verified complaint

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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

:WILLIAM WRIGHT and :RANDY BREEN, :

:Plaintiffs, :

:v. : C.A. No.

:JAWAD ANSARI, :

:Defendant, :

:and :

:HIVE MIND, INC., :

:Nominal Defendant. :

:

VERIFIED COMPLAINT PURSUANT TO 8 DEL. C. § 225

Plaintiffs William Wright (“Wright”) and Randy Breen (“Breen”) (together,

“Plaintiffs”), by their undersigned attorneys, for their verified complaint against defendant

Jawad Ansari (“Ansari”), allege as follows:

Nature of the Action

1. This action is brought pursuant to Section 225 of the Delaware General

Corporation Law (“DGCL”) for a declaration that: (a) an October 31, 2011 Unanimous

Written Consent signed by Hive Mind, Inc.’s (“Hive Mind” or the “Company”) then-Board

of Directors (Wright, Ansari and Raj Parekh) is valid and enforceable; (b) the election of

Plaintiffs to Hive Mind’s Board of Directors pursuant to a February 6, 2012 Written

Consent executed and delivered to Hive Mind in accordance with Section 228 of the

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DGCL is valid; and (c) subsequent actions taken at a duly noticed meeting by the newly

constituted Hive Mind Board of Directors (Wright, Breen and Ansari (who did not attend))

on February 9, 2012 were validly approved. Plaintiffs also seek an Order directing

Defendant Ansari to return Hive Mind’s files and restraining him from speaking or acting

on behalf of Hive Mind without the approval of the Company’s Board of Directors.

The Parties

2. Plaintiff Wright is a founder and director of Hive Mind. Before his

involvement with Hive Mind, Wright created the successful “Sims” video game distributed

by Electronic Arts as well as other popular video games, and he formed a development

company called Stupid Fun Club, LLC (“SFC”) .

3. Plaintiff Breen is an employee of SFC and director of Hive Mind.

4. Defendant Ansari is a founder and a director of Hive Mind.

5. Nominal Defendant Hive Mind is a Delaware corporation with its principal

place of business in Berkeley, California.

Factual Background

6. In or about July 2011, Wright, Ansari and Raj Parekh (“Parekh”) formed

Hive Mind to develop, produce and license location-based interactive systems and

applications created by Wright and his development team at SFC. Hive Mind’s Board of

Directors then consisted of Wright, Ansari and Parekh.

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7. On June 14, 2012, Hive Mind’s Board of Directors executed a Unanimous

Written Consent appointing Ansari as President and CEO. Ansari was primarily

responsible for securing funding for Hive Mind. Wright and his team at SFC were to be

primarily responsible for product development.

8. In June and July of 2011, Wright, Ansari and Parekh negotiated the terms

under which specific technology (“IP Assets”) developed by SFC would be transferred to

Hive Mind in exchange for stock in the Company.

9. On July 14, 2011, Hive Mind and SFC executed a Stock Purchase

Agreement whereby Hive Mind granted a majority interest in the Company to SFC in

exchange for SFC’s agreement to perform services under a Consulting Agreement and

assign to Hive Mind certain IP Assets created by SFC.

10. Significantly, SFC had a right to repurchase the IP Assets and return its

Hive Mind shares if Hive Mind had not raised $5 million in 120 days from the date of the

Stock Purchase Agreement (the “Financing Deadline”). Also, Hive Mind agreed to pay

SFC $1.5 million if the Consulting Agreement was not entered into prior to the end of the

120-day period.

11. Over the next 90 days, Ansari was unable to identify or secure any material

funding opportunities to satisfy his obligations under the Stock Purchase Agreement. In

addition, he failed to obtain a Federal Tax ID number or business license for the Company,

failed to make payments for office space leased in Hive Mind’s name and to consultants

ostensibly hired to work for Hive Mind, brought on workers by promising Company stock

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and other benefits he was not authorized to offer, incurred debt in the name of the

Company and failed to secure insurance for either the office or the workers.

12. On or about August 22, 2011, Ansari blocked Wright’s recommendation to

the Board of Directors that the Company replace Ansari as CEO with Lauren Elliott and in

August and September of 2011, Ansari impeded the appointment of Parekh as CEO by

claiming he needed time to research compensation packages.

13. On or about October 31, 2011, the three members of Hive Mind’s then-

Board of Directors executed a Joint Action by Written Consent of the Board of Directors

and the Stockholders in Lieu of Special Meeting and Omnibus Amendment to Agreements

(“Unanimous Written Consent”) which was drafted by Wilson, Sonsini, Goodrich &

Rosati, LLP (“Wilson Sonsini”), Hive Mind’s counsel and which, among other things,

modified the Stock Purchase Agreement to (i) extend the Financing Deadline to January

29, 2012, and (ii) give SFC a right to purchase all the outstanding Hive Mind shares it did

not own if Hive Mind was not sold or did not receive financing by January 29, 2012. The

amendments were the result of extensive discussions among the parties arising from

Ansari’s inability to attract new capital and problems attracting and retaining qualified

employees due in significant part to Ansari’s volatile and erratic work habits. In short, the

directors of Hive Mind agreed to extend the Financing Deadline in order to give Ansari a

second chance to fulfill his obligations and find either adequate financing or a buyer for

Hive Mind.

