Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 1 of 43
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
JMO WIND DOWN, INC.,1 Case No. 16-10682 (BLS)
Debtor. Hearing Date: October 11, 2017 at 11:00 a.m. (ET) Objection Deadline: October 4, 2017 at 4:00 p.m. (ET)
MOTION OF NON-FOUNDER CIVIL ACTION DEFENDANTS (I) TO ENFORCE THE PLAN, CONFIRMATION ORDER, AND SALE ORDER AND (II) TO ENJOIN PLAINTIFF FROM PROSECUTING THE CIVIL ACTION AND SIMILAR CLAIMS IN OTHER FORUMS
Eduardo Saverin (“Saverin”), Peng-Tsin Ong (“Ong”), Scott Weiss (“Weiss”),
Andreessen Capital Management, LLC (“AH LLC”),2 and Andreessen Horowitz Fund, II, L.P.
(and together with AH LLC, the “AH Entities”), and Stephen Stuut (“Stuut” and collectively
with Saverin, Ong, Weiss, and the AH Entities, the “Non-Founder Defendants”) submit this
motion (the “Motion”) for entry of an order (i) enforcing the terms of (a) the Second Amended
Plan of Liquidation of JMO Wind Down, Inc. Pursuant to Chapter 11 of the Bankruptcy Code
[Docket No. 433] (the “Plan”),3 (b) the Findings of Fact, Conclusions of Law, and Order
Confirming the Second Amended Plan of Liquidation of JMO Wind Down, Inc. Pursuant to
Chapter 11 of the Bankruptcy Code and Approving the Disclosure Statement on a Final Basis
[Docket No. 482] (the “Confirmation Order”), and (c) the Order (A) Authorizing the Sale of
Substantially All of the Debtor’s Assets Free and Clear of Liens, Claims, Encumbrances, and
1 The last four digits of the Debtor’s tax identification number are 6822. 2 Although Plaintiff (as defined below) named Andreessen Horowitz, LLC as a defendant in the Verified Amended Complaint, Court of Chancery of the State of Delaware, C.A. No. 12787-VCS (the “Complaint”), no such entity exists. The entity to which the Complaint should have been directed is AH Capital Management, L.L.C. To the extent Plaintiff intended to name a non-Delaware entity other than AH Capital Management, L.L.C., this motion is without prejudice to such defendant’s rights or defenses, including any defenses based on personal jurisdiction or service of process. A true and correct copy of the Complaint is attached hereto as Exhibit 2. 3 Capitalized terms used and not otherwise defined herein have the meanings given to them in the Plan unless context otherwise requires. 01:22362539.1 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 2 of 43
Other Interests, (B) Authorizing and Approving the Purchase Agreement for Such Sale,
(C) Approving the Assumption and Assignment of Certain Executory Contracts and Unexpired
Leases Related Thereto, and (D) Granting Related Relief [Docket No. 202] (the “Sale Order”)
and (ii) enjoining, barring and/or estopping Bloso Investments, Ltd. (“Bloso” or “Plaintiff”)
from prosecuting the Civil Action (as defined below) and similar claims and causes of action in
other forums. In support of the Motion, the Non-Founder Defendants state as follows:
I. PRELIMINARY STATEMENT
1. The Non-Founder Defendants request that this Court issue an Order, substantially
in the form attached hereto as Exhibit 1, (a) enforcing the terms of the Plan, the Confirmation
Order, and the Sale Order, and (b) ordering Plaintiff to dismiss the civil lawsuit against the Non-
Founder Defendants filed by Plaintiff in the Delaware Court of Chancery, C.A. No. 12787-VCS
(the “Civil Action”) and enjoining, barring and/or estopping prosecution of the Civil Action and
similar claims and causes of action in any other forum.4
2. Plaintiff (which allegedly purchased its Jumio stock from Mattes and
Kastenhofer, and never directly interacted with Jumio or the Non-Founder Defendants),
commenced the Civil Action on the eve of Plan confirmation, shortly before filing its
unsuccessful objection to the Plan. Plaintiff’s Complaint asserts causes of action against the
Non-Founder Defendants for civil conspiracy (Count I), breach of fiduciary duty (Count III),
fraud (Count IV), equitable fraud (Count V), unjust enrichment and constructive trust (Count
VI), fraud in the inducement (Count VII), and fraudulent transfer (Counts VIII and IX)
(collectively, the “Estate Claims”).
4 True and correct copies of the Plan, the Confirmation Order, and the Sale Order are attached hereto as Exhibits 3-5, respectively. 01:22362539.1 2 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 3 of 43
3. These causes of action constitute claims that belong to and could be asserted only
by Jumio, Inc.’s (n/k/a JMO Wind Down, Inc., “Jumio” or the “Debtor”) estate and—in
accordance with the Plan, the Sale Order and federal and Delaware state law—were sold,
released, exculpated and/or assigned exclusively to the Liquidating Trust established under the
Plan for the benefit of all of the Debtor’s interest holders. Pursuant to the Plan and Confirmation
Order, and applicable law, Plaintiff lacks standing and should be enjoined, barred and/or
estopped from asserting these claims.
4. The Plan is premised on a Global Settlement (as memorialized therein), which
was made possible by substantial contributions from Saverin and the AH Entities that served as
consideration for the Plan. Under the Plan, among other things:
(i) Saverin and the AH Entities subordinated certain of their Claims, deemed portions of their Common Interests satisfied and contributed financially to the Debtor’s estate;5
(ii) all administrative and unsecured creditors were paid in full;
(iii) a Liquidating Trust was established;
(iv) all Causes of Action6 were released as to the Released Parties (which include all of the Non-Founder Defendants other than Stuut);7 and
5 Under the Plan, (i) any distributions on the Allowed Saverin Administrative Claim, Allowed DIP Claims, and the Allowed Prepetition Secured Notes Claim were to be distributed to holders of Allowed Common Interests who did not opt-out of the Consensual Third Party Releases; (ii) Saverin was deemed to have contributed $750,000 to the Debtor’s estate on account of his authorizing the Debtor to utilize his cash collateral; (iii) the AH Entities contributed $750,000 to the Debtor’s estate; (iv) the AH Entities and Saverin agreed to the conversion of their Preferred Interests to Common Interests; (v) after conversion of the Preferred Interests into Common Interests the AH Entities and Saverin agreed that 75% of the AH Entities’ Common Interests were deemed satisfied and the remaining 25% of the AH Entities’ Common Interests and all of Saverin’s Common Interest existing prior to the Effective Date (excluding Preferred Interests converted to Common Interests) of the Plan were to be pari passu with all other holders of Allowed Common Interests; and (vi) all Liquidating Trust Remaining Assets were to be distributed to the AH Entities, Saverin and the Liquidating Trust, under a waterfall established in the Plan. See Plan, Art. VIII. 6 The Plan defines “Causes of Action” as any: [A]ction, Claim, cause of action, controversy, demand, right, action, Lien, indemnity, guaranty, suit, obligation, liability, damage, judgment, account, defense, offset, power, privilege, license and franchise of any kind or character whatsoever, known, unknown, contingent or non-contingent, matured or unmatured, suspected or unsuspected, liquidated or unliquidated, disputed or 01:22362539.1 3 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 4 of 43
(v) all Causes of Action against the non-Released Parties8 were assigned to the Liquidating Trust, which is exclusively empowered to pursue and resolve such Causes of Action for the benefit of all interest holders.
5. In addition to the claims brought against the Non-Founder Defendants, the Civil
Action asserts claims against Mattes, Kastenhofer and Starkey (collectively, the “Officer
Defendants,” and together with the Non-Founder Defendants, the “Defendants”) that were also
assigned exclusively to the Liquidating Trust under the Plan. The Liquidating Trustee, acting in
accordance with the Plan, has filed an action asserting the Debtor’s breach of fiduciary duty
claims against the Officer Defendants (and Mattes’ and Kastenhofer’s personal investing
entities) in the Bankruptcy Court (the “Estate Action”).9 Thus, all of the Estate Claims were
addressed in the Chapter 11 Case (as defined below) and Plaintiff is enjoined, barred and/or
estopped from prosecuting these claims.
6. In the Civil Action, Plaintiff endeavors to end-run the Plan, Confirmation Order,
and Sale Order. The Estate claims were vested exclusively in the estate upon commencement of
undisputed, secured or unsecured, assertable directly or derivatively, whether arising before, on or after the Petition Date, in contract or in tort, in law or in equity, or pursuant to any other theory of law, other than those sold to Buyer pursuant to the Sale Order. Causes of Action also include: (a) any right of setoff, counterclaim or recoupment and any claim for breaches of duties imposed by law or in equity; (b) the Avoidance Actions; (c) any Claim or defense including fraud, mistake, duress and usury and any other defenses set forth in Bankruptcy Code section 558; and (d) any state law fraudulent transfer claim. Id. at Art. I.A.18 (emphasis added). 7 In the case of Stuut, the claims asserted by Bloso in the Complaint were sold to Jumio Buyer, Inc., an affiliate of Centana Growth Partners LP (the “Buyer”), pursuant to the Sale Order that approved the sale of substantially all of the Debtor’s assets (the “Sale”). As part of the Sale, any Claim or Action (as defined in the asset purchase agreement between the Debtor and the Buyer (the “APA”), a copy of which is attached as Exhibit A to the Sale Order) against Stuut was sold to the Buyer. Indeed, the Sale Order explicitly bars prosecution of the Civil Action against the Buyer and its officers, including Stuut. Further, Stuut was exculpated in the Confirmation Order and the Plan for any and all acts or omissions based upon, related to or arising from, among other things, the filing of the bankruptcy, and the development and implementation of the Plan—which form the gravamen of the claims made against Stuut. 8 Such non-Released Parties include Daniel Mattes (“Mattes”), Thomas Kastenhofer (“Kastenhofer”), Chad Starkey (“Starkey”), and others whose actions damaged the Debtor. 9 Complaint, Adv. No 17-51042-BLS, United States Bankruptcy Court for the District of Delaware [Adv. Docket. No. 1]. 01:22362539.1 4 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 5 of 43
the Chapter 11 Case, are derivative, constitute “Causes of Action” under the Plan and/or
“Purchased Assets” under the Sale Order, and were thus released, sold to the Buyer, or
conveyed to the Liquidating Trust under the Plan. Plaintiff may not prosecute the Estate
Claims.
7. In In re SemCrude, the Third Circuit determined that claims based in fraud and
breach of fiduciary duty against a company’s former officer—virtually identical to the claims
asserted in the Civil Action—were derivative, because such claims were “masked claims for a
diminution in value” of the plaintiffs’ shares in the company resulting from the officer’s alleged
mismanagement and self-dealing. In re SemCrude L.P. (SemCrude II), 796 F.3d 310, 318 (3d
Cir. 2015). The court barred plaintiffs from asserting their claims because the alleged
misconduct of the defendant officer underlying the plaintiffs’ alleged loss was the same conduct
underlying the cause of the debtor’s bankruptcy and was indistinguishable from the loss suffered
by other investors. Id. at 318-19, 321-22.
8. In accordance with SemCrude II, and other applicable law, all of Plaintiff’s
allegations against the Non-Founder Defendants are derivative claims that were property of the
Debtor’s estate and are included within the definition of “Causes of Action” under the Plan; such
Causes of Action were released, exculpated, or sold to the Buyer. Accordingly, Plaintiff lacks
standing to assert them against the Non-Founder Defendants. Further, Plaintiff’s fraudulent
transfer causes of action are specifically identified in the definition of Causes of Action in the
Plan, belong to the Debtor’s estate, and, under the Plan, Bankruptcy Code section 544, and
applicable law, may be asserted only by the Liquidating Trustee (to the extent not released or
sold to the Buyer). See AstroPower Liquidating Trust v. Xantrex Tech., Inc. (In re AstroPower
Liquidating Trust), 335 B.R. 309, 328 (Bankr. D. Del. 2005) (“[F]raudulent transfer actions are
01:22362539.1 5 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 6 of 43
derivative in nature[.]”); In re PWS Holding Corp., 303 F.3d 308, 314 (3d Cir. 2002) (noting that
section 544(b) “places the debtor in possession in the shoes of its creditors, giving it the right to
prosecute individual creditors’ fraudulent transfer claims for the benefit of the bankruptcy
estate”).
9. The Non-Founder Defendants have moved concurrently in the Court of Chancery
for the State of Delaware to dismiss the Complaint or stay the Civil Action pending this Court’s
ruling on this Motion based on the myriad of standing and pleading inadequacies with Plaintiff’s
claims in the Civil Action. The Non-Founder Defendants respectfully submit that this Court is
the most appropriate forum to determine and enforce the Sale Order and the Plan’s releases,
exculpation provisions and injunctions. Relief from this Court is therefore warranted to avoid
(i) Plaintiff’s wrongful continued prosecution of claims in violation of the Plan’s releases and
injunctions, (ii) Plaintiff’s continued wrongful adjudication of claims that have been sold to the
Buyer pursuant to the Sale Order, and (iii) the potential for entry of orders in the Civil Action
that may be inconsistent with the Plan and Confirmation Order.
10. Accordingly, the Non-Founder Defendants hereby request that the Court enforce
the Plan, the Confirmation Order and the Sale Order and, consistent therewith, order dismissal of
the Estate Claims raised by Plaintiff in the Civil Action.10
II. JURISDICTION AND VENUE
11. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334(b) and
157(b). This Motion involves a core proceeding as it concerns, inter alia, a chapter 11 plan
confirmed by this Court, the liquidation of the estate, avoidance of purportedly fraudulent
transfers, and interpretation and enforcement of the Court’s orders as to which this Court
10 The Non-Founder Defendants have requested that Plaintiff dismiss its claims; however, Plaintiff has elected to continue the Estate Claims in the Civil Action. A true and correct copy of the Non-Founder Defendants’ letter to Plaintiff requesting dismissal of the Estate Claims is attached hereto as Exhibit 6. 01:22362539.1 6 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 7 of 43
retained exclusive jurisdiction pursuant to Article XI of the Plan, Paragraphs NN and 46 of the
Confirmation Order, Paragraph 32 of the Sale Order, and Article VIII of the APA. See
SemCrude II, 796 F.3d at 316 (“Because [defendant]’s motion to enjoin is related to the Chapter
11 reorganization plan and requires a determination that the [plaintiffs’] claims are property of
the Litigation Trust, the Bankruptcy Court had subject-matter jurisdiction under 28 U.S.C.
§§ 1334 and 157(b)(2)(A).”); see also In re SemCrude, L.P. (SemCrude I), 2011 Bankr. LEXIS
3801, at *11-13 (Bankr. D. Del. Oct. 7, 2011) (same).11
12. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
III. FACTUAL BACKGROUND
A. Operations of the Debtor Prior to Bankruptcy and the Relevant Parties
13. Jumio is a Delaware corporation founded in 2010 that provided online credit card
identity and credential authentication services. See Declaration of Stephen Stuut in Support of
Chapter 11 Petition and First Day Pleadings [Docket No. 3] (“First Day Declaration”), ¶¶ 5-
11. Mattes, along with Kastenhofer and Starkey, were founding executives of Jumio. Mattes
served as Jumio’s President, Chief Executive Officer (“CEO”) and Chairman of the Board of
11 Further, this Court has jurisdiction to enforce its own orders. See Travelers Indem. Co. v. Bailey, 557 U.S. 137, 151 (2009) (finding that “the Bankruptcy Court plainly had jurisdiction to interpret and enforce its own prior orders”); In re Resorts Int’l., Inc., 372 F.3d 154, 168-69 (3d Cir. 2004) (“[W]here there is a close nexus to the bankruptcy plan or proceeding, as when a matter affects the interpretation, implementation, consummation, execution, or administration of a confirmed plan or incorporated litigation trust agreement, retention of post- confirmation bankruptcy court jurisdiction is normally appropriate.”); In re Midstate Mortg. Investors, Inc., 105 Fed. Appx. 420, 422-23 (3d Cir. 2004) (affirming bankruptcy court’s decision to enjoin creditors of the debtor from prosecuting a state-court action or instituting any other action that might interfere with the plan or releases); In re FormTech Indus., LLC, 439 B.R. 352, 357 (Bankr. D. Del. 2010) (“Enforcement and interpretation of orders issued in core proceedings are also considered core proceedings within the bankruptcy court’s core jurisdiction.”); In re Continental Airlines, Inc., 236 B.R. 318, 326 (Bankr. D. Del. 1999) (“In the bankruptcy context, courts have specifically, and consistently, held that the bankruptcy court retains jurisdiction, inter alia, to enforce its confirmation order.”); see also, e.g., Celotex Corp. v. Edwards, 514 U.S. 300, 306 (1995) (“[P]ersons subject to an injunctive order issued by a court with jurisdiction are expected to obey the decree until it is modified or reversed[.]”) (quotations and citations omitted); In re Motors Liquidation Co., 534 B.R. 538, 545 (Bankr. S.D.N.Y. 2015) (“Bankruptcy Judges . . . most assuredly have the power to enjoin litigants from prosecuting claims in other courts—state or federal . . . —when such injunctions are otherwise within Bankruptcy Judges’ jurisdiction and an appropriate use of their injunctive powers.”). 01:22362539.1 7 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 8 of 43
Directors (the “Board”), until the Board forced his resignation in April 2015. Complaint, ¶¶ 70-
71. Kastenhofer served as the former Chief Operations Officer of Jumio, and Starkey formerly
served as Jumio’s Chief Financial Officer (“CFO”) and General Counsel until their resignation.
Id. at ¶¶ 21, 24.
14. Saverin, Ong, and the AH Entities, each named as a defendant in the Civil Action,
were early investors in Jumio and served, or designated individuals to serve, on the Board. Id. at
¶¶ 16-18, 27-28.12 Stuut replaced Mattes as the CEO of Jumio in May 2015 following Mattes’
resignation. Id. at ¶¶ 23, 71.
15. Plaintiff is an alleged shareholder of the Debtor. From July 2011 to May 2012,
Plaintiff allegedly executed a series of stock purchase agreements and convertible term note
agreements with Mattes and Kastenhofer and their respective personal investing entities, Ampalu
Investments, GMBH (“Ampalu”) and KTI Privastifung (“KTI”). Id. at ¶¶ 41-51. While Mattes
and Kastenhofer were allegedly selling their Jumio shares to Plaintiff, Mattes simultaneously
represented to Jumio and the Non-Founder Defendants that he spoke for Bloso and controlled
Bloso’s shares. Id. at ¶ 57. Mattes also executed a series of company documents on behalf of
Plaintiff. See id. at ¶ 58, Exhibit D. Despite these representations, Plaintiff alleges that Mattes
was never an authorized agent or representative of Bloso. Id. at ¶ 121. At no time did the Non-
Founder Defendants deal with or associate with Plaintiff. The Non-Founder Defendants were
not apprised of Plaintiff’s transactions with Mattes, Kastenhofer, Ampalu, or KTI, nor were the
Non-Founder Defendants aware of Plaintiff’s separate interest in Jumio. Id. at ¶¶ 42-51, 57.
Plaintiff is not a creditor of the Debtor.13
12 Weiss was appointed to the Board by the AH Entities. Id. at ¶¶ 19-20. 13 Although Bloso filed a proof of claim in the Chapter 11 Case based on its stock ownership (see Claim No. 53, superseding and amending Claim No. 52), the Bankruptcy Court determined that Bloso’s “claim” was an equity 01:22362539.1 8 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 9 of 43
16. In the fall of 2014, the Board hired a new CFO to replace Starkey. Id. at ¶ 64.
The CFO resigned days later after uncovering a host of accounting issues with Jumio’s financial
statements, including revenue recognition errors, for which Mattes later took responsibility. Id.
at ¶¶ 64-70. In March 2015, prompted by the sudden resignation of the new CFO, the Board
appointed a Special Committee to address the situation, which engaged special counsel to
investigate any revenue recognition irregularities or sham transactions orchestrated by Mattes
and issues related to potential secondary sales of Jumio’s common stock by Mattes. First Day
Declaration, ¶¶ 21-24; Complaint, ¶¶ 65-67. On April 30, 2015, following the investigation,
Mattes was forced to resign from the Jumio Board. First Day Declaration, ¶ 22. Stuut became
CEO of Jumio in May 2015. Id. at ¶ 1. In September 2015, based on the findings of the internal
investigation, Jumio announced it would be restating its financial statements for 2013 and 2014.
Id. at ¶¶ 21, 23. As a result of these events, Jumio was subject to additional costs and risks,
including a pending government investigation and potential litigation costs. Id. at ¶ 24.
17. On and after August 28, 2015, in order to provide Jumio with additional working
capital necessary to maintain operations, Saverin and the AH Entities purchased senior secured
convertible promissory notes (the “Prepetition Secured Notes”) from Jumio in connection with
bridge loans that in the aggregate provided Jumio with $15,493,727.74. Id. at ¶ 14. The
Prepetition Secured Notes were secured by liens on and security interests in all of Jumio’s assets,
including its cash. Id. at ¶ 15. Pursuant to the documents governing the Prepetition Secured
Notes, all holders of its capital stock that were accredited investors also could purchase
Prepetition Secured Notes on the same terms as Saverin and the AH Entities; however, no other
interest. See Order Sustaining First Omnibus [Non-Substantive] Objection of the Debtor to Equity, Insufficient Documentation and Amended Claims [Docket No. 420]. Moreover, due to passage of the bar date, Bloso is now barred from asserting any additional claims. See Order Granting Motion of the Debtor for Entry of an Order (A) Establishing Bar Dates for Filing Proofs of Claim, (B) Approving the Form and Manner for Filing Proofs of Claim; and (C) Approving Notice Thereof [Docket No. 316]. 01:22362539.1 9 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 10 of 43
equity holders were willing to invest further capital to support the business. Id. at ¶ 17. These
bridge loans made by Saverin and the AH Entities saved Jumio by enabling the company to
preserve jobs, continue operations, and ultimately file an orderly chapter 11 case.
18. On or around January 14, 2016, in connection with the announcement of its
restated financials, Jumio issued a letter to its shareholders offering, subject to various
conditions, each shareholder a warrant to purchase additional shares of Jumio common stock in
exchange for signing a settlement agreement releasing Jumio of any claims related to events
surrounding the restated financials (the “Settlement Agreement”). Complaint, ¶¶ 94, 96.
However, the Settlement Agreement never went into effect. Id. at ¶¶ 96, 99.
B. The Chapter 11 Case, the Asset Sale, and the DIP Financing
19. On March 21, 2016 (the “Petition Date”), Jumio filed its voluntary petition for
relief commencing the above-captioned case (the “Chapter 11 Case”) under chapter 11 of title
11 of the United States Code (the “Bankruptcy Code”).
20. In order to fund an orderly sale process designed to maximize value for all
stakeholders, Saverin provided debtor-in-possession financing to the Debtor in excess of $2.4
million in principal amount (the “DIP Facility”), which ensured that Jumio had sufficient funds
to maintain its business operations, pay its employees, and consummate the Sale.14 First Day
14 See Motion of Debtor for Interim and Final Orders Authorizing the Debtor to: (A) Incur Postpetition Debt; (B) Provide Adequate Protection; (C) Use Cash Collateral; and (D) Grant Certain Liens and Provide Security and Other Relief to Prepetition Secured Parties [Docket No. 10]; Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to 11 U.S.C. § 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to 11 U.S.C. § 363, (III) Granting Adequate Protection to Prepetition Secured Noteholders Pursuant to 11 U.S.C. §§ 361, 362, 363 and 364, and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 [Docket No. 45] (as modified, supplemented, or amended from time to time, collectively, the “DIP Order”); Second Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to 11 U.S.C. § 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to 11 U.S.C. § 363, (III) Granting Adequate Protection to Prepetition Secured Noteholders Pursuant to 11 U.S.C. §§ 361, 362, 363 and 364, and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 [Docket No. 154]; and Third Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to 11 U.S.C. § 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to 11 U.S.C. § 363, (III) Granting Adequate Protection to 01:22362539.1 10 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 11 of 43
Declaration, ¶ 28. Although the DIP Facility was open to participation by any creditor or interest
holder, only Saverin provided financing to the Debtor to enable this process. See DIP Order,
¶ 33(b).
21. On the Petition Date, the Debtor also filed a sale motion (the “Sale Motion”)15
seeking authorization and approval of sale and bidding procedures in connection with the sale of
substantially all of the Debtor’s assets. On May 5, 2016, the Debtor conducted an auction to sell
substantially all of its assets. See Sale Order, ¶ K. On May 6, 2016, this Court entered the Sale
Order, and the Debtor’s assets were sold to the Buyer, an unaffiliated third party,16 pursuant to
the APA. Following the Sale, because the Buyer acquired the right to use the Jumio name, the
Debtor changed its name to JMO Wind Down, Inc.
22. Pursuant to the APA, the Buyer purchased substantially all of the Debtor’s assets,
including, among other things, “any rights, Claims, or Actions, including Avoidance Actions . . .
to the extent relating to or arising against Transferred Employees” (in each case, as defined in the
APA). APA, §§ 2.1(s), 2.2(g), 1.1. The Transferred Employees included Stuut. Id. at § 5.6(a).
Although the Buyer chose not to purchase certain Actions related to current and former directors
of the Debtor, it specifically purchased all rights, Claims and Actions against Stuut.17 The Sale
Prepetition Secured Noteholders Pursuant to 11 U.S.C. §§ 361, 362, 363 and 364, and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 [Docket No. 180]. 15 Debtor’s Motion for Entry of Orders: (A)(I) Approving Bid Procedures Relating to Sale of Substantially All of the Debtor’s Assets; (II) Approving Certain Bid Protections; (III) Scheduling a Hearing to Consider the Sale; (IV) Approving the Form and Manner of Notice of Sale by Auction; (V) Establishing Notice and Contract Procedures for the Assumption and Assignment of Contracts and Leases; and (VI) Granting Related Relief; and (B)(I) Approving Asset Purchase Agreement and Authorizing the Sale of Certain Assets of Debtor Outside the Ordinary Course of Business; (II) Authorizing the Sale of Assets Free and Clear of All Liens, Claims, Encumbrances and Interests; (III) Authorizing the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (IV) Granting Related Relief [Docket No. 15]. 16 As set forth in Sale Order, as of the Closing, the Buyer was not affiliated with any insider of the Debtor. See Sale Order, ¶ FF(ii). 17 In the APA, the Buyer carved out Actions against Stuut from the Excluded Assets. See APA, § 2.2(g), Insert A (“For the avoidance of doubt, the Excluded Assets include all rights, claims, and Actions against (i) current and former directors (other than Stephen Stuut); (ii) all former officers who are not current officers; and (iii) all 01:22362539.1 11 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 12 of 43
Order expressly bars and estops investors in the Debtor, including Plaintiff, from “asserting,
prosecuting, or otherwise pursuing” any claims against Buyer and its officers. See Sale Order,
¶ 13.18
23. Additionally, this Court made factual findings in connection with its approval of
the Sale in the Sale Order, including, inter alia:
• “Prior to commencing this chapter 11 case, the Debtor determined that potential recoveries for the Debtor’s stakeholders would be maximized if the Debtor’s business could be sold as a going concern.” Id. at ¶ E.
• “The Debtor has demonstrated good, sufficient, and sound business purposes and justifications for consummation of the Transactions pursuant to the Purchase Agreement[.]” Id. at ¶ Q.
• “Approval of the Transactions is necessary to preserve the value of the Debtor's business.” Id. at ¶ T.
• “Neither the Debtor nor the Purchaser are entering into the Purchase Agreement or consummating the Transactions with any fraudulent or otherwise improper purpose.” Id. at ¶ PP.
• “The relief requested in the Motion and set forth in this Sale Order is in the best interests of the Debtor, its respective creditors, estate, and all other parties in interest in the Debtor's chapter 11 case.” Id. at ¶ TT.
• “No alternative to the Transactions exists that would provide a greater value to the Debtor, its creditors, or other parties in interest.” Id. at ¶ S.
• “The total consideration to be provided by the Purchaser under the Purchase Agreement and the Transaction Documents (including the form and amount of
Persons (other than Persons within the scope of Section 2.1(s)) arising out of or related to the restatement of the Seller’s financial statements and secondary sales of the Seller’s Stock.”) (emphasis added). 18 In relevant part, Paragraph 13 of the Sale Order provides: [A]ll persons, including, without limitation, all holders of claims or Interests [defined in the Sale Order to include “claims,” “actions,” and “suits”] . . . and other persons holding Interests of any kind or nature whatsoever against or in the Debtor . . . arising under or out of, in connection with, or in any way relating to, the Debtor, the operation of the Debtor’s businesses prior to the Closing, the Purchased Assets, or the transfer of the Purchased Assets to the Purchaser . . . shall be and hereby are forever barred and estopped from asserting, prosecuting, or otherwise pursuing any Interests against Purchaser, any of its Affiliates, officers, directors, members, partners, principals, or shareholders[.] Sale Order, ¶ 13 (emphasis added). 01:22362539.1 12 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 13 of 43
consideration to be realized by the Debtor), is the highest and best offer received by the Debtor and constitutes fair value, fair, full, and adequate consideration, reasonably equivalent value, and reasonable market value for the Purchased Assets for purposes of the Bankruptcy Code, the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act, and the other laws of the United States, any state, territory, or possession thereof, or the District of Columbia.” Id. at ¶ W.
C. The Plan and Global Settlement
24. The Plan established a Liquidating Trust for the benefit of all of Jumio’s equity
holders, which is exclusively empowered to pursue claims against the Officer Defendants and the
other non-Released Parties. Pursuant to the Plan, Saverin and the AH Entities made substantial
contributions that allowed Jumio’s creditors to be paid in full and enabled the Liquidating Trust
to pursue any and all Causes of Action for the benefit of all interest holders, which the
Liquidating Trust has done by filing the Estate Action in this Court against the Officer
Defendants. As part of the Global Settlement, the Plan grants the Released Parties, including
Saverin, Ong, Weiss and the AH Entities, broad releases. See Plan, Art. VIII.
25. Specifically, the confirmed Plan releases the Released Parties from any Cause of
Action19 (broadly defined) that belonged to the Debtor’s estate, the Liquidating Trustee, or any
19 Pursuant to the Plan, “Cause of Action” is defined as any:
[A]ction, Claim, cause of action, controversy, demand, right, action, Lien, indemnity, guaranty, suit, obligation, liability, damage, judgment, account, defense, offset, power, privilege, license and franchise of any kind or character whatsoever, known, unknown, contingent or non-contingent, matured or unmatured, suspected or unsuspected, liquidated or unliquidated, disputed or undisputed, secured or unsecured, assertable directly or derivatively, whether arising before, on or after the Petition Date, in contract or in tort, in law or in equity, or pursuant to any other theory of law, other than those sold to Buyer pursuant to the Sale Order. Causes of Action also include: (a) any right of setoff, counterclaim or recoupment and any claim for breaches of duties imposed by law or in equity; (b) the Avoidance Actions; (c) any Claim or defense including fraud, mistake, duress and usury and any other defenses set forth in Bankruptcy Code section 558; and (d) any state law fraudulent transfer claim.
Plan, Art. I.A.18 (emphasis added). Specifically, “Avoidance Actions” are defined in the Plan as: [A]ny and all Causes of Action to avoid or recover a transfer of property, or avoid an obligation incurred by the Debtor pursuant to any applicable section of the Bankruptcy Code, including 01:22362539.1 13 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 14 of 43
person claiming through them,20 and grants the Liquidating Trustee the sole and exclusive right
to litigate any non-released Causes of Action, including but not limited to, derivative claims and
state law fraudulent transfer claims.21 The Plan enjoins third parties from litigating any such
claims against the Released Parties and from litigating any Cause of Action that was assigned to
the Liquidating Trustee.22 Furthermore, the Plan provides exculpation for Stuut, as an officer of
the Debtor. 23
Bankruptcy Code sections 544, 545, 547, 548, 549, 550, 551, 553(b), and 724(a) and any other applicable non-bankruptcy law[.] Id. at Art. I.A.9. 20 In relevant part, the Plan provides that: As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtor and the Liquidating Trustee, and any Person seeking to exercise the rights of the Debtor's Estate, shall be deemed to forever release, waive, and discharge the Released Parties . . . of all claims, obligations, suits, judgments, damages, demands, debts, rights, remedies, Causes of Action and liabilities of any nature whatsoever, whether direct or derivative, including, without limitation, any of the foregoing in connection with or related to the Debtor, the Chapter 11 Case, or the Plan, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or hereafter arising, in law, equity, or otherwise, that are or may be based in whole or in part upon any act, omission, transaction, event or other occurrence taking place or existing on or prior to the Effective Date. Id. at Art. VIII.H.1 (emphasis added). 21 The Plan provides that: “[T]he Liquidating Trustee shall have the exclusive right, authority and discretion to determine and initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw or litigate to judgment any Cause of Action and to decline to do any of the foregoing without further notice to or action, order or approval of the Bankruptcy Court. Id. at Art. IV.C (emphasis added). The Confirmation Order confirms the Liquidating Trust Agreement and the scope of the Liquidating Trustee’s powers and responsibilities. See Confirmation Order, ¶¶ 12-14. 22 Pursuant to the Plan: [A]ll Entities that have held, hold or may hold a Claim or other debt or liability against the Debtor or Interest in the Debtor are (a) permanently enjoined from taking any of the following actions against the Liquidating Trust or any of its property on account of such Claims or Interests and (b) permanently enjoined from taking any of the following actions against any of the Released Parties . . . or their property with respect to any claims, obligations, suits, judgments, damages, demands, debts, rights, remedies, Causes of Action or liabilities released pursuant to the Plan: (i) commencing or continuing in any manner or in any place, any action or other proceeding[.] Plan, Art. VIII.I (emphasis added). The Confirmation Order confirms this injunction. See Confirmation Order, ¶ 34. 23 The Plan provides that “(a) the Debtor . . . and (d) with respect to the Entities in clauses (a) through (c), such Entity's . . . officers,” Plan, Art. I.A.50, are exculpated from “any liability to any holder of a Claim or Interest 01:22362539.1 14 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 15 of 43
26. In connection with confirmation, this Court made various factual findings in in
the Confirmation Order, including, inter alia:
• “The Plan and the Global Settlement, as discussed in detail in the Disclosure Statement, are the result of good faith arms’ length negotiations among the Debtor, the Equity Committee, AH, Mr. Saverin, and other parties in interest. . . . The Global Settlement (i) benefits the Debtor's Estate, Creditors and Interest holders and is in their best interests and (ii) is fair, equitable and reasonable. Accordingly, the Global Settlement is fair and reasonable.” Confirmation Order, ¶ N.
• “The Debtor has proposed the Plan, including all documents necessary to effectuate the Plan, in good faith and not by any means forbidden by law. . . . The Debtor's good faith is evident from the facts and record of this Chapter 11 Case, the Disclosure Statement, and the record of the Confirmation Hearing and other proceedings held in this Chapter 11 Case. The Plan itself and the process leading to its formulation provide independent evidence of the Debtor’s good faith, serve the public interest, and assure fair treatment of holders of Claims and Interests. The Plan was proposed with the legitimate and honest purpose of maximizing the value of the Debtor's Estate and to maximize distributions to all Creditors and Interest holders.” Id. at ¶ T
27. Pursuant to the provisions of the Plan, and as set forth in greater detail below, the
Estate Claims—which assert derivative, self-dealing and mismanagement breach of fiduciary
duty claims (and related, derivative fraud, civil conspiracy and unjust enrichment claims) against
Jumio’s former board members, as well as fraudulent transfer claims—clearly constitute “Causes
of Action” belonging to the Debtor’s estate that were released, exculpated, assigned exclusively
to the Liquidating Trustee or sold in the Sale. Despite notice from the Non-Founder Defendants
that Plaintiff is enjoined from bringing the Estate Claims under the Plan, Confirmation Order and
Sale Order, Plaintiff continues to assert these claims in violation of this Court’s orders.24
for any Exculpated Claim, except for actual fraud, willful misconduct or gross negligence . . . ,” id. at Art. VIII.G, for any acts or omissions “based upon, related to or arising from (a) the Chapter 11 Case; (b) formulation, preparation . . . negotiation, or filing of the . . . Plan . . . ; (c) the filing of the Chapter 11 Case . . . [and] the administration and implementation of the Chapter 11 Case and the Plan” brought by any holder of a Claim or Interest, id. at Art. I.A.49. Paragraph 35 of the Confirmation Order contains an identical exculpation clause. 24 Although Bloso opted out of the Global Settlement, this fact is irrelevant as the Estate Claims are derivative and constitute Causes of Action that are property of the Debtor’s estate under the Plan. Accordingly, the Estate 01:22362539.1 15 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 16 of 43
D. The Civil Action
28. On September 29, 2016—shortly before the Court confirmed the Plan—Plaintiff
commenced the Civil Action against the Defendants in the Delaware Court of Chancery.
Plaintiff did not serve its original complaint. Plaintiff filed the amended Complaint on
December 23, 2016.25
29. As noted above, the claims made in the Complaint against the Non-Founder
Defendants and the Officer Defendants are clearly derivative. For instance, Plaintiff claims,
among other things, that the Defendants (i) “fail[ed] to deal fairly with Bloso while at the same
time taking steps to protect Defendants’ controlling stock interest while maneuvering to extricate
themselves from personal liability,” Complaint, ¶ 125, (ii) “fail[ed] to disclose” to stockholders
“Jumio’s financial and accounting position,” “that Mattes was secretly selling his founder-shares
on the gray market,” and “Jumio orchestrated impending bankruptcy filing,” id., (iii) “actively
took steps to retain and improve their positions in Jumio . . . converted old unsecured notes into
secured loans, [and] allowed Jumio to run out of money so they could force Jumio into
bankruptcy and thereafter attempt to release themselves of all liability,” id. at ¶ 151, and
(iv) made representations to induce Bloso to agree to certain stock transactions, id. at ¶¶ 133-34.
As set forth in greater detail below, the gravamen of the Estate Claims asserted by Plaintiff in the
Civil Action is alleged corporate mismanagement and other alleged misconduct leading or
relating to the Debtor’s bankruptcy. As such, Bloso’s injuries are indistinguishable from those of
other shareholders. Accordingly, such claims are derivative of the estate’s claims.
Claims were released as to the Released Parties, assigned to the Liquidating Trustee, and/or sold pursuant to the Sale Order. 25 Plaintiff originally named Ampalu and KTI as defendants in the Complaint, but voluntarily dismissed the entities from the Civil Action on August 2, 2017. 01:22362539.1 16 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 17 of 43
E. Bloso’s Unsuccessful Objection to Plan Confirmation
30. On October 10, 2016, Plaintiff filed an objection to confirmation of the Plan
(the “Plan Objection”), challenging numerous aspects of the Plan, including: (i) the Liquidating
Trust and (ii) the Global Settlement contemplated by the Plan and the release of the Released
Parties.26 Plaintiff specifically argued that “[i]f approved, the Global Settlement releases all
claims that the Debtor or Liquidating Trustee (and equity holders with derivative standing) could
bring against the Released Parties for actions and inactions relating to the Restated Periods,
among other claims.” Plan Objection, ¶ 66.27 These are substantially the same claims as
Plaintiff raises in the Complaint. See Complaint, ¶¶ 108-12. Plaintiff also raised these
arguments at the confirmation hearing. Confirmation Hearing Tr., 176:7-9, 14-15 [Docket No.
456].
31. On October 21, 2016, the Court confirmed the Plan over Plaintiff’s objections.
The Effective Date of the Plan occurred on October 26, 2016.28
32. Plaintiff has chosen to ignore the Plan provisions—including this Court’s
injunction—and to try its luck in another forum. This attempted end run is manifestly improper.
IV. RELIEF REQUESTED
33. The Non-Founder Defendants respectfully request that this Court enter an order,
substantially in the form attached hereto as Exhibit 1: (i) enforcing the terms of the Plan, the
Confirmation Order, and the Sale Order; (ii) ordering Plaintiff to dismiss the Civil Action and
26 See Objection of Bloso Investments, Ltd. to (I) Final Approval of Debtor’s Amended Disclosure Statement and (II) Confirmation of Debtor’s Amended Plan of Liquidation [Docket No. 404], ¶¶ 66-86. 27 Prior to the Plan Objection, Plaintiff filed the Objection of Bloso Investments, Ltd. to Motion of the Debtor for Entry of an Order Approving Disclosure Statement on an Interim Basis and Granting Related Relief [Docket No. 338], which objection was also overruled. 28 See Notice of (A) Entry of the Order (I) Approving the Disclosure Statement for the Amended Plan of Liquidation of JMO Wind Down, Inc. Pursuant to Chapter 11 of the Bankruptcy Code and (II) Confirming the Second Amended Plan of Liquidation of JMO Wind Down, Inc. Pursuant to Chapter 11 of the Bankruptcy Code; (B) Effective Date Thereof; and (C) Certain Deadlines [Docket No. 494]. 01:22362539.1 17 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 18 of 43
enjoining, barring and/or estopping prosecution of the Civil Action and similar claims and causes
of action in any other forum; and (iii) granting such other and further relief as may be just and
proper. The Non-Founder Defendants reserve the right to seek costs and attorneys’ fees incurred
in connection with this Motion and defending the Civil Action in light of Plaintiff’s knowing
violation of this Court’s injunction.
V. ARGUMENT
A. Plaintiff’s Claims in the Civil Action Were Released Under the Plan or Belong to the Liquidating Trust
1. Under Delaware and Federal Law, Following a Petition for Bankruptcy, Derivative Claims Against a Debtor’s Former Officers and Directors Become Property of the Debtor’s Estate
34. The Complaint improperly attempts to circumvent the Plan and usurp claims
belonging to the Debtor’s estate by asserting derivative claims for breach of fiduciary duty,
fraud, unjust enrichment, civil conspiracy, and fraudulent transfer. These specific causes of
action became the exclusive property of the Debtor’s estate and may be brought only by the
estate following the Debtor’s petition for bankruptcy.
35. Upon filing of a chapter 11 case, only the estate or its authorized representatives
may bring claims that are property of the estate. See Bd. of Trustees of Teamsters Local 863
Pension Fund v. Foodtown, Inc., 296 F.3d 164, 169 (3d Cir. 2002) (“[O]nce a company or
individual files for bankruptcy, creditors lack standing to assert claims that are ‘property of the
estate.’”); see also 11 U.S.C. § 541(a)(1). Courts have given broad application to the definition
of “estate,” finding that the debtor’s estate includes “all kinds of property, including . . . causes
of action.” Foodtown, Inc., 296 F.3d at 169 (quoting United States v. Whiting Pools, Inc., 462
U.S. 198, 205 n.9 (1983)).
01:22362539.1 18 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 19 of 43
36. In determining whether a claim constitutes property of the estate, “the Third
Circuit [has] instructed that the nature of the cause of action itself must be examined.” In re
Maxus Energy Corp., 2017 WL 3278830, at *4 (Bankr. D. Del. Aug. 2, 2017). Where a cause of
action is based on facts “generally available to any creditor,” and recovery would “serve to
increase the pool of assets available to all creditors,” then the cause of action is “general,” and
therefore, property of the estate. See In re Emoral, Inc., 740 F.3d 875, 881 (3d Cir. 2014); see
also SemCrude II, 796 F.3d at 317-19, 321-22 (holding fraud and breach of fiduciary duty
claims were derivative where plaintiffs could not show loss in addition to the debtor’s loss, and
rejecting plaintiffs’ argument that the claimed misconduct, which allegedly included
representations that induced them to make additional capital contributions or to forego
opportunities to sell their equity, constituted additional harm); PHP Liquidating, LLC v. Robbins
(In re PHP Healthcare Corp.), 128 Fed. Appx. 839, 844-45 (3d Cir. 2005) (“[A]n individual
creditor of a debtor may not assert a general claim belonging to all creditors.”).
37. It is well settled that derivative claims against officers and directors belong to the
estate. See In re Beach First Nat. Bancshares, Inc. 702 F.3d 772, 776-77 (4th Cir. 2012);
Kennedy v. Venrock Assocs., 348 F.3d 584, 589 (7th Cir. 2003) (“When a corporation is injured
by a wrongful act but the board of directors refuses to seek legal relief, a shareholder can sue the
wrongdoer on behalf of the corporation. Such a suit is known as a derivative suit, and is an asset
of the corporation—which means that if, as in this case, the corporation is in bankruptcy, the suit
is an asset of the bankruptcy estate.”) (citations omitted); Williams v. McGreevey (In re Touch
Am. Holdings, Inc.), 401 B.R. 107, 121-24 (Bankr. D. Del. 2009) (finding that a claim involving
the breach of an officer’s duty was derivative on grounds that “the injury claimed—loss of stock
value—[was] an injury to the corporation”); In re Latin Inv. Corp., 168 B.R. 1, 4 (Bankr. D.D.C.
01:22362539.1 19 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 20 of 43
1993) (“[The] property [of the debtor] includes all causes of action the debtor could have brought
outside bankruptcy. Among these causes of action are suits arising from breaches of fiduciary
duty by the corporate debtor’s principals that could have been brought directly by the debtor or
indirectly through shareholder derivative suits.”).
38. “Whether an action is characterized as direct or derivative is a question of state
law.” SemCrude I, 2011 Bankr. LEXIS 3801, at *15 (quoting In re Touch Am. Holdings, Inc.,
401 B.R. at 121 n.26). A complaint’s “classification of [a] suit is not binding,” and courts must
look beyond the characterization of asserted claims to “independently examine the nature of the
wrong alleged and any potential relief to make its own determination of the suit’s classification.”
Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1035 (Del. 2004) (quotations
omitted). Under Delaware law, whether a claim is direct or derivative “turn[s] solely on the
following questions: (1) who suffered the alleged harm (the corporation or the suing
stockholders, individually); and (2) who would receive the benefit of any recovery or other
remedy (the corporation or the stockholders, individually)?” Id. at 1033; see also Thornton v.
Bernard Techs., Inc., 2009 Del. Ch. LEXIS 29, at *9 (Del. Ch. Feb. 20, 2009) (same). In order
to claim that a cause of action is direct, the “individual plaintiff must allege an injury that the
plaintiff suffered which the corporation did not also suffer.” SemCrude I, 2011 Bankr. LEXIS
3801, at *17-18 (emphasis added). As such, derivative claims include allegedly direct claims of
fraud and breach of fiduciary duty against a debtor’s former officers or directors that are in
reality “masked claims for a diminution in value of [the stockholders’ stock] as a result of
[corporate] mismanagement.” SemCrude II, 796 F.3d at 318-19 (finding that the plaintiffs’ fraud
and breach of fiduciary duty claims were derivative because the “alleged loss . . . [was] the exact
same conduct underlying the alleged cause of SemCrude’s bankruptcy” and that the injury
01:22362539.1 20 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 21 of 43
suffered by the plaintiffs “was no different from the injury suffered by SemCrude as a result of
[defendant]’s wrongful conduct”).
39. Fraudulent transfer claims are similarly derivative under this analysis—such
claims seek to avoid transfers of a debtor’s assets that were intended to defraud creditors or that
were executed in exchange for less than reasonably equivalent value. They are based on harm to
the company and creditors generally, and any recovered assets inure to the benefit of the estate
and such creditors. Fraudulent transfer claims are thus also derivative and belong to the estate.
See In re AstroPower Liquidating Trust, 335 B.R. at 328 (noting that fraudulent transfer claims
are “derivative in nature”); see also In re Emoral, Inc., 740 F.3d at 879 (noting that to determine
whether a cause of action constitutes property of the bankruptcy estate, the court must “examine
the nature of the cause of action itself”); Thornton, 2009 Del. Ch. LEXIS 29, at *10-11 (finding
that claims are derivative when they result in taking from the “corporate treasury and any
recovery would flow directly back into the corporate treasury”).
40. Based on the foregoing, and for the reasons discussed below, the Estate Claims
are derivative claims, belong to the Debtor’s estate, and as to the Non-Founder Defendants have
been either released or sold to the Buyer. Plaintiff thus lacks standing to assert these claims.
2. Each of the Estate Claims Constitute Derivative Claims That are Property of the Debtor’s Estate Under the Plan
a. Plaintiff’s Self-Dealing and Mismanagement Breach of Fiduciary Duty Claims are Derivative, Belong to the Estate, and Plaintiff Lacks Standing to Assert Them
41. Plaintiff’s breach of fiduciary duty claims constitute derivative claims that belong
exclusively to the debtor’s estate. The breach of fiduciary duty cause of action asserts, in part,
that the Non-Founder Defendants “fail[ed] to deal fairly with Bloso while at the same time
taking steps to protect Defendants’ controlling stock interest while maneuvering to extricate
01:22362539.1 21 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 22 of 43
themselves from personal liability.” Complaint, ¶ 125. Plaintiff appears to allege that the Non-
Founder Defendants orchestrated the Global Settlement and the Chapter 11 Case for their own
benefit in breach of their fiduciary duties to Plaintiff. Plaintiff further alleges that “Defendants
used the Settlement Agreement as a ploy to keep Bloso from taking any action . . . while
Defendants were preparing to take Jumio into bankruptcy where they could release themselves of
liability to Bloso,” and that Defendants “had the intention to squeeze out completely Bloso and
take control of a very valuable company at a substantial discount to its fair market value.” Id. at
¶¶ 100, 102. These (false) allegations—which fly in the face of this Court’s factual findings in
the Sale Order and Confirmation Order (see supra ¶¶ 23, 26)—constitute classic “self-dealing”
and “acts of waste” derivative claims that would have affected Jumio and all of its creditors and
equity holders collectively.
42. Under Delaware law, “claims of waste [and] self-dealing . . . have been held to be
derivative and not individual.” In re Rexene Corp. Shareholders Litig., 1991 Del. Ch. LEXIS 81,
at *8 (Del. Ch. May 8, 1991); see also Thornton, 2009 Del. Ch. LEXIS 29, at *10 (“[C]ase law
finds allegations of waste and self-dealing transactions generally to be derivative instead of
direct.”);29 SemCrude I, 2011 Bankr. LEXIS 3801, at *19-20 (finding that self-dealing breach of
fiduciary duty claims were derivative because the “injury suffered by the [plaintiffs] [was] no
different from the injury suffered by SemCrude as a result of [defendant]’s wrongful conduct”);
see also Pepper v. Litton, 308 U.S. 295, 307 (1939) (“[A] fiduciary obligation is designed for the
protection of the entire community of interests in the corporation—creditor as well as
stockholders.”); In re Ionosphere Clubs, Inc., 156 B.R. 414, 439 (S.D.N.Y. 1993) (“A claim for
29 In Thornton, the court found that “[w]hen a director engages in self-dealing or commits waste, he takes from the corporate treasury and any recovery would flow directly back into the corporate treasury. Any benefit to the stockholders would be limited to the indirect effect on their proportional ownership or share of the venture. This is a classic derivative formulation.” See id. at *10-11 (emphasis added). 01:22362539.1 22 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 23 of 43
breach of fiduciary duty based upon acts causing a monetary loss to the corporation cannot,
without more, give rise to a claim asserting ‘special injury’ to the shareholder, as distinct from
the corporation.”).
43. Consequently, Plaintiff is barred from asserting the breach of fiduciary duty
claims because “[u]pon the filing of a bankruptcy petition . . . any claims for injury to the debtor
from actionable wrongs committed by the debtor’s officers and director become property of the
estate. . . and the right to bring a derivative action asserting such claims vests exclusively to the
trustee.” In re RNI Wind Down Corp., 348 B.R. 286, 293 (Bankr. D. Del. 2006).
b. Plaintiff’s Breach of Fiduciary Duty Claim Based on Disclosure Suffers From the Same Defects
44. Plaintiff’s breach of fiduciary duty cause of action also includes derivative claims
for breach of fiduciary duty of disclosure. Plaintiff alleges that the Non-Founder Defendants
breached their fiduciary duties by “failing to disclose” the Company’s true financial position and
pending bankruptcy. However, Plaintiff’s alleged harm is indistinguishable from harm suffered
by other shareholders. Its disclosure claims are, thus, fundamentally derivative. See Crocker v.
