XML 43 R25.htm IDEA: XBRL DOCUMENT v3.6.0.2
Subsequent Events
12 Months Ended
Dec. 31, 2016
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events
On January 3, 2017, CMC filed a second amended complaint in the action pending in the District Court of Ramsey County Minnesota. In addition to alleging that the Company is liable for all open CMC invoices worldwide (approximately $23 million), the second amended complaint asserted fiduciary and related claims against former directors and other defendants, which we have an obligation to defend. We believe CMC’s additional claims are without merit and will vigorously defend our position in the CMC litigation.
On January 23, 2017, the Company consummated the previously announced NXSN transaction. Prior to the consummation of the transaction, we contributed all of the issued and outstanding stock of CDI to Nexsan.
The NXSN transaction was effected pursuant to the Stock Purchase Agreement, dated as of November 22, 2016, by and between the Company and NXSN (the “Stock Purchase Agreement”), as amended by Amendment No. 1 to the Stock Purchase Agreement, dated as of December 12, 2016 (the “Amendment”).
In consideration of the Stock Sale, we received (i) a senior secured convertible promissory note issued by NXSN in an initial aggregate principal amount of $25 million, subject to certain adjustments (the “Note”), and (ii) 50% of the issued and outstanding shares of common stock of NXSN (the “NXSN Shares”). The remaining 50% of the issued and outstanding shares of NXSN common stock is owned by Spear Point Private Equity LP (“SPPE”).
The Note represents a senior secured obligation of NXSN, matures on the third anniversary of the date of issuance, ranks senior in right of payment to all other indebtedness of NXSN, is guaranteed by Nexsan and certain of its subsidiaries, and is secured by a first priority lien on all of the assets of NXSN, including the capital stock of Nexsan and certain of its subsidiaries. The foregoing guarantees and security interests are provided by a guaranty and security agreement (the “Guaranty and Security Agreement”), which we entered into with NXSN, Nexsan and certain of Nexsan’s subsidiaries, as grantors, contemporaneously with the delivery of the Note.
The Note bears interest at a rate of 5 percent per annum from the date of issuance through the second anniversary thereof, and 8 percent per annum thereafter, and is payable quarterly from the date of issuance through the first anniversary thereof, and monthly thereafter. The principal amount, and in certain circumstances, the interest rate of the Note are subject to certain adjustments from time-to-time, including as a result of (i) the failure of NXSN to sell $10 million of Series A Preferred Stock during the period beginning date of the Stock Purchase Agreement and ending on the 6 months anniversary of the closing of the Stock Sale, (ii) certain surpluses or deficiencies in the net working capital of Nexsan and the subsidiaries as of the closing of the Stock Sale, (iii) the incurrence by Nexsan of certain one-time expenses within 60 days of the closing of the Stock Sale and (iv) the satisfaction of any indemnity obligation of the Company arising under the Stock Purchase Agreement. The Note also permits the Company, at any time following the closing of the Stock Sale, to convert up to $10 million of the aggregate principal amount thereof into shares of common stock of NXSN at a conversion price of $1.25 per share. The Note includes anti-dilution provisions, negative covenants and other protective provisions that are customary for instruments of its type.
In connection with the consummation of the Stock Sale, we entered into a stockholders agreement with SPPE providing for certain oversight, management and veto rights with respect to NXSN. As a result, we have the right to designate, individually, two of the five directors serving on the NXSN board, and to designate jointly, with SPPE, an additional independent director to serve on the NXSN board, until the Note is paid in full. In addition, we have a consent right with respect to certain actions proposed to be taken by NXSN, including the issuance of additional amendments to its organizational documents and issuances of additional capital stock.
