Document:

EX-10.5

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 Exhibit
10.5 
 THIS IS NOT A SOLICITATION OF VOTES ON THE PLAN. VOTES MAY NOT BE SOLICITED UNTIL THE BANKRUPTCY COURT HAS APPROVED A DISCLOSURE STATEMENT.
THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT. THE INFORMATION IN THIS DISCLOSURE STATEMENT IS SUBJECT TO CHANGE. THIS DISCLOSURE STATEMENT IS NOT AN OFFER TO SELL ANY SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY ANY SECURITIES. 
 IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE DISTRICT OF DELAWARE 
  

					
	In re:	 	 	  	Chapter 11
		 	 	  	
	WAVE SYSTEMS CORP.,	 	 	  	Case No. 16-10284 (KJC)
		 	 	  	
	 Debtor.
	 	 	  	
		 	 	  	
		 	 	  	

  

DISCLOSURE STATEMENT FOR THE 

PLAN OF REORGANIZATION OF WAVE SYSTEMS CORP. 
  

 
 Alan M. Root (No. 5427) 

ARCHER & GREINER, P.C. 
 300 Delaware Avenue, Suite 1100

 Wilmington, DE 19801 
 Telephone (302) 777-4350 

Email aroot@archerlaw.com 
 - and - 

Stephen M. Packman 
 ARCHER & GREINER, P.C 

1650 Market Street , 32nd Floor 
 Philadelphia, PA 19103-7393 

Telephone: (215) 963-3300 
 E-mail:
spackman@archerlaw.com 
 Counsel to the Chapter 11 Trustee 

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 DISCLAIMERS 

This Disclosure Statement provides information regarding the Plan of Reorganization of Wave Systems Corp. that the Chapter 11 Trustee is
seeking to have confirmed by the Bankruptcy Court. The information contained in this Disclosure Statement is included for purposes of soliciting acceptances to, and confirmation of, the Plan and may not be relied on for any other purpose. Approval
of this Disclosure Statement does not constitute a determination or recommendation by the Bankruptcy Court as to the fairness or the merits of the Plan. 

This Disclosure Statement contains summaries of certain provisions of the Plan, certain statutory provisions, certain documents relating to
the Plan, and certain financial information. Although the Chapter 11 Trustee believes that these summaries are fair and accurate and provide adequate information with respect to the documents summarized, such summaries are qualified to the extent
that they do not set forth the entire text of, or are inconsistent with, such documents. 
 Although the Chapter 11 Trustee has made
every effort to be accurate, the financial information contained herein has not been the subject of an audit or other review by an accounting firm. In the event of any conflict, inconsistency, or discrepancy between the terms and provisions in the
Plan, this Disclosure Statement, the exhibits annexed to this Disclosure Statement, or the financial information incorporated herein or therein by reference, the Plan shall govern for all purposes. All holders of claims should read this disclosure
statement and the Plan in their entirety before voting on the Plan. 
 The statements and financial information contained herein have
been made as of the date hereof unless otherwise specified. Holders of claims and equity interests reviewing this Disclosure Statement should not infer at the time of such review that there have been no changes in the facts set forth herein.
Although the Chapter 11 Trustee has made an effort to disclose where changes in present circumstances could reasonably be expected to affect materially the recovery under the Plan, this Disclosure Statement is qualified to the extent certain events
do occur. 
 IRS Circular 230 Notice: To ensure compliance with IRS Circular 230, holders of claims and equity interests are
hereby notified that: (a) any discussion of U.S. federal tax issues contained or referred to in this Disclosure Statement is not intended or written to be used, and cannot be used, by holders of claims or equity interests for the purpose of
avoiding penalties that may be imposed on them under the Internal Revenue Code; (b) such discussion is written in connection with the promotion or marketing by the Plan proponents of the transactions or matters addressed herein; and
(c) holders of claims and equity interests should seek advice based on their particular circumstances from an independent tax advisor. 

This Disclosure Statement has been prepared in accordance with Section 1125 of the Bankruptcy Code and not necessarily in accordance
with Federal or State securities laws or other non-bankruptcy law. This Disclosure Statement has not been approved or disapproved by the securities and exchange commission (the “SEC”) or any Federal, State,

  
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local or foreign regulatory agency, nor has the SEC or any other such agency passed upon the accuracy or adequacy of the statements contained in this Disclosure Statement. Persons or entities
holding or trading in, or otherwise purchasing, selling, or transferring, securities of or claims against the Debtor should evaluate this Disclosure Statement and the Plan in light of the purpose for which they were prepared. 

The Chapter 11 Trustee makes statements in this Disclosure Statement that are considered forward-looking statements under the Federal
securities laws. Statements concerning these and other matters are not guarantees of the Debtor’s future performance. Such forward-looking statements represent the Chapter 11 Trustee’s estimates and assumptions only as of the date such
statements were made and involve known and unknown risks, uncertainties, and other unknown factors that could impact the Chapter 11 Trustee’s restructuring plans or cause the actual results of the Debtor’s business to be materially
different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements
labeled with the terms “believes,” “belief,” “expects,” “intends,” “anticipates,” “plans,” or similar terms to be uncertain and forward-looking. There can be no assurance that the
restructuring transaction described herein will be consummated. Creditors and other interested parties should see the section of this Disclosure Statement entitled “Risk Factors” for a discussion of certain factors that may affect the
future financial performance of the Reorganized Debtor. 

  
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 TABLE OF CONTENTS 

 

											
	 	 	 	 	 	 	 	  	Page(s)	 
	 I.
	 	 INTRODUCTION
	  	 	1	  
				
		 	 A.
	 	 Overview of the Plan
	  	 	1	  
					
		 		 	 1.
	 	 General Structure of the Plan
	  	 	1	  
					
		 		 	 2.
	 	 Material Terms of the Plan
	  	 	3	  
					
		 		 	 3.
	 	 Summary of Treatment of Claims and Equity Interests Under the Plan
	  	 	5	  
				
		 	 B.
	 	 Plan Voting Instructions and Procedures
	  	 	6	  
					
		 		 	 1.
	 	 Voting Rights
	  	 	6	  
					
		 		 	 2.
	 	 Solicitation Materials
	  	 	7	  
					
		 		 	 3.
	 	 Voting Instructions
	  	 	8	  
					
		 		 	 4.
	 	 Confirmation Hearing and Deadline for Objections to Confirmation
	  	 	10	  
			
	 II.
	 	 GENERAL INFORMATION ABOUT THE DEBTOR
	  	 	11	  
				
		 	 A.
	 	 Background
	  	 	11	  
				
		 	 B.
	 	 Non-Debtor Affiliates
	  	 	11	  
				
		 	 C.
	 	 Prepetition Capital Structure
	  	 	12	  
					
		 		 	 1.
	 	 Secured Debt
	  	 	12	  
					
		 		 	 2.
	 	 Unsecured Debt
	  	 	12	  
					
		 		 	 3.
	 	 Equity Interests
	  	 	12	  
				
		 	 D.
	 	 SEC Filings
	  	 	13	  
			
	 III.
	 	 THE DEBTOR’S BANKRUPTCY CASE
	  	 	13	  
				
		 	 A.
	 	 Commencement of a Chapter 7 Case
	  	 	13	  
				
		 	 B.
	 	 Bid Procedures and Auction Process
	  	 	13	  
				
		 	 C.
	 	 Conversion to Chapter 11 and Appointment of Chapter 11 Trustee
	  	 	14	  
				
		 	 D.
	 	 The ESW Post-Petition Financing
	  	 	15	  
				
		 	 E.
	 	 Schedules, Statements of Financial Affairs and Claims Bar Dates
	  	 	15	  
				
		 	 F.
	 	 Additional Orders
	  	 	16	  
			
	 IV.
	 	 SUMMARY OF THE CHAPTER 11 PLAN
	  	 	17	  
				
		 	 A.
	 	 Treatment of Unclassified Claims
	  	 	17	  
					
		 		 	 1.
	 	 Administrative Claims
	  	 	17	  
					
		 		 	 2.
	 	 Bar Date For Administrative Claims
	  	 	19	  
					
		 		 	 3.
	 	 Allowed Priority Tax Claims
	  	 	21	  

  
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		 	 B.
	 	 Classification and Treatment of Claims and Equity Interests
	  	 	21	  
					
		 		 	 1.
	 	 Class 1: Secured Claims
	  	 	21	  
					
		 		 	 2.
	 	 Class 2: Priority Unsecured Non-Tax Claims
	  	 	22	  
					
		 		 	 3.
	 	 Class 3: General Unsecured Claims
	  	 	22	  
					
		 		 	 4.
	 	 Class 4: Intercompany Claims
	  	 	22	  
					
		 		 	 5.
	 	 Class 5: Equity Interests
	  	 	23	  
				
		 	 C.
	 	 Acceptance or Rejection of the Plan
	  	 	23	  
					
		 		 	 1.
	 	 Impaired Classes Entitled to Vote
	  	 	23	  
					
		 		 	 2.
	 	 Acceptance by Class 3 and Class 4
	  	 	23	  
					
		 		 	 3.
	 	 Presumed Acceptances by Unimpaired Classes
	  	 	24	  
					
		 		 	 4.
	 	 Impaired Class deemed to Reject
	  	 	24	  
				
		 	 D.
	 	 Means for Implementation of the Plan
	  	 	24	  
					
		 		 	 1.
	 	 Continued Corporate Existence
	  	 	24	  
					
		 		 	 2.
	 	 Management and Board of Directors
	  	 	24	  
					
		 		 	 3.
	 	 Arrangements with the Distribution Trustee
	  	 	24	  
					
		 		 	 4.
	 	 The Closing
	  	 	25	  
					
		 		 	 5.
	 	 Tax Treatment of the Distribution Trust
	  	 	27	  
					
		 		 	 6.
	 	 Right to Enforce, Compromise, or Adjust Distribution Trust Assets
	  	 	27	  
					
		 		 	 7.
	 	 Preservation of Rights of Action
	  	 	28	  
					
		 		 	 8.
	 	 Vesting of Property in Reorganized Debtor
	  	 	28	  
					
		 		 	 9.
	 	 Tax Exemption
	  	 	28	  
				
		 	 E.
	 	 Treatment of Executory Contracts and Unexpired Leases
	  	 	29	  
					
		 		 	 1.
	 	 Assumption of Executory Contracts
	  	 	29	  
					
		 		 	 2.
	 	 Rejection of Executory Contracts
	  	 	29	  
					
		 		 	 3.
	 	 Procedures Related to Assumption of Executory Contracts
	  	 	30	  
					
		 		 	 4.
	 	 Rejection Claim Bar Date
	  	 	32	  
					
		 		 	 5.
	 	 Indemnification Obligations
	  	 	32	  
					
		 		 	 6.
	 	 Federal Government Rights
	  	 	32	  
				
		 	 F.
	 	 Provisions Governing Distributions of Property
	  	 	32	  
					
		 		 	 1.
	 	 Distributions Procedures Regarding Allowed Claims
	  	 	32	  
					
		 		 	 2.
	 	 Procedures Regarding Distributions from the Distribution Trust
	  	 	34	  

  
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		 	 G.
	 	 Procedures for Resolution of Disputed Claims
	  	 	34	  
					
		 		 	 1.
	 	 Right to Object to Claims
	  	 	34	  
					
		 		 	 2.
	 	 Deadline for Objecting to Claims
	  	 	35	  
					
		 		 	 3.
	 	 Deadline for Responding to Claim Objections
	  	 	35	  
					
		 		 	 4.
	 	 Right to Request Estimation of Claims
	  	 	35	  
				
		 	 H.
	 	 Injunctions, Releases, and Discharge
	  	 	35	  
					
		 		 	 1.
	 	 Discharge and Release
	  	 	35	  
					
		 		 	 2.
	 	 Discharge Injunction
	  	 	36	  
					
		 		 	 3.
	 	 Exculpation and Limitation of Liability
	  	 	36	  
					
		 		 	 4.
	 	 Releases by the Debtor
	  	 	37	  
					
		 		 	 5.
	 	 Releases by Third Party
	  	 	37	  
				
		 	 I.
	 	 Conditions to Confirmation and Effectiveness
	  	 	39	  
					
		 		 	 1.
	 	 Conditions to Confirmation
	  	 	39	  
					
		 		 	 2.
	 	 Conditions to Effectiveness
	  	 	39	  
				
		 	 J.
	 	 Modification, Revocation or Withdrawal of the Plan
	  	 	39	  
					
		 		 	 1.
	 	 Defects, Omissions, and Amendments of the Plan
	  	 	39	  
					
		 		 	 2.
	 	 Withdrawal of the Plan
	  	 	39	  
				
		 	 K.
	 	 Retention of Jurisdiction
	  	 	40	  
					
		 		 	 1.
	 	 Bankruptcy Court Jurisdiction
	  	 	40	  
					
		 		 	 2.
	 	 Limitations on Jurisdiction
	  	 	41	  
			
	 V.
	 	 POST-EFFECTIVE DATE OPERATIONAL/FINANCIAL INFORMATION
	  	 	42	  
			
	 VI.
	 	 RISK FACTORS
	  	 	42	  
				
		 	 A.
	 	 Risks Related to Bankruptcy
	  	 	42	  
					
		 		 	 1.
	 	 Parties May Object to the Plan’s Classification of Claims and Equity Interests
	  	 	42	  
					
		 		 	 2.
	 	 The Chapter 11 Trustee May Not Be Able to Obtain Confirmation of the Plan
	  	 	42	  
					
		 		 	 3.
	 	 The Conditions Precedent to the Effective Date of the Plan May Not Occur
	  	 	43	  
					
		 		 	 4.
	 	 Risks Associated with Proving and Collecting Claims Asserted in Litigation
	  	 	43	  
					
		 		 	 5.
	 	 Allowed Claims May Substantially Exceed Estimates
	  	 	43	  
				
		 	 B.
	 	 Risks Related to Financial Information
	  	 	43	  

  
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	 VII.
	 	 CONFIRMATION OF THE PLAN
	  	 	44	  
				
		 	 A.
	 	 The Confirmation Hearing
	  	 	44	  
				
		 	 B.
	 	 Requirements for Confirmation of the Plan
	  	 	44	  
				
		 	 C.
	 	 Best Interests of Creditors / Liquidation Analysis
	  	 	45	  
				
		 	 D.
	 	 Feasibility
	  	 	46	  
				
		 	 E.
	 	 Acceptance by Impaired Classes
	  	 	46	  
				
		 	 F.
	 	 Confirmation Without Acceptance by All Impaired Classes
	  	 	47	  
					
		 		 	 1.
	 	 No Unfair Discrimination
	  	 	47	  
					
		 		 	 2.
	 	 Fair and Equitable Test
	  	 	47	  
			
	 VIII.
	 	 TAX CONSEQUENCES OF THE PLAN
	  	 	48	  
			
	 IX.
	 	 CERTAIN SECURITIES LAW MATTERS
	  	 	48	  
				
		 	 A.
	 	 In General
	  	 	48	  
				
		 	 B.
	 	 Distribution Trust Related Matters
	  	 	48	  
					
		 		 	 1.
	 	 Initial Issuance of Beneficial Interests
	  	 	48	  
					
		 		 	 2.
	 	 Resales
	  	 	49	  
					
		 		 	 3.
	 	 Exchange Act Compliance
	  	 	49	  
					
		 		 	 4.
	 	 Compliance if Required
	  	 	50	  
			
	 X.
	 	 RECOMMENDATION
	  	 	51	  

  
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 EXHIBITS 

 

			
	 EXHIBIT A
	  	 Plan of Reorganization

		
	 EXHIBIT B
	  	 Liquidation Analysis

  

THE CHAPTER 11 TRUSTEE HEREBY ADOPTS AND INCORPORATE EACH 

EXHIBIT ATTACHED TO THIS DISCLOSURE STATEMENT 

BY REFERENCE AS THOUGH FULLY SET FORTH HEREIN 

  
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	I.	INTRODUCTION 

 David W. Carickhoff, the chapter 11 trustee (in such capacity, the
“Chapter 11 Trustee”) of the estate (the “Estate”) of Wave Systems Corp. (the “Debtor”) and ESW Capital, LLC (“ESW” or the “Plan Sponsor”) hereby submit this
disclosure statement (the “Disclosure Statement”) pursuant to sections 1125 and 1126(b) of Title 11 of the United States Code (the “Bankruptcy Code”), in connection with the solicitation of votes on the Plan of
Reorganization of Wave Systems Corp., dated June 17, 2016 (as amended, supplemented or otherwise modified from time to time pursuant to its terms, the “Plan”). A copy of the Plan is attached hereto as Exhibit
A.1 
 The purpose of this Disclosure Statement is to enable Creditors whose
Claims are Impaired under the Plan and who are entitled to vote to make an informed decision in exercising their right to accept or reject the Plan. This Disclosure Statement sets forth certain information regarding the Debtor’s prepetition
operating and financial history, its reasons for seeking protection under the Bankruptcy Code and the anticipated organization, operations, and financing of the Debtor upon its successful emergence from bankruptcy protection. This Disclosure
Statement also describes certain terms and provisions of the Plan, certain effects of confirmation of the Plan, certain risk factors associated with the Plan, the business of the Debtor or Reorganized Debtor, and the securities that may be issued
under the Plan, including the issuance of New Equity to ESW, as the Plan Sponsor, and the manner in which Distributions will be made under the Plan. In addition, this Disclosure Statement discusses the confirmation process and the voting procedures
that holders of Claims entitled to vote under the Plan must follow for their votes to be counted. 
  

	 	A.	Overview of the Plan 

  

	 	1.	General Structure of the Plan 

 Generally, the Plan provides for the reorganization of
the Debtor by retiring, cancelling, extinguishing and/or discharging the Debtor’s existing Equity Interests and issuing New Equity in the Reorganized Debtor to ESW, as the Plan Sponsor and, to the extent it exercises the Subscription Option, to
ESW, as the Post-Petition Lender. ESW is an entity unaffiliated with the Debtor. In exchange, ESW, as the Plan Sponsor, has agreed to provide Cash Consideration in the amount of $6.875 million which, along with certain litigation recoveries (if any)
will ultimately be distributed holders of Allowed Claims and, potentially, Equity Interests in accordance with the priority scheme established by the Bankruptcy Code. It is anticipated that holders of allowed administrative and priority claims will
be paid in full under the Plan. Depending on the final reconciled pool of unsecured claims, it is currently anticipated that holders of allowed general unsecured claims and intercompany claims (if any) will receive a distribution of between 66% and
100% of their allowed claims. Finally, and again, depending on the final reconciled pool of unsecured claims, holders of equity interests in the Debtor may receive a recovery under the Plan. 

 
  

	1 	Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. The summary of the Plan provided herein is qualified in its entirety by reference to the Plan. In the case of any
inconsistency between the summary herein and the Plan, the Plan shall govern. 

  
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 In order to fund the Debtor’s chapter 11 Plan process, ESW as the Post-Petition Lender,
has loaned funds to the Debtor’s Estate. The claims of ESW, as the Post-Petition Lender on account of amounts loaned to the Estate after the bankruptcy filing will not be satisfied from the Cash Consideration of $6.875 million, but
rather from another source (i.e. the Financial Consideration). In addition, the Plan provides that certain budgeted administrative expenses associated with operating the Debtor and running the chapter 11 process (i.e Ordinary Course
Liabilities) will be satisfied from sources other than the Cash Consideration of $6.875 million. 
 The Cash Consideration of $6.875 million
will be used to satisfy in full all Allowed Administrative Claims (other than Ordinary Course Liabilities, to the extent payable through the Approved Budget, and the Post-Petition Lender Financing Claim, to be satisfied by the Financial
Consideration), Allowed Secured Claims, Allowed Priority Tax Claims and Allowed Priority Unsecured Non-Tax Claims, consistent with section 1129 of the Bankruptcy Code. 

The Plan also provides that holders of Allowed General Unsecured Claims and Allowed Intercompany Claims (i.e. claims held by the Debtor’s
current or former non-debtor affiliates) will receive their pro rata share of (i) the remaining Cash Consideration after payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, and Allowed Priority
Unsecured Non-Tax Claims, and (ii) the Beneficial Interest in the Distribution Trust in accordance with the Distribution Trust Agreement. As set forth more fully below, it is currently estimated that Holders of Allowed General Unsecured Claims
and Allowed Intercompany Claims may receive payment in full, provided however, that no payment will be made on account of any post-petition interest with respect to any Allowed General Unsecured Claims or Allowed Intercompany Claims. 

Finally, the Plan provides that Interest Holders will receive their pro rata share of (i) the remaining Cash Consideration after payment
of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, Allowed Priority Unsecured Non-Tax Claims, Allowed General Unsecured Claims, and Allowed Intercompany Claims and (ii) the Beneficial Interest in the
Distribution Trust in accordance with the Distribution Trust Agreement, following payment in full of all Allowed General Unsecured Claims and Allowed Intercompany Claims. As set forth more fully below, depending on the size of the final reconciled
unsecured claims pool (which must be satisfied in full first), holders of Equity Interests as of the Voting Record Date may receive a distribution on account of such Equity Interests. However, because it is uncertain whether holders of
Equity Interests may receive a distribution under the Plan, the class of Equity Interests are deemed to reject the Plan and are not entitled to vote thereon. 

THE CHAPTER 11 TRUSTEE AND ESW, AS THE PLAN SPONSOR, BELIEVE THAT THE PLAN IS FAIR AND EQUITABLE, WILL MAXIMIZE THE VALUE TO THE ESTATE, IS
IN THE BEST INTERESTS OF THE ESTATE AND ITS STAKEHOLDERS, AND WILL ENABLE THE DEBTOR TO SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11. 

FOR THESE REASONS, THE CHAPTER 11 TRUSTEE URGES HOLDERS OF CLAIMS WHO ARE ENTITLED TO VOTE TO TIMELY RETURN THEIR BALLOTS AND TO VOTE TO
ACCEPT THE PLAN. 

  
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	 	2.	Material Terms of the Plan 

 The following is an overview of certain material terms of
the Plan: 
  

	 	•	 	The Debtor will be reorganized pursuant to the Plan and continue in operation following the Effective Date of the Plan. In exchange for payment of the Cash Consideration of $6.875 million, ESW, as the Plan Sponsor, will
receive New Equity of the Reorganized Debtor. Further, to the extent ESW, as the Post-Petition Lender, exercises the Subscription Option, ESW, as the Post-Petition Lender, will also receive New Equity of the Reorganized Debtor. 

 

	 	•	 	Except with regards to the Ordinary Course Liabilities and the Allowed Post-Petition Lender Financing Claim which will be satisfied as described below, all Allowed Administrative Claims, Allowed Secured Claims, Allowed
Priority Tax Claims, Allowed Priority Unsecured Non-Tax Claims, will be paid in full from the Cash Consideration of $6.875 million or otherwise satisfied in full as required by the Bankruptcy Code, unless otherwise agreed to by the Chapter 11
Trustee and the holders of such Claims. For the avoidance of doubt, it is contemplated that Professional Fee Claims which are provided for under the Budget shall be paid from Post-Petition Financing, not from the Cash Consideration. Non-Budgeted
Professional Fee Claims include any Chapter 7 or 11 Trustee Fee requests for compensation and any request for compensation filed by GrowthPoint Technology Partners, LLC in connection with the transactions contemplated hereunder, which claims, if and
when Allowed, shall be paid in full from the Cash Consideration. 

  

	 	•	 	On the Effective Date, the Post-Petition Lender Financing Claim will be Allowed in full. The Allowed Post-Petition Lender Financing Claim shall be satisfied solely as follows: (i) pursuant to the Subscription
Option, ESW, as the Post-Petition Lender, shall have the option, on account of being the holder of the Allowed Post-Petition Lender Financing Claim, to exchange a total of up to $1,800,000 in satisfaction of such amount of its Allowed Claim for up
to a total of 600 shares, equal to 60 percent, of the issued New Equity, at a rate of $3,000 of its Allowed Post-Petition Lender Financing Claim for one (1) share of New Equity, and (ii) ESW, as the Post-Petition Lender, on account of
being the holder of the Allowed Post-Petition Lender Financing Claim, shall receive, from the Financing Consideration (which shall be funded by ESW, as the Post-Petition Lender), payment in Cash of the remaining amount of the Allowed Post-Petition
Lender Financing Claim after ESW, as the Post-Petition Lender, has exercised the Subscription Option to receive its share of the New Equity.2 For the avoidance of 

 

	2 	The Plan Sponsor reserves the right to modify the Subscription Option, provided that (i) no such modification shall adversely the Plan treatment of any other creditor and (ii) such modification is approved by
ESW, as the Post-Petition Lender. 

