0001140361-15-015554.txt : 20150416 0001140361-15-015554.hdr.sgml : 20150416 20150416083314 ACCESSION NUMBER: 0001140361-15-015554 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20150415 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150416 DATE AS OF CHANGE: 20150416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RLJ ENTERTAINMENT, INC. CENTRAL INDEX KEY: 0001546381 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE DISTRIBUTION [7822] IRS NUMBER: 454950432 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35675 FILM NUMBER: 15773333 BUSINESS ADDRESS: STREET 1: 8515 GEORGIA AVENUE STREET 2: SUITE 650 CITY: SILVER SPRING STATE: MD ZIP: 20910 BUSINESS PHONE: 301-608-2115 MAIL ADDRESS: STREET 1: 8515 GEORGIA AVENUE STREET 2: SUITE 650 CITY: SILVER SPRING STATE: MD ZIP: 20910 8-K 1 form8k.htm RLJ ENTERTAINMENT, INC 8-K 4-15-2015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 15, 2015

RLJ ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation)

001-35675

(Commission File Number)

45-4950432

(IRS Employer Identification Number)

RLJ Entertainment, Inc.

8515 Georgia Avenue, Suite 650

Silver Spring, Maryland

(Address of principal executive offices)

Registrant’s telephone number, including area code: (301) 608-2115

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

Bridge Preferred Stock

On April 15, 2015, RLJ Entertainment, Inc. (the “Company”) sold to Robert L. Johnson, the Company’s chairman, 15,000 shares of Bridge Preferred Stock for $15,000,000 in cash. The issuance of shares to Mr. Johnson was approved by a special committee of the board of directors composed of three independent directors, and the special committee was advised with respect to the transaction by special independent counsel selected by the committee. The rights of the Bridge Preferred Stock include a preference on any dividends paid, limited voting rights related any amendment to the Bridge Preferred Stock, a liquidation preference, negative covenants with respect to certain events and a redemption right upon certain defaults or a change in control. The Company used $10,000,000 of the net proceeds of the sale of the Bridge Preferred Stock to make a partial payment on its Senior Credit Facility (as defined below) and approximately $1 million for legal fees and expenses associated with the transaction. The balance of the net proceeds are intended to be used for working capital purposes.

In connection with the sale of the Bridge Preferred Stock, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mr. Johnson. Pursuant to the terms of the Purchase Agreement, if convertible preferred stock is issued to a third party within 60 days after the sale to Mr. Johnson of the Bridge Preferred Stock, concurrently with the closing on the sale of convertible preferred stock to such third party, each holder of Bridge Preferred Stock is required to exchange its shares of Bridge Preferred Stock for the number of shares of convertible preferred stock that is equal in liquidation value to the purchase price paid by such holder for Bridge Preferred Stock and would receive the same rights and benefits as the other investors in the convertible preferred stock, including the issuance of warrants. If convertible preferred stock is not issued to a third party within 60 days after the sale to Mr. Johnson of the Bridge Preferred Stock, promptly following such date, each holder of Bridge Preferred Stock is required to exchange its shares of Bridge Preferred Stock for the number of shares of convertible preferred stock that is equal in liquidation value to the purchase price paid by such holder for Bridge Preferred Stock pursuant to the terms of the last convertible preferred stock term sheet offered by the Company to a third party and would receive the same rights and benefits as set forth in such last term sheet, including the issuance of warrants. The conversion of such convertible preferred stock into, and the exercise of such warrants for, shares of the Company’s common stock would be subject to the approval of the stockholders of the Company.

The Company is currently seeking to complete a private placement of between $15 million and $30 million of preferred stock convertible into the Company’s common stock to selected institutional investors (including the contemplated exchange with Mr. Johnson). Such convertible preferred stock will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. In connection with this placement, the Company has received a non-binding term sheet from a third party to purchase for cash $4,000,000 in liquidation value of convertible preferred stock and warrants to purchase common stock. The non-binding term sheet contemplates that the convertible preferred stock would:

Bear an 8% annual dividend, payable in kind for the first two years and thereafter payable quarterly in cash or freely-trading common stock, at the Company’s option. If common stock were used for the payment, it would be valued at 80% of the market price.

Be convertible into common stock at an initial conversion price of $1.00 per share, subject to anti-dilution adjustment.

Be subject to mandatory redemption on the fifth anniversary of the issuance date. The Company would be able to redeem with either cash or freely-tradable common stock. If common stock is used for the redemption, it would be valued at 80% of the market price.

The term sheet further contemplates the issuance of warrants to purchase an aggregate number of shares of common stock equal to 30% of the number of shares into which the convertible preferred stock is convertible on the date of issuance thereof. The Warrants would have a five year term and would have an exercise price of $1.50 per share, subject to anti-dilution adjustment. Investors in the convertible preferred stock also would receive certain other customary rights, including registration rights and anti-dilution protection.

The conversion of the convertible preferred stock into, and the exercise of the warrants for, shares of the Company’s common stock would be subject to the approval of the stockholders of the Company. The Company would hold a special meeting seeking stockholders approval no later than July 31, 2015. Prior to the closing on the issuance of the convertible preferred stock, the Company would be required to obtain proxies from directors, executive officers and greater that 5% stockholders holding at least 50% of the outstanding shares to vote in favor of the issuance of the convertible preferred stock and the warrants.

There is no assurance that the transaction set forth in the term sheet will be completed, that the terms of the actual issuance will not materially vary from the terms set forth in the term sheet or that the Company will be successful in obtaining other investors in the convertible preferred stock.

Debt Amendments

Concurrently with the sale of the Bridge Preferred Stock, the Company also entered into (a) an Amendment (the “Senior Credit Facility Amendment”) to the Credit and Guaranty Agreement (the “Senior Credit Facility”) between the Company, certain lenders and MCP Opportunities LLC (as successor to McLarty Capital Partners SBIC, L.P., the “Administrative Agent”) , and (b) a Note Amendment Agreement (the “Amendment Agreement”) with the holders of certain subordinated notes (the “Subordinated Note Holders”).

The principal terms of the Senior Credit Facility Amendment are as follows:

(a) a waiver by the Requisite Lenders (as defined in the Senior Credit Facility), the Administrative Agent, and the Collateral Agent (as defined in the Senior Credit Facility) (collectively, the “Senior Lender Parties”) of certain Defaults (as defined in the Senior Credit Facility) and Events of Default (as defined in the Senior Credit Facility) caused by, or that would be caused by, (i) the breach of certain financial covenants under the Senior Credit Facility and (ii) the inclusion of a going concern qualification principally relating to the Company’s ability to meet its financial covenants in the 2014 annual consolidated financial statements of the Company and its subsidiaries;

(b) amendments of the Credit Facility (i) modifying the interest rate to equal LIBOR plus 10.64%, (ii) modifying certain financial statement and other reporting and lender communication requirements, (iii) changing the Fixed Charge Coverage Ratio (as defined in the Senior Credit Facility) threshold to 0.73:1.00 for the quarter ending March 31, 2015, and 0.63:1.00 for the quarter ending June 30, 2015, (iv) changing the Senior Leverage Ratio (as defined in the Senior Credit Facility) limit to 7.50:1.00 for the quarter ending March 31, 2015, and 6.92:1.00 for the quarter ending June 30, 2015, (v) changing the Total Leverage Ratio (as defined in the Senior Credit Facility) limit to 9:00:1:00 for the quarter ending March 31, 2015, and 8.95:1.00 for the quarter ending June 30, 2015, and (vi) changing the Minimum Cash Balance (as defined in the Senior Credit Facility) that the Company is required to maintain to $1 million; and

(c) the consent of the Senior Lender Parties to the issuance of the Bridge Preferred Stock and the convertible preferred stock and the use of the proceeds from the issuance of the Bridge Preferred Stock and the convertible preferred stock (i) to pay $10 million of the amounts outstanding pursuant to the Senior Credit Facility, (ii) to pay certain fees and costs associated with the issuance of the Bridge Preferred Stock and the convertible preferred stock, and (iii) for working capital purposes.

The principal terms of the Note Amendment Agreement are as follows:

(a) an agreement by the Subordinated Note Holders to convert 50% of the outstanding balance under the Subordinated Notes into the convertible preferred stock;

(b) amendments to the Subordinated Notes (i) changing the interest rate payable pursuant to such Subordinated Notes (A) from 12% to 1.5% per annum for the 24-month period commencing on January 1, 2015, and (B) 12% per annum thereafter; and (ii) specifying that 45% of the Interest (as defined in the Subordinated Notes) will be payable in cash and the remainder of the accrued Interest will be payable in the form of additional subordinated notes; and

The foregoing summary provides only a brief description of the Purchase Agreement, the Certificate of Designation specifying the terms of the Bridge Preferred Stock, the Senior Credit Facility Amendment and the Note Amendment Agreement. The summary does not purport to be complete and is qualified in its entirety by the full text of such documents, copies of which are attached hereto as Exhibits 3.1, 10.1, 10.2 and 10.3 and incorporated herein by reference.

Item 2.02. Results of Operations and Financial Condition.

On April 16, 2015 the Company issued a press release announcing its preliminary operating results for its fourth fiscal quarter and year ended December 31, 2014. A copy of the press release is furnished as Exhibit 99.1 attached hereto and is incorporated by reference in its entirety into this Item 2.02 of this Current Report on Form 8-K.

The information contained in this Item 2.02 and Exhibit 99.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act or otherwise subject to the liability of that section. Such information shall not be incorporated by reference in any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as otherwise expressly set forth by specific reference in such a filing.

