation or termination of employment of any officer, key employee or group of
employees of the Corporation or any Corporation Subsidiary. The Corporation and each Corporation
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Subsidiary have complied in all material respects with all laws relating to the employment of labor
(including provisions relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other Taxes, and the Employee Retirement Income Security Act of
1974 (“ERISA”)), and the Corporation is not aware that it or any Corporation Subsidiary has any
labor relations problems (including any union organizational activities, threatened or actual strikes or
work stoppages or grievances). Neither the Corporation nor any of the Corporation Subsidiaries is a
party to or bound by any collective bargaining agreement or any other Contract with any labor union.
None of the Corporation, any of the Corporation Subsidiaries or, to the Knowledge of the
Corporation, any of its or their employees is subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements, affecting or in conflict with the
present business activities of the Corporation or any Corporation Subsidiary or the proposed business
activities of the Corporation or any Corporation Subsidiary.
2.14 Employee Benefit Plans. Except as set forth on Schedule 2.14:
(a) Multiemployer Plans. Neither the Corporation nor any Corporation
Subsidiary has any obligation, and has never been required, to contribute to (or any other liability,
including current or potential withdrawal liability, with respect to) any “multiemployer plan” (as
defined in Section 3(37) of ERISA).
(b) Retiree Welfare Plans. Neither the Corporation nor any Corporation
Subsidiary maintains or has any obligation to contribute to (or any other liability with respect to) any
plan or arrangement whether or not terminated, which provides medical, health, life insurance or
other welfare-type benefits for current or future retired or terminated employees (except for limited
continued medical benefit coverage required to be provided under Section 4980B of the Code or as
required under applicable state law).
(c) Defined Benefit Plans. Neither the Corporation nor any Corporation
Subsidiary maintains, contributes to or has any liability under (or with respect to) any employee plan
that is a tax-qualified “defined benefit plan” (as defined in Section 3(35) of ERISA), whether or not
terminated.
(d) Defined Contribution Plans. Neither the Corporation nor any
Corporation Subsidiary maintains, contributes to or has any liability under (or with respect to) any
employee plan that is a tax-qualified “defined contribution plan” (as defined in Section 3(34) of
ERISA), whether or not terminated.
(e) Other Plans. Neither the Corporation nor any Corporation Subsidiary
maintains, contributes to or has any liability under (or with respect to) any plan or arrangement
providing benefits to current or former employees, including any bonus plan, profit sharing, stock
option, employee stock purchase or other plan or arrangement providing for deferred or other
compensation, employee health or other welfare benefit plan or other arrangement, or severance
agreements, programs, policies or arrangements, whether or not terminated and whether or not
subject to ERISA.
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(f) Unfunded Liability. No plan maintained by the Corporation or any
Corporation Subsidiary or to which the Corporation or any Corporation Subsidiary has an obligation
to contribute, or with respect to which the Corporation or any Corporation Subsidiary has any other
liability, has any unfunded liability.
(g) Plan Qualification and Compliance. None of the employee benefit
plans set forth on Schedule 2.14 is intended to be qualified under Section 401(a) of the Code. Each
employee benefit plan set forth on Schedule 2.14 and all related trusts, insurance contracts and funds
have been maintained, funded and administered in material compliance with their respective terms
and with all applicable laws.
For purposes of this Section 2.14, the term “Corporation” includes all entities under common
control with the Corporation pursuant to Section 414(b) or (c) of the Code.
2.15 Taxes.
(a) (i) The Corporation and each Corporation Subsidiary has timely filed
all Tax Returns required to be filed by it; (ii) all such Tax Returns are complete and accurate in all
material respects, disclose all Taxes required to be paid by the Corporation or any Corporation
Subsidiary, for the periods covered thereby and have been prepared in compliance with all applicable
laws and regulations; (iii) the Corporation and each Corporation Subsidiary has timely paid all Taxes
(whether or not shown on such Tax Returns) due and owing by it and has withheld and paid over to
the appropriate taxing authority all Taxes that it is required by law to withhold or to collect for
payment from amounts paid or owing to any employee, stockholder, creditor or other third party; (iv)
neither the Corporation nor any Corporation Subsidiary has waived or been requested to waive any
statute of limitations in respect of Taxes which waiver is currently in effect; (v) neither the
Corporation nor any Corporation Subsidiary is currently the beneficiary of any extension of time
within which to file any Tax Return; (vi) there is no action, suit, investigation, audit, claim or
assessment pending or, to the Knowledge of the Corporation, proposed or threatened with respect to
Taxes of the Corporation or any Corporation Subsidiary and no information related to Tax matters
has been requested by any foreign, Federal, state or local taxing authority; (vii) there are no Liens for
Taxes upon the assets or properties of the Corporation nor any Corporation Subsidiary except Liens
relating to current Taxes not yet due; and (viii) there are no material unresolved questions or claims
concerning any Tax liability of the Corporation or any Corporation Subsidiary.
(b) Neither the Corporation nor any Corporation Subsidiary is liable for the Taxes
of another Person in a material amount (i) under Treasury Regulation § 1.1502-6 (or comparable
provisions of state, local or foreign law), (ii) as a transferee or successor, or (iii) by contract or
indemnity or otherwise. Except as set forth on Schedule 2.15(b), neither the Corporation nor any
Corporation Subsidiary is a party to any Tax sharing or indemnity agreements. Neither the
Corporation nor any Corporation Subsidiary has been a member of any affiliated group as defined in
Section 1504 of the Code that has filed a consolidated return for Federal income tax purposes (or any
similar group under state, local or foreign law). Neither the Corporation nor any Corporation
Subsidiary has made any payments, or is obligated to make payments or is a party to an agreement
that could obligate it to make any payments that would not be deductible under Section 280G of the
Code.
