UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 | Entry into a Material Definitive Agreement |
Loan Agreement and Convertible Promissory Note
On April 10, 2023, iMedia Brands, Inc. (“we”, “us”, “our”, or the “Company”) entered into a Loan Agreement (the “Loan Agreement”) with certain individuals and entities (each an “Investor”), for the purchase and sale of unsecured convertible promissory notes (the “Notes”) in the original aggregate principal amount of $3,500,000, convertible into shares of the Company’s common stock, $0.01 par value (“Common Stock”) and warrants to purchase Common Stock (the “Warrants”), in a private placement upon the terms and subject to the limitations and conditions set forth in the Note.
The terms of the Notes issued and sold at the closing (the “Closing”) of the transactions contemplated by the Loan Agreement are set forth in the form of Note attached as Exhibit 4.1 to this Current Report on Form 8-K. The original principal balance of the Note accrues interest at 7.75% per annum, increasing to 15% per annum effective January 1, 2024 in the event the Notes remain outstanding. The maturity date of the Notes is December 31, 2023.
Upon the completion of (a) the Company’s shareholders approving an increase to the Company’s authorized shares in order to provide sufficient authorized but unissued and unreserved shares of Common Stock to permit conversion and any other required shareholder approvals and (b) either (i) the Company’s entry into either a new or refinanced asset-based lending facility or (ii) the holders of a majority of the principal amount of the Notes determining that the Company has made sufficient progress towards completion of this refinancing, the outstanding principal and interest accrued (the “Conversion Amount”) will be convertible into shares of Common Stock and Warrants.
The holder shall receive a number of shares of Common Stock (the “Shares”), together with a Warrant to purchase 0.85 shares of Common Stock, determined by dividing the Conversion Amount by (a) $0.58625 for the Company’s officers and directors who purchased Notes and (b) $0.57475 for all other purchasers of Notes. In lieu of receiving Shares, a Note holder may request pre-funded warrants to Shares which are identical in form to the Warrants, except that they have no expiration date and have an exercise price of $0.0001 per share. The maximum number of shares of Common Stock that may be issued in connection with a conversion of the Notes or upon exercise of any Warrants to any individual holder may not exceed 19.99% of the Company’s then-current outstanding shares without shareholder approval.
Under the terms of the Loan Agreement, we have agreed to register the shares of Common Stock and the shares issuable upon exercise of Warrants for resale pursuant to the Securities Act of 1933, as amended (the “Securities Act”) in accordance with the terms and conditions therein.
The foregoing summaries of the terms of the Loan Agreement and the Notes are subject to, and qualified in their entirety by, such documents, which are included as exhibits hereto and incorporated by reference herein.
The Notes, underlying shares of Common Stock, and Warrants have not been 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. The Company is relying on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506 of Regulation D promulgated under the Securities Act, and in reliance on similar exemptions under applicable state laws. No form of general solicitation or general advertising was conducted in connection with the issuance. The Note (and, if and to the extent issued, the underlying shares of Common Stock and Warrants), contain (or will contain, where applicable) restrictive legends preventing the sale, transfer, or other disposition of such securities, unless registered under the Securities Act, or pursuant to an exemption therefrom. The disclosure contained in this Current Report on Form 8-K does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company, and is made only as required under applicable rules for filing current reports with the Securities and Exchange Commission.
Credit Facility Amendment
On April 10, 2023, The Company entered into a Forbearance Agreement, Tenth Amendment to Loan and Security Agreement and Amendment to Fee Letter (the “Amendment”), which amends the Loan and Security Agreement dated July 30, 2021 (as amended, the “Loan and Security Agreement”), by and among the Company, as the lead borrower, certain of its subsidiaries party thereto as borrowers, Siena Lending Group LLC and the other financial institutions party thereto from time to time as lenders, Siena Lending Group LLC, as agent, and certain additional subsidiaries of the Company, as guarantors thereunder. The Amendment, among other things, provides that the lenders are agreeing to forbear from exercising rights and remedies available as a result of certain existing events of default for a specified period of time which is subject to extension up to December 31, 2023, increases the interest rate and certain fees payable in connection with the revolving loan facility under the Loan and Security Agreement, permits the use of funds to make a payment on obligations owing to the holders of a seller note guaranteed by the Company, establishes milestones for the refinancing of the obligations under the Loan and Security Agreement and for certain actions with respect to the Sale and Leaseback Transaction (as defined below), requires additional collateral security from foreign subsidiaries of the Company, and further requires that the Company sign a Letter Agreement (the “Letter Agreement”) which requires us to appoint additional independent directors to the Company’s board of directors, appoint a Chief Transformation Officer and engage an investment banker.
This description of the Amendment and the Letter Amendment does not purport to be complete and is qualified in its entirety by reference to the Amendment and the Letter Agreement, which are attached as Exhibits 10.7 and 10.8, respectively, to this Current Report on Form 8-K and is incorporated herein by reference. The Loan and Security Agreement, dated July 30, 2021, by and among the Company, as the lead borrower, certain of its subsidiaries party thereto as borrowers, Siena Lending Group LLC and the other financial institutions party thereto from time to time as lenders, Siena Lending Group LLC, as agent, and VVI Fulfillment Center, Inc., EP Properties, LLC and Portal Acquisition Company, as guarantors, is incorporated by reference as Exhibit 10.2 into this Current Report on Form 8-K.
Master Lease Agreement
As previously disclosed, on December 20, 2022, EP Properties, LLC, a Minnesota limited liability company (“EPP”), and VVI Fulfillment Center, Inc., a Minnesota corporation (“VVIF”, and together with EPP, “Sellers” and individually a “Seller”), both wholly owned subsidiaries of the Company, entered into a purchase and sale agreement (the “Purchase Agreement”) with Pontus Net Lease Advisors, LLC , as assigned to Pontus IMB Portfolio, LLC (“Purchaser”), pursuant to which the parties agreed to consummate a sale and leaseback transaction (the “Sale and Leaseback Transaction”) for the Company’s Eden Prairie, Minnesota (“Minnesota Property”) and Bowling Green, Kentucky (“Kentucky Property”) properties ( collectively “Properties”). On April 10, 2023, the Company consummated the Sale and Leaseback Transaction and entered into a Master Lease Agreement (“Lease”) with Purchaser for the Properties, as well as other closing and post-closing documents and certificates as requested by Purchaser. As part of the consummation of the Sale and Leaseback Transaction, on April 10, 2023 the Company and the Sellers repaid the Company’s Promissory Note Secured by Mortgages between the Company and Sellers as borrowers and GreenLake Real Estate Finance LLC in full.
The initial term of the Lease commenced on April 10, 2023 and continues until April 30, 2048. The Company has two options to extend the initial term of the Lease for two additional 10-year periods, for a total of 45 years of right to lease the Properties. The initial annual rent under the Lease is $4,536,000.00. Rent will increase each year by 3% percent over the previous year’s rent. The Lease is a true triple net lease, and the Company is responsible for all real estate taxes and assessments, insurance, and maintenance costs for the Properties, including all capital repairs and replacements. The Company paid a security deposit of $4,536,000.00 upon signing the Lease. The Company is required to meet certain financial metrics in the Lease to reduce the Security Deposit amount. The Company has the right to repurchase a portion of the Minnesota Property for $100 once the Minnesota Property is subdivided into two separate lots. The Company also agreed to terminate its repurchase right for the Minnesota Property under certain conditions as set forth in the Lease. The Company also entered into a Post-Closing Agreement with the Purchaser whereby the Company deposited $958,550 in escrow with Purchaser for certain repairs to the Properties.
Item 2.02 | Results of Operations and Financial Condition |
On April 12, 2023, the Company issued a press release disclosing its results of operations and financial condition for the Company’s fourth fiscal quarter and fiscal year ended January 28, 2023. The press release is furnished herewith as Exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.
Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
The information set forth under Item 1.01 under the caption “Loan Agreement and Convertible Promissory Note” is incorporated by reference into this Item 2.03.
Item 3.02 | Unregistered Sales of Equity Securities |
The information set forth under Item 1.01 under the caption “Loan Agreement and Convertible Promissory Note” is incorporated by reference into this Item 3.02.
Item 7.01 | Regulation FD Disclosure |
The Company’s investor presentation dated April 12, 2023 is furnished herewith as Exhibit 99.2. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.
Item 9.01 | Financial Statements and Exhibits |
(d) | Exhibits |
The following exhibits are being filed or furnished, as applicable, with this Current Report on Form 8-K:
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.
Date: April 12, 2023 | iMedia Brands, Inc. | |
By: | /s/ Timothy A. Peterman | |
Timothy A. Peterman | ||
Chief Executive Officer & Interim Chief Financial Officer |
Exhibit 4.1
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
THIS CONVERTIBLE PROMISSORY NOTE AND THE OBLIGATIONS AND INDEBTEDNESS PAYABLE HEREUNDER ARE SUBORDINATED TO THE SENIOR INDEBTEDNESS (AS DEFINED BELOW) AS SET FORTH HEREIN.
IMEDIA
BRANDS, INC.
Convertible Promissory Note
$[ ] | [ ], 2023 |
1. Promise to Pay. For value received, iMedia Brands, Inc., a Minnesota corporation (the “Company”), promises to pay to [___________] (the “Investor”), at such place as the Investor may from time to time in writing designate to the Company, the principal sum of $[_______], together with all accrued but unpaid interest thereon as set forth below.
2. Loan Agreement. This Note is one of several notes (the “Notes”) issued by the Company pursuant to that certain Loan Agreement between the Company and the investors set forth on Schedule I thereto dated as of April 10, 2023 (the “Agreement”). All capitalized terms not otherwise defined herein having the meaning set forth in the Agreement. By acceptance of this Note, Investor expressly agrees, for the benefit of the present and future holders of such indebtedness, to be bound by the provisions of this Note and the Agreement.
3. Payment Terms; Maturity. Interest on the unpaid principal balance of this Note will accrue at the rate of 7.75% per annum increasing to 15% per annum effective January 1, 2024 in the event this Note remains outstanding. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity as set forth below. The interest rate will be computed on the basis of the actual number of days elapsed in a 365-day year. If not sooner converted as provided below, the entire unpaid principal balance, together with all accrued but unpaid interest, will be due and payable in cash on March 31, 2024 (the “Maturity Date”). The Company and the Investor expressly acknowledge and agree that the foregoing is subject to the terms and conditions of this Note, including, but not limited to, Section 5, 7 and Section 8. In the event this Note has not been converted to Common Stock and Warrants by the Maturity Date, the Company may not repay the principal amount of this Note or accrued interest upon this Note, in either case, without the consent of the holders of a majority of the then-outstanding principal amount of the Notes (the “Majority Investors”). The Maturity Date of this Note and all of the other Notes may be extended, in their sole discretion, by the Majority Investors. All payments of interest and principal will be made in lawful money of the United States of America and will be made pro rata among all Investors, without any deduction by way of set-off, counterclaim, or otherwise. All payments will be applied first to interest and thereafter to principal. All payments will be made to the Investors at their respective addresses set forth in the Agreement or at such other address as is provided in writing to the Company.
4. Unsecured Obligation. This Note represents an unsecured obligation of the Company. The Notes will rank equally with all other unsecured debt of the Company.
Convertible Promissory Note | Page 1 |
5. Subordination.
(a) This Note is deemed to be subordinated indebtedness under the Senior Debt Agreements and is subordinated and junior in right of payment, priority, collection and all other respects to the indefeasible payment in full in cash of all liabilities of the Company or any of its subsidiaries or parent entities under the Senior Debt Agreements, including, without limitation, all “Obligations” (as defined in the Siena Credit Agreement). No payment under this Note shall be payable or made until the Senior Indebtedness has been indefeasibly paid in full in cash and any commitment to make advances under the Siena Credit Agreement has terminated. No Investor will commence any action or proceeding against Company (or any of its subsidiaries or parent entities) to demand, collect or recover any payment under this Note not paid when due, and shall not join with any creditor in bringing or assisting or cooperating in any Proceeding (as defined below) against Company (or any of its subsidiaries or parent entities), unless and until the Senior Indebtedness is indefeasibly paid in full in cash and any commitment to make advances under the Siena Credit Agreement has terminated. This Section 5 is intended to constitute a “subordination agreement” under Section 510 of the United States Bankruptcy Code and shall be enforceable in any Proceeding and all references in this Section 5 to Company shall be deemed to apply to Company as debtor-in-possession and to any trustee or receiver for the estate of Company.
(b) If any payment under this Note shall be received by any Investor at the time such payment is not permitted to be paid pursuant to this Section 5, then such payment shall be received, segregated and held in trust for, and shall be paid over by wire transfer of immediately available funds to the Senior Lender, to the extent necessary to pay all such Senior Indebtedness in full.
(c) The provisions of this Section 5 shall continue in full force and effect notwithstanding (A) the commencement by Company (or any of its subsidiaries or parent entities) of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) Company’s (or any of its subsidiaries’ or parent entities’) consent to the entry of an order for relief in an insolvency case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Company (or any of its subsidiaries or parent entities) or for any substantial part of its property (any of the foregoing in clauses (A) and (B), a “Proceeding”), (C) the making by Company (or any of its subsidiaries or parent entities) of a general assignment for the benefit of creditors, (D) Company’s (or any of its subsidiaries’ or parent entities’) failure generally to pay its debts as they become due, or (E) the institution of a proceeding having jurisdiction in the premises seeking a decree or order for relief in respect of Company (or any of its subsidiaries or parent entities) in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Company (or any of its subsidiaries or parent entities) or for any substantial part of its property, or for the winding-up or liquidation of its affairs.
(d) No right of Senior Lender to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Company (or any of its subsidiaries or parent entities) or by any act or failure to act, in good faith, by any Senior Lender or by any noncompliance by Company (or any of its subsidiaries or parent entities) with the terms, provisions and covenants of this Note. Without in any way limiting the generality of this Section 5 Senior Lender may, at any time and from time to time, without the consent of or notice to any Investor, and without impairing or releasing the subordination provided in this Section 5, do any one or more of the following: (I) change the manner, place or terms of payment or extend the time of payment of, or alter the Senior Indebtedness, or otherwise amend or supplement in any manner the Senior Indebtedness or any instrument evidencing the same or any agreement under which the Senior Indebtedness is outstanding, (II) release any person liable in any manner for the collection of the Senior Indebtedness, and (III) exercise or refrain from exercising any rights against Company and any other person.
Convertible Promissory Note | Page 2 |
(e) Upon any refinancing of the Senior Indebtedness, the Investors agree, upon the request of the Company, or the Senior Lender and at the sole cost and expense of the Company, to execute and deliver such agreements, documents or instruments as may be reasonably requested by the Company, or the Senior Lender to ratify and confirm the provisions set forth in this Section 5 for the benefit of the creditors under such refinancing.
(f) Each Investor and Company hereby acknowledges and agrees that this Section 5 is made expressly for the benefit of the Senior Lender, and the Senior Lender may enforce the provisions hereof as if they were parties hereto. Senior Lender is an intended and express third-party beneficiary of this Section 5. Notwithstanding anything to the contrary contained herein, none of the provisions of this Section 5 may be amended, supplemented, waived or otherwise modified without the prior written consent of the Senior Lender.
(g) Each Investor agrees that this Note is, and shall at all times remain, unsecured by any lien. Without limiting the foregoing, in the event any Investor obtains any lien to secure all or any portion of this Note, such Investor (A) agrees that such lien shall be junior and subordinate in all respects to any and all liens that may secure the Senior Indebtedness, (B) shall not attempt to enforce any right or remedy available to it or otherwise take any enforcement action with respect to such lien, and (C) agrees that upon Senior Lender’s request, such Investor shall promptly execute and deliver any releases or other documents and agreements that any Senior Lender deems necessary to release all such liens.
(h) In the event of any insolvency or bankruptcy case or Proceeding, or any receivership, liquidation, reorganization or other similar case or Proceeding in connection therewith, relative to Company (or any of its subsidiaries or parent entities) or its property, and in the event of any proceeding for voluntary liquidation, dissolution or other winding-up of Company (or any of its subsidiaries or parent entities), whether or not involving insolvency or bankruptcy proceedings, then the Senior Indebtedness shall first be indefeasibly paid in full in cash before any payment on account of this Note is made, and in such case or proceedings any payment or distribution of any kind or character, whether in cash or property or securities, that may be payable or deliverable in respect of this Note, shall be paid over to or delivered directly to the Senior Lender until such time as all Senior Indebtedness shall have been indefeasibly paid and satisfied in full in cash. If any Investor has not filed a claim or proof of claim in respect of the this Note as of ten (10) days before the expiration of time to file such a claim or proof of claim in such case or Proceeding, then the Senior Lender is hereby authorized (but not obligated) to prepare and file such a claim or proof of claim for or on behalf of such Investor.
(i) “Siena Credit Agreement” means the Loan and Security Agreement dated as July 30, 2021 by and among the Company and certain of its affiliates and the Senior Lender and certain other lenders party thereto (as may be amended, restated, amended and restated, supplemented or otherwise modified, renewed, refinanced or replaced from time to time).