Adjusted EBITDA and Other Non-GAAP Measures

In the press release, the Company discloses Adjusted EBITDA which is a non-GAAP financial measure, as defined in Regulation G promulgated by the Securities and Exchange Commission. A reconciliation of Adjusted EBITDA to net loss is included in page 6 of Exhibit 99.1.

This non-GAAP financial measure, Adjusted EBITDA, is in addition to, not an alternative for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. The Company believes that this non-GAAP measure has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that this measure should only be used to evaluate the Company’s results of operations in conjunction with corresponding GAAP measures.

The Company believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material noncash items that allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of noncash items better reflects our ability to make investments in the business and meet obligations. Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. The Company uses this measure to assess operating results and performance of its business, perform analytical comparisons, identify strategies to improve performance and allocate resources to its business segments. While the Company considers Adjusted EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP. Not all companies calculate Adjusted EBITDA in the same manner, and the measure, as presented, may not be comparable to similarly-titled measures presented by other companies.

Item 3.02. Unregistered Sales of Equity Securities.

The shares of Bridge Preferred Stock have not been registered under the Securities Act. The sale of the shares of Bridge Preferred Stock by the Company under the Purchase Agreement was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated under the Securities Act. The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information set forth in Item 1.01 of this Current Report on Form 8-K with respect to the issuance of Bridge Preferred Stock is incorporated into this Item 5.03 by reference.

Item 8.01. Other Events.

On April 16, 2015, the Company issued a press release announcing its preliminary operating results, the transactions contemplated by the Purchase Agreement and the amendments received from its creditors. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(d)

Exhibits:

Exhibit No.

Description

3.1

Form of Certificate of Designation of Preferences, Rights and Limitations of Bridge Preferred Stock

10.1

Securities Purchase Agreement dated April 15, 2015

10.2

Senior Credit Facility Amendment dated April 15, 2015

10.3

Note Amendment Agreement dated April 15, 2015

99.1

Press release issued on April 16, 2015

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RLJ ENTERTAINMENT, INC.

Date: April 16, 2015	By:	/s/ ANDREW S. WILSON
	Name: Andrew S. Wilson
	Title: Chief Financial Officer

EXHIBIT INDEX

Exhibit No.

Description

3.1	Form of Certificate of Designation of Preferences, Rights and Limitations of Bridge Preferred Stock

10.1	Securities Purchase Agreement dated April 15, 2015

10.2	Senior Credit Facility Amendment dated April 15, 2015

10.3	Note Amendment Agreement dated April 15, 2015

99.1	Press release issued on April 16, 2015

EX-3.1 2 ex3_1.htm EXHIBIT 3.1

Exhibit 3.1

RLJ ENTERTAINMENT, INC.

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

BRIDGE PREFERRED STOCK

PURSUANT TO SECTION 78.1955 OF THE

NEVADA REVISED STATUTE

The undersigned, Miguel Penella and Dawn Martens, do hereby certify that:

1. They are the President and Secretary, respectively, of RLJ Entertainment, Inc., a Nevada corporation (the “Corporation”).

2. The Corporation is authorized to issue 1,000,000 shares of preferred stock, none of which have been issued.

3. The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 1,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;

WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement, up to 17,000 shares of the preferred stock which the Corporation has the authority to issue, as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:

TERMS OF PREFERRED STOCK

Section 1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof, (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d‑5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 33% of the voting securities of the Corporation, (b) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction, (c) the Corporation sells or transfers all or substantially all of its assets to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a one year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the Original Issue Date), or (e) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Fundamental Transaction” means, at any time while the Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination).

“GAAP” means United States generally accepted accounting principles.

“Holder” shall have the meaning given such term in Section 2.

“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Corporation’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP.

“Junior Securities” means the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior or pari passu to the Preferred Stock in dividend rights or liquidation preference.

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Liquidation” shall have the meaning set forth in Section 5.

“New York Courts” shall have the meaning set forth in Section 8(d).

“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

“Permitted Indebtedness” means (a) the Indebtedness existing on the date hereof and (b) lease obligations and purchase money indebtedness of up to $500,000 in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets.

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Corporation) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Corporation’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Corporation’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Corporation and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clause (a) thereunder, and (d) Liens incurred in connection with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Corporation or its Subsidiaries other than the assets so acquired or leased.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Preferred Stock” shall have the meaning set forth in Section 2.

“Purchase Agreement” means the Securities Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

“Securities” means the Preferred Stock.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Stated Value” shall have the meaning set forth in Section 2, as the same may be increased pursuant to Section 3.

“Subsidiary” means any subsidiary of the Corporation as set forth on Schedule 3.1(a) of the Purchase Agreement and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date of the Purchase Agreement.

“Trading Day” means a day on which the principal Trading Market is open for business.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).

“Transaction Documents” means this Certificate of Designation, the Purchase Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated pursuant to the Purchase Agreement.

“Triggering Event” shall have the meaning set forth in Section 7(a).

“Triggering Redemption Amount” means, for each share of Preferred Stock, the sum of (a) 130% of the Stated Value, (b) all accrued but unpaid dividends thereon and (c) all liquidated damages and other costs, expenses or amounts due in respect of the Preferred Stock.

“Triggering Redemption Payment Date” shall have the meaning set forth in Section 7(b).

Section 2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Bridge Preferred Stock (the “Preferred Stock”) and the number of shares so designated shall be up to 17,000 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $1,000 (the “Stated Value”).

Section 3. Dividends.

a) Preferred Dividends. The Corporation shall pay preferential dividends in cash to the Holders of the Preferred Stock when and as declared by the Board of Directors.

b) Other Securities. So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities except as expressly permitted by Section 6(d). So long as any Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall directly or indirectly pay or declare any dividend or make any distribution upon, nor shall any distribution be made in respect of, any Junior Securities nor shall any monies be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares pari passu with the Preferred Stock.

Section 4. Voting Rights. Except as otherwise provided herein or as otherwise required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon under this Certificate of Designation, for each share of Preferred Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.

Section 6. Negative Covenants. As long as any shares of Preferred Stock are outstanding, unless the holders of at least 51% in Stated Value of the then outstanding shares of Preferred Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock, Common Stock Equivalents or Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Corporation, provided that such repurchases shall not exceed an aggregate of $100,000 for all officers and directors for so long as the Preferred Stock is outstanding;

e) pay cash dividends or distributions on Junior Securities of the Corporation;

f) enter into any transaction with any Affiliate of the Corporation which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Corporation (even if less than a quorum otherwise required for board approval); or

g) enter into any agreement with respect to any of the foregoing.

Section 7. Redemption Upon Triggering Events.

a) “Triggering Event” means, wherever used herein any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i. unless specifically addressed elsewhere in this Certificate of Designation as a Triggering Event, the Corporation shall fail to observe or perform any covenant, agreement or warranty contained in, or otherwise commit any breach of the Transaction Documents, and such failure or breach shall not, if subject to the possibility of a cure by the Corporation, have been cured within 30 calendar days after the date on which written notice of such failure or breach shall have been delivered;

ii. the Corporation shall redeem more than a de minimis number of Junior Securities other than as to repurchases of Common Stock or Common Stock Equivalents from departing officers and directors, provided that, while any of the Preferred Stock remains outstanding, such repurchases shall not exceed an aggregate of $100,000 from all officers and directors;

iii. the Corporation shall be party to a Change of Control Transaction;

iv. there shall have occurred a Bankruptcy Event;

v. the Common Stock shall fail to be listed or quoted for trading on a Trading Market for more than five Trading Days, which need not be consecutive Trading Days;

vi. the electronic transfer by the Corporation of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”; or

vii. any monetary judgment, writ or similar final process shall be entered or filed against the Corporation, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days.

b) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable law) have the right, exercisable at the sole option of such Holder, to require the Corporation to redeem all of the Preferred Stock then held by such Holder for a redemption price, in cash, equal to the Triggering Redemption Amount. The Triggering Redemption Amount shall be due and payable within five Trading Days of the date on which the notice for the payment therefor is provided by a Holder (the “Triggering Redemption Payment Date”). If the Corporation fails to pay in full the Triggering Redemption Amount hereunder on the date such amount is due in accordance with this Section, the Corporation will pay interest thereon at a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law, accruing daily from such date until the Triggering Redemption Amount, plus all such interest thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such date as the applicable Holder shall have been paid the Triggering Redemption Amount in cash.

Section 8. Miscellaneous.

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 8515 Georgia Avenue, Suite 650, Silver Spring, Maryland 20910, Attention: Miguel Penella, email address mpenella@rljentertainment.com, or such other address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 8. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

b) Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.

c) Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

e) Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

f) Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

i) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued pursuant to the Purchase Agreement. If any shares of Preferred Stock shall be exchanged, converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Bridge Preferred Stock.

*********************

RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Nevada law.

IN WITNESS WHEREOF, the undersigned have executed this Certificate this 15th day of April 2015.

/s/ Miguel Penella		/s/ Dawn Martens
Name: Miguel Penella Title: President		Name: Dawn Martens Title: Secretary

EX-10.1 3 ex10_1.htm EXHIBIT 10.1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of April 15, 2015, between RLJ Entertainment, Inc., a Nevada corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Certificate of Designation (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.4.

“Action” shall have the meaning ascribed to such term in Section 3.1(f).

“Board of Directors” means the board of directors of the Company.

“Bridge Preferred Stock” means up to 15,500 shares of the Company’s Bridge Preferred Stock issued hereunder having the rights, preferences and privileges set forth in the Certificate of Designation, in the form of Exhibit A hereto.