FDIC, 826 F.2d 347, 350-51 (5th Cir. 1987) (holding that shareholder claims that they “would
have” sold their stock had they known that the corporation was failing was, at its core, nothing
more than a derivative claim for diminution in the value of corporate stock); see also SemCrude
II, 796 F.3d at 319 (finding alleged failure to disclose claims to be fundamentally derivative in
nature because “any injury to plaintiffs was not caused by [the corporation’s] failure to
disclose. Plaintiffs were not harmed because they were unable to realize the true value of their
stock—they were harmed because the true value of their stock was zero”) (emphasis added).
45. Accordingly, Plaintiff’s entire breach of fiduciary duty cause of action (Count III
of the Complaint) consists of derivative claims that were released as to the Released Parties or,
01:22362539.1 23 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 24 of 43
as to the non-Released Parties, sold to the Buyer or assigned to the Liquidating Trustee under the
Plan. Accordingly, Plaintiff lacks standing to assert such claims.
c. Plaintiff’s Unjust Enrichment and Constructive Trust Claims Suffer From the Same Defects
46. Plaintiff’s unjust enrichment cause of action is based on the same derivative, self-
dealing allegations that comprise its breach of fiduciary duty claims and, thus, constitutes a
derivative claim belonging to the Debtor’s estate that Plaintiff lacks standing to assert. In
support of its unjust enrichment cause of action, Plaintiff alleges that “Defendants actively took
steps to retain and improve their positions in Jumio . . . , converted old unsecured notes into
secured loans, [and] allowed Jumio to run out of money so they could force Jumio into
bankruptcy and thereafter attempt to release themselves of all liability.” Complaint, ¶ 151.
However, under the standards set forth in Tooley, Thornton, SemCrude II, and SemCrude I, these
allegations constitute derivative claims.
47. The Non-Founder Defendants’ alleged self-dealing would have directly harmed
the Jumio corporate entity, and any resulting harm to Plaintiff would have been secondary and
proportional to its investment. See Metro. Life Ins. Co. v. Tremont Group Holdings, Inc., 2012
Del. Ch. LEXIS 287, at *36 (Del. Ch. Dec. 20, 2012) (holding unjust enrichment claim to be
derivative because defendants’ alleged misconduct with respect to investment funds would have
damaged plaintiffs “only to the extent of their proportionate interest” in the funds and “the injury
was neither direct nor something that existed independently of the Funds”); Thornton, 2009 Del.
Ch. LEXIS 29, at *10-11 (holding that an allegation that “a director engages in self-dealing or
commits waste . . . is a classic derivative formulation”); see also SemCrude I, 2011 Bankr.
LEXIS 3801, at *19-20 (holding that allegations that Defendant’s “self-dealing and speculative
trading strategy caused SemCrude to file for bankruptcy” were “clearly derivative”).
01:22362539.1 24 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 25 of 43
48. Plaintiff’s unjust enrichment claim is, in fact, derivative and belongs to the
Debtor’s estate. Accordingly, Plaintiff is enjoined from this claim in the Civil Action.30
d. Plaintiff’s Fraud Claims Are Masked Derivative Claims that Are Property of the Debtor’s Estate
49. Plaintiff’s claims for fraud (Count IV), equitable fraud (Count V), and fraud in the
inducement (Count VII), are all masked derivative claims that Plaintiff lacks standing to bring
against the Non-Founder Defendants.31
50. In its fraud cause of action, Plaintiff alleges that the Defendants “continued to
make misrepresentations and to condone past misrepresentations to Bloso to induce Bloso to
agree to Jumio stock transactions and to exercise their conversion rights” and that “Defendants
induced Bloso to enter into the Settlement Agreement[.]” Complaint, ¶¶ 133-134. Plaintiff fails
to allege that any of the Non-Founder Defendants made specific representations to Bloso
intending for Bloso to rely on those statements; on the contrary, Plaintiff concedes that the Non-
Founder Defendants did not even know Bloso was purportedly a separate entity distinct from
Mattes.32
51. Plaintiff also reiterates these allegations in its claims for equitable fraud and fraud
in the inducement. In support of these fraud claims, Plaintiff alleges that, at all times
30 With respect to Plaintiff’s corresponding constructive trust claim, “[u]nder Delaware law, a constructive trust is a remedy, not a substantive cause of action” and Plaintiff’s “claim for [a constructive trust] is secondary to, and derivative of [] its underlying unjust enrichment claim.” See VTB Bank v. Navitron Projects Corp., 2014 Del. Ch. LEXIS 61, at *21 (Del. Ch. Apr. 28, 2014). Because the success of the constructive trust claim turns entirely on the success of the unjust enrichment claim, the Court need only address Plaintiff’s unjust enrichment claim. See id. Because Plaintiff lacks standing to bring its unjust enrichment claim against the Non-Founder Defendants, it also lacks standing to bring its constructive trust cause of action. 31 Additionally, the findings of this Court in the Sale Order and the Confirmation Order described in Paragraphs 23 and 26 above defeat many of these claims in their entirety as well. 32 Delaware does not recognize fraud claims based on general disclosures, such as those which underlie Plaintiff’s disclosure related claims against the Non-Founder Defendants. See Malone v. Brincat, 722 A.2d 5, 12-13 (Del. 1998) (Delaware “has decided not to recognize a state common law cause of action against the directors of Delaware corporations for ‘fraud on the market.’”) 01:22362539.1 25 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 26 of 43
“Defendants . . . fail[ed] to require Jumio to put in place basic financial management and adhere
to basic accounting principles which would have warned Bloso about the financial and
accounting improprieties at Jumio and which would have allegedly prevented Bloso from
undertaking certain stock purchase and conversion transactions.” Id. at ¶ 142.
52. As evident from these claims, the gravamen of Plaintiff’s complaint are
allegations of corporate mismanagement—the same alleged acts and omissions that underlie
Plaintiff’s fiduciary duty of care claims that are fundamentally derivative. See Kramer v. W.
Pac. Indus., Inc., 546 A.2d 348, 353 (Del. 1988) (“[W]here a plaintiff shareholder claims that the
value of his stock will deteriorate and that the value of his proportionate share of the stock will
be decreased as a result of alleged director mismanagement, his cause of action is derivative in
nature.”); Albert v. Alex. Brown Mgmt. Servs., Inc., 2005 Del. Ch. LEXIS 133, at *46 (Del. Ch.
Aug. 26, 2005) (“The gravamen of these claims is that the Managers devoted inadequate time
and effort to the management of the Funds, thereby causing their large losses. Essentially this [is]
a claim for mismanagement, a paradigmatic derivative claim.”). Furthermore, as made clear by
this Court in SemCrude I and the Third Circuit in SemCrude II, such fraud claims, regardless of
their characterization by Plaintiff, are derivative claims belonging to the Debtor’s estate.
53. In SemCrude II, the plaintiffs, former limited partners of the debtor, filed claims
against the debtor’s CEO for negligent misrepresentation (i.e., equitable fraud),33 fraud and
breach of fiduciary duty after SemCrude filed for bankruptcy. 796 F.3d at 312-13. Plaintiffs
claimed that the defendant (a) engaged in self-dealing and related party transactions that
negatively impacted the company and (b) concealed these activities and actively misrepresented
SemCrude’s financial health and stability to induce them to invest capital in SemCrude. Id. at
33 See Fortis Advisors LLC v. Dialog Semiconductor PLC, 2015 Del. Ch. LEXIS 22, at *28 (Del. Ch. 2015) (“A claim for negligent misrepresentation is often referred to interchangeably as equitable fraud[.]”) 01:22362539.1 26 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 27 of 43
313-14. This Court granted defendant’s motion to enjoin the plaintiffs’ claims on grounds that
such claims were derivative causes of action, specifically rejecting the plaintiffs’ argument that
their alleged fraud claims based on defendant’s purported misrepresentations—which allegedly
induced them to invest additional capital and not sell their limited partner units—gave rise to
direct claims. Id. at 315.
54. The Third Circuit held that the “Bankruptcy Court got it right the first time it
passed on the issue: [T]he injury suffered by the [plaintiffs] is no different from the injury
suffered by SemCrude as a result of [defendant]’s wrongful conduct.” Id. at 319 (emphasis
added) (quotations omitted). As to the claims for negligent misrepresentation and fraud, the
court determined that the plaintiffs were “functionally indistinguishable from any other investor
who acted upon or forewent opportunities to sell their limited partner units as a result of
[defendant]’s misrepresentations and omission,” and that “all SemCrude limited partners
suffered the same loss of capital on a pro rata basis as a result of [defendant]’s alleged
misconduct.” Id. at 318. According to the Third Circuit “to the extent the [plaintiffs]’ claims are
masked claims for a diminution in value of their limited partner units as a result of [defendant]’s
mismanagement, their claims are derivative of the claims released by the Litigation Trust.” Id.
55. Although the SemCrude plaintiffs opposed this characterization, and claimed that
they contributed additional capital or retained their investments as a result of inducement, the
Third Circuit specifically rejected such allegations as a basis for direct claims, finding that
plaintiff’s injuries were caused by the demise of the corporation, not the failure to disclose. Id. at
318-19. Because the conduct underlying plaintiffs’ loss was the same conduct alleged to have
caused the bankruptcy, the claims had been released. Id. at 318. The plaintiffs’ were unable to
01:22362539.1 27 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 28 of 43
“show that they experienced any loss ‘in addition to’ the other equity holders or, equally, the
company.” Id. at 319.
56. Just like the plaintiffs’ claims in SemCrude, Plaintiff’s various fraud-based claims
asserted in the Civil Action are masked claims for diminution in the value of their Jumio stock as
a result of alleged misconduct by Jumio’s officers. Plaintiff fails to allege any individualized
harm that would give rise to a direct claim against the Non-Founder Defendants. Plaintiff’s
claimed losses resulting from the alleged fraudulent conduct (namely the loss of the total value
of its Jumio shares) are indistinguishable from the harm suffered by other investors. The claims
are derivative under SemCrude II and applicable Delaware law and, therefore, belong to the
Debtor’s estate. See Arent v. Distribution Scis., Inc., 975 F.2d 1370, 1373 (8th Cir. 1992)
(“[T]he fact that plaintiffs framed the harm as a direct fraud [does] not permit them to go forward
on a claim that [i]s, at its core, derivative.”); see also Tooley, 845 A.2d at 1035 (“[C]lassification
of [a] suit is not binding.”) (quotations omitted).
e. Plaintiff’s Civil Conspiracy Claim Suffers From the Same Defects
57. Plaintiff’s civil conspiracy cause of action consists of the same allegations
asserted in its separate derivative breach of fiduciary duty and fraud claims. Specifically,
Plaintiff alleges that the Non-Founder Defendants conspired to deprive it of the value of its
Jumio shares by misrepresenting Jumio’s financial position to induce Plaintiff to invest in Jumio,
failing to hire qualified financial management, and then driving Jumio into bankruptcy for their
own self-interests. See Complaint, ¶ 116. As explained above, such allegations would, at most,
give rise to derivative claims that would belong to the estate.
58. As Plaintiff’s civil conspiracy cause of action asserts a conspiracy of underlying
derivative claims, the civil conspiracy claims are inherently derivative and are, thus, enjoined by
the Plan. See Big Lots Stores, Inc. v. Bain Capital Fund VII, LLC, 922 A.2d 1169, 1178-81 (Del. 01:22362539.1 28 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 29 of 43
Ch. 2006) (holding that plaintiff lacked standing to bring civil conspiracy claims because
underlying torts on which the claims were based were wholly derivative claims of fraud and
violation of fiduciary duty).
f. Plaintiff’s State Law Fraudulent Transfer Claims Suffer From the Same Defect and Can Be Brought Only by the Estate under Section 544(b) of the Bankruptcy Code
59. Pursuant to the Plan and federal law, “any state law fraudulent transfer claim” and
“Avoidance Actions”—including both avoidance actions “arising under Bankruptcy Code
sections 544, 545, 547, 548, 549, 550, 551, 553(b), and 724(a)” as well as under “any other
applicable non-bankruptcy law”—constitute “Causes of Action” belonging exclusively to the
Debtor’s estate. See Plan, Art. I.A.9, Art. I.A.18; see also In re AstroPower Liquidating Trust,
335 B.R. at 328 (“[F]raudulent transfer actions are derivative in nature[.]”); In re PWS Holding
Corp., 303 F.3d at 314-15 (overruling creditor’s contention that its fraudulent transfer claims
were “direct, non-derivative claims and thus, unaffected by the extinguishment provisions” in the
plan and confirmation order). Thus, the Debtor’s estate has the exclusive right to bring and
litigate state law fraudulent transfer claims under section 1304 and 1305 of the Delaware
Uniform Fraudulent Transfer Act, as well as actions to avoid or recover a transfer of property
pursuant to Bankruptcy Code sections 544, 548, and 550. Plaintiff lacks standing to pursue such
claims. See Plan, Art. IV.C, Art. I.A.18, Art. I.A.9, Art. VIII.H.1, Art. VIII.I.34
60. The foregoing is consistent with Bankruptcy Code section 544(b) and well-settled
bankruptcy law. Bankruptcy Code section 544(b) provides that:
[U]pon commencement of a case under the Bankruptcy Code, a trustee or debtor in possession “may avoid any transfer of an interest of the debtor in property or any obligation incurred by the
34 Additionally, the findings of this Court in the Sale Order and the Confirmation Order described in Paragraphs 23 and 26 above defeat many of these claims in their entirety as well. 01:22362539.1 29 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 30 of 43
debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable” under the Bankruptcy Code.
See In re PWS Holding Corp., 303 F.3d at 314 (quoting 11 U.S.C. § 544(b)). More generally,
section 544(b) “places the debtor in possession in the shoes of its creditors, giving it the right to
prosecute individual creditors’ fraudulent transfer claims for the benefit of the bankruptcy
estate.” In re PWS Holding Corp., 303 F.3d at 314.
61. As noted above, upon the filing of a chapter 11 petition, “the right to pursue
fraudulent transfer claims shifts to the debtor in possession . . . notwithstanding that, outside of
bankruptcy, such claims belong solely to the creditors.” See In re GenTek Inc., 328 B.R. 423,
429 (Bankr. D. Del. 2005). Further, the “phrase ‘the trustee may’ at the beginning of § 544(b)
cannot be read to mean the ‘trustee and other parties in interest may.’” In re Rosenblum, 545
B.R. 846, 857 (Bankr. E.D. Pa. 2016) (quoting Official Comm. of Unsecured Creditors of
Cybergenics Corp. ex rel. Cybergenics Corp. v. Chinery, 330 F.3d 548, 559 (3d Cir. 2003)).
62. Courts across the country have affirmed that, following a bankruptcy petition, the
debtor’s estate’s representative (debtor-in-possession, trustee, or if granted derivative standing, a
creditors committee) has the exclusive right to bring fraudulent transfer claims concerning
transactions executed by the estate, to the extent the claims are not otherwise released under any
chapter 11 plan. See In re PWS Holding Corp., 303 F.3d at 314-15 (holding that creditor did not
have standing to prosecute a state law fraudulent transfer action, because Bankruptcy Code
section 544(b) “places the debtor in possession in the shoes of its creditors, giving it the right to
prosecute individual creditors’ fraudulent transfer claims for the benefit of the bankruptcy
estate”); Nat’l Tax Credit Partners, L.P. v. Havlik, 20 F.3d 705, 708-09 (7th Cir. 1994) (holding
that “the right to recoup a fraudulent conveyance, which outside of bankruptcy may be invoked
by a creditor, is property of the estate that only a trustee or debtor in possession may pursue once
01:22362539.1 30 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 31 of 43
a bankruptcy is under way”); In re Rosenblum, 545 B.R. at 856-57 (holding that “[t]he trustee
has exclusive standing to file avoidance actions under § 544(b) to avoid fraudulent transfers
under both federal and state law” and that “during the period that a trustee retains exclusive
standing, creditors may not raise fraudulent transfer claims, even in state court until after the
trustee’s standing expires); In re Pearlman, 472 B.R. 115, 121-22 (Bankr. M.D. Fla. 2012)
(holding that “only the trustee can bring federal and state law fraudulent transfer actions to
recover property for the bankrupt estate”); In re Fabian, 458 B.R. 235, 259 (Bankr. D. Md.
2011) (holding that the “trustee has the exclusive right to bring a fraudulent conveyance action
during the pendency of the bankruptcy proceedings”).
63. Thus, upon the bankruptcy filing, any fraudulent transfer claims that otherwise
could have been brought by creditors instead may be brought only by a debtor-in-possession or
other authorized estate representative. Upon confirmation of a plan, estate property (including
causes of action) revests in the reorganized debtor except as otherwise provided for in the plan.
11 U.S.C. § 1141(b). Here, the confirmed Plan provides that fraudulent transfer claims were
released or vested exclusively in the Liquidating Trust, and this treatment of these causes of
action—like all provisions of a confirmed plan—is binding on all parties, including Bloso. 11
U.S.C. § 1141(a).35
64. Consequently, in accordance with the Plan and applicable law, Plaintiff lacks
standing to assert its state law fraudulent transfer claims.
35 Moreover, as to Stuut, all fraudulent transfer claims against him were sold to the Buyer pursuant to the Sale Order. See APA, § 2.1(s) (including within the definition of Purchased Assets “all rights, Claims or Actions, including Avoidance Actions . . .”); id. at § 1.1 (defining Avoidance Actions to include “Actions arising under Chapter 5 of the Bankruptcy Code”). The Sale Order’s bar on Plaintiff’s ability to pursue claims against Stuut is discussed in more detail in Section V.C infra. 01:22362539.1 31 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 32 of 43
3. The Plan Releases the Released Parties from the Estate Claims and, as to the Non-Released Parties, Assigns the Estate Claims to the Liquidating Trustee
65. As set forth above, under the Plan, all Causes of Action belonging to the Debtor’s
estate (which include the Estate Claims), are released as to the Released Parties—including
Saverin, Ong, Weiss and the AH Entities. Specifically, the Plan provides that “the Debtor and
the Liquidating Trustee, and any Person seeking to exercise the rights of the Debtor’s Estate,
shall be deemed to forever release . . . the Released Parties . . . of all claims, obligations . . . [and]
Causes of Action.” Plan, Art. VIII.H.1. Further, the Plan enjoins all “Entities that have held,
hold or may hold a Claim . . . against the Debtor or Interest in the Debtor . . . from . . .
commencing or continuing in any manner or in any place, any action or other proceeding”
against the Released Parties. Id. at Art. VIII.I.
66. As to all Causes of Action not released under the Plan, the Liquidating Trustee
has the “exclusive right, authority and discretion to . . . litigate . . . any Cause of Action.” Id. at
Art. IV.C (emphasis added). In addition to this general reservation, Exhibit B to the Plan
expressly identifies (without limitation) certain Causes of Action that are preserved for
prosecution by the Liquidating Trust, which include:
Any Causes of Action against any party not released under the Plan concerning: (a) the accounting/financial reporting issues that necessitated the restatement of the Debtor’s financial statements; (b) the secondary sales of the Debtor’s stock; (c) the Debtor’s former insiders’ monetization of their holdings of the Debtor’s stock by taking loans collateralized by such stock; and/or (d) damages sustained by the Debtor as a result of such parties actions, failures to act, or other conduct, including the following parties . . . [the Officer Defendants].
Id. at Exhibit B (emphasis added). Further, the Plan enjoins all entities that have or hold a
“Claim or other debt or liability against the Debtor or Interest in the Debtor” from “commencing
01:22362539.1 32 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 33 of 43
or continuing . . . any action or other proceeding” against the “Liquidating Trust or any of its
property on account of such Claims or Interests.” Id. at Art. VIII.I.
67. As explained above, the Estate Claims, and the factual allegations underpinning
those claims, are exactly the types of claims belonging to the Debtor’s estate, and which were
subsequently released under the Plan and/or assigned exclusively to the Liquidating Trustee.
Plaintiff lacks standing to assert any of its Estate Claims.36
B. The Doctrine of Res Judicata Bars Plaintiffs from Pursuing the Estate Claims
68. As discussed above, the Plan releases the Released Parties and gives the
Liquidating Trustee, the “exclusive right, authority and discretion to . . . enforce . . . any Cause of
Action.” Id. at Art. IV.C. The Plan defines Cause of Action broadly and, for the reasons
discussed above, a Cause of Action includes all of the Estate Claims raised in Bloso’s
Complaint.
69. In attempting to bring the Estate Claims, Plaintiff is acting in direct contravention
of the Plan, and collaterally attacking the Court’s Confirmation Order and Sale Order.
Furthermore, Plaintiff is attempting to relitigate issues that it raised in opposition to confirmation
of the Plan. Given the prior determination of these issues, Plaintiff cannot now argue that it has
the right to bring the Estate Claims, where the Plan states that the Estate Claims are released,
exculpated or assigned exclusively to the Liquidating Trustee. Under the doctrine of res
judicata, this type of collateral attack is prohibited. See Hendrick v. Avent, 891 F.2d 583, 587
(5th Cir. 1990) (“[T]he proper medium for a challenge to the original bankruptcy court’s order is
through a direct challenge of that order. The collateral attacks brought later are barred by res
judicata.”).
36 Although this section discusses the Non-Founder Defendants’ rights under the Plan, Section V.C below discusses how the Estate Claims are precluded as to Stuut pursuant to the Sale Order. 01:22362539.1 33 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 34 of 43
70. The application of res judicata, or claim preclusion, “bars a party from litigating a
claim that it could have raised or did raise in a prior proceeding in which it raised another claim
based on the same cause of action.” CoreStates Bank, N.A. v. Huls Am., Inc., 176 F.3d 187, 191
(3d Cir. 1999); see also Bd. of Trustees of Trucking Emps. of New Jersey Welfare Fund, Inc.-
Pension Fund v. Centra, 983 F.2d 495, 504 (3d Cir. 1992) (noting that the doctrine of res
judicata gives “dispositive effect to a prior judgment if a particular issue, although not litigated,
could have been raised in the earlier proceeding”). For the doctrine of res judicata to apply three
factors must exist: “(1) a final judgment on the merits, rendered by a court of competent
jurisdiction, in a prior action involving; (2) the same parties or their privies; and (3) a subsequent
suit based on the same cause of action.” See In re Ampace Corp., 279 B.R. 145, 154 (Bankr. D.
Del. 2002). All these elements apply to the case at hand.
71. First, the Confirmation Order constitutes a final judgment on the merits with
respect to the issues addressed in the plan of reorganization. See id. at 154 (“In the context of
bankruptcy, most courts find that a confirmation order constitutes a final judgment on the merits
with respect to the issues addressed in the plan of reorganization.”); see also In re Greater Am.
Land Res., Inc., 452 B.R. 532, 538 (Bankr. D.N.J. 2011) (“It is widely recognized that an order
confirming a plan of reorganization is entitled to res judicata effect.”).
72. Second, the Civil Action and the Chapter 11 Case involve the same parties. See
In re Ampace Corp., 279 B.R. at 155 (finding that the second factor was satisfied where plaintiff
(a liquidating trustee) and defendant and/or their predecessors in interest “participated in the Plan
confirmation proceeding”). In the bankruptcy context, an entity that “participates in a Chapter
11 plan confirmation proceeding” is considered a “party” for res judicata analysis. In re USN
Commc’ns, Inc., 280 B.R. 573, 586 (Bankr. D. Del. 2002) (quotations omitted). Plaintiff played
01:22362539.1 34 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 35 of 43
an active role in the Chapter 11 Case generally, and the confirmation proceedings specifically,
not only objecting to the Plan and Disclosure Statement, but also arguing at the confirmation
hearing. As such, the second factor is satisfied.
73. With respect to the third element, the Third Circuit has taken a “broad view” of
this factor and looks to “whether there is an essential similarity of the underlying events giving
rise to the various legal claims.” See CoreStates Bank, N.A., 176 F.3d at 194 (quotations
omitted). Courts have generally found that plan confirmation orders are res judicata as to “all
issues decided or which could have been decided at the hearing on confirmation.” Donaldson v.
Bernstein, 104 F.3d 547, 554 (3d Cir. 1997) (quoting In re Szostek, 886 F.2d 1405, 1408 (3d Cir.
1989)); see also In re Artic Glacier Int’l, Inc., 2016 WL 3920855, at *14 (Bankr. D. Del. July 13,
2016) (same); In re Greater Am. Land Res., Inc., 452 B.R. at 538 (“The plan confirmation order
is res judicata as to all issues decided or which could have been decided before confirmation
occurs.”). In this instance, the Complaint seeks to relitigate issues that have already been
decided. As noted in Paragraphs 30 and 31, Plaintiff objected to Debtor’s Plan and specifically
to the Global Settlement, the releases, and the Liquidating Trust structure. After considering
Plaintiff’s objections, this Court overruled Plaintiff’s objections and confirmed the Plan.
Plaintiff had the opportunity to—and did—litigate (i) the scope of the Plan releases, exculpation
provisions, and definition of Causes of Action, (ii) the Liquidating Trustee’s authority under the
Plan, and (iii) the Global Settlement generally. However, Plaintiff’s objections were overruled
by this Court.
74. Moreover, both the Confirmation Order and the Sale Order, as noted in
Paragraphs 23 and 26 above, include many findings of fact regarding, among other things, the
good faith of the parties in the filing of the bankruptcy, propriety of the formulation, negotiation
01:22362539.1 35 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 36 of 43
and implementation of the sale of the Debtor’s assets and the Plan, and the overall conduct of the
Chapter 11 Case. Bloso is also attempting to relitigate many of these facts, which is not
permitted.
75. Plaintiff cannot now attempt to side step the express provisions of the Plan by
attempting to bring the Estate Claims. See In re Summit Metals, Inc., 477 B.R. 484, 500 (Bankr.
D. Del. 2012) (barring plaintiff’s claims on grounds of res judicata and collateral estoppel where
the claims were either asserted as objections during the main bankruptcy case and explicitly
rejected by the court, or related to motions approved by the court after hearings for which
plaintiff was present but did not object). Instead, all issues that could have been raised prior to
the confirmation of the Plan are barred under the doctrine of res judicata.
76. This result is not only mandated under applicable law, but is also of critical
importance as a policy matter. Parties negotiating chapter 11 plans—including those who give
up rights and pay consideration (to fund a reorganization, provide seed money to a liquidating
trust or provide a recovery for creditors), and who in exchange are granted releases—should
receive the benefit of their bargain. Disgruntled, unsuccessful objectors should not be permitted
to circumvent the confirmed plan by bringing released claims in another forum or hijacking
claims conveyed to a liquidating trust for the benefit of all the trust’s stakeholders.
C. The Sale Order Bars Plaintiff from Pursuing its Claims Against Stuut
77. Just as Bloso is precluded from bringing the Estate Claims against the Released
Parties because they are derivative claims that were released or assigned to the Liquidating
Trustee under the Plan (as described in Section V.A above), Bloso is precluded from bringing the
Estate Claims against Stuut because they are derivative claims that were transferred to the Buyer
pursuant to the Sale Order.
01:22362539.1 36 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 37 of 43
78. As noted in Paragraphs 21 and 22 above, the Buyer purchased substantially all of
the Debtor’s assets, including, among other things, “any rights, Claims, or Actions,37 including
Avoidance Actions,38 as of Closing of the Seller [i.e., the Debtor] to the extent relating to or
arising against Transferred Employees.” APA, §§ 2.1(s), 2.2(g). As noted above, Stuut was a
Transferred Employee39 and, accordingly, all derivative claims against him were purchased by
the Buyer from the Debtor.40
79. Just as the Plan enjoins Bloso from pursuing the Estate Claims against the
Released Parties, the Sale Order bars and estops “all persons” (including Bloso) from pursuing
the Estate Claims against Stuut—an officer of the Buyer. The Sale Order provides:
[A]ll persons, including, without limitation, all holders of claims or Interests . . . and other persons holding Interests of any kind or nature whatsoever against or in the Debtor or the Purchased Assets . . . arising under or out of, in connection with, or in any way relating to, the Debtor, the operation of the Debtor’s businesses prior to the Closing, the Purchased Assets, or the transfer of the Purchased Assets to the Purchaser . . . shall be and
37 The APA defines “Actions” as “any actual or potential Claim, action, complaint, suit, litigation, arbitration, appeal, petition, inquiry, hearing, Legal Proceeding, investigation or other dispute, whether civil, criminal, administrative or otherwise at law or in equity.” APA, § 1.1. “Claim” is defined as “hav[ing] the meaning set forth in Section 101(5) of the Bankruptcy Code.” Id. 38 The APA defines “Avoidance Actions” as “any and all preference or avoidance claims or Actions which a trustee, a debtor-in-possession or other appropriate party in interest may assert on behalf of the Seller or its Estate under applicable Law, including Actions arising under Chapter 5 of the Bankruptcy Code.” Id. 39 The APA defines “Transferred Employee” to include “US Transferred Employees[,]” which the APA in turn defines as all “Current Employees” of the Seller whose employment with the Seller was terminated “effective immediately prior to the Closing” and who accepted an offer of employment with the Buyer, which offer the Buyer was required to make to all Current Employees. Id. at § 5.6. Because Stuut was the CEO of the Debtor—a Current Employee—and accepted an offer to become the CEO of the Buyer, Stuut was a Transferred Employee. The APA defines “Current Employees” as “all employees of the Seller and the Acquired Subsidiaries [Jumio India and Jumio Austria] employed as of the Closing Date, whether active or not (including those on short-term disability or leave of absence, paid or unpaid).” Id. at § 1.1. 40 That the Buyer specifically purchased all of the Debtor’s claims against Stuut is reinforced elsewhere in the APA. Insert A provides, in part: “For the avoidance of doubt, the Excluded Assets include all rights, Claims and Actions against (i) current and former directors (other than Stephen Stuut) . . . .” Id. at Insert A (emphasis added); see also id. at § 2.1(g). This confirms that the Estate Claims were not among those retained by Jumio, i.e., that they were transferred to the Buyer. Further, pursuant to the Plan and Confirmation Order, any Claims and Causes of Actions not transferred to the Buyer were transferred to the exclusive control of the Liquidating Trustee. See Plan, Art. IV.C. Thus, to the extent any claim against Stuut was not sold, Bloso still lacks standing. See supra ¶¶ 25, 65- 67. 01:22362539.1 37 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 38 of 43
hereby are forever barred and estopped from asserting, prosecuting, or otherwise pursuing any Interests against the Purchaser, any of its Affiliates, officers, directors, members, partners, principals, or shareholders . . . and the interests of the Debtor in such Purchased Assts. Sale Order, ¶ 13 (emphasis added). 80. As explained at length in Section V.A supra, the Estate Claims are fundamentally
derivative in nature and became property of the Debtor’s estate after the filing of the bankruptcy
petition. See supra ¶¶ 41-64 (analyzing Plaintiff’s claims for breach of fiduciary duty, unjust
enrichment, imposition of a constructive trust, fraud, civil conspiracy and fraudulent transfer and
concluding they are all derivative in nature). For the same reasons, and pursuant to the Sale
Order, the Debtor sold any claims it might have against Stuut to the Buyer. The Estate Claims
against Stuut are therefore the property of the Buyer.41
81. For the foregoing reasons, Bloso lacks standing to assert the Estate Claims against
Stuut. The Sale Order and APA should be enforced by this Court and require the dismissal of
the Estate Claims against Stuut.
D. The Plan’s Exculpation Provision Bars Plaintiff from Pursuing its Claims Against Stuut
82. Further, as to Stuut,42 Counts I, III, V, VI, and IX are barred by the exculpatory
clause found in Article VIII.G of the Plan.43 An exculpatory clause in a bankruptcy court order
“reiterates federal preemption principles” which provides that “the Bankruptcy Code ‘completely
preempts state law tort causes of action for damages’” arising from a filing for bankruptcy. Lazo
41 Because Bloso is not a stockholder of the Buyer, it could never have standing to bring the Estate Claims against Stuut on the Buyer’s behalf. 42 The Plan provides that the persons who are exculpated include “(a) the Debtor . . . and (d) with respect to the Entities in clauses (a) through (c), such Entity's . . . officers.” Plan, Art. I.A.50. Stuut was an officer of the Debtor at all times relevant to the Complaint. 43 Stuut reserves his right to argue that other counts of the Complaint are also barred by the Exculpatory Clause, including, without limitation, that the allegations of fraud and fraudulent inducement in Counts IV and VII are barred by the Exculpatory Clause to the extent that Bloso can only demonstrate that the alleged representations were only made with reckless indifference to the truth. 01:22362539.1 38 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 39 of 43
v. Roberts, 2016 WL 738273, at *8 (C.D. Cal. Feb. 22, 2016) (citing In re S. Edge LLC, 478 B.R.
403, 415-16 (D. Nev. 2012) (citing In re Miles, 430 F.3d 1083, 1086, 1089-91 (9th Cir. 2005)).
Delaware law recognizes the enforceability of exculpatory provisions. See In re DB Cos., 2008
WL 704417, at *1 (Bankr. D. Del. Mar. 14, 2008) (dismissing negligent misrepresentation claim
as barred by an exculpatory provision); see also Anglo Am. Sec. Fund, L.P. v. S.R. Global Int'l
Fund, L.P., 2006 WL 1494360, at *4-5 (Del. Ch. May 24, 2006) (finding that general partner
was exculpated from liability for negligence pursuant to an exculpation provision in the
partnership agreement).
83. Pursuant to the Plan, the Debtor’s officers, including Stuut, are exculpated from
“any liability to any holder of a Claim or Interest for any Exculpated Claim, except for actual
fraud, willful misconduct or gross negligence[.]” Plan, Art. VIII.G.44 The plain language of the
Plan’s exculpation provision exculpates Stuut from, among other things, liability resulting from
any acts or omissions “based upon, related to or arising from (a) the Chapter 11 Case;
(b) formulation, preparation . . . negotiation, or filing of the . . . Plan; (c) the filing of the Chapter
11 Case . . . [and] the administration and implementation of the Chapter 11 Case and the Plan”
brought by any holder of a Claim or Interest, such as Bloso. Id. at Art. I.A.49.
84. Because the alleged wrongful acts set forth in Counts I, III, V, VI, and IX of the
Complaint are all predicated on the filing of the Chapter 11 Case, the Plan, or the implementation
of the Plan,45 and such actions cannot fall within the exception to this provision in light of the
44 Paragraph 35 of the Confirmation Order contains an identical exculpation clause. 45 For example: (a) in Count I, Bloso alleges that “Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to deprive Bloso of the value of his [sic] Jumio shares” presumably via the implementation of the Plan, see Complaint, ¶ 114, allegedly accomplished by, among other acts, “taking any action before Jumio entered into bankruptcy; [and] Defendants negotiat[ing] and accept[ing] indemnity agreements in exchange for favorable positions in New Jumio post bankruptcy,” Id. at ¶ 116; (b) in Count III, Bloso alleges that the “Defendants misled or failed to remedy prior misrepresentations to Bloso by, inter alia, failing to disclose Jumio’s orchestrated impending bankruptcy filing,” Id. at ¶ 125; (c) in Count V, Bloso generally alleges that it was 01:22362539.1 39 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 40 of 43
good faith and other findings in the Sale Order and Confirmation Order noted in Paragraphs 23
and 26, these counts of the Complaint against Stuut are barred by the Plan’s exculpation
provisions. Dismissal of these Estate Claims against Stuut is therefore warranted.46
VI. RESERVATION OF RIGHTS
85. The Non-Founder Defendants reserve all rights, claims, causes of action and
remedies, in law or in equity, under the Plan, the Confirmation Order, the Sale Order, or
otherwise, including, without limitation, the right to seek costs and attorneys’ fees incurred in
connection with this Motion and defending the Civil Action in light of Plaintiff’s knowing
violation of this Court’s injunction in the Plan and Confirmation Order, and the bar contained in
the Sale Order.
harmed by the Defendants’ failure to accurately and timely disclose Jumio’s financial condition and specifically alleges that “Defendants also failed to accurately and timely disclose to Bloso Jumio’s orchestrated and impending bankruptcy filing,” Id. at ¶ 144; (d) in Count VI, Bloso alleges that “[u]pon learning of the financial fraud occurring under their watch, Defendants actively took steps . . . so they could force Jumio into bankruptcy and thereafter attempt to release themselves of all liability,” Id. at ¶ 151; and (e) finally, in Count IX, Bloso alleges that “Jumio received less than reasonably equivalent value in exchange for the reclassification of unsecured, previously issued notes into the secured Saverin Notes, because Jumio did not receive any funds in exchange for the reclassification,” Id. at ¶ 180, and Bloso specifically argues that the transfer was part of the scheme to drive Jumio into bankruptcy, Id. at ¶ 181. Each of these alleged acts are clearly “related to” the filing of the Chapter 11 Case and are therefore barred by the Exculpatory Clause. 46 In addition, although the Defendants believe that the allegations in the Complaint show that, as a matter of law, Counts I, III, V, VI, VII and IX are barred by the Exculpatory Clause, they also dispute any allegations of wrongful conduct by the Defendants. To the extent the Court determines that it must make factual findings (in addition to the findings already contained within the Sale Order and Confirmation) as to whether the causes of action committed in Counts I, III, V, VI, or IX fall within the Exculpation Carveout, the Defendants are prepared to present evidence proving that they did not commit actual fraud, willful misconduct, or gross negligence in preparing for this bankruptcy, filing this bankruptcy, implementing the sale or the Plan, or otherwise. 01:22362539.1 40 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 41 of 43
VII. CONCLUSION
86. For the reasons set forth above, the Non-Founder Defendants respectfully request
that this Court enter an order, substantially in the form attached hereto as Exhibit 1: (i) enforcing
the terms of the Plan, the Confirmation Order, and the Sale Order; (ii) ordering Plaintiff to
dismiss the Civil Action and enjoining, barring and/or estopping prosecution of the Civil Action
and similar claims and causes of action in any other forum; and (iii) granting such other and
further relief as may be just and proper.
Dated: Wilmington, Delaware Respectfully Submitted, September 15, 2017 YOUNG CONWAY STARGATT & TAYLOR, LLP
/s/ Michael R. Nestor Michael R. Nestor (No. 3526) Elena C. Norman (No. 4780) Rodney Square 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Email: [email protected] Email: [email protected]
LATHAM & WATKINS LLP
Manny A. Abascal Andrew R. Gray Ted A. Dillman Faraz R. Mohammadi 355 South Grand Avenue, Suite 100 Los Angeles, California 90071 Telephone: (213) 485-1234 Facsimile: (213) 891-8763 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for Eduardo Saverin
01:22362539.1 41 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 42 of 43
MORRIS, NICHOLS ARSHT & TUNNELL, LLP
Eric D. Schwartz (No. 3134) Andrew R. Remming (No. 5120) Susan Wood Waesco (No. 4476) Lauren Neal Bennett (No. 5940) 1201 North Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for Stephen Stuut
ASHBY & GEDDES
William P. Bowden (No. 2553) Catherine A. Gual (No. 4310) Peter H. Kyle (No. 5918) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 Telephone: (302) 654-1888 Facsimile: (302) 654-2067 Email: [email protected] Email: [email protected] Email: [email protected]
ARNOLD & PORTER KAYE SCHOLER LLP
Michael L. Bernstein Arthur Luk 601 Massachusetts Ave., NW Washington, DC 20001 Telephone: (202) 942-5000 Facsimile: (202) 942-5999 Email: [email protected] Email: [email protected]
Attorneys for Scott Weiss, Andreessen Horowitz Fund, II, L.P. and AH Capital Management, L.L.C.
01:22362539.1 42 Case 16-10682-BLS Doc 585 Filed 09/15/17 Page 43 of 43
JACK SHRUM, P.A.
“J” Jackson Shrum (No. 4757) ONE COMMERCE CENTER 1201 N. Orange Street, Suite 502 Wilmington, DE 19801 Telephone: (302) 543-7551 Facsimile: (302) 543-6386 Email: [email protected]
Attorney for Peng-Tsin Ong
01:22362539.1 43 Case 16-10682-BLS Doc 585-1 Filed 09/15/17 Page 1 of 4
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
JMO WIND DOWN, INC.,1 Case No. 16-10682 (BLS)
Debtor. Hearing Date: October 11, 2017 at 11:00 a.m. (ET) Objection Deadline: October 4, 2017 at 4:00 p.m. (ET)
NOTICE OF MOTION
TO: (I) OFFICE OF THE UNITED STATES TRUSTEE FOR THE DISTRICT OF DELAWARE; AND (II) ALL PARTIES REQUESTING NOTICE UNDER BANKRUPTCY RULE 2002.
PLEASE TAKE NOTICE that Eduardo Saverin, Peng-Tsin Ong, Scott Weiss, Andreessen Capital Management, LLC, Andreessen Horowitz Fund, II, L.P., and Stephen Stuut (collectively, the “Non-Founder Defendants”) have filed the attached Motion of Non-Founder Civil Action Defendants (I) to Enforce the Plan, Confirmation Order, and Sale Order and (II) to Enjoin Plaintiff from Prosecuting the Civil Action and Similar Claims in Other Forums (the “Motion”).
PLEASE TAKE FURTHER NOTICE that any objections to the Motion must be filed on or before October 4, 2017 at 4:00 p.m. (ET) (the “Objection Deadline”) with the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, 3rd Floor, Wilmington, Delaware 19801. At the same time, you must serve a copy of the objection upon the undersigned counsel to the Non-Founder Defendants so as to be received on or before the Objection Deadline.
PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE MOTION WILL BE HELD ON OCTOBER 11, 2017 AT 11:00 A.M. (ET) BEFORE THE HONORABLE BRENDAN LINEHAN SHANNON AT THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 NORTH MARKET STREET, SIXTH FLOOR, COURTROOM NO. 1, WILMINGTON, DELAWARE 19801.
1 The last four digits of the Debtor’s tax identification number are 6822.
01:22362513.1 Case 16-10682-BLS Doc 585-1 Filed 09/15/17 Page 2 of 4
PLEASE TAKE FURTHER NOTICE THAT IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR A HEARING.
Dated: Wilmington, Delaware September 15, 2017 Respectfully Submitted,
YOUNG CONWAY STARGATT & TAYLOR, LLP
/s/ Michael R. Nestor Michael R. Nestor (No. 3526) Elena C. Norman (No. 4780) Rodney Square 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 Email: [email protected] Email: [email protected]
LATHAM & WATKINS LLP
Manny A. Abascal Andrew R. Gray Ted A. Dillman Faraz R. Mohammadi 355 South Grand Avenue, Suite 100 Los Angeles, California 90071 Telephone: (213) 485-1234 Facsimile: (213) 891-8763 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for Eduardo Saverin
2 01:22362513.1 Case 16-10682-BLS Doc 585-1 Filed 09/15/17 Page 3 of 4
MORRIS, NICHOLS ARSHT & TUNNELL, LLP
Eric D. Schwartz (No. 3134) Andrew R. Remming (No. 5120) Susan Wood Waesco (No. 4476) Lauren Neal Bennett (No. 5940) 1201 North Market Street, 16th Floor P.O. Box 1347 Wilmington, Delaware 19899-1347 Telephone: (302) 658-9200 Facsimile: (302) 658-3989 Email: [email protected] Email: [email protected] Email: [email protected] Email: [email protected]
Attorneys for Stephen Stuut
ASHBY & GEDDES
William P. Bowden (No. 2553) Catherine A. Gual (No. 4310) Peter H. Kyle (No. 5918) 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, Delaware 19899 Telephone: (302) 654-1888 Facsimile: (302) 654-2067 Email: [email protected] Email: [email protected] Email: [email protected]
ARNOLD & PORTER KAYE SCHOLER LLP
Michael L. Bernstein Arthur Luk 601 Massachusetts Ave., NW Washington, DC 20001 Telephone: (202) 942-5000 Facsimile: (202) 942-5999 Email: [email protected] Email: [email protected]
Attorneys for Scott Weiss, Andreessen Horowitz Fund, II, L.P. and AH Capital Management, L.L.C.
3 01:22362513.1 Case 16-10682-BLS Doc 585-1 Filed 09/15/17 Page 4 of 4
JACK SHRUM, P.A.
“J” Jackson Shrum (No. 4757) ONE COMMERCE CENTER 1201 N. Orange Street, Suite 502 Wilmington, DE 19801 Telephone: (302) 543-7551 Facsimile: (302) 543-6386 Email: [email protected]
Attorney for Peng-Tsin Ong
4 01:22362513.1 Case 16-10682-BLS Doc 585-2 Filed 09/15/17 Page 1 of 3
EXHIBIT 1
Proposed Order Case 16-10682-BLS Doc 585-2 Filed 09/15/17 Page 2 of 3
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
JMO WIND DOWN, INC.,1 Case No. 16-10682 (BLS)
Debtor. Re: Docket No. ___
ORDER APPROVING MOTION OF NON-FOUNDER CIVIL ACTION DEFENDANTS (I) TO ENFORCE THE PLAN, CONFIRMATION ORDER, AND SALE ORDER AND (II) TO ENJOIN PLAINTIFF FROM PROSECUTING THE CIVIL ACTION AND SIMILAR CLAIMS IN OTHER FORUMS
Upon consideration of the Motion of Eduardo Saverin, Peng-Tsin Ong, Scott Weiss,
Andreessen Horowitz, LLC, Andreessen Horowitz Fund, II, L.P., and Stephen Stuut
(collectively, the “Non-Founder Defendants”) (i) to enforce the Plan, Confirmation Order and
Sale Order and (ii) to order Plaintiff to dismiss the Civil Action and enjoin, bar and/or estop
Plaintiff from prosecuting the Civil Action and similar claims and causes of action in other
forums (the “Motion”),2 the Court finds that: (i) it has jurisdiction over the matters raised in the
Motion; (ii) this is a core proceeding pursuant to 28 U.S.C. §§ 157(b) and 1334 upon which this
Court may issue a final order; (iii) notice of the Motion and any hearing thereon was sufficient,
proper, and adequate; and (iv) upon the record herein and after due deliberation thereon, good
and sufficient cause exists for the granting of the relief as set forth herein. Accordingly, the
Court hereby ORDERS that:
1. The Motion is GRANTED in all respects; and
2. Plaintiff shall immediately take all necessary action, at its sole cost and expense,
to effectuate the dismissal with prejudice of the Estate Claims, specifically Counts I, III, IV, V,
1 The last four digits of the Debtor’s tax identification number are 6822. 2 Defined terms used but not defined herein shall have the meanings ascribed to such terms in the Motion. 01:22362542.1
Case 16-10682-BLS Doc 585-2 Filed 09/15/17 Page 3 of 3
VI, VII, VIII and IX, in the Civil Action, currently pending in the Delaware Court of Chancery;
and
3. Plaintiff is enjoined, barred and estopped from asserting or prosecuting the Estate
Claims, and Plaintiff is hereby directed to immediately cease and refrain from any further acts to
prosecute or continue the claims and causes of action asserted against the Non-Founder
Defendants in the Civil Action (whether in the Delaware Court of Chancery or any other court)
or to, in any other manner, seek to enforce such claims and causes of action against the Non-
Founder Defendants or other parties; and
4. This order shall be effective immediately upon entry and shall not be stayed
pursuant to any applicable rule of the Federal Rules of Bankruptcy Procedure or Federal Rules of
Civil Procedure.
Dated: ______, 2017 Wilmington, Delaware ______HONORABLE BRENDAN L. SHANNON UNITED STATES BANKRUPTCY JUDGE
01:22362542.1 -2- Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 1 of 236
EXHIBIT 2
Verified Amended Complaint Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 2 of 236
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
BLOSO INVESTMENTS, LTD, § § C.A. No. 12787-VCS Plaintiff, § § v. § § DANIEL MATTES, AMPALU § INVESTMENT, GMBH, EDUARDO § SAVERIN, PENG-TSIN ONG, SCOTT § WEISS, ANDREESEN HOROWITZ, § LLC, ANDREESEN HOROWITZ § FUND, II, L.P., THOMAS § KASTENHOFER, KTI § PRIVATSTIFUNG, STEPHEN § STUUT, CHAD STARKEY, § § Defendants. § §
VERIFIED AMENDED COMPLAINT
COMES NOW, Plaintiff Bloso Investments, Ltd. (“Bloso”), by and through undersigned counsel, with this Verified Amended Complaint 1 against Defendants
Daniel Mattes (“Mattes”), Amupalu Investment GmBH (“Ampalu”), Eduardo
Saverin (“Saverin”), Peng-Tsin Ong (“Ong”), Scott Weiss (“Weiss”), Andreesen
Horowitz, LLC (“AH LLC”), Andreesen Horowitz Fund, II, L.P. (“AH Fund”),
Thomas Kastenhofer (“Kastenhofer”), KTI Privatstifung (“KTI”), Stephen Stuut
(“Stuut”), Chad Starkey (“Starkey”) (collectively, “Defendants”). Bloso’s
1 Pursuant to Court of Chancery Rule 15(aa), attached hereto as Exhibit A is a redline version of the amended complaint indicating in what respects the amendment differs from the pleading it amends.
ME1 23912433v.1 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 3 of 236
allegations are based upon personal knowledge with respect to it, and, as to all
other allegations here, upon information and belief upon, inter alia , a review of
U.S. Securities and Exchange Commission (“SEC”) and other public filings made by former Jumio Corporation (“Jumio”), an investigation undertaken by Plaintiff’s counsel, a review of media and analyst reports about Jumio, statements made by representatives of Jumio in public court records, and Bloso’s contracts and other agreements with Jumio. In support of this Verified Complaint, Plaintiff states as follows:
NATURE OF THE ACTION
1. On October 13, 2016, in a filing made in the United States Bankruptcy
Court for the District of Delaware in support of a plan of reorganization, Defendant
and Director for former Jumio, Eduardo Saverin (“Saverin”), conceded that any
plan objection must be ignored “so that the estate and investors who were victims
of Mr. Mattes’ fraud can pursue litigation against Mr. Mattes and affiliated
management members for the fraud that caused this bankruptcy.” (Exhibit B,
Statement of Eduardo Saverin). The bankruptcy plan was confirmed in part, based
upon these representations. A director of Jumio has openly admitted that a great
fraud against investors has occurred and that Mr. Mattes and affiliated
management members are responsible for that fraud. This lawsuit seeks to
establish the scope of liability for the conspiracy to commit that fraud among Mr.
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Mattes and other Directors of Jumio, and to recover monetary damages in the form of cash and constructive trusts in satisfaction of that liability.
2. This direct action against former directors and officers of Jumio seeks the recovery of damages related to Defendants’ conspiracy for breach of fiduciary duty of disclosure, misrepresentation, equitable fraud, fraud in the inducement, unjust enrichment and the imposition of a constructive trust.
3. Mattes and members of the board of directors and management, including those parties upon whom certain board members were acting, all named here as Defendants, conspired to keep from other Jumio investors and this Plaintiff the true status of Jumio’s accounting condition, all for their own benefit and to protect themselves from liability. This conspiracy to hide the financial accounting fraud resulted in Jumio’s bankruptcy where it faced the combined scrutiny of the
Department of Justice and the SEC, and worse for Plaintiff, the complete loss of its
3,973,520 common shares of Jumio totaling a nearly $5.0 million investment—an investment Plaintiff would not have made or in the alternative divested itself from its investment if Defendants had disclosed the true nature of Jumio’s financial condition. Simply, Defendants knowingly conspired to operate Jumio absent proper internal financial and accounting controls which diminished the bases of
Plaintiff’s investments in Jumio while enriching themselves. Defendants’ failure to manage Jumio subject to ordinary accounting and financial procedures
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sanctioned by GAAP and FASB, Defendants’ failure to correct prior financial misstatements regarding Jumio’s financial condition and their conspiracy to keep such information from disclosure lead directly to Plaintiff’s losses and the claims made here.
4. When Defendants finally determined that the extent of the financial irregularities perpetrated by the Defendants could no longer be hidden and would be unveiled, rather than inform Plaintiff or correct prior misrepresentations,
Defendants immediately took action to engineer Jumio’s bankruptcy and to secure complete liability releases related to the pre-petition actions and inactions which damaged Plaintiff Bloso. Defendants’ actions and misrepresentations further were specifically designed to blunt a stampede of investors, including Bloso, from exercising considerable rights against them personally and to foreclose derivative claims against them on behalf of the company.