  
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doubt, no portion of the Allowed Post-Petition Lender Financing Claim shall be paid from the Cash Consideration, and shall instead be satisfied pursuant to the Subscription Option or from the
Financing Consideration. On the Effective Date, all liens and interests granted in exchange for or in connection with the Post-Petition Note and/or under the Post-Petition Financing Order shall be deemed discharged, cancelled, and released and shall
be of no further force and effect and neither the Estate nor the Distribution Trust (as applicable) shall have any obligation to repay the Allowed Post-Petition Lender Financing Claim from the Cash Consideration. The Financing Consideration payable
by ESW, as the Plan Sponsor, under the Plan shall be increased to account for any Cash payment to ESW, the Post-Petition Lender, on account of the Allowed Post-Petition Lender Financing Claim, such that the Plan Consideration provided to the Estate
net of all Cash payments to ESW, the Post-Petition Lender, on account of its Allowed Post-Petition Lender Financing Claim shall be $6,875,000. In any scenario, as of the Effective Date, ESW will own 100% of the New Equity of the Reorganized Debtor,
in its capacity as the Plan Sponsor, and possibly in its capacity as the Post-Petition Lender. 

  

	 	•	 	The Chapter 11 Trustee shall continue to pay each Ordinary Course Liability, accrued prior to the Effective Date, pursuant to the payment terms and conditions of the particular transaction giving rise to the Ordinary
Course Liability, and the Approved Budget. The Reorganized Debtor shall continue to pay each Ordinary Course Liability accrued after the Effective Date, pursuant to the payment terms and conditions of the particular transaction giving rise to the
Ordinary Course Liability. 

  

	 	•	 	Each holder of an Allowed General Unsecured Claim and an Allowed Intercompany Claim shall receive, on account of and in full and complete settlement, release and discharge of, and in exchange for its Allowed General
Unsecured Claim or Allowed Intercompany Claim, as applicable, its Pro Rata Share of (i) the remaining Cash Consideration after payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, and Allowed Priority
Unsecured Non-Tax Claims, and (ii) the Beneficial Interest in the Distribution Trust in accordance with the Distribution Trust Agreement. In no event shall any holder of an Allowed General Unsecured Claim or Allowed Intercompany Claim receive a
distribution in an amount in excess of the principal amount of the respective holder’s Allowed General Unsecured Claim or Allowed Intercompany Claim, as applicable. Holders of Allowed General Unsecured Claims and Allowed Intercompany Claims
shall not receive any Distribution on account of any postpetition interest. 

  

	 	•	 	 Each holder of an Allowed Equity Interest shall receive, on account of and in full and complete release and
discharge of, and in exchange for its Allowed Equity Interests, its Pro Rata Share of (i) remaining Cash Consideration after payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, Allowed Priority
Unsecured Non-Tax Claims, Allowed General Unsecured Claims, and Allowed Intercompany Claims and (ii) the Beneficial 

  
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Interest in the Distribution Trust in accordance with the Distribution Trust Agreement. Only those holders of Equity Interests as of the Voting Record Date shall be entitled to a distribution

  

	 	•	 	All existing Equity Interests shall be deemed automatically cancelled, released, and extinguished without further action by the Chapter 11 Trustee or the Reorganized Debtor. 

 

	 	3.	Summary of Treatment of Claims and Equity Interests Under the Plan 

 The table below
summarizes the classification and treatment of the Claims and Equity Interests under the Plan. 
 THE PROJECTED RECOVERIES SET FORTH IN
THE TABLE BELOW ARE ESTIMATES ONLY AND THEREFORE ARE SUBJECT TO CHANGE. FOR A COMPLETE DESCRIPTION OF THE CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS, REFERENCE SHOULD BE MADE TO THE ENTIRE PLAN. 

 

									
	 Class
	  	 Claim or Equity

Interest
	  	 Summary of Treatment
	  	 Estimated Aggregate

Amount of Claims3
	  	 Projected

Recovery Under

Plan

	1	  	Secured Claims	  	Unimpaired; Deemed to Accept Plan	  	$0 - $110,0004	  	100%
	2	  	Priority Unsecured Non- Tax Claims	  	Unimpaired; Deemed to Accept Plan	  	$491,000- $800,000	  	100%
	3	  	General Unsecured Claims	  	Impaired; Entitled to Vote on Plan	  	$2.5 million - undetermined	  	66%-100% (but in all events exclusive of any post-petition interest)
	4	  	Intercompany Claims	  	Impaired; Entitled to Vote on Plan	  	$0 - $7 million5	  	66%-100% (but in all events exclusive of any post-petition interest)
	5	  	Equity Interests	  	Impaired; Deemed to Reject	  	N/A	  	TBD6

  
  

	3 	Estimated aggregate amount of claims in each class as well as projected recoveries for each class are based solely on scheduled and filed claims as of July 12, 2016. However, the claims bar date has not yet passed
and the actual amount of claims and projected recoveries could vary significantly based upon the final pool of filed claims and any reconciliation thereof. Nothing herein shall be construed to be an admission by the Chapter 11 Trustee as to the
extent, priority or validity of any claim. 

	4 	As discussed below, Marble Bridge may assert a Secured Claim in this Case. However, any Secured Claim of Marble Bridge will be satisfied solely from cash in the possession of Marble Bridge. 

	5 	Safend, Ltd has filed a proof of claim in the amount of $6,621, 492. The Debtor’s Statements of Financial Affairs provides Safend was an affiliate of the Debtor within six years of Petition Date. Based upon the
Debtor’s SEC filings, it appears that the Debtor acquired all of the equity interests of Safend, Ltd pursuant to a Share Purchase Agreement effective as of September 22, 2011. 

	6 	While it is estimated that holders of Equity Interests as of the Voting Record Date may receive a distribution, it is not possible to estimate the projected recovery at this time as the claims bar date has
not passed and the pool of Allowed Claims has not been finally reconciled. 

  
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 THE CHAPTER 11 TRUSTEE BELIEVES THAT THE PLAN PROVIDES THE BEST RECOVERIES POSSIBLE FOR
HOLDERS OF CLAIMS AND EQUITY INTERESTS IN THE DEBTOR AND THUS STRONGLY RECOMMENDS THAT YOU VOTE TO ACCEPT THE PLAN. 
  

	 	B.	Plan Voting Instructions and Procedures 

  

	 	1.	Voting Rights 

 Under the Bankruptcy Code, only Classes of Claims or Equity Interests
that are “Impaired” and that are not deemed as a matter of law to have rejected a plan of reorganization under section 1126 of the Bankruptcy Code are entitled to vote to accept or reject the Plan. Any Class that is “Unimpaired”
is not entitled to vote to accept or reject a plan of reorganization and is conclusively presumed to have accepted the Plan. As set forth in section 1124 of the Bankruptcy Code, a Class is “Impaired” if the legal, equitable, or contractual
rights attaching to the claims or equity interests of that Class are modified or altered. 
 Pursuant to the Plan, Claims in Class 3
(General Unsecured Claims) and Class 4 (Intercompany Claims) are Impaired by, and entitled to receive a Distribution under the Plan, and only the holders of Claims in this Class are entitled to vote to accept or reject the Plan. Whether a holder of
a Claim in Class 3 or Class 4 may vote to accept or reject the Plan will also depend on whether the holder held such Claim as of July 19, 2016 (the “Voting Record Date”). 

Pursuant to the Plan, Claims in Classes 1 and 2 are Unimpaired by the Plan, and such holders are deemed to have accepted the Plan and are
therefore not entitled to vote on the Plan. 
 Pursuant to the Plan, Holders of Equity Interests in Class 5 may not receive a recovery and
are Impaired by the Plan and are deemed to have rejected the Plan and are therefore not entitled to vote on the Plan. 

  
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	 	2.	Solicitation Materials 

 The Chapter 11 Trustee, with the approval of the Bankruptcy
Court, has engaged UpShot Services LLC (the “Voting Agent”) to serve as the voting agent to process and tabulate Ballots for each Class entitled to vote on the Plan and to generally oversee the voting process. The following
materials shall constitute the solicitation package (the “Solicitation Package”): 
  

	 	•	 	This Disclosure Statement, including the Plan and all other Exhibits annexed thereto; 

  

	 	•	 	The Bankruptcy Court order approving this Disclosure Statement (the “Disclosure Statement Order”); 

  

	 	•	 	The notice of, among other things, (i) the date, time, and place of the hearing to consider Confirmation of the Plan and related matters and (ii) the deadline for filing objections to Confirmation of the Plan
and the Disclosure Statement (the “Confirmation Hearing Notice”); 

  

	 	•	 	One or more Ballots, as applicable, to be used in voting to accept or to reject the Plan and applicable instructions with respect thereto (the “Voting Instructions”); 

 

	 	•	 	A pre-addressed return envelope; and 

  

	 	•	 	Such other materials as the Bankruptcy Court may direct or approve. 

 The Chapter 11 Trustee,
through the Voting Agent, will distribute the Solicitation Package in accordance with the Disclosure Statement Order. The Solicitation Package is also available at the Voting Agent’s website at http://www.upshotservices.com/wavesystems.

 No later than August 9, 2016, the Chapter 11 Trustee intends to file a Plan Supplement which includes, among other things,
(a) the identity of the Distribution Trustee, and (b) the Distribution Trust Agreement. As the Plan Supplement is updated or otherwise modified, such modified or updated documents will be made available on the Voting Agent’s website
at http://www.upshotservices.com/wavesystems. 
 If you are the holder of a Claim and believe that you are entitled to vote on the
Plan, but you did not receive a Ballot or your Ballot is damaged or illegible, or if you have any questions concerning voting procedures, you should contact the Voting Agent by writing to Wave Systems Corp, Ballot Processing, c/o UpShot Services
LLC, 8269 E. 23rd Avenue, Suite 275, Denver, CO 80238, or by telephone at (855) 812-6112 or via email at WaveSystemsInfo@upshotservices.com. If the reason that you did not receive a Ballot is because your Claim is subject to a pending claim
objection or otherwise has been designated as a Disputed Claim and you wish to vote on the Plan, you must file a motion pursuant to Bankruptcy Rule 3018 with the Bankruptcy Court for the temporary allowance of your Claim for voting purposes by
August 12, 2016, or you will not be entitled to vote to accept or reject the Plan. 

  
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 THE CHAPTER 11 TRUSTEE, REORGANIZED DEBTOR AND DISTRIBUTION TRUST, AS APPLICABLE, RESERVE
THE RIGHT THROUGH THE CLAIM OBJECTION PROCESS TO OBJECT TO OR SEEK TO DISALLOW ANY CLAIM OR EQUITY INTEREST FOR DISTRIBUTION PURPOSES. 
  

	 	3.	Voting Instructions 

 All votes to accept or reject the Plan must be cast by using the
Ballots enclosed with the Solicitation Packages. No votes other than ones using such Ballots will be counted, except to the extent the Bankruptcy Court orders otherwise. The Bankruptcy Court has fixed the Voting Record Date for the determination of
the holders of Claims who are entitled to (a) receive a copy of this Disclosure Statement and all of the related materials and (b) vote to accept or reject the Plan. The Voting Record Date and all of the Debtor’s solicitation and
voting procedures shall apply to all of the Debtor’s Creditors and other parties in interest. 
 After carefully reviewing the Plan,
this Disclosure Statement, and the detailed instructions accompanying your Ballot, you are asked to indicate your acceptance or rejection of the Plan by voting in favor of or against the Plan on the accompanying Ballot. 

The deadline to vote on the Plan is August 18, 2016 at 7:00 p.m. (Eastern Time) (the “Voting Deadline”). In order
for your vote to be counted, your Ballot must be properly completed in accordance with the Voting Instructions on the Ballot, and received no later than the Voting Deadline at the address set forth below: 

WAVE SYSTEMS CORP. 
 Ballot
Processing 
 c/o UpShot Services LLC 

8269 E. 23rd Avenue, Suite 275 

Denver, CO 80238 
 You may also
vote electronically via the Voting Agent’s website: http://www.upshotservices.com/wavesystems. All electronic votes must be submitted by the Voting deadline. 

Only the Holders of Claims in Class 3 and Class 4 as of the Voting Record Date are entitled to vote to accept or reject the Plan, and they may
do so by completing the appropriate Ballots and returning them in the envelope provided by the Voting Agent so as to be actually received by the Voting Agent by the Voting Deadline or by voting on the Voting Agent’s website by the Voting
Deadline. Each holder of a Claim must vote its entire Claim within a particular Class either to accept or reject the Plan and may not split such votes. If multiple Ballots are received from the same holder with respect to the same Claim prior to the
Voting Deadline, the last timely received, properly executed Ballot will be deemed to reflect that voter’s intent and will supersede and revoke any prior Ballot. The Ballots will clearly indicate the appropriate return address. It is important
to follow the specific instructions provided on each Ballot and/or on the Voting Agent’s website. 

  
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 Unless otherwise provided in the Voting Instructions accompanying the Ballots and/or on the
Voting Agent’s website or otherwise ordered by the Bankruptcy Court, the following Ballots will not be counted in determining whether the Plan has been accepted or rejected: 

 

	 	•	 	Any Ballot that fails to clearly indicate an acceptance or rejection, or that indicates both an acceptance and a rejection, of the Plan; 

 

	 	•	 	Any Ballot received after the Voting Deadline, except if the Chapter 11 Trustee has granted an extension of the Voting Deadline with respect to such Ballot, or by order of the Bankruptcy Court; 

 

	 	•	 	Any Ballot containing a vote that the Bankruptcy Court determines was not solicited or procured in good faith or in accordance with the applicable provisions of the Bankruptcy Code; 

 

	 	•	 	Any Ballot that is illegible or contains insufficient information to permit the identification of the Claim; 

  

	 	•	 	Any Ballot cast by a Person or Entity that does not hold an Allowed Claim in a Voting Class or whose claim has been designated as a Disputed Claim; and 

 

	 	•	 	Any unsigned Ballot or Ballot without an original signature (or in the case of electronic balloting, a proper and verified electronic signature). 

Any party who has previously submitted to the Voting Agent prior to the Voting Deadline a properly completed Ballot may revoke such Ballot and
change its vote by submitting to the Voting Agent prior to the Voting Deadline a subsequent properly completed Ballot for acceptance or rejection of the Plan. In the case where more than one timely, properly completed Ballot is received, only the
Ballot that bears the latest date will be counted for purposes of determining whether the requisite acceptances have been received. Any party who has delivered a properly completed Ballot for the acceptance or rejection of the Plan that wishes to
withdraw such acceptance or rejection rather than changing its vote may withdraw such acceptance or rejection by delivering a written notice of withdrawal to the Voting Agent at any time prior to the Voting Deadline. To be valid, a notice of
withdrawal must (i) contain the description of the Claims to which it relates and, in the case of Claims, the aggregate principal amount represented by such Claims, (ii) be signed by the withdrawing party in substantially the same manner
as the Ballot being withdrawn, (iii) contain a certification that the withdrawing party owns the Claims and possesses the right to withdraw the vote sought to be withdrawn, and (iv) be actually received by the Voting Agent prior to the
Voting Deadline. 
 The Chapter 11 Trustee, in his sole discretion, subject to contrary order of the Court, may waive any defect in any
Ballot at any time, either before or after the close of voting, and without notice. Except as otherwise provided herein, the Chapter 11 Trustee may, in his sole discretion, reject such defective Ballot as invalid and, therefore, not count it in
connection with confirmation of the Plan. 

  
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 ALL BALLOTS ARE ACCOMPANIED BY VOTING INSTRUCTIONS. IT IS IMPORTANT THAT THE HOLDER OF A
CLAIM IN THE CLASSES ENTITLED TO VOTE FOLLOW THE SPECIFIC INSTRUCTIONS PROVIDED WITH EACH BALLOT. 
 If you have any questions about
(a) the procedure for voting your Claim, (b) the Solicitation Package that you have received, or (c) the amount of your Claim, or if you wish to obtain, at your own expense (unless otherwise specifically required by Bankruptcy Rule
3017(d)), an additional copy of the Plan, this Disclosure Statement, or any appendices or Exhibits to such documents, please contact the Voting Agent at the address specified above. Copies of the Plan, Disclosure Statement, and other documents filed
in this Chapter 11 Case may be obtained free of charge on the Voting Agent’s website at http://www.upshotservices.com/wavesystems. Documents filed in this case may also be examined between the hours of 8:00 a.m. and 4:00 p.m., prevailing
Eastern Time, Monday through Friday, at the Office of the Clerk of the Bankruptcy Court, 824 North Market Street, 3rd Floor, Wilmington, Delaware 19801. 

The Voting Agent will process and tabulate Ballots for the Classes entitled to vote to accept or reject the Plan and will file a voting report
(the “Voting Report”) as soon as reasonably practicable following the Voting Deadline. The Voting Report will, among other things, describe every Ballot that does not conform to the Voting Instructions or that contains any form of
irregularity, including, but not limited to, those Ballots that are late, illegible (in whole or in material part), unidentifiable, lacking signatures, lacking necessary information, or damaged. 

THE CHAPTER 11 TRUSTEE AND ESW, AS THE PLAN SPONSOR, URGE HOLDERS OF CLAIMS WHO ARE ENTITLED TO VOTE TO TIMELY RETURN THEIR BALLOTS AND TO
VOTE TO ACCEPT THE PLAN BY THE VOTING DEADLINE. 
  

	 	4.	Confirmation Hearing and Deadline for Objections to Confirmation 

 Section 1128(a)
of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on Confirmation of the Plan. Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to Confirmation of the Plan. 

The Bankruptcy Court has scheduled the Confirmation Hearing to commence on August 25, 2016 at 10:00 a.m. (Eastern Time), before the
Honorable Kevin J. Carey, United States Bankruptcy Judge, in the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, 5th Floor, Wilmington, Delaware 19801. The Confirmation Hearing Notice, which sets forth the time
and date of the Confirmation Hearing, has been included along with this Disclosure Statement. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice, except for an announcement of the adjourned
date made at the Confirmation Hearing or any adjournment thereof. 
 Objections to Confirmation of the Plan must be filed and served on
the Chapter 11 Trustee, ESW, as the Plan Sponsor, and certain other entities, all in accordance with the Confirmation Hearing Notice by no later than August 18, 2016 at 12:00 p.m. (Eastern 

  
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Time). Unless objections to Confirmation of the Plan are timely served and filed in compliance with the Disclosure Statement Order, which is attached to this Disclosure Statement, they may
not be considered by the Bankruptcy Court. 
  

	II.	GENERAL INFORMATION ABOUT THE DEBTOR 

  

	 	A.	Background 

 The Debtor was incorporated in Delaware under the name Indata Corp. on
August 12, 1988. It changed its name to Cryptologics International, Inc. on December 4, 1989. The Debtor changed its name again to Wave Systems Corp. on January 22, 1993. Prior to the Petition Date, the Debtor’s principal
executive offices were located at 480 Pleasant Street, Lee, Massachusetts 01238. 
 The Debtor provides data and information security to its
customers by protecting the customers’ computer hardware. Specifically, the Debtor engages in the design, development, licensing and sale of certain software solutions for the Trusted Platform Module (TPM) worldwide market. 

The Debtor receives revenue from licensing its software to end users, original equipment manufacturers (OEM) partners. Typically, the Debtor
enters into perpetual software license agreements through direct sales to customers and indirect sales through its OEM partners, distributors and resellers. These license agreements generally include a maintenance component. The Debtor has defined
two classes of end user customers: large customers, whose orders are in excess of 5,000 licenses and small customers, whose orders are less than 5,000 licenses. 

The Debtor has also been instrumental in the development of purpose-built hardware to enable secure cryptographic operations. This approach is
commonly referred to as “Trusted Computing.” The Debtor’s products can be combined to form a hardened cybersecurity solution covering access management, encryption, and data protection. The Debtor’s products provide a
complementary set of solutions that focus on authentication, encryption and data-loss protection. The Debtor provides centralized remote management of its products in both on-premise and cloud platforms. 

The Debtor markets and sells its data security solutions worldwide primarily through the Debtor’s direct sales force and through indirect
distribution channel partners and strategic partners. The direct sales force is responsible for providing highly responsive, quality service and ensuring client satisfaction. Strategic partnerships and alliances provide the Debtor with additional
access to potential clients. The Debtor also market solutions to original equipment manufacturers in an effort to get the solutions in personal computers that are ultimately purchased by enterprise customers. 

 

	 	B.	Non-Debtor Affiliates 

 Prior to the Petition Date, the Debtor had certain domestic and
foreign affiliates and subsidiaries (the “Non-Debtor Affiliates”). As of the date of this writing, the Chapter 11 Trustee is continuing to investigate the status of and whether the Estate has any continuing interests in any of the
Non-Debtor Affiliates. 

  
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 Certain of the Non-Debtor Affiliates have or may file proofs of claim against the Debtor.7 The Trustee reserves all right to review and object to any such claims and/or designate any such claims as Disputed Claims for purposes of voting on the Plan. Any Allowed Claims of the Non-Debtor
Affiliates will be treated as Class 4 Intercompany Claims under the Plan. 
  

	 	C.	Prepetition Capital Structure 

  

	 	1.	Secured Debt 

 As of the Petition Date, the Debtor and Marble Bridge Funding Group, Inc.
(“Marble Bridge”) were parties to: (i) that certain Receivables Purchase Agreement among the Debtor and the Marble Bridge dated as of December 7, 2015; (ii) that certain Addendum thereto of even date therewith;
(iii) that certain Assignment of Accounts Receivable of even date therewith; (iv) that certain Intellectual Property Security Agreement of even date therewith; and (v) certain other documents related thereto (collectively, the
“Marble Bridge Loan Documents”). Marble Bridge alleged that, as of the Petition Date, the Debtor owed liabilities of at least $100,000.00 (the “Marble Bridge Obligations”). Marble Bridge further alleged that,
pursuant to the Marble Bridge Loan Documents, the Marble Bridge Obligations were secured by a first priority continuing security interest (the “Pre-Petition Liens”) granted by the Debtor in and to all of its right, title and
interest in and substantially all of its property and interests in property, all whether then owned or existing or thereafter owned, arising or acquired, and wherever located. Since the Petition Date, the Marble Bridge Obligations have been
satisfied in full. 
  

	 	2.	Unsecured Debt 

 As of the Petition Date, in addition to the foregoing secured
indebtedness, the Debtor owed material amounts with respect to various unsecured obligations. In the Debtor’s filed Schedules of Liabilities (Schedule E/F), the Debtor scheduled $3,019,895.15 in priority and non-priority unsecured claims. As
set forth more fully below, the Chapter 11 Trustee has filed a motion to establish a claims bar date, which will assist the Chapter 11 Trustee in determining the final unsecured claims pool. 

 

	 	3.	Equity Interests 

 The Debtor is publicly-owned and has two classes of common stock
(collectively, the “Common Stock”) with equal liquidation preference. The number of shares issued and outstanding of Common Stock, par value $0.01 per share, as of December 31, 2015, was 6,082,114. The Debtor’s common stock is
currently traded on the “pink sheets.” 
  
  

	7 	Safend, Ltd has filed a proof of claim in the amount of $6,621, 492. The Debtor’s Statements of Financial Affairs provides Safend was an affiliate of the Debtor within six years of Petition Date. Based upon the
Debtor’s SEC filings, it appears that the Debtor acquired all of the equity interests of Safend, Ltd pursuant to a Share Purchase Agreement effective as of September 22, 2011. 

  
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	 	D.	SEC Filings 

 As a public company, the Debtor was required to file appropriate reports
with the SEC, including quarterly statements of its operational and financial status and reports of significant events. All of the Debtor’s public securities filings prior to the Petition Date are available at www.sec.gov/edgar.shtml. The
Chapter 11 Trustee directs parties to the Debtor’s public securities filings for additional historical information regarding the Debtor. 
  

	III.	THE DEBTOR’S BANKRUPTCY CASE 

  

	 	A.	Commencement of a Chapter 7 Case 

 On February 1, 2016 (the “Petition
Date”), the Debtor commenced a voluntary case under chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. David W. Carickhoff was appointed as chapter 7 trustee (in such capacity, the
“Chapter 7 Trustee”). The section 341(a) meeting of creditors in the Chapter 7 Case was held and concluded on February 26, 2016. 