(j) “Senior Debt Agreements” means, collectively, the Siena Credit Agreement (and the other Loan Documents (as defined therein)) and any other documents evidencing Senior Indebtedness.
(k) “Senior Indebtedness” means all (i) Obligations (as defined in the Siena Credit Agreement), and (ii) unless expressly subordinated to or made on a parity with the amounts due under this Note, all amounts due in connection with (x) other indebtedness of the Company to banks or other lending institutions regularly engaged in the business of lending money, (y) all other indebtedness secured by assets of the Company to the extent of such security, and (z) any other indebtedness or any issued in exchange for such Senior Indebtedness.
(l) “Senior Lender” means Siena Lending Group LLC, its successors and assigns, and any other holder of Senior Indebtedness.
Notwithstanding the foregoing, (i) nothing in this Section 5 shall prohibit, impair or change any of the Company’s obligations to issue the Shares and the Warrants (or the securities issuable thereunder) in accordance with the terms herein and (ii) this Note will be pari passu with all other Notes with respect to right of payment and priority.
Convertible Promissory Note | Page 3 |
6. Prepayment; Repayment. This Note may be prepaid (or repaid) by the Company only with the consent of (a) the Majority Investors at any time or (b) the holder of this Note at any time on or after December 31, 2023. At the time of prepayment (or repayment), if so permitted by the holder of this Note or the Majority Investors pursuant to the prior sentence, the Company will pay all accrued but unpaid interest on the portion of the principal balance prepaid (or repaid). Notwithstanding any other provision of this Note (other than Section 5), this Note may be repaid by the Company without the consent of the Majority Investors or the holder of this Note on or after December 31, 2025, provided that (i) the Company provides at least five business days prior written notice to the holder of this Note and (ii) such repayment is subject to Section 5.
7. Mandatory Conversion. On such date that the Company has (i) amended its articles of incorporation to increase the Company’s authorized shares of Common Stock by at least 7,000,000 shares of Common Stock (as adjusted for any stock splits, stock combinations or similar transactions following the date hereof and prior to the Event Date) (and in any event the number of authorized and unreserved shares of Common Stock shall be increased so that the total number of authorized and unreserved shares of Common Stock is sufficient for the Notes to be converted into the maximum number of shares of Common Stock issuable in accordance with the terms of the Notes and for the Warrants to be exercised for the maximum number of shares of Common Stock issuable in accordance with the terms of the Warrants) (such authorized shares increase, the “Authorized Shares Increase”), (ii) either (A) entered into binding transaction documents in regards to (and closed the transactions contemplated thereby) either a new or refinanced asset-based lending facility (the “Refinancing”) on customary market terms for such an asset-based lending facility or (B) the Majority Investors determine, in their sole discretion, that the Company has made sufficient progress towards completion of the Refinancing and (iii) if applicable, received shareholder approval required pursuant to Nasdaq Marketplace Rule 5635 (for the avoidance of doubt, the Company will not be required to seek approval of the shareholders under Nasdaq Marketplace Rule 5635 for the purposes of allowing any shareholder’s beneficial ownership to exceed 19.99% of the outstanding shares of Common Stock) (such date that the conditions set forth in clauses (i), (ii) and (iii) have been satisfied, the “Event Date”), all of the outstanding principal and interest accrued to the Event Date shall, subject to the Beneficial Ownership Limitation (as defined below) (if applicable), be automatically converted into: (x) a number of shares of Common Stock (the “Shares”) determined by dividing all of the outstanding principal and interest accrued to the Event Date by $[ ] 1 and (y) the issuance of a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares by 0.85. At the option of the holder of this Note, in lieu of receipt of Shares upon mandatory conversion pursuant to this Section or upon any optional conversion pursuant to Section 8, the Investor may request to receive all or any portion of the Shares in the form of a pre-funded warrant to purchase the number of Shares so elected, in the same form as the Warrants, but with an exercise price for the Warrants of $0.00001 per share and no expiration date.
8. Optional Conversion.
(i) At the option of the holder of this Note, at any time prior to the Authorized Shares Increase, any portion of this Note may be converted into: (A) a number of Shares determined by dividing the applicable principal amount and accrued interest of this Note being converted by $[ ] 2, up to a number of Shares equal to a number of shares of Common Stock that represents such holder’s proportionate share (determined by reference to such holder’s Loan Amount relative to all other Note holders’ Loan Amounts) of 5,680,936 shares of Common Stock (which represents the Company’s authorized and unreserved shares of Common Stock as of the date of this Note), and (B) a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares received pursuant to clause (A) of this sentence by 0.85, with such Common Stock Purchase Warrant to be issued to such holder on the date of the Authorized Shares Increase. Any conversion of a portion of this Note effected under this clause shall be referred to as a “Pre-Authorized Optional Conversion”.
1 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
2 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
Convertible Promissory Note | Page 4 |
(ii) At the option of the holder of this Note, at any time after the Authorized Shares Increase, any portion of this Note may be converted into: (A) a number of Shares determined by dividing the applicable principal amount and accrued interest of this Note being converted by $[ ] 3 and (B) a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares received pursuant to clause (A) of this sentence by 0.85. Any conversion of a portion of this Note effected under this clause shall be referred to as a “Post-Authorized Optional Conversion”.
(iii) Following each Pre-Authorized Optional Conversion and Post-Authorized Optional Conversion, the aggregate principal amount of this Note shall be reduced by an amount equal to the applicable principal amount of this Note so converted in accordance with this Section 8. In order to effectuate a conversion under this Section, the holder of this Note shall submit a written notice to the Company, duly executed by such holder and accompanied by this Note, stating that such holder irrevocably elects to convert the applicable principal amount and accrued interest of this Note specified in such conversion notice and, in connection with such conversion, the Company shall issue the Shares and the Common Stock Purchase Warrants to such holder in accordance with this Section 8. If a portion of the principal amount of this Note is being converted, the Company shall issue a replacement Note to the holder of this Note representing the remaining principal amount of this Note that has not been converted.
9. Fundamental Transaction. The Company shall not enter into or be party to a Fundamental Transaction (as defined in the form of Warrant attached to this Agreement) unless, at the option of the holder, (a) the successor entity assumes in writing all of the obligations of the Company under this Note in accordance with the provisions of this Section pursuant to written agreements in form and substance satisfactory to the holder and approved by the holder prior to such Fundamental Transaction, including agreements to deliver to the holder in exchange for such Note a security of the successor entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Note held by the holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the holder or (b) at the option of the holder, the outstanding principal and interest on this Note is repaid in full or the Shares issuable upon conversion of this Note and the Warrants issuable hereunder, in each case, pursuant to Section 8 are so issued to the holder of this Note prior to the closing of any such Fundamental Transaction. Upon the occurrence of any Fundamental Transaction and in the event this Note is not repaid in full or the Shares and Warrants are so issued in accordance with the immediately preceding sentence, the successor entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the successor entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such successor entity had been named as the Company herein. Upon consummation of a Fundamental Transaction and in the event this Note is not repaid in full, the successor entity shall deliver to the holder confirmation that there shall be issued upon conversion or of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock and Warrants (or other securities, cash, assets or other property, which shall continue to be receivable thereafter) issuable upon the conversion or redemption of the Note prior to such Fundamental Transaction, such shares of the common equity (or their equivalent) of the successor entity which the holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the holder of this Note may elect, at its sole option, by delivery of written notice to the Company to waive this Section to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
3 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
Convertible Promissory Note | Page 5 |
10. Actions on Conversion. This Note will be deemed to have been automatically converted on the Event Date, and at such time the rights of the holder of this Note will cease and such holder will be treated for all purposes as the record holder of the Securities issuable upon conversion. As promptly as practicable after the Event Date, the holder of this Note will surrender this Note to the Company at its principal office for cancellation. As promptly as practicable after receipt of the Note, the Company will issue a certificate or certificates, or book entry notation, for the number of full Shares, as well as issue the Warrants, issuable upon conversion.
11. Restriction on Transfer of the Note. Any sale or transfer of this Note must comply with the requirements contained in the Agreement.
12. Collection Fees. If the principal and interest on this Note is not paid when due, and this Note has not been converted to equity securities of the Company, whether or not collection is initiated by any judicial proceeding, or this Note is placed in the hands of an attorney for collection, the Company must pay, in addition to all other amounts owing hereunder, all court costs and reasonable attorney’s fees incurred by the Investor in connection therewith.
13. Events of Default.
(a) AUTOMATIC EVENT OF DEFAULT. The entire unpaid principal balance, together with accrued and unpaid interest thereon, will become immediately due and payable upon the insolvency of the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the Federal Bankruptcy Act, or the appointment of a receiver or trustee to take possession of the property or assets of the Company.
(b) OPTIONAL EVENT OF DEFAULT. The entire unpaid principal balance, together with accrued and unpaid interest thereon, will become immediately due and payable upon the declaration of the Majority Investors and written notice to the Company upon any of the following:
(i) the Company fails to timely pay any of the principal amount due under this Note on the date the principal becomes due and payable or any accrued interest or other amounts due under this Note on the date the same becomes due and payable, and such failure is not remedied within five days of notice of payment to the Company by the Majority Investors; or
(ii) the Company defaults in its performance of, or breaches, any covenant under the Agreement, and such failure is not remedied within five days of notice of non-performance or breach to the Company by the Majority Investors or the Company breaches, in any material respect, any representation and warranty made by the Company under the Agreement.
14. No Rights or Liabilities as Holder of Equity Interests. This Note does not of itself entitle the Investor to any voting rights or other rights as a holder of equity interests in the Company. In the absence of conversion of this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of the Investor, shall cause the Investor to be a holder of Shares or warrants in the Company for any purpose.
Convertible Promissory Note | Page 6 |
15. Amendments and Waivers. Any term of this Note may be amended, terminated or waived only with the written consent of the Company and the Majority Investors. Any amendment or waiver effected in accordance with this Section shall be binding upon each of the Notes and each of the Investors and each transferee of the Notes and the Company.
16. Waiver of Notice, Protest and Demand. The Company hereby waives presentment for payment, notice of nonpayment, protest, notice of protest, and all other notices, filing of suit and diligence in collecting the amounts due under this Note and agrees to not require the Investor to first initiate any suit or exhaust its remedies against any other person or parties in order to enforce payment of this Note.
17. Titles and Subtitles. The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting this Note.
18. Governing Law. This Note and any controversy arising out of or relating to this Note shall be governed by and construed in accordance with the provisions set forth in the Agreement, including the governing law and dispute resolution provisions set forth therein.
19. Electronic Signatures. Signatures may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
Convertible Promissory Note | Page 7 |
20. Beneficial Ownership Limitations. Capitalized terms used in this Section and not otherwise defined in this Note shall have the meanings set forth in the form of Warrant attached to the Agreement. The Company shall not effect any conversion of this Note, and a holder of this Note shall not have the right to convert any portion of this Note, pursuant to Sections 7 or 8 or otherwise, to the extent, and only to the extent, that after giving effect to such conversion, the holder of this Note (together with such holder’s Affiliates, and any other Persons acting as a group together with the holder of this Note or any of such holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (for the avoidance of doubt, a conversion of this Note may be effected up to the Beneficial Ownership Limitation subject to the other requirements of this Note). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the holder of this Note and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Note beneficially owned by the holder of this Note or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder of this Note or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the holder of this Note that the Company is not representing to the holder of this Note that such calculation is in compliance with Section 13(d) of the Exchange Act and the holder of this Note is solely responsible for any schedules required to be filed in accordance therewith and the calculations required under this Section. To the extent that the limitation contained in this Section applies, the determination of whether this Note is convertible (in relation to other securities owned by the holder of this Note together with any Affiliates and Attribution Parties) and of which portion of this Note is convertible shall be in the sole discretion of the holder of this Note, and the acceptance of the issuance of the Shares and Warrants shall be deemed to be such holder’s determination of whether this Note is convertible (in relation to other securities owned by such holder together with any Affiliates and Attribution Parties) and of which portion of this Note is convertible, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section, in determining the number of outstanding shares of Common Stock, the holder of this Note may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the holder of this Note, the Company shall within one Trading Day confirm orally and in writing to the holder of this Note the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the holder of this Note or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by the holder of this Note prior to the issuance of this Note, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The holder of this Note, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 20, provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the holder and the provisions of this Section shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. In the event that the issuance of shares of Common Stock and Warrants to the holder of this Note upon conversion of this Note results in the holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation of the number of shares of outstanding Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which the holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Beneficial Ownership Limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the holder shall not have the power to vote or to transfer the Excess Shares. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the holder for any purpose including for purposes of Section 13(d) of the Exchange Act. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility The provisions of this Section shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section to correct this Section (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section shall apply to a successor holder of this Note. This provision shall not restrict the number of shares of Common Stock which the holder of this Note may receive or beneficially own in order to determine the amount of securities or other consideration that such holder may receive in the event of a Fundamental Transaction. This restriction may not be waived without shareholder approval.
Convertible Promissory Note | Page 8 |
21. Stock Dividends and Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case all prices set forth in Sections 7 and 8 of this Note shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and all references to 5,680,936 shares of Common Stock (or other references to shares of Common Stock) shall be proportionately adjusted. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
[Remainder of page intentionally left blank—signature page follows]
Convertible Promissory Note | Page 9 |
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its duly authorized officer and to be dated as of the date first written above.
iMedia Brands, Inc. | ||
By: | ||
Tim Peterman | ||
Chief Executive Officer | ||
Promissory Note | Signature Page |
Exhibit 4.2
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
IMEDIA
BRANDS, INC.
COMMON STOCK PURCHASE WARRANT
Issue Date: | [·] |
Initial Exercise Date: | [·] |
Holder: | [·] |
Initial Warrant Shares: | [·] |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received the holder named above or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on [·] 1 (the “Termination Date”) but not thereafter, to subscribe for and purchase from iMedia Brands, Inc., a Minnesota corporation (the “Company”), up to the number of Initial Warrant Shares set forth above (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“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 under the Securities Act.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the reasonable fees and expenses of which shall be paid by the Company.
“Commission” means the United States Securities and Exchange Commission.
1 5 years from the date of issue
Warrant | Page 1 |
“Common Stock” means the common stock of the Company, par value $0.01 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.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“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.
“Registration Statement” means the effective registration statement on Form S-1 or Form S-3 to be filed with Commission, including all information, documents and exhibits filed with or incorporated by reference into such registration statement, as amended from time to time, which registers the resale of the Warrant Shares, and includes any Rule 462(b) Registration Statement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiaries” means the subsidiaries of the Company set forth on Exhibit 21.1 to the Company’s most recently filed Annual Report on Form 10-K 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 Common Stock is traded on a Trading Market.
“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 American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means EQ Shareowner Services and any successor transfer agent of the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holders of a majority in interest of the Warrants then outstanding, the reasonable fees and expenses of which shall be paid by the Company.
“Warrants” means this Warrant and other Common Stock purchase warrants issued by the Company upon conversion of those certain convertible promissory notes issued pursuant to that certain loan agreement, dated as of April 10, 2023, among the Company and the investors named therein (the “Purchase Agreement”).
Warrant | Page 2 |
2. Exercise.
(a) EXERCISE OF WARRANT. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form attached hereto as Annex A (the “Notice of Exercise”). Within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank, in either case in immediately available funds, unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company shall have no obligation to inquire with respect to or otherwise confirm the authenticity of the signature(s) contained on any Notice of Exercise nor the authority of the person so executing such Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) EXERCISE PRICE. The exercise price per share of Common Stock under this Warrant shall be $0.55, subject to adjustment hereunder (the “Exercise Price”).
(c) CASHLESS EXERCISE. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two hours thereafter (including until two hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
Warrant | Page 3 |
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
(d) MECHANICS OF EXERCISE.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company’s transfer agent is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless exercise and the Warrant Shares may be resold without respect to the volume limitations of Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that the Company shall have received payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $5 per Trading Day (increasing to $10 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of the delivery of the Notice of Exercise.
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(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares remaining available under this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any failure solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver, but did not timely deliver, to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
Warrant | Page 5 |
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round down to the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the assignment form attached hereto as Annex B (the “Assignment Form”) duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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(e) BENEFICIAL OWNERSHIP LIMITATIONS. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent, and only to the extent, that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below) (for the avoidance of doubt, an exercise of this Warrant may be effected up to the Beneficial Ownership Limitation subject to the other requirements of this Warrant). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith and the calculations required under this Section 2(e). To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this Section 2(e) (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 2(e) shall apply to a successor holder of this Warrant. This provision shall not restrict the number of shares of Common Stock which the holder of this Note may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction. This restriction may not be waived without shareholder approval.
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3. Certain Adjustments.