On January 31, 2017, the Company held a special meeting of the stockholders of the Company (the “Special Meeting”) at which the stockholders approved the issuance of up to 1,500,000 shares (the “Capacity Shares”) of the Company’s common stock, par value $0.01 per share (“Common Stock”), pursuant to the Subscription Agreement, dated as of November 22, 2016, by and between the Company and Clinton Group, Inc. (“Clinton”), as amended by Amendment No. 1 to the Subscription Agreement, dated as of January 9, 2017 (the “Amendment”) (as so amended, the “Subscription Agreement”). Clinton is a diversified asset management firm that invests globally across multiple alternative investment strategies, an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) and a stockholder of the Company. Joseph A. De Perio, the Non-Executive Chairman of the Board of Directors of the Company (the “Board”), is a Senior Portfolio Manager at Clinton.
 Pursuant to the terms of the Subscription Agreement, on February 2, 2017 (the “Initial Closing Date”), we entered into a Capacity and Services Agreement (the “Capacity and Services Agreement”) with Clinton and GlassBridge Asset Management, LLC (“GlassBridge”), our investment adviser subsidiary.
 As consideration for the capacity and services Clinton has agreed to provide under the Capacity and Services Agreement and pursuant to the terms of the Subscription Agreement, we issued 1,250,000 shares of Common Stock to Madison Avenue Capital Holdings, Inc. (“Madison”), an affiliate of Clinton, on the Initial Closing Date.
On the Initial Closing Date, we entered into a Registration Rights Agreement with Madison (the “Registration Rights Agreement”) relating to the registration of the resale of the Capacity Shares.
 On the Initial Closing Date, we also entered into a letter agreement with Madison pursuant to which Madison has agreed to a three-year lock-up with respect to any Capacity Shares issued to it (the “Letter Agreement”).
Pursuant to the terms of the Capacity and Services Agreement, GlassBridge’s initial board of directors is comprised of Joseph A. De Perio, the Non-Executive Chairman of the Company’s Board and a Senior Portfolio Manager at Clinton, Daniel Strauss, a Portfolio Manager at Clinton, Donald H. Putnam, a member of the Company’s Board, Alex Spiro, a member of the Company’s Board and Chair of its Special Committee, and Harlan H. Simon, who has over 20 years of hedge fund experience.
On February 10, 2017, the Company issued a press release announcing that the Board approved a 1:10 reverse stock split to be effective after market close on February 21, 2017. The Board’s approval follows the previously disclosed approval of our stockholders at the special meeting of stockholders held on January 31, 2017.
On February 17, 2017, the Company also filed an amendment to our Restated Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect the previously announced 1:10 reverse split of our common stock, par value $0.01 per share. Pursuant to the Amendment, effective as of the Effective Time, every ten (10) shares of the Company’s issued and outstanding common stock or held by the Company in treasury was converted into one (1) share of common stock, without any change in the par value per share. The Amendment also decreased the number of authorized shares of the Company’s common stock from 100,000,000 to 10,000,000. Our common stock began trading on a Reverse Stock Split-adjusted basis on the New York Stock Exchange (the “NYSE”) at the opening of trading on February 22, 2017.
On February 17, 2017, following a trial, the jury returned a verdict against us in the patent infringement case brought by IOENGINE against the Company in the United States District Court for the District of Delaware. In December 2014, the Plaintiff filed a lawsuit against us alleging infringement of United States Patent No. 8,539,047 (the “Patent”) by certain products we formerly sold under the IronKey brand. The jury awarded the IOENGINE $11.0 million in damages. We strongly disagree with the jury verdict and certain rulings made before trial. We intend to vigorously challenge the verdict and certain of the Court’s pre-trial rulings in post-trial motions, and, if necessary, pursue our rights on appeal.
On February 21, 2017, the Company changed its name to “GlassBridge Enterprises, Inc.” through a short-form merger under Section 253 of the General Corporation Law of the State of Delaware, pursuant to which a subsidiary formed solely for the purpose of the Name Change was merged with and into the Company, with the Company remaining as the surviving corporation in the merger. The merger had the effect of amending our Restated Certificate of Incorporation to reflect our new legal name.
Consistent with our stated strategy of exploring a diverse range of new strategic asset management business opportunities for our portfolio, during Q1 2017, we made $4.0 million in strategic investments. We will account for such investments under the cost method in Q1 2017.