During the Chapter 7 Case, pursuant to Court order, the Chapter 7 Trustee retained certain independent contractors, who are former employees
of the Debtor, to assist in the maintenance of the Debtor’s assets. In addition, the Chapter 7 Trustee and Marble Bridge entered into a consensual cash collateral order which allowed the Chapter 7 Trustee to use cash collateral while the Marble
Bridge Obligations were being satisfied. 
 An immediate effect of commencement of the Chapter 7 Case was the imposition of the automatic
stay under the Bankruptcy Code which, with limited exceptions, enjoins the commencement or continuation of all collection efforts by Creditors, the enforcement of liens against property of the Debtor, and the continuation of litigation against the
Debtor during the pendency of the Debtor’s bankruptcy case. The automatic stay will remain in effect, unless modified by the Bankruptcy Court, until the Effective Date. 

The Court additionally has entered an Order establishing notification and hearing procedures for trading in the Debtor’s equity
securities in order to protect certain of the Debtor’s tax attributes [Dkt. No. 127] (the “Equity Trading Order”). Pursuant to the Equity Trading Order, Substantial Shareholders of the Debtor’s stock (i.e. a
holder of at least 4.5% of the Debtor’s stock), or any person who wishes to become a Substantial Shareholder, must follow certain procedures prior to buying or selling the Debtor’s stock. Any sale by a Substantial Shareholder in violation
of the Equity Trading Order is void ab initio and considered a violation of the automatic stay. 
  

	 	B.	Bid Procedures and Auction Process 

 On February 26, 2016, the Chapter 7 Trustee
filed the Motion for Orders (I) (A) Establishing Bid Procedures Relating to the Sale of the Debtors Assets; (B) Scheduling a Hearing to Consider the Proposed Sale and Approving the Form and Manner of Notice Thereof;
(C) Establishing Procedures Relating to the Assumption and Assignment of Certain Executory 

  
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Contracts and Unexpired Leases; (D) Extending the Time to Assume or Reject Executory Contracts and (E) Granting Related Relief And (II) (A) Approving the Proposed Sale;
(B) Approving the Assumption and Assignment of Executory Contracts and/or Unexpired Leases; and (C) Granting Related Relief [Dkt. No. 29] (the “Sale Motion”). 

On April 7, 2016, the Court held a preliminary hearing on the Sale Motion. Thereafter, on April 11, 2016, the Chapter 7 Trustee
conducted a live auction (the “Auction”) for the sale of the Debtor’s assets. 
 Chime Inc. was the successful bidder
for the Debtor’s wave.com domain name. On April 14, 2016, the Court entered an Order approving the sale of the Debtor’s domain name to Chime Inc. free and clear of all liens, claims and encumbrances for a purchase price of $420,000. The
sale to Chime closed on April 29, 2016. 
 At the conclusion of the Auction, the Chapter 7 Trustee determined that the offer ESW
submitted for 100% of the equity of the Reorganized Debtor, including substantially all assets of the Debtor except for certain excluded assets, as further described in the ESW bid (as amended, supplemented or otherwise modified, the “ESW
Bid”) was the highest and best offer. Through the ESW Bid, ESW has agreed to provide capital for the restructuring of the Debtor (the “Restructuring”). The Restructuring will be effectuated in the form of the Plan with ESW
acting as Plan Sponsor. The Plan provides, consistent with the ESW Bid, that ESW, as the Plan Sponsor, will make available for distribution: (i) $3,800,000 (which amount the Chapter 11 Trustee currently has on deposit); and (ii) an
additional $3,075,000 payable on the Effective Date. Alternatively, as further described in the ESW Bid, upon the occurrence of certain Termination Events (i.e., if the Plan process fails), ESW will purchase the assets of the Debtor in an
asset sale for the sum of $3,800,000, which amount has been fully funded and is currently on deposit in a Chapter 11 Trustee bank account (the “ESW Asset Sale”). 

The ESW Bid also contemplated funding up to $3,000,000 of postpetition financing by ESW, as a postpetition lender to cover the operating and
administrative expenses associated with preserving the Debtor’s operations and running a chapter 11 process through a plan effective date. 

The highest offer that contemplated a purchase of the Debtor’s assets in chapter 7 was for $3,500,000, with no opportunity for additional
upside. 
 On April 29, 2016, the Court entered an Order approving the ESW Bid as the highest and best offer for the Debtor [Dkt.
No. 110] (the “Bid Approval Order”). The final terms of the ESW Bid are attached to the Bid Approval Order. 
  

	 	C.	Conversion to Chapter 11 and Appointment of Chapter 11 Trustee 

 Consistent with the
terms of the ESW Bid, on April 25, 2016, the Chapter 7 Trustee and ESW filed the Joint Motion of David W. Carickhoff, Chapter 7 Trustee and ESW Capital, LLC, for Entry of Order (I) Converting Chapter 7 Case to Chapter 11 and (II)
Appointing a Chapter 11 Trustee [Dkt. No. 103] (the “Conversion Motion”). On May 16, 2016 (the “Conversion Date”), the Court entered an Order granting the Conversion Motion, thereby converting this
Case from Chapter 7 to Chapter 11. Shortly thereafter, on May 20, 2016, the Office of the United States Trustee appointed David W. Carickhoff as the Chapter 11 Trustee. On March 23, 2016, Mr. Carickhoff filed a notice accepting his
appointment as Chapter 11 Trustee. 

  
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 The section 341(a) meeting of creditors in the Chapter 11 Case was held and concluded on
June 16, 2016. 
  

	 	D.	The ESW Post-Petition Financing 

 Pursuant to the ESW Bid, the Chapter 11 Trustee and ESW
negotiated a postpetition financing facility, providing up to $3.0 million (principal amount) in financing (the “ESW Post-Petition Facility”). The ESW Post-Petition Facility provides sufficient financing to fund ordinary course
working capital needs and chapter 11 administrative expenses, and effectuate the Restructuring of the Debtor via the Plan. 
 On
May 20, 2016, the Chapter 11 Trustee filed the Motion of Chapter 11 Trustee for Entry of Interim and Final Orders Pursuant to Sections 105, 361, 362, 363(c), 364(c)(1), 364(c)(2), 364(d)(1), 364(e) and 507 of the Bankruptcy Code
(I) Authorizing Chapter 11 Trustee to (A) Obtain Post-Petition Secured Financing from ESW Capital, LLC; (B) Utilize Cash Collateral; and (C) Pay Certain Related Fees and Charges; and (II) Scheduling a Final Hearing [Dkt.
No. 130] (the “Financing Motion”). 
 On May 25, 2016, the Court entered the Interim Order Pursuant to
Sections 105, 361, 362, 363(c), 364(c)(1), 364(c)(2), 364(d)(1), 364(e) and 507 of the Bankruptcy Code (I) Authorizing Chapter 11 Trustee to (A) Obtain Post-Petition Secured Financing from ESW Capital, LLC; (B) Utilize Cash Collateral; and
(C) Pay Certain Related Fees and Charges; and (II) Scheduling a Final Hearing [Dkt No. 150] (the “Interim Financing Order”). Pursuant to the Interim Financing Order, among other provisions, the Chapter 11 Trustee was
authorized to borrow, on an interim basis, up to $1 million. 
 On June 13, 2016, the Court approved the ESW Post-Petition Facility on
a final basis pursuant to a final order [Dkt. No. 173] (the “Final Financing Order”). Pursuant to the Final Financing Order, the Chapter 11 Trustee was authorized to enter into and draw upon the ESW Post-Petition Facility on a
final basis. 
 Pursuant to the terms of the ESW Bid and the Final Financing Order, the Debtor’s Estate has no obligation to satisfy or
repay the ESW Post-Petition Facility unless one of three specific events of default occur: (1) the Chapter 11 Trustee files a plan of reorganization which is inconsistent with the ESW Bid, (2) the Chapter 11 Trustee files a motion to
obtain financing from someone other than ESW, or (3) The Court confirms a competing plan to that of ESW’s or approves a transaction for the sale or disposition of the Debtor’s assets other than to ESW. If the Plan is confirmed by the
Court, the Debtor’s Estate will have no obligation to satisfy or repay the ESW Post-Petition Facility. 
  

	 	E.	Schedules, Statements of Financial Affairs and Claims Bar Dates 

 The Debtor filed its
Schedules of Assets and Liabilities and Statement of Financial Affairs on February 16, 2016 [Dkt. Nos. 17 and 18]. A Creditor whose Claim is set forth in the Schedules of Assets and Liabilities and not identified as contingent, unliquidated, or
disputed may, but need not, file a proof of claim against that Debtor to be entitled to participate in the Chapter 11 Case or to receive a distribution under the Plan. 

  
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 Pursuant to an order entered on July 1, 2016 [Dkt. No. 219] (the “Bar Date
Order”), the deadline established by the Bankruptcy Court for Creditors to file proofs of claim against the Debtor and/or its Estate is August 4, 2016. Further, the Bar Date Order established certain additional procedures for filing
motions for payment of administrative expenses: (i) for the Chapter 7 period (i.e. February 1, 2016 through May 16, 2016) and (ii) under section 503(b)(9) of the Bankruptcy Code. 

Parties are urged to review the terms of the Bar Date Order and the associated Bar Date Notice in order to obtain specifics and further
information regarding the requirements for filing proofs of claims and the consequences of failing to do so. Copies of the Bar Date Order and Bar Date Notice can be obtained from the Voting Agent’s website:
http://www.upshotservices.com/wavesystems. 
  

	 	F.	Additional Orders 

 After the Conversion Date, the Chapter 11 Trustee filed a number of
motions and applications to retain professionals, to streamline the administration of the Chapter 11 Case, and to obtain other relief in the best interest of the Debtor and the Estate. As of this writing, the Bankruptcy Court has entered the
following orders in the Chapter 11 case: 
  

	 	•	 	Order Extending the Deadline to Assume or Reject Executory Contracts and Unexpired Leases [Dkt. No. 210]; 

  

	 	•	 	Order Authorizing Retention of Archer & Greiner, PC as Counsel to the Chapter 11 Trustee Nunc Pro Tunc to May 20, 2016 [Dkt. No. 213]; 

 

	 	•	 	Order Authorizing Employment and Retention of Giuliano, Miller & Company, LLC as Accountants and Financial Advisors to the Chapter 11 Trustee, Nunc Pro Tunc to May 20, 2016 [Dkt. No. 214];

  

	 	•	 	Order Authorizing Retention and Appointment of UpShot Services LLC as Claims and Noticing Agent Nunc Pro Tunc to June 1, 2016 [Dkt. No. 215]; 

 

	 	•	 	Order Granting Application of the Chapter 11 Trustee for Entry of an Order Authorizing the Employment and Retention of UpShot Services LLC as Administrative Agent Nunc Pro Tunc to June 1, 2016 [Dkt. No. 216];

  

	 	•	 	Order Authorizing Chapter 11 Trustee to Employ Professionals Used in the Ordinary Course of the Debtor’s Business [Dkt. No. 217]; and 

 

	 	•	 	Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses of Professionals [Dkt. No. 218]. 

  
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	IV.	SUMMARY OF THE CHAPTER 11 PLAN 

 This section provides a summary of the structure
and means for implementation of the Plan and the classification and treatment of Claims and Equity Interests under the Plan and is qualified in its entirety by reference to the Plan (as well as the Exhibits thereto and definitions therein). 

The statements contained in this Disclosure Statement do not purport to be precise or complete statements of all the terms and provisions of
the Plan or documents referred to therein, and reference is made to the Plan and to such documents for the full and complete statement of such terms and provisions. 

The Plan itself and the documents referred to therein control the actual treatment of Claims against and Equity Interests in the Debtor under
the Plan and will, upon the occurrence of the Effective Date, be binding upon all holders of Claims against and Equity Interests in the Debtor, the Debtor’s Estate, the Reorganized Debtor, all parties receiving property under the Plan, and
other parties in interest. In the event of any conflict, inconsistency, or discrepancy between this Disclosure Statement and the Plan, the Plan Supplement, and/or any other operative document, the terms of the Plan, Plan Supplement, and/or such
other operative document, as applicable, shall govern and control; provided that, in any event, the terms of the Plan shall govern and control over all other related documents. 

 

	 	A.	Treatment of Unclassified Claims 

 In accordance with section 1123(a)(1) of the
Bankruptcy Code, Administrative Claims (including Professional Compensation Claims and Ordinary Course Liabilities) and Priority Tax Claims have not been classified and the respective treatment of such unclassified Claims is set forth in Article IV
of the Plan. 
  

	 	1.	Administrative Claims 

  

	 	a.	General. Except with regards to the Ordinary Course Liabilities, including Allowed Post-Petition Lender Financing Claims (the treatment of which is described in Section 4.3 (below)), subject to the bar date
provisions herein, unless otherwise agreed to by the parties, each holder of an Allowed Administrative Claim shall receive, from the Cash Consideration, Cash equal to the unpaid portion of such Allowed Administrative Claim within ten (10) days
after the later of (a) the Effective Date, (b) the Allowance Date, or (c) such date as is mutually agreed upon by the Chapter 11 Trustee, the Plan Sponsor, and the holder of such Claim. For the avoidance of doubt, it is contemplated
that Professional Fee Claims which are provided for under the Budget shall be paid from Post-Petition Financing, not from the Cash Consideration. Non-Budgeted Professional Fee Claims include any Chapter 7 or 11 Trustee Fee requests for compensation
and any request for compensation filed by GrowthPoint Technology Partners, LLC in connection with the transactions contemplated hereunder, which claims, if and when Allowed, shall be paid in full from the Cash Consideration. 

  
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	 	b.	Ordinary Course Liabilities All Ordinary Course Liabilities are deemed to be Allowed Claims to the extent set forth in the Approved Budget. Except as set forth in Section 4.3(b) of the Plan, holders of
Administrative Claims on account of Ordinary Course Liabilities are not required to file or serve any request for payment of the Ordinary Course Liability. As provided in the Post-Petition Financing Order, under the Post-Petition Facility, the Final
Borrowing Notice shall identify the Estimated Liabilities Amount under the Approved Budget to be held in the Segregated Account pending payment. The Segregated Account shall be held by Chapter 11 Trustee prior to the Effective Date, and the
Distribution Trustee, after the Effective Date. Any amounts remaining in the Segregated Account one-hundred twenty (120) days after the Effective Date shall be returned to the Post-Petition Lender. To the extent any Ordinary Course Liability is
in excess of the Estimated Liabilities Amount provided for in the Final Borrowing Notice, such amounts will be paid from the Cash Consideration. The Chapter 11 Trustee shall continue to pay each Ordinary Course Liability accrued prior to the
Effective Date, pursuant to the payment terms and conditions of the particular transaction giving rise to the Ordinary Course Liability, and the Approved Budget. The Reorganized Debtor shall continue to pay each Ordinary Course Liability accrued
after the Effective Date, pursuant to the payment terms and conditions of the particular transaction giving rise to the Ordinary Course Liability. 

  

	 	c.	 Allowed Post-Petition Lender Financing Claim. The Post-Petition Lender Financing Claim is Allowed in full,
but shall not be paid from the Cash Consideration of $6.875 million. Pursuant to the Subscription Option, the Post-Petition Lender, shall have the option, on account of being the holder of the Allowed Post-Petition Lender Financing Claim, to
exchange a total of up to $1,800,000 in satisfaction of such amount of its Allowed Claim for up to a total of 600 shares, equal to 60 percent, of the issued New Equity, at a rate of $3,000 of its Allowed Post-Petition Lender Financing Claim for one
(1) share of New Equity. Further, the Post-Petition Lender, on account of being the holder of the Allowed Post-Petition Lender Financing Claim, shall receive, from the Financing Consideration, payment in Cash of the remaining amount of the
Allowed Post-Petition Lender Financing Claim after the Post-Petition Lender has exercised the 

  
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Subscription Option to receive its share of the New Equity.8 For the avoidance of doubt, no portion of the Allowed Post-Petition Lender
Financing Claim shall be paid from the Cash Consideration. On the Effective Date, all liens and interests granted in exchange for or in connection with the Post-Petition Note and/or under the Post-Petition Financing Order shall be deemed discharged,
cancelled, and released and shall be of no further force and effect and neither the Estate nor the Distribution Trust (as applicable) shall have any obligation to repay the Allowed Post-Petition Lender Financing Claim from the Cash Consideration.
The Financing Consideration payable by the Plan Sponsor under the Plan shall be increased to account for any Cash payment to the Post-Petition Lender on account of the Allowed Post-Petition Lender Financing Claim, such that the Plan Consideration
provided to the Estate net of all Cash payments to the Post-Petition Lender on account of its Allowed Post-Petition Lender Financing Claim shall be $6,875,000. 

  

	 	d.	Payment of Statutory Fees All fees payable pursuant to 28 U.S.C. § 1930 shall be paid in Cash through the Post-Petition Financing, up to the amount set forth in the Approved Budget, and otherwise with the
Cash Consideration equal to the amount of such Administrative Claim when due or no later than the Effective Date. Postpetition U.S. Trustee fees and post-confirmation reports shall be paid and filed as required by 28 U.S.C. § 1930 until the
Bankruptcy Case is closed, converted or dismissed, and failure to do either timely is a material default pursuant to section 1112 of the Bankruptcy Code. After confirmation, the Distribution Trustee will file with the court and serve on the U.S.
Trustee quarterly financial reports in a format prescribed by the U.S. Trustee, and the Distribution Trustee will pay post-confirmation quarterly fees to the U.S. Trustee until a final decree is entered or the case is converted or dismissed as
provided in 28 U.S.C. § 1930(a)(6). In no event will the Reorganized Debtor be responsible for any U.S. Trustee fees. 

  

	 	2.	Bar Date For Administrative Claims 

  

	 	a.	General Provisions. Except as otherwise provided in Article IV of the Plan, requests for payment of Administrative Claims must be included within an application (setting forth the amount of, and basis for, such
Administrative Claims, together with documentary evidence) and Filed and served on respective counsel for the Chapter 11 Trustee and Plan Sponsor no later than ten (10) days after the Confirmation Hearing or 

 

	8 	 The Plan Sponsor reserves the right to modify the Subscription Option, provided that (i) no such
modification shall adversely the Plan treatment of other creditors and (ii) such modification is approved by the Post-Petition Lender. 

  
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by such earlier deadline governing a particular Administrative Claim contained in an order of the Bankruptcy Court entered before the Effective Date. Holders of Administrative Claims (including,
without limitation, professionals requesting compensation or reimbursement of expenses and the holders of any Claims for federal, state or local taxes) that are required to File a request for payment of such Claims and that do not File such requests
by the applicable bar date specified in either section 4.1(d)(i),(ii) or (iii) of the Plan shall be forever barred from asserting such Claims against the Debtor or any of its property, absent order of the Court to the contrary. The Plan further
provides that requests for payments of Administrative Claims included within a proof of claim are of no force and effect, and shall be disallowed in their entirety as of the Confirmation Date unless such Administrative Claim is subsequently Filed in
a timely fashion as provided in the Plan. 

  

	 	b.	Professionals. All professionals or other entities requesting compensation or reimbursement of expenses pursuant to sections 327, 328, 330, 331, 503(b) and 1103 of the Bankruptcy Code for services rendered before
the Effective Date (including, without limitation, any compensation or commission requested by any professional or any other entity in connection with the Chapter 7 Case or for making a substantial contribution in the Bankruptcy Case) shall File and
serve on the Reorganized Debtor, the Distribution Trust, the U.S. Trustee and the Post-Confirmation Service List an application for final allowance of compensation and reimbursement of expenses no later than forty-five (45) days after the
Effective Date. Objections to applications of professionals for compensation or reimbursement of expenses must be filed and served on the Reorganized Debtor, the Distribution Trust, the U.S. Trustee and the Post-Confirmation Service List and the
professionals to whose application the objections are addressed no later than twenty-one (21) days after the date the application is filed, or the Bankruptcy Court may enter an order authorizing the fees without a hearing. For the avoidance of
doubt, the Chapter 7 Trustee and the Chapter 11 Trustee shall not be required to file a request for compensation within 45 days of the Effective Date. The Chapter 7 Trustee and the Chapter 11 Trustee shall have 120 days after the Effective Date to
file a request for compensation. The Chapter 7 Trustee’s compensation and the Chapter 11 Trustee’s compensation shall be paid from the Cash Consideration, and the Distribution Trustee shall make appropriate reserves for such compensation.

  

	 	c.	 Tax Claims. All requests for payment of Administrative Claims and other Claims by a Governmental Unit for
taxes (and for interest and/or penalties related to such taxes) for any tax year or period, which accrued or was assessed within the period from and including the Petition Date through and including the Effective Date (“Post-Petition

  
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Tax Claims”) and for which no bar date has otherwise been previously established, must be Filed on or before the later of (i) forty-five (45) days following the Effective
Date; and (ii) ninety (90) days following the filing with the applicable Governmental Unit of the tax return for such taxes for such tax year or period. Any holder of any Post-Petition Tax Claim that is required to File a request for
payment of such taxes and does not File such a Claim by the applicable bar date shall be forever barred from asserting any such Post-Petition Tax Claim against the Debtor or its property, whether any such Post-Petition Tax Claim is deemed to arise
prior to, on, or subsequent to the Effective Date. To the extent that the holder of a Post-Petition Tax Claim holds a lien to secure its Claim under applicable state law, the holder of such Claim shall retain its lien until its Allowed Post-Petition
Tax Claim has been paid in full. 

  

	 	3.	Allowed Priority Tax Claims 

 Each Holder of an Allowed Priority Tax Claim against Debtor
shall receive, from the Cash Consideration, in full satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim (i) Cash equal to the amount of such Allowed Priority Tax Claim, (ii) payment in
full through the fifth anniversary of the Petition Date, plus interest, or (iii) such other less favorable treatment to the Holders of an Allowed Priority Tax Claim as to which the Debtor, or the Chapter 11 Trustee, the Plan Sponsor, and the
Holder of such Allowed Priority Tax Claims shall have agreed upon in writing. 
  

	 	B.	Classification and Treatment of Claims and Equity Interests 

 Pursuant to section 1122 of
the Bankruptcy Code, set forth below is a designation of Classes or Claims and Equity Interests. A Claim or Equity Interest is placed in a particular Class only to the extent that the Claim or Equity Interest falls within the description of that
Class, and is classified in other Classes to the extent that any portion of the Claim or Equity Interest falls within the description of such other Classes. A Claim is also placed in a particular Class for the purpose of receiving Distributions
pursuant to the Plan only to the extent that such Claim is an Allowed Claim in that Class and such Claim has not been paid, released, or otherwise settled prior to the Effective Date. 

 

	 	1.	Class 1: Secured Claims 

 Each holder of an Allowed Secured Claim shall receive, at the
election of the Plan Sponsor, on account of and in full and complete settlement, release and discharge of, and in exchange for, its Allowed Secured Claims, (i) its Pro Rata Share of the Cash Consideration (ii) reinstatement pursuant to
section 1124 of the Bankruptcy Code, (iii) receipt of the collateral securing such claim and any interest required to be paid pursuant to section 506(b) of the Bankruptcy Code, (iv) such other treatment as the Plan Sponsor and the
applicable holder of the Allowed Secured Claim may agree, and/or (v) such other recovery necessary to satisfy section 1129 of the Bankruptcy Code. 

  
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 Class 1 is Unimpaired and therefore holders of Secured Claims are conclusively presumed to
have accepted the Plan. 
  

	 	2.	Class 2: Priority Unsecured Non-Tax Claims 

 Each holder of an Allowed Priority Unsecured
Non-Tax Claim against the Debtor shall receive, from the Cash Consideration, on the Effective Date, on account of and in full and complete settlement, release and discharge of, and in exchange for, such Allowed Priority Unsecured Non-Tax Claim,
either cash equal to the full unpaid amount of such Allowed Priority Unsecured Non-Tax Claim, or such other treatment as the Chapter 11 Trustee, the Plan Sponsor, and the holder of such Allowed Priority Unsecured Non-Tax Claim shall have agreed.

 Class 2 is Unimpaired and therefore holders of Priority Unsecured Non-Tax Claims are conclusively presumed to have accepted the Plan.

  

	 	3.	Class 3: General Unsecured Claims 

 As soon as practicable after the Effective Date, each
holder of an Allowed General Unsecured Claim shall receive, on account of and in full and complete settlement, release and discharge of, and in exchange for its Allowed General Unsecured Claim, its Pro Rata Share of (i) remaining Cash
Consideration after payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, and Allowed Priority Unsecured Non-Tax Claims, and (ii) the Beneficial Interest in the Distribution Trust in accordance with the
Distribution Trust Agreement. In no event shall any holder of an Allowed General Unsecured Claim receive a distribution in an amount in excess of the principal amount of the respective holder’s Allowed General Unsecured Claim. Holders of
Allowed General Unsecured Claims shall not receive any Distribution on account of any postpetition interest. 
 Allowed General Unsecured
Claims shall share pro rata with Allowed Intercompany Claims in the remaining Cash Consideration and the Beneficial Interest in the Distribution Trust. 