(a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) SUBSEQUENT RIGHTS OFFERINGS. In addition to any adjustments pursuant to Section 3(a) above, if at any time while this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
(c) PRO RATA DISTRIBUTIONS. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
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(d) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant is outstanding, (i) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than for the purpose of changing the Company’s name and/or the jurisdiction of incorporation of the Company or a holding company for the Company), (ii) the Company, 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 Company or another Person) is completed pursuant to which holders of the outstanding equity securities of the Company having voting power, including the power to vote on the election of directors of the Company, are permitted to sell, tender or exchange their securities for other securities, cash or property and has been accepted by the holders of the outstanding securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company, (iv) the Company, 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 Company, 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, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall require any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) prior to such Fundamental Transaction and shall deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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(e) CALCULATIONS. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(f) NOTICE TO HOLDER.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email or other address as it shall appear upon the Warrant Register of the Company, at least five calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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4. Transfer of Warrant.
(a) TRANSFERABILITY. Any sale or transfer of this Warrant and the Warrant Shares must comply with the requirements contained in the Purchase Agreement. Neither this Warrant nor the Warrant Shares have been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act. The Holder understands that this Warrant and the Warrant Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold this Warrant and the Warrant Shares indefinitely unless it is registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Warrant and the Warrant Shares, and on requirements relating to the Company which are outside of the Holder’s control, and which the Company is under no obligation and may not be able to satisfy.
(b) NEW WARRANTS. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) WARRANT REGISTER. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
5. Miscellaneous.
(a) NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE; NO SETTLEMENT IN CASH. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i), in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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(c) 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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) AUTHORIZED SHARES.
The Company covenants that, effective as of immediately upon the Company’s amendment of its articles of incorporation to increase the authorized shares of common stock by at least 7,000,000 shares, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value and (ii) take such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant.
(e) JURISDICTION. All questions concerning the construction, validity, enforcement and interpretation of this Warrant 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. The Company and, by accepting this Warrant, the Holder each agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against the Company or the Holder or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of New York. The Company and, by accepting this Warrant, the Holder each hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York County, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. The Company and, by accepting this Warrant, the Holder each 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 it at the address in effect for notices to it under this Warrant 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 the Company or the Holder shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
Warrant | Page 12 |
(f) RESTRICTIONS. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) NONWAIVER AND EXPENSES. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) NOTICES. Any and all notices or other communications or deliveries to be provided by the Holder hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by email or sent by a nationally recognized overnight courier service, addressed to the Company, at 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Chief Financial Officer, email address: provided separately, or such other email address or address as the Company may specify for such purposes by notice to the Holder. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service addressed to the Holder at the email address or address of the Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via email at the email address 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 time of transmission, if such notice or communication is delivered via email at the email address 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. To the extent that any notice provided by the Company hereunder constitutes, or contains, material, non-public information regarding the Company or any subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
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(i) LIMITATION OF LIABILITY. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) REMEDIES. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by such Holder.
(l) AMENDMENT. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the holders of at least a majority of the Common Stock issuable upon the exercise of the then outstanding Warrants (determined without giving effect to Section 2(e) of the Warrants); provided such modification, amendment or waiver applies to all of the then outstanding Warrants.
(m) SEVERABILITY. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) HEADINGS. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(o) ELECTRONIC SIGNATURES. Signatures may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(Signature Page Follows)
Warrant | Page 14 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
iMedia Brands, Inc. | ||
By: | ||
Tim Peterman | ||
Chief Executive Officer |
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Annex A
NOTICE OF EXERCISE
TO: IMEDIA BRANDS, INC.
(1) The undersigned hereby elects to purchase_______Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
[SIGNATURE OF HOLDER] |
Name of Investing Entity: |
Signature of Authorized Signatory of Investing Entity: |
Name of Authorized Signatory: | |
Title of Authorized Signatory: |
Date: |
Annex B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | |||
(Please Print) | |||
Address: | |||
(Please Print) | |||
Phone Number: | |||
Email Address: | |||
Dated: _______________ __, _________________ | |||
Holder’s Signature: | |||
Holder’s Address: |
Exhibit 4.3
THE SECURITIES REPRESENTED HEREBY and the SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
IMEDIA
BRANDS, INC.
COMMON STOCK PURCHASE WARRANT
Issue Date: | [●] |
Initial Exercise Date: | [●] |
Holder: | [●] |
Initial Warrant Shares: | [●] |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received the holder named above or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) until exercised in full (the “Termination Date”) but not thereafter, to subscribe for and purchase from iMedia Brands, Inc., a Minnesota corporation (the “Company”), up to the number of Initial Warrant Shares set forth above (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“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 under the Securities Act.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the reasonable fees and expenses of which shall be paid by the Company.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.01 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.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“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.
“Registration Statement” means the effective registration statement on Form S-1 or Form S-3 to be filed with Commission, including all information, documents and exhibits filed with or incorporated by reference into such registration statement, as amended from time to time, which registers the resale of the Warrant Shares, and includes any Rule 462(b) Registration Statement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiaries” means the subsidiaries of the Company set forth on Exhibit 21.1 to the Company’s most recently filed Annual Report on Form 10-K 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 Common Stock is traded on a Trading Market.
“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 American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means EQ Shareowner Services and any successor transfer agent of the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holders of a majority in interest of the Warrants then outstanding, the reasonable fees and expenses of which shall be paid by the Company.
“Warrants” means this Warrant and other Common Stock purchase warrants issued by the Company upon conversion of those certain convertible promissory notes issued pursuant to that certain loan agreement, dated as of April 10, 2023, among the Company and the investors named therein (the “Purchase Agreement”).
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2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form attached hereto as Annex A (the “Notice of Exercise”). Within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank, in either case in immediately available funds, unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company shall have no obligation to inquire with respect to or otherwise confirm the authenticity of the signature(s) contained on any Notice of Exercise nor the authority of the person so executing such Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.00001, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = | as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two hours thereafter (including until two hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day; |
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(B) = | the Exercise Price of this Warrant, as adjusted hereunder; and |
(X) = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company’s transfer agent is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless exercise and the Warrant Shares may be resold without respect to the volume limitations of Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that the Company shall have received payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $5 per Trading Day (increasing to $10 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of the delivery of the Notice of Exercise.
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(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares remaining available under this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any failure solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver, but did not timely deliver, to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round down to the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the assignment form attached hereto as Annex B (the “Assignment Form”) duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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(e) Beneficial Ownership Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent, and only to the extent, that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below) (for the avoidance of doubt, an exercise of this Warrant may be effected up to the Beneficial Ownership Limitation subject to the other requirements of this Warrant). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith and the calculations required under this Section 2(e). To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this Section 2(e) (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 2(e) shall apply to a successor holder of this Warrant. This provision shall not restrict the number of shares of Common Stock which the holder of this Note may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction. This restriction may not be waived without shareholder approval.
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3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time while this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
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(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than for the purpose of changing the Company’s name and/or the jurisdiction of incorporation of the Company or a holding company for the Company), (ii) the Company, 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 Company or another Person) is completed pursuant to which holders of the outstanding equity securities of the Company having voting power, including the power to vote on the election of directors of the Company, are permitted to sell, tender or exchange their securities for other securities, cash or property and has been accepted by the holders of the outstanding securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company, (iv) the Company, 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 Company, 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, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall require any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) prior to such Fundamental Transaction and shall deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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(e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(f) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email or other address as it shall appear upon the Warrant Register of the Company, at least five calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Pre-Funded Warrant | Page 10 |
4. Transfer of Warrant.
(a) Transferability. Any sale or transfer of this Warrant and the Warrant Shares must comply with the requirements contained in the Purchase Agreement. Neither this Warrant nor the Warrant Shares have been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act. The Holder understands that this Warrant and the Warrant Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold this Warrant and the Warrant Shares indefinitely unless it is registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Warrant and the Warrant Shares, and on requirements relating to the Company which are outside of the Holder’s control, and which the Company is under no obligation and may not be able to satisfy.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
5. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i), in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
Pre-Funded Warrant | Page 11 |
(c) 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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares.
The Company covenants that, effective as of immediately upon the Company’s amendment of its articles of incorporation to increase the authorized shares of common stock by at least 7,000,000 shares, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value and (ii) take such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant.
(e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant 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. The Company and, by accepting this Warrant, the Holder each agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against the Company or the Holder or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of New York. The Company and, by accepting this Warrant, the Holder each hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York County, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. The Company and, by accepting this Warrant, the Holder each 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 it at the address in effect for notices to it under this Warrant 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 the Company or the Holder shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
Pre-Funded Warrant | Page 12 |
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by email or sent by a nationally recognized overnight courier service, addressed to the Company, at 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Chief Financial Officer, email address: provided separately, or such other email address or address as the Company may specify for such purposes by notice to the Holder. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service addressed to the Holder at the email address or address of the Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via email at the email address 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 time of transmission, if such notice or communication is delivered via email at the email address 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. To the extent that any notice provided by the Company hereunder constitutes, or contains, material, non-public information regarding the Company or any subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
Pre-Funded Warrant | Page 13 |
(j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by such Holder.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the holders of at least a majority of the Common Stock issuable upon the exercise of the then outstanding Warrants (determined without giving effect to Section 2(e) of the Warrants); provided such modification, amendment or waiver applies to all of the then outstanding Warrants.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(o) Electronic Signatures. Signatures may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(Signature Page Follows)
Pre-Funded Warrant | Page 14 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
iMedia Brands, Inc. | ||
By: | ||
Tim Peterman | ||
Chief Executive Officer | ||
Pre-Funded Warrant | Page 15 |
Annex A
NOTICE OF EXERCISE
To: IMEDIA BRANDS, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
¨ in lawful money of the United States; or
¨ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: |
Signature of Authorized Signatory of Investing Entity: |
Name of Authorized Signatory: | |
Title of Authorized Signatory: |
Date: |
Annex B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | |||
(Please Print) | |||
Address: | |||
(Please Print) | |||
Phone Number: | |||
Email Address: | |||
Dated: _______________ __, _________________ | |||
Holder’s Signature: | |||
Holder’s Address: |
Exhibit 10.1
IMEDIA BRANDS, INC.
Loan Agreement
This Loan Agreement (the “Agreement”) dated as of April 10, 2023 is made and entered into by and among iMedia Brands, Inc., a Minnesota corporation (the “Company”), and each purchaser listed on Schedule I hereto (each, an “Investor”).
Recitals
The Company is seeking to raise financing for its operations. The Investors desire to lend funds to the Company on the terms and conditions set forth in this Agreement.
Terms and Conditions
Accordingly, in consideration of the foregoing, the mutual promises set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. | Promissory Note. |
(a) Subject to the terms and conditions hereof, the Company hereby agrees to issue and sell to each Investor, and each Investor, severally and not jointly, hereby agrees to purchase from the Company, a convertible promissory note (each, a “Note”) in the principal amount set forth beside the Investor’s name on Schedule I (the “Loan Amount”), in substantially the form attached as Exhibit A.
(b) USe of PRoceeds. The Company will use the proceeds for repayment of debt, general business purposes and working capital.
2. | Closing. |
(a) Closing. The closing of the sale and purchase of the Notes (the “Closing”) will be held on the date hereof or at such other time as the Company and the Investors shall agree, which in no event shall be later than the third business day following the date of this Agreement, subject to the condition set forth in Section 2(c) below.
(b) Delivery. At the Closing under this Agreement, (i) each Investor purchasing a Note under this Agreement will deliver to the Company a check or wire transfer of funds in the amount of the Investor’s Loan Amount and (ii) the Company will issue and deliver to the Investor a Note in favor of the Investor in the principal amount of the Investor’s Loan Amount.
(c) Concurrent Events. Prior to or concurrent with the Closing and as a condition to the obligations of the Investors to consummate the Closing (which may be waived in their sole discretion), (i) all conditions precedent to the closing of the transactions contemplated by that certain Purchase and Sale Agreement and Joint Escrow Instructions (Multi-State) dated December 20, 2022 by and between EP Properties, LLC, VVI Fulfillment Center, Inc., and Pontus Net Lease Advisors, LLC, as amended from time to time, have been satisfied other than the Closing and the Company shall close upon the sale of properties as set forth therein concurrent with the Closing, (ii) the Company (and all other applicable parties thereto) shall have entered into the Forbearance Agreement, Tenth Amendment to Loan and Security Agreement and Amendment to Fee Letter by and among the Company, ValueVision Interactive, Inc. ValueVision Retail, Inc., PW Acquisition Company, LLC, FL Acquisition Company, ValueVision Media Acquisitions, Inc., JWH Acquisition Company, sNorwell Television, LLC, 867 Grand Avenue LLC, Portal Acquisition Company, VVI Fulfillment Center, Inc., EP Properties, LLC, iMedia&123TV Holding GmbH and Siena Lending Group LLC, in each case, in the final forms provided to the Investors prior to the Closing and (iii) the Company (and all other applicable parties thereto) shall have entered into the Amendment Agreement Relating to Impulse Transaction by and among Emotion Invest GmbH & Co. KG, BE Beteiligungen Fonds GmbH & Co. geschlossene Investmentkommanditgesellschaft, Iris Capital Fund II, iMedia & 123tv Holding GmbH, the Company and 1-2-3.TV GmbH, in the final form provided to the Investors prior to the Closing.
Loan Agreement | Page 1 |
3. Representations, Warranties, and Covenants of the Company. To induce the Investors to enter into this Agreement and to purchase the Notes, the Company hereby represents, warrants and covenants, as applicable, to the Investors as follows:
(a) Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. “Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, or results of operations of the Company.
(b) Authorization. All corporate action required to be taken by the Company’s board of directors and shareholders in order to authorize the Company to enter into this Agreement, and to perform its obligations under this Agreement has been taken or will be taken prior to the issuance of those equity securities. All action on the part of the officers of the Company necessary for the execution and delivery of this Agreement, the performance of all obligations of the Company under this Agreement to be performed as of the closing, and the issuance and delivery of the Notes has been taken or will be taken prior to the issuance of these securities. This Agreement and the Notes, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
(c) Valid Issuance of Securities. The Notes, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement or the applicable securities, applicable state and federal securities laws and liens or encumbrances created by or imposed by an Investor. Assuming the accuracy of the representations of the Investors in this Agreement and subject to the filings described in SECTION 3(d), the Notes will be issued in compliance with all applicable federal and state securities laws. The capital stock of the Company issuable upon conversion of the Notes and upon exercise of the warrants issuable upon conversion of the Notes (the “Warrants”), when issued in compliance with the provisions of this Agreement, the Notes or the Warrants and the Company’s articles of incorporation, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement or the applicable securities, applicable federal and state securities laws and liens or encumbrances created by or imposed by an Investor. The form of Warrant is attached as Exhibit B.
(d) Government Consents and Filings. Assuming the accuracy of the representations made by the Investors in this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for (i) filings pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities Act”), and applicable state securities laws, which have been made or will be made in a timely manner, and (ii) the filing of an amendment to the Company’s articles of incorporation to increase the authorized shares of common stock of the Company (“Common Stock”) in accordance with the terms and conditions of the Notes and this Agreement.
Loan Agreement | Page 2 |
(e) Compliance with Other Instruments and Laws. The Company is not in violation or default of any provisions of its articles of incorporation or bylaws, or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of this Agreements and the consummation of the transactions contemplated by this Agreement will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any provision, instrument, judgment, order, writ, decree, contract or agreement of the Company, in each case as would have a material impact on the Company, or (ii) an event which results in the creation of any material lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
(f) No Finder’s Fees. The Company represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
(g) Bad Actor Disqualification.
(i) No Disqualification Events. With respect to Securities (as hereinafter defined) to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the transactions contemplated hereby, any beneficial owner of 20% or more of the Company's outstanding voting equity securities (calculated on the basis of voting power), nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of such sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i)–(viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Investors a copy of any disclosures provided thereunder.
(ii) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.
(iii) Notice of Disqualification Events. The Company will notify the Investors in writing, prior to any closing hereunder of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(h) SEC Filings. As to each report, form, proxy statement and other document filed by the Company with the Securities and Exchange Commission since January 1, 2022 (the “SEC,” and the documents, the “Company SEC Documents”), the information contained therein as of the respective dates thereof, and as of the date hereof, did not and does not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading; provided, that the Company has incurred losses in operating its business subsequent to the date of the Company’s most recent Quarterly Report on Form 10-Q.
Loan Agreement | Page 3 |
(i) Shareholder Meeting. The Company shall use reasonable best efforts to hold an annual or special meeting of shareholders as promptly as practicable for the purpose of obtaining approval to increase the Company’s authorized shares of Common Stock in an amount sufficient to permit the issuance of shares of Common Stock upon maximum conversion of the Notes and maximum exercise of the Warrants, with the recommendation of the Company’s board of directors that such proposals are approved, and the Company shall solicit proxies from its shareholders in connection therewith in the same manner as all other management proposals in such proxy statement. Notwithstanding the foregoing, if the Company shareholders do not approve the foregoing proposals at the Company’s next annual or special meeting of the shareholders (which is currently anticipated to be held in May 2023), the Company will continue to use reasonable best efforts to hold a subsequent special meeting of the shareholders as promptly as practicable thereafter to obtain the requisite shareholders approval for such proposals (and the Company will continue to use reasonable efforts to hold such special meetings until such requisite approval is so obtained).