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2.16 Insurance. The Corporation and the Corporation Subsidiaries have maintained
insurance in such types and amounts as appropriate for their respective businesses. Neither the
Corporation nor any Corporation Subsidiary has any self-insurance or co-insurance programs.
Neither the Corporation nor any Corporation Subsidiary has been refused any insurance coverage
sought or applied for and neither the Corporation nor any Corporation Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
2.17 Claims.
(a) The Corporation and the Corporation Subsidiaries have sole and
exclusive ownership of the Claims. No stockholder or other Affiliate of the Corporation or any
Corporation Subsidiary has any ownership interest in the Claims. Neither the Corporation nor any
Corporation Subsidiary, nor any Person on their behalf, has assigned, transferred, pledged,
encumbered or given, as collateral or otherwise, to any Person, any right or interest of the
Corporation or any Corporation Subsidiary in the Claims or the Proceeds.
(b) There are no Persons who have Liens of any kind against any amount
to which the Corporation or any Corporation Subsidiary may be entitled on account of the Claims
and/or Proceedings.
2.18 Negative Litigation Event. As of the date hereof, no Negative Litigation
Event has occurred, and neither the Corporation nor any of its Subsidiaries is aware of any facts that
indicate a reasonable likelihood of the occurrence of a Negative Litigation Event.
2.19 Brokers or Finders. Except as set forth on Schedule 2.19, neither the
Corporation nor any Corporation Subsidiary has engaged any brokers, finders or agents, and the
Purchaser have not incurred, and will not incur, directly or indirectly, as a result of any action taken
by the Corporation or any Corporation Subsidiary, any liability for brokerage or finders’ fees or
agents’ commissions or any similar charges in connection with the transactions contemplated by or
under this Agreement and the other Transaction Documents.
2.20 Offering. Subject to the accuracy of the Purchaser’s representations and
warranties in Section 3, the offer, sale and issuance of the Securities to be issued in conformity with
the terms of this Agreement will constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act and are in compliance with all applicable securities laws of the United
States and are in compliance with and will have been registered or qualified (or are exempt from
registration or qualification) under the registration, permit or qualification requirements of all
applicable securities laws of each of the states whose laws govern the issuance of the Securities.
Neither the Corporation nor any agent on its behalf has (i) solicited or will solicit any offers to sell or
has offered to sell or will offer to sell all or part of the Securities to any person or persons so as to
bring the sale of such Securities by the Corporation within the registration provisions of the
Securities Act or any state securities laws or (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of the Securities. None of the Corporation, any of its Affiliates or any Person acting
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on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would require registration of the Securities or
cause this offering of Securities to be integrated with any prior offering of the Corporation’s
securities.
2.21 Disclosure. Neither this Agreement (including all the exhibits and schedules
hereto) nor any related agreements nor any certificates or other information delivered in connection
herewith contains any untrue statement of a material fact or omits to state a material fact necessary to
make the statements herein or therein not misleading in light of the circumstances under which they
were made.
3. Representations and Warranties of the Purchaser. As an inducement to the
Corporation to enter into this Agreement and to issue and sell the Securities, the Purchaser hereby
represents and warrants to the Corporation as follows:
3.1 Organization. The Purchaser is a Delaware limited liability company and is
duly organized, validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation.
3.2 Authorization.
(a) The Purchaser has all requisite legal and corporate power and authority
to execute and deliver this Agreement and each of the other Transaction Documents to which it is a
party, to purchase the Securities hereunder and to carry out and perform its obligations under the
terms of this Agreement and each of the other Transaction Documents to which it is a party. All
action on the part of the Purchaser necessary for the authorization, execution, delivery and
performance of this Agreement and each of the other Transaction Documents to which it is a party
and the performance of all of the Purchaser’s obligations under this Agreement and each of the other
Transaction Documents to which it is a party, has been taken.
(b) This Agreement and each of the other Transaction Documents to
which it is a party, when executed and delivered by the Purchaser, shall constitute valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance with their terms except
as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and by general equitable principles.
(c) No consent, approval, authorization, order, filing, registration or
qualification of or with any court, Governmental Entity or third person is required to be obtained by
the Purchaser in connection with the execution and delivery of this Agreement and each of the other
Transaction Documents to which it is a party, or the performance of the Purchaser’s obligations
hereunder or thereunder.
3.3 Accredited Investor. The Purchaser is an “accredited investor” as defined in
Rule 501(a) of Regulation D under the Securities Act on the basis indicated therein.
3.4 Restriction on Resale The Purchaser acknowledges that the Shares and the
Warrant Shares must be held indefinitely unless subsequently registered under the Securities Act or
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unless an exemption from such registration is available. The Purchaser further understands that there
is no assurance that any exemption from registration under the Securities Act will be available to a
resale of the Shares and the Warrant Shares by the Purchaser or, if available, that such exemption
will allow the Purchaser to dispose of or otherwise transfer any or all of the Shares and the Warrant
Shares in the amounts or at the times the Purchaser might propose. The Purchaser understands and
acknowledges that no public market now exists for the Shares and that the Corporation has made no
assurances that a public market will ever exist for the Shares.
3.5 Legends. The Purchaser understands and agrees that the certificates
evidencing the Shares, or any other securities issued in respect of the Shares upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall bear the legends set
forth in Section 5.1.