Class 3 is Impaired and therefore Holders of General Unsecured Claims are entitled to vote on the Plan. 

 

	 	4.	Class 4: Intercompany Claims 

 As soon as practicable after the Effective Date, each
holder of an Allowed Intercompany Claim shall receive, on account of and in full and complete settlement, release and discharge of, and in exchange for its Allowed Intercompany, its Pro Rata Share of (i) remaining Cash Consideration after
payment of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Secured Claims, and Allowed Priority Unsecured Non-Tax Claims, and (ii) the Beneficial Interest in the Distribution Trust in accordance with the Distribution Trust
Agreement. In no event shall any holder of an Allowed Intercompany Claim receive a distribution in an amount in excess of the principal amount of the respective holder’s Allowed Intercompany Claim. Holders of Allowed Intercompany Claims shall
not receive any Distribution on account of any postpetition interest. 

  
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 Allowed Intercompany Claims shall share pro rata with Allowed General Unsecured Claims in the
remaining Cash Consideration and the Beneficial Interest in the Distribution Trust. 
 Class 4 is Impaired and therefore Holders of
Intercompany Claims are entitled to vote on the Plan. 
  

	 	5.	Class 5: Equity Interests 

 As soon as practicable after the Effective Date, each holder of an Allowed
Equity Interest shall receive, on account of and in full and complete release and discharge of, and in exchange for its Allowed Equity Interests, its Pro Rata Share of (i) remaining Cash Consideration after payment of Allowed Administrative
Claims, Allowed Priority Tax Claims, Allowed Secured Claims, Allowed Priority Unsecured Non-Tax Claims, Allowed General Unsecured Claims and Allowed Intercompany Claims, and (ii) the Beneficial Interest in the Distribution Trust in accordance
with the Distribution Trust Agreement, following payment in full of all Allowed General Unsecured Claims and Allowed Intercompany Claims. Holders of Equity Interests as of the Voting Record Date shall be entitled to a distribution as a member of
Class 5. 
 No Distributions shall be made to holders of Allowed Equity Interests unless and until holders of Allowed Claims have been paid
in full and any Disputed Claims have been disallowed pursuant to an Order of the Bankruptcy Court 
 On the Effective Date, all existing
Equity Interests of Debtor shall be retired, cancelled, extinguished and/or discharged in accordance with the terms of the Plan. 
 Class 5
is Impaired and is deemed to reject the Plan. 
  

	 	C.	Acceptance or Rejection of the Plan 

  

	 	1.	Impaired Classes Entitled to Vote 

 Holders of Claims in Class 3 and Class 4 are Impaired
and each Class are entitled to vote as a Class to accept or reject the Plan. Accordingly, only the Holders of Claims in Class 3 and Class 4 shall be solicited with respect to the Plan. 

 

	 	2.	Acceptance by Class 3 and Class 4 

 In accordance with section 1126(c) of the Bankruptcy
Code, and except as provided in section 1126(e) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted the Plan if the Plan is accepted by the holders of at least two-thirds ( 2⁄3) in dollar amount and more than one-half ( 1⁄2) in number of the Allowed Claims in such Class that have timely and
properly voted to accept or reject the Plan. 

  
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	 	3.	Presumed Acceptances by Unimpaired Classes 

 Class 1 and Class 2 are Unimpaired under the
Plan. Under section 1126(f) of the Bankruptcy Code, holders of such Unimpaired Claims are conclusively presumed to have accepted the Plan, and the votes of such Unimpaired Claim Holders shall not be solicited. 

 

	 	4.	Impaired Class deemed to Reject 

 Class 5 is impaired under the Plan but is deemed to
reject the Plan. Therefore, Interest Holders in Class 5 are not entitled to vote to accept or reject the Plan. 
  

	 	D.	Means for Implementation of the Plan 

  

	 	1.	Continued Corporate Existence 

 Except as otherwise provided in the Plan, the Reorganized
Debtor will continue to exist after the Effective Date as a corporate entity, with all of the powers of a corporation under applicable law in the jurisdiction in which the Debtor is incorporated and pursuant to its Charter Documents in effect before
the Effective Date, as such documents are amended by or pursuant to the Plan. 
 Upon the Effective Date, and without any further action by
the shareholders, directors, or officers of the Reorganized Debtor, the Reorganized Debtor’s Charter Documents shall be deemed amended (a) to the extent necessary, to incorporate the provisions of the Plan, and (b) to prohibit the
issuance by the Reorganized Debtor of nonvoting securities to the extent required under section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such Charter Documents as permitted by applicable law, and to the extent such
documents are amended, such documents are deemed to be amended pursuant to the Plan and require no further action or approval other than any requisite filings required under applicable state, provincial or federal law. The Charter Documents shall be
filed with the Plan Supplement. 
  

	 	2.	Management and Board of Directors 

 The Plan Sponsor may nominate and elect new members
for the board of directors of the Reorganized Debtor in accordance with the Reorganized Debtor’s Charter Documents. Upon the Effective Date, the Chapter 11 Trustee shall no longer serve in such capacity and shall be discharged of all duties in
connection therewith. 
  

	 	3.	Arrangements with the Distribution Trustee 

 By the Plan Supplement Deadline of
August 9, 2016, the Chapter 11 Trustee, shall file with the Bankruptcy Court a disclosure identifying the Distribution Trustee under the Distribution Trust. At the Confirmation Hearing, the Bankruptcy Court shall ratify such Distribution
Trustee. All compensation for the Distribution Trustee shall be paid from the Distribution Trust Assets in accordance with the Distribution Trust Agreement. The approved person shall serve as the Distribution Trustee on execution of the Distribution
Trust Agreement at the Closing. 

  
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	 	4.	The Closing 

 The Closing of the transactions required and contemplated under the Plan
shall take place on the Effective Date at the offices of Haynes and Boone, LLP, 30 Rockefeller Plaza, 26th Floor, New York, New York 10112, or at such other place identified in a notice provided to those parties listed in Section 13.12 of the
Plan. The Chapter 11 Trustee and the Plan Sponsor may reschedule the Closing by making an announcement at the originally scheduled Closing of the new date for the Closing. A notice of the rescheduled Closing shall be filed with the Bankruptcy Court
and served on the parties identified in Section 13.12 of the Plan within two (2) days after the originally scheduled Closing. All documents to be executed and delivered by any party as provided in this Article VI and all actions to be
taken by any party to implement the Plan as provided herein shall be in form and substance satisfactory to the Chapter 11 Trustee and Plan Sponsor. The following actions shall occur at or before the Closing (unless otherwise specified), and shall be
effective on the Effective Date: 
  

	 	a.	Execution of Documents and Corporate Action. The Chapter 11 Trustee shall deliver all documents and perform all actions reasonably contemplated with respect to implementation of the Plan. The Chapter 11 Trustee,
or his designee, is authorized (i) to execute on behalf of the Debtor, in a representative capacity and not individually, any documents or instruments after the Confirmation Date or at the Closing that may be necessary to consummate the Plan
and (ii) to undertake any other action on behalf of the Debtor to consummate the Plan. Each of the matters provided for under the Plan involving the corporate structure of the Debtor or corporate action to be taken by or required of the Debtor
will, as of the Effective Date, be deemed to have occurred and be effective as provided herein, and shall be authorized, approved, and (to the extent taken before the Effective Date) ratified in all respects without any requirement of further action
by stockholders, creditors, or directors of the Debtor. On the Effective Date, all matters provided for in the Plan involving the corporate structure of the Reorganized Debtor, and all corporate actions required by the Debtor, the Chapter 11
Trustee, and the Reorganized Debtor in connection with the Plan, shall be deemed to have occurred and shall be in effect, without any requirement of further action by the Chapter 11 Trustee or the Reorganized Debtor. For purposes of effectuating the
Plan, none of the transactions contemplated in the Plan shall constitute a change of control under any agreement, contract, or document of the Debtor. 

  

	 	b.	 Cancellation of Equity Interests. On the Effective Date, all existing Equity Interests of Debtor shall be
retired, cancelled, extinguished and/or discharged in accordance with the terms of the Plan. Except as otherwise provided in the Plan or the Plan Supplement, on the 

  
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Effective Date: (1) the obligations of the Debtor under any certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document, directly or
indirectly, evidencing or creating any indebtedness or obligation of or ownership interest in the Debtor giving rise to any Claim or Equity Interest shall be cancelled as to the Debtor and the Reorganized Debtor shall not have any continuing
obligations thereunder and (2) 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 governing the
shares, certificates, notes, bonds, purchase rights, options, warrants or other instruments or documents evidencing or creating any indebtedness or obligation of the Debtor shall be released and discharged. On the Effective Date, 1,000 shares of New
Equity of the Reorganized Debtor shall be issued. 

  

	 	c.	Issuance of New Equity. The New Equity shall be free and clear of all Liens, Claims, Interests, and encumbrances of any kind, except as otherwise provided in the Plan. All the shares of the New Equity issued
pursuant to the Plan shall be duly authorized, validly issued, fully paid, and non-assignable. All of the New Equity issued pursuant to the Plan shall be duly authorized, validly issued, fully paid and non-assessable. On the Effective Date, none of
the New Equity will be listed on a national securities exchange. Reorganized Debtor may take all necessary actions after the Effective Date to suspend any requirement to (i) be a reporting company under the Securities Exchange Act, and
(ii) file reports with the Securities and Exchange Commission or any other entity or party. Furthermore, the Reorganized Debtor shall not be required to file monthly operating reports, or any other type of report, with the Court after the
Effective Date 

  

	 	d.	Funding of the Plan Consideration. On the Effective Date, the Plan Sponsor shall contribute to the Estate an amount of Cash equal to the Plan Consideration in consideration of the Plan Sponsor’s purchase of
the New Equity, inclusive of the Enhanced Deposit. The Plan Consideration is not subject to any financing contingency. The Plan Consideration shall be used to fund Distributions under the Plan. To the extent Post-Petition Lender does not fully
exercise the Subscription Option, the Financing Consideration payable by the Plan Sponsor under the Plan shall be in the amount sufficient to account for any Cash payment to the Post-Petition Lender on account of the Allowed Post-Petition Lender
Financing Claim, such that the Plan Consideration provided to the Estate net of all Cash payments to the Post-Petition Lender on account of its Allowed Post-Petition Lender Financing Claim shall be $6,875,000. 

  
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	 	e.	Execution and Ratification of the Distribution Trust Agreement. On the Effective Date, the Distribution Trust Agreement shall be executed by all parties thereto. The Distribution Trust Agreement shall be provided
in the Plan Supplement. Each holder of a Claim or Equity Interest shall be deemed to have ratified and become bound by the terms and conditions of the Distribution Trust Agreement. 

 

	 	f.	Transfer of Distribution Trust Assets. All property of the Debtor constituting the Distribution Trust Assets shall be conveyed and transferred by the Debtor to the Distribution Trust, free and clear of all Liens,
Claims, Equity Interests, and encumbrances. 

  

	 	5.	Tax Treatment of the Distribution Trust 

 The Distribution Trust established under the
Plan is established for the purpose of distributions to Administrative Claims, Secured Claims, General Unsecured Claims, Intercompany Claims and Equity Interests by liquidating the Distribution Trust Assets transferred to the Distribution Trust and
performing related and incidental functions referenced in the Distribution Trust Agreement, and the Distribution Trust shall have no objective of continuing or engaging in any trade or business except to the extent reasonably necessary to, and
consistent with, the liquidating purpose of the trust. The purpose of the Distribution Trust is to provide a mechanism for the liquidation of the Distribution Trust Assets, and to distribute the proceeds of the liquidation, net of all claims,
expenses, charges, liabilities, and obligations of the Distribution Trust, to the Beneficiaries in accordance with the terms of the Plan. No business activities will be conducted by the Distribution Trust other than those associated with or related
to the liquidation of the Distribution Trust Assets. It is intended that the Distribution Trust be classified for federal income tax purposes as a “liquidating trust” within the meaning of the Treasury Regulations Section 301.7701-4(d).
All parties and Beneficiaries shall treat the transfers in trust described herein as transfers to the Beneficiaries for all purposes of the Internal Revenue Code of 1986, as amended (including Sections 61(a)(12), 483, 1001, 1012, and 1274 thereof).
All the parties and Beneficiaries shall treat the transfers in trust as if all the transferred assets, including all the Distribution Trust Assets, had been first transferred to the Beneficiaries and then transferred by the Beneficiaries to the
Distribution Trust. The Beneficiaries shall be treated for all purposes of the Internal Revenue Code of 1986, as amended, as the grantors of the Distribution Trust and the owners of the Distribution Trust. The Distribution Trustee shall file returns
for the Distribution Trust as a grantor trust pursuant to Treasury Regulations Section 1.671-4(a) or (b). All parties, including the Beneficiaries and the Distribution Trustee, shall value the Distribution Trust Assets consistently, and such
valuations shall be used for all federal income tax purposes. Beneficiaries may wish to consult with a tax professional regarding the tax consequences of holding a Beneficial Interest in or receiving a Distribution from the Distribution Trust. 

 

	 	6.	Right to Enforce, Compromise, or Adjust Distribution Trust Assets 

 The Distribution
Trustee shall have and retain the sole and full power, authority, and standing to prosecute, compromise, or otherwise resolve the Distribution Trust Actions assigned to the Distribution Trust, subject to the terms and conditions set forth in the
Distribution Trust 

  
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Agreement. All proceeds derived from such causes of action shall constitute Distribution Trust Assets. Notwithstanding the foregoing or any other provision herein, the Distribution Trustee shall
not prosecute or pursue any Distribution Trust Actions against any Person that is a Protected Action Party. Notwithstanding the foregoing, the Distribution Trustee shall retain the right to assert any right of setoff or recoupment or any other
affirmative defense in connection with any Claim or cause of action asserted by the Protected Action Parties. 
  

	 	7.	Preservation of Rights of Action 

 The Reorganized Debtor shall retain and shall have the
exclusive right to enforce any and all claims, rights and causes of action arising from its Intellectual Property. Unless any Claims against a Person are expressly waived, relinquished, exculpated, released, compromised, transferred to the
Distribution Trust or settled in the Plan or by a Final Order, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtor shall retain and may enforce all rights to commence and pursue any and all retained causes of action,
whether arising before or after the Petition Date, and the Reorganized Debtor’s rights to commence, prosecute or settle such causes of action shall be preserved notwithstanding the occurrence of the Effective Date. 

 

	 	8.	Vesting of Property in Reorganized Debtor 

 On the Effective Date, except as otherwise
expressly provided in the Plan or Confirmation Order, all Estate Property, other than the Distribution Trust Assets, shall vest in the Reorganized Debtor free and clear of all Liens, Claims, and encumbrances of any kind, except as otherwise provided
in the Plan. Notwithstanding the foregoing, any sensitive information of the federal government, including Defense Advanced Research Projects Agency, the National Security Agency, or the Department of Defense which resides on the Debtor’s
servers shall not be included in the Estate Property which vests in the Reorganized Debtor. 
  

	 	9.	Tax Exemption 

 The Plan and the Confirmation Order provide for (a) the issuance,
transfer or exchange of notes, debt instruments and equity securities under or in connection with the Plan; (b) the creation, assignment, recordation or perfection of any lien, pledge, other security interest or other instruments of transfer;
(c) the making or assignment of any lease; (d) the creation, execution and delivery of any agreements or other documents creating or evidencing the formation of the Reorganized Debtor or the issuance or ownership of any interest in the
Reorganized Debtor; or (e) the making or delivery of any deed or other instrument of transfer under the Plan in connection with the vesting of the Estate’s assets in the Reorganized Debtor or the Distribution Trust pursuant to or in
connection with the Plan, including, without limitation, merger agreements, stock purchase agreement, agreements of consolidation, restructuring, disposition, liquidation or dissolution, and transfers of tangible property. Pursuant to section 1146
of the Bankruptcy Code and the Plan, any such act described or contemplated herein will not be subject to any stamp tax, transfer tax, filing or recording tax, or other similar tax. 

  
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	 	E.	Treatment of Executory Contracts and Unexpired Leases 

  

	 	1.	Assumption of Executory Contracts 

 On the Effective Date, and subject to section 8.6 of
the Plan, all Executory Contracts identified on the Schedule of Assumed Contracts and Unexpired Leases, attached as Exhibit B to the Plan, shall be deemed assumed by the Reorganized Debtor. The Plan Sponsor may amend the Schedule of Assumed
Contracts and Unexpired Leases through the deadline to file the Plan Supplement. Entry of the Confirmation Order shall constitute approval of the assumption of such Executory Contracts under sections 365 and 1123 of the Bankruptcy Code. 

The Reorganized Debtor will not assume any employment, severance, bonus, incentive, commission, compensation or similar agreement (or any
agreement outside the ordinary course of business) with any employees, officers or directors. To the extent the Debtor’s 401(k) Plan has not yet been formally rejected and/or terminated prior to the Effective Date, such 401(k) Plan is being
rejected by the Reorganized Debtor, and the Chapter 11 Trustee shall take all steps necessary prior to the Effective Date to effectuate termination of the 401(k) Plan. The Reorganized Debtor will not assume the Debtor’s employee handbook, if
any. 
  

	 	2.	Rejection of Executory Contracts 

 All Executory Contracts not identified on the Schedule
of Assumed Contracts and Unexpired Leases (or assumed by the Debtor previously) shall be deemed rejected on the Effective Date. Entry of the Confirmation Order shall constitute approval of such rejections under sections 365 and 1123 of the
Bankruptcy Code. Notwithstanding the rejection of an Executory Contract, the terms of any confidentiality agreement or covenant not to compete contained therein shall survive and remain in full force and effect. 

On the Effective Date, any and all equity based incentive plans or stock ownership plans of the Debtor entered into before the Effective Date,
or other agreements or documents giving rise to equity interests, including the contingent cash components of any such plans, agreements, or documents, shall be immediately terminated without any action of the Debtor, the Chapter 11 Trustee, the
Reorganized Debtor or the Plan Sponsor. To the extent such plans, agreements or documents are considered to be executory contracts, such plans, agreements or documents shall be deemed to be, and shall be treated as though they are, executory
contracts that are rejected pursuant to section 365 of the Bankruptcy Code under the Plan. Any Claims resulting from such rejection shall constitute subordinated claims pursuant to section 510(b) of the Bankruptcy Code, except that Claims for
contingent cash components of any such plans, agreements or documents shall constitute General Unsecured Claims. From and after the Effective Date, all stock options and other equity awards outstanding or issued at such time, whether included in a
contract, agreement or otherwise, will have no value, shall be cancelled and expire and thus will not entitle any holder thereof to purchase or otherwise acquire any equity interests in the Reorganized Debtor. 

  
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	 	3.	Procedures Related to Assumption of Executory Contracts 

  

	 	a)	Establishment of Cure Claim Amounts 

 The Cure Amounts associated with the assumption of the
Executory Contracts pursuant to Section 8.1 of the Plan are specified in the Schedule of Assumed Contracts and Unexpired Leases. The Chapter 11 Trustee shall serve counterparties to the Executory Contracts with a Notice of (I) Possible
Assumption of Contracts and Leases, (II) Fixing of Cure Amounts, and (III) Deadline to Object Thereto (the “Cure Notice”). The deadline for service of the Cure Notice is July 29, 2016. 

Any Objection to Cure Notice including (i) an objection to the applicable Cure Amount (a “Cure Objection”) and
(ii) an objection to the adequate assurance of future performance (the “Adequate Assurance Objection”) to be provided by the Plan Sponsor on behalf of the Reorganized Debtor must be in writing, filed with the Court, and served
upon (a) the Chapter 11 Trustee, (b) counsel to the Chapter 11 Trustee, (c) counsel to the Plan Sponsor, (d) the U.S. Trustee and (e) counsel to the Committee, if any, by no later than August 16, 2016. The objection
must set forth the specific default alleged under the applicable Assumed Contract or Unexpired Lease and claim a specific monetary amount that differs from the applicable Cure Amount, if any, and/or further information required of the Reorganized
Debtor with respect to adequate assurance of future performance. 
 If no Objection to the Cure Amount is received by the Objection Deadline
to an Assumed Contract or Lease, then the assumption of such Assumed Contract or Unexpired Lease shall be authorized pursuant to section 365 of the Bankruptcy Code and the applicable Cure Amount, if any, shall be binding upon the non-Debtor
counterparty to such Assumed Contract or Lease for all purposes and shall constitute a final determination of the cure amount required to be paid to such Assumed Contract or Unexpired Lease counterparty in connection with the assumption of such
Assumed Contract or Unexpired Lease, and the non-Debtor counterparty to such Assumed Contract or Unexpired Lease shall be deemed to have waived its right to object to, contest, condition, or otherwise restrict the assumption of such Assumed Contract
or Unexpired Lease (including, without limitation, from asserting any additional cure or other amounts with respect to the Assumed Contract or Unexpired Lease arising prior to such assumption). Furthermore, upon the assumption of such Assumed
Contract or Unexpired Lease, the Reorganized Debtor shall enjoy all of the Debtor’s rights and benefits thereunder without the necessity of obtaining any party’s written consent to the Debtor’s assumption of such rights and benefits.

  

	 	b)	Objection to Disputed Cure Amounts 

 The Plan Sponsor shall have the right to examine any
Objection to Cure Amount filed by any party, and shall have the right to object to and contest the Disputed Cure Amount asserted therein. 

If an objection to a Disputed Cure Amount has not been resolved by the Bankruptcy Court or agreement of the parties by the Effective Date, the
Executory Contract related to such Disputed Cure Amount shall be deemed assumed by the Reorganized Debtor effective on the Effective Date; provided, however, the Reorganized Debtor may revoke an assumption of any such Executory Contract within ten
(10) days after entry of an order by the Bankruptcy Court adjudicating the objection to the Disputed Cure Amount related to the Executory Contract by filing a notice of such revocation with the Bankruptcy Court and serving a copy on the
party(ies) whose Executory Contract is rejected. Any Executory Contract identified in a revocation notice shall be deemed rejected retroactively to the Effective Date 

  
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	 	c)	Payment of Cure Amounts 

 Within ten (10) Business Days after the Effective Date, the
Distribution Trustee shall pay, in Cash from Cash Consideration, all Cure Amounts, up to $250,000 (the “DT Payable Cure Amounts”), related to Executory Contracts listed on the Cure Notice, other than Disputed Cure Amounts. To the
extent that the Cure Amounts listed on the Cure Notice exceed $250,000, within ten (10) Business Days after the Effective Date, the Plan Sponsor shall pay, in Cash, all Cure Amounts, in excess of amounts paid by the Distribution Trustee, and in
excess of $250,000 (the “ESW Payable Cure Amounts”), other than the Disputed Cure Amounts. 
 Subject to
Section 8.3(b) of the Plan, the Distribution Trustee and/or the Plan Sponsor, as applicable and subject to whether such Cure Amounts are DT Payable Cure Amounts or ESW Payable Cure Amounts, shall pay all Cure Amounts that are subject to an
objection on the later of (i) within ten (10) Business Days after the Effective Date or (ii) within ten (10) Business Days after entry of an order by the Bankruptcy Court resolving the objection or approving an agreement between
the parties concerning the Cure Amount. 
 The Plan Sponsor, on account of payment of the ESW Payable Cure Amounts, shall be deemed to have,
without the need to file any proof of claim, an Allowed General Unsecured Claim in the actual amount that the Plan Sponsor paid as an ESW Payable Cure Amount (the “ESW Unsecured Claim”). The ESW Unsecured Claim shall be treated, for
all distribution purposes, as a Class 3 General Unsecured Claim. For example, if the Cure Amounts related to the Executory Contracts listed on the Schedule of Assumed Contracts and Unexpired Leases are $1,000,000, and the ESW Payable Cure Amounts is
$750,000, the ESW Unsecured Claim will also be $750,000. If Class 3 receives distributions of 90%, then the Plan Sponsor shall also receive a distribution of 90% on account of the ESW Unsecured Claim, or $675,000. 

 

	 	d)	No Admission of Liability. 

 Neither the inclusion nor exclusion of any Executory Contract by
the Chapter 11 Trustee and the Plan Sponsor on the Schedule of Assumed Contracts and Unexpired Leases, nor anything contained in the Plan, shall constitute an admission by the Chapter 11 Trustee and the Plan Sponsor that any such contract or
unexpired lease is in fact an Executory Contract or that the Debtor has any liability thereunder. 
  

	 	e)	Reservation of Rights. 