(j) Authorization of Shares underlying the Notes. As of the date hereof, there is a sufficient number of shares of Common Stock authorized under the Company’s articles of incorporation and otherwise unreserved to permit the Notes to convert into up to 5,680,936 shares of Common Stock in accordance with the terms and conditions thereunder. The Company agrees that such 5,680,936 shares of Common Stock have been reserved exclusively for issuance upon conversion of the Notes and that such shares shall remain so exclusively reserved until such shares have been issued upon conversion of the Notes or until the Notes cease to be convertible.
(k) Share Reserve. The Company further agrees that all additional shares of Common Stock that become authorized after the date of this Agreement shall first be reserved as shares of Common Stock available exclusively for issuance upon conversion of the Notes and exercise of the Warrants until such time the Company has a sufficient reserve to cover all such conversions and exercises in full, and such reserved shares of Common Stock shall remain reserved until such time as all Notes have been fully converted and all Warrants fully exercised or until they cease to be convertible or exercisable by their respective terms. For the avoidance of doubt, unless the Company is in full compliance with the covenant in the preceding sentence and the last sentence of Section 3(j), the Company shall not reserve any additional shares of Common Stock that become authorized after the date of this Agreement for any other purposes, including as shares underlying equity incentive awards for issuance to any persons.
(l) Stock Exchange Listing; Listing of Additional Shares. The Company shall use its reasonable best efforts to maintain the listing of the Common Stock on The Nasdaq Stock Market. The Company has filed a Listing of Additional Shares Notification with The Nasdaq Stock Market covering all of the shares of Common Stock issuable upon conversion of the Notes and upon exercise of the Warrants.
(m) Form S-3 Eligibility. The Company is eligible to register the Shares and the shares issuable upon exercise of the Warrants for resale using Form S-3 promulgated under the Securities Act.
(n) No Shareholder Approval. The Company has no reason to believe that the issuance of the Notes and the Warrants, and the shares of Common Stock issuable upon conversion of the Notes and upon exercise of the Warrants, will require approval of the Company’s shareholders, including, without limitation, pursuant to the rules and regulations of Nasdaq, except for the requisite shareholder approval of an increase in the number of authorized shares of Common Stock under the Company’s articles of incorporation to permit the maximum conversion of the Notes and maximum exercise of the Warrants in accordance with the terms and conditions thereunder.
4. Representations of the Investors. To induce the Company to enter into this Agreement and to sell the Notes, each Investor, severally and not jointly (and as to itself only and not any other Investor), hereby represents and warrants to the Company as follows:
(a) Authorization. The Investor has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by the Investor, will constitute a valid and legally binding obligation of the Investor, enforceable in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
Loan Agreement | Page 4 |
(b) Purchase for Own Account. This Agreement is made with the Investor in reliance upon the Investor’s representation to the Company, which by the Investor’s execution of this Agreement, the Investor hereby confirms, that the Notes and the securities issuable upon conversion of the Notes (the Notes (including upon exercise of the Warrants) (the Notes, the shares of Common Stock issuable upon conversion of the Notes, the Warrants and the securities issuable upon exercise of the Warrants, collectively, the “Securities”) to be acquired by the Investor will be acquired for investment for the Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the Securities. By executing this Agreement, the Investor further represents that the Investor does not presently have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.
(c) Disclosure of Information; Sophistication. The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by the Investor. The Investor and its advisors, if any, have had (i) the opportunity to review this Agreement, the Note and the Warrant form, and the filings made by the Company with the SEC available through the EDGAR filing system (at www.sec.gov), and has been afforded the opportunity to ask such questions of the Company 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 Securities and the merits and risks of investing in the Securities; (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 (including the opportunity to view the Company’s facilities); 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. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives, nor any knowledge of the Investor or any such advisors, whether obtained thereby or otherwise, shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained herein. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. The Investor did not learn of the investment in the Securities as a result of any general solicitation or general advertising. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(d) Restricted Securities. The Investor understands that the Securities have not been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Investor’s representations as expressed herein. The Investor understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Investor must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Investor acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Investor’s control, and which the Company is under no obligation and may not be able to satisfy.
Loan Agreement | Page 5 |
(e) Legends. The Investor understands that the Securities and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends (in substantially the form set forth below):
(i) “THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.”
(ii) Any legend required by the securities laws of any state to the extent such laws are applicable to the Securities represented by the certificate so legended.
(f) Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Investor satisfies the criteria indicated in the accredited investor questionnaire provided to the Company.
(g) Foreign Investors. If the Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986), the Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. The Investor’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Investor’s jurisdiction.
(h) No General Solicitation. Neither the Investor, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including through a broker or finder (i) engaged in any general solicitation, or (ii) published any advertisement in connection with the offer and sale of the Securities.
(i) Exculpation Among Investors. The Investor acknowledges that it is not relying upon any statement, representation or warranty made by any person, except for statements, representations and warranties contained in this Agreement, in making its investment or decision to invest in the Company. The Investor agrees that neither any Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Securities.
(j) Residence, Investment Decision. The Investor’s residence or principal place of business, and the location where the Investor made the decision to purchase the Notes, is in the state set forth in the Investor’s address provided to the Company.
(k) No Finder’s Fees. Each Investor represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Investor or any of its officers, employees, or representatives is responsible.
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(l) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(m) No Bad Actor Disqualification Event. The Investor represents, after reasonable inquiry, that none of the “Bad Actor” disqualifying events described in Rule 506(d)(l)(i) to (viii) under the Securities Act (a “Disqualification Event”) is applicable to the Investor or any of its Rule 506(d) Related Parties (if any). “Rule 506(d) Related Party” means a person or entity that is a beneficial owner of the Investor’s securities for purposes of Rule 506(d).
(n) Further Assurances. Each Investor agrees and covenants that at any time and from time to time it will promptly execute and deliver to the Company such further instruments and documents and take such further action as the Company may reasonably require in order to carry out the full intent and purpose of this Agreement and to comply with federal or state securities laws or other regulatory approvals.
5. | Registration Rights. |
(a) | Registration. The Company shall: |
(i) file a registration statement with the SEC no later than 45 days after the Closing that registers for resale under the Securities Act the maximum number of shares of Common Stock issuable upon conversion of the Notes and upon exercise of the Warrants (collectively, the “Registrable Shares”) on Form S-1 or Form S-3 under the Securities Act (providing for shelf registration of such Registrable Shares under SEC Rule 415 to the extent possible) (each such registration statement, including any preliminary prospectus, final prospectus, exhibit or amendment included in or relating to such registration statement being the “Resale Registration Statement”);
(ii) cause such Resale Registration Statement to be declared effective as soon as practicable and in any event within 90 days of the filing thereof;
(iii) not less than two calendar days prior to the filing of each such Resale Registration Statement or any related prospectus or any amendment or supplement thereto, furnish via email to each Investor copies of all such documents proposed to be filed (other than any document that is incorporated or deemed to be incorporated by reference therein);
(iv) promptly prepare and file with the SEC such amendments and supplements to each such Resale Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Resale Registration Statement continuously effective and free from any material misstatement or omission to state a material fact therein until termination of such obligation as provided below, subject to the Company’s right to suspend as set forth below;
(v) furnish to each Investor such number of copies of prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Shares by the Investor;
(vi) file such documents as may be required of the Company for normal securities law clearance for the resale of the Registrable Shares in such states of the United States as may be reasonably requested by an Investor and use its commercially reasonable efforts to maintain such blue sky qualifications during the period the Company is required to maintain effectiveness of each such Resale Registration Statement; provided, however, that the Company shall not be required in connection with this Section to qualify as a foreign corporation or execute a general consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;
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(vii) upon notification by the SEC that a Resale Registration Statement will not be reviewed or is not subject to further review by the SEC, the Company shall within two trading days following the date of such notification request acceleration of such Resale Registration Statement (with the requested effectiveness date to be not more than two Trading Days later);
(viii) upon notification by the SEC that a Resale Registration Statement has been declared effective by the SEC, the Company shall file the final prospectus under Rule 424 of the Securities Act (“Rule 424”) within the applicable time period prescribed by Rule 424 if required;
(ix) advise each Investor promptly (and in any event within two trading days thereof):
(A) of the effectiveness of a Resale Registration Statement or any post-effective amendments thereto;
(B) of any request by the SEC for amendments to a Resale Registration Statement or amendments to the prospectus or for additional information relating thereto;
(C) of the issuance by the SEC of any stop order suspending the effectiveness of a Resale Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Registrable Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes; and
(D) of the existence of any fact and the happening of any event that makes any statement of a material fact made in a Resale Registration Statement, the prospectus and amendment or supplement thereto, or any document incorporated by reference therein, untrue, or that requires the making of any additions to or changes in a Resale Registration Statement or the prospectus in order to make the statements therein not misleading;
(x) cause all Registrable Shares to be listed on each securities exchange, if any, on which equity securities by the Company are then listed;
(xi) bear all expenses in connection with the procedures in paragraphs (i) through (x) of this Section and the registration of the Registrable Shares on each such Resale Registration Statement and the satisfaction of the blue sky laws of such states; and
(xii) to the extent any Note or Warrant becomes convertible or exercisable for additional shares of Common Stock that are not covered by the Resale Registration Statement, the Company shall file an additional registration statement with the SEC no later than 45 days after the date of such occurrence registering for resale under the Securities Act all of the additional shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants issuable as of such date (collectively, the “Additional Registrable Shares”) on Form S-1 or Form S-3 under the Securities Act (providing for shelf registration of such Registrable Shares under SEC Rule 415 to the extent possible) and all of the provisions of Section 5 shall apply mutatis muntandis to such Additional Registrable Shares.
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(b) | Registration Rights Indemnification. |
(i) The Company agrees to indemnify and hold harmless each Investor and its respective affiliates, partners, members, officers, directors, agents and representatives, and each person, if any, who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each, a “Purchaser Party” and collectively the “Purchaser Parties”), to the fullest extent permitted by applicable law, from and against any losses, claims, damages or liabilities (collectively, “Losses”) to which they may become subject (under the Securities Act or otherwise) insofar as such Losses (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in a Resale Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or arise out of any failure by the Company to fulfill any undertaking included in a Resale Registration Statement and the Company will, as incurred, reimburse the Purchaser Parties for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such Loss arises out of, or is based upon an untrue statement or omission or alleged untrue statement or omission made in a Resale Registration Statement in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor specifically for use in preparation of a Resale Registration Statement; provided further, however, that the Company shall not be liable to any Purchaser Party (or any partner, member, officer, director or controlling person of the Investor) to the extent that any such Loss is caused by an untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus if either (i) (A) the Investor failed to send or deliver a copy of the final prospectus with or prior to, or the Investor failed to confirm that a final prospectus was deemed to be delivered prior to (in accordance with Rule 172 of the Securities Act), the delivery of written confirmation of the sale by the Investor to the person asserting the claim from which such Loss resulted and (B) the final prospectus corrected such untrue statement or omission, or (ii) (X) such untrue statement or omission is corrected in an amendment or supplement to the prospectus and (Y) having previously been furnished by or on behalf of the Company with copies of the prospectus as so amended or supplemented or notified by the Company that such amended or supplemented prospectus has been filed with the SEC, in accordance with Rule 172 of the Securities Act, the Investor thereafter fails to deliver such prospectus as so amended or supplemented, with or prior to or the Investor fails to confirm that the prospectus as so amended or supplemented was deemed to be delivered prior to (in accordance with Rule 172 of the Securities Act), the delivery of written confirmation of the sale by the Investor to the person asserting the claim from which such Loss resulted.
(ii) Each Investor (severally and not jointly) agrees to indemnify and hold harmless the Company and its officers, directors, affiliates, agents and representatives and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each a “Company Party” and collectively the “Company Parties”), to the fullest extent permitted by applicable law, from and against any Losses to which the Company Parties may become subject (under the Securities Act or otherwise), insofar as such Losses (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in a Resale Registration Statement (or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in each case, on the effective date thereof), if, and only to the extent, such untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of a Resale Registration Statement, and the Investor will, as incurred, reimburse each Company Party for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that in no event shall any indemnity under this Section 5(b) be greater in amount than the dollar amount of the net proceeds received by the Investor upon its sale of the Registrable Shares included in the Resale Registration Statement giving rise to such indemnification obligation.
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(iii) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 5(b), such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, and, subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person and such indemnifying person shall have been notified thereof, such indemnifying person shall be entitled to participate therein, and, to the extent that it shall wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate in the reasonable judgment of the indemnified person for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, further, that no indemnifying person shall be responsible for the fees and expense of more than one separate counsel for all indemnified parties. The indemnifying party shall not settle an action without the consent of the indemnified party, which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this Section 5(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other, as well as any other relevant equitable considerations; provided, that in no event shall any contribution by an indemnifying party hereunder be greater in amount than the dollar amount of the proceeds received by such indemnifying party upon the sale of such Registrable Shares.
(c) Suspensions. Each Investor acknowledges that there may be times when the Company must suspend the use of the prospectus forming a part of a Resale Registration Statement until such time as an amendment to such Resale Registration Statement has been filed by the Company and declared effective by the SEC, or until such time as the Company has filed an appropriate report with the SEC pursuant to the Exchange Act. Each Investor hereby covenants that it will not sell any Registrable Shares pursuant to said prospectus during the period commencing at the time at which the Company gives the Investor notice of the suspension of the use of said prospectus and ending at the time the Company gives the Investor notice that the Investor may thereafter effect sales pursuant to said prospectus; provided, that such suspension periods (“Allowable Grace Periods”) shall in no event exceed 60 days in any 12 month period and that, in the good faith judgment of the Board of Directors, the Company would, in the absence of such delay or suspension hereunder, be required under state or federal securities laws to disclose any corporate development, a potentially significant transaction or event involving the Company, or any negotiations, discussions, or proposals directly relating thereto, in either case the disclosure of which would reasonably be expected to have a Material Adverse Effect.
(d) Termination of Registration Rights. The obligations of the Company pursuant to Section 5 shall cease and terminate (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) as to each Investor for so long as (a) a Registration Statement with respect to the sale of such Registrable Shares is declared effective by the SEC under the Securities Act and such Registrable Shares have been disposed of by the Investor in accordance with such effective Registration Statement, (b) such Registrable Shares have been previously sold in accordance with Rule 144 promulgated under the Securities Act (or any successor to such rule), or (c) such Registrable Shares become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Company’s Transfer Agent (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any affiliate of the Company).
Loan Agreement | Page 10 |
(e) Selling Securityholder Questionnaire. Each Investor (severally and not jointly) agrees to furnish to the Company a completed questionnaire in the form provided by the Company. The Company shall not be required to include the Registrable Shares of an Investor in a Registration Statement and shall not be required to pay any damages hereunder to the Investor if the Investor fails to furnish to the Company a fully completed Selling Holder Questionnaire at least three Business Days prior to the filing of the Registration Statement.
(f) Facilitation of Sales Pursuant to Rule 144. For as long as any Investor holds Registrable Shares, to the extent it shall be required to do so under the Exchange Act, the Company shall use reasonable best efforts to timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144) and submit all required Interactive Data Files (as defined in Rule 11 of Regulation S- T of the SEC), and shall use reasonable best efforts to take such further necessary action as any holder of Registrable Shares may reasonably request in connection with the removal of any restrictive legend on the Registrable Shares being sold, all to the extent required from time to time to enable such holder to sell the Registrable Shares without registration under the Securities Act within the limitations of the exemption provided by Rule 144.
6. Lock-Up. For the period from the date hereof until the date that is the six (6) month anniversary of the Closing date, neither the Company nor any subsidiary thereof will sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of its capital stock or any securities convertible into or exercisable or exchangeable for shares of its capital stock, for the primary purpose of capital raising. For the avoidance of doubt, the foregoing shall not prohibit the (i) the issuance of securities pursuant to the Notes or the Warrants, (ii) grants of options, restricted stock units, performance stock units and other awards to purchase or receive shares of the Company’s capital stock under its equity compensation plans, (iii) any shares of the Company’s capital stock issued upon the conversion, exercise or settlement of outstanding warrants, options, restricted stock units performance stock units or other securities, including any purchases pursuant to an employee stock purchase plan or (iv) the issuance of any shares of capital stock or other equity securities in exchange for other securities of the Company.
7. | Miscellaneous. |
(a) Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Investors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the closings under this Agreement and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Investors or the Company.
(b) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. The Company will not assign this Agreement (or any Note or Warrant) or any of its rights or obligations hereunder or thereunder without the express prior written consent of the holders of at least a majority of the then-outstanding principal amount of the Notes or securities issued upon conversion of the Notes except in connection with the sale of all or substantially all of its assets or a merger or similar transaction involving the Company (so long as the Company complies with its obligations with respect to the applicable “Fundamental Transaction” (as defined in the Notes and the Warrants) under the Notes and the Warrants). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
Loan Agreement | Page 11 |
(c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
(d) Counterparts; Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(e) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
(f) Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set provided to the Company or to the Company’s corporate headquarters in the case of the Company, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section. If notice is given to the Company, a copy (which shall not constitute formal notice) shall also be sent to Faegre Drinker Biddle & Reath LLP, 2200 Wells Fargo Center, 90 S. 7th Street, Minneapolis, MN 55402, Attention Jonathan Zimmerman, jon.zimmerman@FaegreDrinker.com.
