Exhibit 10.5

 

HUDSON BAY MASTER FUND LTD.

 

June 1, 2012

 

Innovate/Protect, Inc.

380 Madison Avenue, 22nd Floor

New York, New York 10017

 

Ladies and Gentlemen:

 

This letter agreement (this “Agreement”) sets forth the commitment, subject to
the terms and conditions set forth herein, effective upon the closing of the
merger (the “Merger”) of Innovate/Protect Inc. (“Innovate/Protect”) with and
into VIP Merger Sub, Inc., a wholly owned subsidiary of Vringo, Inc. (“Vringo”)
contemplated pursuant to the terms of that certain Merger Agreement (the “Merger
Agreement”), dated as of March 12, 2012, by and among Innovate/Protect, VIP
Merger Sub, Inc. and Vringo, of Hudson Bay Master Fund Ltd. or, at its election,
one or more of its affiliated funds or entities (the “Fund”), at the request of
Innovate/Protect and subject to the terms and conditions contained herein, to
provide debt financing to Innovate/Protect in the aggregate principal amount of
up to $6,000,000.

 

1.                  Commitment. The Fund hereby commits, subject to the terms
and conditions set forth herein, that, at any time within eighteen (18) months
following the closing of the Merger and upon the request of Innovate/Protect, it
shall provide debt financing to Innovate/Protect in the aggregate principal
amount of up to $6,000,000 (the “Facility”) upon the terms contemplated by the
term sheet (the “Term Sheet”) attached hereto as Exhibit A (the “Commitment”).
The Fund’s Commitment hereunder shall be reduced, on a dollar for dollar basis,
by (i) any cash or capital raised by Vringo, Innovate/Protect and/or any of
their subsidiaries (which for purposes of this Agreement means any entity in
which the Vringo and/or Innovate/Protect, directly or indirectly, owns any of
the capital stock or holds an equity or similar interest) (each a “Vringo
Entity” and, together the “Vringo Entities”), including, without limitation,
through the issuance of any debt, equity and/or securities convertible,
exercisable or exchangeable into equity of any of the Vringo Entities or the
incurrence of indebtedness by any of the Vringo Entities and (ii) any cash
received by any Vringo Entity in connection with the exercise of any of its
outstanding warrants.

 

 

 

 

2.                  Conditions; Termination. The Commitment shall be subject to
(a) the consummation of the Merger on the terms and conditions contemplated
thereby without any amendment or modification (unless consented to in writing by
the Fund), (b) at the time of any request to provide the Facility in accordance
with Section 1 above, the satisfaction of each of the conditions set forth in
Section 6.2(f) (Litigation) and 6.2(j) (Patents) of the Merger Agreement, which
shall be deemed incorporated into this Agreement mutatis mutandis, as if the
Fund was the beneficiary of such conditions, (c) at all times after the
consummation of the Merger and prior to the termination of this Agreement,
Vringo using its best efforts to raise capital by issuing equity securities of
Vringo and/or securities convertible, exercisable or exchangeable for equity
securities of Vringo, (d) the execution by Innovate/Protect and the Fund of all
documents necessary for the consummation of the transaction contemplated by the
Commitment on terms and conditions in all respects acceptable and satisfactory
to Innovate/Protect and the Fund, (e) no Vringo Entity shall have, pursuant to
or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, “Bankruptcy Law”), (A)
commenced a voluntary case, (B) consented to the entry of an order for relief
against it in an involuntary case, (C) consented to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D)
made a general assignment for the benefit of its creditors or (E) admitted in
writing that it is generally unable to pay its debts as they become due, (f) a
court of competent jurisdiction not having entered an order or decree under any
Bankruptcy Law that (A) is for relief against any Vringo Entity in an
involuntary case, (B) appoints a Custodian of any Vringo Entity or (C) orders
the liquidation of any Vringo Entity, (g) from and after the date hereof , there
shall not have occurred a material adverse change or material adverse
development in the business, assets, properties, operations, condition
(financial or otherwise), results of operations or prospects of any of the
Vringo Entities, and (h) no Vringo Entity shall be, prior to the consummation of
the transactions contemplated by the Facility, or after giving effect to the
consummation of the transactions contemplated by the Facility, Insolvent. As
used herein, “Insolvent” means, with respect to any person or entity (“Person”),
(i) the present fair saleable value of such Person’s assets is less than the
amount required to pay such Person’s total indebtedness), (ii) such Person is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, (iii) such Person
intends to incur or believes that it will incur debts that would be beyond its
ability to pay as such debts mature or (iv) such Person has unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted. The obligations of
the Fund under or in connection with this Agreement will terminate automatically
and immediately upon the earlier to occur of (a) the termination of the Merger
Agreement pursuant to its terms, (b) any default under or acceleration prior to
maturity of any indebtedness of any Vringo Entity, (c) the failure of any Vringo
Entity to satisfy any of the conditions set forth above, (d) any event, which,
if occurring prior to the closing of the Merger, would have resulted in the
failure of the conditions set forth in Section 6.2(f) (Litigation) and 6.2(j)
(Patents) of the Merger Agreement to be satisfied, (e) upon written notice to
terminate this Agreement delivered by Innovate/Protect to the Fund or (f)
eighteen months after the consummation of the Merger. 