5. Mattes, Jumio directors and management were well aware of the financial irregularities as of at least 2013 and have admitted “2013—Conclusions and lessons learned: Presented numbers were not GAAP compliant. We should have established professional accounting much earlier.” (Exhibit C). Defendants acted in conspiracy to prevent these facts from being disclosed to Plaintiff. And
Defendants did prevent such disclosures, in fact, even after a meeting of the Jumio board of directors in March of 2015 wherein it was concluded that Defendants
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could no longer keep Jumio’s financial condition hidden from investors,
Defendants failed to take immediate action to contact Bloso or to correct past gross
misstatements.
6. Only shortly after that meeting in March 2015 did Bloso learn the true nature of the Defendants’ ongoing efforts to conceal Jumio’s accounting and financial fraud. By then, it was too late and Defendants’ plan to avoid liability had already been put into action. On April 1, 2016 Jumio filed a petition for relief under chapter 11 of the Bankruptcy Code in the United States District Court for the
District of Delaware. On the same day, Jumio filed a motion for approval of a sale of substantially all of its assets to Jumio Acquisition, i.e. Saverin.
7. On October 19, 2016, the United States Bankruptcy Court for the
District of Delaware confirmed a bankruptcy plan which grants Defendants full liability releases against any derivative claims. Plaintiff, pursuant to the terms of the plan, was required to “opt out” of the relief granted certain Defendants here in order to pursue directly against these Defendants damages claims related to the conspiracy to commit and/or ratify gross financial and accounting fraud.
8. At all relevant times Bloso was a shareholder of Jumio.
JURISDICTION AND VENUE
9. This Court possesses subject matter jurisdiction pursuant to 8 Del. C.
§ 111 and 10 Del. C. § 341.
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10. This Court has jurisdiction over the Board of director Defendants and the executive Defendants, as the directors and officers of a Delaware corporation pursuant to 10 Del. C. § 3114, and over the non-director Defendants pursuant to 10
Del. C. § 3104(c)(1) and as a result of Defendants’ conspiracy to defraud Bloso directors and others by actively working with the Jumio Board to protect their own investments, participating actively with Jumio’s former Board during the pendency of the bankruptcy, securing for themselves and their agents a favorable exchange of Jumio stock for stock in the new Jumio entity, securing from Saverin indemnification for any losses related to their investments in exchange for support of Jumio’s bankruptcy and for supporting director indemnification efforts, availing themselves of the protections of Delaware law, and negotiating for themselves releases of any potential derivative or majority shareholder liability for pre- bankruptcy actions related to the accounting fraud and gross mismanagement which they each endeavored to conceal.
11. This Court has jurisdiction over Defendants Ampalu, AH LLC and
AH Fund based upon the conspiracy theory of jurisdiction, the alter ego theory of
jurisdiction and the agency doctrine.
PARTIES
12. Jumio was a Delaware corporation which recently emerged from
Chapter 11 bankruptcy administered in Delaware under the caption In re: JMO
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Wind-Down, Inc. C.A. No. 16-10682 (BLS).
13. Bloso is a British Virgin Islands Company and at all relevant times was a common stock holder of Jumio.
14. Defendant Mattes is Jumio’s founder, its former CEO and a former member of the Jumio Board. Mattes has been characterized as a “successful serial entrepreneur” and knows well Defendants Saverin, Weiss and billionaire Netscape founder and venture capitalist Marc Andreesen (whose holding companies and various of his partnerships and funds own and control large amounts of Jumio stock). At all times relevant Mattes owned and controlled Jumio common and preferred stock. Mattes also owns and controls Defendant Ampalu Investments
Inc., (“Ampalu”) a corporation of Belize and a Jumio shareholder entity through which Mattes sold Jumio stock to Bloso. Mattes may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
15. Defendant Ampalu is directly owned and controlled by Defendant
Mattes and at all times relevant directly participated with Matters in a conspiracy as to the allegations herein, was the alter ego of Mattes as to the allegations herein or was the principle for which Mattes acted in agency with respect to the allegations herein. Ampalu may be served process through its co-conspirator, alter-ego and agent, Mattes pursuant to 10 Del. C. §3114(b), by serving Jumio’s
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registered agent Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808. Ampalu may also be served process pursuant to 10
Del. C. §3104.
16. Defendant Saverin is a former member of the board of directors of
Jumio. Saverin is the co-founder of Facebook Inc. and knows well Mattes, Weiss and billionaire Netscape founder and venture capitalist Marc Andreesen (whose holding companies and various of his partnerships and funds own and control large amounts of Jumio stock). At all times relevant Saverin owned and controlled a large amount of Jumio common and preferred stock. Saverin may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.
17. Defendant Ong is a former member of the board of directors of Jumio.
Ong may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808.
18. Defendant Weiss is a former director of Jumio and was acting on behalf, and as a member of, Defendant AH, LLC and on behalf of and a partner of
AH Fund, both financing arms of Marc Andreesen. Weiss sat as a director for and in his capacity as a member of and agent to principal AH LLC and as a partner of
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and agent to principal AH Fund which controlled large amounts of Jumio common
and preferred stock and Jumio debt. Weiss may be served process pursuant to 10
Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
19. Defendant AH LLC is directly controlled by Weiss and at all times
relevant directly participated with Weiss in a conspiracy as to the allegations
herein, was the alter ego of Weiss as to the allegations herein or was the principle
for which Weiss acted in agency with respect to the allegations herein. AH LLC
may be served process through its co-conspirator, alter-ego and agent, Weiss
pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation
Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
AH LLC may also be served process pursuant to 10 Del. C. §3104.
20. Defendant AH Fund is directly controlled by Weiss and at all times relevant directly participated with Weiss in a conspiracy as to the allegations herein, was the alter ego of Weiss as to the allegations herein or was the principle for which Weiss acted in agency with respect to the allegations herein. AH Fund may be served process through its co-conspirator, alter-ego and agent, Weiss pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation
Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
AH Fund may also be served process pursuant to 10 Del. C. §3104.
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21. Defendant Kastenhofer is the former COO and Board member of
Jumio. Kastenhofer owns and controls KTI, a foundation organized under the laws of Liechtenstein. Kastenhofer and KTI own and control large amounts of Jumio common and preferred stock. Kastenhofer may be served process pursuant to 10
Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
22. Defendant KTI is directly controlled by Kastenhofer and at all times relevant directly participated with Kastenhofer in a conspiracy as to the allegations herein, was the alter ego of Kastenhofer as to the allegations herein or was the principle for which Kastenhofer acted in agency with respect to the allegations herein. KTI may be served process through its co-conspirator, alter-ego and agent,
Kastenhofer pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808. KTI may also be served process pursuant to 10 Del. C. §3104
23. Defendant Stuut replaced Mattes as CEO of Jumio and is the current
CEO of New Jumio. Stuut may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service Company, 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808.
24. Defendant Chad Starkey (“Starkey”) is a former officer and general counsel of Jumio and a former member of the board of directors of Jumio. Starkey
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may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s
registered agent Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808.
Factual Background
I. Jumio and Its Business Model
25. Jumio was, and New Jumio is, an online mobile identity and credential authentication company, which uses verification products and software to assist customers in reducing fraud, meeting regulatory requirements and providing faster service to users. At the time of Bloso’s initial investment, Jumio’s business model was to authenticate credit cards via the camera of a mobile phone or computer, and scan all the data, transferring all the information to a seller, and authorizing the payment with minimum manual input from the credit card’s owner.
Jumio also verifies credentials (such as passports, driver licenses and government issued identification) in real-time related both to online and mobile transactions and verifies and facilitates online payments. Jumio’s mobile application enables a phone’s camera to scan identification and payment documents, digitizes the photo scan, and auto-fills payment, shipping and other pertinent information fields for the consumer.
26. Jumio was formed by Mattes in September of 2010. Ultimately,
Mattes, through Ampalu, owned and controlled 10,955,435 common shares of
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Jumio. Mattes as the founder of Jumio was Jumio’s CEO and a Director until his
termination and replacement by Defendants Stuut, alleged post .
27. By March 2011, Defendant Saverin made a significant direct investment in Jumio as part of a Series A round of financing. Ultimately, Saverin owned and controlled 2,885,613 common and 14,514,702 preferred shares of
Jumio. For these investments, Saverin secured a key board position known as a
“Preferred Director” giving him super-voting authority sufficient to approve or block any corporate transaction.
28. In December 2011, with the assistance of Weiss, AH LLC and AH
Fund made significant direct investments in Jumio as part of a Series B round of financing. For these investments, AH LLC and AH Fund secured a key board position and installed Weiss. Weiss was also appointed a “Preferred Director” giving him super-voting authority sufficient to approve or block any corporate transaction on behalf of AH LLC and AH Fund.
29. Kastenhofer was also an early investor in Jumio owning and controlling 163,423 Jumio shares. Kastenhofer also directed and controlled KTI to invest in Jumio which received 2,403,238 shares in return. For these investments,
Kastenhofer was awarded a Director position.
30. Jumio’s revenue and business model was software, as a service.
Jumio charged clients a fixed monthly rate within predefined transaction-volume
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ranges and allows for unlimited transactions. At the time of Bloso’s initial
investment in Jumio, Jumio primarily charged a fee for each credit card transaction.
Initially, and unbeknownst to Bloso, Defendants permitted Jumio to account as
revenue 100% of each credit card purchase made by the third party being verified,
not the small fractional fee that was due to Jumio as part of its business model and
then conspired to keep secret from other investors this critical accounting fact.
Defendants permitted, and hid, this accounting practice as it went on for years. It
was upon these numbers that Defendants represented Jumio’s value and upon
which Bloso made its investment. The restatement of accounting pleaded post , revealed significant differences in the value of Jumio and its business and the representations made to the market.
31. Jumio reported “half of the top 10 consumer Internet companies as
clients as well as hundreds of other retailers, financial institutions, marketplaces
and gaming companies throughout the world using its products.”
32. Jumio’s clients reportedly included Delta, United Airlines,
Travelocity and Airbnb.
II. Material Misstatements to the Media Made and Condoned by Defendants
33. As an emerging technology company, Jumio’s initial formation and operation relied on cash infusions from investors. These early investments were
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made by many of the Defendants who were either themselves controlling
shareholders or representatives of controlling shareholders.
34. Defendants then conspired to either directly create or to facility the
creation of favorable reports in the media regarding the income value of Jumio’s
technology. Defendants knowingly permitted public statements by Board
members regarding strong annual sales (subsequently proven to be false), and
condoned statements from high-profile venture capitalists whose were Defendants
in this action, and then conspired to hide the truth about Jumio’s accounting
practices, all to attract new investors in Jumio which would bolster their
investments.
35. Defendants conspired to knowingly or recklessly permit news of an investment in Jumio by Andreesen’s venture capital firms, AH LLC and AH Fund, controlled by Weiss to be publicized and for years failed to make any correction.
On March 5, 2012, Tech Crunch reported as follows:
Disruptive mobile and online payments startup Jumio has raised $25.5 million in Series B funding led by Andreessen Horowitz. The firm’s General Partner Scott Weiss has joined Jumio’s Board of directors. Jumio’s earlier investors include Facebook co-founder Eduardo Saverin, Peng T. Ong, partner at GSR Ventures and founder of Match.com and Vivek Ranadivé, founder of TIBCO. Founded by Daniel Mattes in 2010, Jumio has raised $32 million to date.
As Weiss explains to us, Andreessen Horowitz made this bet on Jumio partly because Mattes is a successful serial entrepreneur but also because the startup’s technology solves a real problem with online merchants accepting credit cards, making the user experience much
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easier and solving fraud problems. “This is already a tempest in a tea pot and starting to explode,” Weiss says of Jumio’s technology.
The company started off with a European focus last year on gaming, retail and travel and now is on track for a $100 million revenue run rate in 2012 . The new cash infusion will go to hiring as well as expanding merchant and network partnerships through the U.S. and Asia in retail, travel, gaming and digital goods.
Weiss seems optimistic that Jumio can enter these markets and change consumer behavior, saying “I don’t stay up at night worrying about how Jumio is going to do…there’s so much to like about the business and it has the potential to be the primary way people take credit cards online.”
This statement regarding $100.0 million is the total amount of credit card
purchases made using Jumio technology. The real number, had Jumio collected
merely 2% of each verified transaction as was its model was closer to $2.0 million
in revenue.
36. On May 25, 2012, Saverin, speaking on behalf of the Jumio Board, which was condoned by Mattes, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer,
KTI and Starkey, was quoted in a story published in Bloomberg News titled
“Jumio is Growing Faster Than Facebook at the Start, Saverin Says ,” as follows:
Facebook Inc. co-founder Eduardo Saverin said mobile-payment company Jumio, Inc., one of his startup investments, is growing even faster than the social network did at the beginning.
Jumio, started nine months ago, is on course for $100 million in annual sales and is “highly profitable,” Saverin, a director at the Mountain View, California-based company, told the CHINICT technology conference in Beijing today.
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Jumio, whose software turns any web cam or handset into a credit- card reader, will “transform” mobile payments, according to Saverin.
“The reason this company is exciting is the growth it’s gone through is phenomenal,” Saverin said of Jumio. “It’s actually grown a lot faster than I’ve seen in Facebook at the beginning.”
Again, this statement regarding $100.0 million is the total amount of credit card
purchases made using Jumio technology. The real number, had Jumio collected
merely 2% of each verified transaction as was its model was closer to $2.0 million
in revenue. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI
and Starkey knew that these public statements were incorrect, conspired to
continue to keep this information secret and condoned and adopted such statements
while making no effort to correct the inaccuracies of these public statements.
Instead, Jumio and the Board continued to accept additional capital investments
into Jumio.
37. At the time of these statements, Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey were each aware that these public statements regarding Jumio’s profits and profitability were unsupportable and were made at a time when Jumio did not have qualified financial and accounting management and during a time in which no reasonable internal accounting procedures had been applied when making representations.
38. At the time of these statements, Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey were each aware that these public
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statements regarding Jumio’s profits and profitability were not based on a review
of audited financials or financial information prepared by qualified financial and
accounting management and were not created or maintained in accordance with
any of the basic accounting tenets. Had Plaintiff known the true state of Jumio’s
finances, and the true state of the facts and understood that Mattes, Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey controlled Jumio as
interested inside shareholders who benefitted from these misrepresentations about
Jumio’s accounting and financial affairs, they would not have invested.
39. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI
and Starkey knowingly permitted and condoned Jumio’s operation without
qualified financial and accounting management, while permitting
misrepresentations about Jumio’s financial prowess to Plaintiffs and conspiring to
keep such information secret for their own gain.
40. Jumio, with the support and approval of Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey continued to make announcements and public representations about Jumio’s financial condition knowing full well that there existed no GAAP, FASB or other reasonable accounting measure of such statements and while conspiring to keep such facts secret from Bloso.
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III. Bloso’s Investments in Jumio
41. Based upon these public representations, together with personal assurances from Mattes delivered regularly to Bloso, Bloso invested in Jumio.
These representations turned out to be flatly incorrect which would have been revealed had Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey had not conspired to keep secret Jumio’s lack of any proper internal financial and accounting controls and to perpetuate the public misstatements that they condoned.
42. On July 21, 2011, based upon these statements, Mattes and Ampalu sold to Bloso 544,513 shares of common stock of Jumio for $500,000, or $0.92 per share (the “July 2011 Ampalu SPA”). Mattes and Ampalu agreed by Section 4.3 of that agreement to a Delaware choice of law. The true nature of the financial condition of Jumio upon which this transaction was based was kept entirely secret from Bloso and was not revealed to Bloso until March 2015.
43. At the same time, and based upon these statements Kastenhofer through KTI sold to Bloso 544,513 shares of common stock of Jumio for $500,000, or $0.92 per share (the “July 2011 KTI SPA”). Mattes and Ampalu agreed by
Section 4.3 of that agreement to a Delaware choice of law. The true nature of the financial condition of Jumio upon which this transaction was based was kept entirely secret from Bloso and was not revealed to Bloso until March 2015.
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44. On August 1, 2011, based upon these statements, Mattes and Ampalu entered with Bloso a Convertible Loan Agreement and Convertible Term Note in the principal amount of $500,000 (the “August 2011 Note”). The true nature of the
financial condition of Jumio upon which this transaction was based was kept
entirely secret from Bloso and was not revealed to Bloso until March 2015.
45. Again, on October 2, 2011, based upon these statements, Mattes and
Ampalu sold to Bloso an additional 1,089,026 shares of common stock of Jumio for $1,000,000, or $0.92 per share (the “October 2011 $1MM SPA”). Mattes and
Ampalu agreed by Section 4.3 of that agreement to a Delaware choice of law. The
true nature of the financial condition of Jumio upon which this transaction was
based was kept entirely secret from Bloso and was not revealed to Bloso until
March 2015.
46. That same day based upon these statements, Mattes and Ampalu sold to Bloso an additional 544,513 shares of common stock of Jumio for $500,000, or
$0.92 per share (the “October 2011 $500K SPA”). Mattes and Ampalu agreed by
Section 4.3 of that agreement to a Delaware choice of law. The true nature of the
financial condition of Jumio upon which this transaction was based was kept
entirely secret from Bloso and was not revealed to Bloso until March 2015.
47. Again on October 3, 2011, based upon these statements, Mattes and
Ampalu entered into a Convertible Loan Agreement and Convertible Term Note
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with Bloso in the principal amount of $1,500,000 (the “October 2011 Note”). The
true nature of the financial condition of Jumio upon which this transaction was
based was kept entirely secret from Bloso and was not revealed to Bloso until
March 2015.
48. On January 20, 2012, based upon these statements, Mattes and
Ampalu sold to Bloso another 625,478 shares of common stock of Jumio for
$983,822.29, or $1.57 per share (the “January 2012 Ampalu SPA”). Mattes and
Ampalu agreed by Section 4.3 of that agreement to a Delaware choice of law. The
true nature of the financial condition of Jumio upon which this transaction was
based was kept entirely secret from Bloso and was not revealed to Bloso until
March 2015.
49. That same day, based upon these statements Kastenhofer and KTI sold to Bloso another 625,477 shares of common stock of Jumio for $983,820.71, or $1.57 per share (the “January 2012 KTI SPA”). The true nature of the financial
condition of Jumio upon which this transaction was based was kept entirely secret
from Bloso and was not revealed to Bloso until March 2015.
50. On January 25, 2015, based upon these statements, Mattes and
Ampalu entered into a Convertible Loan Agreement and Convertible Term Note
with Bloso in the principal amount of $750,000 (the “January 2012 Note”). The
true nature of the financial condition of Jumio upon which this transaction was
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based was kept entirely secret from Bloso and was not revealed to Bloso until
March 2015.
51. Finally, on May 15, 2012, based upon these statements, Mattes and
Ampalu entered into another Convertible Loan Agreement and Convertible Term
Note with Bloso in the principal amount of $233,753 (the “May 2012 Note”).
Based upon the above statements, all of which were condoned by Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, Bloso ultimately
intended to acquire 5% of the Jumio. As part of the initial purchase, Bloso had an
option to increase its stake in Jumio to $5.0 million investment. Bloso acquired
Jumio shares progressively as Bloso arranged new financing, and as Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey failed to
correct the gross misstatements regarding Jumio’s financial condition. The true
nature of the financial condition of Jumio upon which this transaction was based
was kept entirely secret from Bloso and was not revealed to Bloso until March
2015.
52. Each of these transactions were based upon the information provided and or condoned by Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey in conspiracy to keep the real facts secret from
Bloso while continuing to support and condone public misrepresentations of fact hereinbefore highlighted. Furthermore, Bloso agreed to the increasing price-per-
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share transactions as part of the January 2012 Ampalu SPA and the January 2012
KTI SPA due to favorable media reports condoned by Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey regarding Jumio’s technology.
Bloso was equally confident in Jumio because Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey, many of whom are high-profile venture capitalists, had been willing to contribute their own capital to the company.
Simply, because of Defendants’ conspiracy to support representations that Jumio was on target for $100.0 million in annual revenue, statements which were condoned by Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey enticed Bloso to make a series of investments that it would not otherwise have made. It was also important to Bloso’s investment that Defendants
Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey were the right type of players to execute the Jumio business model. Instead,
Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to conceal Jumio’s accounting and financial fraud while continuing to condone statements made about Jumio’s financial status. The true nature of the financial condition of Jumio upon which this transaction was based was kept entirely secret from Bloso and was not revealed to Bloso until March 2015.
53. What Bloso did not know, and what Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to hide, was the fact that
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while Bloso was acquiring stock and convertible rights in Jumio, Mattes was
clandestinely selling off in the gray-market large portions of his so-called
“founders shares” in Jumio, at huge gains estimated to be in excess of $30.0
million. Bloso also did not know that Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey were taking steps to secure their own private
investments by conspiring to work with together to engineer an out by filing
bankruptcy which would extricate the director Defendants from derivative liability,
include loss and liability indemnities to the non-director Defendants and which
could result in substantial gains when exchanging Jumio stock for stock in the New
Jumio, post bankruptcy.
54. Nevertheless, according to Mattes, Saverin, Ong, Weiss, AH, LLC,
AH Fund, Kastenhofer, KTI and Starkey, Jumio’s business was said to have been progressing swimmingly and so on October 3, 2012, Bloso elected to convert (i) the August 2011 Note into 551,370 shares of common stock of Jumio at the per share price of $1.00 per share, (ii) the October 2011 Note into 1,626,682 shares of common stock of Jumio at the per share price of $1.00 per share, (iii) the January
2012 Note into 479,454 shares of common stock of Jumio at the per share price of
$1.65 per share, and (iv) the May 2012 Note into 146,024 shares of common stock of Jumio at the per share price of $1.65 per share.
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55. Bloso made these conversions of the August 2011 Note, October 2011
Note, January 2012 Note and May 2012 Note into common stock of Jumio based upon the public representations of Saverin that Jumio was growing faster than
Facebook and on track toward $100.0 million in annual revenue in 2012, the public representations of Weiss regarding Jumio’s profitability, and representations by
Mattes and Kastenhofer that Jumio was experiencing rapid growth, all of which were incorrect and all of which were condoned by Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey.
IV. Mattes Misrepresentation That He Represented the Shares of Bloso
56. In total, Bloso invested almost $5.0 million in Jumio.
57. During this period, notwithstanding the fact that Bloso was the named shareholder of record, Mattes continued to falsely claim that he spoke for and controlled the Bloso shares and notes. Mattes had no basis for making these claims, had no authority to make such claims and such claims were not supported by any documentation upon which any reasonable party, including Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey could justifiably rely in not communicating with Bloso or otherwise taking actions related to Bloso’s interests which were not expressly approved by Bloso. Bloso was not made aware of these misrepresentations until well after Jumio had filed bankruptcy.
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58. Worse, on August 23, 2013, unbeknownst to Bloso and without any
authorization, apparent or otherwise, Mattes purported to execute on behalf of
Bloso an Amended and Restated Right of First Refusal and Co-Sale Agreement
(the “Restriction”) with Jumio, purporting to severely restrict and limit the
stockholder rights of 28,223,676 shares of Jumio Common Stock. (Exhibit D).
The Restriction was signed by Mattes, Saverin, Kastenhofer, Starkey, AH LLC,
and AH Fund. Bloso was not made aware of the Restriction until after Defendants
had caused Jumio to file for Bankruptcy. Defendants used this agreement as
justification for failing to provide Bloso with any information about Jumio
notwithstanding that each of the Defendants knew or should have known that
Bloso had purchased Jumio shares from Mattes and Ampalu and that Bloso was the
owners of Jumio shares pursuant to the transaction documents detailed in this
Section III of the Amended Complaint.
V. Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Allow Jumio to Operate Without Any Internal Financial Controls
59. Jumio, under the direction and control of Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to secretly operate
Jumio for over four years without qualified financial and accounting management, including over a year and a half without a Chief Financial Officer (“CFO”), manager of finance, VP of Finance or Director of Finance. Defendants conspired
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to prevent the application of any ordinary course accounting system or principle used every day in small businesses, let alone in a fast-growing international internet business controlled by technology venture capital giants. Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to encourage Bloso’s reliance upon the statements made and condoned by these
Defendants, permitted the Board to later structure and control through bankruptcy a protective transaction which in the end protected their Jumio holdings, indemnified the Board under the Jumio certificate of incorporation, secure releases from derivative liability from the Bankruptcy Court, and saw Defendants eventually indemnified by Saverin for helping to cover up the exposed fraud.
60. Worse, Jumio’s Certificate of Incorporation permits common shareholders to hold three (3) seats on the Board of Directors, but Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, who controlled
Jumio, never held an annual meeting for board elections. This lack of corporate governance was intended to preclude Bloso from taking an inside look at the Jumio books, which were not compliant with any financial or accounting standards which would justify or validate the representations and statements made or condoned by these Defendants. Of course, Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey as insiders had no reason to worry about access to this material and in fact acted in conspiracy with each other to protect their
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investments, to prevent the disclosure of the accounting fraud and to reap the
rewards of the engineered bankruptcy of Jumio.
61. Second, although Mattes, with the consent of Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey advised Bloso that Jumio would prepare and distribute audited Jumio financial statements to Bloso on an annual basis, none was ever prepared or circulated. Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, acted in conspiracy to protect and hide from Bloso the true nature of Jumio’s financial condition through at least
March 2015, and prior to the restatement of financials in 2015 never required that
Jumio prepare or produce appropriately audited financial or accounting statements to Bloso.
62. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI
and Starkey through the fourth quarter of 2014 conspired to prevent Jumio from
putting qualified financial management in place which would have revealed the
fraudulent financial and accounting statements of Jumio. And such Defendants
between through at least March of 2015 did not disclose to, or correct
misstatements to Bloso about Jumio’s inability to generate, produce or audit
appropriate financial and accounting statements. All the while such Defendants
conspired to continue to represent and condone representations that Jumio was in
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good stead and to induce Bloso into further additional financial transactions with
Jumio, detailed herein.
63. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey during the first quarter of 2014 also failed to advise Bloso that it had been given false information by Jumio management that a search for an appropriate CFO and accounting system had not actually been initiated, and the
Board took no action with respect to the managements false representations about engaging an appropriately qualified CFO. Defendants conspired to hide these facts from Bloso. At the very least their inaction was grossly negligent.
64. Even after Jumio hired a new CFO in the fall of 2014, that CFO resigned days later telling Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey that Jumio’s finance and accounting issues required a complete review and restatement of Jumio’s financials by a qualified internal financial accountant. Defendants conspired to keep secret these facts as well.
Only that CFO’s departure from Jumio finally spurred Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey into recognizing that they could no longer hide Jumio’s financial condition and past financial misrepresentations did Defendants among themselves initiate a scheme to protect themselves and their investments.
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VI. Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Conduct a Self-Serving Investigation into Jumio’s Financials
65. No longer able to hide the past improprieties, in March 2015, Mattes,
Saverin, Ong, Weiss, Kastenhofer and Starkey authorized the formation of a special committee (the “Special Committee”) to determine the scope of the damage and potential liability for their ongoing conspiracy to hide past misrepresentations couched in terms of an investigation into Jumio’s finances.
66. The Special Committee was made up of Board members Saverin,
Weiss and Ong (the “Special Committee Members”). Of course, as a result of the
conspiracy between all Defendants the Special Committee Members reported to
and worked with Mattes, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey.
67. The Special Committee engaged special counsel to conduct the investigation. In April 2015, special counsel verbally provided its findings to the
Board, which were shared among Mattes, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI and Starkey, without ever producing a written report.
Upon information and belief, special counsel advised the Special Committee
Members, who in turn advised Mattes, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey that the financial and accounting improprieties at Jumio had contributed greatly to Jumio’s poor financial performance, its inability to raise additional capital and constituted gross breaches of director duties to the company. Upon
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information and belief special counsel also advised the Special Committee
Members, who in turn advised Mattes, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey that the past representations to Bloso were entirely improper.
68. Thereafter, Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey failed to share with Bloso these results or make any
announcement regarding the results of the Special Committee’s investigation—the
results of which of course Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey as insiders were aware and they had spent a long
time conspiring to hide; instead, Defendants Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey initiated actions to limit potential
liability for their gross fiduciary breaches and misrepresentations to Bloso.
69. Upon information and belief, Defendants Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey by this time had concluded that
Jumio was insolvent, in financial disarray and potentially faced bankruptcy.
VII. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Panic and the Board Votes to Remove CEO and Founder Daniel Mattes
70. At the conclusion of the Special Committee, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey tried to distance themselves from
Jumio founder and then CEO, Mattes who had already signaled to them that he would not take the fall alone. Saverin, Ong, Weiss, Kastenhofer and Starkey took
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action to forced Mattes to resign. On April 30, 2015, Mattes resigned as CEO of
Jumio and his seat on the Board was forfeited.
71. On June 24, 2015, Mattes’ departure was reported in a story published
on Fortune.com titled: “ Exclusive: Jumio swaps CEOs after examining its books ,” as follows:
Jumio, a mobile identification company whose clients include United Airlines and Airbnb, has quietly said goodbye to founder and CEO Daniel Mattes, Fortune has learned, following an internal investigation into possible financial irregularities.
The Mountain View, Calif.-based company isn’t commenting on Mattes or the investigation, with one source saying that a confidentiality agreement is in place. Mattes did speak with Fortune, saying he made a “voluntary decision to resign” because he is better at starting companies and getting them in position to execute toward profitability, than he is at managing said execution. A source familiar with the situation, however, says that had Mattes not resigned of his own accord, he would no longer be CEO.
Mattes also acknowledged that “at one point” Jumio hired outside auditors to reexamine its books, but says nothing out of the ordinary was found. He adds that he will be available to advise new Jumio CEO Stephen Stuut — who previously ran TruePosition — but he no longer will be a member of Jumio’s Board of directors.
Jumio did send Fortune a statement confirming that Stephen Stuut is now the company’s permanent CEO, but made no mention at all of Mattes. There also was no comment from Jumio investors Andreessen Horowitz, Citi Ventures and Pinnacle Ventures, which have invested more than $25 million into the company (whose Board members include Facebook co-founder Eduardo Saverin).
Perhaps one reason the investors didn’t want to speak was that Mattes has some checkered history when it comes to his investors. Prior to founding Jumio, the serial entrepreneur was best-known for founding
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Jajah, a VC-backed Internet phone company that was acquired in late 2009 by Telefonica for $209 million (which, at the time, was still a lot of money in Silicon Valley).
Mattes was no longer CEO at the time Jajah was sold, but Delaware court filings show that a fellow entrepreneur named Yair Goldfinger (currently CEO of AppCard) subsequently sued Mattes for alleged fraud related to the private sale of Jajah stock.
72. Even at this point Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey took no action to correct past misstatements made in conspiracy about Jumio’s financial condition. Nor did they undertake steps to confirm Mattes misrepresentation that he spoke for Bloso or otherwise.
73. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey searched for a new CEO with whom they could work in an effort to cover up the past misrepresentations. Shortly after Mattes’ departure, Saverin, Ong,
Weiss, Kastenhofer and Starkey hired Stuut to replace Mattes as CEO of Jumio.
Stuut was installed specifically to assist in extricating the other Defendants from potential liability for their past conspiracy.
74. Bloso was not advised of Mattes’ removal, nor of Stuut’s appointment.
75. Stuut did not correct the past misrepresentations adopted by the Jumio board. Stuut did not object to the incorrect Jumio financial information. Instead,
Stuut adopted Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey’s position and went to work assisting in the cover up.
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76. Furthermore, unbeknownst to Bloso at the time, prior to the distribution of the results of the Special Committee’s investigation, Saverin, Weiss,
AH LLC and AH Fund quietly purchased preferred shares in Jumio on an unsecured basis. This acquisition of Jumio shares was designed to provide Saverin,
Weiss, AH LLC and AH Fund a controlling block of votes for any upcoming transaction. Bloso was not advised of this acquisition which upon information and belief was clearly designed to dilute Bloso’s ability to impact any required shareholder vote which was contrary to Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut’s efforts to absolve themselves of potential liability related to the past conspiracy involving Jumio’s financial condition.
77. After receiving the results of the Special Committee’s investigation,
Saverin later determined, as explained post , to help implement a plan to hide any malfeasance and simultaneously to restrict Bloso’s ability to sell its stock in Jumio, by entering into secured loan agreements with Jumio that gave him superior rights and control vis-à-vis Bloso.
78. Saverin insisted on obtaining a security interest in Jumio’s assets so that he would have a position of control and power in Jumio’s eventual bankruptcy; as a secured creditor, he could dictate terms of post-petition financing, be in a position to credit bid in a bankruptcy sale of Jumio’s assets, fight any proposed action which affected his “collateral,” and seek to enter into agreements
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which released Defendants of all liability for Jumio’s past operations while at the same time offering them more lucrative positions in New Jumio while at the same time Saverin would indemnify each.
VIII. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut Improperly Amend Jumio’s By-Laws to Permit Saverin, Weiss, AH LLC and AH Fund to Convert Old Notes to Secured Jumio Loans
79. By August of 2015, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut still had not advised Bloso of the results of the Special Committee’s investigation into financial irregularities at Jumio.
80. Instead, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut focused on amending Jumio’s by-laws to restrict stock transfers, and make it impossible for shareholders to recoup their investments and walk away from Jumio.
81. On August 27, 2015, the Board, as directed by Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut issued Amended and
Restated By-Laws of Jumio Inc. (the “Amended By-Laws”), which, among other things, restricted transfers of capital stock unless the transfer was (a) expressly preapproved by the Board at the Board’s sole discretion, and (b) made in accordance with the Amended and Restated Right of First Refusal and Co-Sale
Agreement, dated August 28, 2015. Defendants had already begun discussing the option of Jumio’s bankruptcy and reorganization, which they would engineer,
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orchestrate and control. These actions directly impacted Bloso in a way that Bloso would be uniquely affected.
82. As a matter of the DGCL, the Amended By-Laws knowingly violate 8
Del. C. § 202, which provides as follows:
(b) A restriction on the transfer or registration of transfer of securities of a corporation, or on the amount of a corporation's securities that may be owned by any person or group of persons, may be imposed by the certificate of incorporation or by the bylaws or by an agreement among any number of security holders or among such holders and the corporation. No restrictions so imposed shall be binding with respect to securities issued prior to the adoption of the restriction unless the holders of the securities are parties to an agreement or voted in favor of the restriction .
8 Del. C. § 202(b) (emphasis added).
83. At the same time Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut were improperly restricting Bloso’s ability to sell its stock, they were discussing Jumio’s potential bankruptcy. Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut were each attempting to prepare security agreements which would give Saverin, Ong, Weiss,
AH LLC, AH Fund, Kastenhofer and KTI the power to dictate and control the sale of Jumio in bankruptcy. As it turned out, Saverin took the lead for he and Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut as the stalking horse bidder and original proposed purchaser during the §363 bankruptcy sale of all of Jumio’s assets. The Stalking Horse Asset Purchase Agreement provided for
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the sale of rights, claims and causes of action against Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut —claims and causes of
action which of course, Saverin would never bring.
84. Bloso was not a party to any agreement consenting to the stock restriction, nor was Bloso asked or permitted to vote in favor of the restriction.
Bloso was not advised of or asked to participate in the potential bankruptcy restructuring of Jumio, and Bloso’s Jumio equity interest.
85. Gearing up to implement their plan to steal Jumio out of bankruptcy while negating Bloso’s rights, on August 28, 2015, Saverin and Weiss for AH purchased the following convertible notes (the “Saverin Notes”):
a. Note No. CPN -1 dated August 28, 2015 in the original
principal amount of $4,000,000.00 owed to Saverin;
b. Note No. CPN -2 dated August 28, 2015 in the original
principal amount of $1,509,780.82 owed to Saverin;
c. Note No. CPN -3 dated August 28, 2015 in the original
principal amount of $2,005,041.10 owed to Saverin; and
d. Note No. CPN -4 dated August 28, 2015 in the original
principal amount of $1,509,780.82 owed to AH. Of course, this
Note was transferred to Saverin on March 18, 2016, three days
before Jumio actually filed for Chapter 11 protection.
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86. Pursuant to a security agreement dated August 28, 2015, the Saverin
Notes were secured by liens on and security interests in substantially all of Jumio’s assets, including its cash (the “Saverin Security Agreement”).
IX. The Financial Restatements
87. After the ability of Bloso to transfer stock was essentially revoked by
the Amended By-Laws, and the Saverin Notes and Saverin Security Agreement
were signed, Bloso learned of the rampant financial mess at Jumio and realized for
the first time that the bases for its investment in Jumio, to wit Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut’s representations about
the financial status of the company, were baseless.
88. On September 2, 2015, Defendants publicly announced that Jumio was required to restate its unaudited financial statements for the years ending
December 31, 2013 and December 31, 2014 (the “Restated Financials”).
89. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut further announced that the decision to issue the Restated Financials was made following the identification of errors related to revenue recognition policies adopted by Jumio. By early fourth quarter 2015, Jumio was not flush with the
$100.0 million but was instead almost flat broke.
90. During a conference call in September 2015, Stuut, on behalf of
Jumio and Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
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Starkey admitted to Bloso that Jumio did not have anyone on staff with the
requisite accounting experience or familiar with and qualified to apply standard
GAAP and FASB rules regarding revenue recognition.
91. This admission that Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey had operated Jumio for over four years absent appropriate financial and accounting management, whilst making representations to Bloso about Jumio’s financial condition was stunning to Bloso. Of course, Stuut had done nothing to remedy this egregious problem nor did he undertake any effort to advise Bloso prior to this admission. Bloso was now locked out of its right to dump Jumio stock while Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut were taking actions to protect their future interests in Jumio and to mitigate all potential liability for their management and fiduciary malfeasance.
92. During that same September 2015 conference call, Stuut made several
other stunning representations on behalf of Jumio which were adopted by
Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut:
a. Although Jumio was broke, Defendants had received significant
inbound interest for Series D financing;
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b. Defendants would be “communicative and informative”
regarding the completion of the Series D financing; and,
c. Defendants appeared confident that the Series D financing
round would be funded; at no point did Defendants tell Bloso
that the restated financials were hindering the Series D issuance.
93. Despite the pledge to be “communicative and informative,” Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut never communicated to Bloso that there were any difficulties completing Series D financing. But in documents disclosed during the bankruptcy proceedings, Stuut certified that the restated financials made raising funds almost impossible.
X. The Settlement Agreement
94. On January 14, 2016, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut caused Jumio to issue the following letter to all shareholders, predominantly impacting Bloso:
Dear Securityholder:
As you may know, Jumio, Inc. (the “Company” or “Jumio”) recently restated its unaudited financial statements for fiscal years ended December 31, 2013, and December 31, 2014 (the “Restated Financials”), copies of which were provided to all stockholders that complied with the instructions provided in the Company’s stockholder letter dated September 2, 2015. The Board of Directors of the Company (the “Board”) recently determined that it is in the best interest of the Company to offer certain stockholders who may have reviewed financial data derived from Jumio’s 2013 unaudited financial statements (the “Disclosures”) in connection with their
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purchase of Jumio capital stock, a warrant to purchase additional shares of common stock of the Company (the “Warrants”) in exchange for signing a settlement agreement. As the issuance of the shares of common stock underlying the Warrants may be dilutive to all other stockholders, option holders and warrant holders (the “Securityholders”) of the Company, the Company also plans to offer you a potential “top up” to maintain your pro rata ownership (the “Top-Up”), as provided in more detail below, in exchange for signing a Settlement Agreement attached hereto as Exhibit A. The Company does not admit any fault or wrongdoing. However, it believes that it is in the best interest of the Company to resolve any potential issues with the holders of its securities.
The net result of the Top-Up is that, if the Company needs to issue more than 15.4 million shares of common stock of the Company to cover the exercise of the Warrants, all Securityholders (other than Selling Stockholders) will receive additional shares of capital stock of the Company (or rights to acquire additional shares of capital stock of the Company) to maintain their current ownership on a fully-diluted basis. The Company estimates that it will be required to issue more than the 15.4 million shares of the Company to cover the exercise of the Warrants if the Independent Valuation is lower than $190 million.
95. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut even attempted to authorize pop-up warrants to be issued to Jumio shareholders in an effort to cover losses related to past misrepresentations.
96. On January 29, 2016, based on these representations by and condoned by Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut that Series D financing would be completed, and the promise that Bloso’s percentage ownership interest would not be diluted, Bloso and Jumio entered into a
Settlement Agreement (the “Settlement Agreement”), in which Jumio agreed to issue additional shares to Bloso in exchange for Bloso’s agreement to release any
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claim related or arising from “(1) the Security-holder’s purchase or acquisition of the shares and/or options or warrants to purchase shares of the Company’s capital stock on or before this date, (2) any actual or alleged accounting errors and irregularities that preceded, were related to, caused in whole or in part by or resulted in the Restated Financials, (3) any actual or alleged defect, error, misstatement, or omission in the Company’s past disclosures and/or the Restated
Financials, (4) the issuance of the Warrants, or (5) the entering into of this
Agreement, provided, however, that nothing herein shall release any claims to enforce the rights granted under this Agreement” (the “Released Claims”).
97. Significantly, the Settlement Agreement also provided that the issuance of additional shares would occur “immediately prior to the earlier of (i) the Company’s next round of equity financing, (ii) a Change of Control, or (iii)
April 1, 2016.”
98. But, unbeknownst to Bloso, in February 2016, Saverin formed Jumio
Acquisition, LLC in order to help Defendants enact a plan to take Jumio from
Bloso in a bankruptcy.
99. The Settlement Agreement had to be ratified by the Jumio Board for it to be valid. The Settlement Agreement was not ratified by the Jumio Board.
100. Defendants used the Settlement Agreement as a ploy to keep Bloso from taking any action until at least April 1, 2016, while Defendants were
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preparing to take Jumio into bankruptcy where they could release themselves of liability to Bloso.
101. Upon information and belief, while during the first quarter of 2016
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut received various term sheet and financing offers to Jumio shareholders totaling as much as $30,000,000, and these defendants, of course, said nothing to Bloso.
102. Instead, in mid-March 2016, AH LLC and AH Fund transferred their secured debt to Saverin, and three days later Jumio filed its voluntary petition for relief under chapter 11 of the Bankruptcy Code. Bloso’s investment was thereby ruined. By then, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut had the intention to squeeze out completely Bloso and take control of a very valuable company at a substantial discount to its fair market value.
The proof is that New Jumio is flourishing and just raised $15.0 million.
XI. Jumio’s Bankruptcy
103. Prior to April 1, 2016 as set forth as a condition in the Settlement
Agreement, on March 21, 2016 (the “Petition Date”), Jumio filed a petition for relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware. On the same day, Jumio filed a motion for approval of a sale of substantially all of its assets to Centana Growth Partners, LP.
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104. Of course, Saverin by now was complaining that he and Mattes had suffered a falling out related to the demise of Jumio, each blaming each other for the financial irregularities leading to the “fraud” articulated by Saverin in his bankruptcy court filing. When Jumio filed bankruptcy Saverin supplied the $2.4 million in Debtor-In-Possession financing to Jumio and thereafter agreed to contribute $600,000.00 to the Jumio bankruptcy estate as part of the now- confirmed plan which included a release of all derivative claims against him.
Saverin benefitted by the engineered bankruptcy as a result of the release of all derivative claims against him as a director of Jumio related to his role in the financial and accounting misrepresentations made to Plaintiff. Defendants argued to the Bankruptcy Court that because Saverin’s investment was hurt too the Board should receive a total release from any potential derivative liability regarding the conspiracy to make and hide ongoing financial misrepresentations.
105. On May 6, 2016, the Bankruptcy Court approved the sale of Jumio’s assets to Centana Growth Partners LP. Despite Defendants’ prior boasting over
$100,000,000 in annual revenue, publicizing partnerships with elite and global companies and listing over $62,000,000 in assets on its bankruptcy schedules,
Jumio was sold to Defendants through Centana Growth Partners for $850,000, less cure costs. New Jumio returned to operations.
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106. No explanation for the drastic difference in purchase price compared to the value of Jumio’s assets was provided to the bankruptcy court, and no amendment to schedules to indicate the value of assets misstated was offered.
107. Less than six months after exiting bankruptcy, New Jumio has already raised $15,000,000 in new financing and issued numerous press releases regarding its “strong growth in the market, having recognized record results for Q2 2016, with a greater than 65 percent growth in recurring revenue year-over-year, and a record 30 million transactions completed to-date.” Jumio Momentum Continues
With $15 Million Financing Round , http://www.marketwired.com/press- release/jumio-momentum-continues-with-15-million-financing-round-
2154169.htm, August 30, 2016. Of course, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI, Starkey and Stuut have all benefitted enormously to the great detriment of Bloso.
108. It is clear that Jumio was a business with value and at that same value was transferred to New Jumio without any material change in the client base, business model, technology or expertise. New Jumio continues to experience growth, and the sole purpose of Jumio’s bankruptcy was to dilute and terminate
Bloso’s rights in Jumio and to absolve Mattes, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI, Starkey and Stuut of any liability with respect to the
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finance and accounting malfeasance perpetrated under their watch, which formed the bases of the representations which induced Bloso to invest.
109. Saverin next proposed a Liquidating Chapter 11 Plan (the “Plan”) and
Global Settlement Agreement, whereby creditors and Bloso release all claims against Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut in exchange for Saverin and AH LLC and AH Fund funding a minor “litigation trust” to pursue derivative fiduciary claims against the so-called
“bad” board members and certain officers. The Plan, of course, calls for Saverin and AH LLC and AH Fund to be repaid from New Jumio operation funds before any other creditor who opts-in to the Global Settlement Agreement is paid.
110. Upon information and belief, Saverin, AH LLC and AH Fund have agreed to indemnify Ong, Weiss, Kastenhofer, KTI, Starkey and Stuut as part of this process.
111. Thus, in exchange for funding a litigation trust, for which Saverin and
AH will be repaid, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut received releases from the bankruptcy estate of all potential derivative and related claims against them. Bloso’s direct claims against the
Defendants properly rest before the Court of Chancery.
112. As a result of Defendants’ actions Bloso has suffered direct and unique harm.
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COUNT I—CIVIL CONSPIRACY Defendants
113. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
114. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to deprive Bloso of the value of his Jumio shares.
115. That conspiracy benefited Mattes, Saverin, Ong, Weiss, AH, LLC,
AH Fund, Kastenhofer, KTI and Starkey and harmed Plaintiff.
116. Multiple unlawful acts in furtherance of this conspiracy occurred when: (1) Defendants made false reports in the media regarding the income value of Jumio’s technology; (2) Defendants made knowingly false statements regarding
Jumio’s income to Bloso to induce Bloso to invest in Jumio; (3) Defendants secretly operated Jumio for years without qualified financial and accounting management; (4) Defendants acted in conspiracy to protect and hide from Bloso the true nature of Jumio’s financial condition; (5) Defendants prevented Jumio from putting qualified financial management in place; (6) Defendants took action to limit their liability for their gross fiduciary breaches and misrepresentations; (7)
Defendants amended Jumio’s by-laws to restrict stock transfers in an effort to protect themselves; (8) Defendants used the Settlement Agreement to keep Bloso from taking any action before Jumio entered into bankruptcy; (9) Defendants
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negotiated and accepted indemnity agreements in exchange for favorable positions
in New Jumio post bankruptcy.
117. As a result of Defendants’ conduct, Bloso has been damaged as
described in this complaint.
COUNT II—FRAUD Mattes and Ampalu
118. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
119. On August 23, 2013, unbeknownst to Bloso and without any authorization, apparent or otherwise, Mattes purported to execute on behalf of
Bloso the Restriction purporting to severely restrict and limit Bloso’s stockholder rights in Jumio Common Stock.
120. During this period, notwithstanding the fact that Bloso was the named shareholder of record, Mattes continued to falsely claim that he spoke for and controlled the Bloso shares and notes. Mattes had no basis for making these claims, had no authority to make such claims and such claims were not supported by any documentation upon which any reasonable party, including Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey could justifiably rely in not communicating with Bloso or otherwise taking actions related to Bloso’s interests which were not expressly approved by Bloso. Bloso was not made aware of these misrepresentations until well after Jumio had filed bankruptcy.
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121. At no time was Mattes or Ampalu an authorized agent or representative of Bloso regarding Bloso’s Jumio stock and convertible notes. At no time were Defendants authorized to deal directly with Mattes or Ampalu with respect to Bloso’s Jumio stock and convertible notes.
122. As a direct and proximate result of this fraud Bloso was injured.
COUNT III—Breach of Fiduciary Duty Against all Defendants
123. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
124. As alleged in detail herein, Defendants owed a fiduciary duty to, among other things, act in furtherance of the best interests of Bloso, to make accurate, timely representations and to correct immediately any misstatements about which Defendants became aware and to assure that Bloso’s franchise and other rights were protected.
125. Specifically, and as alleged above, Defendants misled or failed to remedy prior misrepresentations to Bloso by, inter alia , failing to disclose Jumio’s financial and accounting position, failing to disclose that Mattes was secretly selling his founder-shares on the gray market, failing to disclose Jumio’s orchestrated impending bankruptcy filing, and failing to deal fairly with Bloso while at the same time taking steps to protect Defendants’ controlling stock interests while maneuvering to extricate themselves from personal liability.
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126. As a direct and proximate result of the foregoing breaches of fiduciary duties Bloso has sustained damages in the complete loss of the value of its Jumio stock, its franchise and sale rights prior to bankruptcy and opportunities to meaningfully protect its interests prior to and in bankruptcy, such rights being greater than the value of Bloso’s investment.
127. These losses are unique to Bloso and cannot be remedied by payment
to Jumio.
128. Plaintiff has no adequate remedy at law.
COUNT IV Fraud – All Defendants
129. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
130. Defendants owed to Bloso the duty of accurate and timely disclosure regarding the financial condition of Jumio and to correct any misrepresentation.
131. Defendants by their actions, inactions, statements, misstatements and failure to correct or otherwise condone misstatements committed fraud by making false representations to Bloso regarding the business and Jumio’s financial condition which they kept hidden from Bloso.
132. By allowing Jumio to operate without any internal financial controls for many years, and by knowingly failing to disclose that information to Bloso while at the same time making misrepresentations or failing to correct
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misstatement and condoning past statements about the financial propriety of Jumio,
Defendants acted with reckless indifference to the truth.
133. Although Defendants were aware of the massive errors in Jumio’s financial statements, they continued to make misrepresentations and to condone past misrepresentations to Bloso to induce Bloso to agree to Jumio stock transactions and to exercise their conversion rights.
134. The Defendants induced Bloso to enter into the Settlement Agreement based upon false representations that Bloso’s ownership interest in Jumio would not be diluted and that Bloso would be issued additional shares.
135. Bloso acted in reasonable reliance upon the Board’s representations and those supported and condoned by Defendants.
136. Bloso was not, and could not have been, aware of the material misrepresentations made and condoned by Defendants until at the earliest, March of 2015.
137. Bloso justifiably relied on the Defendant’s false representations, by undertaking the various stock purchase and conversion transactions alleged herein,
Bloso agreed to enter into the Settlement Agreement, and gave up any opportunity to (i) seek to sell its shares, or (ii) or take any other legal action with respect to the
Released Claims.
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138. As a result of Bloso’s reliance on defendant’s false representations,
Bloso was damaged following the Defendants orchestrated bankruptcy of Jumio and subsequent sale, which effectively wiped out the Bloso’s interest in Jumio.
COUNT V Equitable Fraud – All Defendants
139. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
140. Defendants owed to Bloso the duty of accurate and timely disclosure regarding the financial condition of Jumio and to correct any existing or prior material misrepresentations.
141. Defendants breached their duty to Bloso by, inter alia , failing to require Jumio to produce annual audited financial statements, by failing to disclose to Bloso the financial and accounting condition of Jumio and by condoning past and continued misrepresentations regarding such condition.
142. Defendants further breached their duty to Bloso by failing to require
Jumio to put in place basic financial management and adhere to basic accounting principles which would have warned Bloso about the financial and accounting improprieties at Jumio and which would have prevented Bloso from undertaking certain stock purchase and conversion transactions. At no time prior to the stock purchase transactions or conversion transactions did Defendants attempt to or
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otherwise actually correct Bloso’s mistaken belief as to the true state of Jumio’s
financial and accounting affairs.
143. As a direct and proximate result of Defendants’ actions, inactions and misrepresentations, Bloso elected to enter into the stock purchase transactions and elected to convert the August 2011 Note, October 2011 Note, January 2012 Note and May 2012 Note into common stock, each transaction induced by Defendants.