“Certificate of Designation” means the Certificate of Designation to be filed prior to the Closing by the Company with the Secretary of State of Nevada, in the form of Exhibit A attached hereto.

“Closing” means a closing on the purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means any Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Delivery Date” shall have the meaning set forth in Section 5.3.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Date” shall have the meaning set forth in Section 5.3.

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

“Initial Closing” shall have the meaning set forth in Section 2.1(b)

“Issue Date” means the date that shares of Bridge Preferred Stock are first issued by the Company.

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

“Maximum Rate” shall have the meaning ascribed to such term in Section 6.16.

“Permanent Preferred Stock” means preferred stock, $0.001 par value per share, of the Company convertible into the Company’s common stock.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Securities” means the Bridge Preferred Stock.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shareholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents, including the issuance of all of the Underlying Shares in excess of 19.99% of the issued and outstanding Common Stock on the Closing Date.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).

“Stated Value” means $1,000 per share of Bridge Preferred Stock.

“Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for the Bridge Preferred Stock purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

“Subsequent Closing” shall have the meaning set forth in Section 2.1(b)

“Subsidiary” means any subsidiary of the Company and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Transaction Documents” means this Agreement, and the Certificate of Designation, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing.

(a) The issuance of the Bridge Preferred Stock shall take place at one or more closings (each of which is referred to in this Agreement as a “Closing”). The Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, an aggregate of up to 15,500 shares of Bridge Preferred Stock with an aggregate Stated Value for each Purchaser equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser. Each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to its Subscription Amount and the Company shall deliver to each Purchaser its respective shares of Bridge Preferred Stock, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of the Company or such other location as the parties shall mutually agree.

(b) The initial Closing (the “Initial Closing”) shall take place on April 15, 2015, and upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, an aggregate of at least 15,000 shares of Bridge Preferred Stock pursuant to the terms set forth in Section 2.1(a) of this Agreement. If less than all of the shares of Bridge Preferred Stock are sold and issued at the Initial Closing, then, subject to the terms and conditions of this Agreement, the Company may sell and issue at one or more subsequent closings (each, a “Subsequent Closing”), within five (5) Business Days after the Initial Closing, up to the balance of the unissued Bridge Preferred Stock to such persons or entities as may be approved by the Company. Any such sale and issuance in a Subsequent Closing shall be on the same terms and conditions as those set forth in Section 2.1(a) of this Agreement.

2.2 Deliveries.

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser, as to the Securities, the following:

(i) this Agreement duly executed by the Company; and

(ii) a certificate evidencing a number of shares of Bridge Preferred Stock equal to such Purchaser’s Subscription Amount divided by the Stated Value, registered in the name of such Purchaser and evidence of the filing and acceptance of the Certificate of Designation from the Secretary of State of Nevada; and

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

(i) this Agreement duly executed by such Purchaser; and

(ii) such Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

2.3 Closing Conditions.

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

(v) the holders of the Company’s senior debt shall have entered into forbearance agreements with the Company whereby such holders agree not to accelerate any of the obligations thereunder in respect of the Company’s failure to meet any debt to EBITDA ratios, total debt outstanding obligations or senior debt to EBITDA ratios.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Purchaser:

(a) Organization and Qualification. The Company is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(b) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(c) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(d) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filings required pursuant to Section 4.6 of this Agreement.

(e) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.

(f) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):

(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, it will be an “accredited investor” as defined in Rule 501(a) under the Securities Act.

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(f) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and all reports, schedules, forms, statement and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material), and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

4.4 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

4.5 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for (a) the payment of $10 million of senior debt and associated fees and costs and (b) the balance for working capital purposes. The Company shall not use such proceeds: (x) for the redemption of any Common Stock or Common Stock Equivalents, (y) for the settlement of any outstanding litigation or (z) in violation of FCPA or OFAC regulations.

4.6 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

ARTICLE V.

MANDATORY EXCHANGE OF BRIDGE PREFERRED STOCK

5.1 Permanent Preferred Stock Issued to Third Party. If Permanent Preferred Stock is issued by the Company to a third party within sixty (60) days after the Issue Date, concurrently with the closing on the sale of Permanent Preferred Stock to such third party, each holder of Bridge Preferred Stock shall exchange all of its shares of Bridge Preferred Stock for the number of shares of Permanent Preferred Stock that is equal in liquidation value to the purchase price paid by such holder for Bridge Preferred Stock. Concurrent with such exchange, the Company shall (a) issue to such holder warrants on the same terms and at the same rate as those issued to the third party investor and (b) enter into with such holder such other agreements, such as a registration rights agreement or stockholders agreement, on the same terms are entered with such third party investor.

5.2 Permanent Preferred Stock Not Issued to Third Party. If Permanent Preferred Stock is not issued by the Company to a third party within sixty (60) days after the Issue Date, promptly following such date each holder of Bridge Preferred Stock shall exchange all of its shares of Bridge Preferred Stock for the number of shares of Permanent Preferred Stock that is equal in liquidation value to the purchase price paid by such holder for Bridge Preferred Stock pursuant to the terms of the last Permanent Preferred Stock term sheet offered by the Company to a third party. Concurrent with such exchange, the Company shall (a) issue to such holder warrants on the same terms and at the same rate as set forth in such term sheet and (b) enter into with such holder such other agreements, such as a registration rights agreement or stockholders agreement, on the same terms as are specified in such term sheet. The parties shall negotiate in good faith to resolve any terms of such agreements as are not specified in such term sheet.

5.3 Mechanics of Exchange. If the Bridge Preferred Stock is required to be exchanged pursuant to Sections 5.1 or 5.2 of this Agreement, upon such exchange (the “Exchange Date”), the holder of a certificate or certificates evidencing shares of Bridge Preferred Stock shall (i) surrender such certificate or certificates, duly endorsed, at the principal office of the Company and (ii) notify the Company in writing of the name or names in which such holder wishes the certificate or certificates of Permanent Preferred Stock to be issued. In the case of lost or destroyed certificates formerly evidencing ownership of shares of Bridge Preferred Stock to be surrendered, the holder shall submit such proof of loss or destruction and, if requested by the Company, an appropriate indemnity, reasonably required by the Company. The date on which the holder satisfies the foregoing requirements is referred to as the “Delivery Date.” As soon as practicable after the Delivery Date, the Company shall deliver a certificate for the number of full shares of Permanent Preferred Stock issuable upon such exchange. Notwithstanding the foregoing, regardless of whether a holder shall have surrendered such holder’s certificates evidencing shares of Bridge Preferred Stock and/or received in respect thereof certificates evidencing shares of Permanent Preferred Stock, such holder shall from and after the Exchange Date be treated as a record holder of the number of shares of Permanent Preferred Stock into which such holder's shares of Bridge Preferred Stock shall have been exchanged and the certificate held by such holder formerly representing ownership of shares of Bridge Preferred Stock shall, until surrendered in exchange for new certificates evidencing shares of Permanent Preferred Stock as contemplated above, be deemed to evidence the shares of Permanent Preferred Stock issuable upon exchange of the shares of Bridge Preferred Stock formerly held by such holder until such time as record ownership is transferred. All shares of Permanent Preferred Stock issuable upon exchange of the Bridge Preferred Stock shall be fully paid and nonassessable.

ARTICLE VI.

MISCELLANEOUS

6.1 Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before April 22, 2015; provided, however, that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

6.2 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

6.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2^nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

6.4 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 51% in interest of the Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; provided, that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with accordance with this Section 6.4 shall be binding upon each Purchase and holder of Securities and the Company.

6.5 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

6.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.9 and this Section 6.7.

6.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party hereto shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding.

6.9 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

6.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

6.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

6.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

6.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

6.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

6.15 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

6.16 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

6.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.

6.18 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

6.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

6.20 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

6.21 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(Signature Pages Follow)

[COMPANY SIGNATURE PAGE TO RLJE SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

RLJ ENTERTAINMENT, INC.		Address for Notice:
		8515 Georgia Avenue
		Suite 650
By:	/s/ Miguel Penella	Silver Spring, Maryland 20910
Name: Miguel Penella
Title: CEO
		Email:
With a copy to (which shall not constitute notice):		mpenella@rljentertainment.com

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

[PURCHASER SIGNATURE PAGE TO RLJE SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: RLJ SPAC Acquisition, LLC, a Delaware limited liability company

Signature of Authorized Signatory of Purchaser: /s/ H. Van Sinclair

Name of Authorized Signatory: H. Van Sinclair

Title of Authorized Signatory: President

Email Address of Authorized Signatory: van@rljcompanies.com

Facsimile Number of Authorized Signatory: _________________________________________

Address for Notice to Purchaser:

Address for Delivery of Securities to Purchaser (if not same as address for notice):

Subscription Amount: $15,000,000.00

Shares of Preferred Stock: 15,000

EIN/SSN: _______________________

EX-10.2 4 ex10_2.htm EXHIBIT 10.2

Exhibit 10.2

Execution Copy

FIRST AMENDMENT TO

CREDIT AND GUARANTY AGREEMENT

THIS FIRST AMENDMENT TO THE CREDIT AND GUARANTY AGREEMENT (this “Amendment”) is entered into as of April 15, 2015, by and among RLJ Entertainment, Inc., a Nevada corporation (“Parent Borrower”), certain subsidiaries of RLJ Entertainment, Inc. as Guarantors (“Guarantors”), Various Lenders (“Lenders”), MCP Opportunities LLC (as successor to McLarty Capital Partners SBIC, L.P.) as Administrative Agent and Collateral Agent (“MCP” or the “Administrative Agent” and/or “Collateral Agent”)), McLarty Capital Partners SBIC, L.P., as Arranger, Bookmanager and Syndication Agent (“McLarty SBIC” and, together with MCP, “McLarty”) and Crystal Financial LLC, as Documentation Agent (“Crystal”).