3.6 Brokers or Finders. The Corporation will not incur, as a result of any action
taken by the Purchaser, any liability for brokerage or finders’ fees or agents’ commissions or any
similar charges in connection with the transactions contemplated by or under this Agreement and the
other Transaction Documents.
4. Covenants; Purchaser Rights.
4.1 Information Rights.
(a) Financial Statements. Following the Closing, and so long as the
Purchaser continues to hold 20% or more of the Shares originally issued to the Purchaser at the
Closing, the Corporation shall be required to deliver to the Purchaser (whether in hard copy, by e-
mail or e-mail notification that the applicable information is available on the SEC’s EDGAR site) the
following information:
(i) As soon as available, and in any event within 90 days after the
end of each Fiscal Year, the audited balance sheet of the Corporation as at the end of each
such Fiscal Year and the audited statements of income, cash flows and changes in
stockholders’ equity for such year, accompanied by the certification of an independent
certified public accountant of recognized national standing, to the effect that, except as set
forth therein, such financial statements have been prepared in accordance with GAAP,
applied on a basis consistent with prior years and fairly present in all material respects the
financial condition of the Corporation as of the dates thereof and the results of its operations
and changes in its cash flows and stockholders’ equity for the periods covered thereby.
Purchaser hereby acknowledges and agrees that Marcum LLP, the Corporation’s independent
registered public accounting firm, is of recognized national standing.
(ii) As soon as available, and in any event within 45 days after the
end of each fiscal quarter, the balance sheet of the Corporation at the end of such quarter and
the statements of income, cash flows and changes in stockholders’ equity for such quarter, all
in reasonable detail and all prepared in accordance with GAAP, consistently applied, and
certified by the Chief Financial Officer of the Corporation.
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(iii) As soon as available, and in any event on or prior to the
Corporation’s quarterly Board meetings, such additional financial information of the
Corporation as presented to the Board at such meetings.
(iv) To the extent the Corporation is required by Requirements of
Law or pursuant to the terms of any outstanding indebtedness of the Corporation to prepare
such reports, any annual reports, quarterly reports and other periodic reports (without
exhibits) actually prepared by the Corporation as soon as available.
(v) No later than 30 days prior to the start of each Fiscal Year, an
annual budget, which shall include consolidated capital and operating expense budgets, cash
flow projections and income and loss projections for the Corporation in respect of such
Fiscal Year, all itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing.
(vi) Promptly following receipt by the Corporation, each audit
response letter, accountant’s management letter or other written support submitted to the
Corporation by its independent public accountants in connection with an annual or interim
audit of the books of the Corporation.
(vii) Promptly after commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries involving the Corporation or any
Corporation Subsidiary that would reasonably be expected to materially adversely affect the
Corporation or such Corporation Subsidiary.
(viii) Promptly after request by the Purchaser, such additional
financial information of the Corporation as Purchaser may be request to determine whether a
Negative Treasury Event has occurred.
(ix) Within one Business Day of becoming aware thereof, written
notice of a Negative Treasury Event;
(x) Written notice within five Business Days of becoming aware of
any material change in any of the information contained in the representations and warranties
and/or Exhibits to this Agreement.
(b) Inspection Rights. Following the Closing, and so long as the
Purchaser continues to hold 20% or more of the Shares originally issued to the Purchaser at the
Closing, the Corporation shall, and shall cause the Corporation Subsidiaries and each of their
respective officers, directors, managers and employees to, (i) afford the Purchaser and its
representatives, during normal business hours and upon reasonable notice, reasonable access to its
officers, employees, auditors, properties, offices, plants and other facilities and to all books and
records, and (ii) afford the Purchaser the opportunity to consult with its officers from time to time
regarding the Corporation’s and the Corporation Subsidiaries’ affairs, finances and accounts as each
the Purchaser may reasonably request upon reasonable notice. Any information disclosed to the
Purchaser (or its representatives) shall be subject to an appropriate confidentiality agreement. The
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Purchaser (and its representatives) shall take reasonable steps, to the extent commercially
practicable, to minimize the disruption caused by any such inspection. The right set forth in this
Section 4.1 shall not and is not intended to limit any rights which the Purchaser may have with
respect to the books and records of the Corporation, or to inspect its properties or discuss its affairs,
finances and accounts under the laws of the jurisdiction in which the Corporation is incorporated.
4.2 Board of Directors Rights. Upon the earliest to occur of (x) a Negative
Litigation Event, (y) a Negative Treasury Event or (z) the Corporation has not paid the Liquidation
Preference (as defined in the Certificate of Designation) on or prior to such time that the Liquidation
Preference is greater than or equal to 2.8 times the Purchase Price (so long as, in the case of this
clause (z), the Purchaser continues to hold 20% or more of the Shares originally issued to the
Purchaser at the Closing), the following provisions shall apply:
(a) The Purchaser shall have the right to designate a total of one Person to
serve as a member of the Board of Directors (the “Nominee”). The Corporation shall promptly (and
in any event within ten (10) Business Days of request by the Purchaser) (i) increase the size of the
Board of Directors, if necessary, and (ii) appoint such Nominee to the Board of Directors. If at the
time of such appointment the Corporation has a staggered Board of Directors, such Nominee shall be
appointed to the class of the Board of Directors that has the longest remaining term at the time of
such appointment.