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14. The Unanimous Written Consent also expressly waived “notice of and any

right of first refusal held by the Company regarding the transfer of the shares of” Hive

Mind.

15. The Unanimous Written Consent also appointed Parekh CEO and Ansari

the Executive Vice President for Business Development.

16. On December 19, 2011, Raj Parekh resigned from his position as CEO of

Hive Mind.

17. On December 23, 2011 Wright resigned from the Hive Mind Board of

Directors, creating a vacancy.

18. On December 23, 2011 Ansari appointed himself CEO of Hive Mind.

19. On January 9, 2012, Ansari caused Hive Mind’s outside counsel, Wilson

Sonsini, to resign. Ansari also took custody of all the legal files that were in Wilson

Sonsini’s possession.

20. In or around January 2012, Ansari hired the law firm Dhillon & Smith

purportedly to act as Hive Mind’s counsel but in fact to act at the direction of, and in the

interest of, Ansari alone. For example, Dhillon & Smith purported to conduct an

investigation into allegations of misappropriation of Hive Mind intellectual property by

Wright and SFC based solely on accusations made by Ansari. The investigation was

clearly a pretext and a sham and was in no way independent or proper, because the firm

made no attempt to obtain documents from, or conduct interviews of, any of the former

board members or officers of the Company. Instead, Dhillon & Smith, at Ansari’s

direction, used the purported investigation to interfere with shareholder SFC’s and

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Wright’s business interests by threatening an “imminent” lawsuit and instructing third

parties that they had a non-existing legal obligation to preserve documents in anticipation

of such threatened litigation. In fact, on or about January 27, 2012, Dhillon & Smith sent a

letter to Warner Brothers “command[ing]” them “not to destroy, conceal or alter any paper

or electronic files and other data generated by and/or stored on your computers and storage

media (e.g., hard disks, floppy disks, backup tapes, Zip cartridges, CDs, DVDs, etc.), or

any other electronic data, such as voice mail, related to Hive Mind, Mr. Wright, Mr.

Parekh, SFC, Friendly Gravity, or their related parties’ attempts to sell, license, or transfer

any intellectual property which may belong to Hive Mind, including games and television

or mobile media related to the Hive Mind concept” under threat of “severe” legal

sanctions. This caused Warner Brothers to suspend a legitimate licensing deal with

shareholder SFC unrelated to Hive Mind’s business activity.

21. On January 14, 2012, Raj Parekh resigned from the Hive Mind Board of

Directors, creating a vacancy.

22. On or about January 22, 2011, Ansari sent confidential and privileged

materials belonging to Hive Mind to third parties, including Linden Labs, accusing Wright,

Parekh and SFC of attempting to steal IP that purportedly belongs to Hive Mind. In fact,

Ansari was embarking on a plan to draw attention away from his failure to secure

financing by interfering with SFC’s business relationships in the hope of putting pressure

on SFC to further amend the Financing Deadline and the term of the amended Stock

Purchase Agreement.

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23. By January 29, 2012, Ansari had failed to secure $5 million in funding by

the deadline extended by the October Unanimous Written Consent and had failed to cause

Hive Mind to tender to SFC the $1.5 million for the company’s failure to secure the

Consulting Agreement pursuant to the same Consent.

24. On January 31, 2012, Wright and SFC informed Ansari in writing that SFC

intended to invoke the stock repurchase terms of the Unanimous Written Consent at the

price of $100,000 as set forth in such Consent.

25. Ansari refused to tender the stock, claiming the Company held a pre-

existing right of first refusal despite the express and unambiguous language of the

Unanimous Written Consent that Hive Mind waived any right of repurchase.

26. On February 1, 2012, SFC purchased Parekh’s shares in Hive Mind

pursuant to the terms of the Unanimous Written Consent at the price of $100,000 as set

forth in such Consent.

27. On February 6, 2012, SFC and Wright voted their shares pursuant to and in

accordance with Section 228 and elected Wright and Breen to the two vacant seats on the

Hive Mind Board. The right to act by written consent pursuant to Section 228 of the

DGCL has never been altered in any way by Hive Mind’s Charter.

28. On February 6, 2012, Wright and Breen sent written notice to Ansari that

they had scheduled a telephonic meeting of the Board of Directors for Thursday, February

9, 2012, at 1:00 p.m. Pacific Standard Time, to discuss the management of Hive Mind.