RECITALS

A. Parent Borrower, Guarantors, Lenders, McLarty and Crystal are parties to that certain Credit and Guaranty Agreement dated as of September 11, 2014 (the “Credit and Guaranty Agreement”); capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit and Guaranty Agreement.

B. Parent Borrower intends to offer for sale at least $15,000,000 of convertible preferred stock in Parent Borrower (which shall not constitute Disqualified Equity) (the “Equity Transaction”), and to use the proceeds from the Equity Transaction (i) to pay down certain amounts outstanding under Credit and Guaranty Agreement (including any prepayment penalty fee), (ii) to acquire additional content and for general working capital, and (iii) to pay transaction expenses incurred in connection with the Equity Transaction.

C. Parent Borrower and Guarantors have requested that certain provisions of the Credit and Guaranty Agreement be amended as provided herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

1. Waivers. The Requisite Lenders, McLarty and Crystal, acknowledge that (i) Parent Borrower has not complied with Section 6.7(d) for the period between March 31, 2015 and April 15, 2015 (“Section 6.7(d) Noncompliance”) and (ii) the 2014 Annual Financial Statements of Parent Borrower and its Subsidiaries may include a going concern qualification principally relating to Parent Borrower's ability to meet its financial covenants in Section 6.7 of the Credit and Guaranty Agreement (“Section 5.1 Noncompliance,” and together with the Section 6.7(d) Noncompliance, the “Existing Defaults”). The Requisite Lenders, McLarty and Crystal hereby waive any Defaults and Events of Default solely to the extent arising as a result of the Existing Defaults; provided, however, that such waiver shall in no way constitute a waiver of any other Defaults or Events of Default which may have occurred but which are not specifically referenced as the “Existing Defaults” nor shall this waiver obligate the Requisite Lenders, Crystal or McLarty to provide any further waiver of any other Default or Event of Default (whether similar or dissimilar, including any further Default or Event of Default) resulting from a failure to comply with the terms of the Credit and Guaranty Agreement. Other than in respect of the Existing Defaults, this waiver shall not preclude the future exercise of any right, power, or privilege available to the Requisite Lenders, McLarty or Crystal whether under the Credit and Guaranty Agreement, the other Credit Documents, or otherwise.

2. Amendment to Credit and Guaranty Agreement. Subject to the conditions to effectiveness set forth in Section 6 below, the Credit and Guaranty Agreement is hereby amended as follows:

(a) Interest Rate. Section 2.5(a) of the Credit and Guaranty Agreement is hereby deleted in its entirety and replaced with the following:

“(a) Except as otherwise set forth herein, Term Loans shall bear interest on the unpaid outstanding principal amount thereof from the Closing Date through repayment (whether by acceleration or otherwise) thereof as at the Adjusted LIBOR Rate plus 10.64% per annum.”

(b) Compliance Certificates.

(i) Section 5.1(a) of the Credit and Guaranty Agreement is hereby amended by deleting the language “(but excluding the fourth Fiscal Quarter)” in the second line thereof; and

(ii) Section 5.1(d)(i) of the Credit and Guaranty Agreement is hereby amended by deleting the language “(and 5.1(b))” in the third line thereof.

(c) Monthly Reports. Section 5.1(c) of the Credit and Guaranty Agreement is hereby deleted in its entirety and replaced with the following:

“(c) Monthly Reports. As soon as available, and in any event within 30 days after the end of each month ending after the Closing Date, commencing with the month in which the Closing Date occurs (i) the consolidated balance sheet of Parent Borrower and its Subsidiaries as at the end of such month and the related consolidated (and with respect to statements of income, consolidating) statements of income and cash flows of Parent Borrower and its Subsidiaries for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, commencing with the first month for which such corresponding figures are available, and the corresponding figures from the Financial Plan for the current Fiscal Year, to the extent prepared on a monthly basis, all in reasonable detail, together with a Financial Officer Certification with respect thereto, (ii) a schedule (and, if requested by the Administrative Agent, other supporting documentation) demonstrating compliance with the requirements of Section 6.7(d); and (iii) commencing on the month ended April 30, 2015, Parent Borrower will additionally provide within 30 days after the end of such month and each month ending thereafter: (A) a schedule setting forth the aging of accounts payable of the Parent Borrower’s US operations, and (B) a pro forma statement setting forth the projected cash flows for the Parent Borrower and its Subsidiaries for at least 13 weeks following the date of such statement.”

(d) Lender Meetings. Section 5.7 of the Credit and Guaranty Agreement is hereby amended and restated in its entirety as follows:

“5.7 Lenders Meetings.

(i) Parent Borrower will, upon the reasonable request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Parent Borrower’s corporate offices or at such other location as may be agreed to by Parent Borrower and Administrative Agent at such time as may be agreed to by Parent Borrower and Administrative Agent (each such meeting to be at Parent Borrower’s sole cost and expense).

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(ii) Parent Borrower will hold a meeting among Administrative Agent and Lenders at least once each Fiscal Quarter by telephone on the first Business Day of each Fiscal Quarter at 10:00 AM (New York time) or such other time and date otherwise agreed to by Parent Borrower, Administrative Agent, and Lenders, and the Parent Borrower shall make its chief executive officer and chief financial officer available to participate in such telephone conference calls with the Lenders.

(iii) If so requested by the Requisite Lenders or by the Administrative Agent, upon reasonable notice and at a time selected by the Requisite Lenders or Administrative Agent (as the case may be) and reasonably acceptable to the Parent Borrower but, so long as no Event of Default or Default shall have occurred and be continuing, no more than once each month, and otherwise as frequently as required by the Requisite Lenders or the Administrative Agent, the Parent Borrower shall make its chief financial officer available to participate in a telephone conference call with the Lenders.”

(e) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio thresholds for the Fiscal Quarters ending on March 31, 2015 and June 30, 2015 set forth in Section 6.7(a) of the Credit and Guaranty Agreement are hereby amended and replaced with the following:

Fiscal Quarter Ending	Fixed Charge Coverage Ratio
March 31, 2015	0.73:1.00
June 30, 2015	0.63:1.00

(f) Senior Leverage Ratio. The Senior Leverage Ratio limits for the Fiscal Quarters ending on March 31, 2015 and June 30, 2015 set forth in Section 6.7(b) of the Credit and Guaranty Agreement are hereby amended and replaced with the following:

Fiscal Quarter Ending	Senior Leverage Ratio
March 31, 2015	7.50:1.00
June 30, 2015	6.92:1.00

(g) Total Leverage Ratio. The Total Leverage Ratio limits for the Fiscal Quarters ending on March 31, 2015 and June 30, 2015 set forth in Section 6.7(c) of the Credit and Guaranty Agreement are hereby amended and replaced with the following:

Fiscal Quarter Ending	Total Leverage Ratio
March 31, 2015	9.00:1.00
June 30, 2015	8.95:1.00

(h) Minimum Cash Balance. Section 6.7(d) of the Credit and Guaranty Agreement is hereby deleted in its entirety and replaced with the following:

“(d) Minimum Cash Balance. The Parent Borrower shall not permit the Minimum Cash Balance to be less than $1,000,000 at any time.”

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(i) Disqualified Stock. Subclause (a) and Subclause (c) of the definition of “Disqualified Stock are hereby deleted in their entirety and replaced with the following:

“(a) matures or is mandatorily redeemable on or prior to the date that is 180 days after the Term Loan Maturity Date (other than solely for Capital Stock that is not Disqualified Stock), pursuant to a sinking fund obligation or otherwise (except as a result of a change in control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be the subject to prior repayment in full of the Obligations)”

“(c) provides for the scheduled payment of dividends in cash, provided, however, that Capital Stock that provides for optional payment of scheduled dividends in cash will not be deemed Disqualified Stock so long as the Parent Borrower does not actually make, and the Parent Borrower is not required to make under the terms of such Capital Stock, any cash payments of dividends without the prior written consent of the Required Lenders”

3. Use of Proceeds. Notwithstanding anything in the Credit Documents to the contrary (including, without limitation, Section 2.11 thereof), the parties hereby agree that (a) $10,000,000 of the proceeds of the Equity Transaction will be used to repay the principal amount of Term Loans outstanding under the Credit and Guaranty Agreement as a mandatory prepayment of the Term Loans pursuant to Section 2.11 thereof, (b) an Applicable Prepayment Premium of 5% payable on $5,000,000 of the Term Loans being repaid (totaling $250,000) will be paid out of the proceeds of the Equity Transaction, and (c) the remainder of the proceeds from the Equity Transaction may be used by the Parent Borrower for working capital purposes (including reinvesting in content related assets) and to pay expenses associated with the Equity Transaction; provided however, that at least $3,000,000 of such proceeds from the Equity Transaction must be placed on the balance sheet of the Parent Borrower for working capital purposes.