(b) The Corporation shall take (and cause to be taken) all actions and
agrees to exercise all authority under Requirements of Law to cause any slate of directors presented
to stockholders of the Corporation for election to the Board of Directors to include the Nominee. In
this regard, the Corporation shall, subject to Requirements of Law, duly nominate the Nominee for
election to the Board of Directors and shall solicit proxies in favor of the election of the Nominee
from the stockholders of the Corporation entitled to vote for the election of directors. In connection
therewith and in furtherance thereof, the Corporation shall include in any proxy solicitation materials
related to the election of members of the Board of Directors such information regarding the Nominee
and recommendations of the Board of Directors as are appropriate in proxy solicitation materials or
as may be required under the rules and regulations promulgated by the SEC.
(c) Following the election of a Nominee to the Board of Directors and so
long as Shares remain outstanding, such Nominee shall not be removed from the Board of Directors
except by the Purchaser. Upon the resignation, removal by the Purchaser, death or disability of a
Nominee serving as a director of the Board of Directors, the Purchaser shall have the right to
designate a replacement Nominee and either the remaining directors on the Board of Directors shall
promptly (and in any event within ten Business Days) appoint such replacement Nominee to fill the
vacancy on the Board of Directors or, if the remaining directors fail to appoint such replacement
Nominee to fill such vacancy, then the Corporation shall duly nominate such replacement Nominee
for election to the Board of Directors pursuant to Section 4.2(b), and, if reasonably requested by the
Purchaser in order to elect or appoint such nominee, promptly call (or cause to be called) and hold a
special meeting of the Corporation’s stockholders for the purpose of voting on such replacement
Nominee.
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4.3 Board Observer Rights. For so long as the Purchaser continues to hold 20% or
more of the Shares originally issued to the Purchaser at the Closing, the Purchaser shall have the
right to designate one representative (an “Observer”) with the right to attend and observe all
meetings of the Board of Directors or committees designated by the Board of Directors. The
Corporation shall promptly invite (or cause to be invited) the Observer to attend all meetings of the
Board of Directors or any committee thereof and, in this respect, shall give (or cause to be given) to
the Observer copies of all notices, minutes, consents, and other material that the Corporation
provides to its directors at the same time as such materials are provided to its directors.
Notwithstanding the foregoing, the Corporation reserves the right to exclude the Observer from
access to any material or meeting or portion thereof if and only to the extent the Corporation believes
that such exclusion is reasonably necessary to preserve the attorney-client privilege.
4.4 Preemptive Rights.
(a) Following the Closing, the Purchaser shall have the right to purchase
any New Securities that the Corporation or any Corporation Subsidiary may from time to time
propose to issue or sell to any Person.
(b) At least thirty (30) Business Days prior to any issuance or sale referred
to in Section 4.4(a), the Corporation shall notify in writing the Purchaser of such proposed issuance
or sale (the “Preemptive Right Notice”). The Preemptive Right Notice shall describe the proposed
issuance or sale and the material terms and conditions thereof, including: (i) the number of New
Securities proposed to be issued and the percentage of the Corporation's or such Corporation
Subsidiary’s outstanding Common Stock, as applicable, on a fully diluted basis, that such issuance
would represent; (ii) the proposed issuance date, which shall be at least thirty (30) Business Days
from the date of the Preemptive Right Notice; (iii) the proposed purchase price per share and (iv) a
summary of the material terms of such New Securities. The Purchaser shall for a period of twenty
(20) Business Days following the receipt of a Preemptive Right Notice (the “Exercise Period”) have
the right to elect irrevocably to purchase, at the purchase price set forth in the Preemptive Right
Notice, all or any portion of such New Securities, by delivering a written notice to the Corporation.
(c) Subject to the Certificate of Designation, the Corporation shall be free
to complete the proposed issuance or sale of New Securities described in the Preemptive Right
Notice with respect to any New Securities not elected to be purchased pursuant to Section 4.4(b)
above in accordance with the terms and conditions set forth in the Preemptive Right Notice (except
that the amount of New Securities to be issued or sold by the Corporation may be reduced) so long as
such issuance or sale is closed within sixty (60) Business Days after the expiration of the Exercise
Period (subject to the extension of such sixty (60) Business Day period for a reasonable time not to
exceed thirty (30) days to the extent reasonably necessary to obtain necessary approvals from
Governmental Entities). In the event the Corporation has not sold such New Securities within such
time period, the Corporation shall not thereafter issue or sell any New Securities without first again
offering such securities to the Stockholders in accordance with the procedures set forth in this
Section 4.4.
(d) Upon the consummation of the issuance of any New Securities in
accordance with this Section 4.4, the Corporation shall deliver to the Purchaser certificates (if any)
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evidencing the New Securities, which New Securities shall be issued free and clear of any Liens
(other than those arising hereunder and those attributable to the actions of the purchasers thereof),
and the Corporation shall so represent and warrant to the purchaser thereof, and further represent and
warrant to such purchaser that such New Securities shall be, upon issuance thereof to the Purchaser
and after payment therefor, duly authorized, validly issued, fully paid and non-assessable. The
Purchaser shall deliver to the Corporation the purchase price for the New Securities purchased by
wire transfer of immediately available funds. Each party to the purchase and sale of New Securities
shall take all such other actions as may be reasonably necessary to consummate the purchase and sale
including entering into such additional agreements as may be necessary or appropriate.