(g) Fees and Expenses. Each party shall pay its own expenses in connection with the matters contemplated by this Agreement.
(h) Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of this Agreement or the Securities, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.
(i) Amendments and Waivers. Any term of this Agreement may be amended, terminated or waived only with the written consent of (i) the Company and (ii) the holders of at least a majority of the then-outstanding principal amount of the Notes or securities issued upon conversion of the Notes. Any amendment or waiver effected in accordance with this Section shall be binding upon the Investors and each transferee of the Securities, each future holder of all such securities, and the Company.
(j) Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
(k) Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
Loan Agreement | Page 12 |
(l) Entire Agreement. This Agreement (including the exhibits hereto), the Notes, the Warrants and the Board Observation Rights Agreement constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled. The “Board Observation Rights Agreement” means the board observer agreement between the Company and BSMF LLC dated as of the date hereof.
(m) Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the State of New York for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the State of New York, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
(n) | Waiver of Conflicts; Other Acknowledgment. |
(i) Faegre Drinker. Each party to this Agreement acknowledges that Faegre Drinker Biddle & Reath LLP (“Faegre Drinker”), counsel for the Company, has in the past performed and may continue to perform legal services for certain of the Investors in matters unrelated to the transactions described in this Agreement, including the representation of such Investors in venture capital financings and other matters. Accordingly, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; and (b) gives its informed consent to Faegre Drinker’s representation of certain of the Investors in such unrelated matters and to Faegre Drinker’s representation of the Company in connection with this Agreement and the transactions contemplated hereby.
(ii) Wilson Sonsini. Each Investor has been represented by (or had the opportunity to be represented by) its own counsel in connection with this Agreement and the transactions contemplated hereby. Each party to this Agreement acknowledges that Wilson Sonsini Goodrich & Rosati, Professional Corporation represented only Olympus Capital Investments, LLC, an affiliate of OCI-VB, LLC, in connection with this Agreement and the transactions contemplated hereby and not any other Investor.
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Loan Agreement | Page 13 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
By: | /s/ Tim Peterman | By: | /s/ Tim Peterman | ||
Tim Peterman | Tim Peterman | ||||
Chief Executive Officer | |||||
¨ | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock ¨ | By: | /s/ J. Alex Wasserberger | |||
J. Alex Wasserberger | |||||
General Counsel |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
By: | /s/ Benjamin Schrag | By: | |||
Benjamin Schrag | Tim Peterman | ||||
Chief Executive Officer | |||||
x | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock x |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | |||
BSMF LLC | ||||
By: | /s/ Michael Frishberg | By: | ||
Michael Frishberg | Tim Peterman | |||
Title: | Principal | Chief Executive Officer |
¨ | Pre-Funded Warrants | |||
Number of Pre-Funded Warrants: | ||||
OR check box to receive entirely Pre-Funded | ||||
Warrants in lieu of shares of Common Stock ¨ |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
OCI-VB, LLC | |||||
By: | /s/ Christopher W. Bodell | By: | |||
Christopher W. Bodell | Tim Peterman | ||||
Authorized Representative | Chief Executive Officer | ||||
¨ | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock ¨ |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | |||
Invicta Media Investments, LLC | ||||
By: | ||||
Tim Peterman | ||||
By: | /s/ Eyal Lalo | Chief Executive Officer | ||
Name: | Eyal Lalo | |||
Title: | Owner |
x | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock x |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
By: | /s/ Aaron Reitkopf | By: | |||
Aaron Reitkopf | Tim Peterman | ||||
Chief Executive Officer | |||||
¨ | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock ¨ |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
By: | /s/ Michael Friedman | By: | |||
Michael Friedman | Tim Peterman | ||||
Chief Executive Officer | |||||
x | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock x |
Loan Agreement | Signature Page |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investor: | iMedia Brands, Inc. | ||||
By: | /s/ Alan Aldworth | By: | |||
Alan Aldworth | Tim Peterman | ||||
Chief Executive Officer | |||||
¨ | Pre-Funded Warrants | ||||
Number of Pre-Funded Warrants: | |||||
OR check box to receive entirely Pre-Funded | |||||
Warrants in lieu of shares of Common Stock ¨ |
Loan Agreement | Signature Page |
Schedule I
Schedule of Investors
Investor | Loan Amount | Date of Note Issue |
BSMF LLC Attention: Michael Frishberg New York, NY 10013 Email: Frish1948@gmail.com |
$1,665,000 |
April 10, 2023 |
Benjamin Schrag 270 Riverside Drive Email: bschrag@gmail.com |
$1,000,000 |
April 10, 2023 |
OCI-VB, LLC Attention: Christopher W. Bodell West Tower, 8th Floor Morristown, New Jersey 07960 Email: cbodell@olympuscapinv.com |
$530,000 |
April 10, 2023 |
Tim Peterman Address of file with Company Email: tpeterman@imediabrands.com |
$50,000 |
April 10, 2023 |
Invicta Media Investments LLC Address on file with Company Email: elalo@imediabrands.com |
$105,000 |
April 10, 2023 |
Aaron Reitkopf Address on file with Company Email: areitkopf@imediabrands.com |
$50,000 |
April 10, 2023 |
Michael Friedman Address on file with Company Email: mfriedman@imediabrands.com |
$50,000 |
April 10, 2023 |
Alan Aldworth Address on file with Company Email: aaldworth@imediabrands.com |
$50,000 |
April 10, 2023 |
Loan Agreement | Schedule I |
Exhibit A
Form of Convertible Note
Loan Agreement | Exhibit A |
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
THIS CONVERTIBLE PROMISSORY NOTE AND THE OBLIGATIONS AND INDEBTEDNESS PAYABLE HEREUNDER ARE SUBORDINATED TO THE SENIOR INDEBTEDNESS (AS DEFINED BELOW) AS SET FORTH HEREIN.
IMEDIA BRANDS, INC.
Convertible Promissory Note
$[_________] | [____________ __],2023 |
1. Promise to Pay. For value received, iMedia Brands, Inc., a Minnesota corporation (the “Company”), promises to pay to [ ___________________] (the “Investor”), at such place as the Investor may from time to time in writing designate to the Company, the principal sum of $[________], together with all accrued but unpaid interest thereon as set forth below.
2. Loan Agreement. This Note is one of several notes (the “Notes”) issued by the Company pursuant to that certain Loan Agreement between the Company and the investors set forth on Schedule I thereto dated as of April 10, 2023 (the “Agreement”). All capitalized terms not otherwise defined herein having the meaning set forth in the Agreement. By acceptance of this Note, Investor expressly agrees, for the benefit of the present and future holders of such indebtedness, to be bound by the provisions of this Note and the Agreement.
3. Payment Terms; Maturity. Interest on the unpaid principal balance of this Note will accrue at the rate of 7.75% per annum increasing to 15% per annum effective January 1, 2024 in the event this Note remains outstanding. Accrual of interest will commence on the date of this Note, will continue until this Note is fully paid, and will be payable in a single installment at maturity as set forth below. The interest rate will be computed on the basis of the actual number of days elapsed in a 365-day year. If not sooner converted as provided below, the entire unpaid principal balance, together with all accrued but unpaid interest, will be due and payable in cash on March 31, 2024 (the “Maturity Date”). The Company and the Investor expressly acknowledge and agree that the foregoing is subject to the terms and conditions of this Note, including, but not limited to, Section 5, 7 and Section 8. In the event this Note has not been converted to Common Stock and Warrants by the Maturity Date, the Company may not repay the principal amount of this Note or accrued interest upon this Note, in either case, without the consent of the holders of a majority of the then-outstanding principal amount of the Notes (the “Majority Investors”) . The Maturity Date of this Note and all of the other Notes may be extended, in their sole discretion, by the Majority Investors. All payments of interest and principal will be made in lawful money of the United States of America and will be made pro rata among all Investors, without any deduction by way of set-off, counterclaim, or otherwise. All payments will be applied first to interest and thereafter to principal. All payments will be made to the Investors at their respective addresses set forth in the Agreement or at such other address as is provided in writing to the Company.
4. Unsecured Obligation. This Note represents an unsecured obligation of the Company. The Notes will rank equally with all other unsecured debt of the Company.
Convertible Promissory Note | Page 1 |
5. Subordination.
(a) This Note is deemed to be subordinated indebtedness under the Senior Debt Agreements and is subordinated and junior in right of payment, priority, collection and all other respects to the indefeasible payment in full in cash of all liabilities of the Company or any of its subsidiaries or parent entities under the Senior Debt Agreements, including, without limitation, all “Obligations” (as defined in the Siena Credit Agreement). No payment under this Note shall be payable or made until the Senior Indebtedness has been indefeasibly paid in full in cash and any commitment to make advances under the Siena Credit Agreement has terminated. No Investor will commence any action or proceeding against Company (or any of its subsidiaries or parent entities) to demand, collect or recover any payment under this Note not paid when due, and shall not join with any creditor in bringing or assisting or cooperating in any Proceeding (as defined below) against Company (or any of its subsidiaries or parent entities), unless and until the Senior Indebtedness is indefeasibly paid in full in cash and any commitment to make advances under the Siena Credit Agreement has terminated. This Section 5 is intended to constitute a “subordination agreement” under Section 510 of the United States Bankruptcy Code and shall be enforceable in any Proceeding and all references in this Section 5 to Company shall be deemed to apply to Company as debtor-in-possession and to any trustee or receiver for the estate of Company.
(b) If any payment under this Note shall be received by any Investor at the time such payment is not permitted to be paid pursuant to this Section 5, then such payment shall be received, segregated and held in trust for, and shall be paid over by wire transfer of immediately available funds to the Senior Lender, to the extent necessary to pay all such Senior Indebtedness in full.
(c) The provisions of this Section 5 shall continue in full force and effect notwithstanding (A) the commencement by Company (or any of its subsidiaries or parent entities) of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) Company’s (or any of its subsidiaries’ or parent entities’) consent to the entry of an order for relief in an insolvency case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Company (or any of its subsidiaries or parent entities) or for any substantial part of its property (any of the foregoing in clauses (A) and (B), a “Proceeding”), (C) the making by Company (or any of its subsidiaries or parent entities) of a general assignment for the benefit of creditors, (D) Company’s (or any of its subsidiaries’ or parent entities’) failure generally to pay its debts as they become due, or (E) the institution of a proceeding having jurisdiction in the premises seeking a decree or order for relief in respect of Company (or any of its subsidiaries or parent entities) in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of Company (or any of its subsidiaries or parent entities) or for any substantial part of its property, or for the winding-up or liquidation of its affairs.
(d) No right of Senior Lender to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of Company (or any of its subsidiaries or parent entities) or by any act or failure to act, in good faith, by any Senior Lender or by any noncompliance by Company (or any of its subsidiaries or parent entities) with the terms, provisions and covenants of this Note. Without in any way limiting the generality of this Section 5 Senior Lender may, at any time and from time to time, without the consent of or notice to any Investor, and without impairing or releasing the subordination provided in this Section 5, do any one or more of the following: (I) change the manner, place or terms of payment or extend the time of payment of, or alter the Senior Indebtedness, or otherwise amend or supplement in any manner the Senior Indebtedness or any instrument evidencing the same or any agreement under which the Senior Indebtedness is outstanding, (II) release any person liable in any manner for the collection of the Senior Indebtedness, and (III) exercise or refrain from exercising any rights against Company and any other person.
Convertible Promissory Note | Page 2 |
(e) Upon any refinancing of the Senior Indebtedness, the Investors agree, upon the request of the Company, or the Senior Lender and at the sole cost and expense of the Company, to execute and deliver such agreements, documents or instruments as may be reasonably requested by the Company, or the Senior Lender to ratify and confirm the provisions set forth in this Section 5 for the benefit of the creditors under such refinancing.
(f) Each Investor and Company hereby acknowledges and agrees that this Section 5 is made expressly for the benefit of the Senior Lender, and the Senior Lender may enforce the provisions hereof as if they were parties hereto. Senior Lender is an intended and express third-party beneficiary of this Section 5. Notwithstanding anything to the contrary contained herein, none of the provisions of this Section 5 may be amended, supplemented, waived or otherwise modified without the prior written consent of the Senior Lender.
(g) Each Investor agrees that this Note is, and shall at all times remain, unsecured by any lien. Without limiting the foregoing, in the event any Investor obtains any lien to secure all or any portion of this Note, such Investor (A) agrees that such lien shall be junior and subordinate in all respects to any and all liens that may secure the Senior Indebtedness, (B) shall not attempt to enforce any right or remedy available to it or otherwise take any enforcement action with respect to such lien, and (C) agrees that upon Senior Lender’s request, such Investor shall promptly execute and deliver any releases or other documents and agreements that any Senior Lender deems necessary to release all such liens.
(h) In the event of any insolvency or bankruptcy case or Proceeding, or any receivership, liquidation, reorganization or other similar case or Proceeding in connection therewith, relative to Company (or any of its subsidiaries or parent entities) or its property, and in the event of any proceeding for voluntary liquidation, dissolution or other winding-up of Company (or any of its subsidiaries or parent entities), whether or not involving insolvency or bankruptcy proceedings, then the Senior Indebtedness shall first be indefeasibly paid in full in cash before any payment on account of this Note is made, and in such case or proceedings any payment or distribution of any kind or character, whether in cash or property or securities, that may be payable or deliverable in respect of this Note, shall be paid over to or delivered directly to the Senior Lender until such time as all Senior Indebtedness shall have been indefeasibly paid and satisfied in full in cash. If any Investor has not filed a claim or proof of claim in respect of the this Note as of ten (10) days before the expiration of time to file such a claim or proof of claim in such case or Proceeding, then the Senior Lender is hereby authorized (but not obligated) to prepare and file such a claim or proof of claim for or on behalf of such Investor.
(i) “Siena Credit Agreement ” means the Loan and Security Agreement dated as July 30, 2021 by and among the Company and certain of its affiliates and the Senior Lender and certain other lenders party thereto (as may be amended, restated, amended and restated, supplemented or otherwise modified, renewed, refinanced or replaced from time to time).
(j) “Senior Debt Agreements” means, collectively, the Siena Credit Agreement (and the other Loan Documents (as defined therein)) and any other documents evidencing Senior Indebtedness.
(k) “Senior Indebtedness” means all (i) Obligations (as defined in the Siena Credit Agreement), and (ii) unless expressly subordinated to or made on a parity with the amounts due under this Note, all amounts due in connection with (x) other indebtedness of the Company to banks or other lending institutions regularly engaged in the business of lending money, (y) all other indebtedness secured by assets of the Company to the extent of such security, and (z) any other indebtedness or any issued in exchange for such Senior Indebtedness.
(l) “Senior Lender” means Siena Lending Group LLC, its successors and assigns, and any other holder of Senior Indebtedness.
Notwithstanding the foregoing, (i) nothing in this Section 5 shall prohibit, impair or change any of the Company’s obligations to issue the Shares and the Warrants (or the securities issuable thereunder) in accordance with the terms herein and (ii) this Note will be pari passu with all other Notes with respect to right of payment and priority.
Convertible Promissory Note | Page 3 |
6. Prepayment; Repayment. This Note may be prepaid (or repaid) by the Company only with the consent of (a) the Majority Investors at any time or (b) the holder of this Note at any time on or after December 31, 2023. At the time of prepayment (or repayment), if so permitted by the holder of this Note or the Majority Investors pursuant to the prior sentence, the Company will pay all accrued but unpaid interest on the portion of the principal balance prepaid (or repaid). Notwithstanding any other provision of this Note (other than Section 5), this Note may be repaid by the Company without the consent of the Majority Investors or the holder of this Note on or after December 31, 2025, provided that (i) the Company provides at least five business days prior written notice to the holder of this Note and (ii) such repayment is subject to Section 5.
7. Mandatory Conversion. On such date that the Company has (i) amended its articles of incorporation to increase the Company’s authorized shares of Common Stock by at least 7,000,000 shares of Common Stock (as adjusted for any stock splits, stock combinations or similar transactions following the date hereof and prior to the Event Date) (and in any event the number of authorized and unreserved shares of Common Stock shall be increased so that the total number of authorized and unreserved shares of Common Stock is sufficient for the Notes to be converted into the maximum number of shares of Common Stock issuable in accordance with the terms of the Notes and for the Warrants to be exercised for the maximum number of shares of Common Stock issuable in accordance with the terms of the Warrants) (such authorized shares increase, the “Authorized Shares Increase”), (ii) either (A) entered into binding transaction documents in regards to (and closed the transactions contemplated thereby) either a new or refinanced asset-based lending facility (the “Refinancing”) on customary market terms for such an asset-based lending facility or (B) the Majority Investors determine, in their sole discretion, that the Company has made sufficient progress towards completion of the Refinancing and (iii) if applicable, received shareholder approval required pursuant to Nasdaq Marketplace Rule 5635 (for the avoidance of doubt, the Company will not be required to seek approval of the shareholders under Nasdaq Marketplace Rule 5635 for the purposes of allowing any shareholder’s beneficial ownership to exceed 19.99% of the outstanding shares of Common Stock) (such date that the conditions set forth in clauses (i), (ii) and (iii) have been satisfied, the “Event Date”), all of the outstanding principal and interest accrued to the Event Date shall, subject to the Beneficial Ownership Limitation (as defined below) (if applicable), be automatically converted into: (x) a number of shares of Common Stock (the “Shares”) determined by dividing all of the outstanding principal and interest accrued to the Event Date by $[___]1 and (y) the issuance of a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares by 0.85. At the option of the holder of this Note, in lieu of receipt of Shares upon mandatory conversion pursuant to this Section or upon any optional conversion pursuant to Section 8, the Investor may request to receive all or any portion of the Shares in the form of a pre-funded warrant to purchase the number of Shares so elected, in the same form as the Warrants, but with an exercise price for the Warrants of $0.00001 per share and no expiration date.