4. [Reserved]

5. Representations and Warranties. Parent Borrower and each Guarantor hereby represents and warrants to McLarty, Crystal and the Requisite Lenders that as of the date hereof, both before and after giving effect to this Amendment and the transactions contemplated thereby (it being understood, for the sake of clarity, any breach of these representations and warranties shall be an Event of Default under the Credit and Guaranty Agreement):

(a) The execution, delivery and performance of this Amendment has been duly authorized by all requisite action on the part of each of Parent Borrower and each Guarantor and constitutes the legal, valid and binding obligations of Parent Borrower and each Guarantor, enforceable in accordance with its terms;

(b) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by the Credit Parties of this Amendment, the Credit and Guaranty Agreement or any other Credit Documents, as amended hereby, or the consummation by the Credit Parties of the transactions among the parties contemplated hereby and thereby or referred to herein;

(c) No Default or Event of Default has occurred and is continuing or would arise as a result of the transactions contemplated by this Amendment; and

(d) The representations and warranties set forth in the Credit and Guaranty Agreement, as amended hereby, and in the other Credit Documents, as amended to date, are true and correct in all material respects as of the date hereof, with the same effect as though made on the date hereof (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date).

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6. Condition Precedent to Effectiveness. The effectiveness of Sections 1, 2, and 3 of this Amendment are subject to the prior or concurrent consummation of each of the following conditions:

(a) McLarty shall have received a copy of this Amendment executed by Parent Borrower, each Guarantor, Crystal, McLarty and each Requisite Lender;

(b) McLarty, on behalf of the Lenders, shall have received (i) a non-refundable fee in an aggregate amount equal to $450,000, which Parent Borrower and Guarantors acknowledge Lenders shall have earned in full as of the date hereof and which shall not be subject to proration and (ii) the payments required to be made pursuant Sections 3(a) and 3(b) hereof;

(c) McLarty, on behalf of the Lenders, shall have received evidence in the form of a wire confirmation or bank account statements from Parent Borrower that the Equity Transaction has been consummated, and gross proceeds of at least $15,000,000 in connection therewith have been received by Parent Borrower on or prior to April 15, 2015;

(d) McLarty shall have received a copy of the amendment to the Agreement Among Lenders executed by the parties thereto; and

(e) No Default or Event of Default shall have occurred and be continuing.

7. Acknowledgement. Each of Parent Borrower and each Guarantor acknowledges that notwithstanding the terms this Amendment or otherwise, the terms of this Amendment shall not constitute a course of dealing among the parties hereto. Except as expressly set forth in Section 1, 2 or 3 of this Amendment, nothing in this Amendment shall constitute a modification or alteration of the terms, conditions or covenants of the Credit and Guaranty Agreement or any other Credit Document, or a waiver of any terms or provisions thereof, and the Credit and Guaranty Agreement and the other Credit Documents shall remain unchanged and shall continue in full force and effect, in each case as amended hereby. Except as specifically provided herein, McLarty, Crystal and each Lender hereby reserves and preserves all of its rights and remedies against any Credit Party under the Credit and Guaranty Agreement and the Credit Documents.

8. Miscellaneous.

(a) Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. Receipt by telecopy, facsimile or email transmission of any executed signature page to this Amendment shall constitute effective delivery of such signature page.

(b) Reference to Credit and Guaranty Agreement. Each reference in the Credit and Guaranty Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each reference to the Credit and Guaranty Agreement in the Credit and Guaranty Agreement or in any other Credit Documents, or other agreements, documents or other instruments executed and delivered pursuant to the Credit and Guaranty Agreement, shall mean and be a reference to the Credit and Guaranty Agreement as amended by this Amendment.

(c) Costs and Expenses. Each of Parent Borrower and each Guarantor (i) acknowledges that Section 10.2 of the Credit and Guaranty Agreement applies to this Amendment and the transactions, agreements and documents contemplated hereunder, and (ii) agrees to pay promptly the actual and reasonable out-of-pocket costs and expenses incurred by the Requisite Lenders in connection with the preparation of this Amendment and the Agreement Among Lenders being executed in connection with this Amendment.

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(d) Reviewed by Attorneys. Each of Parent Borrower and each Guarantor represents and warrants to McLarty, Crystal and each Requisite Lender that it (i) understands fully the terms of this Amendment and the consequences of the execution and delivery of this Amendment, (ii) has been afforded an opportunity to discuss this Amendment with, and have this Amendment reviewed by, such attorneys and other Persons as each of Parent Borrower and each Guarantor may wish, and (iii) has entered into this Amendment and executed and delivered all documents in connection herewith of its own free will and accord and without threat, duress or other coercion of any kind by any Person. The parties hereto acknowledge and agree that neither this Amendment nor the other documents executed pursuant hereto shall be construed more favorably in favor of one than the other based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation and preparation of this Amendment and the other documents executed pursuant hereto or in connection herewith.

(e) Severability. The illegality or unenforceability of any provision of this Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Amendment or any instrument or agreement required hereunder.

(f) Governing Law. The validity of this Amendment, the construction, interpretation, and enforcement hereof, the rights of the parties hereto with respect to all matters arising hereunder or related hereto, and any claims, controversies or disputes arising hereunder or related hereto shall be determined under, governed by, construed and enforced in accordance with the laws of the State of New York.

(g) Reaffirmation. Each of the Credit Parties hereby ratifies and confirms all of its Obligations to McLarty, Crystal and the Lenders under the Credit and Guaranty Agreement, as amended hereby, and the other Credit Documents, including, without limitation, the Loans, and each of the Credit Parties hereby affirms its absolute and unconditional promise to pay to the Lenders and McLarty and Crystal, as applicable, the Term Loans, reimbursement obligations and all other amounts due or to become due and payable to the Lenders and McLarty and Crystal, as applicable, under the Credit and Guaranty Agreement and the other Credit Documents, as amended hereby and it is the intent of the parties hereto that nothing contained herein shall constitute a novation or accord and satisfaction. Each of the Credit Parties hereby acknowledges and confirms that the liens, hypothecs, pledges and security interests granted pursuant to the Credit Documents are and continue to be valid, perfected and enforceable first priority liens, hypothecs, pledges and security interests (subject only to Permitted Liens) that secure all of the Obligations on and after the date hereof. Except as expressly amended hereby, each of the Credit and Guaranty Agreement and the other Credit Documents shall continue in full force and effect. This Amendment shall constitute a Credit Document.

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(h) Release. In order to induce McLarty, Crystal and the Requisite Lenders to enter into this Amendment, each Credit Party acknowledges and agrees that: (a) no Credit Party has any claim or cause of action against McLarty, Crystal or any Lender (or, with respect to the Credit and Guaranty Agreement and the other Credit Documents and the administration of the credit facilities thereunder, any of their respective directors, officers, employees, agents or representatives); (b) no Credit Party has any offset or compensation right, counterclaim, right of recoupment or any defense of any kind against any Credit Party’s obligations, indebtedness or liabilities to McLarty, Crystal or any Lender; and (c) each of the McLarty, Crystal and the Lenders has heretofore properly performed and satisfied in a timely manner all of its obligations to the Borrower and, as applicable, the Guarantors. Each Credit Party wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any of McLarty’s, Crystal’s and the Lenders’ rights, interests, contracts, collateral security or remedies. Therefore, each Credit Party unconditionally releases, waives and forever discharges (i) any and all liabilities, obligations, duties, promises or indebtedness of any kind of McLarty, Crystal or any Lender to any Credit Party, except the obligations to be performed by McLarty, Crystal or any Lender on or after the date hereof as expressly stated in this Amendment, the Credit and Guaranty Agreement and the other Credit Documents and (ii) all claims, counterclaims, offsets, compensation rights, causes of action, right of recoupment, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which any Credit Party might otherwise have against McLarty, Crystal or any Lender (or, with respect to the Credit and Guaranty Agreement and the other Credit Documents and the administration of the credit facilities thereunder, any of their respective directors, officers, employees or agents), in either case of clause (i) or (ii), on account of any past or presently existing (as of the date hereof) condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, counterclaims, compensation rights, circumstance or matter of any kind.

*Signatures on Next Page*

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

	RLJ ENTERTAINMENT, INC., as Parent Borrower

	By:	/s/ Miguel Penella
	Name: Miguel Penella
	Title: Chief Executive Officer

GUARANTORS:

	RLJ ACQUISITION, INC., as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Secretary & Treasurer

	IMAGE ENTERTAINMENT, INC., as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Secretary & Treasurer

	IMAGE/MADACY HOME ENTERTAINMENT LLC, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Chief Financial Officer

	ACORN MEDIA GROUP, INC., as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Secretary & Treasurer

	RLJ ENTERTAINMENT HOLDINGS LTD, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Director

	RLJ ENTERTAINMENT LTD, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Director

	RLJE INTERNATIONAL LIMITED, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Director

	FOYLE’S WAR 8 PRODUCTION LIMITED, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Director

	RLJ ENTERTAINMENT AUSTRALIA PTY LTD, as Guarantor Subsidiary

	By:	/s/ Andrew Wilson
	Name: Andrew Wilson
	Title: Director

	MCLARTY CAPITAL PARTNERS SBIC, L.P., as a Requisite Lender

	By:	McLarty Capital Partners SBIC, LLC,
		its general partner

	By:	/s/ Christopher D. Smith
	Name: Christopher D. Smith
	Title: Manager

	MCP OPPORTUNITIES LLC, as Administrative Agent, Collateral Agent and a Requisite Lender

	By:	/s/Christopher D. Smith
	Name: Christopher D. Smith
	Title: Manager

	CRYSTAL FINANCIAL LLC, as Documentation Agent

	By:	/s/ Matthew J. Governali
	Name: Matthew J. Governali
	Title: Managing Director

	CRYSTAL FINANCIAL SBIC LP, as a Requisite Lender

	By:	Crystal SBIC GP LLC, its general partner

	By:	/s/ Matthew J. Governali
	Name: Matthew J. Governali
	Title: Managing Director

	CRYSTAL FINANCIAL SPV LLC, as a Requisite Lender

	By:	/s/ Matthew J. Governali
	Name: Matthew J. Governali
	Title: Managing Director

	TEVEURA LIMITED, as a Requisite Lender

	By:	/s/ Anton Lotzer
	Name: Anton Lotzer
	Title: Director

	MAIN STREET CAPITAL CORPORATION,
	as a Requisite Lender

	By:	/s/ Nick Meserve
	Name: Nick Meserve
	Title: Managing Director

EX-10.3 5 ex10_3.htm EXHIBIT 10.3

Exhibit 10.3

NOTE AMENDMENT AGREEMENT

THIS NOTE AMENDMENT AGREEMENT (this “Agreement”) is entered into on April 15, 2015 (the “Execution Date”) by and between RLJ Entertainment, Inc., a Nevada corporation (“Borrower”) and JH Investment Partners III, LP, JH Partners Evergreen Fund, LP, JH Investment Partners GP Fund III, LLC, Forrestal, LLC, Taylor Rettig, Theodore S. Green, John P. Avagliano, Ray Gagnon, and Producers Sales Organization (each a “Holder,” and collectively, “Holders”). Holders and Borrower shall be referred to herein as the “Parties.”