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29. On Wednesday, February 8, 2012, Ansari, through the Dhillon & Smith law

firm, informed Wright and Breen that Ansari would not recognize their appointment to the

Board of Directors, would not tender his shares pursuant to the Unanimous Written

Consent, and would not recognize their authority to take any action on behalf of Hive

Mind.

30. Also on Wednesday, February 8, 2012, at Ansari’s direction, the Dhillon &

Smith firm filed an action in California against Wright, Parekh and SFC, alleging fraud,

breach of fiduciary duty, misappropriation of trade secrets and interference with

prospective economic advantage. That California action does not seek any relief under or

akin to Section 225 of the DGCL, it merely recycles the unsubstantiated claims of Ansari,

and it was filed the day before the noticed meeting of the Board of Directors for the

apparent purpose of undermining the legitimacy of the Board and further entrenching

Ansari as the sole director and officer of Hive Mind.

31. On Thursday, February 9, 2012, as previously noticed to Ansari, Wright and

Breen conducted a meeting of the Hive Mind Board of Directors. At that meeting, the

Board of Directors removed Ansari as CEO of Hive Mind and appointed Lauren Elliott as

interim CEO. The Board also approved an order directed to Ansari that he (i) immediately

cease all activities by or on behalf of the Company, including but not limited to

representing to others he has the authority to act on behalf of the Company, entering into

contracts or commitments of any kind, hiring agents, advisors or representatives to act on

behalf of the Company, or discussing any confidential information of the Company with

third parties, and (ii) immediately return, or cause to be returned (from his advisors and the

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like) to the Company’s offices located at 2629 7th Street in Berkeley, California, all

material of the Company, tangible or intangible, in his possession (or his advisors’

possession, as the case may be) or that he previously removed from the Company’s

facilities or servers, including but not limited to, paper or electronic files and other data

generated and/or stored on the Company’s computers or other storage media (e.g., hard

disks, zip cartridges, CDs, DVDs, etc.), or any other electronic data, hardware or other

equipment, software, intellectual property. The Hive Mind Board of Directors authorized

the Interim CEO to take such actions as necessary to cause this order to be carried out.

The Board also fired the law firm Dhillon & Smith which, while purporting to act as Hive

Mind’s counsel, was nothing more than a facilitator for Ansari's ultra vires acts. In that

firm’s place, the Board of Directors appointed the firm of Bergeson LLP as independent

counsel for the Company. The Board provided notice to Ansari and to the Dhillon &

Smith firm of the board’s actions.

32. Both Ansari and his attorneys refused to recognize the Hive Mind Board of

Directors’ authority and refused to recognize the lawful election of Wright and Breen to

the Hive Mind’s Board. Ansari has refused to allow access to all the legal files that were

in Wilson Sonsini’s possession to Wright and Breen, or any other person.

33. Ansari clearly has usurped the corporate governance of Hive Mind and is

using the Company’s declining financial assets for his individual benefit. Furthermore, he

purports to act on the Company’s behalf against the instruction of the duly elected majority

of the Hive Mind’s Board of Directors.

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34. Ansari continues to allow the business and opportunities of Hive Mind to

dissipate and is not paying contractors and employees. Consequently, Hive Mind’s

business is wasting away. On information and belief, Plaintiffs believe that Hive Mind is

presently in a state of impairment or that impairment is imminent without timely action.

35. Ansari’s actions have damaged and continue to damage the Company, the

opportunities available to the IP Assets contributed to Hive Mind by SFC and the value of

shareholders’ investment. Ansari’s actions have further undermined shareholders’ rights to

participate in corporate governance.

36. Ansari’s actions, including his attempts to smear the reputation of Wright

and SFC with respect to third parties, have been and continue to be motivated by Ansari’s

desire to increase his leverage over the Company, to frustrate the actions taken by the Hive

Mind’s Board of Directors in violation of his fiduciary duties, to avoid his obligation to

sell his shares pursuant to his earlier agreement, to conceal his failure to provide the

financing that was the entire reason for bringing him into the Company and to attempt to

extort a larger payout from SFC than the $100,000 agreed to in the Unanimous Written

Consent.

COUNT I – DECLARATORY RELIEF(The October 31, 2011 Unanimous Written Consent)

37. Plaintiffs reallege and incorporate by reference the allegations set forth in

all prior paragraphs of this Complaint.

38. The actions taken by plaintiffs as shareholders and as board members were

at all times a lawful exercise of their rights under the DGCL.

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39. The Unanimous Written Consent, entered into by all three directors of Hive

Mind in both their official and individual capacities, is valid and enforceable.