1 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
2 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
Convertible Promissory Note | Page 4 |
8. Optional Conversion.
(i) At the option of the holder of this Note, at any time prior to the Authorized Shares Increase, any portion of this Note may be converted into: (A) a number of Shares determined by dividing the applicable principal amount and accrued interest of this Note being converted by $[___]2, up to a number of Shares equal to a number of shares of Common Stock that represents such holder’s proportionate share (determined by reference to such holder’s Loan Amount relative to all other Note holders’ Loan Amounts) of 5,680,936 shares of Common Stock (which represents the Company’s authorized and unreserved shares of Common Stock as of the date of this Note), and (B) a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares received pursuant to clause (A) of this sentence by 0.85, with such Common Stock Purchase Warrant to be issued to such holder on the date of the Authorized Shares Increase. Any conversion of a portion of this Note effected under this clause shall be referred to as a “Pre-Authorized Optional Conversion”.
(ii) At the option of the holder of this Note, at any time after the Authorized Shares Increase, any portion of this Note may be converted into: (A) a number of Shares determined by dividing the applicable principal amount and accrued interest of this Note being converted by $[___] 3 and (B) a Common Stock Purchase Warrant, in the form attached to the Agreement, to purchase a number of shares of Common Stock underlying such Common Stock Purchase Warrant determined by multiplying the number of Shares received pursuant to clause (A) of this sentence by 0.85. Any conversion of a portion of this Note effected under this clause shall be referred to as a “Post-Authorized Optional Conversion”.
(iii) Following each Pre-Authorized Optional Conversion and Post-Authorized Optional Conversion, the aggregate principal amount of this Note shall be reduced by an amount equal to the applicable principal amount of this Note so converted in accordance with this Section 8. In order to effectuate a conversion under this Section, the holder of this Note shall submit a written notice to the Company, duly executed by such holder and accompanied by this Note, stating that such holder irrevocably elects to convert the applicable principal amount and accrued interest of this Note specified in such conversion notice and, in connection with such conversion, the Company shall issue the Shares and the Common Stock Purchase Warrants to such holder in accordance with this Section 8. If a portion of the principal amount of this Note is being converted, the Company shall issue a replacement Note to the holder of this Note representing the remaining principal amount of this Note that has not been converted.
9. Fundamental Transaction. The Company shall not enter into or be party to a Fundamental Transaction (as defined in the form of Warrant attached to this Agreement) unless, at the option of the holder, (a) the successor entity assumes in writing all of the obligations of the Company under this Note in accordance with the provisions of this Section pursuant to written agreements in form and substance satisfactory to the holder and approved by the holder prior to such Fundamental Transaction, including agreements to deliver to the holder in exchange for such Note a security of the successor entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Note held by the holder, having similar conversion rights as the Note and having similar ranking and security to the Note, and satisfactory to the holder or (b) at the option of the holder, the outstanding principal and interest on this Note is repaid in full or the Shares issuable upon conversion of this Note and the Warrants issuable hereunder, in each case, pursuant to Section 8 are so issued to the holder of this Note prior to the closing of any such Fundamental Transaction. Upon the occurrence of any Fundamental Transaction and in the event this Note is not repaid in full or the Shares and Warrants are so issued in accordance with the immediately preceding sentence, the successor entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Company” shall refer instead to the successor entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such successor entity had been named as the Company herein. Upon consummation of a Fundamental Transaction and in the event this Note is not repaid in full, the successor entity shall deliver to the holder confirmation that there shall be issued upon conversion or of this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock and Warrants (or other securities, cash, assets or other property, which shall continue to be receivable thereafter) issuable upon the conversion or redemption of the Note prior to such Fundamental Transaction, such shares of the common equity (or their equivalent) of the successor entity which the holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the holder of this Note may elect, at its sole option, by delivery of written notice to the Company to waive this Section to permit the Fundamental Transaction without the assumption of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.
3 Equal to the Nasdaq Minimum Price (or Nasdaq last closing bid price for directors) + $0.10625. [$0.57475 | $0.58625]
Convertible Promissory Note | Page 5 |
10. Actions on Conversion. This Note will be deemed to have been automatically converted on the Event Date, and at such time the rights of the holder of this Note will cease and such holder will be treated for all purposes as the record holder of the Securities issuable upon conversion. As promptly as practicable after the Event Date, the holder of this Note will surrender this Note to the Company at its principal office for cancellation. As promptly as practicable after receipt of the Note, the Company will issue a certificate or certificates, or book entry notation, for the number of full Shares, as well as issue the Warrants, issuable upon conversion.
11. Restriction on Transfer of The Note. Any sale or transfer of this Note must comply with the requirements contained in the Agreement.
12. Collection Fees. If the principal and interest on this Note is not paid when due, and this Note has not been converted to equity securities of the Company, whether or not collection is initiated by any judicial proceeding, or this Note is placed in the hands of an attorney for collection, the Company must pay, in addition to all other amounts owing hereunder, all court costs and reasonable attorney’s fees incurred by the Investor in connection therewith.
13. Events of Default.
(a) Automatic Event of Default. The entire unpaid principal balance, together with accrued and unpaid interest thereon, will become immediately due and payable upon the insolvency of the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the Federal Bankruptcy Act, or the appointment of a receiver or trustee to take possession of the property or assets of the Company.
(b) Optional Event of Default. The entire unpaid principal balance, together with accrued and unpaid interest thereon, will become immediately due and payable upon the declaration of the Majority Investors and written notice to the Company upon any of the following:
(i) the Company fails to timely pay any of the principal amount due under this Note on the date the principal becomes due and payable or any accrued interest or other amounts due under this Note on the date the same becomes due and payable, and such failure is not remedied within five days of notice of payment to the Company by the Majority Investors; or
(ii) the Company defaults in its performance of, or breaches, any covenant under the Agreement, and such failure is not remedied within five days of notice of non-performance or breach to the Company by the Majority Investors or the Company breaches, in any material respect, any representation and warranty made by the Company under the Agreement.
14. No Rights or Liabilities as Holder of Equity Interests. This Note does not of itself entitle the Investor to any voting rights or other rights as a holder of equity interests in the Company. In the absence of conversion of this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of the Investor, shall cause the Investor to be a holder of Shares or warrants in the Company for any purpose.
Convertible Promissory Note | Page 6 |
15. Amendments and Waivers. Any term of this Note may be amended, terminated or waived only with the written consent of the Company and the Majority Investors. Any amendment or waiver effected in accordance with this Section shall be binding upon each of the Notes and each of the Investors and each transferee of the Notes and the Company.
16. Waiver of Notice, Protest and Demand. The Company hereby waives presentment for payment, notice of nonpayment, protest, notice of protest, and all other notices, filing of suit and diligence in collecting the amounts due under this Note and agrees to not require the Investor to first initiate any suit or exhaust its remedies against any other person or parties in order to enforce payment of this Note.
17. Titles and subtitles. The titles and subtitles used in this Note are used for convenience only and are not to be considered in construing or interpreting this Note.
18. Governing law. This Note and any controversy arising out of or relating to this Note shall be governed by and construed in accordance with the provisions set forth in the Agreement, including the governing law and dispute resolution provisions set forth therein.
19. Electronic Signatures. Signatures may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
Convertible Promissory Note | Page 7 |
20. Beneficial Ownership Limitations. Capitalized terms used in this Section and not otherwise defined in this Note shall have the meanings set forth in the form of Warrant attached to the Agreement. The Company shall not effect any conversion of this Note, and a holder of this Note shall not have the right to convert any portion of this Note, pursuant to Sections 7 or 8 or otherwise, to the extent, and only to the extent, that after giving effect to such conversion, the holder of this Note (together with such holder’s Affiliates, and any other Persons acting as a group together with the holder of this Note or any of such holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (for the avoidance of doubt, a conversion of this Note may be effected up to the Beneficial Ownership Limitation subject to the other requirements of this Note). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the holder of this Note and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Note beneficially owned by the holder of this Note or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the holder of this Note or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the holder of this Note that the Company is not representing to the holder of this Note that such calculation is in compliance with Section 13(d) of the Exchange Act and the holder of this Note is solely responsible for any schedules required to be filed in accordance therewith and the calculations required under this Section. To the extent that the limitation contained in this Section applies, the determination of whether this Note is convertible (in relation to other securities owned by the holder of this Note together with any Affiliates and Attribution Parties) and of which portion of this Note is convertible shall be in the sole discretion of the holder of this Note, and the acceptance of the issuance of the Shares and Warrants shall be deemed to be such holder’s determination of whether this Note is convertible (in relation to other securities owned by such holder together with any Affiliates and Attribution Parties) and of which portion of this Note is convertible, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section, in determining the number of outstanding shares of Common Stock, the holder of this Note may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the holder of this Note, the Company shall within one Trading Day confirm orally and in writing to the holder of this Note the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the holder of this Note or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by the holder of this Note prior to the issuance of this Note, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The holder of this Note, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 20, provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the holder and the provisions of this Section shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. In the event that the issuance of shares of Common Stock and Warrants to the holder of this Note upon conversion of this Note results in the holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Beneficial Ownership Limitation of the number of shares of outstanding Common Stock (as determined under Section 13(d) of the Exchange Act), the number of shares so issued by which the holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Beneficial Ownership Limitation (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the holder shall not have the power to vote or to transfer the Excess Shares. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Note in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the holder for any purpose including for purposes of Section 13(d) of the Exchange Act. No prior inability to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility The provisions of this Section shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section to correct this Section (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section shall apply to a successor holder of this Note. This provision shall not restrict the number of shares of Common Stock which the holder of this Note may receive or beneficially own in order to determine the amount of securities or other consideration that such holder may receive in the event of a Fundamental Transaction. This restriction may not be waived without shareholder approval.
Convertible Promissory Note | Page 8 |
21. Stock Dividends and Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case all prices set forth in Sections 7 and 8 of this Note shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and all references to 5,680,936 shares of Common Stock (or other references to shares of Common Stock) shall be proportionately adjusted. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
[Remainder of page intentionally left blank—signature page follows]
Convertible Promissory Note | Page 9 |
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its duly authorized officer and to be dated as of the date first written above.
iMedia Brands, Inc. | ||
By: | ||
Tim Peterman | ||
Chief Executive Officer |
Promissory Note | Signature Page |
Exhibit B
Form of Warrant
Loan Agreement | Exhibit B |
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
IMEDIA BRANDS, INC.
COMMON STOCK PURCHASE WARRANT
Issue Date: | [ ● ] |
Initial Exercise Date: | [ ● ] |
Holder: | [ ● ] |
Initial Warrant Shares: | [ ● ] |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received the holder named above or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on [ ● ]1 (the “Termination Date”) but not thereafter, to subscribe for and purchase from iMedia Brands, Inc., a Minnesota corporation (the “Company”), up to the number of Initial Warrant Shares set forth above (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
1. Definitions. In addition to the terms defined elsewhere in this Warrant, the following terms have the meanings indicated in this Section 1:
“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 under the Securities Act.
“Bid Price” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the bid price of the Common Stock for the time in question (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the reasonable fees and expenses of which shall be paid by the Company.
“Commission” means the United States Securities and Exchange Commission.
1 5 years from the date of issue
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“Common Stock” means the common stock of the Company, par value $0.01 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.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“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.
“Registration Statement” means the effective registration statement on Form S-1 or Form S-3 to be filed with Commission, including all information, documents and exhibits filed with or incorporated by reference into such registration statement, as amended from time to time, which registers the resale of the Warrant Shares, and includes any Rule 462(b) Registration Statement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Subsidiaries” means the subsidiaries of the Company set forth on Exhibit 21.1 to the Company’s most recently filed Annual Report on Form 10-K 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 Common Stock is traded on a Trading Market.
“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 American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any successors to any of the foregoing).
“Transfer Agent” means EQ Shareowner Services and any successor transfer agent of the Company.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holders of a majority in interest of the Warrants then outstanding, the reasonable fees and expenses of which shall be paid by the Company.
“Warrants” means this Warrant and other Common Stock purchase warrants issued by the Company upon conversion of those certain convertible promissory notes issued pursuant to that certain loan agreement, dated as of April 10, 2023, among the Company and the investors named therein (the “Purchase Agreement”).
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2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e- mail attachment) of the Notice of Exercise in the form attached hereto as Annex A (the “Notice of Exercise”). Within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank, in either case in immediately available funds, unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. The Company shall have no obligation to inquire with respect to or otherwise confirm the authenticity of the signature(s) contained on any Notice of Exercise nor the authority of the person so executing such Notice of Exercise. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one Trading Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) Exercise price. The exercise price per share of Common Stock under this Warrant shall be $0.55, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two hours thereafter (including until two hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
Warrant | Page 3 |
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this Section 2(c).
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company’s transfer agent is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) this Warrant is being exercised via cashless exercise and the Warrant Shares may be resold without respect to the volume limitations of Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that the Company shall have received payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $5 per Trading Day (increasing to $10 per Trading Day on the third Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of the delivery of the Notice of Exercise.
Warrant | Page 4 |
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares remaining available under this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any failure solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy- In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver, but did not timely deliver, to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
Warrant | Page 5 |
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round down to the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the assignment form attached hereto as Annex B (the “Assignment Form”) duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
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(e) Beneficial Ownership Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent, and only to the extent, that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below) (for the avoidance of doubt, an exercise of this Warrant may be effected up to the Beneficial Ownership Limitation subject to the other requirements of this Warrant). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith and the calculations required under this Section 2(e). To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 19.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this Section 2(e) (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 2(e) shall apply to a successor holder of this Warrant. This provision shall not restrict the number of shares of Common Stock which the holder of this Note may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction. This restriction may not be waived without shareholder approval.
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3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time while this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
(c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation); provided, that such Purchase Right shall terminate on, and shall not be held in abeyance for any period subsequent to the Termination Date.
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(d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company (and all of its Subsidiaries, taken as a whole), directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than for the purpose of changing the Company’s name and/or the jurisdiction of incorporation of the Company or a holding company for the Company), (ii) the Company, 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 Company or another Person) is completed pursuant to which holders of the outstanding equity securities of the Company having voting power, including the power to vote on the election of directors of the Company, are permitted to sell, tender or exchange their securities for other securities, cash or property and has been accepted by the holders of the outstanding securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company, (iv) the Company, 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 Company, 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, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires securities representing more than 50% of the aggregate voting power, including the power to vote on the election of directors of the Company, of the issued and outstanding equity securities of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall require any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) prior to such Fundamental Transaction and shall deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction). Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
Warrant | Page 9 |
(e) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(f) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
(ii) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email or other address as it shall appear upon the Warrant Register of the Company, at least five calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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4. Transfer of Warrant.
(a) Transferability. Any sale or transfer of this Warrant and the Warrant Shares must comply with the requirements contained in the Purchase Agreement. Neither this Warrant nor the Warrant Shares have been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act. The Holder understands that this Warrant and the Warrant Shares are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Holder must hold this Warrant and the Warrant Shares indefinitely unless it is registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Holder acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Warrant and the Warrant Shares, and on requirements relating to the Company which are outside of the Holder’s control, and which the Company is under no obligation and may not be able to satisfy.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
5. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i), in no event shall the Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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(c) 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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized Shares.
The Company covenants that, effective as of immediately upon the Company’s amendment of its articles of incorporation to increase the authorized shares of common stock by at least 7,000,000 shares, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value and (ii) take such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant.
(e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant 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. The Company and, by accepting this Warrant, the Holder each agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against the Company or the Holder or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of New York. The Company and, by accepting this Warrant, the Holder each hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New York County, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. The Company and, by accepting this Warrant, the Holder each 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 it at the address in effect for notices to it under this Warrant 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 the Company or the Holder shall commence an action, suit or proceeding to enforce any provisions of this Warrant, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
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(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver and expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by email or sent by a nationally recognized overnight courier service, addressed to the Company, at 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Chief Financial Officer, email address: provided separately, or such other email address or address as the Company may specify for such purposes by notice to the Holder. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service addressed to the Holder at the email address or address of the Holder appearing on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via email at the email address 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 time of transmission, if such notice or communication is delivered via email at the email address 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. To the extent that any notice provided by the Company hereunder constitutes, or contains, material, non-public information regarding the Company or any subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.