144. But for the failure of Defendants to properly and accurately disclose, or to correct prior disclosures regarding, Jumio’s true financial and accounting condition, Bloso would not have invested in or otherwise would have divested itself from Jumio. Defendants also failed to accurately and timely disclose to
Bloso Jumio’s orchestrated and impending bankruptcy filing.
145. At all times relevant Defendants acting as agents of each other and
Jumio, or acting as a close controlling group of directors, officers and shareholders
owed a special obligation to Bloso as a minority shareholder beholden to them.
Defendants were required to make to Bloso, and correct misstatements about, all
appropriate and material correct disclosures as to Jumio’s financial and accounting
condition which they failed individually and collectively to do. Defendants created
a deliberate and false impression about Jumio designed to entice Bloso to
undertake the stock purchase and other transactions complained about herein.
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146. Bloso acted in reasonable reliance upon the Board’s representations
and those supported and condoned by Defendants.
147. Bloso was not, and could not have been, aware of the material
misrepresentations made and condoned by Defendants until at the earliest, March
of 2015.
148. Bloso is entitled to rescind the stock purchase agreements and the conversion transactions and receive from Defendants any and all consideration paid by Bloso to Defendants in support of those transactions.
149. Bloso has suffered direct pecuniary losses as a result of Defendants’ conduct.
COUNT VI Unjust Enrichment & Constructive Trust– All Defendants
150. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
151. Upon learning of the financial fraud occurring under their watch,
Defendants actively took steps to retain and improve their positions in Jumio to the detriment of Bloso, converted old unsecured notes into secured loans, allowed
Jumio to run out of money so they could force Jumio into bankruptcy and thereafter attempt to release themselves of all liability.
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152. Defendants were enriched by Saverin and AH converting old debt into
the Saverin Notes, which improved their position of power and control vis-à-vis
the Bloso.
153. As a result of the Defendants actions to take control, impoverish, and
force Jumio into bankruptcy, Bloso suffered a loss of almost $5.0 million dollars.
154. Defendants had no justification for taking their actions to disenfranchise and dilute Bloso other than their desire to take control of Jumio and to absolve themselves of liability through seeking releases first through the
Proposed Asset Purchase Agreement, and then through the Proposed Global
Settlement Agreement and Liquidating Chapter 11 Plan.
155. As a direct and proximate result Defendants have been unjustly enriched by Bloso’s investment in Jumio.
156. Bloso has no adequate remedy at law.
COUNT VII Fraud in the Inducement – Defendants
157. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
158. At all times relevant Defendants were acting personally or as direct agents on behalf of parties from whom Bloso acquired its Jumio shares, and are as a result of the breach of fiduciary duties, fraud, negligent misrepresentations and equitable fraud are directly liable to Bloso.
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159. Defendants knowingly failed to disclose or failed to remedy improper prior disclosures of Jumio’s financial and accounting affairs prior to Bloso’s acquisition of Jumio shares.
160. Defendants made representations about Jumio’s financial condition that were false or acted with reckless disregard to the truth about the veracity of
Jumio’s financial and accounting condition as publicly touted, and about Jumio’s impending bankruptcy.
161. Defendants waited over five (5) months before advising Bloso that they had done a forensic audit and investigation into Jumio’s financial mismanagement, which ultimately resulted in the Restated Financials.
162. Defendants made numerous false statements to Bloso regarding their absolute confidence that Series D financing would be completed.
163. Defendants made numerous false statements to Bloso that it would be issued additional stock and that its ownership in Jumio would not be diluted, but
Bloso, and others would instead be compensated for any event that led to dilution.
164. These representations induced Bloso to enter into the stock purchase agreements, exercise conversion rights and to enter the Settlement Agreement.
165. Defendants were actively preparing for Jumio’s bankruptcy and subsequent sale while they were soliciting Bloso to enter into the Settlement
Agreement, as evidenced by Saverin’s formation of Jumio Acquisition, LLC in
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February 2016, at a time when Jumio was allegedly actively engaged in securing
Series D financing.
166. Defendants fraudulently induced Bloso to enter into the Settlement
Agreement, improperly restricted Bloso’s ability to sell stock in the Amended By-
Laws, and essentially held Bloso hostage until the Petition Date, when Bloso’s interest in Jumio was effectively eliminated.
167. Defendants’ rights and gains related to their Jumio ownership and any ownership or other pecuniary interest in New Jumio were unjust, and as a direct and proximate result of Defendants’ conduct they were unjustly enriched to the detriment of Bloso.
168. As a direct and proximate result of Defendants’ fraudulent, unfair and unconscionable conduct, Defendants were unjustly enriched at the expense of
Bloso to which they owed fiduciary duties. As a result, all gains of Defendants resulting from Jumio and New Jumio are held in constructive trust for the benefit of Bloso.
169. Bloso has no adequate remedy at law.
COUNT VIII Fraudulent Transfer 6 Del. C. §1304 – Saverin, Ong, Weiss, Kastenhofer, Starkey and Stuut
170. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
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171. The reclassification of unsecured, previously issued notes into the secured Saverin Notes represents a transfer that is fraudulent as to Bloso.
172. Saverin, Ong, Weiss, Kastenhofer, Starkey and Stuut permitted
Saverin and AH to convert unsecured notes into the Saverin Notes with the actual intent to hinder, delay and defraud Bloso, as Defendants were conspiring to place
Jumio in bankruptcy and obtain releases of liability for themselves.
173. Saverin, Ong, Weiss, Kastenhofer, Starkey and Stuut permitted
Saverin and AH to convert unsecured notes into the Saverin Notes without receiving a reasonably equivalent value in exchange for the transfer, as no new funds were provided to Jumio in exchange for granting the security interest.
174. The reclassification of unsecured notes into the secured Saverin Notes occurred at a time when Jumio was about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
175. The reclassification of unsecured notes into secured Saverin Notes occurred at time when Saverin, AH and acting Management reasonably should have known that Jumio was incurring debts beyond its ability to pay as they became due.
176. As a direct and proximate result of these actions Bloso was harmed.
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COUNT IX Fraudulent Transfer 6 Del. C. § 1305 – Saverin, Ong, Weiss, Kastenhofer, Starkey and Stuut
177. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
178. The reclassification of unsecured, previously issued notes into the secured Saverin Notes represents a transfer that is fraudulent as to Bloso.
179. Bloso’s claim arose before the reclassification of the previously issued unsecured notes into the secured Saverin Notes.
180. Jumio received less than reasonably equivalent value in exchange for the reclassification of unsecured, previously issued notes into the secured Saverin
Notes, because Jumio did not receive any funds in exchange for the reclassification.
181. Ultimately, Jumio was insolvent or became insolvent as a result of the reclassification of unsecured, previously issued notes into the secured Saverin
Notes, it was still cash flow negative, it had used almost all of its capital, because it could not raise new capital, and Defendants saw an opportunity take control of
Jumio while at the same time insulating themselves from liability regarding past representations and actions.
182. Saverin, Ong, Weiss, Kastenhofer, Starkey and Stuut are insiders of
Jumio pursuant to 6 Del. Code § 1301(7)(b).
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183. The reclassification of unsecured, previously issued notes into the secured Saverin Notes constitutes a transfer to an insider for an antecedent debt,
Jumio was insolvent at the time of the transfer and Saverin, Ong, Weiss,
Kastenhofer, Starkey and Stuut had reason to believe that Jumio was insolvent.
WHEREFORE , Plaintiff Bloso demands judgment as follows:
A. An award of damages for Defendants’ breach of fiduciary duties to
Bloso, including an award for the value of the loss of Bloso’s rights to vote its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes and for losses accrued to Bloso for such actions, jointly and severally as a result of Defendants’ civil conspiracy;
B. An award of damages for Mattes and Ampalu’s fraudulent conduct and statements that each spoke for and represented Bloso, including an award for the value of the loss of Bloso’s rights to vote its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes and an order that Mattes and Ampalu are jointly and severally liable for damages to
Bloso and for losses accrued to Bloso for such actions;
C. An award of damages for Mattes and Ampalu’s fraudulent conduct and statements that each spoke for and represented Bloso, including an award for the value of the loss of Bloso’s rights to vote its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes and
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an order that Defendants are liable for losses accrued to Bloso for such actions, jointly and severally as a result of Defendants’ civil conspiracy;
D. An award of damages for Defendants’ equitable fraud including an award for the value of the loss of Bloso’s rights to vote its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes;
E. An award of damages for Defendants’ fraud including an award for the value of the loss of Bloso’s rights to vote its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes;
F. An award based upon Defendants’ unjust enrichment and for the imposition of a constructive trust upon all rights and gains of Defendants related to their interests and rights in Jumio and New Jumio;
G. An award of damages related to Defendants’ fraudulent inducement of
Bloso to enter into the stock purchase and conversion transactions regarding
Bloso’s acquisition of Jumio stock and that Defendants directly or as acting agents for such transactions be held liable for recoupment of the consideration paid therefore;
H. An award of damages resulting from Defendants’ fraudulent transfers; and,
I. An award of costs, attorneys’ fees, pre-judgment and post-judgment interest and all other relief that the Court deems equitable and just.
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Dated: December 23, 2016.
Respectfully submitted,
MCCARTER ENGLISH, LLP
/s/ Christopher A. Selzer Christopher A. Selzer (No. 4305) 405 North King Street, 8 th Floor Wilmington, Delaware 19899 (302) 984-6300 (302) 984-6399 [email protected]
Of Counsel
McCarter & English, LLP Charles A. Stanziale, Esq. Four Gateway Center 100 Mulberry Street Newark, NJ 07102
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EXHIBIT A Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 64 of 236
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
BLOSO INVESTMENTS, LTD, § § C.A. No. 12787-VCS § Plaintiff, § § v. § § DANIEL MATTES, AMPALU § INVESTMENT, GMBH, EDUARDO § SAVERIN , JAMES COOK , PENG- § TSIN ONG, SCOTT WEISS, WENDY § HSU, DANIEL § MATTES ANDREESEN HOROWITZ, § LLC, ANDREESEN HOROWITZ § FUND, II, L.P. , THOMAS § KASTENHOFER, KTI § PRIVATSTIFUNG, STEPHEN § STUUT, and CHAD STARKEY, § Former Directors and Officers of a Delaware Corporation
Defendants. - VERIFIED AMENDED COMPLAINT
COMES NOW, Plaintiff Bloso Investments, Ltd. (“Bloso”), by and through undersigned counsel, with this Verified Amended Complaint 1 against Defendants
Daniel Mattes (“Mattes” ), Amupalu Investment GmBH (“Ampalu” ), Eduardo
1 Pursuant to Court of Chancery Rule 15(aa), attached hereto as Exhibit A is a redline version of the amended complaint indicating in what respects the amendment differs from the pleading it amends.
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Saverin (“Saverin”) , James Cook (“Cook”) , Peng-Tsin Ong (“Ong”), Scott Weiss
(“Weiss”), Wendy Hsu (“Hsu”), Daniel Mattes (“Mattes Andreesen Horowitz,
LLC (“AH LLC” ), Andreesen Ho rowitz Fund, II, L.P. (“AH Fund ”), Thomas
Kastenhofer (“Kastenhofer”), KTI Privatstifung (“KTI” ), Stephen Stuut (“Stuut”)
and , Chad Starkey (“Starkey”) (collectively, “Defendants”). Bloso’s allegations are based upon personal knowledge with respect to it, and, as to all other allegations here, upon information and belief upon, inter alia , a review of U.S.
Securities and Exchange Commission (“SEC”) and other public filings made by
former Jumio Corporation (“Jumio”), an investigation undertaken by Plaintiff’s
counsel, a review of media and analyst reports about Jumio, statements made by
representatives of Jumio in public court records, and Bloso’s contracts and other
agreements with Jumio. In support of this Verified Complaint , Plaintiff states as follows:
NATURE OF THE ACTION
1. On October 13, 2016, in a filing made in the United States
Bankruptcy Court for the District of Delaware in support of a plan of
reorganization, Defendant and Director for former Jumio, Eduardo Saverin
(“Saverin” ), conceded that any plan ob jection must be ignored “ so that the estate
and investors who were victims of Mr. Mattes ’ fraud can pursue litigation against
Mr. Mattes and affiliated management members for the fraud that caused this
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bankruptcy.” (Exhibit B, Statement of Eduardo Saverin). The bankruptcy plan
was confirmed in part, based upon these representations. A director of Jumio has
openly admitted that a great fraud against investors has occurred and that Mr.
Mattes and affiliated management members are responsible for that fraud. This
lawsuit seeks to establish the scope of liability for the conspiracy to commit that
fraud among Mr. Mattes and other Directors of Jumio, and to recover monetary
damages in the form of cash and constructive trusts in satisfaction of that liability.
2. 1. This is a direct action against the former directors and officers of
Jumio , which presently is in Chapter 11 bankruptcy administered in Delaware
under the caption In re: JMO Wind-Down, Inc. C.A. No. 16-10682 (BLS) ,
seeking seeks the recovery of damages related to Defendants ’ conspiracy for breach of fiduciary duty of disclosure, misrepresentation, equitable fraud, fraud in the inducement and , unjust enrichment and the imposition of a constructive trust .
3. 2. Defendants grossly mismanaged Jumio, the result of which sees
Jumio in Mattes and members of the board of directors and management, including
those parties upon whom certain board members were acting, all named here as
Defendants, conspired to keep from other Jumio investors and this Plaintiff the
true status of Jumio ’s accounting condition, all for their own benefit and to protect
themselves from liability. This conspiracy to hide the financial accounting fraud
resulted in Jumio ’s bankruptcy and facing where it faced the combined scrutiny of
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the Department of Justice and the SEC, and worse for Plaintiff, the complete loss
of its 3,973,520 common shares of Jumio totaling a nearly $5.0 million
investment—an investment Plaintiff would not have made or in the alternative
divested itself from its investment if Defendants had disclosed the true nature of
Jumio’s financial condition. Simply, Defendants knowingly operated conspired to
operate Jumio absent proper internal financial and accounting controls which
formed diminished the bases for of Plaintiff’s investments in Jumio while enriching
themselves . Defendants ’ failure to manage Jumio subject to ordinary accounting
and financial procedures sanctioned by GAAP and FASB , Defendants ’ failure to
correct prior financial misstatements regarding Jumio ’s financial condition and
their conspiracy to keep such information from disclosure lead directly to
Plaintiff ’s losses and the claims made here.
4. 3. When Defendants finally unveiled determined that the extent of the
financial irregularities perpetrated by the Defendants in their mismanagement of
Jumio under their watch could no longer be hidden and would be unveiled , rather than inform Plaintiff or correct prior representations, they misrepresentations,
Defendants immediately took action to engineer Jumio’s bankruptcy , coordinate
the repurchase of Jumio at below fair market value, and to secure complete liability releases related to the pre-petition actions and inactions which damaged
Plaintiff Bloso. However, Defendants’ actions and misrepresentations further
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were specifically designed to disenfranchise and dilute Bloso’s ownership in
Jumio and to prevent it blunt a stampede of investors, including Bloso, from exercising its considerable rights as a uniquely non-interested shareholder of
Jumio against them personally and to foreclose derivative claims against them on behalf of the company .
5. Mattes, Jumio directors and management were well aware of the financial irregularities as of at least 2013 and have admitted “ 2013 —Conclusions and lessons learned: Presented numbers were not GAAP compliant. We shoul d have established professional accounting much earlier.” (Exhibit C). Defendants acted in conspiracy to prevent these facts from being disclosed to Plaintiff. And
Defendants did prevent such disclosures, in fact, even after a meeting of the Jumio board of directors in March of 2015 wherein it was concluded that Defendants could no longer keep Jumio ’s financial condition hidden from investors,
Defendants failed to take immediate action to contact Bloso or to correct past gross misstatements.
6. Only shortly after that meeting in March 2015 did Bloso learn the true nature of the Defendants ’ ongoing efforts to conceal Jumio ’s accounting and financial fraud. By then, it was too late and Defendants ’ plan to avoid liability had already been put into action. On April 1, 2016 Jumio filed a petition for relief under chapter 11 of the Bankruptcy Code in the United States District Court
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for the District of Delaware. On the same day, Jumio filed a motion for approval of a sale of substantially all of its assets to Jumio Acquisition, i.e. Saverin.
7. On October 19, 2016, the United States Bankruptcy Court for the
District of Delaware confirmed a bankruptcy plan which grants Defendants full liability releases against any derivative claims. Plaintiff, pursuant to the term s of the plan, was required to “opt out” of the relief granted certain Defendants here in order to pursue directly against these Defendants damages claims related to the conspiracy to commit and/or ratify gross financial and accounting fraud.
4. Once Defendants’ malfeasance was outed, Defendants, for the first time in their tenure as directors and officers of Jumio, attempted to implement appropriate accounting and financial controls while orchestrating a series of transactions designed to absolve them of any potential liability. Defendants’ actions ultimately deposited Jumio into Chapter 11 bankruptcy and permitted
Defendants to profit from Bloso its investment interest in Jumio while expanding for themselves better interest in New Jumio. Defendants continue to actively pursue ways to release all liability within the bankruptcy process with respect to them regarding financial and accounting misrepresentations and ineptitude.
5. This case involves a fairly common corporate financing of a startup, in which after a series of issuances of stock over several years, controlling inside stockholders who were also officers and directors made material misstatements of
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the company’s financial records to raise capital while maintaining control of the
Jumio Board of directors and ultimately segregating, sidestepping voting and sale rights, diluting and orchestrating a bankruptcy which protected Defendants’ interest but left no value in the equity interest of Plaintiff. The Defendant controllers deposited Jumio into bankruptcy and now seek certain liability releases for their misdeeds and stand to assume control of the newly emerging Jumio, post bankruptcy, for almost nothing. Plaintiff Bloso which invested almost $5.0 million and held only common stock will receive nothing while the insider officers, directors and shareholders who control the remainder of Jumio will exit bankruptcy free of debt and absolved of their actions which induced Bloso to invest in Jumio in the first place. Because the Defendants control and work with each other as Jumio’s other controlling shareholders who each stand to retain some Jumio interest, Bloso’s loss is unique.
6. Plaintiff Bloso is not linked to the other Defendant shareholders, and not otherwise protected by the acts of Defendants or the pending bankruptcy reorganization of Jumio: Simply put, Defendants control much of the remaining stock in Jumio and have various interests in New Jumio, now controlled by
Centana Growth Partners and Stuut, and the harm to Bloso is specific, individual and a harm and detriment which is not borne by or shared by other Jumio shareholders or the company itself.
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8. 7. At all relevant times Bloso was a shareholder of Jumio , and retains at present an equity shareholder claim in the Jumio bankruptcy estate, explained further post .
JURISDICTION AND VENUE
9. 8. This Court possesses subject matter jurisdiction pursuant to 8 Del.
C. § 111 and 10 Del. C. § 341.
10. 9. This Court has jurisdiction over the Board of director Defendants , former Board of director Defendants, and the executive Defendants, and former executive Defendants, as the directors and officers of a Delaware corporation under pursuant to 10 Del. C. § 3114 , and /or under over the non-director
Defendants pursuant to 10 Del. C. § 3104 .(c)(1) and as a result of Defendants ’ conspiracy to defraud Bloso directors and others by actively working with the
Jumio Board to protect their own investments, participating actively with Jumio ’s former Board during the pendency of the bankruptcy, securing for themselves and their agents a favorable exchange of Jumio stock for stock in the new Jumio entity, securing from Saverin indemnification for any losses related to their investments in exchange for support of Jumio ’s bankruptcy and for supporting director indemnification efforts, availing themselves of the protections of Delaware law, and negotiating for themselves releases of any potential derivative or majority
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shareholder liability for pre-bankruptcy actions related to the accounting fraud and
gross mismanagement which they each endeavored to conceal.
11. This Court has jurisdiction over Defendants Ampalu, AH LLC and
AH Fund based upon the conspiracy theory of jurisdiction, the alter ego theory of
jurisdiction and the agency doctrine.
PARTIES
12. Jumio was a Delaware corporation which recently emerged from
Chapter 11 bankruptcy administered in Delaware under the caption In re: JMO
Wind-Down, Inc. C.A. No. 16-10682 (BLS) .
13. 10. Bloso is a British Virgin Islands Company and at all relevant
times was a common stock holder of Jumio.
14. 11. Defendant Daniel Mattes (“Mattes”) is Jumio’s founder, its
former CEO and a former member of the Jumio Board. Mattes has been
characterized as a “successful serial entrepreneur” and knows well Defendants
Saverin, Weiss and billionaire Netscape founder and venture capitalist Marc
Andreesen (whose holding companies and various of his partnerships and funds
own and control large amounts of Jumio stock). At all times relevant Mattes
owns owned and controls controlled Jumio common and preferred stock. Mattes also owns and controls Defendant Ampalu Investments Inc., (“Ampalu” ) a corporation of Belize and the a Jumio shareholder entity through which Mattes
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sold Jumio stock to Bloso. Mattes owns and controls Ampalu Investment GmBH,
a corporation organized under the laws of the Republic of Austria, which issued
certain convertible loan agreements to Bloso. Mattes may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation
Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware
19808.
15. Defendant Ampalu is directly owned and controlled by Defendant
Mattes and at all times relevant directly participated with Matters in a conspiracy
as to the allegations herein, was the alter ego of Mattes as to the allegations
herein or was the principle for which Mattes acted in agency with respect to the
allegations herein. Ampalu may be served process through its co-conspirator,
alter-ego and agent, Mattes pursuant to 10 Del. C. § 3114(b), by serving Jumio ’s
registered agent Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808. Ampalu may also be served process pursuant to 10
Del. C. § 3104.
16. 12. Defendant Eduardo Saverin (“Saverin”) is a former member of
Board of Directors the board of directors of Jumio. Saverin is the co-founder of
Facebook Inc. and knows well Mattes, Weiss and billionaire Netscape founder and venture capitalist Marc Andreesen (whose holding companies and various of his partnerships and funds own and control large amounts of Jumio stock). At all
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times relevant Saverin owns owned and controls controlled a large amount of Jumio
common and preferred stock. Saverin may be served process pursuant to 10 Del.
C. §3114(b), by serving Jumio’s registered agent Corporation Service Company,
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
17. 13. Defendant James Cook (“Cook”) Ong is a former officer and
general counsel member of the board of directors of Jumio. Cook presently is the
general counsel to Jumio Buyer, Inc. Cook Ong may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
18. 14. Defendant Scott Weiss (“Weiss”) is a former director of Jumio
and is the general partner of Andreessen Horowitz was acting on behalf, and as a
member of, Defendant AH , LLC and Andreessen Horowitz Fund, II, L.P. on behalf
of and a partner of AH Fund, both financing arms of Marc Andreesen. Weiss is
presently assisting Andreesen Horowitz, LLC and Andreessen Horowitz Fund, II,
L.P. in creating a litigation trust in exchange for certain liability releases. Weiss
as a partner through Andreesen Horowitz and Andreessen Horowitz Fund, II, L.P.
controls sat as a director for and in his capacity as a member of and agent to
principal AH LLC and as a partner of and agent to principal AH Fund which
controlled large amounts of Jumio common and preferred stock and Jumio debt .
Weiss may be served process pursuant to 10 Del. C. §3114(b), by serving
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Jumio’s registered agent Corporation Service Company, 2711 Centerville Road,
Suite 400, Wilmington, Delaware 19808.
19. 15. Defendant Peng-Tsin Ong (“Ong”) is a former Board member of
Jumio. Ong AH LLC is directly controlled by Weiss and at all times relevant
directly participated with Weiss in a conspiracy as to the allegations herein, was
the alter ego of Weiss as to the allegations herein or was the principle for which
Weiss acted in agency with respect to the allegations herein. AH LLC may be
served process through its co-conspirator, alter-ego and agent, Weiss pursuant to
10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. AH
LLC may also be served process pursuant to 10 Del. C. § 3104.
20. 16. Defendant Wendy Hsu (“Hsu”) is the former CFO and a former
Board member of Jumio. Hsu AH Fund is directly controlled by Weiss and at all
times relevant directly participated with Weiss in a conspiracy as to the
allegations herein, was the alter ego of Weiss as to the allegations herein or was
the principle for which Weiss acted in agency with respect to the allegations
herein. AH Fund may be served process through its co-conspirator, alter-ego and
agent, Weiss pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
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Delaware 19808. AH Fund may also be served process pursuant to 10 Del. C.
§3104.
21. 17. Defendant Thomas Kastenhofer (“Kastenhofer”) is the former
COO and a former Board member of Jumio. Kastenhofer owns and controls KTI
Investment Foundation , a foundation organized under the laws of Liechtenstein.
Kastenhofer and his foundation KTI own and control large amounts of Jumio common and preferred stock. Kastenhofer may be served process pursuant to 10
Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.
22. Defendant KTI is directly controlled by Kastenhofer and at all times relevant directly participated with Kastenhofer in a conspiracy as to the allegations herein, was the alter ego of Kastenhofer as to the allegations herein or was the principle for which Kastenhofer acted in agency with resp ect to the allegations herein. KTI may be served process through its co-conspirator, alter-ego and agent, Kastenhofer pursuant to 10 Del. C. § 3114(b), by serving Jumio ’s registered agent Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808. KTI may also be served process pursuant to 10
Del. C. § 3104
23. 18. Defendant Stephen Stuut (“Stuut”) replaced Daniel Mattes as
CEO of Jumio and is the current CEO of New Jumio. Stuut may be served
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process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.
24. 19. Defendant Chad Starkey (“Starkey”) is a former officer and
general counsel of Jumio and a former member of the board of directors of Jumio
Board . Starkey may be served process pursuant to 10 Del. C. §3114(b), by serving Jumio’s registered agent Corporation Service Company, 2711 Centerville
Road, Suite 400, Wilmington, Delaware 19808.
Factual Background
I. Jumio and It’s Its Business Model
25. 20. Jumio was, and New Jumio is, an online mobile identity and
credential authentication company, which uses verification products and software
to assist customers in reducing fraud, meeting regulatory requirements and
providing faster service to users. At the time of Bloso’s initial investment ,
Jumio’s business model was to authenticate credit cards via the camera of a
mobile phone or computer, and scan all the data, transferring all the information to
a seller, and authorizing the payment with minimum manual input from the credit
card’s owner. Jumio also verifies credentials (such as passports, driver licenses
and government issued identification) in real-time related both to online and
mobile transactions and verifies and facilitates online payments. Jumio’s mobile
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application enables a phone’s camera to scan identification and payment documents, digitizes the photo scan, and auto-fills payment, shipping and other pertinent information fields for the consumer.
26. Jumio was formed by Mattes in September of 2010. Ultimately,
Mattes, through Ampalu, owned and controlled 10,955,435 common shares of
Jumio. Mattes as the founder of Jumio was Jumio ’s CEO and a Director until his termination and replacement by Defendants Stuut, alleged post .
27. By March 2011, Defendant Saverin made a significant direct investment in Jumio as part of a Series A round of financing. Ultimately , Saverin owned and controlled 2,885,613 common and 14,514,702 preferred shares of
Jumio. For these investments, Saverin secured a key board position known as a
“Preferred D irector” giving him super-voting authority sufficient to approve or block any corporate transaction.
28. In December 2011, with the assistance of Weiss, AH LLC and AH
Fund made significant direct investments in Jumio as part of a Series B round of financing. For these investments, AH LLC and AH Fund secured a key board position and installed Weiss. Weiss was also appointed a “Preferred Director” giving him super-voting authority sufficient to approve or block any corporate transaction on behalf of AH LLC and AH Fund.
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29. Kastenhofer was also an early investor in Jumio owning and
controlling 163,423 Jumio shares. Kastenhofer also directed and controlled KTI
to invest in Jumio which received 2,403,238 shares in return. For these
investments, Kastenhofer was awarded a Director position.
30. 21. Jumio’s revenue and business model is was software, as a service.
Jumio charges charged clients a fixed monthly rate within predefined transaction-
volume ranges and allows for unlimited transactions. At the time of Bloso’s
initial investment in Jumio , Jumio primarily charged a fee for each credit card transaction. Initially, and unbeknownst to Bloso, Defendants permitted Jumio
accounted to account as revenue 100% of each credit card purchase made by the
third party being verified, not the small fractional fee that was due to Jumio as
part of its business model and then conspired to keep secret from other investors
this critical accounting fact . Defendants permitted, and hid, this accounting practice as it went on for years. It was upon these numbers that Defendants represented Jumio’s value and upon which Bloso made its investment . The restatement of accounting pleaded post , revealed significant differences in the
value of Jumio and its business and the representations made to the market.
31. 22. Jumio reported “half of the top 10 consumer Internet companies
as clients as well as hundreds of other retailers, financial institutions, marketplaces
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and gaming companies throughout the world using its products.” Company
Snapshot: Jumio, September 2014, Mercator Advisory Group, Inc.
32. 23. Jumio’s clients reportedly included Delta, United Airlines,
Travelocity and Airbnb.
II. Material Misstatements in to the Media by Members of the Board Made and Condoned by Defendants
33. 24. As an emerging technology company, Jumio’s initial formation
and operation was reliant relied on cash infusions from investors. These early investments were made by many of the Defendants who were then either
themselves controlling shareholders or representatives of controlling shareholders.
34. 25. Favorable Defendants then conspired to either directly create or to
facility the creation of favorable reports in the media regarding the income value
of Jumio’s technology ,. Defendants knowingly permitted public statements by
Board members regarding strong annual sales (subsequently proven to be false),
and investments condoned statements from high-profile venture capitalists , all
attracted whose were Defendants in this action, and then conspired to hide the
truth about Jumio ’s accounting practices, all to attract new investors to in Jumio
which would bolster their investments .
35. 26. News Defendants conspired to knowingly or recklessly permit
news of an investment in Jumio from by Marc by Andreesen’s venture capital firm
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Andreessen Horowitz, as made by its partner Defendant Weiss, was highly firms,
AH LLC and AH Fund, controlled by Weiss to be publicized and for years failed to make any correction . On March 5, 2012, Tech Crunch reported as follows:
Disruptive mobile and online payments startup Jumio has raised $25.5 million in Series B funding led by Andreessen Horowitz. The firm ’s General Partner Scott Weiss has joined Jumio ’s Board of directors. Jumio ’s earlier investors include Facebook co- founder Eduardo Saverin, Peng T. Ong, partner at GSR Ventures and foun der of Match.com and Vivek Ranadivé , founder of TIBCO. Founded by Daniel Mattes in 2010, Jumio has raised $32 million to date.
As Weiss explains to us, Andreessen Horowitz made this bet on Jumio partly because Mattes is a successful serial entrepreneur but also because the startup’s technology solves a real problem with online merchants accepting credit cards, making the user experience much easier and solving fraud problems. “This is already a tempest in a tea pot and starting to explode,” Weiss says of Jumio’s technology.
The company started off with a European focus last year on gaming, retail and travel and now is on track for a $100 million revenue run rate in 2012 . The new cash infusion will go to hiring as well as expanding merchant and network partnerships through the U.S. and Asia in retail, travel, gaming and digital goods.
Weiss seems optimistic that Jumio can enter these markets and change consumer behavior, saying “I don’t stay up at night worrying about how Jumio is going to do…there’s so much to like about the business and it has the potential to be the primary way people take credit cards online.”
This statement regarding $100.0 million is the total amount of credit card purchases made using Jumio technology. The real number, had Jumio collected
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merely 2% of each verified transaction as was its model should have been
reported was closer to $2.0 million in revenue.
36. 27. On May 25, 2012, Defendant Saverin Saverin, speaking on behalf
of the Jumio Board, which was condoned by Mattes, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI and Starkey, was quoted in a story published in
Bloomberg News titled “ Jumio is Growing Faster Than Facebook at the Start,
Saverin Says ,” as follows:
Facebook Inc. co-founder Eduardo Saverin said mobile-payment company Jumio, Inc., one of his startup investments, is growing even faster than the social network did at the beginning.
Jumio, started nine months ago, is on course for $100 million in annual sales and is “highly profitable,” Saverin, a director at the Mountain View, California-based company, told the CHINICT technology conference in Beijing today.
Jumio, whose software turns any web cam or handset into a credit- card reader, will “transform” mobile payments, according to Saverin.
“The reason this company is exciting is the growth it’s gone through is phenomenal,” Saverin said of Jumio. “It’s actually grown a lot faster than I’ve seen in Facebook at the beginning.”
Again, this statement regarding $100.0 million is the total amount of credit card purchases made using Jumio technology. The real number, had Jumio collected merely 2% of each verified transaction as was its model should have been
reported was closer to $2.0 million in revenue. Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey knew that these public statements
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were incorrect, conspired to continue to keep this information secret and
condoned and adopted such statements while making no effort to correct the
inaccuracies of these public statements. Instead, Jumio and the Board continued
to accept additional capital investments into Jumio.
37. 28. As members of Jumio’s Board of Directors and as professional
investors At the time of these statements, Mattes , Saverin and , Ong, Weiss , AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey were each aware that their
respective these public statements regarding Jumio’s profits and profitability were
unsupportable and were made at a time when Jumio did not have qualified financial and accounting management and during a time in which no reasonable internal accounting procedures had been applied when making representations in
the U.S. Market .
38. 29. As members of Jumio’s Board of Directors and as professional
investors At the time of these statements, Mattes , Saverin and , Ong, Weiss , AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey were each aware that their
respective these public statements regarding Jumio’s profits and profitability were not based on a review of audited financials or financial information prepared by qualified financial and accounting management and which were not created or maintained in accordance within with any of the basic accounting tenets. Had
Bloso Plaintiff known the true state of Jumio’s interested shareholder control
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and finances, and the true state of the facts and understood that Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey controlled Jumio
as interested inside shareholders who benefitted from these misrepresentations
about Jumio ’s accounting and financial affairs it , they would not have invested.
39. 30. Mattes, Saverin, Ong, Weiss and the remaining Board members ,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey knowingly permitted Jumio to
continue to operate and condoned Jumio ’s operation without qualified financial and accounting management , while permitting outlandish and unsupportable
representations misrepresentations about Jumio’s financial prowess to Bloso for
over four years, including direct statements from Mattes and the distribution of
Board presentations based upon these numbers Plaintiffs and conspiring to keep
such information secret for their own gain .
40. 31. Defendants Jumio, with the support and approval of Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
continued to make announcements and public representations about Jumio’s
financial condition knowing full well that there existed no GAAP, FASB or other
reasonable accounting measure of such statements and while conspiring to keep
such facts secret from Bloso .
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III .. Bloso’s Investments in Jumio
41. 32. Based upon these public representations, together with personal
assurances from Mattes delivered regularly to Bloso, Bloso decided to
invest invested in Jumio. These representations turned out to be flatly incorrect
and deliberate misrepresentations which would have been revealed had Jumio
applied Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey had not conspired to keep secret Jumio ’s lack of any proper internal financial and accounting controls and to perpetuate the public misstatements that
they condoned .
42. 33. On July 21, 2011, following discussions with Mattes based upon
these statements , Mattes caused his company and Ampalu Investments Inc. to
sell sold to Bloso 544,513 shares of common stock of Jumio for $500,000, or
$0.92 per share (the “July 2011 Ampalu SPA ”). Mattes and Ampalu agreed by
Section 4.3 of that agreement specifies to a Delaware choice of law. The true
nature of the financial condition of Jumio upon which this transaction was based
was kept entirely secret from Bloso and was not revealed to Bloso until March
2015.
43. 34. At the same time, and based upon Defendants’ representations on
July 21, 2011, Bloso and these statements Kastenhofer agreed that Kastenhofer’s
KTI Investment Foundation would also sell through KTI sold to Bloso 544,513
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shares of common stock of Jumio for $500,000, or $0.92 per share (the “July
2011 KTI SPA ”). Mattes and Ampalu agreed by Section 4.3 of that agreement
specifies to a Delaware choice of law. The true nature of the financial condition
of Jumio upon which this transaction was based was kept entirely secret from
Bloso and was not revealed to Bloso until March 2015.
44. 35. On August 1, 2011, based upon these statements, Mattes through
his company and Ampalu Investment GmBH entered with Bloso into a Convertible
Loan Agreement and Convertible Term Note in the principal amount of $500,000
(the “August 2011 Note ”). The true nature of the financial condition of Jumio
upon which this transaction was based was kept entirely secret from Bloso and
was not revealed to Bloso until March 2015.
45. 36. Again, on October 2, 2011, based upon these statements, Mattes
and Ampalu sold to Bloso through Ampalu Investments Inc. an additional
1,089,026 shares of common stock of Jumio for $1,000,000, or $0.92 per share
(the “October 2011 $1MM SPA ”). Mattes and Ampalu agreed by Section 4.3 of that agreement specifies to a Delaware choice of law. The true nature of the
financial condition of Jumio upon which this transaction was based was kept
entirely secret from Bloso and was not revealed to Bloso until March 2015.
46. 37. That same day Bloso purchased through based upon these
statements, Mattes ’ and Ampalu Investments Inc. sold to Bloso an additional
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544,513 shares of common stock of Jumio for $500,000, or $0.92 per share (the
“October 2011 $500K SPA ”). Mattes and Ampalu agreed by Section 4.3 of that
agreement specifies to a Delaware choice of law. The true nature of the financial
condition of Jumio upon which this transaction was based was kept entirely secret
from Bloso and was not revealed to Bloso until March 2015.
47. 38. Again on October 3, 2011, Bloso and based upon these
statements, Mattes , through and Ampalu Investment GmBH, again entered into a
Convertible Loan Agreement and Convertible Term Note with Bloso in the principal amount of $1,500,000 (the “October 2011 Note ”). The true nature of
the financial condition of Jumio upon which this transaction was based was kept
entirely secret from Bloso and was not revealed to Bloso until March 2015.
48. 39. On January 20, 2012, Bloso acquired from based upon these
statements, Mattes ’ and Ampalu Investments Inc. sold to Bloso another 625,478
shares of common stock of Jumio for $983,822.29, or $1.57 per share (the
“January 2012 Ampalu SPA ”). Mattes and Ampalu agreed by Section 4.3 of that agreement specifies to a Delaware choice of law. The true nature of the financial
condition of Jumio upon which this transaction was based was kept entirely secret
from Bloso and was not revealed to Bloso until March 2015.
49. 40. That same day, based upon these statements Kastenhofer , through
his and KTI Investment Foundation sold to Bloso another 625,477 shares of
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common stock of Jumio for $983,820.71, or $1.57 per share (the “January 2012
KTI SPA ”). Section 4.3 of that agreement specifies Delaware choice of law The
true nature of the financial condition of Jumio upon which this transaction was
based was kept entirely secret from Bloso and was not revealed to Bloso until
March 2015 .
50. 41. On January 25, 2015, Bloso and based upon these statements,
Mattes , through and Ampalu Investment GmBH entered into a Convertible Loan
Agreement and Convertible Term Note with Bloso in the principal amount of
$750,000 (the “January 2012 Note ”). The true nature of the financial condition of
Jumio upon which this transaction was based was kept entirely secret from Bloso
and was not revealed to Bloso until March 2015.
51. 42. Finally, on May 15, 2012, Bloso through based upon these
statements, Mattes ’ and Ampalu Investment GmBH entered into another
Convertible Loan Agreement and Convertible Term Note dated May 15, 2012 with
Bloso in the principal amount of $233,753 (the “May 2012 Note ”). Based upon
the above statements, all of which were condoned by Mattes, Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, Bloso ultimately intended to acquire 5% of the Jumio. As part of the initial purchase , Bloso had
an option to increase it’s its stake in Jumio to $5.0 million investment. Bloso acquired Jumio shares progressively as Bloso arranged new financing, and as
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Mattes and Kastenhofer structured share sales. , Saverin, Ong, Weiss, AH, LLC,
AH Fund, Kastenhofer, KTI and Starkey failed to correct the gross misstatements
regarding Jumio ’s financial condition. The true nature of the financial condition
of Jumio upon which this transaction was based was kept entirely secret from
Bloso and was not revealed to Bloso until March 2015.
52. 43. Each of these transactions were based upon the information
provided and or condoned by Mattes and Defendants directly and through such ,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey in
conspiracy to keep the real facts secret from Bloso while continuing to support
and condone public misrepresentations of fact hereinbefore highlighted.
Furthermore, Bloso agreed to the increasing price-per-share transactions as part of
the January 2012 Ampalu SPA and the January 2012 KTI SPA due to favorable
media reports condoned by Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey regarding Jumio’s technology , because of the recent
backing of Jumio by . Bloso was equally confident in Jumio because Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, many
of whom are high-profile venture capitalists, and had been willing to contribute
their own capital to the company. Simply, because of Mattes’ and
Kastenhofer’s Defendants ’ conspiracy to support representations that Jumio was on target for $100.0 million in annual revenue all of which were , statements which
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were condoned by Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey enticed Bloso to make a series of investments that it would not otherwise have made. It was also important to Bloso’s understanding that key members of management, investment that Defendants Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey were the right type of players to execute the Jumio business model and management’s ability to execute were all supported by high-profile and experienced venture capitalists.
These representations turned out to be knowingly incorrect if they had been based on application of proper GAAP and FASB accounting principles to Jumio’s internal financial and accounting controls. Instead, such irregularities were disguised and hidden beyond all reasonable examination of financial statements compiled in accordance with acceptable accounting conventions. . Instead, Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey conspired to conceal Jumio ’s accounting and financial fraud while continuing to condone statements made about Jumio ’s financial status. The true nature of the financial condition of Jumio upon which this transaction was based was kept entirely secret from Bloso and was not revealed to Bloso until March 2015.
53. 44. What Bloso did not know, and what Defendants failed to draw any attention to Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer,
KTI and Starkey conspired to hide , was the fact that while Bloso was acquiring
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stock and convertible rights in Jumio, Defendant Mattes was clandestinely selling
off in the gray-market large portions of his so-called “founders shares” in Jumio,
at huge gains estimated to be in excess of $30.0 million. Bloso also did not know
that Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
were taking steps to secure their own private investments by conspiring to work
with together to engineer an out by filing bankruptcy which would extricate the
director Defendants from derivative liability, include loss and liability indemnities
to the non-director Defendants and which could result in substantial gains when
exchanging Jumio stock for stock in the New Jumio, post bankruptcy.
54. 45. Nevertheless, according to Defendants, Mattes, Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey, Jumio ’s business was said to have been progressing swimmingly and so on October 3, 2012, Bloso elected to convert (i) the August 2011 Note into 551,370 shares of common stock of Jumio at the per share price of $1.00 per share, (ii) the October 2011 Note into
1,626,682 shares of common stock of Jumio at the per share price of $1.00 per share, (iii) the January 2012 Note into 479,454 shares of common stock of Jumio at the per share price of $1.65 per share, and (iv) the May 2012 Note into
146,024 shares of common stock of Jumio at the per share price of $1.65 per share.
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55. 46. Bloso made these conversions of the August 2011 Note, October
2011 Note, January 2012 Note and May 2012 Note into common stock of Jumio based upon the public representations of Saverin that Jumio was growing faster than Facebook and on track toward $100.0 million in annual revenue in 2012, the public representations of Weiss regarding Jumio’s profitability, and representations by Mattes and Kastenhofer that Jumio was experiencing rapid growth , all of which were incorrect and all of which were condoned by Mattes, Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey .
IV. Mattes Misrepresentation That He Represented the Shares of Bloso
56. 47. In total, Bloso invested almost $5.0 million in Jumio.
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57. During this period, notwithstanding the fact that Bloso was the named shareholder of record, Mattes continued to falsely claim that he spoke for and controlled the Bloso shares and notes. Mattes had no basis for making these claims, had no authority to make such claims and such claims were not supported by any documentation upon which any reasonable party, including Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey could justifiably rely in not communicating with Bloso or otherwise taking actions related to Bloso ’s interests which were not expressly approved by Bloso. Bloso was not made aware of these misrepresentations until well after Jumio had filed bankruptcy.
58. Worse, on August 23, 2013, unbeknownst to Bloso and without any authorization, apparent or otherwise, Mattes purported to ex ecute on behalf of
Bloso an Amended and Restated Right of First Refusal and Co-Sale Agreement
(the “Restriction” ) with Jumio, purporting to severely restrict and limit the stockholder rights of 28,223,676 shares of Jumio Common Stock. (Exhibit D).
The Restriction was signed by Mattes, Saverin, Kastenhofer, Starkey, AH LLC, and AH Fund. Bloso was not made aware of the Restriction until after
Defendants had caused Jumio to file for Bankruptcy. Defendants used this agreement as justification for failing to provide Bloso with any information about
Jumio notwithstanding that each of the Defendants knew or should have known that Bloso had purchased Jumio shares from Mattes and Ampalu and that Bloso
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was the owners of Jumio shares pursuant to the transaction documents detailed in
this Section III of the Amended Complaint.
IV V. The Board Allows Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Allow Jumio to Operate Without Any Internal Financial Controls and Secretly Disenfranchises Bloso
59. 48. Jumio operated , under the direction and control of Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
conspired to secretly operate Jumio for over four years without qualified financial
and accounting management, including over a year and a half without a Chief
Financial Officer (“CFO”), manager of finance, VP of Finance or Director of
Finance. Jumio had no system in place to even apply Defendants conspired to
prevent the application of any ordinary course accounting principles system or
principle used everyday every day in small businesses, let alone in a fast-growing international internet business controlled by technology venture capital giants.
While this ordinarily would impact all shareholders, Bloso was uniquely at risk
because of Defendants’ close control of Jumio, the failure to call any shareholder
meetings and the ability to Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey conspired to encourage Bloso ’s reliance upon the
statements made and condoned by these Defendants, permitted the Board to later
structure and control through bankruptcy a protective transaction which in the end
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saved Defendants, and shareholders other than Bloso. protected their Jumio
holdings, indemnified the Board under the Jumio certificate of incorporation,
secure releases from derivative liability from the Bankruptcy Court, and saw
Defendants eventually indemnified by Saverin for helping to cover up the exposed
fraud.
60. 49. First Worse , Jumio’s Certificate of Incorporation permits that
common shareholders are permitted to hold three (3) seats on the Board of
Directors, but Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey , who controlled Jumio, never held an annual meeting for Board board elections. This complete lack of corporate governance
was designed intended to preclude Bloso from taking an inside look at the Jumio books, which were very obviously and knowingly not compliant with any financial
or accounting standards which would justify or validate the public representations
and statements made or condoned by these Defendants. All Defendants Of course,
Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
as insiders had no reason to worry about access to this material and in fact acted
in conspiracy with each other to protect their investments, to prevent the
disclosure of the accounting fraud and to reap the rewards of the engineered
bankruptcy of Jumio .
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61. 50. Second, although Mattes and other Defendants , with the consent
of Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
advised Bloso that Jumio would prepare and distribute audited Jumio financial statements to Bloso on an annual basis, none was ever prepared or circulated.
Defendants, from 2010 through at least April Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey, acted in conspiracy to protect and
hide from Bloso the true nature of Jumio ’s financial condition through at least
March 2015, and prior to the restatement of financials in 2015 never required that
Jumio prepare or produce appropriately audited financial or accounting statements
to Bloso because of the constant and ongoing assurances from Mattes, as
condoned by all Defendants, of the financial health of Jumio .
62. 51. Defendants from 2010 Mattes, Saverin, Ong, Weiss, AH, LLC,
AH Fund, Kastenhofer, KTI and Starkey through the fourth quarter of 2014 did
not demand that Jumio put conspired to prevent Jumio from putting qualified financial management in place . And which would have revealed the fraudulent
financial and accounting statements of Jumio. And such Defendants from
2010 between through at least September March of 2015 did not disclose to Bloso
that Jumio had no ability , or correct misstatements to Bloso about Jumio ’s
inability to generate, produce or audit appropriate financial and accounting statements. All the while such Defendants continued conspired to continue to
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represent and condone representations that Jumio was in good stead and to induce
Bloso into further additional financial transactions with Jumio, detailed herein.
63. 52. The Jumio Board Mattes, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI and Starkey during the first quarter of 2014 also failed to advise Bloso that it had been given false information by Jumio management that a search for an appropriate CFO and accounting system had not actually been initiated, and the Board took no action with respect to the managements false representations about engaging an appropriately qualified CFO. Defendants conspired to hide these facts from Bloso. At the very least their inaction was grossly negligent.
64. 53. Even after Jumio hired a new CFO in the fall of 2014, that CFO resigned days later telling Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI and Starkey that Jumio’s finance and accounting issues required a complete review and restatement of Jumio’s financials by a qualified internal financial accountant. And when Defendants conspired to keep secret these facts as well. Only that CFO’s departure from Jumio finally spurred the Board of
Directors in place at that time into belated action, Mattes, Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey into recognizing that they could no longer hide Jumio ’s financial condition and past financial misrepresentations did Defendants among themselves and the shareholders they
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control did nothing to inform Bloso about the shaky position of its investment in
Jumio or to otherwise correct the past representations initiate a scheme to protect themselves and their investments .
VVI . The Board Conducts a Self-Interested Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Conduct a Self-Serving Investigation into Jumio’s Financials
54. In March 2015, the Board finally formed a special committee (the
“Special Committee”) to investigate Jumio’s finances.
65. No longer able to hide the past improprieties, in March 2015, Mattes,
Saverin, Ong, Weiss, Kastenhofer and Starkey authorized the formation of a special committee (the “ Special Committee ”) to determine the scope of the damage and potential liability for their ongoing conspiracy to hide past misrepresentations couched in terms of an investigation into Jumio ’s finances.
66. 55. The Special Committee was made up of Board members Saverin,
Weiss and Ong (the “Special Committee Members”). Of course, the Board and as a result of the conspiracy between all Defendants the Special Committee Members all worked directly with and reported to one another as directors, officers and fellow shareholders. Only Bloso was left out of the loop. and worked with Mattes,
AH, LLC, AH Fund, Kastenhofer, KTI and Starkey.
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67. 56. The Special Committee engaged special counsel to conduct the
investigation into the financial and accounting failures . In April 2015, special counsel verbally provided its findings to the Board, which were shared among
Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey,
without ever producing a written report. Upon information and belief, special
counsel advised the Special Committee Members, who in turn advised the Board
and company officers (which collectively comprise the Defendants) Mattes, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey that the financial and accounting
improprieties at Jumio had contributed greatly to Jumio’s poor financial
performance, its inability to raise additional capital and constituted gross breaches
of director duties to the company. Upon information and belief special counsel
also advised Defendants that the the Special Committee Members, who in turn
advised Mattes, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey that the past
representations to Bloso were entirely improper.
68. 57. Thereafter, the Board Mattes, Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI and Starkey failed to share with Bloso these results or
make any other public announcement regarding the results of the Special
Committee’s investigation—the results of which of course all Defendants Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey as
insiders were aware ; instead, the Special Committee Members and the Board and
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they had spent a long time conspiring to hide; instead, Defendants Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey initiated actions to limit potential liability for their gross fiduciary breaches and misrepresentations to Bloso.
69. 58. Upon information and belief, the Special Committee Defendants
Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey
by this time had concluded that Jumio was insolvent, in financial disarray and potentially faced bankruptcy.
VII. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey Panic and the Board Votes to Remove CEO and Founder Daniel Mattes VI. The Board Removes CEO and Founder Daniel Mattes 70. 59. At the conclusion of the Special Committee the Board attempted ,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey tried to
distance itself themselves from Jumio founder and then CEO, Mattes who had
already signaled to them that he would not take the fall alone. Saverin, Ong,
Weiss, Kastenhofer and Starkey took action to forced Mattes to resign . On April
30, 2015, Mattes resigned as CEO of Jumio and his seat on the Board was
forfeited.
71. 60. On June 24, 2015, Mattes’ departure was reported in a story
published on Fortune.com titled: “ Exclusive: Jumio swaps CEOs after examining
its books ,” as follows:
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Jumio, a mobile identification company whose clients include United Airlines and Airbnb, has quietly said goodbye to founder and CEO Daniel Mattes, Fortune has learned, following an internal investigation into possible financial irregularities.
The Mountain View, Calif.-based company isn’t commenting on Mattes or the investigation, with one source saying that a confidentiality agreement is in place. Mattes did speak with Fortune, saying he made a “voluntary decision to resign” because he is better at starting companies and getting them in position to execute toward profitability, than he is at managing said execution. A source familiar with the situation, however, says that had Mattes not resigned of his own accord, he would no longer be CEO.