4.5 Reporting Status. The Corporation shall comply with all Requirements of
Law, including the rules and regulations under the Securities Act and the Exchange Act, and the
rules of any securities exchange upon which any shares of its capital stock are listed. The
Corporation shall use commercially reasonable efforts to maintain its status as a company with
securities registered under Section 12 of the Exchange Act and the quotation of the Common Stock
on NASDAQ, and shall timely file all reports and other filings required to be filed by it under the
Securities Act and the Exchange Act, the rules and regulations adopted by the SEC thereunder or the
rules and regulations of NASDAQ. If required, the Company shall promptly file the “Listing
Application” for, or in connection with, the issuance and delivery of the Warrant Shares. The
Corporation shall take such further action as the Purchaser may reasonably request to enable such
holders to sell Restricted Securities pursuant to Rule 144 adopted by the SEC under the Securities
Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter
adopted by the SEC. Upon reasonable request, the Corporation shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with such requirements.
4.6 Public Disclosure of Transaction. On or before 5:30 p.m., New York City
time, on or before the Fourth Business Day immediately following the date hereof, the Corporation
shall issue a press release announcing the entry into this Agreement and describing the terms of the
transactions contemplated hereby and by the other Transaction Documents.
4.7 Pursuit of the Claims. The Corporation shall use its commercially reasonable
best efforts and exercise good faith and reasonable commercial judgment, but at all times within the
bounds of any applicable law and rules of professional responsibility: (i) in pursuing all of the
Corporation’s and the Corporation Subsidiaries’ or any of their respective Affiliates’ legal and
equitable rights in the Claims and/or Proceedings and with respect to the Proceeds; (ii) to bring the
Claims and/or Proceedings to settlement or final judgment; and (iii) to enforce collection of all
money and other Proceeds due on account of the Claims and/or Proceedings or other enforcement
actions relating to the Proceeds, including any settlement(s) with Adverse Parties. The Corporation
shall maintain and prosecute the Patents.
4.8 Preserve Accuracy of Representations and Warranties; Notification of Certain
Matters.
(a) During the period prior to the Closing Date, each party hereto shall
refrain from taking any action which would render any representation or warranty contained in
Sections 2 or 3, as applicable, inaccurate as of the Closing Date. Each party shall promptly notify the
25
other of any action, suit or proceeding that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this
Agreement.
(b) During the period prior to the Closing Date, the Corporation will notify
the Purchaser of (i) any Material Adverse Effect, (ii) any lawsuit, claim, proceeding or investigation
that is threatened, brought, asserted or commenced against the Corporation which would have been
listed in Schedule 2.8 if such lawsuit, claim, proceeding or investigation had arisen prior to the date
hereof, (iii) any notice or other communication from any third Person alleging that the consent of
such third Person is or may be required in connection with the transactions contemplated by this
Agreement, and (iv) any material default under any agreement of the Corporation or any Corporation
Subsidiary or event which, with notice or lapse of time or both, would become such a default on or
prior to the Closing Date and of which the Corporation has Knowledge.
4.9 Operations Prior to the Closing Date. During the period prior to the Closing
Date, the Corporation shall operate and carry on its and the Corporation Subsidiaries’ business only
in the ordinary course and substantially as presently operated. Consistent with the foregoing, the
Corporation shall keep and maintain its assets in good operating condition and repair and shall use its
commercially reasonable best efforts consistent with good business practice to maintain the business
organization of the Corporation and the Corporation Subsidiaries intact and to preserve the goodwill
of the suppliers, contractors, licensors, licensees, employees, customers, distributors and others
having business relations with the Corporation or the Corporation Subsidiaries.
4.10 Acquisition Proposals. During the period prior to the Closing Date, the
Corporation shall not, and shall not authorize or permit any officer, director, employee or Affiliate
of the Corporation , or authorize any investment banker, attorney, accountant or other representative
retained by the Corporation or any Affiliate of the Corporation, to, directly or indirectly, solicit or
encourage, or furnish information with respect to the Corporation to, or engage in any discussions
with, any Person in connection with any proposal for the acquisition of all or a substantial portion of
the Corporation or any financing transaction involving the Corporation, other than as contemplated
by this Agreement. The Corporation shall promptly cease or cause to be terminated any existing
activities or discussions with any Person with respect to any of the foregoing.
5. Transfer Restrictions.
(a) Subject to compliance with applicable securities laws, the Shares and
the Warrant shall not be Transferable to any Person other than an Affiliate of the Purchaser.
(b) Each certificate or instrument representing Restricted Securities shall
be imprinted with a legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
26
EFFECTIVE REGISTRATION UNDER THE ACT OR IN A
TRANSACTION WHICH QUALIFIES AS AN EXEMPT TRANSACTION
UNDER THE ACT, THE RULES AND REGULATIONS PROMULGATED
THEREUNDER AND THE SECURITIES LAW OF ANY APPLICABLE
STATE.”
(c) If any Restricted Securities become eligible for sale pursuant to Rule
144(b), the Corporation shall, upon the reasonable request of the holder of such Restricted Securities,
remove the legend set forth in Section 5(b) from the certificates for such Restricted Securities.
6. Conditions to the Purchaser’s Obligations at Closing. The obligations of the Purchaser
to purchase the Shares and the Warrant at the Closing are subject to the fulfillment, on or before such
Closing, of each of the following conditions, unless waived by the Purchaser:
6.1 Representations and Warranties; Covenants. The representations and
warranties of the Corporation contained in Section 2 shall be true and correct in all respects as of the
date of Closing. The Corporation shall have complied with each of its covenants set forth herein.
6.2 Consents, Permits and Waivers. The Corporation shall have obtained any and
all consents, permits and waivers necessary or appropriate for consummation of the transactions
contemplated hereby and by the other Transaction Documents.