 Nothing in the Plan shall waive, excuse, limit, diminish, or otherwise
alter any of the defenses, claims, causes of action, or other rights of the Debtor under any executory or non-executory contract or any unexpired or expired lease, nor shall any provision of the Plan increase, augment, or add to any of the duties,
obligations, responsibilities, or liabilities of the Debtor under any such contract or lease. 

  
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	 	4.	Rejection Claim Bar Date 

 Each Claim resulting from the rejection of an Executory
Contract pursuant to Section 8.2 of the Plan shall be filed with the Bankruptcy Court no later than the Rejection Claim Bar Date; provided, however, any party whose Executory Contract is rejected pursuant to a revocation notice pursuant to
Section 8.3(b) of the Plan may file a rejection damage Claim arising out of such rejection within 30 days after the filing of the revocation notice with the Bankruptcy Court. Any Claim resulting from the rejection of an Executory Contract not
filed by the applicable deadline shall be discharged and forever barred, and shall not be entitled to any Distributions under the Plan. The Distribution Trustee shall have the right to object to any rejection damage Claim. 

 

	 	5.	Indemnification Obligations 

 Any obligation of the Debtor to indemnify, reimburse, or
limit the liability of any Person, including any officer or director of the Debtor, or any agent, professional, financial advisor, or underwriter of any securities issued by the Debtor, relating to any acts or omissions occurring before the
Effective Date, whether arising pursuant to charter, bylaws, contract or applicable state law, shall be deemed to be, and shall be treated as, an Executory Contract and shall be deemed to be rejected, canceled, and discharged pursuant to the Plan as
of the Effective Date. Notwithstanding any of the foregoing, nothing contained in the Plan impacts, impairs, or prejudices the rights of the Distribution Trustee to pursue the Distribution Trust Actions. 

 

	 	6.	Federal Government Rights 

 Notwithstanding any other provisions of the Plan, no
Executory Contract with or any sensitive information of the federal government, including Defense Advanced Research Projects Agency, the National Security Agency, or the Department of Defense shall be assumed by or transferred to the Reorganized
Debtor absent the express written consent of the federal government counterparty to such Executory Contract. 
  

	 	F.	Provisions Governing Distributions of Property 

  

	 	1.	Distributions Procedures Regarding Allowed Claims 

  

	 	a)	In General. 

 The Distribution Trustee shall make all Distributions required to be made under
the Plan, including Distributions from the Distribution Trust. 
  

	 	b)	Distributions on Allowed Claims Only. 

 Distributions from Available Cash shall be made only to
the holders of Allowed Claims and, if applicable, to Equity Interests. Until a Disputed Claim becomes an Allowed Claim, the holder of that Disputed Claim shall not receive a Distribution from Available Cash. No Distributions shall be made to holders
of Allowed Equity Interests unless and until holders of Allowed Claims have been paid in full and any Disputed Claims have been disallowed pursuant to an Order of the Bankruptcy Court. 

  
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	 	c)	Place and Manner of Payments of Distributions. 

 Except as otherwise specified in the Plan,
Distributions from Available Cash shall be made by mailing such Distribution to the Creditor or Interest Holder at the address listed in any proof of claim or interest filed by the Creditor or Interest Holder or at such other address as such
Creditor or Interest Holder shall have specified for payment purposes in a written notice received by the Distribution Trustee at least twenty (20) days before a Distribution Date. If a Creditor or Interest Holder has not filed a proof of claim
or interest or sent the Distribution Trustee a written notice of payment address, then the Distribution(s) for such Creditor or Interest Holder will be mailed to the address identified in the Schedules of Assets and Liabilities or as provided by the
Debtor’s stock transfer agent. The Distribution Trustee shall distribute any Cash by wire, check, or such other method as it deems appropriate under the circumstances. Before receiving any Distributions, all Creditors and Interest Holders, at
the request of the Distribution Trustee, must provide written notification of their respective Federal Tax Identification Numbers or Social Security Numbers to the Distribution Trustee; otherwise, the Distribution Trustee may suspend Distributions
to any Creditors or Interest Holders who have not provided their Federal Tax Identification Numbers or Social Security Numbers. 
  

	 	d)	Undeliverable Distributions. 

 If a Distribution made from Available Cash to any Creditor or
Interest Holder is returned as undeliverable, the Distribution Trustee shall use reasonable efforts to determine the then current address for such Creditor or Interest Holder. If the Distribution Trustee cannot determine, or is not notified of, a
then current address for such Creditor or Interest Holder within six months after the Effective Date, the Distribution reserved for such Creditor or Interest Holder shall be deemed an unclaimed Distribution, and Section 7.5(e) of the Plan shall
be applicable thereto. 
  

	 	e)	Unclaimed Distributions. 

 If the current address for a Creditor or Interest Holder entitled to
a Distribution from Available Cash under the Plan has not been determined within six months after the Effective Date or such Creditor or Interest Holder has otherwise not been located or submitted a valid Federal Tax Identification Number or Social
Security Number to the Distribution Trustee, then such Creditor or Interest Holder (i) shall no longer be a Creditor or Interest Holder (as applicable) and (ii) shall be deemed to have released such Claim. 

 

	 	f)	Withholding. 

 The Distribution Trustee may, but shall not be required to, at any time withhold
from a Distribution from Available Cash to any Person (except the Internal Revenue Service) amounts sufficient to pay any tax or other charge that has been or may be imposed on such Person with respect to the amount distributable or to be
distributed under the income tax laws of the United States or of any state or political subdivision or entity by reason of any Distribution provided for in the Plan, whenever such withholding is determined by the Distribution Trustee (in its sole
discretion) to be required by any law, regulation, rule, ruling, directive, or other governmental requirement. The Distribution Trustee, in the exercise of its sole discretion and judgment, may enter into agreements with taxing or other authorities
for the payment of such amounts that may be withheld in accordance with the provisions of this section. 

  
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	 	g)	Dissolution. 

 i. The Distribution Trustee and Distribution Trust shall be discharged or
dissolved, as the case may be, at such time as all of the Distribution Trust Assets have been distributed pursuant to the Plan and the Distribution Trust Agreement; provided, however, that in no event shall the Distribution Trust be dissolved later
than three (3) years from the creation of the Distribution Trust unless the Bankruptcy Court, upon motion within the six-month period prior to the third (3rd) anniversary (or within the six-month period prior to the end of an extension
period), determines that a fixed period extension (not to exceed three (3) years, together with any prior extensions, without a favorable private letter ruling from the Internal Revenue Service or an opinion of counsel satisfactory to the
Distribution Trustee that any further extension would not adversely affect the status of the trust as a liquidating trust for United States federal income tax purposes) is necessary to facilitate or complete the liquidation of the Distribution Trust
Assets. 
 ii. If at any time the Distribution Trustee determines, in reliance upon such professionals as a Distribution Trustee may retain,
that the expense of administering the Distribution Trust so as to make a final distribution to Distribution Trust Beneficiaries is likely to exceed the value of the assets remaining in the Distribution Trust, the Distribution Trustee may
(i) reserve any amount necessary to dissolve the Distribution Trust, (ii) donate any balance to a charitable organization (A) described in section 501(c)(3) of the Internal Revenue Code, (B) exempt from United States federal
income tax under section 501(a) of the Internal Revenue Code, (C) not a “private foundation,” as defined in section 509(a) of the Internal Revenue Code, and (D) that is unrelated to the Debtor, the Distribution Trust, and any
insider of the Distribution Trustee, and (iii) dissolve the Distribution Trust. 
  

	 	2.	Procedures Regarding Distributions from the Distribution Trust 

 Procedures regarding
Distributions from the Distribution Trust to holders of Class 3 Allowed General Unsecured Claims, Class 4 Allowed Intercompany Claims, and Class 5 Allowed Equity Interests shall be governed by the Distribution Trust Agreement. 

 

	 	G.	Procedures for Resolution of Disputed Claims 

  

	 	1.	Right to Object to Claims 

 The Plan Sponsor and the Reorganized Debtor shall have the
authority, but not the obligation, to object to, litigate, and, subject to the approval of the Chapter 11 Trustee or the Distribution Trustee (as applicable), settle, the amount, priority or the extent of any Administrative Claim, Secured Claim,
Priority Tax Claim, or Priority Unsecured Non-Tax Claim. Notwithstanding anything to the contrary herein, subject to the terms and conditions set forth in the Distribution Trust Agreement, and notwithstanding any requirements that may be imposed
pursuant to Bankruptcy Rule 9019, except insofar as a Claim is Allowed under the Plan on and after the Effective Date, the Distribution Trustee shall have the authority, but not the 

  
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obligation, to: (1) file, withdraw or litigate to judgment objections to and requests for estimation of Claims; (2) settle or compromise any Disputed Claim without any further notice to
or action, order or approval by the Bankruptcy Court; and (3) 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. The
Distribution Trustee shall succeed to any pending objections to Claims filed by the Chapter 11 Trustee prior to the Effective Date, and shall have and retain any and all rights and defenses the Debtor and/or the Estate had immediately prior to the
Effective Date with respect to any Disputed Claim, including the causes of action retained under the Plan. The Reorganized Debtor shall provide commercially reasonable assistance and cooperation to the Distribution Trustee in connection with the
Distribution Trustee’s prosecution of objections to Claims, including, without limitation, access to the books and records of the Debtor or the Reorganized Debtor (as the case may be) and other information reasonably requested by the
Distribution Trustee to enable the Distribution Trustee to perform its obligations under the Distribution Trust Agreement. 
  

	 	2.	Deadline for Objecting to Claims 

 Objections to Claims must be filed with the Bankruptcy
Court, and a copy of the objection must be served on the subject Creditor before the expiration of the Claim Objection Deadline (unless such period is further extended by subsequent orders of the Bankruptcy Court); otherwise such Claims shall be
deemed Allowed in accordance with section 502 of the Bankruptcy Code. The objection shall notify the Creditor of the deadline for responding to such objection. 
  

	 	3.	Deadline for Responding to Claim Objections 

 Within twenty (20) days after service
of an objection, or such other date as is indicated on such objection or the accompanying notice thereof, the Creditor whose Claim was objected to must file a written response to the objection with the Bankruptcy Court and serve a copy on the
Distribution Trustee. Failure to file a written response within the twenty (20) day time period shall may cause the Bankruptcy Court to enter a default judgment against the non-responding Creditor or granting the relief requested in the claim
objection. 
  

	 	4.	Right to Request Estimation of Claims 

 Pursuant to section 502(c) of the Bankruptcy
Code, the Debtor, the Reorganized Debtor, and the Distribution Trustee may request estimation or liquidation of any Disputed Claim that is contingent or unliquidated or any Disputed Claim arising from a right to an equitable remedy or breach of
performance. 
  

	 	H.	Injunctions, Releases, and Discharge 

  

	 	1.	Discharge and Release 

 To the fullest extent provided under section 1141(d)(1)(A) and
other applicable provisions of the Bankruptcy Code, except as otherwise expressly provided by the Plan or the Confirmation Order, all distributions under the Plan will be in exchange for, and in complete satisfaction, settlement, discharge, and
release of, all Claims and causes of action, 

  
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whether known or unknown, including any interest accrued on such Claims from and after the Petition Date, against, liabilities of, Liens on, obligations of, rights against, and Equity Interests
in the Debtor or any of its assets or properties, and regardless of whether any property will have been distributed or retained pursuant to the Plan on account of such Claims or Equity Interests. Except as otherwise expressly provided by the Plan or
the Confirmation Order, upon the Effective Date, the Debtor and its estate will be deemed discharged and released under and to the fullest extent provided under section 1141(d)(1)(A) and other applicable provisions of the Bankruptcy Code from any
and all Claims and Equity Interests of any kind or nature whatsoever, including, but not limited to, demands and liabilities that arose before the Confirmation Date, and all debts of the kind specified in section 502(g), 502(h), or 502(i) of the
Bankruptcy Code. The Confirmation Order shall be a judicial determination of the discharge of all Claims against and Equity Interests in the Debtor, subject to the occurrence of the Effective Date. 

 

	 	2.	Discharge Injunction 

 Except as otherwise expressly provided in the Plan, the
discharge and releases set forth in Section 11.1 shall also operate as an injunction permanently prohibiting and enjoining the commencement or continuation of any action or the employment of process with respect to, or any act to collect,
recover from, or offset (a) any Claim discharged and released in Section 11.1 (b) any cause of action, whether known or unknown, based on the same subject matter as any Claim discharged and released in Section 11.1. Except as
otherwise expressly provided in the Plan, all Persons shall be precluded and forever barred from asserting against the Protected Parties, their successors or assigns, or their assets, properties, or interests in property any other or further Claims,
or any other right to legal or equitable relief regardless of whether such right can be reduced to a right to payment, based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Effective Date,
whether or not the facts of or legal bases therefor were known or existed prior to the Effective Date 
  

	 	3.	Exculpation and Limitation of Liability 

 The Chapter 7 Trustees, the Chapter 11
Trustee and their respective professionals will neither have nor incur any liability to any entity for any claims or causes of action arising before, on or after the Petition Date and prior to or on the Effective Date for any act taken or omitted to
be taken in connection with, or related to formulating, negotiating, preparing, disseminating, implementing, administering, confirming or effecting the consummation of the Plan, the Disclosure Statement, or any other contract, instrument, release or
other agreement or document created or entered into in connection with the Plan or any other prepetition or postpetition act taken or omitted to be taken in connection with or in contemplation of the restructuring of the Debtor, the approval of the
Disclosure Statement or Confirmation or consummation of the Plan; provided, however, that the foregoing provisions will have no effect on the liability of any entity that results from any such act or omission that is determined in a Final Order of
the Bankruptcy Court or other court of competent jurisdiction to have constituted gross negligence or willful misconduct; 

  
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provided, further, that the Chapter 7 Trustee and the Chapter 11 Trustee will be entitled to rely upon the advice of counsel concerning their duties pursuant to, or in connection with, the above
referenced documents, actions or inactions. 
  

	 	4.	Releases by the Debtor 

 Notwithstanding anything to the contrary in the Plan or
the Confirmation Order, effective as of the Effective Date, for good and valuable consideration provided by each of the Released Parties, the adequacy of which is hereby acknowledged and confirmed, the Debtor will be deemed to have conclusively,
absolutely, unconditionally, irrevocably, and forever provided a full discharge, waiver and release to the Released Parties and their respective related parties (and each such Released Party and their respective related parties so released shall be
deemed forever released, discharged, and waived by the Debtor Releasing Parties) and their respective properties from any and all released claims that the Debtor and their respective related parties would have been legally entitled to assert in
their own right, on behalf of one another, or on behalf of another party against the Released Parties or their respective related parties; provided, however, that the foregoing provisions of this release shall not operate to waive or release
(i) any Distribution Trust Action expressly set forth in and preserved by the Plan or the Plan Supplement; (ii) the rights of the Debtor to enforce the Plan and the contracts, instruments, releases and other agreements or documents
delivered under or in connection with the Plan or assumed pursuant to the Plan or assumed pursuant to final order of the Bankruptcy Court; and/or (iii) any claims or defenses against third party. 

The foregoing release shall be effective as of the Effective Date without further notice to or order of the Bankruptcy Court, act or
action under applicable law, regulation, order, or rule or the vote, consent, authorization or approval of any person and the Confirmation Order will permanently enjoin the commencement or prosecution by any person or entity, whether directly,
derivatively or otherwise, of any claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action, or liabilities released pursuant to this release. for purposes of this release, and without limiting the scope of the
foregoing, the Debtor is specifically not releasing the Distribution Trust Actions. 
  

	 	5.	Releases by Third Party 

 To the extent allowed by applicable law, on, and as of,
the Effective Date and for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Protected Parties (acting in any capacity whatsoever) shall be forever released and discharged from any and all claims,
obligations, actions, suits, rights, debts, accounts, causes of action, remedies, avoidance actions, agreements, promises, damages, judgments, demands, defenses, or claims in respect of equitable subordination, and liabilities throughout the world
under any law or court ruling through the Effective Date (including all claims based on or arising out of facts or circumstances that existed as of or prior to the Plan in the Bankruptcy Case, including claims based on negligence or strict
liability, and further including any derivative claims asserted on behalf of the Debtor, whether known or unknown, foreseen or unforeseen, existing or hereinafter arising, in law, equity or otherwise, that the Debtor, its Estate, or the Reorganized
Debtor would have been legally 

  
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entitled by applicable law to assert in its own right, whether individually or collectively) which the Debtor, its Estate, the Reorganized Debtor, Creditors or other persons receiving or who
are entitled to receive Distributions under the Plan may have against any of them in any way related to the Bankruptcy Case or the Debtor (or its predecessors); provided, however, the releases provided for in this paragraph shall not extend to any
claims by any Governmental Unit with respect to criminal liability under applicable law, willful misconduct or bad faith under applicable law, or ultra vires acts under applicable law. No compliance with or
reliance on the applicable law or the orders of the Bankruptcy Court shall be deemed or permitted to be judged, declared, or ruled to be in any way wrongful, in bad faith, ultra vires, inequitable or otherwise
subject to any sanction or punishment, all of which are preempted, superseded and negated by the Plan to the maximum extent permitted by applicable law. 

A vote to accept the plan, or failure to vote by a creditor entitled to vote, constitutes an acceptance of all of the terms and
provisions contained in the Plan, including, but not limited to, the grant of releases, injunctions, exculpation, exoneration and other limitations of liability in the Plan. If a Creditor votes to reject the Plan, the Creditor may nevertheless be
deemed to be bound to the releases and be bound by the injunctions, exculpations, and other limitations of liability in the Plan to the maximum extent permitted by law, as later determined by the Court. Notwithstanding the foregoing, if a Creditor
elects not to grant the releases contained in section 11.5 of the Plan, then the Creditor must opt-out in the Ballot. Election to withhold consent is at the Creditor’s option. 

For the avoidance of doubt, nothing in Article XI of the Plan (as set forth above) shall prevent the enforcement of the terms of the
Plan. 

  
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	 	I.	Conditions to Confirmation and Effectiveness 

  

	 	1.	Conditions to Confirmation 

 The Confirmation Order will not be effective unless
(a) the Confirmation Order shall be in form and substance acceptable to the Plan Sponsor, in its reasonable discretion, and shall provide for the Plan Sponsor and the Post-Petition Lender to acquire the New Equity subject to the Subscription
Option, free and clear of all Liens, Claims, Equity Interests and encumbrances of any kind, except as otherwise provided in the Plan, and (b) the final version of the Plan, Plan Supplement, and any other documents, or schedules thereto, shall
have been filed in form and substance acceptable to the Plan Sponsor in its reasonable discretion. 
  

	 	2.	Conditions to Effectiveness 

 The Plan will not be effective unless (a) the
conditions to confirmation above have been either satisfied, or waived, by the Plan Sponsor, (b) the Confirmation Order has been entered by the Bankruptcy Court, and no stay or injunction is in effect with respect thereto, (c) Plan Sponsor
and the Post-Petition Lender shall acquire the New Equity subject to the Subscription Option, free and clear of all Liens, Claims, Equity Interests and encumbrances of any kind, except as otherwise provided in the Plan, and (d) no material
adverse change or development shall have occurred with respect to the Debtor’s Intellectual Property or capital structure of the Debtor. 
  

	 	J.	Modification, Revocation or Withdrawal of the Plan 

  

	 	1.	Defects, Omissions, and Amendments of the Plan 

 The Chapter 11 Trustee may, with the
approval of the Bankruptcy Court and without notice to holders of Claims and Equity Interests, insofar as it does not materially and adversely affect holders of Claims and Equity Interests, correct any defect, omission, or inconsistency in the Plan
in such a manner and to such extent necessary or desirable to expedite the execution of the Plan. The Chapter 11 Trustee may propose amendments or alterations to the Plan before the Confirmation Hearing as provided in section 1127 of the Bankruptcy
Code if, in the opinion of the Bankruptcy Court, the modification does not materially and adversely affect the interests of holders of Claims and Equity Interests, so long as the Plan, as modified, complies with sections 1122 and 1123 of the
Bankruptcy Code and the Chapter 11 Trustee has complied with section 1125 of the Bankruptcy Code. The Chapter 11 Trustee may propose amendments or alterations to the Plan after the Confirmation Date but prior to substantial consummation, in a manner
that, in the opinion of the Bankruptcy Court, does not materially and adversely affect holders of Claims and Equity Interests, so long as the Plan, as modified, complies with sections 1122 and 1123 of the Bankruptcy Code, the Chapter 11 Trustee has
complied with section 1125 of the Bankruptcy Code, and after notice and a hearing, the Bankruptcy Court confirms such Plan, as modified, under section 1129 of the Bankruptcy Code. 

 

	 	2.	Withdrawal of the Plan 

 The Chapter 11 Trustee reserves the right to withdraw the Plan
at any time prior to the Confirmation Date. If the Chapter 11 Trustee withdraws the Plan prior to the Confirmation Date, or if the Confirmation Date does not occur by August 31, 2016, unless extended by mutual

  
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agreement of the Chapter 11 Trustee or the Plan Sponsor, or the Effective Date does not occur by September 30, 2016, unless extended by mutual agreement of the Chapter 11 Trustee or the Plan
Sponsor, then the Plan shall be deemed null and void. In such event, nothing contained herein shall be deemed to constitute an admission, waiver or release of any claims by or against the Debtor or any other person, or to prejudice in any manner the
rights of the Chapter 11 Trustee, the Debtor’s Estate, or any person in any further proceedings involving the Debtor. 
  

	 	K.	Retention of Jurisdiction 

  

	 	1.	Bankruptcy Court Jurisdiction 

 Notwithstanding the entry of the Confirmation Order or
the occurrence of the Effective Date, the Bankruptcy Court shall retain and have such jurisdiction over the Bankruptcy Case to the maximum extent as is legally permissible, including, without limitation, for the following purposes: 

 

	 	a.	To allow, disallow, determine, liquidate, classify or establish the priority or secured or unsecured status of or estimate any Right of Action, Claim or Equity Interest, including, without limitation, the resolution of
any request for payment of any Administrative Claim and the resolution of any and all objections to the allowance or priority of Claims or Equity Interests; 

  

	 	b.	To ensure that Distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan; 

  

	 	c.	To determine any and all applications or motions pending before the Bankruptcy Court on the Effective Date of the Plan, including without limitation any motions for the rejection, assumption or assumption and assignment
of any Executory Contract; 

  

	 	d.	To consider and approve any modification of the Plan, remedy any defect or omission, or reconcile any inconsistency in the Plan, or any order of the Bankruptcy Court, including the Confirmation Order; 

 

	 	e.	To determine all controversies, suits and disputes that may arise in connection with the interpretation, enforcement or consummation of the Plan or any Plan Documents or any entity’s obligations in connection with
the Plan or any Plan Documents, or to defend any of the rights, benefits, Estate Property transferred, created, or otherwise provided or confirmed by the Plan or the Confirmation Order or to recover damages or other relief for violations thereof;

  

	 	f.	To consider and act on the compromise and settlement of any claim or cause of action by or against the Debtor, the Estate, the Reorganized Debtor or the Distribution Trust; 

 

	 	g.	To decide or resolve any and all applications, motions, adversary proceedings, contested or litigated matters, and any other matters, or grant or deny any applications involving the Debtor, the Chapter 11 Trustee, or
the Estate that may be pending on the Effective Date or that may be brought by the Reorganized Debtor, the Chapter 11 Trustee, or the Distribution Trustee (as applicable), including any Distribution Trust Actions, or any other related proceedings by
the Reorganized Debtor, and to enter and enforce any default judgment on any of the foregoing; 

  
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	 	h.	To decide or resolve any and all applications filed by the Chapter 7 Trustee or the Chapter 11 Trustee for compensation; 

  

	 	i.	To issue orders in aid of execution and implementation of the Plan or any Plan Documents to the extent authorized by section 1142 of the Bankruptcy Code or provided by the terms of the Plan; 

 

	 	j.	To decide issues concerning the federal or state tax liability of the Debtor which may arise in connection with the confirmation or consummation of the Plan or any Plan Documents; 

 

	 	k.	To interpret and enforce any orders entered by the Bankruptcy Court in the Bankruptcy Case; and 

  

	 	l.	To enter an order closing this Bankruptcy Case when all matters contemplating the use of such retained jurisdiction have been resolved and satisfied. 