40. SFC’s purchase of Parekh’s shares on or about February 1, 2012, was valid

and enforceable as undertaken pursuant to the terms of the Unanimous Written Consent.

41. SFC’s January 31, 2012, demand that Ansari tender his shares for $100,000

was valid and enforceable.

42. Accordingly, plaintiffs seek a declaration that the Unanimous Written

Consent is valid and enforceable, including its waiver of Hive Mind’s “right of first

refusal” with respect to the transfer of Hive Mind shares.

43. Plaintiffs further seek a declaration that SFC’s purchase of Parekh’s shares

on or about February 1, 2012, was valid and enforceable.

44. Plaintiffs further seek a declaration that SFC’s demand on or about January

31, 2012, that Ansari tender his shares for $100,000, was valid and enforceable.

45. Plaintiffs have no adequate remedy at law.

COUNT II – DECLARATORY RELIEF(The February 6, 2012 Written Consent)



47. Wright and Breen were elected to occupy the vacant seats on Hive Mind’s

Board of Directors pursuant to Wright’s and SFC’s February 6, 2012 Written Consent

pursuant to Section 228 of the DGCL.

48. Accordingly, plaintiffs seek a declaration that the election of Wright and

Breen to the Hive Mind Board of Directors is valid and enforceable.

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COUNT III – DECLARATORY RELIEF(The February 9, 2012 Board Action)



51. Wright and Breen provided adequate, written notice to Ansari of the Hive

Mind Board of Directors’ meeting to be held on February 9, 2012, at 1:00 p.m. Pacific

Standard Time.

52. Wright and Breen constituted a majority of Hive Mind’s Board of Directors

at said meeting held on February 9, 2012.

53. On February 9, 2012, a majority of Hive Mind’s Board voted, among other

resolutions, to remove Ansari as CEO of Hive Mind and to fire Dhillon & Smith as

putative counsel to Hive Mind.

54. Ansari has refused to recognize the authority of Wright and Breen as

directors, or of the resolutions passed by the Board of Directors on February 9, 2012.

55. Accordingly, Plaintiffs seek a declaration that the resolutions passed by

Hive Mind’s Board of Directors on February 9, 2012, were validly approved and

enforceable.


57. Plaintiffs further seek an order directing Ansari to take no action and make

no statement on behalf of Hive Mind without the express written consent of a majority of

the Hive Mind Board of Directors.

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COUNT IV – MANDATORY INJUNCTIVE RELIEF(Compliance with Company Instructions and Return of Company Files)



59. As members of Hive Mind’s Board of Directors, Wright and Breen are

entitled to Hive Mind’s files.

60. Ansari has withheld Hive Mind’s files from Wright and Breen.

61. Accordingly, Plaintiffs seek an order requiring Ansari to promptly deliver to

Hive Mind all Company files in Ansari’s possession, including files from Wilson, Sonsini

and Dhillon & Smith.


PRAYER FOR RELIEF

WHEREFORE, Plaintiffs respectfully request that the Court enter an Order:

A. entering judgment in favor of plaintiffs and against defendants;

B. affirming the validity and enforceability of the October UnanimousWritten Consent;

C. affirming that SFC’s purchase of Parekh’s shares on or about February 1, 2012, was valid and enforceable;

D. affirming that SFC’s demand on or about January 31, 2012, that Ansari tender his shares for $100,000, was valid and enforceable;

E. affirming the validity and enforceability of the election of Wright and Breen to the Hive Mind Board;

F. affirming the validity and enforceability of the resolution passed by the Hive Mind Board on February 9, 2012;

G. requiring Ansari to make available Hive Mind’s files to the Company;

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H. directing Ansari to take no action and make no statements on behalf of Hive Mind without the express written consent of the Hive Mind Board;

I. awarding costs and expenses, including reasonable attorneys’ fees, that plaintiffs were forced to incur in bringing this action to address Ansari’s wrongful acts and intransigence; and

J. granting such other and further relief as this Court shall deem proper and just.

DATED: February 10, 2012 DLA PIPER LLP (US)

/s/ John L. Reed John L. Reed (I.D. No. 3023)K. Tyler O’Connell (I.D. No. 4514)919 N. Market Street, Suite 1500Wilmington, DE 19801Telephone: (302) 468-5700Facsimile (302) 394-2341

OF COUNSEL: [email protected]@dlapiper.com

David Lisi, EsquireCathleen Donohoe, EsquireAnn K. Miller, EsquireDLA PIPER LLP (US)2000 University AvenueEast Palo Alto, CA 94303-2215Telephone: (650) 833-2000Facsimile: (650) 833-2001

Attorneys for Plaintiffs

mailto:[email protected]

verified complaint

Documents

pacific standard time

unanimous written consent

express written consent

hive minds files

hive minds board

hive minds counsel

wilson sonsinis possession

hive mind agreed