Mattes also acknowledged that “at one point” Jumio hired outside auditors to reexamine its books, but says nothing out of the ordinary was found. He adds that he will be available to advise new Jumio CEO Stephen Stuut — who previously ran TruePosition — but he no longer will be a member of Jumio’s Board of directors.
Jumio did send Fortune a statement confirming that Stephen Stuut is now the company’s permanent CEO, but made no mention at all of Mattes. There also was no comment from Jumio investors Andreessen Horowitz, Citi Ventures and Pinnacle Ventures, which have invested more than $25 million into the company (whose Board members include Facebook co-founder Eduardo Saverin).
Perhaps one reason the investors didn’t want to speak was that Mattes has some checkered history when it comes to his investors. Prior to founding Jumio, the serial entrepreneur was best-known for founding Jajah, a VC-backed Internet phone company that was acquired in late 2009 by Telefonica for $209 million (which, at the time, was still a lot of money in Silicon Valley).
Mattes was no longer CEO at the time Jajah was sold, but Delaware court filings show that a fellow entrepreneur named Yair Goldfinger (currently CEO of AppCard) subsequently sued Mattes for alleged fraud related to the private sale of Jajah stock.
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61. Stuut replaced Mattes as CEO of Jumio. Stuut was installed specifically to assist in extricating the other Defendants from potential liability for malfeasance.
72. Even at this point Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI and Starkey took no action to correct past misstatements made in conspiracy about Jumio ’s financial condition. Nor did they undertake steps to confirm Mattes misrepresentation that he spoke for Bloso or otherwise.
73. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey searched for a new CEO with whom they could work in an effort to cover up the past misrepresentations. Shortly after Mattes ’ departure, Saverin,
Ong, Weiss, Kastenhofer and Starkey hired Stuut to replace Mattes as CEO of
Jumio. Stuut was installed specifically to assist in extricating the other
Defendants from potential liability for their past conspiracy.
74. 62. Bloso was not advised of Mattes’ removal, nor of Stuut’s appointment.
75. Stuut did not correct the past misrepresentations adopted by the
Jumio board. Stuut did not object to the incorrect Jumio financial information.
Instead, Stuut adopted Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer,
KTI and Starkey ’s position and went to work assisting in the cover up.
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76. 63. Furthermore, unbeknownst to Bloso at the time, prior to receiving
the distribution of the results of the Special Committee’s investigation, Saverin,
and Weiss as a general partner and on behalf of the separate Andreessen
Horowitz Fund, II, L.P. (“AH ”), invested , AH LLC and AH Fund quietly
purchased preferred shares in Jumio on an unsecured basis , and received equity in
the company in exchange for the investment . This acquisition of Jumio shares
was designed to provide Saverin, Weiss, AH LLC and AH Fund a controlling
block of votes for any upcoming transaction . Bloso was not advised of this acquisition and which upon information and belief was clearly designed to dilute
Bloso’s ability to control or otherwise impact Jumio’s future insolvency. impact
any required shareholder vote which was contrary to Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut ’s efforts to absolve
themselves of potential liability related to the past conspiracy involving Jumio ’s
financial condition.
77. 64. After receiving the results of the Special Committee’s
investigation, Saverin later determined, as explained post , to help implement a
plan to hide any malfeasance and simultaneously to restricted restrict Bloso’s
ability to sell its stock in Jumio, by entering into secured loan agreements with
Jumio that gave him superior rights and control vis-à-vis Bloso.
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78. 65. Saverin insisted on obtaining a security interest in Jumio’s assets
so that he would have a position of control and power in Jumio’s eventual
bankruptcy; as a secured creditor , he could dictate terms of post-petition
financing, be in a position to credit bid in a bankruptcy sale of Jumio’s assets,
fight any proposed action which affected his “collateral,” and seek to enter into
agreements which released certain members of the Board Defendants of all liability for Jumio’s past operations while at the same time offering them more
lucrative positions in New Jumio while at the same time Saverin would indemnify
each .
VII. The Board Improperly Amends By-Laws and Permits Saverin and Andreessen Horowitz to Convert Old Notes to Secured Loans VIII. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut Improperly Amend Jumio ’s By-Laws to Permit Saverin, Weiss, AH LLC and AH Fund to Convert Old Notes to Secured Jumio Loans
79. 66. By August of 2015, the Defendants Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut still had not advised Bloso
of the results of the Special Committee’s investigation into financial irregularities
at Jumio.
80. 67. Instead, Defendants Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut focused on amending Jumio’s by-laws to
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restrict stock transfers, and make it impossible for shareholders to recoup their investments and walk away from Jumio.
81. 68. On August 27, 2015, the Board , as directed by Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut issued Amended and Restated By-Laws of Jumio Inc. (the “Amended By-Laws”), which, among other things, restricted transfers of capital stock unless the transfer was (a) expressly preapproved by the Board at the Board’s sole discretion, and (b) made in accordance with the Amended and Restated Right of First Refusal and Co-Sale
Agreement, dated August 28, 2015. Defendants had already begun discussing the option of Jumio’s bankruptcy and reorganization, which they would engineer, orchestrate and control. These actions directly impacted Bloso in a way that
Bloso would be uniquely affected.
82. 69. As a matter of the DGCL, the Amended By-Laws knowingly violate 8 Del. C. § 202, which provides as follows:
(b) A restriction on the transfer or registration of transfer of securities of a corporation, or on the amount of a corporation's securities that may be owned by any person or group of persons, may be imposed by the certificate of incorporation or by the bylaws or by an agreement among any number of security holders or among such holders and the corporation. No restrictions so imposed shall be binding with respect to securities issued prior to the adoption of the restriction unless the holders of the securities are parties to an agreement or voted in favor of the restriction .
8 Del. C. § 202(b) (emphasis added).
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83. 70. At the same time that the Board was Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut were improperly restricting
Bloso’s ability to sell its stock and the Board and management , they were discussing Jumio’s potential bankruptcy ,. Saverin, Ong, Weiss, Weiss on behalf
of both Andreessen Horowitz and AH and Ong each were papering AH, LLC, AH
Fund, Kastenhofer, KTI, Starkey and Stuut were each attempting to prepare
security agreements which would give them Saverin, Ong, Weiss, AH LLC, AH
Fund, Kastenhofer and KTI the power to dictate and control the sale of Jumio in bankruptcy. As it turns turned out, Saverin , for the other Defendants, was took the
lead for he and Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and
Stuut as the stalking horse bidder and original proposed purchaser during the §363
bankruptcy sale of all of Jumio’s assets. The Stalking Horse Asset Purchase
Agreement provided for the sale of rights, claims and causes of action against
Saverin, Weis, Andreessen Horowitz, AH, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Ong Stuut —claims and causes of action which of
course, Saverin would never bring.
84. 71. Bloso was not a party to any agreement consenting to the stock
restriction, nor was Bloso asked or permitted to vote in favor of the restriction.
Bloso was not advised of or asked to participate in the potential bankruptcy
restricting restructuring of Jumio, and Bloso’s Jumio equity interest.
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85. 72. Gearing up to implement their plan to steal Jumio out of bankruptcy while negating Bloso’s rights, on August 28, 2015, Saverin and Weiss for AH purchased the following convertible notes (the “Saverin Notes”):
a. Note No. CPN -1 dated August 28, 2015 in the original
principal amount of $4,000,000.00 owed to Saverin;
b. Note No. CPN -2 dated August 28, 2015 in the original
principal amount of $1,509,780.82 owed to Saverin;
c. Note No. CPN -3 dated August 28, 2015 in the original
principal amount of $2,005,041.10 owed to Saverin; and
d. Note No. CPN -4 dated August 28, 2015 in the original
principal amount of $1,509,780.82 owed to AH. Of course,
this Note was transferred to Saverin on March 18, 2016, three
days before Jumio actually filed for Chapter 11 protection.
86. 73. Pursuant to a security agreement dated August 28, 2015, the
Saverin Notes were secured by liens on and security interests in substantially all of Jumio’s assets, including its cash (the “Saverin Security Agreement”).
VIII IX . The Financial Restatements
87. 74. After the ability of Bloso to transfer stock was essentially revoked by the Amended By-Laws, and the Saverin Notes and Saverin Security
Agreement were signed, and Bloso was thereafter finally advised learned of the
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rampant financial mess at Jumio and realized for the first time that the bases for its investment in Jumio, to wit Defendants’ Saverin, Ong, Weiss, AH, LLC, AH
Fund, Kastenhofer, KTI, Starkey and Stuut ’s representations about the financial
status of the company, were baseless.
88. 75. On September 2, 2015, Defendants publicly announced that
Jumio was required to restate its unaudited financial statements for the years
ending December 31, 2013 and December 31, 2014 (the “Restated Financials”).
89. 76. The Defendants Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut further announced that the decision to issue the Restated Financials was made following the identification of errors related to revenue recognition policies adopted by Jumio. By early fourth quarter 2015,
Jumio was not flush with the $100.0 million but was instead almost flat broke.
90. 77. During a conference call in September 2015, Stuut , on behalf of
Jumio and Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and
Starkey admitted to Bloso that Jumio did not have anyone on staff with the requisite accounting experience or familiar with and qualified to apply standard
GAAP and FASB rules regarding revenue recognition.
91. 78. This admission that Defendants Mattes, Saverin, Ong, Weiss, AH,
LLC, AH Fund, Kastenhofer, KTI and Starkey had operated Jumio for over four years absent appropriate financial and accounting management, whilst making
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representations to Bloso about Jumio’s financial condition was stunning to Bloso.
Of course, Stuut had done nothing to remedy this egregious problem nor did he undertake any effort to advise Bloso prior to this admission. Bloso was now locked out of its rights right to dump Jumio stock while Defendants Mattes,
Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut were taking actions to protect their future interests in Jumio and to mitigate all potential liability for their management and fiduciary malfeasance.
92. 79. During that same September 2015 conference call , Stuut made several other stunning representations on behalf of Jumio which were adopted by
Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut :
a. Although Jumio was broke, Defendants had received significant
inbound interest for Series D financing;
b. Defendants would be “communicative and informative”
regarding the completion of the Series D financing; and,
c. Defendants appeared confident that the Series D financing
round would fund be funded ; at no point did Defendants tell
Bloso that the restated financials were hindering the Series D
issuance.
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93. 80. Despite the pledge to be “communicative and informative,”
Defendants Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut never communicated to Bloso that there were any difficulties completing
Series D financing. But in documents later revealed in disclosed during the bankruptcy court proceedings , Stuut certified that the Restated Financials restated financials made raising funds almost impossible.
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IX X. The Settlement Agreement
94. 81. On January 14, 2016, Defendants issued Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut caused Jumio to issue the following letter to all shareholders, predominantly impacting Bloso:
Dear Securityholder:
As you may know, Jumio, Inc. (the “Company” or “Jumio”) recently restated its unaudited financial statements for fiscal years ended December 31, 2013, and December 31, 2014 (the “Restated Financials”), copies of which were provided to all stockholders that complied with the instructions provided in the Company’s stockholder letter dated September 2, 2015. The Board of Directors of the Company (the “Board”) recently determined that it is in the best interest of the Company to offer certain stockholders who may have reviewed financial data derived from Jumio’s 2013 unaudited financial statements (the “Disclosures”) in connection with their purchase of Jumio capital stock, a warrant to purchase additional shares of common stock of the Company (the “Warrants”) in exchange for signing a settlement agreement. As the issuance of the shares of common stuck sto ck underlying the Warrants may be dilutive to all other stockholders, option holders and warrant holders (the “Securityholders”) of the Company, the Company also plans to offer you a potential “top up” to maintain your pro rata ownership (the “Top-Up”), as provided in more detail below, in exchange for signing a Settlement Agreement attached hereto as Exhibit A. The Company does not admit any fault or wrongdoing. However, it believes that it is in the best interest of the Company to resolve any potential issues with the holders of its securities.
The net result of the Top-Up is that, if the Company needs to issue more than 15.4 million shares of common stock of the Company to cover the exercise of the Warrants, all Securityholders (other than Selling Stockholders) will receive additional shares of capital stock of the Company (or rights to acquire additional shares of capital stock of the Company) to maintain their current ownership on a fully- diluted basis. The Company estimates that it will be required to
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issue more than the 15.4 million shares of the Company to cover the exercise of the Warrants if the Independent Valuation is lower than $190 million.
95. Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey
and Stuut even attempted to authorize pop-up warrants to be issued to Jumio
shareholders in an effort to cover losses related to past misrepresentations.
96. 82. On January 29, 2016, based upon Defendants’ on these
representations by and condoned by Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut that Series D financing would be completed, and the promise that Bloso’s percentage ownership interest would not be diluted,
Bloso and Jumio entered into a Settlement Agreement (the “Settlement
Agreement”), in which Jumio agreed to issue additional shares to Bloso in exchange for Bloso’s agreement to release any claim related or arising from “(1) the Security-holder’s purchase or acquisition of the shares and/or options or warrants to purchase shares of the Company’s capital stock on or before this date,
(2) any actual or alleged accounting errors and irregularities that preceded, were related to, caused in whole or in part by or resulted in the Restated Financials, (3) any actual or alleged defect, error, misstatement, or omission in the Company’s past disclosures and/or the Restated Financials, (4) the issuance of the Warrants, or (5) the entering into of this Agreement, provided, however, that nothing herein
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shall release any claims to enforce the rights granted under this Agreement” (the
“Released Claims”).
97. 83. Significantly, the Settlement Agreement also provided that the
issuance of additional shares would occur “immediately prior to the earlier of (i)
the Company’s next round of equity financing, (ii) a Change of Control, or (iii)
April 1, 2016.”
98. 84. But, unbeknownst to Bloso, in February 2016, Saverin formed
Jumio Acquisition, LLC in order to help Defendants enact a plan to take Jumio
from Bloso in a bankruptcy.
99. 85. The Settlement Agreement had to be ratified by the Jumio Board
for it to be valid. The Settlement Agreement was not ratified by the Jumio Board.
100. 86. Defendants used the Settlement Agreement as a ploy to keep
Bloso from taking any action until at least April 1, 2016, while Defendants were
preparing to take Jumio into bankruptcy where they could through their clever
engineering release themselves of liability to Bloso.
101. 87. Upon information and belief, while during the first quarter of
2016 Defendants Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut received various term sheet and financing offers for to Jumio shareholders totaling as much as $30,000,000, Defendants and these defendants, of
course, said nothing to Bloso.
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102. 88. Instead, in mid March mid-March 2016, AH LLC and AH Fund
transferred its allegedly their secured debt to Saverin, and three days later Jumio filed its voluntary petition for relief under chapter 11 of the Bankruptcy Code.
Bloso’s investment was thereby ruined. By then, Defendants Saverin, Ong, Weiss,
AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut had the intention to squeeze out completely Bloso and take control of a very valuable company at a substantial discount to its fair market value. The proof is that New Jumio is flourishing and just raised $15.0 million.
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XXI . Jumio’s Bankruptcy
103. 89. Of course prior Prior to April 1, 2016 as set forth as a condition in the Settlement Agreement, on March 21, 2016 (the “Petition Date”), Jumio filed a petition for relief under chapter 11 of the Bankruptcy Code in the United
States District Court for the District of Delaware. On the same day, Jumio filed a motion for approval of a sale of substantially all of its assets to Centana Growth
Partners, LP.
104. Of course, Saverin by now was complaining that he and Mattes had suffered a falling out related to the demise of Jumio, each blaming each other for the financial irregul arities leading to the “fraud” articulated by Saverin in his bankruptcy court filing. When Jumio filed bankruptcy Saverin supplied the $2.4 million in Debtor-In-Possession financing to Jumio and thereafter agreed to contribute $600,000.00 to the Jumio bankruptcy estate as part of the now- confirmed plan which included a release of all derivative claims against him.
Saverin benefitted by the engineered bankruptcy as a result of the release of all derivative claims against him as a director of Jumio related to his role in the financial and accounting misrepresentations made to Plaintiff. Defendants argued to the Bankruptcy Court that because Saverin ’s investment was hurt too the Board should receive a total release from any potential derivative liability regarding the conspiracy to make and hide ongoing financial misrepresentations.
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105. 90. On May 6, 2016, the Bankruptcy Court approved the sale of
Jumio’s assets to Centana Growth Partners LP. Despite Defendants’ prior
boasting over $100,000,000 in annual revenue, publicizing partnerships with elite
and global companies and listing over $62,000,000 in assets on its bankruptcy
schedules, Jumio was sold to Defendants through Centana Growth Partners for
$850,000, less cure costs. New Jumio returned to operations.
106. 91. No explanation for the drastic difference in purchase price
compared to the value of Jumio’s assets was provided to the bankruptcy court, and no amendment to schedules to indicate the value of assets misstated was offered.
107. 92. Less than six months after exiting bankruptcy, New Jumio has
already raised $15,000,000 in new financing and issued numerous press releases
regarding its “strong growth in the market, having recognized record results for
Q2 2016, with a greater than 65 percent growth in recurring revenue year-over-
year, and a record 30 million transactions completed to-date.” Jumio Momentum
Continues With $15 Million Financing Round ,
http://www.marketwired.com/press-release/jumio-momentum-continues-with-15-
million-financing-round-2154169.htm, August 30, 2016. Of course, this all
benefits Defendants Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI,
Starkey and Stuut have all benefitted enormously to the great detriment of Bloso.
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108. 93. It is clear that Jumio was a business with value and at that this
same value was transferred to New Jumio without any material change in the
client base, business model, technology or expertise. New Jumio continues to
experience growth, and that the sole purpose of Jumio’s bankruptcy was to dilute
and terminate Bloso’s rights in Jumio and to absolve Defendants Mattes, Saverin,
Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut of any liability with respect to the finance and accounting malfeasance perpetrated under their watch, which formed the bases of the representations which induced Bloso to invest.
109. 94. Saverin next proposed a Liquidating Chapter 11 Plan (the “Plan”)
and Global Settlement Agreement, whereby creditors and Bloso release all claims
against Defendants Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund,
Kastenhofer, KTI, Starkey and Stuut in exchange for Saverin and AH LLC and
AH Fund funding a minor “litigation trust” to pursue derivative fiduciary claims
against the so-called “bad” Board board members and certain officers. The Plan,
of course, calls for Saverin and AH LLC and AH Fund to be repaid from New
Jumio operation funds before any other creditor who opts-in to the Global
Settlement Agreement is paid.
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110. Upon information and belief, Saverin, AH LLC and AH Fund have
agreed to indemnify Ong, Weiss, Kastenhofer, KTI, Starkey and Stuut as part of
this process.
111. 95. Thus, in exchange for funding a litigation trust, for which Saverin
and AH will be repaid, Defendants demand releases of all direct and Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI, Starkey and Stuut received
releases from the bankruptcy estate of all potential derivative and related claims against them. At present, potential derivative claims reside in the bankruptcy
court. Bloso’s direct claims against the Defendants properly rest before the Court
of Chancery.
96. Defendants’ proposed Plan has not been approved by the bankruptcy
court.
112. 97. As a result of Defendants’ actions Bloso has suffered direct and
unique harm.
COUNT I —CIVIL CONSPIRACY Defendants
113. Bloso repeats and realleges each and every allegation contained
above as if fully set forth herein.
114. Mattes, Saverin, Ong, Weiss, AH, LLC, AH Fund, Kastenhofer, KTI
and Starkey conspired to deprive Bloso of the value of his Jumio shares.
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115. That conspiracy benefited Mattes, Saverin, Ong, Weiss, AH, LLC,
AH Fund, Kastenhofer, KTI and Starkey and harmed Plaintiff.
116. Multiple unlawful acts in furtherance of this conspiracy occurred when: (1) Defendants made false reports in the media regarding the income value of Jumio ’s technology; (2) Defendants made knowingly false statements regarding
Jumio ’s income to Bloso to induce Bloso to invest in Jumio; (3) Defendants secretly operated Jumio for years without qualified financial and accounting management; (4) Defendants acted in conspiracy to protect and hide from Bloso the true nature of Jumio ’s financial condition; (5) Defendants prevented Jumio from putting qualified financial management in place; (6) Defendants took action to limit their liability for their gross fiduciary breaches and misrepresentations; (7)
Defendants amended Jumio ’s by-laws to restrict stock transfers in an effort to protect themselves; (8) Defendants used the Settlement Agreement to keep Bloso from taking any action before Jumio entered into bankruptcy; (9) Defendants negotiated and accepted indemnity agreements in exchange for favorable positions in New Jumio post bankruptcy.
117. As a result of Defendants ’ conduct, Bloso has been damaged as described in this complaint.
COUNT II —FRAUD Mattes and Ampalu
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118. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
119. On August 23, 2013, unbeknownst to Bloso and without any authorization, apparent or otherwise, Mattes purported to execute on behalf of
Bloso the Restriction purporting to severely restrict and limit Bloso ’s stockholder rights in Jumio Common Stock.
120. During this period, notwithstanding the fact that Bloso was the named shareholder of record, Mattes continued to falsely claim that he spoke for and controlled the Bloso shares and notes. Mattes had no basis for making these claims, had no authority to make such claims and such claims were not supported by any documentation upon which any reasonable party, including Saverin, Ong,
Weiss, AH, LLC, AH Fund, Kastenhofer, KTI and Starkey could justifiably rely in not communicating with Bloso or otherwise taking actions related to Bloso ’s interests which were not expressly approved by Bloso. Bloso was not made aware of these misrepresentations until well after Jumio had filed bankruptcy.
121. At no time was Mattes or Ampalu an authorized agent or representative of Bloso regarding Bloso ’s Jumio stock and convertible notes. At no time were Defendants authorized to deal directly with Mattes or Ampalu with respect to Bloso ’s Jumio stock and convertible notes.
122. As a direct and proximate result of this fraud Bloso was injured.
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COUNT IIII —Breach of Fiduciary Duty Against all Defendants
123. 98. Plaintiffs incorporate by reference all preceding and subsequent paragraphs Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
124. 99. As alleged in detail herein, Defendants owed a fiduciary duty to, among other things, act in furtherance of the best interests of Bloso, to make accurate, timely representations and to correct immediately any misstatements about which Defendants became aware and to assure that Bloso’s franchise and other rights were protected.
125. 100. Specifically, and as alleged above, Defendants misled or failed to remedy prior misrepresentations to Bloso by, inter alia , failing to disclose
Jumio’s financial and accounting position, failing to disclose that Mattes was secretly selling his founder-shares on the gray market, failing to disclose Jumio’s orchestrated impending bankruptcy filing, and generally failing to deal fairly with
Bloso while at the same time taking steps to protect Defendants’ controlling stock interests while maneuvering to extricate themselves from personal liability.
126. 101. As a direct and proximate result of the foregoing breaches of fiduciary duties Bloso has sustained damages in the complete loss of the value of its Jumio stock, its franchise and sale rights rights prior to bankruptcy and
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opportunities to meaningfully protect its interests prior to and in bankruptcy, such rights being greater than the value of Bloso’s investment.
127. 102. These losses are unique to Bloso and cannot be remedied by payment to Jumio.
128. 103. Plaintiff has no adequate remedy at law.
COUNT II IV Fraud – All Defendants
129. 104. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
130. 105. Defendants owed to Bloso the duty of accurate and timely disclosure regarding the financial condition of Jumio and to correct any misrepresentation.
131. 106. Defendants by their actions, inactions, statements, misstatements and failure to correct or otherwise condone misstatements committed fraud by making false representations to Bloso regarding the business , and Jumio’s financial condition which they kept hidden from Bloso .
132. 107. By allowing to Jumio to operate without any internal financial controls for many years, and by knowingly failing to disclose that information to
Bloso while at the same time making representations misrepresentations or failing
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to correct misstatement and condoning past statements about the financial
propriety of Jumio, Defendants acted with reckless indifference to the truth.
133. 108. Although Defendants were aware of the massive errors in
Jumio’s financial statements, they continued to make
representations misrepresentations and to condone past misrepresentations to Bloso to induce Bloso to agree to Jumio stock transactions and to exercise their conversion rights.
134. 109. The Defendants induced Bloso to enter into the Settlement
Agreement based upon false representations that Bloso’s ownership interest in
Jumio would not be diluted and that Bloso would be issued additional shares.
135. Bloso acted in reasonable reliance upon the Board ’s representations
and those supported and condoned by Defendants.
136. Bloso was not, and could not have been, aware of the material
misrepresentations made and condoned by Defendants until at the earliest, March
of 2015.
137. 110. Bloso justifiably relied on the Defendant’s false representations,
by undertaking the various stock purchase and conversion transactions alleged
herein, Bloso agreed to enter into the Settlement Agreement, and gave up any
opportunity to (i) seek to sell its shares, or (ii) or take any other legal action with
respect to the Released Claims.
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138. 111. As a result of Bloso’s reliance on defendant’s false representations, Bloso was damaged following the Defendants orchestrated bankruptcy of Jumio and subsequent sale, which effectively wiped out the Bloso’s interest in Jumio.
COUNT III V Equitable Fraud – All Defendants
139. 112. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
140. 113. Defendants owed to Bloso the duty of accurate and timely disclosure regarding the financial condition of Jumio and to correct any misrepresentation existing or prior material misrepresentations .
141. 114. Defendants breached their duty to Bloso by, inter alia , failing to require Jumio to produce annual audited financial statements, by failing to disclose to Bloso the financial and accounting condition of Jumio and by condoning past and continued misrepresentations regarding such condition.
142. 115. Defendants further breached their duty to Bloso by failing to require Jumio to put in place basic financial management and adhere to basic accounting principles which would have warned Bloso about the financial and accounting improprieties at Jumio and which would have prevented Bloso from undertaking certain stock purchase and conversion transactions. At no time prior
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to the stock purchase transactions or conversion transactions did Defendants attempt to or otherwise actually correct Bloso’s mistaken belief as to the true state of Jumio’s financial and accounting affairs.
143. 116. As a direct and proximate result of Defendants’ actions, inactions and misrepresentations, Bloso elected to enter into the stock purchase transactions and elected to convert the August 2011 Note, October 2011 Note,
January 2012 Note and May 2012 Note into common stock, each transaction induced by Defendants.
144. 117. But for the failure of Defendants to properly and accurately disclose, or to correct prior disclosures regarding, Jumio’s true financial and accounting condition, Bloso would not have invested in or otherwise would have divested itself from Jumio. Defendants also failed to accurately and timely disclose to Bloso Jumio’s orchestrated and impending bankruptcy filing.
145. 118. At all times relevant Defendants acting as agents of each other and Jumio, or acting as a close controlling group of directors, officers and shareholders owed a special obligation to Bloso as a minority shareholder beholden to them. Defendants were required to make to Bloso, and correct misstatements about, all appropriate and material correct disclosures as to Jumio’s financial and accounting condition which they failed individually and collectively to do. Defendants created a deliberate and false impression about Jumio designed
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to entice Bloso to undertake the stock purchase and other transactions complained about herein.
146. Bloso acted in reasonable reliance upon the Board ’s representations and those supported and condoned by Defendants.
147. Bloso was not, and could not have been, aware of the material misrepresentations made and condoned by Defendants until at the earliest, March of 2015.
148. 119. Bloso is entitled to rescind the stock purchase agreements and the conversion transactions and receive from Defendants any and all consideration paid by Bloso to Defendants in support of those transactions.
149. 120. Bloso has suffered direct pecuniary losses as a result of
Defendants’ conduct.
COUNT IV VI Negligent Misrepresentation – Saverin and Weiss 121. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
122. Saverin and Weiss, as members of the Board had a duty to provide accurate information to Bloso with respect to Jumio’s financial condition.
123. Saverin and Weiss made false statements regarding the profitability and revenue of Jumio in March of 2012 and May of 2012, respectively.
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124. Saverin and Weiss made these false statements at a time when the knew or should have been known that Jumio did not have sufficient financial and accounting management and controls in place to substantiate the representations about Jumio.
125. Saverin and Weiss made the incorrect and unsupportable statements at a time when they knew the financial statements were not properly prepared, because Jumio had not at the time even prepared such financial statements.
126. Saverin and Weiss failed to exercise reasonable care when they made statements regarding the financial condition of Jumio because (1) they knew or should have known that no proper financial and accounting management and controls were in place at Jumio, and (2) could not have possibly relied on proper financial statements at the time their respective statements were made.
127. As a result of Saverin and Weiss’s public statements regarding
Jumio’s growth and profits, on October 3, 2012, Bloso elected to convert the
August 2011 Note, October 2011 Note, January 2012 Note and May 2012 Note into common stock.
128. Bloso has suffered a pecuniary loss as a result of its justifiable reliance on Saverin and Weiss’s statements.
COUNT V Unjust Enrichment & Constructive Trust – All Defendants
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150. 129. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
151. 130. Upon learning of the financial fraud occurring under their watch,
Defendants actively took steps to retain and improve their positions in Jumio to the detriment of Bloso, converted old unsecured notes into secured loans, allowed
Jumio to run out of money so they could force Jumio into bankruptcy and thereafter attempt to release themselves of all liability.
152. 131. Defendants were enriched by Saverin and AH converting old debt into the Saverin Notes, which improved their position of power and control vis-à-vis the Bloso.
153. 132. As a result of the Defendants actions to take control, impoverish, and force Jumio into bankruptcy, Bloso suffered a loss of almost $5.0 million dollars.
154. 133. Defendants had no justification for taking their actions to disenfranchise and dilute Bloso other than their desire to take control of Jumio and to absolve themselves of liability through seeking releases first through the
Proposed Asset Purchase Agreement, and then through the Proposed Global
Settlement Agreement and Liquidating Chapter 11 Plan.
155. 134. As a direct and proximate result Defendants have been unjustly enriched by Bloso’s investment in Jumio.
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156. Bloso has no adequate remedy at law.
COUNT VI VII Fraud in the Inducement – Defendants
157. 135. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
158. 136. At all times relevant Defendants were acting personally or as direct agents on behalf of parties from whom Bloso acquired its Jumio shares, and are as a result of the breach of fiduciary duties, fraud, negligent misrepresentations and equitable fraud are directly liable to Bloso.
159. 137. Defendants knowingly failed to disclose or failed to remedy improper prior disclosures of Jumio’s financial and accounting affairs prior to
Bloso’s acquisition of Jumio shares.
160. 138. Defendants made representations about Jumio’s financial condition that were false or acted with reckless disregard to the truth about the veracity of Jumio’s financial and accounting condition as publicly touted, and about Jumio’s impending bankruptcy.
161. 139. Defendants waited over five (5) months before advising Bloso that they had done a forensic audit and investigation into Jumio’s financial mismanagement, which ultimately resulted in the Restated Financials.
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162. 140. Defendants made numerous false statements to Bloso regarding their absolute confidence that Series D financing would be completed.
163. 141. Defendants made numerous false statements to Bloso that it would be issued additional stock and that its ownership in Jumio would not be diluted, but Bloso, and others would instead be compensated for any event that led to dilution.
164. 142. These representations induced Bloso to enter into the stock purchase agreements, exercise conversion rights and to enter the Settlement
Agreement.
165. 143. Defendants were actively preparing for Jumio’s bankruptcy and subsequent sale while they were soliciting Bloso to enter into the Settlement
Agreement, as evidenced by Saverin’s formation of Jumio Acquisition, LLC in
February 2016, at a time when Jumio was allegedly actively engaged in securing
Series D financing.
166. 144. Defendants fraudulently induced Bloso to enter into the
Settlement Agreement, improperly restricted Bloso’s ability to sell stock in the
Amended By-Laws, and essentially held Bloso hostage until the Petition Date, when Bloso’s interest in Jumio was effectively eliminated.
167. 145. Defendants ’ rights and gains related to their Jumio ownership and any ownership or other pecuniary interest in New Jumio were unjust, and as a
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direct and proximate result of Defendants’ conduct they were unjustly enriched to
the detriment of Bloso.
168. 146. As a direct and proximate result of Defendants’ fraudulent,
unfair and unconscionable conduct, Defendants were unjustly enriched at the
expense of Bloso to which they owed fiduciary duties. As a result, all gains of
Defendants resulting from Jumio and New Jumio are held in constructive trust for
the benefit of Bloso.
169. 147. Bloso has no adequate remedy at law.
COUNT VII VIII Fraudulent Transfer 6 Del. Code C. §1304 – Saverin, AH and Management Ong, Weiss, Kastenhofer, Starkey and Stuut
170. 148. Bloso repeats and realleges each and every allegation contained
above as if fully set forth herein.
171. 149. The reclassification of unsecured, previously issued notes into
the secured Saverin Notes represents a transfer that is fraudulent as to Bloso.
172. 150. Saverin, AH and acting Management Ong, Weiss, Kastenhofer,
Starkey and Stuut permitted Saverin and AH to convert unsecured notes into the
Saverin Notes with the actual intent to hinder, delay and defraud Bloso, as
Saverin AH and acting Management Defendants were conspiring to place Jumio in bankruptcy and obtain releases of liability for themselves.
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173. 151. Saverin, AH and acting Management Ong, Weiss, Kastenhofer,
Starkey and Stuut permitted Saverin and AH to convert unsecured notes into the
Saverin Notes without receiving a reasonably equivalent value in exchange for the transfer, as no new funds were provided to Jumio in exchange for granting the security interest.
174. 152. The reclassification of unsecured notes into the secured Saverin
Notes occurred at a time when Jumio was about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
175. 153. The reclassification of unsecured notes into secured Saverin
Notes occurred at time when Saverin, AH and acting Management reasonably should have known that Jumio was incurring debts beyond its ability to pay as they became due.
176. As a direct and proximate result of these actions Bloso was harmed.
COUNT VIII IX Fraudulent Transfer 6 Del. Code C. § 1305 – Saverin, AH and Management Ong, Weiss, Kastenhofer, Starkey and Stuut
177. 154. Bloso repeats and realleges each and every allegation contained above as if fully set forth herein.
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178. 155. The reclassification of unsecured, previously issued notes into the secured Saverin Notes represents a transfer that is fraudulent as to Bloso.
179. 156. Bloso’s claim arose before the reclassification of the previously issued unsecured notes into the secured Saverin Notes.
180. 157. Jumio received less than reasonably equivalent value in exchange for the reclassification of unsecured, previously issued notes into the secured Saverin Notes, because Jumio did not receive any funds in exchange for the reclassification.
181. 158. Ultimately, Jumio was insolvent or became insolvent as a result of the reclassification of unsecured, previously issued notes into the secured
Saverin Notes, it was still cash flow negative, it had used almost all of its capital, because it could not raise new capital, and Defendants saw an opportunity take control of Jumio while at the same time insulating themselves from liability regarding past representations and actions.
182. 159. Saverin, AH and acting Management Ong, Weiss, Kastenhofer,
Starkey and Stuut are insiders of Jumio pursuant to 6 Del. Code § 1301(7)(b).
183. 160. The reclassification of unsecured, previously issued notes into the secured Saverin Notes constitutes a transfer to an insider for an antecedent debt, Jumio was insolvent at the time of the transfer and Saverin, AH and acting
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Management Ong, Weiss, Kastenhofer, Starkey and Stuut had reason to believe
that Jumio was insolvent.
WHEREFORE , Plaintiff Bloso demands judgment as follows:
A. An award of damages for Defendants’ breach of fiduciary duties to
Bloso, including an award for the value of the loss of Bloso’s rights to vote it its
stock, sell its stock and to meaningfully participate in the bankruptcy and other
reorganization processes and for losses accrued to Bloso for such actions, jointly
and severally as a result of Defendants ’ civil conspiracy ;
B. An award of damages for Defendants’ Mattes and Ampalu ’s
fraudulent conduct and statements that each spoke for and represented Bloso,
including an award for the value of the loss of Bloso’s rights to vote it its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes and an order that Mattes and Ampalu are jointly and
severally liable for damages to Bloso and for losses accrued to Bloso for such
actions ;
C. An award of damages for Mattes and Ampalu ’s fraudulent conduct
and statements that each spoke for and represented Bloso, including an award for
the value of the loss of Bloso ’s rights to vote its stock, sell its stock and to
meaningfully participate in the bankruptcy and other reorganization processes and
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an order that Defendants are liable for losses accrued to Bloso for such actions,
jointly and severally as a result of Defendants ’ civil conspiracy;
CD. And An award of damages for Defendants’ equitable fraud including
an award for the value of the loss of Bloso’s rights to vote it its stock, sell its
stock and to meaningfully participate in the bankruptcy and other reorganization
processes;
DE. An award of damages for Defendants’ negligent
misrepresentations fraud including an award for the value of the loss of Bloso’s rights to vote it its stock, sell its stock and to meaningfully participate in the bankruptcy and other reorganization processes;
EF. An award based upon Defendants’ unjust enrichment and for the
imposition of a constructive trust upon all rights and gains of Defendants related
to their interests and rights in Jumio and New Jumio;
FG. An award of damages or alternatively rescission related to
Defendants’ fraudulent inducement of Bloso to enter into the stock purchase and
conversion transactions regarding Bloso’s acquisition of Jumio stock and that
Defendants directly or as acting agents for such transactions be held liable for
recoupment of the consideration paid therefore;
GH. An award of damages resulting from Defendants’ fraudulent transfers;
and,
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HI. An award of costs, attorneys’ fees, pre-judgment and post-judgment interest and all other relief that the Court deems equitable and just.
Dated: September 29 December 23 , 2016.
Respectfully submitted,
MCCARTER ENGLISH, LLP
/s/ Christopher A. Selzer , Esquire Christopher A. Selzer , Esquire (No. 4305) 405 North King Street, 8 th Floor Wilmington, Delaware 19899 (302) 984-6300 (302) 984-6399 [email protected]
Of Counsel
McCarter & English, LLP Charles A. Stanziale, Esq. Four Gateway Center 100 Mulberry Street Newark, NJ 07102
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Summary report: Litéra® Change-Pro TDC 7.5.0.145 Document comparison done on 12/23/2016 1:17:34 PM Style name: McCarter Intelligent Table Comparison: Active Original filename: Bloso Original Complaint (use for redline).doc Modified filename: 2016.12.23 Bloso Amended Complaint Final.doc Changes: Add 578 Delete 477 Move From 7 Move To 7 Table Insert 0 Table Delete 0 Table moves to 0 Table moves from 0 Embedded Graphics (Visio, ChemDraw, Images etc.) 0 Embedded Excel 0 Format changes 0 Total Changes: 1069 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 138 of 236
EXHIBIT B
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: Chapter 11 JMO WIND DOWN, INC.,1 Case No. 16-10682 (BLS) Debtor. Ref Nos. 399, 400, 404
STATEMENT OF EDUARDO SAVERIN IN RESPONSE TO AMPALU INVESTMENT GMBH AND SAMIRANA INVESTMENT CORP’S OBJECTION TO DEBTOR’S AMENDED PLAN OF LIQUIDATION AND DISCLOSURE STATEMENT FOR THE AMENDED PLAN OF LIQUIDATION AND TO OBJECTION OF BLOSO INVESTMENTS, LTD. TO (I) FINAL APPROVAL OF DEBTOR’S AMENDED DISCLOSURE STATEMENT AND (II) CONFIRMATION OF DEBTOR’S AMENDED PLAN OF LIQUIDATION
Eduardo Saverin, by and through his undersigned counsel, hereby files this response to
Ampalu Investment GmbH and Samirana Investment Corp.’s Objection to the Debtor’s Amended
Plan of Liquidation and Disclosure Statement for the Amended Plan of Liquidation [Docket No.
399] (the “Ampalu Objection”), the Declaration of Daniel Mattes [Docket No. 400] in support
thereof (the “Mattes Declaration”), and the Objection of Bloso Investments, Ltd. to (I) Final
Approval of Debtor’s Amended Disclosure Statement and (II) Confirmation of Debtor’s Amended
Plan of Liquidation [Docket No. 404] (the “Bloso Objection”). In support hereof, Mr. Saverin
respectfully states as follows:
1. In the Ampalu Objection and Mattes Declaration, Daniel Mattes, the former Chief
Executive Officer of Jumio Inc. (“Jumio” or the “Company”), intentionally misrepresented facts
in a self-serving effort to protect himself and malign the victims of his fraud. His filing should
not prevent this bankruptcy from proceeding so that the estate and investors who were victims of
1 The last four digits of the Debtor’s tax identification number are 6822. The Debtor’s mailing address is 268 Lambert Avenue, Palo Alto, California 94306.
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Mr. Mattes’ fraud can pursue litigation against Mr. Mattes and affiliated management members
for the fraud that caused this bankruptcy.
2. The Plan2 is the product of good faith arms-length negotiations between the Debtor
(which was approved by the Debtor’s independent director), the Official Committee of Equity
Security Holders (the “Equity Committee”) appointed in the above-captioned chapter 11 case to
act as a fiduciary for and represent the interests of all equity holders, Mr. Saverin, and
Andreessen Horowitz. Other than himself, Mr. Saverin has no control over any of these parties.
Through the Plan, a liquidating trust will be established that will be empowered to vindicate the
rights of the victims of Mr. Mattes’ fraud—which is precisely what Mr. Mattes seeks to derail
through his filings.
I. Mr. Mattes Engaged in Wrongdoing and the Plan Seeks to Authorize Legal Action Against Him
3. Jumio failed because Mr. Mattes, by his own admission, engaged in fraud,
including misappropriating millions of dollars in Jumio’s assets, falsifying accounting records,
and making misrepresentations to Jumio’s Board of Directors and investors. As shown in
Exhibit 1, an excerpt from a March 2015 presentation to the Jumio Board of Directors, Mr.
Mattes acknowledged his wrongdoing and apologized for his misconduct. He was then forced
out of the Company. Under the Plan, unsecured creditors will be paid in full, and the key
stakeholders—i.e., the debt holders, several of the largest equity holders, the Equity Committee,
and the Debtor—have created a trust empowered to pursue claims against Mr. Mattes and
associated members of his management team that creates an opportunity for the victims of Mr.
Mattes’ fraud to obtain a recovery on their investment if these claims are successful. Mr. Mattes’
filing mischaracterizes and misrepresents the facts in an effort to distort the reality of this
2 Amended Chapter 11 Plan of Liquidation of JMO Wind Down, Inc.[Docket No. 345] (the “Plan”).
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bankruptcy—that is, that he caused the Company to fail—and the major stakeholders are all
united in seeking claims against him.
II. Mr. Mattes Lies About the Jumio Auction and Financings
4. Jumio was unable to raise money during Mr. Mattes’ tenure and, thereafter, due to
Mr. Mattes’ misconduct.3 The only investor willing to support Jumio was Mr. Saverin. He
invested in the Company prior to the bankruptcy on terms highly favorable to the Company, and
he offered those terms to other investors, including Mr. Mattes and the other investors identified
in Mr. Mattes’ filing.4 None of them participated in the financing.5 When Jumio could no longer
raise any money, it had no choice but to file for bankruptcy to absolve itself of the ramifications
of Mr. Mattes’ fraud, while seeking to continue in business and preserve jobs.6
5. Mr. Saverin provided approximately $2.4 million of debtor-in-possession (“DIP”)
financing, on exceedingly favorable terms that were approved by the Court.7 This financing
allowed Jumio to engage in an orderly, Court-approved auction process for its assets, run by an
experienced investment banking firm, designed to maximize value for all stakeholders.8 The
alternative was failure of the Company and the loss of jobs for its employees. Mr. Saverin stands
to lose most of this unassailable post-petition financing.
3 Declaration of Stephen Stuut in Support of Chapter 11 Petition and First Day Pleadings [Docket No. 3] (“First Day Decl.”) at ¶ 24. 4 First Day Decl. at ¶ 17. 5 First Day Decl. at ¶ 17. 6 First Day Decl. at ¶ 27. 7 See Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to 11 U.S.C. § 364, (II) Authorizing the Debtor’s Limited Use of Cash Collateral Pursuant to 11 U.S.C. § 363, (III) Granting Adequate Protection to Prepetition Secured Noteholders Pursuant to 11 U.S.C. § 361, 362, 363 and 364, and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 [Docket No. 45] at p. 9, ¶ K. 8 See Order (A) Authorizing the Sale of Substantially All of the Debtor’s Assets Free and Clear of Liens Claims, Encumbrances, and Other Interests, (B) Authorizing and Approving the Purchase Agreement for Such Sale, (C) Approving the Assumption and Assignment of Certain Executory Contracts and Unexpired Leases Related Thereto, and (D) Granting Related Relief [Docket No. 202] (“Sale Order”) at p. 3, ¶ G. 01:19403920.1 3
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6. The auction process was also found by the Court to be more than fair. Specifically,
the Court held that the “sale process…afforded all potential bidders a full, fair, and reasonable
opportunity to submit a higher or otherwise better offer to purchase the [Jumio] Assets and
participate in the Auction.”9 Few bidders appeared, and the one that prevailed had no affiliation
with Mr. Saverin.10 Mr. Saverin has no economic or other relationship with the current owner of
Jumio. Rather than benefiting from the sale, the sale did not result in sufficient proceeds to
provide any meaningful return on Mr. Saverin’s DIP financing, let alone his other claims.
However, in order to facilitate the continuation of the business and preservation of jobs for its
employees, Mr. Saverin supported this sale (at considerable personal expense). Mr. Saverin
stands to lose virtually all of his investment absent whatever can be recovered from Mr. Mattes,
who currently lives in Austria and has sheltered his assets outside of the United States.
7. In short, every decision about the Jumio auction and sale was closely scrutinized
by this Court and the Equity Committee, decisions as to the process were made independently by
the Debtor, and the Court determined the results of the process to be fair and reasonable. There
is no basis to Mr. Mattes’ claim that the sale of Jumio benefitted Mr. Saverin. Had Mr. Saverin
not invested in Jumio after Mr. Mattes was removed, the Company would have failed. His
investment—which resulted in a substantial loss to him personally—allowed the Company, and
the jobs it provides, to survive from Mr. Mattes’ fraud.
9 See Sale Order at p. 3, ¶ G. 10 See Transcript of Hearing Re: Sale Motion Before the Honorable Brendan L. Shannon, Chief United States Bankruptcy Judge, May 6, 2016, at pp. 24-25 (excerpt attached hereto as Exhibit 2).
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III. The Bloso Objection Should Be Viewed Skeptically Because There Is Substantial Evidence that Mr. Mattes Controlled Bloso
8. Bloso Investments, Ltd. (“Bloso”), who is also a potential target of litigation by the
trust established under the Plan,11 submitted a separate objection that is similar to the Ampalu
Objection and Mattes Declaration, and Mr. Mattes, in the Ampalu Objection, joined in the Bloso
Objection. However, the appearance that Mr. Mattes and Bloso are separate entities may be
misleading as there is substantial evidence that Mr. Mattes, at one point, controlled Bloso.
9. Mr. Mattes repeatedly represented to Jumio’s board members, officers, and
investors that he controlled Bloso. For instance, in the Jumio Amended and Restated Right of
First Refusal and Co-Sale Agreement, which Mr. Mattes signed, Mr. Mattes is listed as a key
shareholder of Jumio “on behalf of” Bloso.12 Mr. Mattes also signed several documents on
behalf of Bloso, including the stockholder consent for the Series B financing round, and the
amendments to the Jumio Voting and Right of First Refusal Agreements.13
10. In its separate lawsuit, filed in Delaware Chancery Court, against Jumio’s former
officers and board members, including Mr. Mattes (the “Delaware action”), Bloso represents
that it “is not linked to the other Defendant shareholders.”14 This representation contradicts the
evidence in the Jumio corporate documents. The questionable relationship between Mr. Mattes
and Bloso is further highlighted by the fact that Mr. Mattes joined in Bloso’s objection to the
11 See Plan, Exh. B (preserving causes of action against, inter alia, any party not released under the Plan involved in secondary sales of the Debtor’s stock). 12 The signature pages and relevant schedule of the Jumio Amended and Restated Right of First Refusal and Co-Sale Agreement are attached hereto as Exhibit 3. 13 The signature pages of the Jumio Series B stockholder consent, Amendment No. 1 to the Voting Agreement, and Amendment No. 1 to the Right of First Refusal and Co-Sale Agreement are attached hereto as Exhibits 4 - 6, respectively. 14 Bloso Investments, Ltd. v. Eduardo Saverin, et al., Court of Chancery of the State of Delaware, Case No. 12787 (filed Sep. 29, 2016), at ¶ 6.
01:19403920.1 5
CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427 Filed Filed 09/15/17 10/13/16 Page Page 144 6 of of 6 236
Plan after Bloso sued him. Consequently, even though Bloso names Mr. Mattes as a defendant
in the Delaware action, it is unclear if Bloso will actually pursue any claims against him.
11. Bloso’s effort to object to this bankruptcy—which is intended to allow all of
Jumio’s aggrieved shareholders to pursue claims against Mr. Mattes—should be viewed
skeptically in light of Mr. Mattes’ representations regarding Bloso.
Dated: Wilmington, Delaware YOUNG CONAWAY STARGATT & TAYLOR, LLP October 13, 2016 /s/ Michael R. Nestor Michael R. Nestor (No. 3526) Sean M. Beach (No. 4070) Rodney Square 1000 North King Street Wilmington, Delaware 19801 Telephone: (302) 571-6600 Facsimile: (302) 571-1253 E-Mail: [email protected] [email protected]
-and-
Peter M. Gilhuly, Esq. (Admitted pro hac vice) Ted A. Dillman, Esq. (Admitted pro hac vice) LATHAM & WATKINS LLP 355 South Grand Avenue Los Angeles, CA 90071-1560 Telephone: (213) 485-1234 Facsimile: (213) 891-8763 E-Mail: [email protected] [email protected]
Counsel for Eduardo Saverin and Jumio Acquisition, LLC
01:19403920.1 6
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EXHIBIT 1 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-1 Filed Filed 09/15/17 10/13/16 Page Page 146 2 of 4236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-1 Filed Filed 09/15/17 10/13/16 Page Page 147 3 of 4236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-1 Filed Filed 09/15/17 10/13/16 Page Page 148 4 of 4236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 149 1 of 9236
EXHIBIT 2
CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 150 2 of 9236 1
UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE
. Chapter 11 IN RE: . . Case No. 16-10682(BLS) JUMIO, INC., . . Courtroom No. 1 . 824 Market Street Debtor. . Wilmington, Delaware 19801 . . Friday, May 6, 2016 ......