 

	 	2.	Limitations on Jurisdiction 

 In no event shall the provisions of the Plan be deemed to
confer in the Bankruptcy Court jurisdiction greater than that established by the provisions of 28 U.S.C. §§ 157 and 1334, as well as the applicable circumstances that continue jurisdiction for defense and enforcement of the Plan and Plan
Documents. For the avoidance of doubt, however, such jurisdiction shall be deemed, by the entry of the Confirmation Order, to: 
  

	 	a.	Permit entry of a final judgment by the Bankruptcy Court in any core proceeding referenced in 28 U.S.C. § 157(b) and to hear and resolve such proceedings in accordance with 28 U.S.C. § 157(c) and any and all
related proceedings, including, without limitation, (i) all proceedings concerning disputes with, or Rights of Action or Claims against, any Person that the Debtor, the Estate, the Distribution Trust or the Reorganized Debtor or any of their
successors or assigns, may have, and (ii) any and all Rights of Action or other Claims against any Person for harm to or with respect to (x) any Estate Property, including any infringement of intellectual property or conversion of Estate
Property, or (y) any Estate Property liened or transferred by the Debtor to any other Person; 

  

	 	b.	Include jurisdiction over the recovery of any Estate Property (or property transferred by the Debtor with Bankruptcy Court approval) from any Person wrongly asserting ownership, possession or control of the same,
whether pursuant to sections 542, 543, 549, 550 of the Bankruptcy Code or otherwise, as well as to punish any violation of the automatic stay under section 362 of the Bankruptcy Code or any other legal rights of the Debtor or the Estate under or
related to the Bankruptcy Code; and 

  

	 	c.	Permit the taking of any default judgment against any Person who has submitted himself or herself to the jurisdiction of the Bankruptcy Court. 

  
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	V.	POST-EFFECTIVE DATE OPERATIONAL/FINANCIAL INFORMATION 

 The Chapter 11 Trustee and
Plan Sponsor believe that the Plan meets the feasibility requirement set forth in section 1129(a)(11) of the Bankruptcy Code, as Confirmation is not likely to be followed by liquidation or the need for further financial reorganization of the
Reorganized Debtor. In connection with the development of the Plan and for the purposes of determining whether the Plan satisfies this feasibility standard, the ability of the Reorganized Debtor to satisfy its financial obligations while maintaining
sufficient liquidity and capital resources has been examined. 
 In particular, the Plan Sponsor and its affiliates have acquired more than
30 distressed software-related companies in the past 5 years. The Plan Sponsor and its affiliates are experienced in successfully turning around distressed situations to generate sustainable profits. The Plan Sponsor has committed to providing the
Plan Consideration to acquire the Debtor and its assets, through acquisition of the New Equity. The Plan Sponsor believes that under its management, the Reorganized Debtor will enhance its relationships with its employees, customers and vendors,
while simultaneously engaging in cost-cutting efforts to drive efficiency and profitability. The Plan Sponsor possesses more than $20 million of liquidity and believes that it will be able to leverage its relationships, expertise and know-how to
help the Reorganized Debtor thrive. Accordingly, the Plan Sponsor is confident that the Reorganized Debtor will be feasible going forward, and will not require a further reorganization. Further, no Distributions to Creditors or Interest Holders are
dependent on any metrics related to the Reorganized Debtor, such as the Reorganized Debtor’s profitability. 
  

	VI.	RISK FACTORS 

  

	 	A.	Risks Related to Bankruptcy 

  

	 	1.	Parties May Object to the Plan’s Classification of Claims and Equity Interests 

Section 1122 of the Bankruptcy Code provides that a plan may place a claim or an interest in a particular class only if such claim or
interest is substantially similar to the other claims or interests in such class. The Chapter 11 Trustee believes that the classification of the Claims and Equity Interests under the Plan complies with the requirements set forth in the Bankruptcy
Code because the Chapter 11 Trustee created Classes of Claims and Equity Interests, each encompassing Claims or Equity Interests, as applicable, that are substantially similar to the other Claims or Equity Interests in each such Class. Nevertheless,
there can be no assurance that the Bankruptcy Court will reach the same conclusion. 
  

	 	2.	The Chapter 11 Trustee May Not Be Able to Obtain Confirmation of the Plan 

 With regard
to any proposed plan of reorganization, the Chapter 11 Trustee may not receive the requisite acceptances to confirm a plan. In the event that votes from Claims in Class 3 entitled to vote are received in number and amount sufficient to enable the
Bankruptcy Court to confirm the Plan, the Chapter 11 Trustee intends to seek Confirmation of the Plan by the Bankruptcy Court. 

  
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 Even if the requisite acceptances of a proposed plan are received, the Bankruptcy Court might
not confirm the Plan as proposed if the Bankruptcy Court finds that any of the statutory requirements for confirmation under section 1129 of the Bankruptcy Code have not been met. 

 

	 	3.	The Conditions Precedent to the Effective Date of the Plan May Not Occur 

 As more
fully set forth in the Plan, the Effective Date is subject to certain conditions precedent. If such conditions precedent are not met or waived, the Effective Date will not occur. 

 

	 	4.	Risks Associated with Proving and Collecting Claims Asserted in Litigation 

 The ultimate
recoveries under the Plan to holders of Equity Interests depends in part upon the ability of the Distribution Trustee to realize favorable litigation outcomes or settlements of Distribution Trust Actions. It is extremely difficult to place a value
on litigation, and litigation outcomes cannot be predicted. It is possible that the Distribution Trust may recover nothing at all, or very little, on account of such litigation. 

The risks in such litigation include, but are not limited to, risks associated with defenses and counter-claims of opposing parties to the
litigation, the delay and expense associated with discovery and trial of factually intensive and complex disputes, and the additional delay and expense inherent in appellate review. 

 

	 	5.	Allowed Claims May Substantially Exceed Estimates 

 The projected distributions set forth
in this Disclosure Statement are based upon, among other things, good faith estimates of the total amounts of Claims that will ultimately be Allowed. The actual amount of Allowed Claims could be materially greater than anticipated, which will impact
the distributions to be made to holders of Claims and Equity Interests. 
 As of the date of this writing, the aggregate total dollar amount
of filed priority and general unsecured claims is approximately $9.8 million. The aggregate total dollar amount of filed claims is likely to increase prior to the expiration of the Court established claims bar date. The Chapter 11 Trustee (and
subsequently, the Distribution Trustee) will reconcile filed claims and reserve the right to object or compromise any filed claims on all applicable grounds. 
  

	 	B.	Risks Related to Financial Information 

 The financial information contained in this
Disclosure Statement has not been audited. In preparing this Disclosure Statement, the Chapter 11 Trustee relied on financial data derived from the Debtor’s books and records and schedules and statements that was available at the time of such
preparation. Although the Chapter 11 Trustee has used reasonable efforts to assure the accuracy of the financial information provided in this Disclosure Statement the Chapter 11 Trustee is unable to warrant or represent that the financial
information contained herein and attached hereto is without inaccuracies. 

  
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	VII.	CONFIRMATION OF THE PLAN 

  

	 	A.	The Confirmation Hearing 

 Section 1128(a) of the Bankruptcy Code requires the
Bankruptcy Court, after notice, to hold a hearing on Confirmation of the Plan. Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to Confirmation of the Plan. 

The Bankruptcy Court has scheduled the Confirmation Hearing to commence on August 25, 2016 at 10:00 a.m. (Eastern Time), before the Honorable
Kevin J. Carey, United States Bankruptcy Judge, in the United States Bankruptcy Court for the District of Delaware, 824 North Market Street, 5th Floor, Wilmington, Delaware 19801. The Confirmation Hearing may be adjourned from time to time without
further notice except for an announcement of the adjourned date made at the Confirmation Hearing or any adjournment thereof. 
 Objections
to Confirmation of the Plan must be filed and served by no later than August 18, 2016 at 12:00 p.m. (Eastern Time). Unless objections to Confirmation of the Plan are timely served and filed in compliance with the Disclosure Statement Order, they
may not be considered by the Bankruptcy Court. 
  

	 	B.	Requirements for Confirmation of the Plan 

 Among the requirements for the Confirmation
of the Plan is that the Plan (i) is accepted by all Impaired Classes of Claims or Equity Interests, or, if rejected by an Impaired Class of Claims or Equity Interests, that the Plan “does not discriminate unfairly” and is “fair
and equitable” as to such Impaired Class of Claims or Equity Interests; (ii) is feasible; and (iii) is in the “best interests” of Holders of Claims or Equity Interests. 

At the Confirmation Hearing, the Bankruptcy Court will determine whether the Plan satisfies the requirements of section 1129 of the Bankruptcy
Code. The Chapter 11 Trustee believes that: (i) the Plan satisfies or will satisfy all of the necessary statutory requirements of chapter 11 of the Bankruptcy Code; (ii) the Chapter 11 Trustee has complied or will have complied with all of
the necessary requirements of chapter 11 of the Bankruptcy Code; and (iii) the Plan has been proposed in good faith. Specifically, in addition to other applicable requirements, the Chapter 11 Trustee believes that the Plan satisfies or will
satisfy the following applicable Confirmation requirements of section 1129 of the Bankruptcy Code: 
  

	 	•	 	The Plan complies with the applicable provisions of the Bankruptcy Code. 

  

	 	•	 	The Chapter 11 Trustee, as a plan proponent, has complied with the applicable provisions of the Bankruptcy Code. 

  

	 	•	 	The Plan has been proposed in good faith and not by any means forbidden by law. 

  

	 	•	 	 Any payment made or promised under the Plan for services or for costs and

  
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expenses in, or in connection with, the Bankruptcy Case, or in connection with the Plan and incident to the Bankruptcy Case, has been disclosed to the Bankruptcy Court, and any such payment:
(1) made before the Confirmation of the Plan is reasonable; or (2) is subject to the approval of the Bankruptcy Court as reasonable, if it is to be fixed after Confirmation of the Plan. 

 

	 	•	 	Either each holder of a Claim in an Impaired Class has accepted the Plan, or will receive or retain under the Plan on account of such Claim or Equity Interest property of a value, as of the Effective Date of the Plan,
that is not less than the amount that such holder would receive or retain if the Debtor were liquidated on the Effective Date of the Plan under chapter 7 of the Bankruptcy Code. 

 

	 	•	 	Each Class of Claims that is entitled to vote on the Plan will have accepted the Plan. 

  

	 	•	 	Except to the extent a different treatment is agreed to, the Plan provides that all Administrative Claims and Allowed Priority Claims will be paid in full on the Effective Date, or as soon thereafter as is reasonably
practicable. 

  

	 	•	 	At least one Class of Impaired Claims will have accepted the Plan, determined without including any acceptance of the Plan by any insider holding a Claim in that Class. 

 

	 	•	 	Confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of the Debtor or any successors thereto. 

 

	 	•	 	All accrued and unpaid fees of the type described in 28 U.S.C. § 1930, including the fees of the U.S. Trustee, will be paid as of the Effective Date. 

 

	 	C.	Best Interests of Creditors / Liquidation Analysis 

 Often called the “best
interests of creditors” test, section 1129(a)(7) of the Bankruptcy Code requires that a Bankruptcy Court find, as a condition to confirmation of a chapter 11 plan, that the plan provides, with respect to each impaired class, that each holder of
a claim or an interest in such class either (i) has accepted the plan or (ii) will receive or retain under the plan property of a value that is not less than the amount that such holder would receive or retain if the debtor liquidated
under chapter 7 on the Effective Date. To make these findings, the Bankruptcy Court must: (a) estimate the cash liquidation proceeds that a chapter 7 trustee would generate if the Chapter 11 Case was converted to a chapter 7 case on the
Effective Date and the assets of the Debtor’s Estate were liquidated; (b) determine the liquidation distribution that each non-accepting holder of a Claim or an Equity Interest would receive from such liquidation proceeds under the
priority scheme dictated in chapter 7; and (c) compare the holder’s liquidation distribution to the distribution under the Plan that the holder would receive if the Plan were confirmed and consummated. 

  
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 In this particular case, the analysis is straightforward because the Debtor was previously in
Chapter 7 bankruptcy. The highest offer that contemplated a purchase of the Debtor’s assets in chapter 7 was for $3,800,000. Conversely, by this Plan, the Debtor is being reorganized and the Estate is receiving Cash Consideration of $6,875,000.
In addition, because the chapter 11 administrative expenses are being funded by the Post-Petition Lender and are not being satisfied from the Cash Consideration, holders of Allowed Claims and Equity Interests stand to receive approximately
$3,075,000 more in aggregate distributions in chapter 11 than they would if the Debtor’s case had remained in chapter 7. 
 As further
support, the Chapter 11 Trustee has attached hereto as Exhibit B a liquidation analysis prepared by his professionals. Based on the foregoing and the liquidation analysis, the Chapter 11 Trustee believes that holders of Claims and
Equity Interests will receive greater value as of the Effective Date under the Plan than such holders would receive in a chapter 7 liquidation. 
  

	 	D.	Feasibility 

 Section 1129(a)(11) of the Bankruptcy Code requires that confirmation
of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization of the Debtor, or any successor to the Debtor (unless such liquidation or reorganization is proposed in the plan). To determine whether the
Plan meets this feasibility requirement, the Chapter 11 Trustee and Plan Sponsor have analyzed the ability of the Reorganized Debtor to meet its obligations under the Plan. Further, as discussed in Article V of this Disclosure Statement, the Chapter
11 Trustee and Plan Sponsor believe that the Reorganized Debtor will be viable following the Effective Date, and that the Plan therefore meets the feasibility requirements of the Bankruptcy Code. The Chapter 11 Trustee shall present further
information and evidence regarding feasibility as may be necessary in connection with Confirmation of the Plan. 
  

	 	E.	Acceptance by Impaired Classes 

 The Bankruptcy Code requires, as a condition to
confirmation, that, except as described in the following section, each class of claims or interests that is impaired under a plan accept the plan. A class that is not “impaired” under a plan is deemed to have accepted the plan and,
therefore, solicitation of acceptances with respect to such class is not required. 
 A class is “impaired” unless a plan:
(a) leaves unaltered the legal, equitable and contractual rights to which the claim or the interest entitles the holder of such claim or interest; or (b) cures any default, reinstates the original terms of such obligation, compensates the
holder for certain damages or losses, as applicable, and does not otherwise alter the legal, equitable or contractual rights to which such claim or interest entitles the holder of such claim or interest. 

Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of impaired claims as acceptance by holders of at least
two-thirds in dollar amount and more than one-half in number of allowed claims in that class, counting only those claims that actually voted to accept or reject the plan. Thus, a Class of Impaired Claims will have voted to accept the Plan only if
two-thirds in amount and a majority in number actually voting cast their Ballots in favor of acceptance. 

  
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	 	F.	Confirmation Without Acceptance by All Impaired Classes 

 Section 1129(b) of the
Bankruptcy Code allows a Bankruptcy Court to confirm a plan even if all impaired classes have not accepted it, provided that the plan has been accepted by at least one impaired class, determined without including the acceptance of the plan by
any insider. Notwithstanding an impaired class’s rejection or deemed rejection of the plan, such plan will be confirmed, at the plan proponent’s request, in a procedure commonly known as “cramdown,” so long as the plan does not
“discriminate unfairly” (as discussed below) and is “fair and equitable” (as discussed below) with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. 

To the extent that any Impaired Class rejects the Plan or is deemed to have rejected the Plan, to the extent applicable, the Chapter 11
Trustee shall request Confirmation of the Plan under section 1129(b) of the Bankruptcy Code. The Chapter 11 Trustee reserves the right to alter, amend, modify, revoke, or withdraw the Plan, the Plan Supplement, or any schedule or exhibit, including
to amend or modify it to satisfy the requirements of section 1129(b) of the Bankruptcy Code, if necessary, subject to the written approval of the Plan Sponsor. 
  

	 	1.	No Unfair Discrimination 

 The “unfair discrimination” test applies to classes
of claims or interests that reject or are deemed to have rejected a plan and that are of equal priority with another class of claims or interests that is receiving different treatment under such plan. The test does not require that the treatment of
such classes of claims or interests be the same or equivalent, but that such treatment be “fair.” In general, bankruptcy courts consider whether a plan discriminates unfairly in its treatment of classes of claims of equal rank
(e.g., classes of the same legal character). Bankruptcy courts will take into account a number of factors in determining whether a plan discriminates unfairly, and, accordingly, a plan could treat two classes of unsecured creditors
differently without unfairly discriminating against either class. The Chapter 11 Trustee submits that if the Chapter 11 Trustee “crams down” the Plan pursuant to section 1129(b) of the Bankruptcy Code, the Plan is structured such that it
does not “discriminate unfairly” against any rejecting Class. 
  

	 	2.	Fair and Equitable Test 

 The “fair and equitable” test applies to classes that
reject or are deemed to have rejected a plan and are of different priority and status vis-à-vis another class (e.g., secured versus unsecured claims, or unsecured claims versus equity interests), and includes the general requirement
that no class of claims receive more than 100% of the amount of the allowed claims in such class, including interest. As to the rejecting class, the test sets different standards depending upon the type of claims or interests in such rejecting
class. The Chapter 11 Trustee submits that if the Chapter 11 Trustee “crams down” the Plan pursuant to section 1129(b) of the Bankruptcy Code, the Plan is structured such that the applicable “fair and equitable” standards are
met. 

  
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	VIII.	TAX CONSEQUENCES OF THE PLAN 

 THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
ARE COMPLEX. ALL HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTOR SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND OF ANY CHANGE IN APPLICABLE TAX LAWS. 
  

	IX.	CERTAIN SECURITIES LAW MATTERS 

  

	 	A.	In General 

 The Plan provides for the establishment of the Distribution Trust and for
the issuance of Beneficial Interests therein. In general, beneficial interests in trusts may sometimes be subject to regulation under applicable federal and state securities laws. However, as discussed herein, the Chapter 11 Trustee does not believe
that the Beneficial Interests constitute “securities” for purposes of applicable nonbankruptcy law. Alternatively, even if the Beneficial Interests were to constitute “securities,” the Chapter 11 Trustee believes that they would
be exempt from registration pursuant to Bankruptcy Code section 1145(a)(1). 
 Further, as provided in Section 13.4 of the Plan, the
Chapter 11 Trustee believes that the New Equity in the Reorganized Debtor and the offering and issuance thereof shall be exempt from Section 5 of the Securities Act of 1933, if applicable, and from any state or federal securities laws requiring
registration for offer or sale of a security or registration or licensing of an issuer of, underwriter of, or broker or dealer in, a security, and shall otherwise enjoy all exemptions available for Distributions of securities under a plan of
reorganization in accordance with all applicable law, including, without limitation, section 1145 of the Bankruptcy Code. As set forth in Section 13.4 of the Plan, if the issuance of the New Equity does not qualify for an exemption under
section 1145 of the Bankruptcy Code, the New Equity shall be issued in a manner, which qualifies for any other available exemption from registration, whether as a private placement under Rule 506 of the Securities Act, Section 4(2) of the
Securities Act, and/or the safe harbor provisions promulgated thereunder. 
  

	 	B.	Distribution Trust Related Matters 

  

	 	1.	Initial Issuance of Beneficial Interests 

 Unless an exemption is available, the offer
and sale of a security generally is subject to registration with the United States Securities and Exchange Commission (the “SEC”) under Section 5 of the Securities Act of 1933, as amended (the “Securities
Act”). In the opinion of the Chapter 11 Trustee, and based on “no action” letters by the SEC, the Beneficial Interests will not be considered “securities” within the definition of Section 2(11) of the Securities Act
and corresponding definitions under state securities laws and regulations (“Blue Sky Laws”) because the Beneficial Interests will be uncertificated and non-transferable other than by operation of law. Accordingly, the Beneficial
Interests should be issuable in accordance with the Plan without registration under the Securities Act or any Blue Sky Law. 

  
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 Alternatively, in the event that the Beneficial Interests are deemed to constitute
securities, section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a plan of reorganization from registration under the Securities Act and Blue Sky Laws if three principal requirements are satisfied: 

A. the securities are offered and sold under a plan of reorganization and are securities of the debtor, of an affiliate of the debtor
participating in a joint plan with the debtor, or of a successor to the debtor under the plan; 
 B. the recipients of the securities hold a
pre-petition or administrative claim against the debtor or an interest in the debtor; and 
 C. the securities are issued entirely in
exchange for recipient’s claim against or interest in the debtor, or principally in such exchange and partly for cash or property. 

If and to the extent that the Beneficial Interests may constitute securities, the Chapter 11 Trustee believes that these beneficial interests
issued in respect of certain Allowed Claims and Equity Interests will qualify as securities “of the debtor ... or of a successor to the debtor” pursuant to section 1145(a)(1). In addition, the Beneficial Interests will be issued
entirely in exchange for such Claims and Equity Interests. Thus, the Chapter 11 Trustee believes that the issuance of the Beneficial Interests pursuant to the Plan will satisfy the applicable requirements of section 1145(a)(1) of the Bankruptcy
Code, and that such issuance should be exempt from registration under the Securities Act and any applicable Blue Sky Law. 
 The Chapter 11
Trustee believes that their reliance upon the foregoing exemptions in respect of the issuance of the Beneficial Interests is consistent with positions taken by the SEC with respect to similar transactions and arrangements by other chapter 11
trustees. However, the Chapter 11 Trustee has not sought any “no-action” letter by the SEC with respect to any such matters, and therefore no assurance can be given regarding the availability of any exemptions from registration with
respect to any securities, if any, issued pursuant to the Plan. 
  

	 	2.	Resales 

 The Beneficial Interests will be subject to transfer restrictions under the
terms of the Distribution Trust Agreement. As provided in said agreement, generally, the Beneficial Interests cannot be assigned or transferred other than by operation of law, and will not be represented by certificates. 

 

	 	3.	Exchange Act Compliance 

 Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), applies only to a company that has both (i) total assets in excess of $10.0 million and (ii) a class of equity securities held of record by more than 2,000 persons or 500 persons who are not
accredited investors (within 120 days after the last day of the company’s fiscal year). The Chapter 11 Trustee believes it unlikely condition (i) will be deemed satisfied in respect to the 

  
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Distribution Trust and Beneficial Interests, and in any event, the Distribution Trust should not be required to register under Section 12(g) of the Exchange Act. The Chapter 11 Trustee
understands that the staff of the SEC has issued no-action letters with respect to the non-necessity of Exchange Act registration of a bankruptcy plan trust when the following are true: 

A. the beneficial interests in the trust are not represented by certificates or, if they are, the certificates bear a legend
stating that the certificates are transferable only upon death or by operation of law; 
 B. the trust exists only to effect
a liquidation and will terminate within a reasonable period of time; and 
 C. the trust will issue annual unaudited
financial information to all beneficiaries. 
 Based on the foregoing, the Chapter 11 Trustee believes that the Distribution Trust will not
be subject to registration under the Exchange Act. However, the views of the SEC on the matter have not been sought by the Chapter 11 Trustee and, therefore, no assurance can be given regarding this matter. 

 

	 	4.	Compliance if Required 

 Notwithstanding the preceding discussion, if the Distribution
Trustee, in relation to the Distribution Trust, determines, with the advice of counsel, that the Distribution Trust is required to comply with the registration and reporting requirements of the Exchange Act, then prior to the registration of the
Distribution Trust under the Exchange Act, the Distribution Trustee (subject to the terms of the Distribution Trust Agreement) will seek to amend the Distribution Trust Agreement, to make such changes as are deemed necessary or appropriate to ensure
that the Distribution Trust is not subject to registration or reporting requirements of the Exchange Act. The Distribution Trust Agreement, as so amended, will be effective after notice and opportunity for a hearing, and the entry of an order of the
Bankruptcy Court. 
 If the Distribution Trust Agreement, as amended, is not approved by the Bankruptcy Court or the Bankruptcy Court
otherwise determines in a Final Order that registration under the Exchange Act (or any other related or similar federal laws) is required, then the Distribution Trustee will take such actions as may be required to satisfy the registration and
reporting requirements of the Exchange Act (or any other related or similar federal laws). 

  
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	X.	RECOMMENDATION 

 In the opinion of the Chapter 11 Trustee, the Plan is superior
and preferable to the alternatives described in this Disclosure Statement. Furthermore, the value being provided to Creditors and Interest Holders under the Plan was subject to a competitive process through which parties other than the Plan Sponsor
could have provided higher and better bids. Accordingly, the Chapter 11 Trustee recommend that holders of Claims entitled to vote on the Plan vote to accept the Plan and support Confirmation of the Plan. 

Dated: July 18, 2016 
  

	
	 Respectfully submitted,
  

Wave Systems Corp.

	
	 /s/ David W. Carickhoff

	Name: David W. Carickhoff
	Title: Chapter 11 Trustee

  
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 EXHIBIT A 

Plan of Reorganization 

* The Plan will be separately filed with the Court.* 

  
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 EXHIBIT B 

Liquidation Analysis 

  
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 Wave Systems Inc. 