RECITALS

Borrower executed certain Unsecured Subordinated Promissory Notes in favor of each Holder as more fully set forth on Exhibit A to this Agreement (collectively, the “Outstanding Notes”).

The Outstanding Notes are subordinate to Borrower’s obligations pursuant to that certain Credit and Guaranty Agreement (the “Senior Credit Agreement”) dated as of September 11, 2014, by and among Borrower, certain subsidiaries of Borrower as Guarantors, Various Lenders, MCP Opportunities LLC (as successor to McLarty Capital Partners SBIC, L.P.) as Administrative Agent and Collateral Agent (“MCP”), McLarty Capital Partners SBIC, L.P., as Arranger, Bookmanager and Syndication Agent (“McLarty SBIC” and, together with MCP, “McLarty”) and Crystal Financial LLC, as Documentation Agent (“Crystal”).

Simultaneously with the execution of this Agreement, certain related parties (the “Related Parties”) of Borrower are purchasing at least Fifteen Million Dollars ($15,000,000) of Bridge Preferred Stock (the “Bridge Preferred Stock”) pursuant to a Securities Purchase Agreement between such Related Parties and the Borrower.

Borrower intends to (i) sell up to fifteen million ($15,000,000) of convertible preferred stock in Borrower (the “Preferred Stock”) in a third party transaction to occur within sixty (60) days after the Execution Date of this Agreement at which time the Bridge Preferred Stock will be exchanged for the Preferred Stock (the “Preferred Stock Sale”) or (ii) if the Preferred Stock Sale is not completed within sixty (60) days after the Execution Date of this Agreement, exchange all of the Related Parties’ Bridge Preferred Stock for Preferred Stock pursuant to the terms of the last Preferred Stock term sheet offered by the Borrower to a third party (the “Related Party Exchange”).

Concurrently with the execution of this Agreement, Borrower, the Requisite Lenders (as defined in the Senior Credit Agreement), McLarty and Crystal will execute that certain First Amendment to Credit and Guaranty Agreement (the “Senior Credit Agreement Amendment”), pursuant to which certain terms of the Senior Credit Agreement, including certain financial covenants of Borrower, will be modified.

Holders have agreed to convert fifty percent (50%) of the outstanding amount owed to Holders pursuant to the Outstanding Notes into shares of Preferred Stock upon consummation of the Preferred Stock Sale or the Related Party Exchange.

Holders and Borrower have agreed to amend the Outstanding Notes as set forth below.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1. Mandatory Conversion. Concurrently with the closing of the Preferred Stock Sale or the Related Party Exchange, each Holder shall convert fifty percent (50%) of the outstanding balance under its Outstanding Notes (the “Convertible Balance”) for the number of shares of Preferred Stock that is equal to the Convertible Balance divided by the per share purchase price of the Preferred Stock. Concurrent with such exchange, Borrower shall (a) issue to such Holder warrants on the same terms and at the same rate as those issued to the third party investors and/or the Related Parties and (b) enter into with such Holder such other agreements, such as a registration rights agreement or stockholders agreement, on the same terms that are entered with the third party investors and/or the Related Parties.

2. Amendment of Notes. The Outstanding Notes held by each Holder are hereby amended to reflect the terms set forth on Exhibit B attached hereto. The amendment to the Outstanding Notes shall be effective as of January 1, 2015. For the avoidance of doubt, all Interest (as defined in the Outstanding Notes) accrued in accordance with the terms of the Outstanding Notes with respect to the 2014 calendar year remains due and payable on May 15, 2015 in accordance with the terms of the Outstanding Notes; provided, however, that any Cash Interest (as defined in the Outstanding Notes) shall be paid within three (3) business days after the Execution Date. Except as set forth herein, the Outstanding Notes shall remain in full force and effect. Each Holder agrees to reasonably cooperate with Borrower (at Borrower’s expense) to amend and restate the Outstanding Notes to reflect the amendments set forth in this Agreement.

3. Past-Due Royalties. Upon the execution of this Agreement, Borrower will pay to Producers Sales Organization any past-due royalties owed by Borrower to Producers Sales Organization with respect to content rights held by Producers Sales Organization and licensed to Borrower or its affiliates.

4. Waiver of Default. Upon the execution of this Agreement, Holders hereby waive any existing defaults and Events of Default (as defined in the Outstanding Notes) under the Outstanding Notes (the “Existing Defaults”); provided, however, that such waiver shall in no way obligate Holders to provide any further waiver of any other default or Event of Default (whether similar or dissimilar, including any further default or Event of Default resulting from a failure to comply with the terms of the Amended and Restated Notes). Other than in respect of the Existing Defaults, this waiver shall not preclude the future exercise of any right, power, or privilege available to Holders whether under the Amended and Restated Notes or otherwise.

5. Conditions to Closing. Borrower and Holders contemplate that the signing of this Agreement and the Closing shall occur concurrently. Nevertheless, for the ease of reference of the parties to this Agreement, the parties specify the following conditions, among other conditions, to the obligation of parties to perform the covenants and obligations to be performed under this Agreement prior to or at the Closing.

(a) Execution and Delivery of this Agreement. Borrower and all Holders shall have executed and delivered this Note Amendment Agreement.

(b) Execution and Delivery of Senior Credit Agreement Amendment. Borrower, the Requisite Lenders, McLarty, and Crystal shall have executed and delivered the Senior Credit Agreement Amendment.

6. Miscellaneous.

(a) Counterparts. This Agreement may be executed in any number of counterparts, and by the Parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt by telecopy, facsimile or email transmission of any executed signature page to this Agreement shall constitute effective delivery of such signature page.

(b) Costs and Expenses. Borrower agrees to pay promptly an aggregate amount of up to Thirty Thousand Dollars ($30,000) of the actual and reasonable out-of-pocket costs and expenses incurred by Holders in connection with the preparation of this Agreement and the Amended and Restated Notes.

(c) Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.

(d) Governing Law. The validity of this Agreement, the construction, interpretation, and enforcement hereof, the rights of the parties hereto with respect to all matters arising hereunder or related hereto, and any claims, controversies or disputes arising hereunder or related hereto shall be determined under, governed by, construed and enforced in accordance with the laws of the State of New York.

(e) Release. In order to induce Holders to enter into this Amendment, Borrower acknowledges and agrees that: (i) Borrower does not have any claim or cause of action against any Holder (or, with respect to the Outstanding Notes and the administration of the loans thereunder, any of their respective directors, officers, employees, agents or representatives); (ii) Borrower does not have any offset or compensation right, counterclaim, right of recoupment or any defense of any kind against Borrower’s obligations, indebtedness or liabilities to any Holder; and (iii) each Holder has heretofore properly performed and satisfied in a timely manner all of its obligations to Borrower. Borrower wishes to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect any Holder’s rights, interests, contracts, collateral security or remedies. Therefore, Borrower unconditionally releases, waives and forever discharges (X) any and all liabilities, obligations, duties, promises or indebtedness of any kind of each Holder, except the obligations to be performed by such Holder on or after the date hereof as expressly stated in this Agreement, or the Amended and Restated Notes, and (Y) all claims, counterclaims, offsets, compensation rights, causes of action, right of recoupment, suits or defenses of any kind whatsoever (if any), whether arising at law or in equity, whether known or unknown, which Borrower might otherwise have against Holders (or, with respect to the Outstanding Notes and the administration of the loans thereunder, any of their respective directors, officers, employees or agents), in either case of clause (X) or (Y), on account of any past or presently existing (as of the date hereof) condition, act, omission, event, contract, liability, obligation, indebtedness, claim, cause of action, defense, counterclaims, compensation rights, circumstance or matter of any kind.

*Signatures on Next Page*

IN WITNESS WHEREOF, the Parties have executed this Note Amendment Agreement as of the Execution Date set forth above.