6.3 No Prohibitions. No provision of any Requirements of Law and no order,
injunction, temporary restraining order, judgment, award, decree or ruling of any Governmental
Entity shall prohibit or otherwise challenge the legality or validity of the transactions contemplated
by this Agreement.
6.4 Blue Sky. The Corporation shall have obtained all necessary blue sky law
permits and qualifications, or have the availability of exemptions therefrom, required by any
Governmental Entity or regulatory body of the United States or of any state or foreign jurisdiction
that are required in connection with the lawful offer, sale and issuance of the Securities.
6.5 Certificate of Designation. The Certificate of Designation shall have been filed
with and certified by the Secretary of State of the State of Delaware.
6.6 Other. The Purchaser shall have received a correct and complete copy of the
items set forth on Schedule 6.6 and the Purchaser shall be satisfied with the contents thereof in its
sole and absolute discretion.
6.7 Schedules. The Corporation shall have delivered correct and complete copies
of all schedules contemplated hereunder and the Purchaser shall be satisfied with the contents thereof
in its sole and absolute discretion.
6.8 Closing Deliverables. At the Closing, the Corporation shall have delivered to
the Purchaser, the following:
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(a) a certificate executed by the Chief Executive Officer of the
Corporation on behalf of the Corporation, certifying the satisfaction of the conditions to closing
listed in Sections 6.1, 6.2, 6.4 and 6.5;
(b) a certificate executed by the Corporation’s Secretary on behalf of the
Corporation having attached thereto (i) the Corporation’s Amended and Restated Certificate as in
effect at the time of the Closing, including a copy of the as filed Certificate of Designation, certified
by the Secretary of State of the State of Delaware, (ii) the Corporation’s Bylaws as in effect at the
time of the Closing, and (iii) resolutions approved by the Board of Directors authorizing the
transactions contemplated hereby;
(c) good standing certificates with respect to the Corporation from the
applicable authority(ies) in Delaware and any other jurisdiction in which the Corporation is qualified
to do business, dated a recent date before the Closing;
(d) to the Purchaser, free and clear of all Liens, a stock certificate, duly
executed by the Corporation, evidencing 153,000 Shares; and
(e) to the Purchaser, free and clear of all Liens, the Warrant, duly executed
by the Corporation, to purchase 2,000,000 shares of Common Stock at the exercise price and upon
the terms and conditions set forth therein.
6.9 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in substance and form to the
Purchaser, and the Purchaser shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
7. Conditions to the Corporation’s Obligations at Closing. The Corporation’s obligation
to sell and issue the Shares and the Warrant at Closing to the Purchaser is subject to the fulfillment
on or before the Closing of the following conditions, unless waived by the Corporation:
7.1 Representations and Warranties. The representations and warranties of the
Purchaser contained in Section 3 shall be true and correct in all respects as of the Closing.
7.2 No Prohibitions. No provision of any Requirements of Law or ruling of any
Governmental Entity shall prohibit or otherwise challenge the legality or validity of the transactions
contemplated by this Agreement.
7.3 Closing Deliverables. At the Closing, the Purchaser shall have (a) delivered to
the Corporation (i) all such counterpart originals or certified or other copies of this Agreement, the
other Transaction Documents to which the Purchaser is a party and such other documents as the
Corporation may reasonably request, and (ii) a certificate executed by the Purchaser certifying the
satisfaction of the condition to closing listed in Section 7.1.
8. Termination of the Agreement Prior to Closing.
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8.1 Termination Triggers. Notwithstanding anything to the contrary herein, this
Agreement may be terminated (i) by either party at any time after the twentieth (20th) Business Day
following the date hereof if the Closing shall not have occurred by such date; provided, however, that
if the Closing shall not have occurred as a result of the failure of the conditions set forth in Section 6
to be satisfied by such date, then the Purchaser may extend such date in its sole discretion, (ii) by the
mutual written consent of the Corporation and the Purchaser or (iii) by either party upon the breach
of any representation, warranty or covenant set forth herein by the other party that would result in the
failure of the conditions set forth in Sections 6 or 7 (as applicable) to be satisfied.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability
on the part of any party hereto as to which such termination has occurred; provided, however, that
nothing herein shall relieve any party from liability for any breach of this Agreement or the
Corporation of its obligations under Section 9.9.
9. Miscellaneous.
9.1 Indemnification.
(a) In addition to all rights and remedies available to the Purchaser at law
or in equity, the Corporation shall indemnify the Purchaser and its Affiliates, stockholders, members,
officers, directors, managers, partners, employees, agents, representatives, heirs, successors and
assigns (each an “Indemnified Party,” and collectively, the “Indemnified Parties”) and shall save
and hold each of them harmless against, and pay on behalf of or reimburse such party as and when
incurred for, any loss, liability, obligation, demand, claim, action, cause of action, proceeding,
judgment, settlement, cost (including attorneys’ fees), damage, deficiency, Tax, penalty, fine,
expense, or disbursement, whether or not arising out of any claims by or on behalf of any third party,
including interest, penalties, reasonable attorneys’ fees and expenses, and all reasonable amounts
paid in investigation, defense, or settlement of any of the foregoing (collectively, “Losses”) which
any such party may suffer, sustain, or become subject to, as a result of, in connection with, relating or
incidental to, or by virtue of:
(i) Any misrepresentation or breach of a representation or
warranty on the part of the Corporation under Section 2 or any certificate delivered
hereunder; or
(ii) Any nonfulfillment or breach of any covenant or agreement on
the part of the Corporation under this Agreement or under any of the other Transaction
Documents.