Liquidation Analysis 
  

									
	 	  	Chapter 11 Plan	 	  	Chapter 7 Liquidation	 
	 Domain Name Sale Proceeds
	  	$	420,000	  	  	$	420,000	  
			
	 Plan/Sale Transaction Proceeds
	  	$	6,875,000	  	  	$	3,800,000	  
			
	 Less Chapter 7 Admin (1)
	  	$	361,725	  	  	$	461,725	  
		  	  
	  
	 	  	  
	  
	 
	 Net Proceeds available
	  	$	6,933,275	  	  	$	3,758,275	  
			
	 Less Chapter 11 Expenses (2)
	  	$	—  	  	  	$	—  	  
	 Less Success Fee for Growth Point
	  	$	984,375	  	  	$	570,000	  
	 Less Chapter 7/Chapter 11 Trustee Commissions
	  	$	252,573	  	  	$	160,323	  
		  	  
	  
	 	  	  
	  
	 
	 Cash Available for Distribution for Claims (3)
	  	$	5,696,327	  	  	$	3,027,952	  

  

	(1)	Chapter 7 Admin expenses if case did not convert to ch 11 assumes an additional $100,000 of professional fees incurred from sale closing through such time as a TFR is approved by the Court. 

	(2)	Budgeted Chapter 11 Admin expenses (other than GrowthPoint Success Fee and Trustee Commissions) are being funded by post petition lender through the post-peititon financing and not being deducted from plan proceeds. If
case were converted to Chapter 7, accrued Chapter 11 admin expenses would still be satisfied by the post-petition financing, with no corresponding claim against the estate. 

	(3)	Final claims pool has not yet been determined, to the extent Allowed Claims do not exceed available cash, excess cash will be available for distribution to holders of Equity InterestsExhibit 10.9

 

ADIENT PLC
 2016 OMNIBUS INCENTIVE PLAN

 

1.                                      Purpose and Effective Date.

 

(a)                                 Purpose.  The Adient plc 2016 Omnibus Incentive Plan has two complementary purposes:  (i) to attract and retain outstanding individuals to serve as officers and employees and (ii) to increase shareholder value. This Plan will provide participants incentives to increase shareholder value by offering the opportunity to acquire shares of the Company, or receive monetary payments, on the potentially favorable terms that this Plan provides.  In addition, this Plan permits the issuance of awards in partial substitution for awards relating to ordinary shares of Johnson Controls International plc (“JCI”) immediately prior to the spin-off of the Company by JCI (the “Spinoff”), in accordance with the terms of an Employee Matters Agreement into which JCI and the Company intend to enter in connection with the Spinoff (the “Employee Matters Agreement”).

 

(b)                                 Effective Date.  This Plan will become effective on October 31, 2016 (the “Effective Date”).

 

2.                                      Definitions. Capitalized terms used in this Plan have the meanings given below.  Additional defined terms are set forth in other sections of this Plan.

 

(a)                                 “10% Shareholder” means an Eligible Employee who, as of the date an ISO is granted to such individual, owns more than ten percent (10%) of the total combined voting power of all classes of shares then issued by the Company or a Subsidiary corporation.

 

(b)                                 “Administrator” means the Committee.  In addition, subject to any limitations imposed by law and any restrictions imposed by the Committee, the Chief Executive Officer of the Company may act as the Administrator with respect to Awards granted (or to be granted) to employees who are not Section 16 Participants or subject to Code Section 162(m) at the time such authority or responsibility is exercised.

 

(c)                                  “Affiliate” means any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with the Company within the meaning of Code Sections 414(b) or (c), provided that, in applying such provisions, the phrase “at least 50 percent” shall be used in place of “at least 80 percent” each place it appears therein.

 

(d)                                 “Affiliated Company” or “Affiliated Companies” shall include any company or companies controlled by, controlling or under common control with the Company; provided that when determining when a Participant has experienced a separation from service for purposes of this Plan, control shall be determined pursuant to Code Sections 414(b) or (c), except that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” in each place it appears in the regulations thereunder.

 

(e)                                  “Award” means a grant of Options, Share Appreciation Rights, Performance Shares, Performance Units, Restricted Shares, Restricted Share Units, Deferred Share Rights, Dividend Equivalent Units, an Annual Incentive Award, a Long-Term Incentive Award, or any other type of award permitted under this Plan.

 

(f)                                   “Beneficial Ownership” (or derivatives thereof) shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

 

(g)                                  “Board” means the Board of Directors of the Company.

 

(h)                                 “Cause” means (1) if the Participant is subject to an employment agreement with the Company or an Affiliate that contains a definition of “cause”, such definition, or (2) otherwise, except as otherwise determined by the Administrator and set forth in an Award agreement, any of the following as determined by the Administrator in its sole discretion:  (A) any act or omission that is inimical to the best interests of the Company or any Affiliate; (B) violation of any employment, non-compete, confidentiality or other agreement in effect with the Company or any Affiliate, or the Company’s or an Affiliate’s code of ethics, as then in effect, (C) conduct rising to the level of gross negligence or willful misconduct in the course of employment with the Company or an Affiliate, (D) commission of an act of dishonesty or disloyalty involving the Company or an Affiliate, or taking any action which damages or negatively reflects on the reputation of the Company or an Affiliate, (E) failure to comply with applicable laws relating to trade secrets, confidential information or unfair competition or a violation of any other federal, state or local law in connection with the Participant’s employment or service, or (F) breach of any fiduciary duty to the Company or an Affiliate.

 

(i)                                     “Change of Control” means the first to occur of the following events:

 

(i)                                     The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then-outstanding Shares (the “Outstanding Company Ordinary Shares”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (4) any acquisition by any corporation pursuant to a transaction that complies with Sections 2(i)(iii)(A) — 2(i)(iii)(C);

 

(ii)                                  Any time at which individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

(iii)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction, whether by way of scheme of arrangement or otherwise, involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or shares of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (A) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Ordinary Shares and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially

 

2

 

own, directly or indirectly, more than 50% of the then-outstanding common or ordinary shares and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Ordinary Shares and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or an Affiliated Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then-outstanding shares of common or ordinary shares of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)                              Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, for purposes of an Award (1) that provides for the payment of deferred compensation that is subject to Code Section 409A or (2) with respect to which the Company permits a deferral election, the definition of Change of Control herein shall be deemed amended to conform to the requirements of Code Section 409A to the extent necessary for the Award and deferral election to comply with Code Section 409A.

 

(j)                                    “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any successor provision and the regulations promulgated under such provision.

 

(k)                                 “Commission” means the United States Securities and Exchange Commission or any successor agency.

 

(l)                                     “Committee” means the Compensation Committee of the Board (or a successor committee with the same or similar authority), or such other committee of the Board designated by the Board to administer this Plan and composed of no fewer than two directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3 and an “outside director” within the meaning of Code Section 162(m)(4)(C); provided that if no such committee shall be in existence at any time, the functions of the Committee shall be carried out by the Board.

 

(m)                             “Company” means Adient plc or any successor thereto.

 

(n)                                 “Deferred Share Right” means the right to receive Shares or Restricted Shares at some future time.

 

3

 

(o)                                 “Director” means a member of the Board, and “Non-Employee Director” means a Director who is not also an officer or an employee of the Company or an Affiliate.

 

(p)                                 “Disability” means, except as otherwise determined by the Administrator and set forth in an Award agreement: (i) with respect to an ISO, the meaning given in Code Section 22(e)(3), and (ii) with respect to all other Awards, the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of at least twelve (12) months, as determined by the Administrator.  The Administrator shall make the determination of Disability and may request such evidence of disability as it reasonably determines.

 

(q)                                 “Distribution Time” means the effective time of the distribution, in connection with the Spinoff, of Shares to the holders of ordinary shares of JCI.

 

(r)                                    “Dividend Equivalent Unit” means the right to receive a payment, in cash or property, equal to the cash dividends or other distributions paid with respect to a Share.

 

(s)                                   “Eligible Employee” means any officer or other employee of the Company or of any Affiliate, or any individual that the Company or an Affiliate has engaged to become an officer or employee.

 

(t)                                    “Exchange Act” means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes any successor provision and the regulations and rules promulgated under such provision.

 

(u)                                 “Excluded Items” means any gains or losses from the sale of assets outside the ordinary course of business; any gains or losses from discontinued operations; any extraordinary gains or losses; the effects of accounting changes; any unusual, nonrecurring, transition, one-time or similar items or charges; the diluted impact of goodwill on acquisitions; and any other items specified by the Administrator; provided that, for Awards intended to qualify as performance-based compensation under Code Section 162(m) and not subject to the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii), the Administrator shall specify the Excluded Items in writing at the time the Award is made unless, after application of the Excluded Items, the amount payable under the Award is reduced.

 

(v)                                 “Fair Market Value” means, per Share on a particular date: (i) the closing price on such date on the New York Stock Exchange or, if no sales of Shares occur on the date in question, on the last preceding date on which there was a sale on such market; (ii) if the Shares are not listed on the New York Stock Exchange, but are traded on another national securities exchange or in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the last bid and asked prices) for the Shares on the particular date, or on the last preceding date on which there was a sale of Shares on that exchange or market; or (iii) if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by the Administrator.  The Administrator also shall establish the Fair Market Value of any other property.  If an actual sale of a Share occurs on the market, then the Company may consider the sale price to be the Fair Market Value of such Share.

 

4

 

(w)                               “Incentive Award” means the right to receive a cash payment to the extent Performance Goals are achieved, and shall include “Annual Incentive Awards” as described in Section 10 and “Long-Term Incentive Awards” as described in Section 11.

 

(x)                                 “Incentive Share Option” or “ISO” mean an Option that meets the requirements of Code Section 422.

 

(y)                                 “JCI Plan” means the Johnson Controls International Public Limited Company 2016 Omnibus Incentive Plan or any similar or predecessor plan sponsored by JCI or any of its subsidiaries under which any awards remain outstanding as of immediately prior to the Distribution Time.

 

(z)                                  “Option” means the right to purchase Shares at a stated price for a specified period of time.

 

(aa)                          “Participant” means an individual selected by the Administrator to receive an Award.

 

(bb)                          “Performance Awards” means a Performance Share and Performance Unit, and any Award of Restricted Shares, Restricted Share Units or Deferred Share Rights the payment or vesting of which is contingent on the attainment of one or more Performance Goals.

 

(cc)                            “Performance Goals” means the following categories (in all cases after taking into account any Excluded Items, as applicable), including in each case any measure based on such category:

 

(i)                                     Basic earnings per share for the Company on a consolidated basis.

 

(ii)                                  Diluted earnings per share for the Company on a consolidated basis.

 

(iii)                               Total shareholder return.

 

(iv)                              Fair Market Value of Shares.

 

(v)                                 Net sales.

 

(vi)                              Increase in percentage of total revenues represented by consolidated or unconsolidated revenues.

 

(vii)                           Cost of sales.

 

(viii)                        Gross profit.

 

(ix)                              Selling, general and administrative expenses.

 

(x)                                 Operating income.

 

(xi)                              Segment income.

 

(xii)                           Earnings before interest and the provision for income taxes (EBIT).

 

(xiii)                        Earnings before interest, the provision for income taxes, depreciation, and amortization (EBITDA).

 

(xiv)                       Net income.

 

5

 

(xv)                          Accounts receivable.

 

(xvi)                       Inventories.

 

(xvii)                    Trade working capital.

 

(xviii)                 Return on equity.

 

(xix)                       Return on assets.

 

(xx)                          Return on invested capital.

 

(xxi)                       Return on sales.

 

(xxii)                    Economic value added, or other measure of profitability that considers the cost of capital employed.

 

(xxiii)                 Free cash flow.

 

(xxiv)                Net cash provided by operating activities.

 

(xxv)                   Net increase (decrease) in cash and cash equivalents.

 

(xxvi)                Increase (decrease) in debt or net debt.

 

(xxvii)             Customer satisfaction, which may include customer backlog and/or relationships.

 

(xxviii)          Market share.

 

(xxix)                Quality.

 

(xxx)                   Safety.

 

(xxxi)                Realization or creation of innovation projects or products.

 

(xxxii)             Achievement of cost reduction targets or restructuring initiatives.

 

(xxxiii)          Employee engagement.

 

(xxxiv)         Employee and/or supplier diversity improvement.

 

(xxxv)            Completion of integration of acquired businesses and/or strategic activities.

 

(xxxvi)         Development, completion and implementation of succession planning.

 

The Performance Goals described in items (v) through (xxxvi) may be measured (A) for the Company on a consolidated basis, (B) for any one or more Affiliates or divisions of the Company and/or (C) for any other business unit or units of the Company or an Affiliate as defined by the Administrator at the time of selection.

 

In addition, the Administrator may designate other categories, including categories involving individual performance and subjective targets, not listed above (A) with respect to Awards that

 

6

 

are not intended to qualify as performance-based compensation within the meaning of Code Section 162(m) or that are subject to the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii) or (B) to the extent that the application of such categories results in a reduction of the maximum amount otherwise payable under the Award.

 

Where applicable, the Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers, averages and/or percentages) in the particular criterion or achievement in relation to a peer group or other index. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur).  Notwithstanding the foregoing, with respect to a Replacement Award, “Performance Goal” shall mean any performance objective defined in the applicable agreement or other document evidencing the Replacement Award.

 

(dd)                          “Performance Shares” means the right to receive Shares (including Restricted Shares) to the extent Performance Goals are achieved.

 

(ee)                            “Performance Unit” means the right to receive a payment valued in relation to a unit that has a designated dollar value or the value of which is equal to the Fair Market Value of one or more Shares, to the extent Performance Goals are achieved.

 

(ff)                              “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

 

(gg)                            “Plan” means this Adient plc 2016 Omnibus Incentive Plan, as may be amended from time to time.

 

(hh)                          “Replacement Award” means an Award that is issued under this Plan in accordance with the terms of the Employee Matters Agreement in substitution of, or in accordance with, an award that was granted under a JCI Plan.

 

(ii)                                  “Restriction Period” means the length of time established relative to an Award during which the Participant cannot sell, assign, transfer, pledge or otherwise encumber the Shares or Share Units subject to such Award and at the end of which the Participant obtains an unrestricted right to such Shares or Share Units.

 

(jj)                                “Restricted Shares” means Shares that are subject to a risk of forfeiture or a Restriction Period, or both a risk of forfeiture and a Restriction Period.

 

(kk)                          “Restricted Share Unit” means the right to receive a payment equal to the Fair Market Value of one Share that is subject to a risk of forfeiture or restriction period or other restrictions on transfer, or both a risk of forfeiture and a restriction period or other restrictions on transfer.

 

(ll)                                  “Retirement” means, except as otherwise determined by the Administrator and set forth in an Award agreement, the end of a Participant’s employment with the Company and its Affiliates (for other than Cause) on or after the Participant’s attainment of (A) age fifty-five (55) and completion of ten (10) years of continuous service with the Company and its Affiliates, or (B) age sixty-five (65) and completion of five (5) years of continuous service with the

 

7

 

Company and its Affiliates.  For purposes of this paragraph, the phrase “continuous service” means the most recent period of continuous, uninterrupted service with the Company and its Affiliates, as well as any such continuous service with JCI or its affiliates prior to the Spinoff.

 

(mm)                  “Rule 16b-3” means Rule 16b-3 promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto.

 

(nn)                          “Section 16 Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

 

(oo)                          “Share” means an ordinary share of the Company.

 

(pp)                          “Share Appreciation Right” or “SAR” means the right to receive a payment equal to the appreciation of the Fair Market Value of a Share during a specified period of time.

 

(qq)                          “Share Unit” means a right to receive a payment equal to the Fair Market Value of one Share.

 

(rr)                                “Subsidiary” means any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entity in the chain) owns the stock or equity interests possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.

 

(ss)                              “Unrestricted Shares” means Shares issued under this Plan that are not subject to either a risk of forfeiture or a Restriction Period.

 

3.                                      Administration.

 

(a)                                 Administration.  The Administrator shall administer this Plan. In addition to the authority specifically granted to the Administrator in this Plan, the Administrator has full discretionary authority to administer this Plan and all Awards, including but not limited to the authority to: (i) interpret the provisions of this Plan and any Award agreement; (ii) prescribe, amend and rescind rules and regulations relating to this Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award or agreement covering an Award in the manner and to the extent it deems desirable to carry this Plan or such Award into effect; and (iv) make all other determinations necessary or advisable for the administration of this Plan.  All Administrator determinations shall be made in the sole discretion of the Administrator and are final and binding on all interested parties.

 

Notwithstanding the above statement or any other provision of this Plan, the Committee shall have no discretion to increase the amount, once established, of compensation payable under an Award that is intended to be performance-based compensation under Code Section 162(m) and that is not subject to the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii), although the Committee may decrease the amount of compensation a Participant may earn under such an Award.

 

(b)                                 Delegation to Other Committees or Officers.  To the extent applicable law permits, the Board may delegate to another committee of the Board or to one or more officers of the Company, or the Committee may delegate to one or more officers of the Company, any or all of their respective authority and responsibility as an Administrator of this Plan; provided that

 

8

 

no such delegation is permitted with respect to Share-based Awards made to Section 16 Participants or Awards made to Participants subject to Code Section 162(m) at the time any such delegated authority or responsibility is exercised unless the delegation is to another committee of the Board consisting entirely of directors who are “non-employee directors” within the meaning of Rule 16b-3 and “outside directors” within the meaning of Code Section 162(m)(4)(C).  If the Board or the Committee has made such a delegation, then all references to the Administrator in this Plan include such other committee or one or more officers to the extent of such delegation.

 

(c)                                  Indemnification. The Company will indemnify and hold harmless each member of the Board and the Committee, and each officer or member of any other committee to whom a delegation under Section 3(b) has been made, as to any acts or omissions with respect to this Plan or any Award to the maximum extent that applicable law and the Company’s governing documents permit.

 

4.                                      Eligibility.  The Administrator (to the extent of its authority) may designate any of the following as a Participant from time to time: any officer or other employee of the Company or its Affiliates or any individual that the Company or an Affiliate has engaged to become an officer or employee. The Administrator’s designation of a Participant in any year will not require the Administrator to designate such person to receive an Award in any other year. No individual shall have any right to be granted an Award, even if an Award was granted to such individual at any prior time, or if a similarly-situated individual is or was granted an Award under similar circumstances.

 

5.                                      Types of Awards.  Subject to the terms of this Plan, the Administrator may grant any type of Award to any Participant it selects, but only employees of the Company or a Subsidiary may receive grants of Incentive Share Options.  Awards may be granted alone or in addition to, in tandem with, or (subject to the prohibition on repricing set forth in Section 16(e)) in substitution for any other Award (or any other award granted under another plan of the Company or any Affiliate).

 

6.                                      Shares Reserved under this Plan.

 

(a)                                 Plan Reserve.  Subject to adjustment as provided in Section 18(a), an aggregate of 4,000,000 Shares are reserved for issuance under this Plan.  The Shares reserved for issuance may be either authorized and unissued Shares or Shares reacquired at any time and now or hereafter held as treasury shares, subject to compliance with applicable law.  In addition to the number of Shares set forth in the first sentence of this Section 6(a), such number of Shares as are subject to the Replacement Awards are also reserved for issuance under this Plan but the Shares subject to the Replacement Awards shall neither deplete the reserve set forth in the first sentence of this Section 6(a) nor be eligible to be recredited to this Plan’s reserve pursuant to Section 6(c).

 

(b)                                 Incentive Share Option Award Limits.  Subject to adjustment as provided in Section 18(a), the Company may issue an aggregate of 4,000,000 Shares upon the exercise of Incentive Share Options.

 

9

 

(c)                                  Replenishment of Shares Under this Plan.  If (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares under the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award or (iv) Shares are issued under any Award and the Company subsequently (subject to compliance with applicable law) reacquires them pursuant to rights reserved upon the issuance of the Shares, then such Shares shall be recredited to this Plan’s reserve (in the same number as they depleted the reserve) and may again be used for new Awards under this Plan, but Shares recredited to this Plan’s reserve pursuant to clause (iv) may not be issued pursuant to Incentive Share Options.  Notwithstanding the foregoing, in no event shall the following Shares be recredited to this Plan’s reserve: Shares tendered in payment of or withheld to satisfy the exercise price of an Option (subject to compliance with applicable law); Shares withheld to satisfy federal, state or local tax withholding obligations; and Shares purchased by the Company (subject to compliance with applicable law) using proceeds from Option exercises.

 

(d)                                 Participant Limitations.  Subject to adjustment as provided in Section 18(a), during any time when the Company has a class of equity security registered under Section 12 of the Exchange Act and the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii) has lapsed or does not apply, no Participant may be granted Awards that could result in such Participant:

 

(i)                                     receiving Options for, and/or Share Appreciation Rights with respect to, more than 2,000,000 Shares during any fiscal year of the Company;

 

(ii)                                  receiving Awards of Restricted Shares (including any dividends paid thereon) and/or Restricted Share Units (including any associated Dividend Equivalent Units) and/or Deferred Share Rights (including any associated Dividend Equivalent Units) relating to more than 800,000 Shares during any fiscal year of the Company;

 

(iii)                               receiving Awards of Performance Shares, and/or Awards of Performance Units the value of which is based on the Fair Market Value of Shares, for more than 1,600,000 Shares during any fiscal year of the Company;

 

(iv)                              receiving Awards of Performance Units the value of which is not based on the Fair Market Value of Shares that would pay more than USD $15,000,000 during any fiscal year of the Company;

 

(v)                                 receiving other Share-based Awards pursuant to Section 13 relating to more than 800,000 Shares during any fiscal year of the Company;

 

(vi)                              receiving an Annual Incentive Award in any fiscal year of the Company that would pay more than USD $15,000,000; or

 

(vii)                           receiving a Long-Term Incentive Award in any fiscal year of the Company that would pay more than USD $10,000,000.

 

In all cases, determinations under this Section 6(d) should be made in a manner that is consistent with the exemption for performance-based compensation that Code Section 162(m) provides and, to the extent applicable, the transition rules thereunder.  Notwithstanding the

 

10

 

foregoing, for the avoidance of doubt, Replacement Awards shall not be subject to, or counted against, the limits in this Section 6(d).

 

7.                                      Options.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each Option, including but not limited to:

 

(a)                                 Whether the Option is an Incentive Share Option or a “nonqualified share option” which does not meet the requirements of Code Section 422;

 

(b)                                 The number of Shares subject to the Option;

 

(c)                                  The date of grant, which may not be prior to the date of the Administrator’s approval of the grant;

 

(d)                                 The exercise price, which may not be less than the Fair Market Value of the Shares subject to the Option as determined on the date of grant (except with respect to Replacement Awards or pursuant to Section 18); provided that an Incentive Share Option granted to a 10% Shareholder must have an exercise price at least equal to 110% of the Fair Market Value of the Shares subject to the Option as determined on the date of grant;

 

(e)                                  The terms and conditions of exercise, including the manner and form of payment of the exercise price; provided that if the aggregate Fair Market Value of the Shares subject to all ISOs granted to a Participant (as determined on the date of grant of each such Option) that become exercisable during a calendar year exceeds the dollar limitation set forth in Code Section 422(d), then such ISOs shall be treated as nonqualified share options to the extent such limitation is exceeded; and

 

(f)                                   The term; provided that each Option must terminate no later than ten (10) years after the date of grant and each Incentive Share Option granted to a 10% Shareholder must terminate no later than five (5) years after the date of grant.

 

In all other respects, the terms of any Incentive Share Option should comply with the provisions of Code Section 422 except to the extent the Administrator determines otherwise.  If an Option that is intended to be an Incentive Share Option fails to meet the requirements thereof, the Option shall automatically be treated as a nonqualified share option to the extent of such failure.

 

8.                                      Share Appreciation Rights. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each SAR, including but not limited to:

 

(a)                                 Whether the SAR is granted independently of an Option or relates to an Option;

 

(b)                                 The number of Shares to which the SAR relates;

 

(c)                                  The date of grant, which may not be prior to the date of the Administrator’s approval of the grant;

 

(d)                                 The grant price, provided that the grant price shall not be less than the Fair Market Value of the Shares subject to the SAR as determined on the date of grant (except with respect to Replacement Awards or pursuant to Section 18);

 

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(e)                                  The terms and conditions of exercise or maturity;

 

(f)                                   The term, provided that each SAR must terminate no later than ten (10) years after the date of grant; and

 

(g)                                  Whether the SAR will be settled in cash, Shares or a combination thereof.