	BORROWER

	RLJ ENTERTAINMENT, INC.,

	By:	/s/ Miguel Penella
	Name: Miguel Penella
	Title: Chief Executive Officer

	HOLDERS

	FORRESTAL, LLC
	By: JH Evergreen Management, LLC, its General Partner

	By:	/s/ R. Todd Forrest
	Name: R. Todd Forrest
	Title: Chief Financial Officer

	JH PARTNERS EVERGREEN FUND, LP
	By: JH Evergreen Management, LLC, its General Partner

	By:	/s/ R. Todd Forrest
	Name: R. Todd Forrest
	Title: Chief Financial Officer

	JH INVESTMENT PARTNERS III, LP
	By: JH Evergreen Management, LLC, its General Partner

	By:	/s/ R. Todd Forrest
	Name: R. Todd Forrest
	Title: Chief Financial Officer

	JH INVESTMENT PARTNERS GP FUND III, LLC
	By: JH Evergreen Management, LLC, its General Partner

	By:	/s/ R. Todd Forrest
	Name: R. Todd Forrest
	Title: Chief Financial Officer

	JOHN AVAGLIANO

	/s/ John Avagliano
	John Avagliano

	RAYMOND GAGNON

	/s/ Raymond Gagnon
	Raymond Gagnon

	THEODORE S. GREEN

	/s/ Theodore S. Green
	Theodore S. Green

	TAYLOR RETTIG

	/s/ Taylor Rettig
	Taylor Rettig

	PRODUCERS SALES ORGANIZATION

	By:	/s/ John Hyde
	Name: John Hyde
	Title: Secretary

EXHIBIT A

Outstanding Notes

RLJ ENTERTAINMENT, INC.

SUBORDINATED NOTES PAYABLE

AS OF DECEMBER 31, 2014

Note Holder	10/3/12 Original Note		5/15/2013 Interest Note		5/15/2014 Interest Note		PIK from 5/16/14 to 12/31/2014		TOTAL at 12/31/2014

JH Partners Evergreen Fund, LP	$	9,729,490.27	$	158,752.85	$	652,624.05	$	695,697.23	$	11,236,564.40

Forrestal	$	1,302,488.31	$	21,252.27	$	87,366.88	$	93,133.09	$	1,504,240.55

JH Investment Partners III, LP	$	1,315,881.19	$	21,470.79	$	88,265.23	$	94,090.74	$	1,519,707.95

JH Investment Partners GP Fund III, LLC	$	604,685.69	$	9,866.45	$	40,560.44	$	43,237.43	$	698,350.02

John Avagliano	$	317,786.56	$	5,185.22	$	21,316.14	$	22,723.00	$	367,010.92

Ray Gagnon	$	39,723.32	$	648.15	$	2,664.52	$	2,840.38	$	45,876.36

Producers Sales Organization	$	675,296.44	$	11,018.59	$	45,296.79	$	48,286.38	$	779,898.20

Theodore S. Green	$	794,466.40	$	12,963.04	$	53,290.34	$	56,807.51	$	917,527.29

Taylor Rettig	$	20,181.82	$	329.30	$	1,353.73	$	1,443.08	$	23,307.93

Outstanding Balance	$	14,800,000.00	$	241,486.67	$	992,738.12	$	1,058,258.84	$	17,092,483.62

EXHIBIT B

Amendments to Outstanding Notes

The definition of Interest Rate shall be deleted in its entirety and replaced with the following:

“Interest Rate” shall mean (a) from January 1, 2015 until January 1, 2017, one and a half percent (1.5%) per annum, and (b) after January 1, 2017, twelve percent (12%) per annum, computed on the basis a 360-day year; provided, however, that upon the occurrence of an Event of Default, the Interest Rate shall be the Default Rate until the Event of Default is cured, and twelve percent (12%) thereafter.

Notwithstanding anything in any Outstanding Note to the contrary on each Interest Date, forty five percent (45%) of the Interest payable on such Interest Date shall be paid in cash, and the remainder of the accrued Interest shall be payable on each Interest Date to the Holder in the form of additional Notes in form and substance identical to the Outstanding Notes.

EX-99.1 6 ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

RLJ ENTERTAINMENT ANNOUNCES CAPITAL RESTRUCTURE AND REPORTS PRELIMINARY FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FULL YEAR ENDED DECEMBER 31, 2014

Chairman of the Board and Largest Shareholder Robert L. Johnson Invests $15 Million in Private Placement

SILVER SPRING, MD – April 16, 2015 – RLJ Entertainment Inc., (“RLJ Entertainment” or “the Company”) (NASDAQ: RLJE), today announced that its Chairman and largest shareholder, Robert L. Johnson, has purchased 15,000 shares of Bridge Preferred Stock for $15.0 million in cash. The issuance of shares to Mr. Johnson was approved by a special committee of the board of directors composed of three independent directors, and the special committee was advised with respect to the transaction by special independent counsel selected by the committee. $10 million of net proceeds were used by the Company to reduce its senior debt and the net balance will be used for working capital purposes.

The company also announced its preliminary results for the fourth quarter and full year ended December 31, 2014 in advance of the full release of their audited financials, which are expected to be filed with the SEC by next week.

RLJ Entertainment is a creator, owner and distributor of media content across digital, broadcast and physical platforms. The Company leverages its branding expertise, access to content and direct to consumer skills to optimize the value of its programs for distinct audiences.

RLJ Entertainment is focused on driving growth through the development of interest-based entertainment services for targeted audiences in niche genres including British drama and mystery, urban, action/thriller, and fitness, by using new technologies to deliver that content to consumers.

Robert L. Johnson, Chairman of RLJ Entertainment stated, “My completion of the private purchase underscores my confidence in the management team and my commitment to the future of the business. During the year, despite liquidity constraints, we made strong progress in developing a solid platform and distribution strategy to offer exciting new entertainment content to underserved and passionate audiences. I am pleased with management’s disciplined efforts to contain costs while making strategic investments in content that will support our growth in the future. These actions, alongside an improved balance sheet and an increasing appetite by consumers for distinct entertainment content, make us excited about the value of our unique content library, and the role RLJ Entertainment will play in the expanding digital media industry.”

Miguel Penella, Chief Executive Officer of RLJ Entertainment, commented, “I am excited about the financial commitment and continued support from our Chairman, Mr. Johnson. Over the past year, we have made great advancements towards improving our operations. The company has brought in new equity, restructured its capital structure and dramatically delevered its balance sheet and lowered its interest expense. In addition, we have pursued cost containment initiatives during the year resulted in a $4.9 million reduction in SG&A; we allocated content investments to titles with strong strategic and economic value; and we successfully launched two new proprietary digital channels, UMC and Acacia TV. Acorn TV, our high-quality British mystery and drama digital channel continued to perform exceptionally well in 2014 and has reached over 130,000 paid subscribers. These efforts, along with Mr. Johnson’s financial commitment are an important first step towards helping us strengthen our balance sheet and overall cash position. We continue to actively explore additional options with our lenders that we believe will better enhance our liquidity position.

“Beyond addressing the balance sheet, as we look ahead to the remainder of 2015, we are focused on four key areas. These include the acquisition of long-term and exclusive broad exploitation rights for content across key genres, the production and purchase of new intellectual property rights, the expansion of content offerings on current and emerging digital platforms and the expansion of our international distribution footprint. Ultimately, we are confident that these initiatives will position the business for growth in the quarters and years ahead.”

Preliminary Financial Results for the Three and Twelve Months Ended December 31, 2014

Revenue for the three months ended December 31, 2014 decreased $19.3 million or 33.5% compared to the three months ended December 30, 2013. The decrease in revenue was primarily due to a decline in the US Wholesale segment as a result of the termination of a feature-film output deal. Excluding the impact of the terminated output deal, US Wholesale segment revenue declined 27.6% year over year to $19.8 million due to number and timing of several feature film title releases in the fourth quarter of 2013 that did not have a comparable release in the fourth quarter of 2014.

Revenue for the year ended December 31, 2014 decreased $27.1 million when compared to year ended December 31, 2013. The decrease in revenue was primarily due to a decline of $24.3 million in revenue within the Company’s Wholesale segment revenues generated in the U.S., which was $77.1 million and $101.4 million for the years ended December 31, 2014 and 2013, respectively. This decline is primarily attributed to the revenues related to the terminated output deal which were negative revenues of $1.1 million for 2014 compared to $21.9 million in 2013. Excluding the impact of the terminated output deal, Wholesale segment revenue decreased by 1.0% or $1.0 million year-over-year.

Revenue from the Company’s Direct-to-Consumer segment decreased $3.9 million when comparing the year ended December 31, 2014 to 2013. The decrease in revenue in the Direct-to-Consumer segment was due to lower catalog sales of $7.5 million as a result of reduced circulation and increased backorders, which were due to customer orders not shipping during the year due to limited availability of cash to replenish inventory levels. The Company’s Direct-to-Consumer revenues benefited from revenue growth from the proprietary SVOD channels, primarily Acorn TV, which generated revenue of $4.1 million in 2014 compared to $488,000 in 2013. The increased revenue is primarily attributable to an increase in Acorn TV’s paying subscribers to 118,000 at December 31, 2014 from 57,000 at December 31, 2013. During 2014, the Company launched two additional proprietary SVOD channels, Acacia and UMC. Currently, revenues from these newly launched channels are immaterial, but the Company expects the revenues from these SVOD channels to increase in future years. The Company is continually rolling-out new content on its digital channels, which it believes is a key factor in attracting new subscribers for all of its channels.

IP licensing segment revenue for the year ended December 31, 2014 increased by $733,000 when compared to the same period in 2013. This increase is attributable to increased broadcast revenue for the current season of Foyle’s War released in 2014, as compared to the prior season. Also included within the IP Licensing segment is the Company’s 64% majority interest in Agatha Christie Limited (“ACL”). As ACL is not a consolidated entity, the Company does not report any revenues from ACL, but instead includes its share of ACL’s earnings, including revenues, within “equity earnings in affiliate” within its consolidated financial statements.