(b) The obligations of the Corporation to each Indemnified Party under
this Section 9.1 will be separate and distinct obligations and will survive any transfer of the Shares
by the Purchaser and the expiration or termination of this Agreement or any other Transaction
Document.
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9.2 Survival of Warranties. The warranties, representations and covenants of the
Corporation and Purchaser contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be affected by any
investigation or knowledge of the subject matter thereof made by or on behalf of the Purchaser or the
Corporation.
9.3 Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
9.4 Governing Law and Jurisdiction. This Agreement and any controversy arising
out of or relating to this Agreement shall be governed by and construed in accordance with the
internal laws of the State of State of New York, without regard to conflict of law principles that
would result in the application of any law other than the law of the State of New York, with the
Corporation and the Purchaser hereby agreeing to personal jurisdiction and venue in such court of
competent jurisdiction in the federal and state courts of the City of New York, New York.
9.5 Counterparts; Facsimile or PDF. This Agreement may be executed and
delivered by facsimile, PDF signature or electronic signature and in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
9.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.
9.7 Disclosure Schedules. The Disclosure Schedules shall be arranged in sections
corresponding to the numbered and lettered sections and subsections contained in Section 2.
9.8 Notices. All notices and other communications given or made pursuant to this
Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt
or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or
facsimile during normal business hours of the recipient, and if not sent during normal business hours,
then on the recipient’s next Business Day, (c) the next business day upon deposit with a reputable
national overnight delivery service for overnight delivery, (d) five (5) days after having been sent by
certified or registered mail, return receipt requested, postage prepaid, to be sent as follows:
If to the Purchaser:
Soryn HLDR Vehicle II LLC
Attention: Chief Compliance Officer
477 Madison Avenue, 8th Floor
New York, New York 10022
Email: smcdermott@halcyonllc.com
Facsimile: 212-935-1831
30
If to the Corporation:
Finjan Holdings, Inc.
Attention: Chief Executive Officer
2000 University Avenue, Suite 600
East Palo Alto, California 94303
Email: phil@finjan.com
with copies to (which shall not constitute notice):
GCA Law Partners LLP
2570 W. El Camino Real, Suite 510
Mountain View, California 94040
Attention: Jon C. Gonzales
Email: jgonzales@gcalaw.com
Facsimile: 650-428-3901
9.9 Expenses. The Corporation shall pay up to a total of $125,000 of the
Purchaser’s reasonable and documented fees and expenses (the “Purchaser Expenses”) in
connection with this Agreement and the transactions contemplated hereby (it being agreed and
understood that, at the Purchaser’s option, the amount of the Purchaser Expenses shall be payable by
offsetting the amount due from the Purchaser pursuant Section 1.2(c)).
9.10 Origination Fee. The Corporation shall pay the Purchaser an origination fee
equal to $300,000 (the “Origination Fee”) in connection with this Agreement and the transactions
contemplated hereby (it being agreed and understood that, at the Purchaser’s option, the amount of
the Origination Fee shall be payable by offsetting the amount due from the Purchaser pursuant
Section 1.2(c)).
9.11 Remedies; Attorneys’ Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement or any of the other
Transaction Documents, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and
necessary disbursements in addition to any other relief to which such party may be entitled. The
Purchaser shall be entitled to enforce any rights it has under this Agreement or the Transaction
Documents specifically (without posting a bond or other security), to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights granted by law.
9.12 Amendments and Waivers. Except as expressly provided herein, any term of
this Agreement may be amended, terminated or waived only with the written consent of the
Corporation and (i) the holders of at least a majority of the then-outstanding Shares or (ii) for an
amendment, termination or waiver effected prior to the Closing, the Purchaser. Any amendment or
waiver effected in accordance with this Section 9.12 shall be binding upon the Purchaser and each
transferee of the Shares, each future holder of all such securities, and the Corporation.
9.13 Confidentiality. The parties will keep confidential the Confidential
Information (which obligation shall continue for a period of 1 year following the redemption of all
31
Shares) save that such Confidential Information may be disclosed: (a) if so required by any court of
competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body with
jurisdiction over the affairs of the Purchaser or any Affiliate of the Purchaser; (b) if required in
connection with any legal proceedings; or (c) to Affiliates and representatives of Purchaser who have
a specific need to review such Confidential Information for legal or compliance reasons. The parties
agree not to use any Confidential Information for any unlawful purpose.
9.14 Severability. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision.
9.15 Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party under this Agreement, upon any breach or default of any other party
under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-
defaulting party nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part
of any party of any breach or default under this Agreement, or any waiver on the part of any party of
any provisions or conditions of this Agreement, must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party, shall be cumulative and not alternative.
9.16 Rights of Purchaser. The Purchaser shall have the absolute right to exercise or
refrain from exercising any right or rights that the Purchaser may have by reason of this Agreement
or the other Transaction Documents, the Amended and Restated Certificate, the Bylaws, or at law or
in equity, including the right to consent to the waiver of any obligation of the Corporation and to
enter into an agreement with the Corporation for the purpose of modifying this Agreement or the
other Transaction Documents, and the Purchaser shall not incur any liability to any other holder of
Shares with respect to exercising or refraining from exercising any such right or rights.