 

3.                  Representations and Warranties. The Fund hereby represents
and warrants to Innovate/Protect that (a) it has all limited partnership,
corporate or other organizational power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement by it has been duly and validly authorized and approved by all
necessary limited partnership action by it, and no other proceedings or actions
on the part of the Fund are necessary therefor, and (c) this Agreement has been
duly and validly executed and delivered by it and constitutes a valid and
legally binding obligation of it, enforceable against it in accordance with the
terms of this Agreement, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors’ rights generally.

 

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4.                  Indemnification. In consideration of the Fund’s execution
and delivery of this Agreement, each of the Vringo Entities hereby agree to
jointly and severally defend, protect, indemnify and hold harmless the Fund and
each of their stockholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing Persons’ agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements, incurred by any
Indemnitee as a result of, or arising out of, or relating to any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of any of
the Vringo Entities) arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement.

 

5.                  Governing Law; Jurisdiction; Venue; Waiver of Jury Trial.

 

(a)                This Agreement shall be governed by and construed and
enforced in accordance with the domestic substantive laws of the State of New
York, without giving effect to any choice or conflict of law provision or rule
that would cause the application of the laws of any other jurisdiction.

 

(b)               All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in the United States District Court
located in the Southern District of New York or if such action or proceeding may
not be brought in federal court, the state courts of the State of New York
located in the Borough of Manhattan and the parties hereto hereby irrevocably
submit to the exclusive jurisdiction of such courts in any such action or
proceeding and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such action or proceeding.

 

(c)                EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES HERETO
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

6.                  Counterparts. This Agreement may be executed in any number
of counterparts (including by facsimile or by .pdf delivered via email), each
such counterpart when executed being deemed to be an original instrument, and
all such counterparts shall together constitute one and the same agreement.

 

7.                  No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Indemnitee shall have the right to
enforce the obligations of the Vringo Entities with respect to Section 3.

 

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8.                  Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the parties hereto, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein and
therein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein. No provision of this Agreement may be amended other than by an
instrument in writing signed by the parties hereto.

 

9.                  Successors and Assigns. Except in connection with the
Merger, Innovate/Protect shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Fund, including
by way of any change of control. The Fund may assign some or all of its rights
hereunder to one or more affiliates of the Fund without the consent of
Innovate/Protect.

 

10.              Expenses. Notwithstanding the non-binding nature of the Term
Sheet, the Company hereby covenants and agrees to comply with the terms of the
section entitled “Expenses” in the Term Sheet and to promptly satisfy all
obligations contemplated therein, provided that the reimbursement of expenses
relating to this Agreement shall not exceed $10,000.

 

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Sincerely,

 

HUDSON BAY MASTER FUND LTD.

 

 

By: HUDSON BAY CAPITAL MANAGEMENT, L.P., its investment manager

 

 

By: /s/ Yoav Roth

Name: Yoav Roth

Title: Authorized Signatory

 

Agreed to and accepted:

 

INNOVATE/PROTECT, INC.

 

 

By: /s/ Alexander R. Berger

Name: Alexander R. Berger
Title: Chief Operating Officer

 

 

 

 

SIGNATURE PAGE TO DEBT COMMITMENT LETTER