SG&A decreased by $2.0 million to $14.6 million for the three months ended December 31, 2014, compared to the same period in 2013. The decrease in SG&A is primarily related to the synergistic savings related to the combining of Acorn and Image legacy companies and the delay and reduced circulation of the Company’s Direct-to-Consumer segment’s catalog drops due to limited cash to support the segment when compared to the same period in 2013.

SG&A decreased by $4.9 million for the year ended December 31, 2014, compared to the same period in 2013. The decrease in SG&A is primarily related to the synergistic savings related to the combining of Acorn and Image legacy companies and the delay and reduced circulation of the Company’s Direct-to-Consumer segment’s mail-order catalogs due to limited cash when compared to the same periods in 2013. Most of the Company’s integration efforts were conducted during 2013, yet integration of the combined businesses continued into 2014. During 2014 and 2013, the Company incurred severance charges of $548,000 and $2.4 million, respectively.

The Company’s net loss for the comparable quarters ended December 31, 2014 and 2013, improved by $2.1 million to breakeven. For the year, the company generated a net loss of $20.1 million versus a net loss of $31.1 million in 2013.

Adjusted EBITDA decreased by $6.4 million to $6.1 million for the three months ended December 31, 2014 compared to the same period in 2013 and decreased by $4.7 million to $9.0 million for twelve months ended December 31, 2014. The decreases in the three and twelve-month periods ended December 31, 2014 were primarily the result of the loss of Adjusted EBITDA realized in the third quarter of 2013 from content sold pursuant to the terminated feature-film output deal. The Company’s ability to continue to improve its Adjusted EBITDA is contingent on its ability to generate sufficient cash flow to invest in content to grow the business.

Adjusted EBITDA is a non-GAAP financial measure. See the table on the following pages for reconciliation to U.S. GAAP.

The Company understands that it is likely that its audited consolidated financial statements for the fiscal year ended December 31, 2014 will contain an audit opinion from its independent public accounting firm including explanatory language stating a going concern qualification resulting from the Company’s need for external financing to continue its business for the next twelve months. The Company believes that the sale of $15 million of Bridge Preferred Stock and the debt amendments described in this release plus its efforts to privately place convertible preferred stock will substantially assist in mitigating this concern.

Private Placement Transaction

On April 15, 2015, the Company sold to Mr. Johnson in a private transaction 15,000 shares of Bridge Preferred Stock for $15,000,000 in cash. In addition, Mr. Johnson agreed, if the Company issues convertible preferred stock to a third party investor within the next 60 days, that he will exchange his shares of Bridge Preferred Stock for the same amount of convertible preferred stock and would receive the same rights and benefits as the other investors in the convertible preferred stock, including the issuance of warrants.

Concurrent with the sale to Mr. Johnson, the Company also entered into an amendment to its senior credit facility and a note amendment agreement with the holders of its subordinated notes. The lenders under the senior credit facility, upon the receipt of a $10 million payment and the payment of certain fees and expenses, granted a waiver with respect to defaults caused by, or that would be caused by, the breach of certain financial covenants and the inclusion of a going concern qualification in the Company’s 2014 annual consolidated financial statements. They also modified the interest rate under the facility to equal LIBOR plus 10.64% and modified certain financial covenants.

The holders of the subordinated notes agreed to convert 50% of the outstanding balance under the subordinated notes into convertible preferred stock on the same terms as Mr. Johnson. They also amended the subordinated notes to (a) change the interest rate on the notes from 12.0% to 1.5% per annum for the 24-month period commencing on January 1, 2015 and 12% per annum thereafter and (b) provide that 45% of the interest will be payable in cash and the remainder of the accrued interest will be payable in the form of additional subordinated notes.

Additional information with respect to the sale of preferred stock and the debt modifications is set forth in a Current Report on Form 8-K being filed today by the Company with the Securities Exchange Commission.

Cautionary Statement about Preliminary Results

The financial results and other financial data presented in this press release are preliminary, based upon the Company's estimates and subject to completion of the Company's final financial closing procedures. Moreover, this data has been prepared on the basis of currently available information. The Company's independent auditor has not audited or reviewed, and does not express an opinion with respect to, this data. This data does not constitute a comprehensive statement of the Company's financial results for the year ended December 31, 2014, and the Company's final results could differ materially from these preliminary results. In particular, the Company continues to prepare and evaluate information related to goodwill impairment and its ability to operate as a going concern and to provide such information to its auditor for the purposes of its audit of the Company's financial statements for the year ended December 31, 2014.

RLJ Entertainment, Inc. (NASDAQ: RLJE) is a premier independent owner, developer, licensee, and distributor of entertainment content and programming in primarily North America, the United Kingdom, and Australia. RLJE is a leader in numerous genres via its owned and distributed brands such as Acorn (British TV), Image (feature films, stand-up comedy), UMC (urban), Acacia (fitness), Athena (documentaries), and Madacy (gift sets). These titles are distributed in multiple formats including broadcast television (including satellite and cable), theatrical and non-theatrical, DVD, Blu-Ray, digital download, and digital streaming.

Via its relationship with Agatha Christie Limited, a company that RLJE owns 64% of, RLJE manages the intellectual property and publishing rights to some of the greatest works of mystery fiction, including stories of the iconic sleuths Miss Marple and Poirot. RLJE also owns all rights to the hit UK mystery series Foyle’s War.

RLJE leverages its management experience to acquire, distribute and monetize existing and original content for its many distribution channels, including its branded digital subscription channels, Acorn TV, Acacia TV, and UMC, and engages distinct audiences with programming that appeals directly to their unique viewing interests. Through its proprietary e-commerce web sites and print catalogs for the Acorn and Acacia brands, RLJE has direct contacts and billing relationships with millions of consumers. For more information visit: www.rljentertainment.com

Forward Looking Statements

This press release may include “forward looking statements” within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other than statements of historical fact, all statements made in this press release are forward-looking, including, but not limited to, statements regarding industry prospects, future results of operations or financial position, and statements of our intent, belief and current expectations about our strategic direction, prospective and future results and condition. In some cases, forward-looking statements may be identified by words such as “will,” “should,” “could,” “may,” “might,” “expect,” “plan,” “possible,” “potential,” “predict,” “anticipate,” “believe,” “estimate,” “continue,” “future,” “intend,” “project” or similar words.

Forward-looking statements involve risks and uncertainties that are inherently difficult to predict, which could cause actual outcomes and results to differ materially from our expectations, forecasts and assumptions. Factors that might cause such differences include, but are not limited to:

Our financial performance, including our ability to achieve revenue growth and Adjusted EBITDA or realize synergies;

The effects of limited cash liquidity on operational growth;

Our ability to satisfy financial ratios;

Our ability to raise additional equity capital;

Our ability to fund planned capital expenditures and development efforts;

Our inability to gauge and predict the commercial success of our programming;

Our ability to estimate sales returns;

The ability of our officers and directors to generate a number of potential investment opportunities;

Our ability to maintain relationships with customers, employees, suppliers and lessors;

Delays in the release of new titles or other content;

The effects of disruptions in our supply chain;

The loss of key personnel;

Our public securities’ limited liquidity and trading; or

Our ability to continue to meet the NASDAQ Capital Market continuing listing standards.

You should carefully consider and evaluate all of the information in this press release, including the risk factors listed above and in our Form 10-K filed with the Securities Exchange Commission (or SEC), including “Item 1A. Risk Factors.” If any of these risks occur, our business, results of operations, and financial condition could be harmed, the price of our common stock could decline and you may lose all or part of your investment, and future events and circumstances could differ significantly from those anticipated in the forward-looking statements contained in this press release. Unless otherwise required by law, we undertake no obligation to release publicly any updates or revisions to any such forward-looking statements that may reflect events or circumstances occurring after the date of this press release.

Readers are referred to the most recent reports filed with the SEC by RLJ Entertainment. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:

Sloane & Company

Erica Bartsch, 212-446-1875

Traci Otey Blunt, 301-830-6204

RLJ Entertainment, Inc.

tblunt@rljentertainment.com

# # #

RLJ ENTERTAINMENT, INC.

UNAUDITED ADJUSTED EBITDA

Years ended December 31, 2014 and 2013

We define “Adjusted EBITDA” as adjusted earnings before income tax, depreciation, amortization, cash investment in content, interest expense, transaction and severance costs, warrants and stock-based compensation. Management believes Adjusted EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations because it removes material noncash items that allows investors to analyze the operating performance of the business using the same metric management uses. The exclusion of noncash items better reflects our ability to make investments in the business and meet obligations. Presentation of Adjusted EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. We use this measure to assess operating results and performance of its business, perform analytical comparisons, identify strategies to improve performance and allocate resources to its business segments. While management considers Adjusted EBITDA to be important measures of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. GAAP. Not all companies calculate Adjusted EBITDA in the same manner and the measure as presented may not be comparable to similarly-titled measures presented by other companies.

The following table includes the reconciliation of our consolidated Adjusted EBITDA to consolidated U.S. GAAP net loss:

	Years Ended December 31,
(In thousands)	2014			2013

Net loss	$	(20,092	)	$	(31,077	)

Amortization of content		57,876			75,345
Cash investment in content		(44,611	)		(50,239	)
Depreciation and amortization		5,694			6,174
Interest expense		9,459			8,279
Loss on extinguishment of debt		1,457			—
Goodwill impairment		981			—
Provision for income tax		399			2,201
Severance		548			2,369
Warrant liability fair value adjustment		(3,522	)		(201	)
Stock-based compensation		769			805

Adjusted EBITDA, with the terminated output deal included		8,959			13,656

Less terminated output deal		3,009			(442	)

Adjusted EBITDA, without the terminated output deal	$	11,968		$	13,214

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