9.17 Exchange of Certificates. Upon surrender by any holder to the Corporation of
any certificate or certificates evidencing any securities, the Corporation at its expense will issue in
exchange therefor, and deliver to such holder new certificates in such denomination or
denominations as may be requested by such holder. Upon receipt of evidence reasonably satisfactory
to the Corporation of the loss, theft, destruction or mutilation of any security issued by it and in case
of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to the Corporation of any such mutilation, upon surrender and cancellation of such
security, the Corporation at its expense will issue and deliver to any such holder a new security of
like tenor, in lieu of such lost, stolen, destroyed or mutilated certificate.
9.18 Entire Agreement. This Agreement (including the exhibits hereto) and the
other Transaction Documents constitute the full and entire understanding and agreement between the
parties with respect to the subject matter hereof, and any other written or oral agreement relating to
the subject matter hereof existing between the parties are expressly canceled.
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9.19 Interpretation. For purposes of this Agreement, (a) the words “include,”
“includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the
word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder”
refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to
Articles, Sections, Exhibits and Schedules mean the Articles and Sections of, and Exhibits and
Schedules attached to, this Agreement; (y) to an agreement, instrument or other document means
such agreement, instrument or other document as amended, supplemented and modified from time to
time to the extent permitted by the provisions thereof and (z) to a statute means such statute as
amended from time to time and includes any successor legislation thereto and any regulations
promulgated thereunder. This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting an instrument or causing any
instrument to be drafted. The Schedules referred to herein shall be construed with, and as an integral
part of, this Agreement to the same extent as if they were set forth verbatim herein.
9.20 Further Assurances. Each party hereto agrees to execute and deliver, by the
proper exercise of its corporate, limited liability company, partnership or other powers, all such other
and additional instruments and documents and do all such other acts and things as may be necessary
to more fully effectuate this Agreement.
[Signature Pages Follow]
SIGNATURE PAGE TO PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Series A-1 Preferred Stock
Purchase Agreement as of the date first written above.
CORPORATION:
FINJAN HOLDINGS, INC.
By:
Name:
Title:
PURCHASER:
SORYN HLDR VEHICLE II LLC
By:
Name:
Title:
EXHIBITS
EXHIBIT A - FORM OF WARRANT
EXHIBIT B - FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT A
FORM OF WARRANT
(See attached)
EXHIBIT B
FORM OF CERTIFICATE OF DESIGNATION
(See attached)
ANNEX A
LITIGATION
1. Finjan, Inc. v. FireEye, Inc., 4:13-cv-03133-SBA, (N.D. Cal).
2. Finjan, Inc. v. Blue Coat Systems, Inc., Case 5:13-cv-03999-BLF, (N.D. Cal.).
3. Finjan, Inc. v. Symantec Corporation, Case 3:14-cv-02998-HSG (N.D. Cal.).
4. Finjan, Inc. v. Palo Alto Networks, Inc., Case 3:14-cv-04908-PJH (N.D. Cal.).
5. Finjan, Inc. v. Blue Coat Systems, Inc., Case 5:15-cv-03295-BLF (N.D. Cal.).
6. Finjan, Inc. v. ESET, LLC et al, Case 3:16-cv-00183-CAB (S.D. Cal)
7. Finjan, Inc. v. Cisco Systems, Inc., Case 5:17-cv-00072-BLF (N.D. Cal.)
ANNEX B
PATENTS
The following table sets forth, as of the date hereof, a brief description of the Corporation’s issued U.S. patents,
including their respective issued patent numbers, filing dates, issue dates, expiration dates and titles (collectively, the
“Patents”)
U.S. Patent No. Title
6,092,194 System and Method for Protecting a Computer and a Network from Hostile Downloadables
6,154,844 System and Method for Attaching a Downloadable Security Profile to a Downloadable
6,804,780 System and Method for Protecting a Computer and a Network from Hostile Downloadables
6,965,968 Policy-Based Caching
7,058,822 Malicious Mobile Code Runtime Monitoring System and Methods
7,418,731 Method and System for Caching at Secure Gateways
7,613,918 System and Method for Enforcing a Security Context on a Downloadable
7,613,926 Method and System for Protecting a Computer and a Network from Hostile Downloadables
7,647,633 Malicious Mobile Code Runtime Monitoring System and Methods
7,756,996 Embedding Management Data Within HTTP Messages
7,757,289 System and Method for Inspecting Dynamically Generated Executable Code
7,769,991 Automatically Executing an Anti-Virus Application on a Mobile Communication Device
7,930,299 System and Method for Appending Security Information to Search Engine Results
7,975,305 Method and System for Adaptive Rule-Based Content Scanners for Desktop Computers
8,015,182 System and Method for Appending Security Information to Search Engine Results
8,079,086 Malicious Mobile Code Runtime Monitoring System and Methods
8,087,079 Byte-Distribution Analysis of File Security
8,141,154 System and Method for Inspecting Dynamically Generated Executable Code
8,225,408 Method and System for Adaptive Rule-Based Content Scanners
8,474,048 Website Content Regulation
8,566,580 Splitting an SSL Connection Between Gateways
8,677,494 Malicious Mobile Code Runtime Monitoring System and Methods
9,141,786 Malicious Mobile Code Runtime Monitoring System and Methods
9,189,621 Malicious Mobile Code Runtime Monitoring System and Methods
9,219,755 Malicious Mobile Code Runtime Monitoring System and Methods
9,294,493 Computer Security Method and System with Input Parameter Validation
9,444,844 Malicious Mobile Code Runtime Monitoring System and Methods
9,525,680 Splitting an SSL Connection Between Gateways