 

If an SAR is granted in relation to an Option, then, unless otherwise determined by the Administrator, the SAR shall be exercisable or shall mature at the same time or times, on the same conditions and to the extent and in the proportion, that the related Option is exercisable and may be exercised or mature for all or part of the Shares subject to the related Option. Upon exercise of any number of SARs, the number of Shares subject to the related Option shall be reduced accordingly and such Option may not be exercised with respect to that number of Shares.  The exercise of any number of Options that relate to an SAR shall likewise result in an equivalent reduction in the number of Shares covered by the related SAR.

 

9.                                      Performance and Share Awards.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Restricted Shares, Restricted Share Units, Deferred Share Rights, Performance Shares or Performance Units, including but not limited to:

 

(a)                                 The number of Shares and/or units to which such Award relates;

 

(b)                                 Whether, as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies;

 

(c)                                  The Restriction Period with respect to Restricted Shares or Restricted Share Units and the period of deferral for Deferred Share Rights;

 

(d)                                 The performance period for Performance Awards;

 

(e)                                  With respect to Performance Units, whether to measure the value of each unit in relation to a designated dollar value or the Fair Market Value of one or more Shares; and

 

(f)                                   With respect to Restricted Share Units and Performance Units, whether to settle such Awards in cash, in Shares, or a combination thereof.

 

Except as otherwise provided in this Plan, at such time as all restrictions applicable to an Award of Restricted Shares, Deferred Share Rights or Restricted Share Units are met and the Restriction Period expires, ownership of the Shares subject to such restrictions shall be transferred to the Participant free of all restrictions except those that may be imposed by applicable law; provided that if Restricted Share Units are paid in cash, then the payment shall be made to the Participant after all applicable restrictions lapse and the Restriction Period expires.

 

10.                               Annual Incentive Awards.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of an Annual Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable, and the timing of payment, subject to the following: (a) the Administrator must require that payment of all or any portion of the amount subject to the Annual Incentive Award is contingent on the achievement of

 

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one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability or (for Awards not intended to qualify as performance-based compensation within the meaning of Code Section 162(m) or subject to the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii)) Retirement, or such other circumstances as the Administrator may specify; and (b) the performance period must relate to a period of one fiscal year of the Company except that, if the Award is made in the year this Plan becomes effective, at the time of commencement of employment with the Company or on the occasion of a promotion, then the Award may relate to a period shorter than one fiscal year.

 

11.                               Long-Term Incentive Awards.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of a Long-Term Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable, and the timing of payment, subject to the following: (a) the Administrator must require that payment of all or any portion of the amount subject to the Long-Term Incentive Award is contingent on the achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability or (for Awards not intended to qualify as performance-based compensation within the meaning of Code Section 162(m) or subject to the transition period under Treasury Reg. Section 1.162-27(f)(4)(iii)) Retirement, or such other circumstances as the Administrator may specify; and (b) the performance period must relate to a period of more than one fiscal year of the Company.

 

12.                               Dividend Equivalent Units.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Dividend Equivalent Units, including but not limited to whether: (a) such Award will be granted in tandem with another Award; (b) payment of the Award be made currently or credited to an account for the Participant that provides for the deferral of such amounts until a stated time; provided that Dividend Equivalent Units that relate to Performance Awards that are contingent on the achievement of a Performance Goal at the time the cash dividend or other distribution is paid with respect to a Share shall also be contingent on the achievement of such Performance Goal and shall not be paid until such Performance Goal is achieved; and (c) the Award will be settled in cash or Shares; provided that Dividend Equivalent Units may be granted only in connection with a “full-value Award.”  For this purpose, a “full-value Award” includes Restricted Shares, Restricted Share Units, Performance Shares, Performance Units (valued in relation to a Share), Deferred Share Rights and any other similar Award under which the value of the Award is measured as the full value of a Share, rather than the increase in the value of a Share.

 

13.                               Other Share-Based Awards.  Subject to the terms of this Plan, the Administrator may grant to Participants other types of Awards, which shall be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, Shares, either alone or in addition to or in conjunction with other Awards, and payable in Shares or cash.  Without limitation, such Award may include the issuance of Unrestricted Shares (which may be awarded in lieu of cash compensation to which a Participant is otherwise entitled, in exchange for cancellation of a compensation right, as a bonus, upon the attainment of Performance Goals or otherwise) or rights to acquire Shares from the Company.  The Administrator shall determine all terms and conditions of the Award, including but not limited to, the time or times at which such Awards shall be made, and the number of Shares to be granted pursuant to such Awards or to which such Award shall relate; provided that any Award that provides for purchase rights shall be priced at 100% of Fair Market Value on the date of grant of the Award; and provided

 

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further that the date of grant cannot be prior to the date the Administrator takes action to approve the Award.

 

14.                               Effect of Termination on Awards.  The Administrator shall have the discretion to determine, at the time an Award is made to a Participant or any time thereafter, the effect of the termination of the Participant’s employment or service with the Company and its Affiliates on the Award.

 

15.                               Transferability.

 

(a)                                 Restrictions on Transfer. No Award (other than Unrestricted Shares), and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution, unless and to the extent the Administrator allows a Participant to: (i) designate in writing a beneficiary to exercise the Award after the Participant’s death; or (ii) transfer an Award.

 

(b)                                 Restrictions on Exercisability.  Each Award, and each right under any Award, shall be exercisable during the lifetime of the Participant only by such individual or, if permissible under applicable law, by such individual’s guardian or legal representative.

 

16.                               Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards.

 

(a)                                 Term of Plan.  Unless the Board or Committee earlier terminates this Plan pursuant to Section 16(b), this Plan will terminate on the date all Shares reserved for issuance have been issued.  If the term of this Plan extends beyond ten (10) years from the Effective Date, no Incentive Share Options may be granted after such time unless the shareholders of the Company have approved an extension of this Plan for such purpose.

 

(b)                                 Termination and Amendment.  The Board or the Committee may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations:

 

(i)                                     the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) prior action of the Board, (B) applicable corporate law, or (C) any other applicable law;

 

(ii)                                  shareholders must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and

 

(iii)                               shareholders must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified in Section 6(a) or 6(b) or the limits set forth in Section 6(e) (except as permitted by Section 18), (B) an amendment to materially expand the group of individuals that may become Participants, or (C) an amendment that would diminish the protections afforded by Section 16(e).

 

(c)                                  Amendment, Modification, Cancellation and Disgorgement of Awards.

 

(i)                                     Subject to the requirements of this Plan, including the limitations of Section 16(e), the Administrator may modify, amend or cancel any Award or waive any

 

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restrictions or conditions applicable to any Award or the exercise of the Award, provided that any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of the Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in the Award, but the Administrator need not obtain Participant (or other interested party) consent for the modification, amendment or cancellation of an Award pursuant to the provisions of Section 18 or as follows:  (A) to the extent the Administrator deems such action necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which the Shares are then traded; (B) to the extent the Administrator deems necessary to preserve favorable accounting or tax treatment of any Award for the Company; or (C) to the extent the Administrator determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant or any other person(s) as may then have an interest in the Award.  Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.

 

(ii)                                  Any Awards granted pursuant to this Plan, and any Shares issued or cash paid pursuant to an Award, shall be subject to (A) any recoupment, clawback, equity holding, share ownership or similar policies adopted by the Company from time to time and (B) any recoupment, clawback, equity holding, share ownership or similar requirements made applicable by law, regulation or listing standards to the Company from time to time.

 

(iii)                               Unless the Award agreement specifies otherwise, the Administrator may cancel any Award at any time if the Participant is not in compliance with all applicable provisions of the Award agreement and this Plan.

 

(d)                                 Survival of Authority and Awards.  Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 16 and to otherwise administer this Plan will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

 

(e)                                  Repricing and Backdating Prohibited.  Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided in Section 18, neither the Administrator nor any other person may (i) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (ii) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (iii) cancel outstanding Options or SARs with an exercise price above the current Share price in exchange for cash or other securities.  In addition, the Administrator may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Administrator takes action to approve such Award.

 

(f)                                   Foreign Participation.  To assure the viability of Awards granted to Participants employed or residing in foreign countries, the Administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Administrator may approve such supplements to, or amendments,

 

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restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Administrator approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country. In addition, all such supplements, amendments, restatements or alternative versions must comply with the provisions of Section 16(b).

 

In addition, if an Award is held by a Participant who is employed or residing in a foreign country and the amount payable or Shares issuable under such Award would be taxable to the Participant under Code Section 457A in the year such Award is no longer subject to a substantial risk of forfeiture, then the amount payable or Shares issuable under such Award shall be paid or issued to the Participant as soon as practicable after such substantial risk of forfeiture lapses (or, for Awards that are not considered nonqualified deferred compensation subject to Code Section 409A, no later than the end of the short-term deferral period permitted by Code Section 457A) notwithstanding anything in this Plan or the Award agreement to contrary.

 

(g)                                  Code Section 409A.  The provisions of Code Section 409A are incorporated herein by reference to the extent necessary for any Award that is subject to Code Section 409A to comply therewith.

 

17.                               Taxes.

 

(a)                                 Withholding.  In the event the Company or an Affiliate of the Company is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company will, unless it otherwise determines, satisfy such tax obligations by withholding from cash or Shares otherwise payable or issuable under the Award in the amount needed to satisfy any withholding obligations; provided that, in the case of Shares, the amount withheld may not exceed the Participant’s minimum statutory tax withholding obligations associated with the transaction to the extent needed for the Company and its Affiliates to avoid an accounting charge until Accounting Standards Update 2016-09 applies to the Company, after which time the amount withheld may not exceed the total maximum statutory tax rates associated with the transaction.  Alternatively, the Company may require such Participant to pay to the Company, in cash, promptly on demand, amounts sufficient to satisfy such tax obligations or make other arrangements satisfactory to the Company regarding the payment to the Company or an Affiliate of the aggregate amount of any such tax obligations, or the Company may withhold from cash or other property payable or issuable to the Participant or from Shares no longer subject to restrictions in the amount needed to satisfy any withholding obligations.  If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires.  In any case, the Company may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

 

(b)                                 No Guarantee of Tax Treatment.  Notwithstanding any provisions of this Plan, the Company does not guarantee to any Participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

 

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(c)                                  Participant Responsibilities.  If a Participant shall dispose of Shares acquired through exercise of an ISO within either (i) two (2) years after the date the Option is granted or (ii) one (1) year after the date the Option is exercised (i.e., in a disqualifying disposition), such Participant shall notify the Company within seven (7) days of the date of such disqualifying disposition.  In addition, if a Participant elects, under Code Section 83, to be taxed at the time an Award of Restricted Shares (or other property subject to such Code section) is made, rather than at the time the Award vests, such Participant shall notify the Company within seven (7) days of the date the Participant makes such an election.

 

18.                               Adjustment Provisions; Change of Control.

 

(a)                                 Adjustment of Shares.  If:  (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares (subject to compliance with applicable law), that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Board or Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust as applicable: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Section 6) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) to the extent such discretion does not cause an Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such, the Performance Goals of an Award.  In any such case, the Administrator may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the Administrator effective at such time as the Administrator specifies (which may be the time such transaction or event is effective). However, in each case, with respect to Awards of Incentive Share Options, no such adjustment may be authorized to the extent that such authority would cause this Plan to violate Code Section 422(b).  Further, the number of Shares subject to any Award payable or denominated in Shares must always be a whole number. In any event, previously granted Options or SARs are subject only to such adjustments as are necessary to maintain the relative proportionate interest the Options and SARs represented immediately prior to any such event and to preserve, without exceeding, the value of such Options or SARs.

 

Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, including by way of scheme or arrangement or otherwise, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Shares are not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares

 

17

 

subject to this Plan (if this Plan will continue in effect), the number and kind of shares, other securities, cash or other property to which holders of Shares are or will be entitled in respect of each Share pursuant to the transaction.

 

Notwithstanding the foregoing, in the case of a share dividend (other than a share dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse share split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such share dividend or subdivision or combination of the Shares.

 

(b)                                 Issuance or Assumption.  Notwithstanding any other provision of this Plan, and without affecting the number of Shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or shares, or reorganization, the Administrator may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate, subject to the listing requirements of any principal securities exchange or market on which the Shares are then traded.

 

(c)                                  Change of Control.  If the Participant has in effect an employment, retention, change of control, severance or similar agreement with the Company or any Affiliate that determines the effect of a Change of Control on the Participant’s Awards, then such agreement shall take precedence over the terms of this Plan.  In all other cases, unless provided otherwise in an Award agreement or by the Administrator prior to the date of the Change of Control, in the event of a Change of Control:

 

(i)                                     If the purchaser, successor or surviving corporation (or parent thereof) (the “Survivor”) so agrees, some or all outstanding Awards shall be assumed, or replaced with the same type of award with similar terms and conditions, by the Survivor in the Change of Control transaction.  If applicable, each Award which is assumed by the Survivor shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to the Participant upon the consummation of such Change of Control had the Award been exercised, vested or earned immediately prior to such Change of Control, and other appropriate adjustments in the terms and conditions of the Award shall be made.

 

(ii)                                  To the extent the Survivor in the Change of Control transaction does not agree to assume the Awards or issue replacement awards as provided in clause (i), then immediately prior to the date of the Change of Control:

 

(A)                               Each Option or SAR that is then held by a Participant who is employed by or in the service of the Company or an Affiliate shall become immediately and fully vested, and, unless otherwise determined by the Board or Committee, all Options and SARs shall be cancelled on the date of the Change of Control in exchange for a cash payment equal to the excess of the Change of Control price of the Shares covered by the Option or SAR that is so cancelled over the purchase or grant price of such Shares under the Award.

 

(B)                               Restricted Shares, Restricted Share Units and Deferred Share Rights (that are not Performance Awards) that are not then vested shall vest.

 

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(C)                               All Performance Awards and Annual and Long-Term Incentive Awards that are earned but not yet paid shall be paid upon the Change of Control, and all Performance Awards and Annual and Long-Term Incentive Awards for which the performance period has not expired shall be cancelled in exchange for a cash payment equal to the product of (1) the target value payable to the Participant under his or her Award and (2) a fraction, the numerator of which is the number of days after the first day of the performance period on which the Change of Control occurs and the denominator of which is the number of days in the performance period.

 

(D)                           All Dividend Equivalent Units that are not vested shall vest and be paid in cash, and all other Awards that are not vested shall vest and if an amount is payable under such vested Award, such amount shall be paid in cash based on the value of the Award.

 

All payments of cash and issuance of Shares required hereunder shall be made as soon as practicable after, but in no event more than thirty (30) days following, the date of the Change of Control. 

 

(iii)                               In the event that (1) the Survivor terminates the Participant’s employment or service without cause (as defined in the agreement relating to the Award or, if not defined therein, as defined by the Administrator) or (2) if the Participant has in effect an employment, retention, change of control, severance or similar agreement with the Company or any Affiliate that contemplates the termination of his or her employment or service for good reason, and the Participant terminates his or her employment or service for good reason (as defined in such agreement), in the case of either (1) or (2) within twenty-four (24) months following a Change of Control, then the following provisions shall apply to any assumed Awards or replacement awards described in paragraph (i) and any Awards not cancelled in connection with the Change of Control pursuant to paragraph (ii):

 

(A)                               Effective upon the date of the termination of the Participant’s employment or service, all outstanding Awards or replacement awards automatically shall vest (assuming for any Award the vesting of which is subject to Performance Goals, that such goals had been met at the target level); and

 

(B)                               All Options or Share Appreciation Rights (or replacement awards) held by the Participant shall be cancelled in exchange for a payment in cash and/or Shares (which may include shares or other securities of the Survivor) equal to the excess of the fair market value of the Shares over the exercise or grant price of such Shares under the Award; and

 

(C)                               All Restricted Shares, Restricted Share Units or Deferred Share Rights (or replacement awards) held by the Participant shall be cancelled as of the termination of the Participant’s employment or service in exchange for a payment in cash and/or Shares (which may include shares or other securities of the Survivor) equal to the fair market value of a Share; and

 

(D)                               All Performance Awards and Annual and Long-Term Incentive Awards held by the Participant that are earned but not yet paid shall be paid promptly following the termination of employment or service, and all Performance Awards and Annual and Long-Term Incentive Awards held by the Participant for which the performance period has not expired shall be cancelled in exchange for a cash payment equal to the product of (1) the target value payable to the Participant under his or her Award and (2) a fraction, the numerator of which is

 

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the number of days after the first day of the performance period on which the termination of employment or service occurs and the denominator of which is the number of days in the performance period; and

 

(E)                                All other Awards (or replacement awards) held by the Participant shall be cancelled in exchange for a payment in cash in an amount equal to the value of the Award.

 

All payments of cash and issuance of Shares required hereunder shall be made as soon as practicable after, but in no event more than thirty (30) days following, the date of the termination of employment or service of the Participant. 

 

Notwithstanding anything to the contrary in the foregoing, if the Participant has a deferral election in effect with respect to any amount payable under this Section 18(c) or if the applicable Award is otherwise subject to Code Section 409A, such amount shall be deferred pursuant to such election and the requirements of Code Section 409A.

 

If the value of an Award for purposes of this subsection is based on the fair market value of a Share, such fair market value shall be determined by the Administrator in its discretion.

 

(d)                                 Application of Limits on Payments.  Except as otherwise expressly provided in any agreement between a Participant and the Company or an Affiliate, if the receipt of any payment by a Participant under the circumstances described above would result in the payment by the Participant of any excise tax provided for in Section 280G and Section 4999 of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax.

 

19.                               Miscellaneous.

 

(a)                                 Other Terms and Conditions.  The grant of any Award may also be subject to other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate, including, without limitation, provisions for:

 

(i)                                     the payment of the purchase price of Options by delivery of cash or other Shares or other securities of the Company (including by attestation) having a then Fair Market Value equal to the purchase price of such Shares, or by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price;

 

(ii)                                  one or more means to enable Participants to defer the delivery of Shares or recognition of taxable income relating to Awards or cash payments derived from the Awards on such terms and conditions as the Administrator determines, including, by way of example, the form and manner of the deferral election, the treatment of dividends paid on the Shares during the deferral period or a means for providing a return to a Participant on amounts deferred, and the permitted distribution dates or events (provided that no such deferral means may result in an increase in the number of Shares issuable under this Plan);

 

(iii)                               restrictions on resale or other disposition of Shares; and

 

(iv)                              compliance with federal or state securities laws and stock exchange requirements.

 

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(b)                                 Employment and Service.  The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate.  Unless determined otherwise by the Administrator, for purposes of this Plan and all Awards, the following rules shall apply:

 

(i)                                     a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have ended employment; and

 

(ii)                                  a Participant employed by an Affiliate will be considered to have ended employment when such entity ceases to be an Affiliate.

 

Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A.  Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required by Code Section 409A, any payment made to the Participant on account of such separation from service shall not be made before a date that is six months after the date of the separation from service.

 

(c)                                  Whole Shares Only.  Only whole Shares or other securities may be issued or delivered pursuant to this Plan, and if any calculation of a number of Shares pursuant to any provision of this Plan would otherwise result in a number of Shares that is not a whole number, the calculation shall be rounded down to the next whole number of Shares.

 

(d)                                 Offset. Subject to compliance with applicable law, the Company shall have the right to offset, from any amount payable or shares deliverable hereunder, any amount that the Participant owes to the Company or any Affiliate without the consent of the Participant or any individual with a right to the Participant’s Award.

 

(e)                                  Unfunded Plan.  This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors. Income recognized by a Participant pursuant to an Award shall not be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) or group insurance or other benefit plans applicable to the Participant which are maintained by the Company or any Affiliate, except as may be provided under the terms of such plans or determined by resolution of the Board.

 

(f)                                   Requirements of Law and Securities Exchange.  The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any Award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the

 

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Participant has taken all actions required by the Company in connection therewith.  The Company may impose such restrictions on any Shares issued under this Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchange.

 

(g)                                  Restrictive Legends; Representations. All Shares delivered (whether in certificated or book entry form) pursuant to any Award or the exercise thereof shall bear such legends or be subject to such stop transfer orders as the Administrator may deem advisable under this Plan or under applicable laws, rules or regulations or the requirements of any national securities exchange.  The Administrator may require each Participant or other Person who acquires Shares under this Plan by means of an Award to represent to the Company in writing that such Participant or other Person is acquiring the Shares without a view to the distribution thereof.

 

(h)                                 Governing Law.  This Plan, and all Awards hereunder, and all determinations made and actions taken pursuant to this Plan, shall be governed by, except to the extent preempted by other applicable laws (1) with respect to the corporate law requirements applicable to the Company, the validity and authorization of the issuance of Shares under this Plan and similar matters, the internal laws of Ireland (without reference to conflict of law principles thereof) and (2) with respect to all other matters relating to this Plan and Awards, the internal laws of the State of New York (without reference to conflict of law principles thereof), and this Plan and all Awards hereunder shall be construed in accordance with such applicable law.

 

(i)                                     Arbitration.  Notwithstanding anything to the contrary herein, if any individual (other than the Company) brings a claim involving the Company or an Affiliate, regardless of the basis of the claim (including but not limited to claims relating to wrongful discharge, Title VII discrimination, the Participant’s employment or service with the Company or its Affiliates or the termination thereof, benefits under this Plan or other matters), such claim shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association (“AAA”) and the following provisions, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof; provided that the requirement for arbitration under this subsection shall not apply to the extent such requirement is not enforceable under, or otherwise violates, applicable law.

 

(i)                                     Initiation of Action. Arbitration must be initiated by serving or mailing a written notice of the complaint to the other party. Normally, such written notice should be provided to the other party within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. However, this time frame may be extended if the applicable statute of limitation provides for a longer period of time. If the complaint is not properly submitted within the appropriate time frame, all rights and claims that the complaining party has or may have against the other party shall be waived and void. Any notice sent to the Company shall be delivered to:

 

Office of General Counsel

Adient plc

833 East Michigan Street, Suite 1100

Milwaukee, WI 53202

 

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The notice must identify and describe the nature of all complaints asserted and the facts upon which such complaints are based. Notice will be deemed given according to the date of any postmark or the date of time of any personal delivery.

 

(ii)                                  Compliance with Personnel Policies. Before proceeding to arbitration on a complaint, the claimant must initiate and participate in any complaint resolution procedure identified in the personnel policies of the Company or an Affiliate, as applicable. If the claimant has not initiated the complaint resolution procedure before initiating arbitration on a complaint, the initiation of the arbitration shall be deemed to begin the complaint resolution procedure. No arbitration hearing shall be held on a complaint until any complaint resolution procedure of the Company or an Affiliate, as applicable, has been completed.

 

(iii)                               Rules of Arbitration. All arbitration will be conducted by a single arbitrator according to the Employment Dispute Arbitration Rules of the AAA. The arbitrator will have authority to award any remedy or relief that a court of competent jurisdiction could order or grant including, without limitation, specific performance of any obligation created under the award or policy, the awarding of punitive damages, the issuance of any injunction, costs and attorney’s fees to the extent permitted by law, or the imposition of sanctions for abuse of the arbitration process. The arbitrator’s award must be rendered in a writing that sets forth the essential findings and conclusions on which the arbitrator’s award is based.

 

(iv)                              Representation and Costs. Each party may be represented in the arbitration by an attorney or other representative selected by the party. The Company or Affiliate shall be responsible for its own costs, the AAA filing fee and all other fees, costs and expenses of the arbitrator and AAA for administering the arbitration. The claimant shall be responsible for his or her attorney’s or representative’s fees, if any. However, if any party prevails on a statutory claim which allows the prevailing party costs and/or attorneys’ fees, the arbitrator may award costs and reasonable attorneys’ fees as provided by such statute.

 

(v)                                 Discovery; Location; Rules of Evidence. Discovery will be allowed to the same extent afforded under the Federal Rules of Civil Procedure. Arbitration will be held at a location selected by the Company. AAA rules notwithstanding, the admissibility of evidence offered at the arbitration shall be determined by the arbitrator who shall be the judge of its materiality and relevance. Legal rules of evidence will not be controlling, and the standard for admissibility of evidence will generally be whether it is the type of information that responsible people rely upon in making important decisions.

 

(vi)                              Confidentiality. The existence, content or results of any arbitration may not be disclosed by a party or arbitrator without the prior written consent of both parties.  Witnesses who are not a party to the arbitration shall be excluded from the hearing except to testify.

 

(j)                                    Construction.  Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply.  Titles of sections are for general information only, and this Plan is not to be construed with reference to such titles.

 

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(k)                                 Severability.  If any provision of this Plan or any Award agreement or any Award (a) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (b) would disqualify this Plan, any Award agreement or any Award under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, Award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such Award agreement and such Award will remain in full force and effect.

 

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