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(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by such Holder.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the holders of at least a majority of the Common Stock issuable upon the exercise of the then outstanding Warrants (determined without giving effect to Section 2(e) of the Warrants); provided such modification, amendment or waiver applies to all of the then outstanding Warrants.
(m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
(o) Electronic Signatures. Signatures may be delivered via facsimile, electronic mail (including.pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
iMedia Brands, Inc. | ||
By: | ||
Tim Peterman | ||
Chief Executive Officer |
Warrant | Page 15 |
Annex A
NOTICE OF EXERCISE
TO: IMEDIA BRANDS, INC.
(1) The undersigned hereby elects to purchase __________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
¨ in lawful money of the United States; or
¨ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: |
Signature of Authorized Signatory of Investing Entity: |
Name of Authorized Signatory: | |
Title of Authorized Signatory: |
Date: |
Annex B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to exercise the Warrant to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | |||
(Please Print) | |||
Address: | |||
(Please Print) | |||
Phone Number: | |||
Email Address: | |||
Dated: _______________ __, _________________ | |||
Holder’s Signature: | |||
Holder’s Address: |
Exhibit 10.3
SEVENTH AMENDMENT TO
LOAN AND SECURITY
AGREEMENT
THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of September 12, 2022, is entered into by and among IMEDIA BRANDS, INC., a Minnesota corporation (“iMedia” or “Borrowing Agent”), VALUEVISION INTERACTIVE, INC., a Minnesota corporation (“Value Interactive”), VALUEVISION RETAIL, INC., a Delaware corporation (“Value Retail”), PW ACQUISITION COMPANY, LLC, a Minnesota limited liability company (“PW Acquisition”), FL ACQUISITION COMPANY, a Minnesota corporation (“FL Acquisition”), VALUEVISION MEDIA ACQUISITIONS, INC., a Delaware corporation (“Value Media”), TCO, LLC, a Delaware limited liability company (“TCO”), JWH ACQUISITION COMPANY, a Minnesota corporation (“JWH Acquisition”), NORWELL TELEVISION, LLC, a Delaware limited liability company (“Norwell”), 867 GRAND AVENUE LLC, a Minnesota limited liability company (“867 Grand Avenue”), PORTAL ACQUISITION COMPANY, a Minnesota corporation (“Portal” and together with iMedia, Value Interactive, Value Retail, PW Acquisition, FL Acquisition, Value Media, TCO, JWH Acquisition, Norwell, 867 Grand Avenue and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers”), VVI FULFILLMENT CENTER, INC., a Minnesota corporation (“VVI Fulfillment”), EP PROPERTIES, LLC, a Minnesota limited liability company (“EP Properties”), IMEDIA&123TV HOLDING GMBH (“iMedia&123tv Holding” and together with VVI Fulfillment, and EP Properties, collectively, the “Guarantors”), SIENA LENDING GROUP LLC, as a lender (“Siena” and together with any other financial institutions who become part to the Loan Agreement referred to below from time to time, each a “Lender” and collectively, the “Lenders”) and SIENA LENDING GROUP LLC, as administrative and collateral agent for the Lenders (in such capacity, the “Agent”). Terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement defined below.
RECITALS
A. Agent, Lenders and Borrowers have previously entered into that certain Loan and Security Agreement dated as of July 30, 2021 (as amended, modified and supplemented from time to time, the “Loan Agreement”), pursuant to which Lenders have made certain loans and financial accommodations available to Borrowers.
B. Borrowers have requested that Agent and Lenders amend the Loan Agreement on the terms and conditions set forth herein.
C. Agent and Lenders are willing to amend the Loan Agreement on the terms and conditions set forth herein.
D. Borrowers and Guarantors are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement or any other Loan Document are being waived or modified by the terms of this Amendment.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. | Amendments to Loan Agreement. Effective as of the Seventh Amendment Effective Date (except with respect to Section 1(b), which shall be effective as of September 9, 2022): |
(a) | Section 10.7 of the Loan Agreement is hereby amended and restated in its entirety as follows: |
“10.7 Expenses, Fee and Costs Reimbursement. Borrowers hereby agree to promptly and jointly and severally pay (a) all fees, costs and expenses of Agent on its behalf or on behalf of Lenders (including Agent’s underwriting fees) and (b) all out of pocket fees, costs and expenses of one main legal counsel to Agent and one main legal counsel to each Lender (other than Lenders who are Affiliates of Agent) (and one local counsel in each relevant jurisdiction and one special or regulatory counsel for each relevant subject matter to the extent reasonably necessary), and appraisers, accountants, consultants and other professionals and advisors retained by or on behalf of, Agent on its behalf or on behalf of Lenders all of which shall be reasonable, prior to the occurrence and continuance of an Event of Default, and documented in connection with: (i) all loan proposals and commitments pertaining to the transactions contemplated hereby (whether or not such transactions are consummated), (ii) the examination, review, due diligence investigation, documentation, negotiation, and closing of the transactions contemplated by the Loan Documents (whether or not such transactions are consummated), (iii) the creation, perfection and maintenance of Liens pursuant to the Loan Documents, (iv) the performance by Agent or any Lender of its rights and remedies under the Loan Documents, (v) the administration of the Loans (including usual and customary fees for wire transfers and other transfers or payments received by Agent or any Lender on account of any of the Obligations) and Loan Documents, (vi) any amendments, modifications, consents and waivers to and/or under any and all Loan Documents (whether or not such amendments, modifications, consents or waivers are consummated), (vii) any periodic public record searches conducted by or at the request of Agent (including, title investigations and public records searches), pending litigation and tax lien searches and searches of applicable corporate, limited liability company, partnership and related records concerning the continued existence, organization and good standing of Loan Parties), (viii) protecting, storing, insuring, handling, maintaining, auditing, examining, valuing or selling any Collateral, (ix) any litigation, dispute, suit or proceeding relating to any Loan Document, and (x) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Loan Documents (it being agreed that such costs and expenses may include the costs and expenses of workout consultants, investment bankers, financial consultants, appraisers, valuation firms and other professionals and advisors retained by or on behalf of Agent), and (c) without limitation of the preceding clauses (a) and (b), all out of pocket costs and expenses of Agent in connection with Agent’s reservation of funds in anticipation of the funding of the initial Loans to be made hereunder. Any fees, costs and expenses owing by Borrowers or any other Loan Party hereunder shall be due and payable within three (3) days after written demand therefor.”
2
(b) Section 3 of Schedule A of the Loan Agreement is amended and restated as follows:
“3. Interest Rate for Revolving Loans: | 5.61448% per annum in excess of Term SOFR | |
Or if the Base Rate is then in effect pursuant to Section 2.6, 2.75% per annum in excess of the Base Rate.” |
(c) Schedule B of the Loan Agreement is amended to amend and restate the definition of Base Rate in its entirety as follows:
“‘Base Rate’ means, for any day, the greatest of (a) the per annum rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal (or, if such rate ceases to be so published, as quoted from such other generally available and recognizable source as Agent may select) (the “Published Prime Rate”) (and, if any such published rate is below zero, then the rate determined pursuant to this clause (a) shall be deemed to be zero), (b) the sum of the Federal Funds Rate plus 0.5% and (c) the most recently-used Term SOFR, plus 2.86488%. Any change in the Base Rate due to a change in such Published Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in such Published Prime Rate or the Federal Funds Rate, as applicable. Notwithstanding the foregoing, in no event shall the interest rate for any Loan based on the Base Rate be less than the interest rate that would have applied to such Loan if the interest rate for such Loan was based on Term SOFR.”
(d) Schedule D of the Loan Agreement is amended by amending and restating the first four boxes thereof in their entirety as set forth on Exhibit A annexed hereto.
(e) Subsection (a) set forth on Schedule E of the Loan Agreement is amended and restated in its entirety as follows:
“(a) Minimum Liquidity. Borrowers shall not permit Minimum Liquidity at any time to be less than $10,000,000.
(f) Subsection (b) set forth on Schedule E of the Loan Agreement is amended and restated in its entirety as follows:
“(b) Maximum Senior Net Leverage Ratio. Loan Parties shall maintain a Senior Net Leverage Ratio of not greater than the applicable ratio set forth in the table immediately below, and corresponding to the applicable time period, which shall be tested as of the last day of each fiscal quarter (the “Testing Date”) of Loan Parties:
Trailing Twelve Month Period | Senior Net Leverage Ratio |
Period ending on Testing Date April 30, 2022 | 3.50:1.00 |
Period ending on Testing Date July 30, 2022 | 3.90:1.00 |
Period ending on Testing Date October 29, 2022 | 4.10:1.00 |
Period ending on Testing Date January 28, 2023 | 3.25:1.00 |
Period ending on Testing Date April 29, 2023 | 2.80:1.00 |
Period ending on Testing Date July 30, 2023 | 2.65:1.00 |
Period ending on Testing Date October 29, 2023 and thereafter | 2.50:1.00 |
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2. | Release; Covenant Not to Sue. |
(a) Each Loan Party hereby absolutely and unconditionally releases and forever discharges Agent and each Lender, and any and all of their respective participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each a “Released Party”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of each Loan Party in providing this release that the same shall be effective as a bar to each and every claim, demand and cause of action specified.
(b) Each Loan Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each Loan Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised and discharged by any Loan Party pursuant to the above release. If any Loan Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Loan Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Released Party as a result of such violation.
3. Amendment Fee. In consideration of the agreements set forth herein, Borrowers hereby agree to jointly and severally pay to Agent for the ratable benefit of the Lenders, an amendment fee in the amount of $600,000 (the “Amendment Fee”), which fee is non-refundable when paid and is fully-earned as of the date of this Amendment and due and payable on November 1, 2022. Borrowers hereby authorize Agent to charge Borrowers’ Loan Account in full payment of such Amendment Fee on the due date therefor;
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4. Effectiveness of this Amendment. This Amendment shall become effective upon the satisfaction, as determined by Agent, of the following conditions (the “Seventh Amendment Effective Date”):
(a) Amendment. Agent shall have received this Amendment fully executed by the other parties hereto;
(b) Representations and Warranties. The representations and warranties set forth herein and in the Loan Agreement must true and correct in all material respects (without duplication of materiality qualifiers therein) as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct in all material respects (without duplication of materiality qualifiers therein) as of such earlier date); and
(c) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as reasonably required by Agent in its Permitted discretion.
5. | Representations and Warranties. Each Loan Party represents and warrants as follows: |
(a) Authority. Such Loan Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder, under the Loan Agreement (as amended or modified hereby) and under the other Loan Documents to which it is a party. The execution, delivery and performance by such Loan Party of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.
(b) Enforceability. This Amendment has been duly executed and delivered by each Loan Party. This Amendment, the Loan Agreement (as amended or modified hereby) and each other Loan Document is the legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained in the Loan Agreement and each other Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof.
(d) Due Execution. The execution, delivery and performance of this Amendment are within the power of each Loan Party, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on any Loan Party.
(e) No Default. No event has occurred and is continuing that constitutes a Default or an Event of Default.
(f) No Duress. This Amendment has been entered into without force or duress, of the free will of each Loan Party. Each Loan Party’s decision to enter into this Amendment is a fully informed decision and such Loan Party is aware of all legal and other ramifications of such decision.
(g) Counsel. Each Loan Party has read and understands this Amendment, has consulted with and been represented by legal counsel in connection herewith, and has been advised by its counsel of its rights and obligations hereunder and thereunder.
6. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AMENDMENT AND ALL SUCH RELATED LOAN DOCUMENTS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
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7. Counterparts; Facsimile Signatures. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by e-mail, Docusign, facsimile or other similar form of electronic transmission shall be deemed to be an original signature hereto.
8. | Reference to and Effect on the other Loan Documents. |
(a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement and each reference in the other Loan Documents to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement as modified and amended hereby.
(b) Except as specifically amended above, the Loan Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents.
(d) To the extent that any terms and conditions in any of the other Loan Documents shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby.
9. Ratification. Each Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Loan Agreement, as amended hereby, and the other Loan Documents effective as of the date hereof.
10. Integration. This Amendment, together with the Loan Agreement and the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.
11. Severability. If any part of this Amendment is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
12. Guarantors’ Acknowledgment. With respect to the amendments to the Loan Agreement effected by this Amendment, each Guarantor hereby acknowledges and agrees to this Amendment and confirms and agrees that its Guaranty (as modified and supplemented in connection with this Amendment) is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of this Amendment, each reference in such Guaranty to the Loan Agreement, “thereunder”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended or modified by this Amendment. Although Lender has informed the Guarantors of the matters set forth above, and each Guarantor has acknowledged the same, each Guarantor understands and agrees that Lender has no duty under the Loan Agreement, any Guaranty or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BORROWERS:
IMEDIA BRANDS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION RETAIL, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
FL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
PW ACQUISITION COMPANY, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION MEDIA ACQUISITIONS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
TCO, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
JWH ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
NORWELL TELEVISION, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
867 GRAND AVENUE LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION INTERACTIVE, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
PORTAL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
GUARANTORS:
VVI FULFILLMENT CENTER, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
EP PROPERTIES, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
IMEDIA&123TV HOLDING GMBH | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: Managing Director |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
SIENA LENDING GROUP LLC, as Agent | ||
By: | /s/ Renee Singer | |
Name: Renee Singer | ||
Title: Authorized Signatory |
By: | /s/ Steven Sanicola | |
Name: Steven Sanicola | ||
Title: Authorized Signatory |
SIENA LENDING GROUP LLC, as a Lender | ||
By: | /s/ Renee Singer | |
Name: Renee Singer | ||
Title: Authorized Signatory |
By: | /s/ Steven Sanicola | |
Name: Steven Sanicola | ||
Title: Authorized Signatory |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: Mirko Andric | ||
Title: Senior Managing Director |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: Mirko Andric | ||
Title: Senior Managing Director |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | ||
Name: | ||
Title: |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | ||
Name: | ||
Title: |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | ||
Name: | ||
Title: |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | /s/ ILLEGIBLE | |
Name: ILLEGIBLE | ||
Title: |
[Signature Page to Seventh Amendment to Loan and Security Agreement]
Exhibit A
Weekly (due on Wednesday of each week for the preceding week) |
● reporting of weekly sales, collections and credits,
● a Value Pay Plan ageing summary,
● updated In-transit Credit Card Receipts for the prior week.
● Inventory reports (including breakout by category, including without limitation In-Transit Inventory), and
● A system generated perpetual inventory report that will capture inventory amounts by product line and related ineligibles in a form satisfactory to Siena.
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Weekly (due on Thursday of each week (or the next Business Day if such Thursday is not a Business Day) for Wednesday of such week) |
● A detailed calculation of Borrower’s Minimum Liquidity as of Wednesday of such week. |
Monthly (no later than the 10th day of each calendar month); |
● a detailed aging, by total, of Portal’s Accounts, together with an Account roll- forward with supporting details supplied from sales journals, collection journals, credit registers and any other records, with respect to Portal’s Accounts (delivered electronically in an acceptable format); and
● accounts payable schedules solely with respect to Portal, inclusive of reconciliations to the general ledger
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Monthly (no later than the 20th day of each calendar month) |
● accounts receivable ageings inclusive of reconciliations to the general ledger,
● accounts payable schedules inclusive of reconciliations to the general ledger (including ageing of accrued cable access fees included in accounts payable),
● monthly reporting of the prior month’s Average FICO Score,
● Borrowing Base Certificate in form and substance satisfactory to Agent (which shall be calculated as of the last day of the prior month and which shall not be binding upon Agent or restrictive of Agent’s rights under this Agreement),
● copies of bank statements for all bank accounts of Portal, and
● Monthly trial balances.
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Exhibit 10.4
FORBEARANCE AGREEMENT AND EIGHTH AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS FORBEARANCE AGREEMENT AND EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of December 20, 2022, is entered into by and among IMEDIA BRANDS, INC., a Minnesota corporation (“iMedia” or “Borrowing Agent”), VALUEVISION INTERACTIVE, INC., a Minnesota corporation (“Value Interactive”), VALUEVISION RETAIL, INC., a Delaware corporation (“Value Retail”), PW ACQUISITION COMPANY, LLC, a Minnesota limited liability company (“PW Acquisition”), FL ACQUISITION COMPANY, a Minnesota corporation (“FL Acquisition”), VALUEVISION MEDIA ACQUISITIONS, INC., a Delaware corporation (“Value Media”), JWH ACQUISITION COMPANY, a Minnesota corporation (“JWH Acquisition”), NORWELL TELEVISION, LLC, a Delaware limited liability company (“Norwell”), 867 GRAND AVENUE LLC, a Minnesota limited liability company (“867 Grand Avenue”), PORTAL ACQUISITION COMPANY, a Minnesota corporation (“Portal” and together with iMedia, Value Interactive, Value Retail, PW Acquisition, FL Acquisition, Value Media, JWH Acquisition, Norwell, 867 Grand Avenue and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers”), VVI FULFILLMENT CENTER, INC., a Minnesota corporation (“VVI Fulfillment”), EP PROPERTIES, LLC, a Minnesota limited liability company (“EP Properties”), IMEDIA&123TV HOLDING GMBH (“iMedia&123tv Holding” and together with VVI Fulfillment, and EP Properties, collectively, the “Guarantors”), SIENA LENDING GROUP LLC, as a lender (“Siena” and together with any other financial institutions who become part to the Loan Agreement referred to below from time to time, each a “Lender” and collectively, the “Lenders”) and SIENA LENDING GROUP LLC, as administrative and collateral agent for the Lenders (in such capacity, the “Agent”). Terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement defined below.