TRANSCRIPT OF HEARING RE: SALE MOTION BEFORE THE HONORABLE BRENDAN L. SHANNON CHIEF UNITED STATES BANKRUPTCY JUDGE
APPEARANCES:
For the Debtor: Adam G. Landis, Esq. Kerri K. Mumford, Esq. Kimberly A. Brown, Esq. LANDIS, RATH & COBB, LLP 919 Market Street, Suite 1800 Wilmington, Delaware 19801
George W. Shuster, Jr.,, Esq. WILMER, CUTLER, PICKERING, HALE & DOOR, LLP Seven World Trade Center New York, New York 10007
(Appearances Continued)
Audio Operator: Electronically Recorded by Dana Moore, ECRO
Transcription Company: Reliable 1007 N. Orange Street Wilmington, Delaware 19801 (302)654-8080 Email: [email protected]
Proceedings recorded by electronic sound recording, transcript produced by transcription service. CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 151 3 of 9236 2
APPEARANCES: (Continued)
For the U.S. Trustee: David L. Buchbinder, Esq. Natalie Cox, Esq. OFFICE OF THE U.S. TRUSTEE 844 North King Street Wilmington, Delaware 19801
For the Equity Committee: Peter J. Keane, Esq. PACHULSKI, STANG, ZIEHL & JONES, LLP 919 North Market Street 17th Floor Wilmington, Delaware 19801
Steven L. Caponi, Esq. K&L GATES, LLP 600 North King Street, Suite 901 Wilmington, Delaware 19801
Sven Nylen, Esq. K&L GATES, LLP 70 West Madison Street, Suite 3100 Chicago, Illinois 60602
Michael B. Lubic, Esq. K&L GATES, LLP 10100 Santa Monica Boulevard 8th Floor Los Angeles, California 90067
For Jumio Buyer, Inc.: David M. Fournier, Esq. PEPPER HAMILTON, LLP Hercules Plaza, Suite 5100 1313 Market Street Wilmington, Delaware 19899
For Eduardo Saverin and Jumio Acquisition: Sean M. Beach, Esq. YOUNG, CONAWAY, STARGATT & TAYLOR, LLP Rodney Square 1000 North King Street Wilmington, Delaware 19801
(Appearances Continued) CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 152 4 of 9236 3
APPEARANCES: (Continued)
For Eduardo Saverin and Jumio Acquisition: Peter M. Gilhuly, Esq. Ted A. Dillman, Esq. LATHAM & WATKINS, LLP 355 South Grand Avenue Los Angeles, California 90071
For ATF Annex Fund, LP: William P. Bowden, Esq. ASHBY & GEDDES, PA 500 Delaware Avenue Wilmington, Delaware 19899
Michael B. Bernstein, Esq. ARNOLD & PORTER, LLP 601 Massachusetts Avenue, NW Washington, D.C. 20001
Also Appearing: Wayne P. Weitz EISNERAMPER 750 Third Avenue New York, New York 10017
APPEARANCES VIA TELEPHONE:
For Centana Growth: Dominick DeChiara, Esq. Greg M. Gartland, Esq. Justin Rawlins, Esq. WINSTON & STRAWN, LLP
Jeremy Fielding, Esq. Anntal Silver, Esq. KEKST AND COMPANY
For the Equity Committee: Charles A. Stanziale, Esq. William F. Taylor, Esq. Jeffrey T. Testa, Esq. MCCARTER & ENGLISH
ALSO APPEARING VIA TELEPHONE:
Eric Byunn Ben Cukier CENTANA GROWTH PARTNERS CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 153 5 of 9236 4
INDEX
Page
PRESENTMENT/ARGUMENT 5
PROFFER OF EPSTEIN TESTIMONY 11
PROFFER OF CUKIER TESTIMONY 22
FURTHER ARGUMENT 25
COURT DECISION 37 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 154 6 of 9236 23
1 Cukier, of Centana, on both, good faith and adequate assurance.
2 Your Honor, Mr. Cukier is in the courtroom and available for
3 cross-examination.
4 If called to testify, he would testify he is a founder
5 and managing partner of Centana Growth Partners, a private
6 investment firm, seeking investments in financial services and
7 enterprise technologies.
8 Mr. Cukier, would testify he's also a member of the
9 board of directors of Jumio Buyer, Inc., an affiliate of
10 Centana, formed for purposes of acquiring the assets of
11 acquiring the assets of Jumio, Inc.
12 THE COURT: Pretty creative name.
13 (Laughter)
14 MR. FOURNIER: All the parties have creative purchaser
15 names here, Your Honor.
16 In these capacities, Mr. Cukier is confident to
17 testify as to the matters set forth in the proffer. With
18 respect to Jumio Buyer's request that the Court find that Jumio
19 Buyer is a good faith purchaser, entitled to the protections of
20 Section 363(m), Mr. Cukier would testify that Centana was
21 contacted by the debtor's investment banker, Sagent Advisors,
22 after Centana earlier made an inquiry regarding the assets.
23 He would testify that Centana executed an NDA and
24 began due diligence around a potential transaction involving
25 Jumio and its assets. That on May 4th, 2016, Centana made a CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 155 7 of 9236 24
1 written proposal to debtor to purchase, substantially, all the
2 debtor's assets, for a consideration package of cash, specified
3 assumed liabilities, and specified excluded assets.
4 He would testify that on May 5th, 2016, Jumio Buyer
5 took part in an auction conducted by the debtor in Wilmington;
6 that Jumio Buyer is one of two bidders at the auction; that at
7 the conclusion of the auction, the debtor selected Jumio Buyer;
8 Jumio Buyer's final bid is the highest and best bid for the
9 debtor's assets.
10 He would testify that following the auction, the
11 debtor and Jumio Buyer worked through the night on revising an
12 asset purchase agreement which reflects the bid selected at the
13 auction.
14 Mr. Cukier would testify that neither, Centana, nor
15 Jumio Buyer, nor any of their affiliates or insiders, is or has
16 been an insider of the debtors, within the meaning of Section
17 101(31) of the Bankruptcy Code and that the asset purchase
18 agreement-related sale documents represent an arm's-length
19 agreement between the debtor and Jumio Buyer that was
20 negotiated in good faith by the parties.
21 Mr. Cukier would further testify that there are no
22 undisclosed arrangements involving Centana, Jumio Buyer, the
23 debtor, any insider of the debtor, or any other bidder, or
24 party in interest, and that neither Centana, nor Jumio Buyer,
25 has colluded with any other bidder, with respect to the CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 156 8 of 9236 25
1 auction, or otherwise entered into any agreement to control or
2 limit the price at hand at the auction.
3 Finally, Mr. Cukier would testify that Centana's
4 committed to investing for growth, with regard to Jumio Buyer,
5 and that toward that end, has already committed an initial $3
6 million with the ability to go up to $15 million, as the
7 company identifies additional opportunities to build the
8 platform. That would conclude Mr. Cukier's proffer.
9 THE COURT: All right. Does anyone wish to cross-
10 examine Mr. Cukier?
11 (No verbal response)
12 THE COURT: Very well, I'll accept the proffer. Thank
13 you, Mr. Fournier.
14 MR. LANDIS: Your Honor, getting to my brief argument,
15 we were here a week ago seeking to extend the process and that
16 was by consent and that was the first real inflection point of
17 great consent in the case where the parties all got together
18 and said, we need to extend this process out. The debtor
19 wanted to let the market speak. We didn't think the market had
20 stopped talking to us yet.
21 And it wasn't only to see what the market had to say.
22 We also wanted to see if we could get the parties to even
23 further consent, with respect to the terms and conditions of a
24 sale. And, Your Honor, we are here today after the market has
25 spoken and we are here in a situation where there is full CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-2 Filed Filed 09/15/17 10/13/16 Page Page 157 9 of 9236 46
1 CERTIFICATION
2 I certify that the foregoing is a correct transcript
3 from the electronic sound recording of the proceedings in the
4 above-entitled matter prepared to the best of my knowledge and
5 ability.
6
7
8
9 /s/ William J. Garling May 12, 2016
10 William J. Garling
11 Certified Transcriptionist
12 For Reliable CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 158 1 of 8236
EXHIBIT 3
CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 159 2 of 8236
IN WITNESS \VHEREOF, the parties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
COJHPANY:
JUMIO INC.
By ~~~" Name: Dan7eM¥ Title: Chief Executive Officer
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 160 3 of 8236
IN WITNESS 'VHEREOF, the parties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
KEY HOLDERS:
AMPALU INVESTMENTS INC. SAMIRANA INVESTMENTS, CORP
r'/) ~~~=-c_:_:_/ff.-=.__J--- ~attes
KTI PRIVATSTIFTUNG
By: Thomas Kastenhofer
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 161 4 of 8236
IN WITNESS WHEREOI~', the parties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
INVESTORS:
ANI>REESSEN HOROWITZ FUND II, L.P. as nominee for Andreessen Horowitz Fund II, L.P. Andreessen Horowitz Fund II-A, L.P. and Andreessen Horowitz Fund II-B, L.P.
By: AH Equity Partners II, L.L.C. Its general partner
By: Name: Title: Managin
AH ANNEX FUND, L.P. By: AH Equity Partners II, L.L.C. Its general partner
By: ------~~~~--r-=-==~=------Name: Title: Managi
AH PARALLEL FUND, L.P. By: AH Equity Partners II, L.L.C. Its general partner
By: _____!:::~C-~~':'::::__ ___ Name: Title: Managin
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF Fm.ST REFUSAL AND CO-SAl,E AGREEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 162 5 of 8236
IN WITNESS WI-mREOF, the parties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
INVESTORS:
CHI VENTURES, INC.
By: --~~'§~1 ___ Name: Ramneek Gupta Title: Managing Director
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 163 6 of 8236
IN 'VITNESS WHEREOF, the parties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
INVESTORS:
CHAD STARKEY
Signature: (.~-~<;;(:_-<=->;rf__;;{_ , By: ______C_H_A_D_S_T_A_R_K_E_Y ______~------
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 164 7 of 8236
IN WITNESS WHEREOf', the patties have executed this Amended and Restated Right of First Refusal and Co-Sale Agreement as of the date first written above.
INVESTORS:
EDUARDO SAVERIN
SIGNATURE PAGE TO AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGRKEMENT CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-3 Filed Filed 09/15/17 10/13/16 Page Page 165 8 of 8236 EXECUTION VERSION
SCHEDULER
KEY HOLDERS
Name and Address Number of Shares Held Daniel Mattes on behalf of: 28,223,676 shares of Common Stock Ampalu Investments Inc. Samirana Investments, Corp. Bloso Investments Ltd. Mysore Investments Ltd.
Thomas Kastenhofer on behalf of: 3,007,908 shares of Common Stock KTI Privatstiftung
I 159105 v3/HN CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-4 Filed Filed 09/15/17 10/13/16 Page Page 166 1 of 6236
EXHIBIT 4
CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-4 Filed Filed 09/15/17 10/13/16 Page Page 167 2 of 2366
IN WITNESS WHEREOF, the undersigned have executed and delivered this Consent of Stockholders in counterparts as of the date first set forth above, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be acceptable as originals.
AMPALU INVESTMENTS GMBH By: ~~~J
SAMIRANAY CORP. By: ,
BLOSO INVESTMENTS LTD.
By:
KTI PRIVATSTIFTUNG ~~ - By: ;r CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-4 Filed Filed 09/15/17 10/13/16 Page Page 168 3 ofof 2366
IN WI1NESS WHEREOF, the undersigned have executed and delivered this Consent of Stockholders in counterparts as of the date first set forth above, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be acceptable as originals.
EDUARDO SA VERIN CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-4 Filed Filed 09/15/17 10/13/16 Page Page 169 4 ofof 2366
IN WITNESS WHEREOF, the undersigned have executed and delivered this Consent of Stockholders in counterparts as of the date first set forth above, each of which shall be deemed an original, but all of which taken together shall constitute one and "the same instrument. Facsimile signatures shall be acceptable as originals .
. ANDREESSEN HOROWITZ FUND II, L.P •.
as nominee for
Andreessen Horowitz Fund II, L.P.
Andreesse11 Horowitz. Fund liMA, L.P. and
Andreessen Horowitz Fund II,.B, L.P.
By: AH Equity Pa11ners II, L.L~C. · Its general partner
Nam~: ~ DB212307646S.I Case 16-10682-BLS Doc 427-4 Filed 10/13/16 Page 5 of 6 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 170 of 236 IN WITNESS WHEREOF, the undersigned have executed and delivered this Consynt of Stockholders in counterparts as of the date first set forth above, each of which shall be deemed. an original, but all of which taken together shall constitute one and ·the same instrument. Facsimile signatures shall be acceptable as o!iginals. AH PARALLEL FUND, L.P, By: AH Equity Partners II, L.L.C. Its general partner By: ~ Name: '{S'Qw • Title: Managing Member DD2123076465.l Case 16-10682-BLS Doc 427-4 Filed 10/13/16 Page 6 of 6 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 171 of 236 IN WITNESS WHEREOF, the undersigned have executed and delivered this Consent of Stockholders in counterparts as of the date first set fmth above, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be acceptable as originals. AH ANNEX FUND, L.P. By: AH Equity Pmtners II, L.L.C. Its general By: Name: l{a.._; Title: Managing Member DB2/23076465.1 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-5 Filed Filed 09/15/17 10/13/16 Page Page 172 1 of 8236 EXHIBIT 5 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-5 Filed Filed 09/15/17 10/13/16 Page Page 173 2 of 2368 IN WITNESS WHEREOF, the parties have executed this Amendment to the Voting Agreement as of the date first above written. COMPANY: JUMIOINC. By: Address: 1971 Landings Drive Mountain View, CA 94043 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-5 Filed Filed 09/15/17 10/13/16 Page Page 174 3 of 2368 IN WITNESS WHEREOF, the parties have executed this Amendment to the Voting Agreement as of the date first above written. KEY HOLDER: AMPALU INVESTMENTS GMBH By: SAMIRANA INVESTMENTS CORP. By: -~ BLOSO INVESTMENTS LTD. KTI PRIVATSTIFTUNG ~-,.-·- By: CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-5 Filed Filed 09/15/17 10/13/16 Page Page 175 4 ofof 2368 IN WITNEsS WHEREOF, 1be parties hereto have executed this AmendmentNo. l to .the Voting Agreement a~ of the date and year frrst above written. INVESTORS: .)\ IN WITNESS WHEREOF) the parties hereto have executed this Amendment No.1 to the Voting Agreement as of the date and year first above written. AH ANNEX FUND, L.P. By: AH Equity Partners I~, L.L.C. By: Name: &....J ,._..,O'>W...... ,..., Tide: Managing Member DB212302S014.2 5 Case 16-10682-BLS Doc 427-5 Filed 10/13/16 Page 6 of 8 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 177 of 236 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Voting Agreementas ofthe date and year first above written. ANDREESSEN HOROWITZ FUND II, L.P. as nominee for Audreessen Horowitz Fund II, L.P. Andree~?sen Horowitz Fund II-A, L.P. and · Andreessen Horowitz Fun,d II-B, L.P. By: AH Equity Patiners II, ;L.L.C. Its general patiner By: ~ Name:~~. Title: Ma~aging Member DB2/2302S014.2 6 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-5 Filed Filed 09/15/17 10/13/16 Page Page 178 7 ofof 2368 IN WITNESS WHEREOF, the patties hereto have executed this Amendment No.1 to the Voting Agreement as of the date and year first above written. AH PARALLEL FUND, L.P. By: AH Equity Partners lit L.L.C. Its general partner By: Name:.~~~~.. :...... :.~~==-- Title: Managing Member DB2123025014.2 7 Case 16-10682-BLS Doc 427-5 Filed 10/13/16 Page 8 of 8 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 179 of 236 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Voting Agreement as of the date and year first above written. EDUARDO SA VERIN Signature: -~-01\-~------=.~-~_.:...:.....-..__ By: ______CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-6 Filed Filed 09/15/17 10/13/16 Page Page 180 1 of 8236 EXHIBIT 6 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-6 Filed Filed 09/15/17 10/13/16 Page Page 181 2 ofof 2368 IN WITNESS WHEREOF, the parties have executed this Amendment to the Right of First Refusal and Co-Sale Agreement as of the date first above written. COMPANY: JUMIOINC. By: Address: -~1=9_,_7"'""1=L=an=d=i=no:gs"-'D=ri'-'-v=-e _____ Mountain View, CA 94043 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-6 Filed Filed 09/15/17 10/13/16 Page Page 182 3 ofof 2368 IN WITNESS WHEREOF, the parties have executed this Amendment to the Right of First Refusal and Co-Sale Agreement as of the date first above written. KEY HOLDERS: AMPALU INVESTMENTS GMBH By: :;;})«d~ SAMIRANAINVEq.EN CORP. By: BLOSO INVESTMENTS LTD. By: ;;!).i~~ 7 KTI PRIVATSTIFTUNG By: CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-6 Filed Filed 09/15/17 10/13/16 Page Page 183 4 ofof 2368 IN WITNESS WHEREOF, the parties hcretohayc cxccutedthis AmendincntNo. I to the Right ofFirst Refl,lsal and Co-Sale Agreement as of the date and year first above w~ittcn. CB)TI VENTURES~l... N.C. · C1 ·y·~· >I Rartm~~Difuctor Address: Address: 260 HomerA ve; Suite 10 J Palo Alto,¢AQ430l...... CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 427-6 Filed Filed 09/15/17 10/13/16 Page Page 184 5 ofof 2368 ·IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Right of First Refusal and Co-Sale Agreement as of the date and year first above \vritten. AH ANNEX FUND, L.P. By: AH Equity Partners II, L.L.C. Its general n By: Name: &"' Title: Managing Member DB21 23015492.2 6 Case 16-10682-BLS Doc 427-6 Filed 10/13/16 Page 6 of 8 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 185 of 236 \ IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.1 to the Right of First Refusal and Co-Sale Agreement as of the date and year first above written. ANDREESSEN HOROWITZ FUND II, L.P. as noniinee for Andreessen Horowitz Fund II, L.P. Andreessen Horowitz Fund II-A, L.P. and Andreessen Horowitz Fund II-B, L.P. By: AH Equity Partners II, L.L.C. Its genera} partner Name: ~w ....,,.,,..,...- Title: Managing Member DB212301S492.2 7 Case 16-10682-BLS Doc 427-6 Filed 10/13/16 Page 7 of 8 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 186 of 236 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Right of First Refusal and Co-Sale Agreement as of the date and year first above written .. AH PARALLEL FUNDt L.P. By:. AH Equity Partners II, L.L.C .. Tts general partner Title: Managing.Member DB2/2301S492.2 8 Case 16-10682-BLS Doc 427-6 Filed 10/13/16 Page 8 of 8 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 187 of 236 IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 to the Right of First Refusal and Co-Sale Agreement as of the date and year first above written. EDUARDO SA VERIN signature: _r ~-M-~_~_v_~_· By: ______Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 188 of 236 EXHIBIT C CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 189 1 of of 11 236 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: Chapter 11 JMO WIND DOWN INC., Case No. 16-10682 (BLS) Debtor. Re: Doc. 345, 350, 374 and 399 DECLARATION OF DANIEL MATTES I, DANIEL MATTES, declare and state as follows: 1. I am the Authorized Representative of Samirana Investment Corp. ("Samirana") and the Managing Director of Ampalu Investment GmbH ("Ampalu"). I also previously served as the CEO of Jumio, Inc., the debtor in the above-captioned bankruptcy case ("Jumio" or the "Debtor"). I have personal and first-hand knowledge of all the matters contained in this declaration and, if called and sworn as a witness, I can and will competently testify to all of the matters contained herein. I make this declaration in support of Ampalu Investment GmbH and Samirana Investment Corp.'s Objection to Debtor's Amended Plan of Liquidation and Disclosure Statement for the Amended Plan of Liquidation ("Objection"). 2. I have been the Managing Director of Ampalu and the Authorized Representative of Samirana for the period relevant to the transactions and events which are the subject matter of this action, and I am personally familiar with the record keeping procedures used by Ampalu and Samirana and with the records and files maintained by Ampalu and Samirana in the ordinary course of their business operations. 3. Ampalu is an Austrian Company and holds 15,714,880 common shares of Jumio. I am an Austrian citizen who owns and controls Ampalu and I also serve as its Managing Director. MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 190 2 of of 11 236 4. Samirana is an Belize Company and holds 360,000 common shares of Jumio. I own and control Samirana and serve as its Authorized Representative. 5. In September 2010, I founded Jumio. Jumio was conceived as an online mobile identity and credential authentication company, which uses verification products and software to assist customers in reducing fraud, meeting regulatory requirements and providing faster service to users. The company eventually became a market leader in its segment, growing to over nine hundred employees and reporting record revenues and transactions of over $30 million. 6. Jumio was the sole owner of Jumio Software Development GmbH ("Jumio Austria"). Jumio Austria provided all research and development activities for Jumio and was the sole entity doing payment processing business. Jumio was the sales organization for Jumio's product businesses Netswipe and Netverify. 7. In the beginning, Jumio's business model was to authenticate credit cards via the camera of a mobile phone or computer, scan all the data, transfer all the information to a seller, and authorize the payment with minimum manual input from the credit card's owner. Later on, Jumio also started to verify credentials (such as passports, drivers licenses and government issued identification) in real time related both to online and mobile transactions and to verify and facilitate online payments. Jumio's mobile application enables a camera's phone to scan identification and payment documents, digitizes the photo scan, and auto-fills payment, shipping and other pertinent information fields for the consumer. 8. Jumio's revenue and business model is based on its software, and it charges clients a fixed monthly rate within predefined transaction-volume ranges and allows for unlimited transactions. - 2 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 191 3 of of 11 236 9. In or around March 2011, Jumio completed a Series A financing with Eduardo Saverin, the co-founder of Facebook Inc. ("Saverin"), and Liber Argentum (the "Series A Financing"). At the time, Saverin insisted upon a direct investment in Jumio. Thus, the Series A Financing was for the aggregate amount of $6.5 million, $5 million from Saverin and $1.5 million from Liber Argentum. 10. In or around December 2011, Jumio completed a Series B financing with Andreessen Horowitz, LLC ("AH LLC") and Andreessen Horowitz Fund, II, L.P. ("AH Fund LP") (the "Series B Financing"). AH LLC and AH Fund LP are the financing arms of Marc Andreessen ("Andreessen"), the billionaire founder of Netscape and a venture capitalist. Mr. Andreessen's holding companies and various of his partnerships and funds own and control large amounts of Jumio stock. 11. Beginning a course of conduct that would continue throughout his role as a director of Jumio, Saverin almost destroyed the Series B Financing because he was not reachable for weeks at a time and would attempt not to accept standard industry terms. Only through massive efforts, principally from me, did the Series B Financing finally close. 12. In or around the Spring of 2013, I signed a term sheet for a Series C financing with Pinnacle Ventures ("Pinnacle") ("Series C Financing"). Again, Saverin worked hard to sabotage the deal and was ultimately successful. The Series C Financing with Pinnacle never closed. In or around August 2013, after sabotaging the Series C Financing with Pinnacle, Saverin himself provided the Series C funding to gain more control over Jumio. 13. As of 2014, the Board of Directors ("Board") consisted of Thomas Kastenhofer ("Kastenhofer"); Chad Starkey ("Starkey"); Saverin; Scott Weiss, the general partner of AH LLC and AH Fund LP ("Weiss"); Peng-Tsin Ong ("Ong"); and myself. Saverin, Weiss, and Ong were - 3 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 192 4 of of 11 236 preferred directors (collectively, the "Preferred Directors") and had the power to block any corporate actions. Kastenhofer, Starkey, I were common directors (collectively, the "Common Directors"). 14. In or around September 2014, Jumio received a final term sheet for a Series D financing ("Series D Financing") from RCS Capital Corp. ("RCAP"), a then-prominent brokerage firm. Had Jumio closed the Series D Financing, it would have raised $120 million. Instead, the Preferred Directors voted to reject the deal. 15. In or around October 2014, I met with citizen.vc to discuss an alternative Series D financing offer. Again, the Preferred Directors voted to reject the deal. 16. In or around October 2014, Jumio hired Accretive, an outside accounting firm, to audit its financials, cash, and business contracts. Wendy Hsu ("Hsu") was the person sent by Accretive to conduct the audit. 17. Accretive determined that the revenues of Jumio GmbH, an Austrian subsidiary of Jumio, were recognized and reported consistently with International Financial Reporting Standards ("IFRS"), a global accounting standard. Additionally, Accretive reported that after a review of all of Jumio's customer contracts, it concluded that those contracts could all be substantiated. 18. Accretive recommended, and the Board agreed, to change the accounting system from IFRS accounting standards to US-GAAP and FASB rules regarding revenue recognition. Jumio's major shareholders were informed of these necessary changes to the accounting standards. Specifically, Kastenhofer, Starkey, and I met with two of the largest holders of Jumio's common stock to explain the accounting changes. - 4 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 193 5 of of 11 236 19. Thereafter, in or around November 2014, after determining that there had been no wrongdoing, Hsu agreed to serve as Jumio's Interim CFO. 20. By the fourth quarter of 2014, Jumio required additional funds to get to cash flow break even. There was, however, a significant inbound interest for financing. 21. In or around March 2015, Hsu and I presented three binding term sheets to the Board and one non-binding term sheet. The Term Sheets ranged from $10 million to $30 million, had better than industry standard terms, and came from tier-1 financial providers like "Triple Point", "Fifth Street", and "Ares". Specifically, the Term Sheet from Fifth Street proposed a $10 million First Lien Term Loan Credit Facility with a term of 48 months and an interest rate of Libor + 10.25% (the "Fifth Street Term Sheet"). Additionally, the Term Sheet from Triple Point Capital proposed a $15 million loan with an option for an additional $15 million loan with term options ranging from 3 to 48 months at varying interest rates (the "Triple Point Term Sheet"). Further, the Term Sheet from Ares proposed a $15 million loan facility with a term of 48 months and an interest rate of Libor + 8.5% (the "Ares Term Sheet"). Finally, the Term Sheet from Pinnacle Ventures proposed a loan commitment of up to $30 million over a term of 48 months at an interest rate of Prime + 6% (the "Pinnacle Term Sheet", and collectively with the Fifth Street Term Sheet, the Triple Point Term Sheet, and the Ares Term Sheet, the "Term Sheets"). Had Jumio entered into any of the Term Sheets, it would have been financed to a point where it had break even cash flow. 22. The Preferred Directors rejected all of the proposed Term Sheets, sabotaging the financing deals. Instead, the Preferred Directors voted to take insider financing from Saverin in the form of a six-month convertible loan (the "Saverin Loan"). The loan's terms were unfavorable compared to the Term Sheets, which contemplated a 48-month term with 18 months of interest - 5 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 194 6 of of 11 236 only payments. The terms of the Saverin Loan ultimately forced Jumio into bankruptcy in March 2016 because of the short re-payment terms. 23. In March 2015, the Board formed a special committee (the "Special Committee") made up of the Preferred Directors, Saverin, Weiss, and Ong (collectively, the "Special Committee Members"). The Special Committee engaged special counsel to conduct an investigation. 24. The report of the Special Committee's counsel found no wrongdoing by me and that all issues raised in the report had been addressed by me. In fact, Weiss told me that I had done "nothing illegal". Nevertheless, the Preferred Directors used the report as a pretext to oust me from Jumio. 25. On or about April 21, 2015, I met with Weiss and Andreessen. Weiss and Andreessen threatened to act in a fashion that would harm Jumio by lessening its chances for success unless I resigned. 26. In light of that threat, on April 30, 2015, I was forced to resign as CEO of Jumio and my seat on the Board was forfeited, in order to save the future of the company. Stephen Stuut ("Stuut") replaced me as CEO. Stuut controls large amounts of Jumio common and preferred stock. Under Stuut's leadership, the Board voted to reject the four financing proposals that I had put together in the Term Sheets and instead voted to take insider financing in the form of the Saverin Loan, which had onerous terms that ultimately drove Jumio into bankruptcy. 27. The Preferred Directors then began orchestrating a plan to consolidate their power and control and eliminate other shareholders. For example, Saverin insisted on obtaining a security interest in Jumio's assets so that he would have a position of control and power in Jumio's eventual bankruptcy. As a secured creditor, he could dictate terms of post-petition financing, be in a position to credit bid in a bankruptcy sale of Jumio's assets, fight any proposed action which - 6 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 195 7 of of 11 236 affected his "collateral", and seek to enter into agreements which released the Preferred Directors, including Saverin himself, from all liability for Jumio's past operations. 28. In August 2015, the Board amended Jumio's by-laws to restrict stock transfers, making it impossible for shareholders to recoup their investments and walk away from Jumio. Specifically, on August 27, 2015, the Board illegally issued Amended and Restated By-Laws of Jumio, Inc. (the "Amended By-Laws"), which, among other things, restricted transfers of capital stock unless the transfer was: (a) expressly preapproved by the Board at the Board's sole discretion, and; (b) made in accordance with the Amended and Restated Right of First Refusal Co- Sale Agreement, dated August 28, 2015. 29. Ampalu and Samirana, who together own over 16 million shares of common stock in Jumio, were not parties to any agreement consenting to the stock restriction, nor were they consulted or permitted to vote on the restriction. Further, at the same time the Board was unlawfully amending the By-Laws, they were also discussing placing Jumio into bankruptcy. Ampalu and Samirana, while owning 16,074,880 common shares, were completely ignored, and were never asked or involved in the decision to file bankruptcy. Accordingly, the Board began drafting security agreements which would give them the power to dictate and control the sale of Jumio in bankruptcy. 30. On August 28, 2015, Saverin and Weiss purchased four convertible notes (collectively, the "Saverin Notes"): (a) Note No. CPN -1 dated August 28, 2015 in the original principal amount of $4,000,000 owed to Saverin; (b) Note No. CPN -2 dated August 28, 2015 in the original principal amount of $1,509,780.82 owed to Saverin; (c) Note No. CPN -3 dated August 28, 2015 in the original principal amount of $2,005,041.10 owed to Saverin; and (d) Note No. CPN -4 dated August 28, 2015 in the original principal amount of $1,509,780.82 owed to AH LLC (on - 7 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 196 8 of of 11 236 March 18, 2016, three days before the Petition Date, this Note was transferred to Saverin). The Saverin Notes are purportedly secured by virtually all of the Debtor's assets, making Saverin the Debtor's only secured creditor. 31. Pursuant to a security agreement dated August 28, 2015, the Saverin Notes were secured by liens on and security interests in substantially all of Jumio's assets, including its cash (the "Saverin Security Agreement"). 32. On September 2, 2015, the Board publicly announced that Jumio was required to restate its unaudited financial statements for the years ending December 31, 2013 and December 31, 2014 (the "Restated Financials"). 33. In October 2015, six months after I had resigned as CEO, Stuut finally began attempting to secure financing for Jumio. On or about October 8, 2015, citizen.vc provided a placement agreement to Stuut for the Series-D financing. The Board rejected the deal. 34. On or about October 14, 2015, Jumio received an acquisition offer from MITEK Systems, Inc., a mobile capture and identity verification company that is traded on NASDAQ. The Board rejected the offer. 35. On or about February 10, 2016, citizen.vc provided Stuut with another potential Series-D term sheet. The Board rejected the offer. 36. On January 25, 2016, the Securities Exchange Commission ("SEC") began an investigation of Jumio. Although Stuut has stated that he could not obtain financing because of "certain government investigations," the Board was offered and rejected numerous financing deals well before the SEC investigation began. - 8 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 Filed Filed 09/15/17 10/11/16 Page Page 197 9 of of 11 236 37. In February 2016, Saverin formed Jumio Acquisition, LLC ("Jumio Acquisition") to help the Board take Jumio into bankruptcy. In mid-March 2016, AH transferred its allegedly secured debt to Saverin. 38. On March 21, 2016 (the "Petition Date"), Jumio filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code, commencing the above-referenced bankruptcy case ("Bankruptcy Case") in the United States Bankruptcy Court for the District of Delaware. On the Petition Date, Jumio also filed a motion for approval of a sale of substantially all of its assets to Jumio Acquisition. 39. On May 6, 2016, the Bankruptcy Court approved the sale of Jumio's assets to Jumio Buyer, Inc. ("New Jumio"), an entity owned by Centana Growth Partners, LP ("Centana Growth Partners") for $850,000, less cure costs. Saverin's prepetition liens arising from the Saverin Security Agreement attached to the sale proceeds. Upon information and belief, Stuut holds a 10- 15% ownership interest in New Jumio and, according to statements made in the press, Saverin is still actively part of New Jumio. A true and correct copy of a September 6, 2016 article from the Blog "Silicon Angle" referencing Saverin's continued participation in New Jumio is attached hereto as Exhibit 1. 40. The sale of Jumio's assets to New Jumio for $850,000 is substantially less than Jumio's prior reporting of annual revenue, and its listing of over $62,000,000 in assets on its bankruptcy schedules. The sale price also stands in stark contrast to a 409a valuation performed before the bankruptcy that valued Jumio in excess of $100 million. 41. Less than six months after acquiring Jumio's assets, New Jumio has already raised $15,000,000 in new financing and issued numerous press releases regarding its "strong growth in the market . . . [and] record results for Q2 2016, with a greater than 65 percent growth in recent - 9 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 FiledFiled 09/15/1710/11/16 PagePage 19810 of of 11 236 revenue year-over-year, and a record 30 million transactions completed to-date." A true and correct copy of Saverin's August 30, 2016 press release is attached hereto as Exhibit 2. Additionally, a true and correct copy of an email dated September 17, 2016 from Joe Dempsey at citizen.vc discussing a conference call in which Stuut described the financial condition of New Jumio in glowing terms is attached hereto as Exhibit 3. 42. Following the filing of this Objection, Ampalu and Samirana, along with six other investors who were equity security holders in the Debtor ( KTI Investment Foundation, Stephan Skrobar, Markus Rumler, Thomas Willomitzer, Evers Invest AB, and Patrick Griffin (individually and collectively with Ampalu and Samirana, the "Investors")), are filing a Motion for Relief from Stay ("Motion for Relief from Stay") in the Bankruptcy Case requesting leave from the Court to file a Complaint in the Court of Chancery of the State of Delaware to pursue derivative claims against the Debtor's Preferred Directors on behalf of the Bankruptcy Estate. The Complaint alleges the same breaches of fiduciary duty that serve as the factual basis for this Objection. Each of the Investors have indicated that they oppose confirmation of the Debtor's Plan and Disclosure Statement and agree with the positions taken by Ampalu and Samirana in their Objection. [SIGNATURE ON FOLLOWING PAGE] - 10 - MWEISS\101668325\V-2 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400 FiledFiled 09/15/1710/11/16 PagePage 19911 of of 11 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 200 1 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 201 2 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 202 3 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 203 4 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 204 5 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 205 6 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 206 7 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 207 8 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 208 9 of of 10 236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-1 Filed Filed 09/15/17 10/11/16 Page Page 209 10 of 10236 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-3 400-2 Filed Filed 09/15/17 10/11/16 Page Page 210 1 of 1236 CERTIFICATE OF SERVICE I, Thomas F. Driscoll III, hereby certify that on this 11th day of October, 2016, a copy of the foregoing Declaration of Daniel Mattes was caused to be served on the attorneys listed below via CM/ECF and the manner indicated below: VIA HAND DELIVERY VIA U.S. MAIL Adam G. Landis, Esq. Michael B. Lubic, Esq. Kerri K. Mumford, Esq. K&L Gates LLP Landis Rath & Cobb LLP, 10100 Santa Monica Blvd, 919 Market Street, 8th Floor Suite L800, Los Angeles, CA 90067 Wilmington, Delaware 19801 Michael L. Berstein, Esq. Laura Davis Jones, Esq. Arnold & Porter LLP, Pachulski Stang Ziehl & Jones LLP 60L Massachusetts Avenue, NW, 919 N. Market Street, 17th Floor, Washington, DC 20001 Wilmington, DE 19801 Peter M. Gilhuly, Esq. David Buchbinder Esq. Ted A. Dillman, Esq. Office of the United States Trustee Latham & Watkins LLP, 844 King Street 355 South Grand Avenue, Suite 2207 Los Angeles, CA 90071-1560 Wilmington, DE 19801 Sven T. Nylen, Esq. Michael R. Nestor, Esq. K&L Gates LLP, Sean M. Beach, Esq. 70 West Madison Street, Young Conaway Stargatt & Taylor, LLP, Suite 3100, Rodney Square, Chicago, IL 60602 1000 North King Street, Wilmington, DE 19801 /s/ Thomas F. Driscoll III Thomas F. Driscoll III (#4703) Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 211 of 236 EXHIBIT D Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 212 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 213 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 214 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 215 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 216 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 217 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 218 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 219 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 220 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 221 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 222 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 223 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 224 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 225 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 226 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 227 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 228 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 229 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 230 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 231 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 232 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 233 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 234 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 235 of 236 Case 16-10682-BLS Doc 585-3 Filed 09/15/17 Page 236 of 236 CERTIFICATE OF SERVICE I, Christopher A. Selzer, hereby certify that on December 23, 2016, I caused a true and correct copy of the above and foregoing Verified Amended Complaint to be served via File & ServeXPress upon the following counsel of record: Elena Norman, Esquire Paul Loughman, Esquire Benjamin Potts, Esquire Young Conaway Stargatt & Taylor, LLP Rodney Square 1000 North King Street Wilmington, DE 19801 /s/ Christopher A. Selzer Christopher A. Selzer (#4305) Case 16-10682-BLS Doc 585-4 Filed 09/15/17 Page 1 of 55 EXHIBIT 3 The Plan CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 1 2 of of 50 55 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELA\ryARE In re: Chapter 11 JMO V/IND DOWN, INC.,I Case No. 16-10682 (BLS) Debtor SECOND AMENDED PLAN OF LIQUIDATION OF JMO WIND DO\ryN, INC. PURSUANT TO CHAPTER 11 OF TIIE BANKRUPTCY CODE LANDIS RATH & COBB LLP Adam G. Landis (No.3407 ) Kerri K. Mumford (No. 4186) Kimberly A. Brown (No. 5138) 919 Market Street, Suite 1800 Wilmington, Delaware 1 9801 Telephone : (302) 461 -4400 Facsimile: (302) 467 -4450 Email: [email protected] [email protected] [email protected] Counsel to the Debtor and Debtor-in- Dated: October 14,2016 Possession I The last four digits of the Debtor's tax identification number are 6822. The Debtor's mailing address is 268 Lambert Avenue, Palo Alto, California 94306. { 1086.002-w0044087 .} CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 2 3 of of 50 55 TABLE OF CONTENTS Page ARTICLE I DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW I A. Defined Terms. 1 B. Rules of Interpretation...... t2 C. Goveming Law. .... 13 D. Reference to Monetary Figures. 13 ARTICLE II ADMINISTRATIVE CLAIMS, AND PRIORITY TAX CLAIMS I4 A. Administrative Claims. .. t4 B. Priority Tax Claims...... 16 C. Statutory Fees...... t6 ARTICLE III CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS ...... 16 A. Classification of Claims and Interests t6 B. Summary of Classifi cation. t7 C. Treatment of Claims and Interests...... t7 D. Special Provision Governing Claims that are Not Impaired...... l9 E. Acceptance or Rejection of the Plan...... T9 F. Subordinated Claims. 20 ARTICLE IV MEANS FOR IMPLEMENTATION OF THE PLAN 20 A. Liquidating Trust 20 B. Cancellation of Existing Securities. .. 24 C. Preservation of Causes of Action...... 25 D. Vesting of Assets. 25 E. Conversion of Preferred Interests...... 25 ARTICLE V FUNDING AND DISBURSEMENTS .26 A. No Separate Disbursing Agents. 26 B. Reserves - Payment of Disputed Claims and Interests ',,26 C. Cash Payments...... 26 D. Distribution for Allowed Claims and Allowed Interests. ...26 E. Interest and Charges...... 26 F. Compliance with Tax Requirements...... 27 G. Allocations ,',27 H. Fractional Dollars: De Minimis Distributions...... 27 I. Delivery of Distributions to Holders of Allowed Claims and Interests. 28 J. No Penalty Claims. 28 K. Setoffs and Recoupment. 28 L, Distributions by Liquidating Trust. 28 { 1086.002-w0044087.} -l- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 3 4 of of 50 55 M. Claims Paid or Payable by Third Parties...... 28 ARTICLE VI TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 29 A. Assumption and Rejection of Executory Contracts and Unexpired Leases...... 29 B. Claims Based on Rejection of Executory Contracts or Unexpired Leases...... 29 C. Insurance Policies and Proceeds. 30 D. Indemnification Obli gations .....30 ARTICLE VII PROCEDURES FOR RESOLVING CONTINGENT, UNLIQUIDATED AND DISPUTED CLAIMS AND INTERESTS..... 30 A. Allowance of Claims and Interests. B. Claims Administration Responsibilities. C. Estimation of Claims.. D. Adjustment to Claims or Interests Without Objection... E. Time to File Objections to Claims. F. Amendments to Claims...... G. Tax Implications for Recipients of Distributions H. Offer of Judgment...... I. Release of Liens Securing Disputed Claims...... J. No Distributions Pending Allowance K. Distributions Aft er Allowance. ARTICLE VIII SETTLEMENT, RELEASE, INJUNCTION AND RELATED PROVISIONS ...... JJ A. Compromise and Settlement of Claims, Interests and Controversies...... JJaa B. Global Settlement JJ C. The Citi Settlement. 35 D. Binding Effect. 35 E. Release of Liens. 36 F. Liabilities to, and Rights of Governmental Units 36 G. Exculpation...... 36 H. Releases.... 36 I. Injunction..... 37 J. Term of Injunctions or Stays 38 ARTICLE IX CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN 38 A Conditions Precedent to the Effective Date. 38 'Waiver B of Conditions...... 39 C Effect of Failure of Conditions. 39 { l 086.002-w0044087. } -11 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 4 5 of of 50 55 ARTICLE X MODIFICATION, REVOCATION OR WITHDRAWAL OF THE PL4N...... 39 A. Modification and 4mendments...... 39 B. Effect of Confirmation on Modifications...... 39 C. Revocation or Withdrawal of Plan...... 40 ARTICLE XI RETENTION OF JURISDICTION... 40 ARTICLE XII MISCELLANEOUS PROVISIONS 42 A. Immediate Binding Effect. 42 B. Additional Documents 42 C. Statutory Committee and Cessation of Fee and Expense Pa5iment. 42 D. Reservation of Rights 43 E. Successors and 4ssigns...... 43 F. Notices. 43 G. Entire Agreement 43 H. Exhibits. 44 I. Severability of Plan Provisions 44 J. Votes Solicited in Good Faith.. 44 K. Closing of Chapter 11 Case. 45 L, No Admission Against Interest...... 45 M No Waiver 45 N. Headings.. 45 o. Governing Law...... 45 P. Conflicts. 46 { 1086.002-w0044087. } -111- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 5 6 of of 50 55 INTRODUCTION JMO Wind Down, Inc. (flWa Jumio Inc.), as debtor and debtor-in-possession (the "Debtor") proposes this plan of liquidation (the "Plun")2 for the resolution of the Claims against and Interests in the Debtor pursuant to chapter 11 of the Bankruptcy Code. Holders of Claims and Interests should refer to the Disclosure Statement for a discussion of the Debtor's history, businesses, assets, results of operations, and historical financial information, as well as a summary and description of this Plan. ARTICLE I DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LA\il A. Defined Terms. As used in this Plan, capitalized terms have the meanings ascribed to them below. 1. *737'means 137 Ventures II, LP, 137 Ventures Management LLC, and I37 Ventures II, LLC (including all predecessors) successors and assigns, subsidiaries, and Affiliates of such Entities) and each of their managed accounts or funds, former or current directors and officers, principals, shareholders, investors, members, partners, employees, relatives, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, each in its respective capacity as such. 2. "Admínístrøtìve Cløím" means any Claim against the Debtor or its Estate for costs and expenses of administration pursuant to sections 503(b), 507(a)(2),507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses incurred after the Petition Date and through the Effective Date of preserving the Estates and operating the businesses of the Debtor (such as wages, salaries or commissions for services and payments for goods and other services and leased premises) and (b) all fees and charges assessed against the Estates pursuant to section 1930 of chapter I23 of the Judicial Code, but shall exclude the Saverin Administrative Claim and Fee Claims. 3. "Admínístrøtíve Claíms Bar Dutes" means either (a) September 16, 2016 at 4:00 p.m. (E.T) for all Administrative Claims arising, accruing or otherwise due and payable any time during the period from the Petition Date through and including July 31,2076, or (b) thirty (30) days from the Effective Date for all Administrative Claims arising, accruing or otherwise due and payable any time during the period from August 1,2076 through the Effective Date. 4. "Affiiate" means, with respect to any specified Entity, any other Entity that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such specified Entity. For purposes of this definition, "control" (and any similar term) means the power of one or more Entities to direct, or cause the direction of, the affairs of another Entity by reason of ownership of voting stock or by contract or otherwise. 2 Capítalized terms used in the Plan and not otherwise defined shall have the meanings ascribed to such terms in Article I.A. { 1086.002-w0044087. } CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 6 7 of of 50 55 5. UAII' means, individually and collectively, Scott Weiss, Andreessen Horowitz Fund, II, L.P. (for itself and as nominee for Andreessen Horowitz Fund, II-4, L.P. and Andreessen Horowitz Fund, II-8, L.P.), AH Parallel Fund, L.P., AH Annex Fund, L.P., AH Equity Partners II, L.L.C., AH Capital Management, L.L.C., and any of each such Entity's predecessors, successors and assigns, subsidiaries, and Affiliates, and each of their managed accounts or funds, former or current directors and officers, principals, shareholders, members, partners, employees, investors, relatives, agents, advisory board members, financial advisors, attomeys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, each in its respective capacity as such. 6. "Allowed" means with respect to (I) any Claim against the Debtor or its Estate (including any Administrative Claim) or portion thereof: (a) a Claim that is listed on the Debtor's Schedules, as such Schedule may be amended from time to time in accordance with Bankruptcy Rule 1009 prior to the closing of the Chapter 11 Case, as neither disputed, contingent nor unliquidated and for which no contrary Proof of Claim has been Filed and as to which no objection to allowance thereof, or action to reclassify, subordinate or otherwise limit recovery with respect thereto, shall have been interposed within such period of limitation fixed by this Plan, the Bankruptcy Code, the Bankruptcy Rules or Final Order of the Bankruptcy Court; (b) a Claim that is not a Disputed Claim or has been allowed by a Final Order; (c) a Claim that is allowed (i) pursuant to the terms of the Plan or (ii) in any stipulation that is approved by a Final Order of the Bankruptcy Court; and (d) a Claim as to which a Proof of Claim has been timely Filed and as to which no objection has been Filed by the Claims Objection Deadline or action to reclassify, subordinate or otherwise limit recovery with respect thereto has been interposed within such time period of limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules or a Final Order and (II) means with respect to any Interest against the Debtor or portion thereof: (a) an Interest that is not a Disputed Interest or has been allowed by a Final Order; (b) an Interest that is allowed (i) pursuant to the terms of the Plan or (ii) in any stipulation that is approved by a Final Order of the Bankruptcy Court and (c) an Interest as to which a Proof of Interest has been timely Filed and as to which no objection has been Filed by the Claims Objection Deadline or action to reclassify, subordinate or otherwise limit recovery with respect thereto has been interposed within such time period of limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules or a Final Order. Except for any Claim that is expressly Allowed herein, any Claim that has been or is hereafter listed in the Schedules as contingent, unliquidated or disputed and for which no Proof of Claim has been Filed is not considered Allowed and such person or entity shall not be treated as a creditor with respect to such Claim for the purposes of voting and distributions under the Plan. 7 . "Assets" means any and all of the right, title and interest of the Debtor in and to property of whatever type or nature, including, without limitation, any real estate, buildings, structures, improvements, privileges, rights, easements, leases, subleases, licenses, goods, materials, supplies, furniture, fixtures, equipment, work in process, accounts, chattel paper, cash, deposit accounts, reserves, deposits, contractual rights, intellectual property rights, Claims, Causes of Action and any other general intangibles of the Debtor, as the case may be, including, without limitation, the Debtor's Estate. { 1086.002-w0044087.} CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 7 8 of of 50 55 8. "Asset Purchase Agreemenl" means that certain Asset Purchase Agreement, dated May 6, 2016 between the Debtor and Jumio Buyer, Inc., as may be amended, modified or supplemented. 9. "Avoidance Actíons" means any and all Causes of Action to avoid or recover a transfer of property, or avoid an obligation incurred by the Debtor pursuant to any applicable section of the Bankruptcy Code, including sections Bankruptcy Code sections 544, 545,547, 548,549,550, 551, 553(b), and724(a) and any other applicable non-bankruptcy law, whether or not litigation has been commenced with respect to such Causes of Action as of the Effective Date, but excludes any Avoidance Action sold to Buyer pursuant to the Sale Order. 10. "Bankruptcy Code' means chapter 11 of title 11 of the United States Code. 1 1. "Bønkruptcy Court" means the United States Bankruptcy Court for the District of Delaware having jurisdiction over the Chapter 11 Case or any other court having jurisdiction over the Chapter 11 Case, including, to the extent of the withdrawal of the reference under 28 U.S.C.$ 157, the United States District Court for the District of Delaware. 12. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure promulgated under section 2075 of the Judicial Code and the general, local and chambers rules of the Bankruptcy Court. 13. "Bør Døte Order" means the Order Granting Motion of the Debtor þr Entry of an Order (A) Establishing Bar Dates for Filing Proofs of Claim, (B) Approving the Form and Mannerþr Filing Proofs of Claim; ønd (C) Approving Notice ThereoflD.I. 3161. 14. "Bíd Procedures Order" means the Order (A) Approving Bid Procedures and Expense Reimbursement Relating to the Sale of the Debtor's Assets; (B) Scheduling a Hearing to Consider the Sale; (C) Approving the Form and Manner of Notice of Contract Procedures for the Assumption and Assignment of Contrqcts and Leases; and (E) Granting Related Relief lD.I. I ssl. 15. "Busíness Day" means any day, other than a Saturday, Sunday or "legal holiday" (as defined in Bankruptcy Rule 9006(a)(6)). 16. "Buyer" means Jumio Buyer, Inc 17. uCøsh' means cash and cash equivalents, including, but not limited to, bank deposits, wire funds, checks and legal tender of the United States of America or equivalents thereof. 18. "Cuuses of Actíon" means any action, Claim, cause of action, controversy, demand, right, action, Lien, indemnity, gaaranty, suit, obligation, liability, damage, judgment, account, defense, offset, power, privilege, license and franchise of any kind or character whatsoever, known, unknown, contingent or non-contingent, matured or unmatured, suspected or unsuspected, liquidated or unliquidated, disputed or undisputed, secured or unsecured, assertable directly or derivatively, whether arising before, on or after the Petition Date, in contract or in tort, in law or in equity, or pursuant to any other theory of law, other than those sold to Buyer { 1086.002-w0044081 .} -3- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 8 9 of of 50 55 pursuant to the Sale Order. Causes of Action also include: (a) any right of setoff, counterclaim or recoupment and any claim for breaches of duties imposed by law or in equity; (b) the Avoidance Actions; (c) any Claim or defense including fraud, mistake, duress and usury and any other defenses set forth in Bankruptcy Code section 558; and (d) any state law fraudulent transfer claim. 19. 'oCertificøte of Incorporstíon" means that Amended and Restated Certificate of Incorporation of Jumio Inc., dated August 23,2013. 20. "Chapter 77 Cøse" means the case pending for the Debtor under chapter 11 of the Bankruptcy Code under case number 16-10682 (BLS). 21. "C¡t¡" means, individually and collectively, Ramneek Gupta, Citi Ventures, Inc. and any ofeach such Person's or Entity's predecessors, successors and assig[s, subsidiaries, and Affiliates, and each of their managed accounts or funds, former or current directors and officers, principals, shareholders, members, partners, employees, investors, relatives, agents, advisory board members, financial advisors, attomeys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, including, without limitation, any individuals who served in any capacity vis a vis the Board, including as in any board observer or other similar role, each in its respective capacity as such. 22. uCítì Senlement" has the meaning set forth in Section VIII.C of the Plan. 23. uCløìmu means any claim, as such term is defined in Bankruptcy Code section 101(s). 24. "Cløíms Bar Date" means the date or dates established by the Bankruptcy Court in the Claims Bar Date Order by which Prooß of Claim must be Filed. 25. "Claíms Bør Døte Order" means the Order Granting Motion of the Debtor for Entry of an Order Granting Motion of the Debtor þr Entry of an Order (A) Establíshing Bar Dates þr Filing Proofs of Claim, (B) Approving the Form and Manner þr Filing Proofs of Claim, and (C) Approving Notice Thereof, dated August 15, 2016 [D.I. 316]. 26. "Cløims Objectíon Deødlíne" means the later of (a) 180 days after the Effective Date or (b) such other period of limitation as may be fixed by an order of the Bankruptcy Court for objecting to Claims against the Debtor. 27 . "Cløims Register" means the official register of Claims maintained by the Notice, Claims and Balloting Agent. 28. "Clúss" means pursuant to Bankruptcy Code section 1122(a), a class of Claims against or Interests in the Debtor as set forth in Article III. 29. "Colløteral" means any property or interest in property in the Debtor's Estate subject to a Lien to secure the payment or perfonnance of a Clairn, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code or applicable state laws, or otherwise avoided pursuant to the Sale Order. { 1086.002-W0044087. } -4- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 FiledFiled 10/14/1609/15/17 PagePage 910 of of 50 55 30. "Common Interests" means those Interests arising out of or related to the Debtor's Common Stock (as defined in the Certificate of Incorporation), as well as Preferred Interests converted to Common Interests pursuant to the terms of the Plan 31. ooConfirmatíon" means the entry of the Confirmation Order on the docket of the Chapter 11 Case. 32. "Confirmatíon Døte" means the date upon which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Case, within the meaning of Bankruptcy Rules 5003 and 9021. 33. "Confirmatìon Hearíng" means the confirmation hearing held by the Bankruptcy Court pursuant to Bankruptcy Code section 7129, as such hearingmay be continued from time to time. 34. "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan pursuant to Bankruptcy Code section II29. 35. "Consensual Thírd Party Releøses" means the releases set forth in Section VIII.G.2 of the Plan. 36. "Consummøtìon" means the occurrence of the Effective Date 37. "Credítors" has the same meaning as set forth in Bankruptcy Code section 101(10). 38. "Debtor" means JMO Wind Down, Inc. (flkla Jumio Inc.), as Debtor and debtor- in-possession in the Chapter 11 Case. 39. "DIP Cløíms" means all Claims arising under the Postpetition Facility, including interest thereon through the date on which such claims are paid in full at the rates provided in the Postpetition Facility, as well as any and all fees and expenses arising in connection therewith. 40. "DIP Orders" means Interim Order (I) Authorizing the Debtor to Obtain Post- Petition Secured Financing Pursuant to I I U.S.C. S 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to lI U.S.C.$$ 361, 362, 363 and 364 and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 lD.I. a5l; Second Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to 1l U.S.C. S 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to I1 U.S.C. SS 361, 362, 363 and 364 and (IV) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 lD.I. I54l; and Third Interim Order (I) Authorizing the Debtor to Obtain Post-Petition Secured Financing Pursuant to II U.S.C. S 364, (II) Authorizing the Debtor's Limited Use of Cash Collateral Pursuant to II U.S.C.$$ 361, 362, 363 and 364 and (IV) Scheduling a Final Heøring Pursuant to Bankruptcy Rule 4001 lD.I.l80l. 41. "Disclosure Statement" means the Disclosure Statement for the Plan of Liquidation of JMO Wind Down, Inc. Pursuant to Chapter 11 of the Bankruptcy Code, dated August 77 ,2076, as amended, supplemented or modified from time to time, including all exhibits { l 086.002-v/0044087. } -5- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 10 11 of of 50 55 and schedules thereto and references therein that relate to the Plan, and that is prepared and distributed in accordance with the Bankruptcy Code, the Bankruptcy Rules and any other applicable law. 42. "Dìsparøgíngl'has the meaning set forth in Section VIII.B of the Plan. 43. "Dísputed" means, any Claim against or Interest in the Debtor that is (a) listed in the Schedules as disputed, contingent or unliquidated and for which a Proof of Claim has not been timely Filed; (b) subject to a timely objection andlor request for estimation in accordance with Bankruptcy Code section 502(c) and Bankruptcy Rule 3018, which objection andlor request for estimation has not been withdrawn or determined by a Final Order; (c) objected to in whole or in part on or before the Claim Objection Deadline; (d) held by a party that is adverse to the Debtor in any litigation or contested matter pending at the time of the Distribution Date and as to which no Final Order resolving such litigation or contested matter has been entered; or (e) disallowed pursuant to Bankruptcy Code section 502(d). A Claim or Interest that is Disputed as to its amount shall not be Allowed in any amount for purposes of distribution until it is no longer a Disputed Claim or Disputed Interest. 44. "Dístributíon Døte" means, with respect to (a) any Claim that is Allowed as of the Effective Date, the date that is as soon as reasonably practicable after the Effective Date; (b) any Claim that is Allowed after the Effective Date, a date as soon as reasonably practicable thereafter; or (c) any Interest that is Allowed, the dates upon which the Liquidating Trust makes distributions to holders of Allowed Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) in accordance with the Liquidating Trust Agreement. 45. "Effectíve Date" means the date selected by the Debtor that is a Business Day after the Confirmation Date on which (a) the conditions to the occurrence of the Effective Date have been met or waived and (b) no stay of the Confirmation Order is in effect. 46. uEntíty" means an entity as such term is defined in Bankruptcy Code section 1 01(1 s). 47 . "Estøte" means the estate created for the Debtor in the Chapter 11 Case pursuant to Bankruptcy Code section 541. 48. "Equìty Commíttee" means the statutory committee of equity security holders appointed in the Chapter 11 Case pursuant to Bankruptcy Code section 1102. 49. "Exculpated Cløím' means any Cause of Action related to any act or omission derived from, based upon, related to or arising from (a) the Chapter 11 Case; (b) formulation, preparation, dissemination, negotiation, or filing of the Disclosure Statement, the Plan, the Plan Supplement or any contract, instrument, release or other agreement or document created or entered into in connection with the Disclosure Statement, the Plan, or the Plan Supplement, including, but not limited to, the Global Settlement; (c) the filing of the Chapter 11 Case; (d) any post-petition act taken or omitted to be taken in connection with the Chapter 11 Case or the restructuring of the Debtor including without limitation the Sale; (e) the pursuit of Confirmation and Consummation; and (f) the administration and implementation of the Chapter 11 Case and the Plan. { 1086.002-w0044087.} -6- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 11 12 of of 50 55 50. "Exculpated Person" means each of: (a) the Debtor; (b) the members of the Equity Committee including any member who resigned therefrom solely in their respective capacities as such; (c) the Professionals retained by the Debtor and the Equity Committee; and (d) with respect to the Entities in clauses (a) through (c), such Entity's predecessors, successors and assigns, subsidiaries, Affiliates, current (as of the Effective Date) directors, officers, principals, shareholders, members, partners, employees, agents, advisory board members, financial advisors, attorneys, accounts, investment bankers, consultants, representatives, and other Professionals solely in their respective capacities as such. 51. "Executory Contrøct" means a contract to which the Debtor is a party and that is subject to assumption or rejection under Bankruptcy Code section 365. 52. "Federal Judgment Rate" means the federal judgment rate of interest in effect as of the Petition Date. 53. "Fee Cløím" means (i) any accrued, contingent andlor unpaid fees and expenses for legal, financial advisory, accounting and other services and reimbursement of expenses that are awarded and allowable under Bankruptcy Code sections 328, 330, 331, 503(b) or 1103 or that are awardable and allowable under Bankruptcy Code section 503 all (a) to the extent that any such fees and expenses have not been previously paid (regardless of whether a fee application has been Filed for any such amount), (b) after applying any retainer that has been provided to such Professional and (c) to the extent incurred prior to or after the Effective Date and (ii) any outstanding expenses of any member of the Equity Committee as of the Effective Date. To the extent that the Bankruptcy Court or any higher court of competent jurisdiction denies or reduces by a Final Order any amount of a Professional's fees or expenses or an Equity Committee member's expenses, then those reduced or denied amounts shall no longer constitute a Fee Claim. 54. uFíleu or "Filed" means file or filed with the Bankruptcy Court or its authorized designee in the Chapter l1 Case. 55. "Fínal Distríbutíon" means, with respect to the Liquidating Trust, the distribution under this Plan which: (a) after giving effect to such distribution, results in remaining assets held by such Liquidating Trust, including cash, of a value of less than $500 or (b) the Bankruptcy Court determines that such distribution is the Final Distribution. 56. "Fínøl Order" means, as applicable, an order or judgment of the Bankruptcy Court or other court of competent jurisdiction with respect to the relevant subject matter, which has not been reversed, stayed, modified or amended, and as to which the time to appeal or seek certiorari has expired and no appeal or petition for certiorari has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been or may be filed has been resolved by the highest court to which the order or judgment could be appealed or from which certiorari could be sought or the new trial, reargument or rehearing shall have been denied, resulted in no modification of such order or has otherwise been dismissed with prejudice. 57. "Generøl (Insecured Cløím' m.eans any Claim against the Debtor that (i) is neither Secured nor entitled to priority under the Bankruptcy Code or an order of the Bankruptcy { 1086.002-w0044087.} -l CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 12 13 of of 50 55 Court and (ii) is not an Administrative Claim, a Fee Claim, a Saverin Administrative Claim, Priority Tax Claim, a Priority Non-Tax Claim, an Other Secured Claim, a DIP Claim or a Prepetition Secured Notes Claim. 58. "Globøl Settlement" has the meaning set forth in Section VIII.B of the Plan. 59. "Governmentøl Claím' means any Claim against the Debtor Filed by a Governmental Unit, as such term is defined in Bankruptcy Code section I0l (27). 60. "Governmentøl Unít'means a goveTnmental unit as defined in Bankruptcy Code section I0I(27). 61. "Impøíred" means, with respect to a Class of Claims or Interests, a Class of Claims or Interests that is impaired within the meaning of Bankruptcy Code section 1124. 62. "fnsurønce Polícies" means all insurance policies maintained by the Debtor as of the Petition Date, including, without limitation, any general liability policies, any directors & officers liability policies, and any effors and omissions policies. 63. "Interests" means any equity security in a Debtor as defined in Bankruptcy Code section 101(16), including all Preferred Interests, Common Interests, and all issued, unissued, authorized or outstanding shares of capital stock of the Debtor together with any waffants, options or contractual rights to purchase or acquire such equity securities at any time and all rights arising with respect thereto. 64. "Interím Compensøtíon Order" means the Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses for Professionals and Official Committee Members [D. I. 116]. 65. "Judícíal Code' means title 28 of the United States Code, 28 U.S.C. $$ l-4001 66. "Líen" means a lien as defined in Bankruptcy Code section 101(37) 61. "Líquìdøting Trusf'means the trust, of which the Liquidating Trustee shall serve as trustee, formed pursuant to this Plan, the Liquidating Trust Agreement, and the Confirmation Order. 68. ooLiquídøtíng Trust Agreemenl" means the agreement included in the Plan Supplement, as may be amended, established as of the Effective Date, setting forth the terms and conditions of the Liquidating Trust, as may be modified from time to time. 69. "Líquídøtíng Trust Assets" means all Assets of the Estate on the Effective Date, including, for avoidance of doubt, the Retained Causes of Action and all proceeds thereof, but excluding all Cash ncoessary to fund the Professional Fee Claim Resele. 70. ooLiquídøtíng Trust Boartt' shall mean the board established pursuant to the Plan and the Liquidating Trust Agreement to advise, assist and supervise the Liquidating Trustee. The { 1086.002-W0044087. } -8- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 13 14 of of 50 55 Equity Committee is entitled to select two (2) members of the Liquidating Trust Board and AH and Mr. Saverin are each entitled to select one (1) member of the Liquidating Trust Board. 71. "Liquídating Trust Nel Dístributøble Assets" means Liquidating Trust Remaining Assets, net of all amounts payable pursuant to the Plan and the Global Settlement on account of (i) $375,000 to AH and (ii) the DIP Claims to Mr. Saverin, and subject to the establishment of trust expense reserves pursuant to the Liquidating Trust Agteement. 72. "Líquídøtíng Trust Remaíníng Assets" means all Liquidating Trust Assets after payment in full of all Allowed Unimpaired Claims. 73. "Líquídøtíng Trustee" means the person selected by the Liquidating Trust Board to manage and oversee the winding up and dissolution of the Debtor and any successor thereto. 74. "LRC Fee Escroro" mearìs the professional fee escrow held by Landis Rath & Cobb LLP pursuant to the Sale Order. 75. "Mr. Saverín" means Eduardo Saverin. 76. "Notíce, Cløíms and Bøllotíng Agent" means Rust Consulting/Omni Bankruptcy 77. "Ordínøry Course Professionøl Order" means the Order Authorizing the Debtor to Retain, Employ and Compensate Certain Professionals Utilized in the Ordinary Course of Business [D.I. 170]. 78. "Other Secured Cløíms" means any Secured Claim that is not a DIP Claim or a Prepetition Secured Note Claim. 79. "Person" means a person as such term is defined in Bankruptcy Code section 101(41). 80. "Petitíon Date" means March 21,2016, the date on which the Debtor commenced the Chapter 11 Case. 81. "Pínnøcle" means Pinnacle Ventures Equity Fund II, L.P. and such Entity's predecessors, successors and assigns, subsidiaries, and Affiliates, and each of their managed accounts or funds, former or current directors and officers, principals, shareholders, investors, members, partners, employees, relatives, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, each in its respective capacity as such. 82. "PIøn" means this Plan of Liquidation of JMO Wind Down, Inc. Pursuant to Chapter 11 of the Bankruptcy Code (as modified, amended or supplemented from time to time). 83. "Plan Supplement" means the compilation of documents and forms of documents, schedules and exhibits to the Plan whereby the Debtor will disclose the identity and affiliations of the Liquidating Trustee selected by the Liquidating Trust Board and file the Liquidating Trust Agreement, as amended prior to the Confirmation Hearing. { l 086.002-v/0044087. } -9- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 14 15 of of 50 55 84. "Postpetitìon Føcilíty" means that certain postpetition financing provided by Mr. Saverin through the DIP Orders, and Christopher Joseph Clower, in the capacity of the security agent for the Postpetition Facility. 85. "Prefewed fnterests" means those Interests arising out of or relating to the Series A Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock (each as defined in the Certificate of Incorporation). Pursuant to the terms of the Plan, all Preferred Interests shall be deemed converted to Common Interests on the Effective Date' 86. "Prepetítíon Security Agreemenl" means that certain Security Agreement dated as of August 28, 2015 by and between Jumio, as borrower, and Christopher Joseph Clower, as security agent, pursuant to the Note Purchase Agreement and under the Prepetition Secured Notes and the other Security Perfection Documents (as defined in the Note Purchase Agreement). 87. "Prepetítìon Secured Notes" means those various notes issued pursuant to that certain Note Purchase Agreement dated as of AugusI2ï,2015, in the aggregate original principal amount of $15,493 ,727.74, including: (a) Note No.: CPN-1 dated August 28,2015 in the original principal amount of $4,000,000.00 owed to Mr. Saverin; (b) Note No.: CPN-2 dated August 28, 2015 inthe original principal amount of $1,509,780.82 owed to Mr. Saverin; (c) Note No.: CPN- 3 dated August 28,2015 in the original principal amount of $2,005,04L10 owed to Mr. Saverin; (d) Note No.: CPN-4 dated August 28,2075 in the original principal amount of $1,509,780.82 issued to AH, which was transferred to Mr. Saverin on or about March I8,2016; (e) Note No.: CPN-5 dated October 23,2015 in the original principal amount of $4,000,000.00 owed to Mr. Saverin; and (f) Note No.: CPN-6 dated February 26,2016 in the original principal amount of 52,469,725.00 owed to Mr. Saverin. 88. 'oPrepetítíon Secured Notes Claíms" means all Claims arising under the Prepetition Secured Notes, whether Secured Claims or deficiency claims. 89. "Príoríty Non-Tøx Claìms" means any Claim against the Debtor, other than an Administrative Claim or a Priority Tax Claim, entitled to priority in right of pa¡ment under Bankruptcy Code section 507(a). 90. "Príoríty Tøx Claím" means any Claim against the Debtor of the kind specified in Bankruptcy Code section 507(a)(8). 91. "Professíonø|" meaÍts any Person: (a) employed pursuant to a Bankruptcy Court order in accordance with Bankruptcy Code sections 321,363 or 1103 and to be compensated for services rendered before or on the Effective Date, pursuant to Bankruptcy Code sections 327, 328,329,330, 331 or 363 or (b) awarded compensation and reimbursement by the Bankruptcy Court pursuant to Bankruptcy Code section 503(bX4). 92. "Professíonul Fee Claím Reserve" means the reserve established and maintained pursuant to the terms of this Plan and Confirmation Order, which shall contain, on the Effective Date, the amount of Cash estimated for distribution to holders of Allowed Fee Claims. 93. "Proof of Cløím" Íteans a written proof of Claim Filed against the Debtor in the Chapter 11 Case. { 1086.002-W0044087.} -10- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 15 16 of of 50 55 94. "Proof of Interest" means a written proof Interest Filed against the Debtor in the Chapter 11 Case. 95. "Re.jectíon Cløim' means a Claim against the Debtor arising from the rejection of an Executory Contract or Unexpired Lease pursuant to Bankruptcy Code section 365. 96. "Released Partíes" means, except as otherwise expressly set forth in the Plan, AH and the Saverin Parties. 97. "Retaìned Causes of Actíon" means any and all Claims or Causes of Action of the Debtor not sold to Buyer pursuant to the Sale or otherwise waived and released pursuant to this Plan. 98. oosale" shall means the sale of substantially all of the Debtor's assets to Buyer pursuant to the Asset Purchase Agreement and the Sale Order, which Sale was consummated on or about May 9, 2016. 99. "Sale Order" shall mean the Order (a) approving the Sale of substantially all of the Debtor's assets free and clear of all liens, claims, encumbrances and other interests and (b) authorizing the assumption and assignment of certain executory contracts and unexpired leases :D.r.2021. 100. "Saverín Pørties" means, individually and collectively, Eduardo Saverin, Peng T. Ong, Jumio Acquisition, LLC and each such Entity's predecessors, successors and assigns, subsidiaries, and Affiliates, and each of their managed accounts or funds, former or current directors and officers, principals, shareholders, investors, members, partners, employees, relatives, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, each in its respective capacity as such. 101. "Søverin Admínístrøtive Cløím" means the amount of reasonable, documented out-of-pocket expenses in connection with the Sale, which pursuant to the Global Settlement is Allowed at $300,000, incurred by Jumio Acquisition, LLC, which was approved as an Administrative Claim in the Bid Procedures Order. 102. "schedules" means, collectively, the schedules of assets and liabilities, schedules of Executory Contracts and Unexpired Leases and statements of {inancial affairs Filed by the Debtor pursuant to Bankruptcy Code section 521, as such schedules may be amended, modified or supplemented from time to time. 103. "Secured" means when referring to a Claim: (a) secured by a Lien on property in which the Estate has an interest, which Lien is valid, perfected and enforceable pursuant to applicable law or by reason of a Bankruptcy Court order, or that is subject to setoff pursuant to Bankruptcy Code section 553, to the extent of the value of the creditor's interest in the Estate's interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to Bankruptcy Code section 506(a) or (b) Allowed as such pursuant to the Plan. { 1086.002-w0044087 .} - 11- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 16 17 of of 50 55 104. "Securìties Act" means the Securities Act of 1933, 15 U.S.C. $$ 77a-77aa, as amended, together with the rules and regulations promulgated thereunder. 105. "Securíty" means a security as defined in section 2(a)(l) of the Securities Act. 106. "subordinøted 510(b) Cløím'means (a) all Claims or demands whenever and wherever arising or asserted against the Debtor and any derivative claim against the Debtor's predecessors, successors or their present or former officers, directors or employees and (b) any debt, obligation or liability (whether or not reduced to judgment, liquidated, unliquidated, fixed contingent, matured, unmatured, disputed, undisputed, legal, equitable, bonded, secured, or unsecured), whenever and wherever arising or asserted, of the Debtor, and any derivative claim against the Debtor, the Debtor's predecessors, successors, or their present or former officers, directors or employees (including, but not limited to, all thereof in the nature of or sounding in tort, contract, warranty, or any other theory of law, equity or admiralty); in either case (a) and (b) for, relating to, or arising by reason of, the ownership of the Debtor's Preferred Interests, Common Interests or any other equity interest in the Debtor, including but not limited to, any Claim subject to subordination under Bankruptcy Code section 510(b). 107. "subordínøted Cløím" means any Claim against the Debtor that is subordinated to General Unsecured Claims pursuant to an order of the Bankruptcy Court or other court of competent jurisdiction. 108. "(Jncløìmed Property" means any distribution to Creditors under this Plan that are unclaimed thirty (30) days following the date of such distribution under this Plan. 109. "(Jncløimed Property Reserve" means any Unclaimed Property reserved for a period of thirty (30) days by the Liquidating Trustee on behalf of holders of Unclaimed Property. 1 10. "(Jnexpíred Leøse" means a lease to which the Debtor is a party that is subject to assumption or rejection under Bankruptcy Code section 365. 1 1 1. "(/nímpøíred" means, with respect to a Class of Claims or Interests, a Class of Claims or Interests that is not impaired within the meaning of Bankruptcy Code section 1124. 112. "(Inimpøired Cløíms" means the following Claims, which are Unimpaired under the Plan: Administrative Claims, Fee Claims, Priority Tax Claims, Priority Non-Tax Claims, Other Secured Claims, and General Unsecured Claims. 113. "U.5. Trustee" means the United States Trustee for Region 3 114. "Votíng Deødline" means 11:59 p.m. (prevailing Eastem Time) on October 7, 20r6 B. Rules of Interpretation. For purposes of this Plan: (1) in the appropriate context, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and the neuter { 1086.002-w0044087. } -12- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 17 18 of of 50 55 gender; (2) any reference herein to a contract, lease, instrument, release, indenture or other agreement or document being in a particular form or on particular terms and conditions means that the referenced document shall be substantially in that form or substantially on those terms and conditions; (3) any reference herein to an existing document, schedule or exhibit, whether or not Filed, having been Filed or to be Filed shall mean that document, schedule or exhibit, as it may thereafter be amended, modified or supplemented; (4) any reference to an Entity as a holder of a Claim or Interest includes that Entity's successors and assigns; (5) unless otherwise specified, all references herein to "Articles" are references to Articles hereof or hereto; (6) unless otherwise specified, all references herein to exhibits are references to exhibits in the Plan Supplement; (7) unless otherwise specified, the words "herein," "hereof' and "hereto" refer to the Plan in its entirety rather than to a particular portion of the Plan; (8) subject to the provisions of any contract, certificate of incorporation, bylaw, instrument, release or other agreement or document entered into in connection with the Plan, the rights and obligations arising pursuant to the Plan shall be governed by, and construed and enforced in accordance with the applicable law, including the Bankruptcy Code and the Bankruptcy Rules; (9) captions and headings to Articles are inserted for convenience ofreference only and are not intended to be a part ofor to affect the interpretation of the Plan; (10) unless otherwise specified herein, the rules of construction set forth in Bankruptcy Code section 102 shall apply; (11) all references to docket numbers of documents Filed in the Chapter 11 Case are references to the docket numbers under the Bankruptcy Court's CM/ECF system; and (12) all references to statutes, regulations, orders, rules of courts and the like shall mean as amended from time to time, and as applicable to the Chapter 11 Case, unless otherwise stated. Computation of Time. Unless otherwise specifically stated herein, the provisions of Bankruptcy Rule 9006(a) shall apply in computing any period of time prescribed or allowed herein. C. Governing Law Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) or unless otherwise specifically stated, the laws of the State of Delaware, without giving effect to the principles of conflict of laws, shall govern the rights, obligations, construction and implementation of the Plan, any agreements, documents, instruments or contracts executed or entered into in connection with the Plan (except as otherwise set forth in those agreements, in which case the governing law of such agreement shall control). D. Reference to Monetary Figures All references in the Plan to monetary figures shall refer to currency of the United States of America, unless otherwise expressly provided. { 1086.002-w0044087.} - 13 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 18 19 of of 50 55 ARTICLE II ADMINISTRATIVE CLAIMS, AND PRIORITY TAX CLAIMS In accordance with Bankruptcy Code section 1123(a)(l), Administrative Claims and Priority Tax Claims have not been classified and, thus, are excluded from the Classes of Claims and Interests set forth in Article III. A. Administrative Claims. 1. Administrative Claims Except with respect to Administrative Claims that are Fee Claims or Saverin Administrative Claims, and except to the extent that a holder of an Allowed Administrative Claim and the Debtor agree to less favorable treatment with respect to such holder, each holder of an Allowed Administrative Claim shall be paid in full in Cash. Such Claims shall be paid on the earlier of (a) on or as soon as reasonably practicable after the Effective Date if such Administrative Claim is Allowed as of the Effective Date or (b) on or as soon as reasonably practicable after the date such Administrative Claim is Allowed, if such Administrative Claim is not Allowed as of the Effective Date. 2. Fee Claims Any Person asserting a Fee Claim for services rendered before the Effective Date must File and serve on the Debtor and such other Entities who are designated by the Bankruptcy Rules, the Confirmation Order, the Interim Compensation Order or any other applicable order of the Bankruptcy Court, an application for final allowance of such Fee Claim no later than thirty (30) days after the Effective Date; provided, however that any Professional who may receive compensation or reimbursement of expenses pursuant to the Ordinary Course Professional Order may continue to receive such compensation or reimbursement of expenses for services rendered before the Effective Date, without further Bankruptcy Court order, pursuant to the Ordinary Course Professional Order. Objections to any Fee Claim must be Filed and served on the Liquidating Trust and the requestingparty no later than twenty (20) days from the service of an application for final allowance of a Fee Claim. To the extent necessary, the Plan and the Confirmation Order shall amend and supersede any previously entered order regarding the payment of Fee Claims. On the Effective Date, the Professional Fee Claim Reserve shall be transferred by the Debtor to Landis Rath & Cobb LLP's IOLTA account to be held for the pa5rment of Allowed Fee Claims. Upon entry of a Final Order approving any such application for such Fee Claim, Landis Rath & Cobb LLP shall promptly pay any unpaid portion of such Allowed Fee Claim. To the extent that there is any Cash in the Professional Fee Claim Reserve after payment in full of all Fee Claims, Landis Rath & Cobb LLP shall return any such Cash to the Liquidating Trust and such Cash shall be deemed to be a Liquidating Trust Asset. Pursuant to the Global Settlement, the Professionals all agree that all Allowed Professional Fee Claims shall be satisfied as follows (and any Professional Fee Claims in excess of such amounts - including any Professional Fee Claims for services rendered before, on, or after the Effective Date - shall be deemed waived by the holders thereof): { 1086.002-w0044087.} -14- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 19 20 of of 50 55 a The Debtor's Allowed Fee Claims (Landis Rath & Cobb LLP ("LRC'), Ernst & Young, LLP ("EY'), Wilmer Hale, LLP (*ll'H') and Cooley LLP ("Cooley")) and the Equity Committee's Allowed Professional Fee Claims (K&L Gates, LLP ("KL"), EisnerAmper, LLP (*EA") and Pachulski Stang Ziehl e,Young, LLP ("PSZID')) for allowed fees and expenses from the Petition Date through July 23,2076 shall be paid out of the LRC Fee Escrow and $450,000 of Estate Cash (together with the cash sufficient to satisfy the Allowed Professional Fee Claims as identified and subject to the Winddown Budget (defined below), the "Professíonal Fee Funds"). To the extent not already transferred, all Professional Fee Funds shall be transferred to LRC's escrow account on the Effective Date. a LRC's Allowed Fee Claim shall not exceed $650,000 for fees and expenses incurred from the Petition Date through July 23,2016. o The Equity Committee's Allowed Fee Claims (KL, EA and PSZY) shall not exceed $530,000 for allowed fees and expenses incurred from the Petition Date through July 23,2016. o The Debtor's Allowed Fee Claims (LRC, EY, WH and Cooley) for allowed fees and expenses from July 24,2016 through the Effective Date shall be capped pursuant to the line item amounts identified the Winddown Budget attached hereto as Exhibit A (the "Winddown Budeet")' The Equity Committee's Allowed Fee Claims (KL, EA and PSZY) for allowed fees and expenses from July 24,2016 through the Effective Date shall be capped at $25,000, as further set forth in the'Winddown Budget. 3. Saverin Administrative Claim and DIP Claims Pursuant to the Global Settlement, Mr. Saverin has agreed to defer payment on the Allowed Saverin Administrative Claim until the payment in full of Allowed Unimpaired Claims. In addition, Mr. Saverin has agreed that any distribution made on account of the Allowed Saverin Administrative Claim shall be distributed pro rata to holders of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) who do not opt-out of the Consensual Third Party Releases. The Allowed Saverin Administrative Claims shall be paid in full, to the extent funds arc available therefor, from Liquidating Trust Net Distributable Assets, after payment in full of the Allowed Prepetition Secured Notes Claims and prior to any distributions on account of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan). Pursuant to the Global Settlement: (a) the DIP Claims shall be allowed in the full principal amount thereof, including accrued interest at the rate providetl therelor irr the applicable documents through the date on which the DIP Claims are indefeasibly paid in full and any and all fees and expenses arising under such documents: (b) Mr. Saverin has agreed to defer payment on the Allowed DIP Claims until the payrnent in full of all Allowed Unimpaired Claims: and (c) the Allowed DIP Claims shall be paid in the manner set fofih in the Global Settlement. { 1086.002-w0044087.} - 15 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 20 21 of of 50 55 4. Administrative Claim Bar Dates Except as otherwise provided in Article II.A.2, Article IIA.3 and the Bar Date Order, requests for payment of Administrative Claims must be Filed on or before the applicable Administrative Claims Bar Dates. Holders of Administrative Claims that are required to, but do not, File and serve a request for payment of such Administrative Claims by such applicable dates shall be forever barred, estopped and enjoined from asserting such Administrative Claims against the Debtor or its property and such Administrative Claims shall be deemed discharged as of the Effective Date. B. Priority Tøx Claims. Except to the extent that a holder of an Allowed Priority Tax Claim agrees to a less favorable treatment, in exchange for full and final satisfaction, settlement, release and discharge of each Allowed Priority Tax Claim, each holder of an Allowed Priority Tax Claim due and payable on or before the Effective Date shall receive, on the Distribution Date, at the option of the Debtor, one of the following treatments: (i) Cash in an amount equal to the amount of such Allowed Priority Tax Claim, plus interest at the rate determined under applicable non- bankruptcy law and to the extent provided for by Bankruptcy Code section 511; (ii) Cash in an aggregate amount of such Allowed Priority Tax Claim payable in installment payments over a period of time not to exceed five years after the Petition Date, pursuant to Bankruptcy Code section 1129(aX9XC), plus interest at the rate determined under applicable non-bankruptcy law and to the extent provided for by Bankruptcy Code section 511; or (iii) such other treatment as may be agreed upon by such holder and the Debtor or otherwise determined upon an order of the Bankruptcy Court. C. Statutory Fees. On the Distribution Date, the Debtor shall pay, in full in Cash, any fees due and owing to the U.S. Trustee at the time of Confirmation. On and after the Effective Date, the Liquidating Trust shall be responsible for (i) filing post-Confirmation quarterly reports and any pre-Confirmation monthly operating reports not filed as of the Confirmation Hearing in conformity with the U.S. Trustee guidelines and (ii) all applicable U.S. Trustee fees for the Chapter 11 Case until the entry of a final decree or until such Chapter 11 Case is closed or dismissed. ARTICLE III CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS A. Classification of Claims and Interests. Pursuant to Bankruptcy Code section 1122, se| forth below is a designation of Classes of Claims against and Interests in the Debtor. All Claims and Interests, except for Administrative Claims and Priority Tax Claims, are classified in the Classes set forth in this Article III. A Claim or Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest qualifies within the description of such other Classes. A Claim or Interest also is classified in a particular Class for the purpose of receiving { 1086.002-W0044087. } -16- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 21 22 of of 50 55 distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or Interest in that Class and has not been paid, released or otherwise satisfied before the Effective Date. B. Summary of Classification. The following chart summarizes the classification of Claims and Interests pursuant to the Plan: Class lCtaim/Interest Status lVotine Riehts I þrioritv Non-Tax Claims Unimpaired Þeemed to Accept t lother Secured Claims Unimpaired lDeemed to Accept I Þrepetition Secured Notes Claims lmpaired lEntitled to Vote I lGeneral Unsecured Claims Unimpaired þeemed to Accept to Accept 5 lcommon Interests (including converted Unimpaired [Preferred Interests) & Subordinated lstorul claims C. Treatment of Claims and Interests. To the extent a Class contains Allowed Claims or Allowed Interests with respect to a particular Debtor, the treatment provided for the holders of such Allowed Claims or Allowed Interests within each class is specified below: 1. Class 1 - Priority Non-Tax Claims (a) Classifi.cation'. Class 1 consists of Priority Non-Tax Claims. (b) Treatment: Except to the extent thal aholder of an Allowed Priority Non-Tax Claim agfees to a less favorable treatment, in exchange for full and final satisfaction, settlement, and release of each Allowed Priority Non-Tax Claim, each holder of such Allowed Priority Non-Tax Claim shall be paid in full in Cash. Allowed Priority Non-Tax Claim shall be paid on or as reasonably practicable after the later of (i) the Effective Date, (ii) the date on which such Priority Non-Tax Claim against the Debtor becomes an Allowed Priority Non-Tax Claim or (iii) such other date as may be ordered by the Bankruptcy Court. (c) Voting: Class 1 is Unimpaired by the Plan, and each holder of a Class I Priority Non-Tax Claim is conclusively presumed to have accepted the Plan pursuant to Bankruptcy Code section 1126(Ð. Therefore, holders of Class 1 PriorityNon-Tax Claims are not entitled to vote to accept or reject the Plan. 2. Class 2 - Other Secured Claims (a) Classificatíon: Class 2 consists of Other Secured Claims. (b) Treatment: Except to the extent Ihat a holder of an Allowed Other Secured Claim agrees to less favorable treatment, in exchange for full and final satisfaction, settlement, and release of each Allowed Other Secured Claim, each holder of t 1086.002-w0044087. ) -17 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 22 23 of of 50 55 Allowed Other Secured Claim shall either (a) be paid in full in Cash on the later of the Effective Date or the date such Claim becomes an Allowed Claim; (b) receive all Collateral in possession of the Debtor securing the respective holder's Allowed Other Secured Claim or (c) such other treatment as the Liquidating Trustee or Debtor and such Creditor agree to in writing. (c) Voting: Class 2 is Unimpaired by the Plan, and each holder of a Class 2 Other Secured Claim is conclusively presumed to have accepted the Plan pursuant to Bankruptcy Code section I126(f). Therefore, holders of Class 2 Other Secured Claims are not entitled to vote to accept or reject the Plan. 3. Class 3 - Prepetition Secured Notes Claims (a) Classification: Class 3 consists of Prepetition Secured Notes Claims. (b) Treatment: Pursuant to the Global Settlement: (i) the Prepetition Secured Notes Claims shall be Allowed in the aggregate amount of $16,018 ,812.55; (ii) Mr. Saverin has agreed to subordinate payment of the Allowed Prepetition Secured Notes Claims to payment in full of all Allowed Unimpaired Claims; and (iii) after satisfaction of all Allowed Unimpaired Claims, the Allowed Prepetition Secured Notes Claims shall be entitled to fulI payment from the Liquidating Trust Net Distributable Assets, to the extent funds are available therefor, prior to any distributions on account of the Allowed Saverin Administrative Claim and prior to any distributions on account of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan), provided that any distributions on account of the Allowed Prepetition Secured Notes Claims shall be made to holders of Allowed Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) that do not opt-out of the Consensual Third Party Releases. (c) Voting: Class 3 is Impaired by the Plan and is entitled to vote. 4. Class 4 - General Unsecured Claims (a) Classif.cation: Class 4 consists of General Unsecured Claims (b) Treatment: Except to the extent that a holder of an Allowed General Unsecured Claim agrees to a less favorable treatment, in exchange for full and final satisfaction, settlement, and release of each Allowed General Unsecured Claim, each holder of such Allowed General Unsecured Claim shall be paid in full, plus the applicable interest rate, on the Effective Date or soon thereafter as reasonably practicable. (c) Voting: Class 4 is Unimpaired by the Plan, and each holder of a Class 4 General Unsecured Claim is conclusively presumed to have accepted the Plan pursuant to Bankruptcy Code section 1126(Ð. Therefore, holders of Class 4 General Unsecured Claims are not entitled to vote to accept or reject the Plan. { 1086.002-w0044087. } - 18 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 23 24 of of 50 55 5. Class 5 - Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) and Subordinated 510(b) Claims (a) Classification: Class 5 consists of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) and Subordinated 5 I 0(b) Claims. (b) Treatment'. (i) Pursuant to the Global Settlement and Section IV.E of the Plan, on the Effective Date, all Preferred Interests shall be deemed converted to Common Interests pursuant to the Certificate of Incorporation, and all Common Interests resulting from the conversion of such Preferred Interests shall be entitled to the same treatment as holders of other Allowed Common Interests under this Section III.C.5.b.; (ii) each holder of Allowed Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) who does not opt-out of the Consensual Third Party Releases shall be entitled, to the extent of Liquidating Trust Net Distributable Assets, to a pro rata share of any distributions made on account of the Allowed Saverin Administrative Claim andlor the Allowed Prepetition Secured Notes Claims; and (iii) each holder of an Allowed Common Interest (including Preferred Interests converted to Common Interests pursuant to the Plan) and Allowed Subordinated 510(b) Claims, regardless of whether such holder opts-out of the Consensual Third Party Releases, shall be entitled to a pro rata share of all Liquidating Trust Net Distributable Assets remaining after full and indefeasible payment of the Allowed Prepetition Secured Notes Claims and Allowed Saverin Administrative Claim; plevided, however, that Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) of Mr. Saverin and AH that are waived pursuant to the Global Settlement shall not participate in such distributions. (c) Voting: Class 5 is Unimpaired by the Plan, and each holder of an Allowed Common Interest and Allowed Subordinated 510(b) Claims is conclusively presumed to have accepted the Plan pursuant to Bankruptcy Code section 1126(Ð. Therefore, holders of Allowed Common Interests and Allowed Subordinated 510(b) Claims are not entitled to vote to accept or reject the Plan. D. Special Provision Governing Claims thqt are Not Impaired. Except as otherwise provided in the Plan, nothing under the Plan shall affect the Liquidating Trustee's rights in respect of any Claims or Interests that are not Impaired, including all rights of the Debtor in respect of legal and equitable defenses to or setofß or recoupments against any such Claims or Interests that are not Impaired. E. Acceptance or Rejectíon of the Plan. 1. Voting Classes Class 3 is entitled to vote on the Plan. { 1086.002-w0044087.} -t9- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 24 25 of of 50 55 2. Presumed Acceptance of the Plan Pursuant the Bankruptcy Code, Classes I,2, 4 and 5 are deemed to have accepted the Plan and are not entitled to vote to accept or reject the Plan. F. Subordinøted Claims Except as expressly provided herein, the allowance, classification and treatment of all Allowed Claims and Interests and the respective distributions and treatments under the Plan take into account and conform to the relative priority and rights of the Claims and Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto, whether arising under general principles of equitable subordination, Bankruptcy Code section 510(b) or otherwise. Pursuant to Bankruptcy Code section 510, the Liquidating Trustee reserves the right to seek to reclassify any Allowed Claim, other than the Fee Claims, in accordance with any contractual, legal or equitable subordination relating thereto. ARTICLE IV MEANS FOR IMPLEMENTATION OF THE PLAN A. Liquidating Trust. 1. Creation of Liquidating Trust. On the Effective Date, the Liquidating Trust shall be created in accordance with the Liquidating Trust Agreement to be included in the Plan Supplement and funded by the Debtor's transfer to the Liquidating Trust of the Liquidating Trust Assets. The Liquidating Trust shall be a newly-formed Delaware trust with no prior assets or liabilities. The Liquidating Trustee shall serve as the trustee of the Liquidating Trust. 2. Transfers to the Liquidating Trust. On the Effective Date, the Debtor and its Estate shall transfer and shall be deemed to have irrevocably transferred to the Liquidating Trust, the Liquidating Trust Assets, which transfer shall be free and clear of Claims and Liens and contractually imposed restrictions except as otherwise provided herein. 3. The Liquidatirìg Tn¿Stgg. From and after the Effective Date, the Liquidating Trust Board shall appoint the Liquidating Trustee pursuant to the Liquidating Trust Agreement, Plan, and Confirmation Order, until death, resignation or discharge and the appointment of a successor Liquidating Trustee in accordance with the terms of the Liquidating Trust Agreement. The Liquidating Trustee shall be the exclusive trustee of the Debtor's estate underTitle 11 forpurposes of 31 U.S.C. $ 3713(b) and26 U.S.C. $ 601(bX3)' 4. Responsibilities of the Liquidating Trustee. The responsibilities of the Liquidating Trustee under the Liquidating Trust Agreement and this Plan shall include those set forth in the Liquidating Trust Agreement, including, without limitation, the following (a) the receipt of the Liquidating Trust Assets; (b) the establishment and maintenance of such operating, reserve and trust account(s) as are necessary and appropriate to carry out the terms of the Liquidating Trust; (c) the investment of Cash; (d) the pursuit of objections to, estimation of and settlements of Claims and Interests, regardless of whether such Claim or Interest is listed on the Debtor's Schedule, other than Claims or Interests that are Allowed pursuant to the Plan; (e) the { 1086.002-W0044087. } -20- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 25 26 of of 50 55 prosecution of any cause of action of the Debtor's Estate not otherwise released under the Plan for the benefit of holders of Allowed Claims and Allowed Interests; (f) unless otherwise provided in the Plan, the calculation and distribution of all distributions to be made under this Plan to holders of Allowed Claims and Interests; (g) the payment of fees pursuant to 28 U.S.C. $ 1930 incurred after the Effective Date until the closing of the Chapter 11 Case; (h) to respond to reasonable requests for information regarding the administration of the Liquidating Trust made by parties in interest; and (i) such other responsibilities as may be vested in the Liquidating Trustee pursuant to this Plan, the Liquidating Trust Agreement, the Confirmation Order, other Bankruptcy Court Orders, or as otherwise may be necessary and proper to carry out the provisions of this Plan. The Liquidating Trustee shall be responsible for the filing of all required tax returns and operating reports and the paying of taxes due from the Debtor's Estate or the Liquidating Trust and all other obligations on behalf of the Liquidating Trust, if any. 5. Powers of s Trustee. The powers of the Liquidating Trustee, as set forth in the Liquidating Trust Agreement shall include, without limitation and without further Bankruptcy Court approval, each of the following: a. To exercise in a manner not inconsistent with the Plan all power and authority that may be or could have been exercised, commence all proceedings that may be or could have been commenced and take all actions that may be or could have been taken by any member, officer, director or shareholder of the Debtor with like effect as if authoized, exercised and taken by unanimous action of such officers, directors and shareholders, including, without limitation, the dissolution of the Debtor; b. To maintain accounts, to make distributions to holders of Allowed Claims and Allowed Interests provided for or contemplated in the Plan; and take other actions consistent with the Plan and the implementation thereof, including the establishment, re- evaluation, adjustment and maintenance of appropriate reserves, in the name of the Liquidating Trustee; c. Except to the extent set forth in the Plan, to object to any Claims or Interests regardless of whether such Claim or Interest was Disputed on the Effective Date, other than the Fee Claims, to compromise or settle any Claims or Interests regardless of whether such Claim or Interest was Disputed on the Effective Date, prior to objection without supervision or approval of the Bankruptcy Court, free of any restriction of the Bankruptcy Code, the Bankruptcy Rules, the local rules of the Bankruptcy Court, and the guidelines and requirements of the U.S. Trustee, other than those restrictions expressly imposed by the Plan, the Confirmation Order or the Liquidating Trust Agreement; d. To make decisions, without further Bankruptcy Court approval, regarding the retention or engagement of professionals, employees and consultants by the Liquidating Trust and the Liquidating Trustee on the Estate's behalf and to pay the fees and charges incurred by the Liquidating Trustee ou the Liquidating Ttust's behalf on or aftcr thc Effective Date for fees and expenses of professionals (including those retained by the Liquidating Trustee), disbursements, expenses or related support services relating to the winding down of the Debtor and implementation of the Plan without application to the Bankruptcy Court; { 1086.002-w0044087. } -21 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 26 27 of of 50 55 e. To file, if necessarY, anY and all tax and information retums required with respect to the Liquidating Trust as a gtantor trust pursuant to Treas. Reg. 1.671- 4(a) or otherwise, (ii) make tax elections by and on behalf of the Liquidating Trust, and (iii) pay taxes, if any, payable by the Liquidating Trust. f. To take all other actions not inconsistent with the provisions of the Plan which the Liquidating Trustee deems reasonably necessary or desirable with respect to administering the Plan; g. To collect any accounts receivable or other claims of the Debtor or Estate not otherwise disposed of pursuant to the Plan or the Confirmation Order, or sold to the Buyer pursuant to the Sale Order; h. To implement and/or enforce all provisions of the Plan, including entering into any agreement or executing aîy document required by or consistent with the Plan, the Confirmation Order and the Liquidating Trust Agreement, and perform all of the Debtor' s obligations thereunder; i. To abandon in arry commercially reasonable manner, including abandonment or donation to a charitable organization of its choice, any Liquidating Trust Asset if the Liquidating Trustee concludes they are no benefit to the Estate; j. Except as otherwise set forth herein, to prosecute and/or settle Claims for the benefit of holders of Allowed Claims and Allowed Interests, with or without approval of the Bankruptcy Court, including Causes of Action and exercise, participate in or initiate any proceeding before the Bankruptcy Court or any other court of appropriate jurisdiction and participate as a party or otherwise in any administrative, arbitrative or other nonjudicial proceeding and pursue to settlement or judgment such actions; k. To purchase ot create and carry all insurance policies and pay all insurance premiums and costs the Liquidating Trustee deems necessary or advisable; l. To collect and liquidate andlor distribute all Liquidating Trust Assets pursuant to the Plan, the Confirmation Order and the Liquidating Trust Agreement and administer the winding down of the Debtor's affairs; m. To hold any legal title to any and all of the Assets; n. If any of the Liquidating Trust Assets are situated in any state or other jurisdiction in which the Liquidating Trustee is not qualified to act as trustee, to nominate and appoint a Person duly qualified to act as trustee in such state or jurisdiction and require from each such trustee such security as may be designated by the Liquidating Trustee in its discretion; confer upon such trustee all the rights, powers, privileges and duties of the Liquidating Trustee hereunder, subject to the conditions and limitations of the Liquidating Trust Agreement, except as modified or limited by the Liquidating Trustee and except where the conditions and limitations may be modified by the laws of such state or other jurisdiction (in which case, the laws or the state or jurisdiction in which the trustee is action shall prevail to the extent necessary); require such trustee to be answerable to the Liquidating Trustee for all monies, .ta {r 086.002-w0044087,} - LL- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 27 28 of of 50 55 assets and other property that may be received in connection with the administration of all property; and remove such trustee, with or without cause, and appoint a successor trustee at any time by the execution by the Liquidating Trustee of a written instrument declared such trustee removed from office, and specifying the effective date and time of removal; o. Retain any and all Insurance Policies of the Debtor providing coverage with respect to Claims; and p. Exercise such other powers as may be vested in or assumed by the Liquidating Trustee pursuant to the Plan, the Liquidating Trust Agreement, the Confirmation Order, other orders of the Bankruptcy Court, or as may be necessary and proper to carry out the provisions of the Plan. The Liquidating Trustee shall stand in the same position as the Debtor with respect to any claim the Debtor may have to an attorney-client privilege, the work-product doctrine, or any other privilege, and the Liquidating Trustee shall succeed to all of the Debtor's rights to preserve, assert or waive any such privilege. 6. Unclaimed Propertv of the Liouidatins Trust. The Liquidating Trustee shall establish the Unclaimed Property Reserve for all Unclaimed Property. Such Unclaimed Property shall be in held in a reserve, for a period of sixty (60) days, for the recipients of the beneficial interests in the Liquidating Trust entitled thereto under the terms of this Plan and Confirmation Order. Once the distribution to Creditors or Interest holders becomes Unclaimed Property, the Liquidating Trustee shall, subject to the limitations set forth herein, (a) hold such Unclaimed Property in the Unclaimed Property Reserve solely for the benefit of such holder or holders who have failed to claim such Unclaimed Property and (b) release the Unclaimed Property from the Unclaimed Property Reserve and deliver to the holder entitled thereto upon presentation of proper proof by such holder of its entitlement thereto. After the expiration of sixty (60) days, the holders of Allowed Claims or Allowed Interest theretofore entitled to such Unclaimed Property shall cease to be entitled thereto and shall be entitled to no further distribution under this Plan, and such Claims or Interests shall be deemed disallowed and expunged in their entirety and the funds shall be redistributed to the other holders of Allowed Claims and Interests in accordance with the terms of this Plan, Confirmation Order and Liquidating Trust Agreement. Such funds shall not be subject to the escheat laws of any state. 7. Compensation of the Liquidating Trustee. The Liquidating Trustee shall be compensated as agreed upon by the Liquidating Trustee and the Liquidating Trust Board, pursuant to the terms of the Liquidating Trust Agreement. Any professionals retained by the Liquidating Trustee shall be entitled to reasonable compensation for services rendered and reimbursement of expenses incurred, subject to approval by the Liquidating Trustee. The payment of fees and expenses of the Liquidating Trustee and its professionals shall be made in the ordinary course of business and shall not be subject to Bankruptcy Court approval. The identity of the Liquidating Trustee and the initial members of the Liquitlating Trust Boartl antl the proposed compensation for each shall be disclosed in the Plan Supplement. 8. Sale Free and Clear of Liens. The sale or other disposition of any Liquidating Trust Assets by the Liquidating Trustee in accordance with this Plan and the { r086.002-w0044087.} -23 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 28 29 of of 50 55 Liquidating Trust Agreement shall be free and clear of any and all liens, claims, interests and encumbrances pursuant to Bankruptcy Code section 363(Ð. 9. Transfer Taxes. Any transfer of all or any portion of the Liquidating Trust Assets pursuant to this Plan shall constitute a "transfer under aplan" within the purview of Bankruptcy Code section 1 1a6(c) and shall not be subject to any stamp tax or similar tax. 10. Causes of Action. The Liquidating Trustee shall have the sole right to pursue any existing or potential Cause of Action, except those previously waived or released by the Debtor or released pursuant to this Plan, by informal demand andlor commencement of liti gation. I 1. Effective l)ete. On the Effective Date, the Liquidating Trustee shall have the rights and powers set forth herein in order to carry out and implement the purposes and intent of the Plan. 12. Records. On or prior to the Effective Date, the Debtor shall transfer to the Liquidating Trust all originals andlor copies of available documents and business records of the Debtor, to the extent they exist and are in the Debtor's possession. The Liquidating Trustee shall uphold all of the Debtor's obligations under the Asset Purchase Agreement with respect to the documents transferred hereunder. Except as provided in the Asset Purchase Agreement, the Liquidating Trust shall maintain such records until the earlier of: (a) the entry of a final decree in this Chapter 11 Case or (b) five years from the filing of the Debtor's final tax returns. Thereafter, said records may be destroyed or otherwise disposed of. If the Liquidating Trustee seeks to destroy or otherwise dispose of any records of the Debtor's Estate prior to the time periods set forth herein, the Liquidating Trustee shall be entitled to do so upon Final Order of the Bankruptcy Court after notice and hearing. 13. Resiqnation of Officers and Directors. On the Effective Date, the members of the board of directors and officers of the Debtor shall be deemed to have resigned. B. Cancellation of Existing Securities. Except as otherwise provided in the Plan or any agreement, instrument or other document incorporated in the Plan, on the Effective Date, the obligations of the Debtor pursuant, relating or pertaining to any agreements, indentures, certificates of designation, bylaws or certificate or articles of incorporation or similar documents goveming the shares, certificates, notes, bonds, purchase rights, options, warrants or other instruments or documents evidencing or creating any indebtedness or obligation of the Debtor (except such agreements, certificates, notes or other instruments evidencing indebtedness or obligations of the Debtor that are specifically Reinstated pursuant to the Plan) shall be released and discharged; provided, however. notwithstanding Confirmation or the occlrffence of the Effective Date, any such indenture or agreement that governs the rights of the holder of a Claim against the Debtor or Interests shall continue in effect solely for purposes of enabling holders of Allowed Claims or Interests to receive distributions under the Plan as provided herein; provided, further, however, that the { 1086.002-w0044087 .} -24- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 29 30 of of 50 55 preceding provision shall not result in any expense or liability to the Debtor, except to the extent set forth in or provided for under this Plan. C. Preservation of Causes of Action. In accordance with Bankruptcy Code section 1123(b), the Liquidating Trustee may pursue the Causes of Action in its discretion, other than those released under this Plan. The Liquidating Trustee expressly reserves all rights to prosecute any and all Causes of Action against any Entity for the benefit of holders of Allowed Claims and Allowed Interests, except as otherwise expressly provided in the Plan. Unless any Causes of Action against an Entity are expressly waived, relinquished, exculpated, released, compromised or settled in the Plan or a Bankruptcy Court order, the Liquidating Trust expressly reserve all Causes of Action, for later adjudication, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, estoppel (udicial, equitable or otherwise) or laches, shall apply to the Causes of Action upon, after or as a consequence of the Confirmation or Consummation. In accordance with Bankruptcy Code section 1123(b)(3), the Liquidating Trustee may exclusively enforce any and all Causes of Action that are not released hereunder. The Liquidating Trustee shall have the exclusive right, authority and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw or litigate to judgment any Cause of Action and to decline to do any of the foregoing without fuither notice to or action, order or approval of the Bankruptcy Court. Nothing in this paragraph shall be deemed to permit the commencement or prosecution of any cause of action that is released under the terms of this Plan. Without limiting the breadth and generality of the foregoing paragraph, the Causes of Action set forth in Exhibit B hereto are expressly preserved for prosecution by the Liquidating Trust for the benefit of holders of Allowed Claims and Allowed Interests. D. Vesting of Assets. Except as otherwise explicitly provided in this Plan, on the Effective Date all property comprising the Debtor's Estate shall vest in the Liquidating Trust to the same extent such Assets were held by the Debtor, free and clear of all Claims, Liens, charges, encumbrances, rights and Interests of creditors and Interest holders, but subject to the terms of this Plan. As of the Effective Date, the Liquidating Trustee may use, acquire and dispose of property and settle and compromise Claims and Interests subject only to the restrictions expressly imposed by this Plan, the Liquidating Trust Agreement and the Confirmation Order. E. Conversion of Preferred Interests. On the Effective Date, and as part of the Global Settlement, Mr. Saverin as the majority holder of Series A Preferred Interests, AH as the majority holder of Series B Preferred Interests, and Mr. Saverin as the majority holder of Series C Preferred Interests shall be deemed to have voted to convert all Preferred Interests to Common Interests pursuant to the Certificate of Incorporation. The Preferred Interests shall be converted pursuant to the restrictions and conditions of the Certificate of Incorporation. { r086.002-w0044087.} 25- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 30 31 of of 50 55 ARTICLE V FUNDING AND DISBURSEMENTS A. No Separøte Disbursing Agents. The Liquidating Trustee shall make all distributions under the Plan on account of Allowed Claims against, and Allowed Interests in, the Debtor, provided, however, that all Allowed Fee Claims shall be paid out of the Professional Fee Claim Reserve. Except as otherwise expressly set forth herein, on the Effective Date, or as soon thereafter as practicable, the Liquidating Trustee shall make all distributions required pursuant to the Plan. All other distributions or payments under the Plan shall be made by the Liquidating Trustee pursuant to the terms of the Plan, Confirmation Order and Liquidating Trust Agreement. B. Reserves - Pøyment of Disputed Claims and Interests The Liquidating Trustee shall establish appropriate reserves, which shall be segregated and held by the Liquidating Trustee on and after the Effective Date for the payment of Disputed Claims to the extent they become Allowed Claims. The Liquidating Trustee shall establish appropriate reserves, which shall be segregated and held by the Liquidating Trustee on and after the Effective Date for distributions on account of any Disputed Interests to the extent they become Allowed Interests. C. Cash Payments. Cash payrnents made pursuant to the Plan shall be in U.S. funds, by the means agreed to by payor and payee, including by check or wire transfer or, in the absence of an agreement, such commercially reasonable manner as the Liquidating Trustee shall determine in his or her sole discretion. D. Distributionþr Allowed Claims and Allowed Interests Except as otherwise provided in the Plan or the Confirmation Order, or as otherwise ordered by the Bankruptcy Court, distributions to Allowed Claims or Allowed Interests shall be made on the Distribution Date, or as soon after as practicable. No holder of a Disputed Claim shall have any Claim against the applicable Reserved Funds, the Liquidating Trustee, the Liquidating Trust, the Debtor or the Estate with respect to such Disputed Claim until such Disputed Claim becomes an Allowed Claim, and no holder of a Disputed Claim shall have any right to interest on such Disputed Claim except as provided in the Plan. No holder of a Disputed Interest shall have any Claim against the applicable Reserved Funds, the Liquidating Trustee, the Liquidating Trust, the Debtor or the Estate with respect to such Disputed Interest until such Disputed Interest becomes an Allowed Interest. E. Interest and Charges. Post-petition interest shall accrue and be paid on Allowed Claims. Unless otherwise set forth in any applicable contract, interest shall be at the Federal Judgment Rate. All { 1086.002-w0044087, } -26- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 31 32 of of 50 55 interest earned on the funds held by the Liquidating Trust in any account shall be distributed with the distributions provided in this Plan. F. Compliance with Tax Requirements, In connection with the Plan, to the extent applicable, the Liquidating Trust shall comply with all tax withholding and reporting requirements imposed on it by any Govemmental Unit, and all distributions pursuant to the Plan shall be subject to such withholding and reporting requirements. Notwithstanding any provision in the Plan to the contrary, the Liquidating Trust shall be authorized to take all actions necessary or appropriate to comply with such withholding and reporting requirements, including liquidating a portion of the distribution to be made under the Plan to generate sufficient funds to pay applicable withholding taxes, withholding distributions pending receipt of information necessary to facilitate such distributions, including, without limitation, requiring that the holder of an Allowed Claim or Interest complete the appropriate IRS Form W-8 or IRS Form W-9, as applicable to each holder or establishing any other mechanisms they believe are reasonable and appropriate. The Liquidating Trust reserves the right to allocate all distributions made under the Plan in compliance with applicable wage gamishments, alimony, child support and other spousal awards,liens and encumbrances. The Liquidating Trust shall not be required to make distributions on any Allowed Claim or Allowed Interest if the holder thereof has not provided all documentation necessary to determine all tax withholding and reporting requirements for such Allowed Claim or Allowed Interest. To the extent such documentation is not provided within thirty (30) days of the respective Distribution Date, the distribution on such Allowed Claim or Allowed Interest shall be deemed Unclaimed Property. G. Allocations. Distributions in respect of Allowed Claims shall be allocated first to the principal amount of such Claims (as determined for federal income tax purposes) and then, to the extent the consideration exceeds the principal amount of the Claims, to any portion of such Claims for accrued but unpaid interest. H. Fractíonal Dollars: De Minimis Distributions' Notwithstanding any other provision of the Plan, the Liquidating Trustee shall not be required to make distributions or payments of fractions of dollars, and whenever any payment of a fraction of a dollar under the Plan would otherwise be called for, the actual payment made shall reflect a rounding down of such fraction to the nearest whole dollar. In addition, the Liquidating Trustee shall not be required to may any distribution in an amount less than $50.00. To the extent that such a distribution shall be called for as part of any interim distribution, the Liquidating Trustee shall establish a reserve for all distributions in the amount of less than $50.00 and shall, when and if the holder of a Claim or Interest is entitlecl to a rlistrihution of $50.00 or more, make such distribution at such time. The Liquidating Trustee shall not be required to make any Final Distribution of less than $50.00 and all monies otherwise payable in such amount shall be paid to the other holders of Allowed Claims and Interests, in accordance with the terms of the Plan, the Confirmation Order and the Liquidating Trust Agreetnent. 4.7 - { l 086.002-v/0044087 .\ - Lt CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 32 33 of of 50 55 I. Delivery of Distributions to Holders of Allowed Claims and Interests. Distributions to holders of Allowed Claims and Allowed Interests shall be made at the address set forth in the Schedules unless such addresses are superseded by proofs ofclaim or interest or transfers of claims filed pursuant to Bankruptcy Rule 3001 or at the last known address of such holders if the Liquidating Trustee has been notifìed in writing of a change of address. If the distribution to any holder of an Allowed Claim or Interest is returned to the Liquidating Trustee as undeliverable or otherwise unclaimed, such Unclaimed Property shall be held in a reserve as set forth in Section IV.6 of the Plan. If there is any residual Unclaimed Property at the time of the dissolution of the Liquidating Trust, such residual Unclaimed Property shall be available for a subsequent Distribution or donated to a charitabl e organization at the sole discretion of the Liquidating Trustee. J. No Penalty Claims. Unless otherwise specifically provided for in the Plan or the Confirmation Order, no holder of any Claim will be entitled to allowance of, or to receive any payment on account of, any penalty arising with respect to or in connection with such Claim and any such penalty shall be deemed disallowed and expunged. K. Setffi and Recoupment. The Liquidating Trust may, but shall not be required to, setoff against or recoup from any Claims of any nature whatsoever that the Debtor may have against the claimant pursuant to Bankruptcy Code section 558 or otherwise, but neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtor or the Liquidating Trust of any such Claim it may have against the holder of such Claim. L. Distributions by Liquidating Trust. The Liquidating Trustee shall not be obligated to make a distribution that would impair the ability of the Liquidating Trust to pay the expenses incurred by the Liquidating Trust. M. Clqíms Paid or Payable by Third Pqrties. 1. Claims Paid Third Parties The Liquidating Trust shall reduce in full a Claim, and such Claim shall be disallowed without a Claim objection having to be Filed and without any further notice to or action, order or approval of the Bankruptcy Court, to the extent that the holder of such Claim receives pa5rment in full on account of such Claim from a party that is not the Debtor or Liquidating Trust. To the extent a holder of such Claim receives a distribution on account of such Claim and receives payment from a party that is not the Debtor or the Liquidating Trust on account of such Claim, such holder shall repay, retum or deliver any distribution to the Liquidating Trust, to the extent the holder's total recovery on account of such Claim from the third party and under the Plan exceeds the amount of such Claim as of the date of any such { r 086.002-vi 0044087. } -28- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 33 34 of of 50 55 distribution under the Plan. The Liquidating Trust and the Debtor's Estate reserve all of their rights, remedies, claims and actions against any such holders who fail to repay or return any such distribution. 2. Claims Pavable bv Third Parties No distributions under the Plan shall be made on account of an Allowed Claim that is payable pursuant the Debtor's Insurance Policies until the holder of such Allowed Claim has exhausted all remedies with respect to such Insurance Policy. To the extent that one or more of the Debtor's insurers agrees to satisfy in full or in part a Claim, then immediately upon such insurers' agfeement, the applicable portion of such Claim may be expunged without a Claims objection having to be Filed and without any further notice to or action, order or approval of the Bankruptcy Court. 3. Applicability of Insurance Policies Except as otherwise provided in the Plan, distributions to holders of Allowed Claims shall be in accordance with the provisions of any applicable Insurance Policy. ARTICLE VI TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. Assumption ønd Rejection of Executory Contracts and Unexpired Leases On the Effective Date, and except for Insurance Policies assumed hereunder, all Executory Contracts and Unexpired Leases shall be deemed rejected as of the Effective Date, unless such Executory Contract or Unexpired Lease: (i) was assumed or rejected previously by the Debtor; (ii) previously expired or terminated pursuant to its own terms; or (iii) is the subject of a motion to assume Filed on or before the Effective Date. Entry of the Confirmation Order shall constitute a Bankruptcy Court order approving the rejection of such Executory Contracts or Unexpired Leases pursuant to Bankruptcy Code sections 365(a) and 1123. Unless otherwise indicated, rejection of Executory Contracts and Unexpired Leases pursuant to the Plan shall be effective as of the Effective Date. B. Claims Based on Rejection of Executory Contracts or Unexpired Leases. Proofs of Clairn with respect to Claims arising from the rejection of Executory Contracts or Unexpired Leases, if any, must be Filed with the Bankruptcy Court within thirty (30) days after the date of entry of an order of the Bankruptcy Court (including, but not limited to, the Confirmation Order) approving such rejection. Any Claims arising from the rejection of an Executory Contract or Unexpired Lease not Filed within such time will not be considered Allowed and such person or entity shall not be treated as a creditor for purposes of distributions under the Plan. Claims arising frorn the rejection of the Debtor's Executory Contracts or Unexpired Leases shall be classified as General Unsecured Claims and shall be treated in accordance with Class 3 of the Plan. { 1086.002-w0044087. } -29 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 34 35 of of 50 55 Reiection Claims for which a Proof of Claim is not timely Filed will not be considered Allowed such nerson or entitv shall not be treated as a creditor for nurnoses of distributions under the Plan. C. Insurance Policies and Proceeds Any and all proceeds of the Debtor's Insurance Policies received by or payable to the Debtors pursuant to the terms of the Insurance Policies shall be deemed assigned to the Liquidating Trust. Except to the extent determined by Final Order to be Executory Contracts, the Debtor's Insurance Policies and any agreements, documents or instruments relating thereto shall not be treated as or deemed to be Executory Contracts. On the Effective Date, the Debtor retains all such Insurance Policies, and nothing in the Plan, including any releases, shall diminish or impair the enforceability of any Insurance Policies that cover claims against the Debtor or any other Entity. To the extent such Insurance Policies are determined by Final Order to be Executory Contracts subject to assumption pursuant to section 365 of the Bankruptcy Code, such Insurance Policies shall not be assumed by the Debtors or the Liquidating Trust unless such relief is sought by the Liquidating Trustee, within 60 days after entry of a Final Order determiningthat such Insurance Policies constitute Executory Contracts, and is approved by the Court. D. Indemnificatíon Obligations. Except as otherwise provided in the Plan, the Confirmation Order, any and all Indemnification Obligations that the Debtor has pursuant to a contract, instrument, agreement, certificate of incorporation, by-law, comparable organizational document, or other document or applicable law shall be rejected as of the Effective Date of the Plan; provided that any insurer under any Insurance Policy, to the extent such party timely files a Proof of Claim, may assert a General Unsecured Claim against the Debtor's estate in an amount up to the applicable retention amount. ARTICLE VII PROCEDURES FOR RESOLVING CONTINGENT, UNLIQUIDATED AND DISPUTED CLAIMS AND INTERESTS A. Allowance of Claims and Interests. After the Effective Date, the Liquidating Trust shall have and retain any and all rights and defenses such Debtor had with respect to any Claim or Interest immediately before the Effective Date. B. ClaimsAdministrationResponsibilities. Except as otherwise specifically provided in the Plan, after the Effective Date, the Liquidating Trust shall have the sole authority: (i) to File, withdraw or litigate to judgment objections to (a) Claims and Interests and (b) to settle or compromise any Claim or Interest, that t 108ó.002-w0044087. ) -30- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 35 36 of of 50 55 is a Disputed Claim or Interest without any further notice to or action, order or approval by the Bankruptcy Court and (ii) to administer and adjust the Claims Register to reflect any such settlements or compromises without any further notice to or action, order or approval by the Bankruptcy Court. C. Estimation of Claims. Before or after the Effective Date, the Debtor or Liquidating Trust, as applicable, may (but are not required to) at any time request that the Bankruptcy Court estimate any Disputed Claim or Interest that is contingent or unliquidated pursuant to Bankruptcy Code section 502(c) for any reason, regardless of whether any party previously has objected to such Claim or Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court shall retain jurisdiction to estimate any such Claim or Interest, including during the litigation of any objection to any Claim or Interest or during the appeal relating to such objection. Notwithstanding any provision otherwise in the Plan, a Claim that has been expunged from the Claims Register, but that either is subject to appeal or has not been the subject of a Final Order, shall be deemed to be estimated at zero dollars, unless otherwise ordered by the Bankruptcy Court. In the event that the Bankruptcy Court estimates any contingent or unliquidated Claim or Interest, that estimated amount shall constitute a maximum limitation on such Claim or Interest for all pu{poses under the Plan (including for purposes of distributions), and the Liquidating Trust may elect to pursue any supplemental proceedings to object to any ultimate distribution on such Claim or Interest. D. Adjustment to Claims or Interests Without Obiection. Any Claim or Interest that has been paid or satisfied, or any Claim or Interest that has been amended or superseded, cancelled or otherwise expunged (including pursuant to the Plan), or any Claim or Interest whose treatment has been deemed modified by this Plan, or any Claim or Interest whose treatment has been agreed to by the Holder of such Claim or Interest, may be adjusted or expunged (including on the Claims Register, to the extent applicable) by the Liquidating Trust, without a Claims objection or any other notice or motion having to be Filed and without any further notice to or action, order or approval of the Bankruptcy Court. E. Time to File Objections to Claims. Any objection to Claims against the Debtor shall be Filed on or before the Claims Objection Deadline. F. Amendments to Claims On or after the Effective Date, a Claim may not be Filed or amended without the prior authorization of the Bankruptcy Court or the Liquidating Trust, unless the proposed amencleci Claim is for a lesser amount than the original Claim. Absent such authorization, any new or amended Claim Filed shall be deemed disallowed in full and expunged without any fuither action. - { 1086.002-w0044087. } - 31 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 36 37 of of 50 55 G. Tax Implicationsfor Recipients of Dístributions. Notwithstanding any other provision of the Plan, each Entity receiving a distribution of Cash or other consideration pursuant to the Plan shall have the sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed on it by any Governmental Unit on account of the distribution, including income, withholding and other tax obligations. H. Offer of Judgment. The Liquidating Trust is authorized to serve upon a holder of a Claim or Interest an offer to allow judgment to be taken on account of such Claim, and pursuant to Bankruptcy Rule 7068 and 9014, Federal Rule of Civil Procedure 68 shall applyto such offer of judgment. To the extent the holder of a Claim must pay the costs of Liquidating Trust, after making of such offer, the Liquidating Trust is entitled to setoff such amounts against the amount of any distribution to be paid to such holder. I. Release of Liens Securing Disputed Claims. If a Secured Claim is a Disputed Claim, the holder of such claim shall be deemed to have released any Lien on its collateral, if any, pending determination of its Allowed Secured Claim, upon: (i) payment to the holder of such Disputed Claim the undisputed portion of such Secured Claim and (ii) the placement of the disputed portion thereof into escrow. J. No Distributions Pending Allowance. If an objection to a Claim or Interest or portion thereof is Filed, no payment or distribution provided under the Plan shall be made on account of such Claim or Interest or portion thereof unless and until such Disputed Claim becomes an Allowed Claim or Allowed Interest. K. Distríbutions After Allowance. To the extent that a Disputed Claim or Disputed Interest ultimately becomes an Allowed Claim or Allowed Interest, distributions (if any) shall be made to the holder of such Allowed Claim or Allowed Interest in accordance with the provisions of the Plan. As soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing any Disputed Claim or Disputed Interest becomes a Final Order, the Liquidating Trust shall provide to the holder of such Claim or Interest the distribution (if any) to which such holder is entitled under the Plan as of the Effective Date, without any interest to be paid on account of such Claim or Interest unless required under applicable bankruptcy law. { l 086.002-v/0044087. } -32- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 37 38 of of 50 55 ARTICLE VIII SETTLEMENT, RELEASE, INJUNCTION AND RELATED PROVISIONS A. Compromise and Settlement of Claims, Interests and Controversies. Pursuant to Bankruptcy Code sections 363 and ll23 and Bankruptcy Rule 9019, and in consideration for the distributions and other benefits provided pursuant to the Plan, the provisions of the Plan shall constitute a good faith compromise of all Claims, Interests and controversies relating to the contractual, legal and subordination rights that the Saverin Parties and AH may have against the Debtor with respect to any Allowed Claim or Interest or any distribution to be made on account of such Allowed Claim or Interest and all Claims, Interests and controversies belonging to the Debtor or its Estate including any derivative claims. The entry of the Confirmation Order shall constitute the Bankruptcy Court's approval of the compromise or settlement of all such Claims, Interests and controversies, as well as a finding by the Bankruptcy Court that such compromise or settlement is in the best interests of the Debtor, its Estate and holders, and is fair, equitable and reasonable. In accordance with the provisions of the Plan, pursuant to Bankruptcy Code section 363 and Bankruptcy Rule 9019(a), without any fuither notice to or action, order or approval of the Bankruptcy Court, after the Effective Date, the Liquidating Trust may compromise and settle Claims against the Estate and any Causes of Action against Entities that are Retained Causes of Action. B. Global Settlement. Pursuant to Bankruptcy Code sections 363 and ll23 and Bankruptcy Rule 9019, and in consideration for the distributions and other benefits provided pursuant to the Plan, the provisions of the Plan shall constitute a good faith compromise of the claims and Causes of Action asserted or that could have been asserted by the Debtor andlor the Equity Committee against AH and the Saverin Parties. After extensive negotiations among the Debtor, the Equity Committee, AH and Mr. Saverin, the parties reached a global settlement which provides for sufficient funds to consummate this Plan and allow for the consensual and expedited winddown of the Debtor's estate and distribution to holders of Allowed Claims and Interests (the "Global Settlemenf'). In addition to the terms of the Plan and the Releases contained herein, the terms of the Global Settlement are as follows: a The Equity Committee, AH and Mr. Saverin agree to the treatment of the Claims and Interests as further set forth in the Plan, including, but not limited to, the treatment of the Allowed Saverin Administrative Claim, Allowed DIP Claims, and Allowed Prepetition Secured Notes Claims, Preferred Interests, and Common Interests. On the Effective Date, AH shall contribute $750,000 to the Debtor's Estate. a On the Effective Date, Mr. Saverin shall be deemed to have contributed $750,000 to the Debtor's Estate on account of Mr. Saverin's cash collateral (for avoidance of doubt no additional contribution from Mr. Saverin shall be required hereunder). { 1086.002-w0044087. } -JJ- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 38 39 of of 50 55 a Following the conversion of Preferred Interests into Common Interests, as fuither set forth in Article IV.E of the Plan, AH agrees thaI T5o/o of its Common Interests shall be deemed satisfied. AH's remaining 25o/o of Common Interests and all of Mr. Saverin's Common Interests existing prior to the Effective Date (but excluding any Preferred Interests converted to Common Interests, which shall be deemed waived upon the occuffence of the Effective Date) shall share pari passu with all other Allowed Common Interests. a A1l Liquidating Trust Remaining Assets, including the proceeds of any Retained Cause of Action asserted, brought or settled by the Liquidating Trust shall be distributed as follows: (i) until AH has been fully and indefeasibly paid $375,000, 33 ll3% to AH, 33 ll3% to Mr. Saverin to be applied to the DIP Claims, and 33 113% to the Liquidating Trust to be distributed pursuant to the Plan; (ii) after AH has been fully and indefeasibly paid $375,000 and until the DIP Claims have been fully and indefeasibly paid, 50Yo to Mr. Saverin to be applied to the DIP Claims, and 50o/o to the Liquidating Trust to be distributed pursuant to the Plan; and (iii) after the DIP Claims have been fully and indefeasibly paid, 100% to the Liquidating Trust to be distributed pursuant to the Plan. Distributions of Liquidating Trust Net Distributable Assets shall be distributed: first, to fully and indefeasibly pay the Allowed Prepetition Secured Notes Claims, which shall be distributed to holders of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) that do not opt-out of the Consensual Third Party Releases; second, to fully and indefeasibly pay the Allowed Saverin Administrative Claim, which shall be distributed to holders of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) that do not opt-out of the Consensual Third Party Releases; and third, distributed pro rata to holders of Common Interests (including Preferred Interests converted to Common Interests pursuant to the Plan) and Allowed Subordinated 5 1 0(b) Claims. a The Debtor, the Liquidating Trust, AH, Saverin and the Equity Committee and its members agree that at no time shall any of them make, publish or communicate, or encourage any other person or entity to make, publish or communicate, any Disparaging remarks, comments, or statements concerning the one another or their Affiliates, or any of their respective directors, officers, employees, representatives, agents, or affiliates. "Dispuraging" remarks, comments or statements are those that impugn the character, honesty, integrity, morality, or business acumen, business strategy, or abilities, or reflect negatively tlpon, the inrlividual or entity being disparaged. Nothing in this provision shall be construed to preclude truthful disclosures in response to lawful process as required by applicable law, regUlation, or order or directive or authority of a court, govemmental agency, or regulatory organization. { 1086.002-w0044087.} -34- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 39 40 of of 50 55 a The Liquidating Trust shall not interfere, nor shall it have any input or control over any of Mr. Saverin's or AH's direct claims against any third- party, plevidçd, however, to the extent that AH, Mr. Saverin or the Liquidating Trust anticipates pursuing any derivative or direct claims against any other Entity, such parties agree to discuss in good faith a potential cooperation agreement. o The Debtor shall make good faith efforts to obtain the consent of the insurel for the Debtor's director and officer insurance policy, UV41466319.15 to the Global Settlement and the terms and conditions of the Plan. a The Equity Committee, AH and Mr. Saverin shall take all actions reasonably necessary to support confirmation of the Plan. a The entry of the Confirmation Order shall constitute the Bankruptcy Court's approval and implementation of the Global Settlement, as well as a finding by the Bankruptcy Court that such compromise and settlement is in the best interests of the Debtor, its Estate and stakeholders, and is fair, equitable and reasonable. In the event of any conflict between this Article VIII Section B and any other Provision of the Plan, the Provisions of this Article VIII Section B shall govem and control. C. The Citi Settlement. Pursuant to Bankruptcy Code sections 363 and ll23 and Bankruptcy Rule 9019, and in consideration for the distributions and other benefits provided pursuant to the Plan, the provisions of the Plan shall constitute a good faith compromise of the informal objection raised 6y Citi to confirmation of the Plan and any claims and Causes of Action that Citi has or could *Cítí have asserted against the Debtor or its Estate (the Settlemenf'). In consideration of the foregoing, the Debtor, the Equity Committee, the Saverin Parties, and AH have agteed to provide Citi with mutual releases of all claims and Causes of Action solely related to or in connection with Jumio, Inc., the Debtor, the Chapter 11 Case, or the Plan as further set forth in Article VIII Sections H.1. and I and Article IX Section 4.6. The entry of the Confirmation Order shall constitute the Bankruptcy Court's approval of this compromise and settlement, as well as a finding by the Bankruptcy Court that such compromise and settlement is in the best interests of the Debtor, its Estate and stakeholders, and is fair, equitable and reasonable. D. Binding Effect. The Plan shall be binding upon and inure to the benefit of the Debtor, all prcscnt and former holders of Claims and Interests, and their respective successors and assigns. { 1 086.002-W004408'7 .} -35- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 40 41 of of 50 55 E. Release of Liens. Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document created pursuant to the Plan, on the Effective Date, all mortgages, deeds of trust, Liens, pledges or other security interests against any property of the Estates shall be fully released and discharged, and all of the right, title and interest of any holder of such mortgages, deeds of trust, Liens, pledges or other security interests shall revert to the Liquidating Trustee. F. Liabilities to, and Rights of Governmental Units. Nothing in the Plan or Confirmation Order shall discharge, release, or preclude: (l) any liability to a Governmental Unit that is not a Claim; (2) any Claim of a Govemmental Unit arising on or after the Confirmation Date; (3) any liability to a Governmental Unit on the part of any Entity other than the Debtor or Liquidating Trust; (4) any valid right of setoff or i""o,tp*"nt by a Governmental Unit; or (5) any criminal liability. Nothing in the Plan or Confirmation Order shall enjoin or otherwise bar any Governmental Unit from asserting or enforcing, outside the Bankruptcy Court, any liability described in the preceding sentence. The Plan and Confirmation Order are not intended and shall not be construed to bar any Govemmental Unit from, after the Confirmation Date, pursuing any police or regulatory action. For the avoidance of doubt, notwithstanding anything to the contrary contained in the Disclosure Statement, Plan or Confirmation Order, no provision of the Plan or the Confirmation Order (i) releases any person or entity from any Claim or cause of action of the U.S. Securities and Exchange Commission (the "SEC"); or, (ii) enjoins, limits, impairs or delays the SEC from commencing or continuing any Claims, causes of action, proceedings or investigations against any person or entity in any forum. Further, notwithstanding anything to the contrary contained in the Disclosure Statement, Plan or Confirmation Order, the SEC may amend its Claim No. 48 as necessary and appropriate without the need to seek prior authorizatíon of the Bankruptcy Court or Liquidating Trust. G. Exculpation. None of the Exculpated Persons shall have or incur any liabilify to any holder of a Claim or Interest for any Exculpated Claim, except for actual fraud, willful misconduct or gross negligence, and in all respects, the Exculpated Person shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under the Plan. H. Releases 1. Releøses by the Debtor As of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmedo the Debtor and the Liquidating Trustee, and any Person seeking to exercise the rights of the Debtor's Estate, shall be deemed to forever releaseo { 1086.002-w0044087.} -36- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 41 42 of of 50 55 \ryaive, and discharge the Released Parties and Citi of all claims, obligations suits, judgmentso damages, demands, debts, rights, remedies, Causes of Action and liabilities of any nature whatsoever, whether direct or derivative, includingo without limitation, any of the foregoing in connection with or related to the Debtor, the Chapter 11 Caseo or the Plan, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknowno foreseen or unforeseen, then existing or hereafter arising, in law, equityo or otherwise, that are or may be based in whole or in part upon any act, omission, transactiono event or other occurrence taking place or existing on or prior to the Effective Date. 2. Consensual Thírd Pørty Releases Pursuant to the Global Settlement, as of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, (a) all holders of Claims and (b) all holders of Common Interests and/or Preferred Interests (including any holders of Preferred Interests that convert to Common Interests pursuant to the terms of this Plan) who do not timely exercise their right to opt-out of such release in accordance with the terms of this Plan, shall be deemed to forever release, waive, and discharge the Released Parties of all claims, obligations suits, judgments, damages, demands, debts, rights, remedieso Causes of Action and liabilities of any nature whatsoevero whether direct or derivative, including, without timitation, any of the foregoing in connection with or related to the Debtor, the Chapter LL Case, or the Plano whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseeno then existing or hereafter arising, in law, equity, or otherwiseo that are or may be based in whole or in part upon any act, omissiono transaction, event or other occurrence taking place or existing on or prior to the Effective Date. I. Injunction. Except as otherwise provided in the Plan or the Confirmation Order, as of the Confirmation Date, all Entities that have held, hold or may hold a Claim or other debt or liability against the Debtor or Interest in the Debtor are (a) permanently enjoined from taking any of the following actions against the Liquidating Trust or any of its property on account of such Claims or Interests and (b) permanently enjoined from taking any of the following actions against any of the Released Parties and Citi or their property with respect to any claims, obligations, suits, judgments, damages, demandso debts, rights, remedies, Causes of Action or liabilities released pursuant to the Plan: (i) commencing or continuing in any manner or in any place, any action or other proceeding; (ii) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order; (iii) creating, perfecting or enforcing any lien or encumbrance; (iv) asserting any right of setoff, subrogation or recoupment of any kind against any debt, liability or obligation including, but not limited to, on account of or in connection with or with respect to any Claims or Interests unless such holder has filed a motion requesting the right to perform such setoff on or before the Confïrmation Date; and (c) commencing or continuing in any manner or in any place, any action that does not comply with or is inconsistent with the provision. { l 086.002-v/0044087. } -tl- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 42 43 of of 50 55 J. Term of Iniunctions or StaYs. Unless otherwise provided in the Plan or in the Confirmation Order, all injunctions or stays in effect in the Chapter 11 Case pursuant to Bankruptcy Code section 105 or 362 or any order of the Bankruptcy Court, and existent on the Confirmation Date (excluding any injunctions or stays contained in the Plan or the Confirmation Order), shall remain in full force and effect until the Effective Date. All injunctions or stays contained in the Plan or the Confirmation Order shall remain in full force and effect in accordance with their terms. ARTICLE IX CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN A. Conditions Precedent to the Effective Date. It shall be a condition to the Effective Date of the Plan that the following conditions shall have been satisfied or waived: 1. The Confirmation Order, the Plan, the Disclosure Statement, the Liquidating Trust Agreement, the Plan Supplement documents, and all other document related to the implementation of the Plan, shall have been duly entered and be a Final Order and shall be in form and substance reasonably acceptable to the Debtor, the Equity Committee, AH, and Mr. Saverin. 2. After payment in full of all Administrative Claims, Fee Claims, Priority Tax Claims, Priority Non-Tax Claims, Other Secured Claims, and General Unsecured Claims, the Liquidating Trust Assets shall include at least $200,000 of cash. 3. Buttonwood Alpha QP Fund LLC and Tumer Investment Fund XI, LLC shall not opt-out of the Consensual Third-Party Releases. 4. No more than l5o/o of the shares owned by holders of Common Interests (including Preferred Interests that are converted to Common Interests under this Plan) calculated without regard to shares owned or held by current or former members of the Equity Committee, AH and Mr. Saverin shall opt-out of the Consensual Third-Party Releases. 5. Pinnacle and I37 shall provide releases of all claims, obligations suits, judgments, damages, demands, debts, rights, remedies, Causes of Action and liabilities of any nature whatsoever, whether direct or derivative, including, without limitation, any of the foregoing in connection with or related to the Debtor, the Chapter 11 Case, or the Plan to the Released Parties in form and substance reasonably acceptable to AH and Mr. Saverin in their discretion. 6. The Saverin Parties, AH and Citi shall provide mutual releases of all claims, obligations suits, judgments, damages, demands, debts, rights, remedies, Causes of Action and liabilities of any nature whatsoever, whether direct or derivative, in connection with or related to Jumio, Inc., the Debtor, the Chapter 11 Case, or the Plan to each other in form and substance reasonably acceptable to all such parties in their discretion. { 1086.002-w0044087.} -38- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 43 44 of of 50 55 l. All actions, documents, certificates and agreements necessary to implement this Plan shall have been effected or executed and delivered to the required parties unã, to the extent required, Filed with the applicable Govemmental Units in accordance with applicable laws. B. Waíver of Conditíons. Waiver of the conditions to the Effective Date set forth (i) in Sections IX.A.1 and IX.A.7 shall require the written consent of the Debtor, the Equity Committee, AH, and Mr' Saverin, (ii) in Section IX.A.2 shall require the written consent of the Equity Committee, (iii) in Sections IX.A.3, IX.A.4 and IX.A.5 shall require the written consent of Mr. Saverin and AH and (iv) in Section IX.A.6 shall require the written consent of Mr. Saverin, AH and Citi. No waivers shall require notice, leave or order of the Bankruptcy Court or any formal action other than proceeding to confirm or consummate the Plan. C. Effect of Failure of Conditions. Unless expressly set forth herein, if the Consummation of the Plan does not occur, the Plan shall be null and void in all respects and nothing contained in the Plan or the Disclosure Statement shall: (1) constitute a waiver or release of any Claims by the Debtor, any holders or any other Entity; (2) prejudice in any manner the rights of the Debtor, any holders or any other Entity or (3) constitute an admission, acknowledgment, offer or undertaking by the Debtor, any holder of any Claim or any other Entity in any respect. ARTICLE X MODIFICATION' REVOCATION OR \ilITHDRA\ilAL OF TIIE PLAN A. Modification and Amendments. Except as otherwise specifically provided in the Plan, the Debtor reserves the right to modify the Plan, whether such modification is material or immaterial, and seek Confirmation consistent with the Bankruptcy Code. Subject to certain restrictions and requirements set forth in Bankruptcy Code section 1727 and Bankruptcy Rule 3019 (as well as those restrictions on modifications set forth in the Plan), the Debtor expressly reserves its right to revoke or withdraw, to alter, amend or modify the Plan, one or more times, after Confirmation, and, to the extent necessary, may initiate proceedings in the Bankruptcy Court to so alter, amend or modify the Plan, or remedy any defect or omission or reconcile any inconsistencies in the Plan, the Disclosure Statement or the Confirmation Order, in such matters as may be necessary to carry out the purposes and intent of the Plan. B. Effect of Confirmation on Modifications. Entry of a Confirmation Order shall mean that all modifications or amendments to the Plan since the solicitation thereof are approved pursuant to Bankruptcy Code section II27(a) and do not require additional disclosure or re-solicitation under Bankruptcy Rule 3019. { l 086.002-v/0044087. } -39 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 44 45 of of 50 55 C. Revocation or Withdrawal of Plan' The Debtor reserves the right to revoke or withdraw the Plan before the Confirmation Date and to file a subsequent plan. If the Debtor revokes or withdraws the Plan, or if Confirmation or Consummation does not occur, then: (l) the Plan shall be null and void in all respects; (2) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain of the Claims or Interests or Class of Claims or Interests), assumption or rejection of Executory Contracts or Unexpired Leases effected by the Plan, and any document or agreement executed pursuant to the Plan, shall be deemed null and void and (3) nothing contained in the Plan shall: (a) constitute a waiver or release of any Claim or Interest; (b) prejudice in any manner the rights of the Debtor, the Liquidating Trustee, any holder of a Claim or Interest or any other Entity or (c) constitute an admission, acknowledgement, offer or undertaking of any sort by the Debtor, any holder or any other Entity. ARTICLE XI RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, on and after the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters arising out of, or related to, the Chapter 11 Case and the Plan pursuant to Bankruptcy Code sections 105(a) and 1142, including jurisdiction to: 1. allow, disallow, determine, liquidate, classify, estimate or establish the priority, secured or unsecured status, or amount of any Claim or Interest, including the resolution of any request for pa}rment of any Administrative Claim and the resolution of any and all objections to the secured or unsecured status, priority, amount or allowance of Claims or Interests; 2. decide and resolve all matters related to the granting and denying, in whole or in part, any applications for allowance of compensation or reimbursement of expenses to Professionals (including Fee Claims) authorized pursuant to the Bankruptcy Code or the Plan; 3. resolve any matters related to: (a) the assumption, assumption and assignment or rejection of any Executory Contract or Unexpired Lease to which the Debtor is party or with respect to the Debtor may be liable and to hear, determine and, if necessary, liquidate, any Claims arising therefrom; (b) any potential contractual obligation under any Executory Contract or Unexpired Lease that is assumed; (c) the Debtor amending, modifying or supplementing, after the Effective Date, the Executory Contracts and Unexpired Leases to be assumed or rejected or otherwise; and (d) any dispute regarding whether a contract or lease is or was executory, expired or terminated; 4. ensure that distributions to holders of Allowed Claims and Interests are accomplished pursuant to the provisions of the Plan; 5. adjudicate, decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters, and grant or deny any applications involving the Debtor that may be pending on the Effective Date; { 1086.002-W0044087.} -40- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 45 46 of of 50 55 6. adjudicate, decide or resolve any and all matters related to Bankruptcy Code section 1 141; l. enter and implement such orders as may be necessary or appropriate to execute, implement or consummate the provisions of the Plan and all contracts, instruments, releases, indentures and other agreements or documents created in connection with the Plan, the Plan Supplement or the Disclosure Statement; 8. enter and enforce any order for the sale of property pursuant to Bankruptcy Code sections 363, Il23 or II46(a); 9. resolve any cases, controversies, suits, disputes or Causes of Action thatmay arise in connection with Consummation, including interpretation or enforcement of the Plan or any Entity's obligations incurred in connection with the Plan; 10. issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any Entity with Consummation or enforcement of the Plan; 11. resolve any cases, controversies, suits, disputes or Causes of Action with respect to the releases, injunctions, and enter such orders as may be necessary or appropriate to implement such releases, injunctions and other provisions; 12. resolve any cases, controversies, suits, disputes or Causes of Action with respect to the repayment or return of distributions and the recovery of additional amounts owed by the holder of a Claim or Interests for amounts not timely repaid; 13. enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated; 14. determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement or the Confirmation Order; 15. enter an order or final decree concluding or closing of the Chapter 11 Case; 16. adjudicate any and all disputes arising from or relating to distributions under the Plan; l7. consider any modifications of the Plan, to cure any defect or omission or to reconcile any inconsistency in any Bankruptcy Court order, including the Confirmation Order; 18. determine requests for the payment of Claims entitled to priority pursuant to Bankruptcy Code section 507; 19. hear and determine disputes arising in connection with the interpretation, implementation or enforcement of the Plan or the Confirmation Order, including { l 086.002-w0044087. } -41 - CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 46 47 of of 50 55 disputes arising under agreements, documents or instruments executed in connection with the Plan; 20. hear and determine matters conceming state, local and federal taxes in accordance with Bankruptcy Code sections 346,505 and 1146; 2I. hear and determine all disputes involving the existence, nature, scope or enforcement of any exculpations, discharges, injunctions and releases granted in connection with and under the Plan; and 22. enforce all orders previously entered by the Bankruptcy Court. 23. The Bankruptcy Court shall retain non-exclusive jurisdiction to hear any other matter not inconsistent with the Bankruptcy Code. ARTICLE XII MISCELLANEOUS PROVISIONS A. Immediate Binding Effect Notwithstanding Bankruptcy Rules 3020(e), 6004(h) or 7062 or otherwise, upon the occurrence of the Effective Date, the terms of the Plan and the Plan Supplement shall be immediately effective and enforceable and deemed binding upon the Debtor, the Liquidating Trust and any and all holders of Claims or Interests (irrespective of whether their Claims or Interests are deemed to have accepted the Plan), all Entities that are parties to or are subject to the settlements, compromises, releases, discharges and injunctions described in the Plan, each Entity acquiring property under the Plan and arry and all non-Debtor parties to Executory Contracts and Unexpired Leases with the Debtor. B. Additional Documents On or before the Effective Date, the Debtor may File with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. The Debtor or Liquidating Trust, as applicable, and all holders receiving distributions pursuant to the Plan and all other parties in interest may, from time to time, prepare, execute and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of the Plan. C. Statutory Committee and Cessation of Fee and Expense Payment. On the Effective Date, the Equity Committee shall dissolve and all of its members, Professionals and agents shall be deemed released of their duties, responsibilities and obligations, and shall be without fuither duties, responsibilities and authority in connection with the Debtor, the Chapter 11 Case, the Plan, or its implementation, except with respect to applications for Fee Claims. The Liquidating Trust shall not be responsible for paying any fees or expenses incurred by the Equity Committee before or after the Effective Date. { 1086.002-w0044087. } -42- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 47 48 of of 50 55 D. Reservation of Rights. Except as expressly set forth in the Plan, the Plan shall have no force or effect unless the Bankrup[cy Court enters the Confirmation Order, and the Confirmation Order shall have no force or effect if the Effective Date does not occur. None of the Filing of the Plan, any statement or provision contained in the Plan or the taking of any action by the Debtor, with respect to the Plan, the Disclosure Statement or the Plan Supplement shall be or shall be deemed to te an admission or waiver of any of their respective rights with respect to the holders of Claims and Interests or each other before the Effective Date. E. Successors and Assigns' The rights, benefits and obligations of any Entity named or referred to in the Plan shall be binding on, and shall inure to the benefit of any heir, executor, administrator, successor or assign, if any, of such EntitY. F. Notices. To be effective, all notices, requests and demands to or upon the Liquidating Trust shall be in writing. Unless otherwise expressly provided herein, notice shall be deemed to have been duly given oi made when actually delivered or when received and telephonically confirmed, addressed to the following: Liquidatins Trust: Development Specialists, Inc. Attn: Bradley D. SharP Wells Fargo Center 333 South Grand Avenue, Suite 4070 Los Angeles, CA 90071-1544 Email: [email protected] After the Effective Date, the Liquidating Trustee may, in its sole discretion, notify Entities that, in order to continue to receive documents pursuant to Bankruptcy Rule 2002, such Entity must File a renewed request to receive documents pursuant to Bankruptcy Rule 2002. After the Effective Date, the Liquidating Trustee is authorized to limit the list of Entities receiving documents pursuant to Bankruptcy Rule 2002 to those Entities who have Filed such renewed requests. G. Entire Agreement' Except as otherwise indicated, the Plan and the Plan Supplement supersede all previous and contemporaneous negotiations, promises, covenants, agreements, understandings ãnd representations on such subjects, all of which have become merged and integrated into the P1an. { 1086.002-w0044087. } -43- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 48 49 of of 50 55 H. Exhibits All exhibits and documents included in the Plan Supplement are incorporated into and are a part of the Plan as if set forth in full in the Plan. After the exhibits and documents are Filed, of such exhibits and documents shall be available upon written request to the Debtor's"opi.s counsel at the address above, from the Notice, Claims and Balloting Agent's website at http://www.omnimgt.com/jumio/ or by downloading such exhibits and documents from the Ba-nkruptcy Court's website at http:llwww.deb.uscourts.gov. To the extent any exhibit or document is inconsistent with the terms of the Plan, unless otherwise ordered by the Bankruptcy Court, the non-exhibit or non-document portion of the Plan shall control. I. Severability of Plan Provísions. If, before Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original pu{pose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted, prcvided, he.weys{, that if the releases set forth in Section VIII.G of the Plan are held to be invalid, void or unenforceable in any way, then the Plan shall be withdrawn and not be confirmed, unless the Debtor, AH, and Mr. Saverin agree otherwise in writing; plQvided, further, however, that if either of the releases set forth in Article VIII Sections H.1. and Article IX Section 4.6 of the Plan are held to be invalid, void or unenforceable in any way, then the Plan shall be withdrawn and not be confirmed, unless the Debtor, the Equity Committee, AH, Mr. Saverin, and Citi, as applicable, agree otherwise in writing. Notwithstanding any such holdings, alterations or interpretations, the remainder of the terms and provisions of the Plan will remain in ful| force and effect and will in no way be affected, impaired or invalidated by such holdings, alterations or interpretations. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is: (1) valid and enforceable pursuant to its terms; (2) integral to the Plan and may not be deleted or modified without the Debtor's consent and (3) non-severable and mutually dependent. J. Votes Solicited in Good Faith. Once the Confirmation Order becomes a Final Order, the Debtor and the Equity Committee will be deemed to have solicited votes on the Plan in good faith and in compliance with the Bankruptcy Code, and pursuant to Bankruptcy Code section lI25(e), the Debtor and its agents, representatives, members, principals, shareholders, officers, directors, employees, aãvisors and attorneys will be deemed to have participated in good faith and in compliance with the Bankruptcy Code in the offer, issuance, sale and purchase of Securities offered and sold under the Plan and any previous plan and, therefore, no such parties, individuals or the Debtor will have any liability for the violation of any applicable law, rule or regulation goveming the solicitation of votes on the Plan or the offer, issuance, sale or purchase of the Securities offered and sold under the Plan or any previous plan. { 1086.002-w0044087.} -44- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 49 50 of of 50 55 K. ClosingofChaPter Il Case. The Liquidating Trustee shall promptly after the full administration of the Chapter 11 Case, File with the Bankruptcy Court all documents required by Bankruptcy Rule 3022 and any applicable order necessary to close the Chapter 11 Case that has been fully administered. L. No Admission Against Interest. Neither the filing of the Plan, the Disclosure Statement, nor any statement contained therein, is or shall be deemed an admission against interest. In the event that this Plan is not consummated, neither this Plan, the Disclosure Statement nor any statement contained therein may be used or relied upon in any manner in any suit, action, proceeding or controversy within or outside the Bankruptcy Court involving the Debtor. M. No Waiver. Except as otherwise specifically provide herein, nothing set forth in this Plan or the Disclosure Statement shall be deemed a waiver or release of any claims, rights or Causes of Action against any Person other than the Debtor. N. Headings. The article and section headings used in the Plan are inserted for convenience and reference only and neither constitutes a part of the Plan nor any manner affects the terms, provisions or interpretation of the Plan. O. Governing Law. Except to the extent the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, or to the extent otherwise provided in the Plan, the rights and obligations arising ntrã". the Plan, shall be governed by, and construed and enforced in accordance with the laws ãf Delaware, without giving any effect to the principles of conflicts of law or such jurisdiction. [Remainder of Page Intentionatly Left Blank] { 1086.002-W0044087.} -45- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433 Filed Filed 10/14/16 09/15/17 Page Page 50 51 of of 50 55 P. Conflicts. Except as set forth in the Plan, to the extent that any provisions of the Disclosure Statement, the Plan Supplement or any other order (other than the Confirmation Order) referenced in the Plan (or any exhibits, schedules, appendices, supplements or amendments to any of the foregoing), conflict with or are in any way inconsistent with any provision of the Plan, the Confirmation Order shall govern and control and then the Plan. Dated: October 14,2016 Respectfully Submitted, JMO WIND DOWN, INC. By: /s/ Matthew Foster Matthew Foster Interim Chief Financial Officer By: /s/ Grant Lyon Grant Lyon Independent Director { 1086.002-w0044087 .l 46- CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433-1 Filed Filed 09/15/17 10/14/16 Page Page 52 1 of 255 EXHIBIT A The Winddown Budget { 1086.002-w0044087. } CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433-1 Filed Filed 09/15/17 10/14/16 Page Page 53 2 of 255 JMO Wind Down, lnc. Chapter 11 Budget- DRAFT For period from 5/9/16 to 8/5/16 USD Amount Professional Fees: Landis Rath Cobb $ 175,000 EY 150,000 Rust Omni 30,000 Wilmer Hale 10,000 Total professional Fees $ 365,000 Other Gosts: US Trustee $ 13,000 Jumio representative 25,000 Equity Committee 25,000 Document Preservation Other (D&0 ins, etc.) TBD Total Other Costs $ 6g,0o0 TotalWind-down cost $ 428,000 Notes: (1) Liquidating Trust will need to prepare tax return (2) Assumes Matt Foster, lnterim CFO, with a flat rate of $5,000 per month for 3 months, Grant Lyon, Independent Director, for $10,000 (3) Assumes limited claims discrepancies to be resolved (4) Document Preservation paid out of EC $50k budget (5) Professional Fees are for general case administration, monthly reporting requirements, bar date motion and fìling/soliciting plan (6) Cunent D&O expires 11116i nay need insurance for Matt Foster/Grant Lyon (7) Does not include bank fees related to disbursements/distributions {1086.002-W0043320.} CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433-2 Filed Filed 09/15/17 10/14/16 Page Page 54 1 of 255 EXHIBIT B Preserved Causes of Action { 1086.002-w0044087.} CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-4 433-2 Filed Filed 09/15/17 10/14/16 Page Page 55 2 of 255 EXHIBIT B Without limiting the breadth and generality of Article IV.C of the Plan, this Exhibit sets forth Causes of Action expressly preserved for prosecution by the Liquidating Trust: A. Avoidance Actions against any party not released under the Plan. B. Any Causes of Action against any party not released under the Plan concerning: (a) the accounting/financial reporting issues that necessitated the restatement of the Debtor's financial statements; (b) the secondary sales of the Debtor's stock; (c) the Debtor's former insiders' monetization of their holdings of the Debtor's stock by taking loans collateralized by such stock; andlor (d) damages sustained by the Debtor as a result of such parties actions, failures to act, or other conduct, including the following parties: 1. Daniel Mattes, together with his Insidersr and Affiliates (including without limitation Ampalu Investments Inc. and Ampalu Investment GmbH), and co- conspirators; 2. Thomas Kastenhofer, together with his Insiders and Affiliates, and co- conspirators; 3. Chad Starkey, together with his Insiders and Affiliates, and co-conspirators; 4. Citizen.vc, together with its Insiders and Affiliates, and co-conspirators; 5. Gregor Famira and CMS Reich-Rohrwig Hainz Rechtsanwälte GmbH, together with their Insiders and Affiliates; 6. Any other parties (together with their Insiders and AfÍiliates, and co- conspirators) not released under the Plan; 7. Any party acling in concert with any of the foregoing; and 8. Any Insider or Affiliate of any of the foregoing. C. Any insurer providing coverage for the matters set forth on this Exhibit B, including without limitation Hiscox Insurance Company Inc. I "Insider" shall have the meaning provided in the Bankruptcy Code { 1086.002-w0043464.} Case 16-10682-BLS Doc 585-5 Filed 09/15/17 Page 1 of 47 EXHIBIT 4 The Confirmation Order CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 1 2 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 2 3 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 3 4 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 4 5 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 5 6 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 6 7 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 7 8 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 8 9 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 FiledFiled 10/21/1609/15/17 PagePage 910 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 10 11 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 11 12 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 12 13 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 13 14 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 14 15 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 15 16 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 16 17 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 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10/21/16 09/15/17 Page Page 44 45 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 45 46 of of 46 47 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-5 482 Filed Filed 10/21/16 09/15/17 Page Page 46 47 of of 46 47 Case 16-10682-BLS Doc 585-6 Filed 09/15/17 Page 1 of 79 EXHIBIT 5 The Sale Order CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 1 2 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 2 3 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 3 4 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 4 5 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 5 6 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 6 7 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 7 8 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 8 9 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 FiledFiled 05/06/1609/15/17 PagePage 910 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 10 11 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 11 12 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 12 13 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 13 14 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 14 15 of of 35 79 CaseCase 16-10682-BLS 16-10682-BLS Doc Doc 585-6 202 Filed Filed 05/06/16 09/15/17 Page Page 15 16 of of 35 79 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585-7 Filed 09/15/17 Page 4 of 6 Case 16-10682-BLS Doc 585-7 Filed 09/15/17 Page 5 of 6 Case 16-10682-BLS Doc 585-7 Filed 09/15/17 Page 6 of 6