RECITALS
A. Agent, Lenders and Borrowers have previously entered into that certain Loan and Security Agreement dated as of July 30, 2021 (as amended, modified and supplemented from time to time, the “Loan Agreement”), pursuant to which Lenders have made certain loans and financial accommodations available to Borrowers.
B. Certain Events of Default have occurred and are continuing under (1) Section 7.1(b) of the Loan Agreement as a result of Borrowers’ failure to repay the Overadvance in an amount equal to $4,355,629.68 that was outstanding as of December 10, 2022 (such amount, the “Overadvance Amount”), as required by Section 1.7(a) of the Loan Agreement, (2) Section 7.1(c)(1) of the Loan Agreement as a result of Borrowers’ failure to maintain a Senior Net Leverage Ratio of not greater than 4.10: 1.00 for the Testing Date on October, 29, 2022 as required by Section 5.26 of the Loan Agreement, (3) Section 7.1(c)(1) of the Loan Agreement as a result of Borrowers’ failure to maintain Minimum Liquidity at the requisite amount from time to time prior to the date of this Amendment, as required by Section 5.26 of the Loan Agreement, (4) Section 7.1(c)(1) of the Loan Agreement as a result of Borrowers’ disposition of Collateral pursuant to the C&B Master Agreement (as defined herein) in violation of Section 5.25(d) of the Loan Agreement, (5) Section 7.1(c)(2) of the Loan Agreement as a result of Borrowers’ failure to deliver to Agent the irrevocable standing transfer instructions or similar documents required by Section 5 of that certain Sixth Amendment and Consent to Loan and Security Agreement and Amendment to Fee Letter dated as of May 27, 2022 among Agent, Lenders and Loan Parties, and (6) any Event of Default arising under Section 7.1(c) as a result of the divestiture of the Equity Interests of TCO, LLC owned by iMedia on or about June 30, 2022 without a prior written consent from Agent and applicable Lenders, as more specifically described in the 10-Q of iMedia for the period ended July 30, 2022 filed with the SEC on September 13, 2022 (the foregoing Events of Default, collectively, the “Specified Defaults”).
C. Borrowers have requested that the Agent and Lenders (i) forbear for a period of time from exercising their respective rights and remedies with respect to the Specified Defaults and (ii) amend the Loan Agreement as hereafter provided, and Agent and Lenders have agreed to such forbearance and amendment subject to the terms and conditions set forth in this Agreement.
D. Borrowers and Guarantors are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement or any other Loan Document are being waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Acknowledgments by Loan Parties. Each Loan Party acknowledges and agrees as follows:
(a) Acknowledgment of Debt. As of the close of business on December 12, 2022, each Loan Party is indebted, jointly and severally, to Lenders and Agent, without defense, deduction, setoff, claim or counterclaim, of any nature, under the Loan Agreement and the other Loan Documents in the aggregate principal amount of $61,224,336.14, plus accrued and continually accruing interest and all fees, costs and expenses.
(b) Acknowledgment of Specified Defaults. That on and as of the date hereof: (i) the Specified Defaults exist and continue to exist under the Loan Agreement and other Loan Documents; (ii) neither the Agent nor any Lender has waived in any respect any or all of such Specified Defaults or their rights and remedies with respect thereto; and (iii) as a result of the Specified Defaults, except as expressly provided in this Agreement, Agent and Lenders are permitted to immediately exercise all rights and remedies available under the Loan Documents, applicable law and/or otherwise.
(c) Acknowledgment that Liabilities Continue in Full Force and Effect. That the Loans and all other liabilities and obligations of the Borrowers under the Loan Documents shall, remain in full force and effect, and shall not be released, impaired, diminished or in any other way modified or amended as a result of the execution and delivery of this Agreement or by the agreements and undertakings of the parties contained herein.
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(d) Acknowledgment of Perfection of Security Interest. As of the date hereof, the security interests and Liens granted to the Agent, for its benefit and the benefit of the Lenders, under the Loan Documents securing the Obligations are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Loan Documents.
2. Forbearance by Agent and Lenders.
(a) Forbearance Period. At the request of the Borrowers, the Agent and Lenders agree to forbear from accelerating the Obligations and from commencing and/or prosecuting the exercise of any rights and remedies, whether at law, in equity, by agreement or otherwise, available to the Agent and Lenders as a result of the Specified Defaults (including, without limitation, the right to refuse to fund any requested Loan solely as a result of the Specified Defaults), from the date hereof until the earliest to occur of the following times: (i) January 31, 2023; (ii) the time at which (x) any representation or warranty made by a Loan Party under this Agreement shall prove to have been materially incorrect (without duplication of any materiality qualifiers therein) when made or deemed made or (y) any Loan Party fails to comply in any respect with its covenants set forth in this Agreement; or (iii) the occurrence of any Event of Default (other than the Specified Defaults) under any of the Loan Documents (the period beginning on the date hereof and terminating on the earliest of such dates being hereinafter referred to as the "Forbearance Period"). Notwithstanding the foregoing, Loan Parties acknowledge and agree that (A) prior to the date hereof, in accordance with Section 4.1 of the Loan Agreement Agent has delivered a notice to PNC Bank, National Association (“PNC”) instructing PNC to remit to Agent all amounts from time to time received in account ending 5863 maintained at PNC (the “Collection Account”), and (B) on and after the date hereof, and for so long as a Springing DACA Event is continuing, Agent shall continue to receive Collections from the Collection Account and apply such Collections to the Obligations in accordance with the Loan Agreement.
(b) Termination of Forbearance Period. Upon the termination of the Forbearance Period, all forbearances, deferrals and indulgences granted by the Agent and Lenders in Section 2(a) above shall automatically terminate, and the Agent and Lenders shall thereupon have, and shall be entitled to exercise, any and all rights and remedies which the Agent and/or Lenders may have upon the occurrence of an Event of Default, including, without limitation, the Specified Defaults.
(c) Preservation of Rights. By entering into this Agreement and agreeing to temporarily forbear from the exercise of rights and remedies under the terms of this Agreement, Agent and Lenders do not waive the Specified Defaults or any other Event of Default that may be outstanding on the date hereof or any Event of Default that may occur after the date hereof (whether the same as, or similar to, the Specified Defaults or otherwise). The Specified Defaults and any other Events of Default which may be continuing on the date hereof or any Events of Default which may occur after the date hereof (whether the same as, or similar to, the Specified Defaults or otherwise) are hereby preserved. The granting of the forbearance hereunder shall not be deemed a waiver of any options, rights and remedies of Agent and/or Lenders and shall not constitute a course of conduct or dealing on behalf of Agent or Lenders. Subject to the terms of this Agreement, Agent and Lenders specifically reserve all options, rights and remedies available to it and them under the Loan Agreement, the other Loan Documents, applicable law or otherwise. Each Loan Party acknowledges and agrees that upon the occurrence and during the continuance of any Default or Event of Default (other than the Specified Defaults), (i) neither Agent nor any Lender is obligated or required to make any Loans or any other extension of credit to Borrowers under the Loan Agreement or the other Loan Documents and (ii) any Loans or other extensions of credit made by Agent or any Lender to Borrowers during the continuance of a Default or an Event of Default (other than the Specified Defaults) shall be made at the sole discretion of Agent or such Lender and shall not obligate Agent or any Lender to make any additional Loans or make any other extension of credit to Borrowers.
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3. Covenants. In consideration of the agreements set forth herein, Borrowers hereby covenant and agree as follows:
(a) Borrower shall not permit the outstanding Overadvance to exceed the Overadvance Amount at any time.
(b) In addition to the requirements set forth in the foregoing clause (a), Borrowers shall reduce the outstanding Overadvance as follows: (i) on December 23, 2022, the Overadvance shall be reduced to $3,266,722.26 and the Overadvance shall not exceed such amount at any time thereafter; (ii) on December 30, 2022, the Overadvance shall be reduced to $2,177,814.84 and the Overadvance shall not exceed such amount at any time thereafter; (iii) on January 6, 2023, the Overadvance shall be reduced to $1,088,907.42 and the Overadvance shall not exceed such amount at any time thereafter; and (iv) on January 13, 2023, the Overadvance shall be reduced to $0 and no Overadvance shall exist at any time thereafter. Neither the existence of, nor the failure to repay, at any time any Overadvance equal to or less than the amount permitted by Section 3(a) and (b) at such time, shall constitute a new Default or Event of Default under the Loan Agreement. The existence of any Overadvance at any time that exceeds the amount permitted by Section 3(a) and (b) at such time shall constitute an immediate Event of Default.
(c) On December 23, 2022, Borrowers shall remit to Agent all funds in excess of $2,000,000 on deposit in the iMedia operating account ending 5855 maintained at PNC Bank, National Association, and such funds shall be immediately applied to reduce the outstanding principal balance of the Revolving Loans.
(d) As soon as reasonably practicable, but in any event on or before the earlier of February 15, 2023 or the date that is 15 days following the closing of the Pontus Sale Leaseback, Borrowers shall deliver to Agent:
(i) a customary German law guaranty and pledge agreement and appropriate stock certificates and stock transfer powers, granting Agent and Lenders, as security for the Obligations, a Lien in all of the Equity Interests issued by iMedia&123tv Holding GmbH and each of its direct and indirect Subsidiaries, including without limitation, 1-2-3.TV GmbH,
(ii) a customary opinion of Borrowers’ German counsel with respect to the deliverables described in the foregoing clause (i) and the following clause (iii), and
(iii) such other customary agreements, documents and deliverables reasonably requested by Agent, in consultation with Agent’s German counsel, in connection with the foregoing clauses (i) and (ii), in each case under this clause (d), in form and substance reasonably satisfactory to Agent.
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(e) Immediately upon the closing of any Mortgaged Real Estate Disposition, Borrowers shall deliver to Agent landlord waivers with respect to any real property disposed of by such Mortgaged Real Estate Disposition, to the extent a Loan Party continues to occupy such real property (whether as lessee, licensee or otherwise), in form and substance satisfactory to Agent.
(f) Borrowers shall cause the Pontus LOI to remain in full force and effect at all times prior to the closing of the Pontus Sale Leaseback.
(g) Borrowers shall not permit the Exclusivity Period (as defined in the Pontus LOI) to expire prior to the closing of the Pontus Sale Leaseback.
(h) On or before December 22, 2022, Borrowers shall deliver to Agent a fully executed copy of the purchase agreement with respect to the Pontus Sale Leaseback, the terms of which shall be consistent in all material respects with the Pontus LOI (the “Pontus Purchase Agreement”).
(i) On or before February 14, 2022, Borrowers shall close the Pontus Sale Leaseback in accordance with the terms set forth in the Pontus Purchase Agreement.
Notwithstanding anything to the contrary in any Loan Document (including, without limitation, Section 7.1 of the Loan Agreement) the Borrowers’ failure to comply in all respects with any covenant in this Section 3 shall constitute an immediate Event of Default.
4. Amendments to Loan Agreement. Effective as of the Eighth Amendment Effective Date:
(a) Section 1.8 of the Loan Agreement is hereby amended by adding a new subsection (c) thereto as follows:
(c) Mandatory Prepayment re Mortgaged Real Estate Disposition. Borrowers shall be required to apply 100% of the proceeds (net of documented reasonable out-of-pocket costs and expenses incurred in connection with the collection of such proceeds, in each case payable to Persons that are not Affiliates of any Loan Party) received by any Loan Party with respect to any Mortgaged Real Estate Disposition (the “Real Estate Proceeds”) to:
first, repay the Term Debt Permitted Indebtedness on the closing date of such Mortgaged Real Estate Disposition (and on any date thereafter on which proceeds pertaining thereto are received by any Loan Party) until the Term Loan Indebtedness is Paid in Full (as defined in the Intercreditor Agreement), and
second, to the extent any Real Estate Proceeds remain after the Term Debt Permitted Indebtedness is Paid in Full (as defined in the Intercreditor Agreement), to repay the Revolving Loans, in each case without any demand or notice from Agent or any other Person, all of which is hereby expressly waived by Borrowers.
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(b) Section 4.8 of the Loan Agreement is hereby amended and restated in its entirety as follows:
4.8 Appraisals. Each Loan Party will permit Agent and each of its representatives or agents to conduct appraisals and valuations of the Collateral at such times and intervals as Agent may designate. Such appraisals and valuations shall be at Borrowers’ expense; provided, that, Borrowers shall only be required to reimburse Agent for (i) up to two (2) appraisals and valuations in any 12 consecutive month period plus any additional appraisals and valuations that are conducted during the existence of an Event of Default, (ii) in addition to any appraisals and valuations under the foregoing clause (i), an appraisal of any real property owned by a Loan Party that remains subject to the Mortgages, which appraisal under this clause (ii) shall commence on or before the earlier of (x) January 15, 2023 or (y) the last day of the calendar month in which the Mortgaged Real Estate Disposition closes. Agent shall promptly upon receipt of any appraisal or valuation provide a copy of same to Borrowers for review and Borrowers shall have a period of five (5) Business Days to review and raise questions or concerns with Agent and any applicable appraiser, provided that (i) during such five (5) Business Day period and any time thereafter, Agent shall be permitted to make any adjustments to the Borrowing Base (and any items included in the Borrowing Base) that are otherwise permitted by this Agreement, (ii) Agent shall have no obligation to deliver any such appraisal or valuation to Borrowers if such disclosure is prohibited by the appraiser that prepared such appraisal or valuation (it being agreed that Agent shall use commercially reasonable efforts to obtain such appraiser’s consent to such disclosure), and (iii) Borrowers shall deliver executed non-reliance letters as may be reasonably requested by Agent or any such appraiser as a condition to receipt of copies of such appraisals.
(c) Section 5.25 of the Loan Agreement is hereby amended by adding a new subsection (u) thereto as follows:
(u) (i) terminate, or fail to keep in full force and effect, the Huron Consultant Agreement at any time prior to April 30, 2023 or (ii) change the engagement scope of the Huron Consultant Agreement without Agent’s prior written consent.
(d) Section 3 of Schedule A of the Loan Agreement is amended and restated as follows:
3. Interest Rate for Revolving Loans: 5.86448% per annum in excess of Term SOFR
Or if the Base Rate is then in effect pursuant to Section 2.6, 3.0% per annum in excess of the Base Rate.
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(e) Schedule B of the Loan Agreement is amended to add the following new definitions in the appropriate alphabetical order as follows:
“C&B Consignment Agreement” means that certain Amended and Restated Consignment Agreement dated as of November 23, 2022 between C&B Newco, LLC and iMedia.
“C&B Master Agreement” means that certain Master Agreement dated November 23, 2022 among C&B Newco, LLC, C&B Ipco, LLC and IMedia.
“Eighth Amendment Effective Date” shall mean December 20, 2022.
“Huron Consultant Agreement” means that certain letter agreement dated November 23, 2022 between Huron Consulting Services LLC and iMedia.
“Mortgaged Real Estate Disposition” means any sale, lease, license, exchange, transfer or other disposition (including the Pontus Sale Leaseback and any other sale-leaseback) of any real property that is subject to the Mortgages.
“Pontus LOI” means that certain letter agreement regarding Sale- Leaseback of iMedia Brands Facilities dated November 8, 2022, between iMedia and Pontus Net Lease Advisors, LLC.
“Pontus Sale Leaseback” means the sale and leaseback transaction described in the Pontus LOI with respect to the real property located at 4811 Nashville Rd., Bowling Green, KY, 4813 Nashville Rd., Bowling Green, KY and 6740 Shady Oak Lane, Eden Prairie, MN.
(f) Schedule D of the Loan Agreement is amended by adding three new boxes at the end thereof as set forth on Exhibit A annexed hereto.
(g) Schedule E of the Loan Agreement is amended and restated in its entirety as set forth on Exhibit B annexed hereto.
5. | Release; Covenant Not to Sue. |
(a) Each Loan Party hereby absolutely and unconditionally releases and forever discharges Agent and each Lender, and any and all of their respective participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each a “Released Party”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of each Loan Party in providing this release that the same shall be effective as a bar to each and every claim, demand and cause of action specified.
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(b) Each Loan Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each Loan Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised and discharged by any Loan Party pursuant to the above release. If any Loan Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Loan Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Released Party as a result of such violation.
6. Forbearance Fee. In consideration of the agreements set forth herein, Borrowers hereby agree to jointly and severally pay to Agent for the ratable benefit of the Lenders, fees as follows (collectively the “Forbearance Fee”): (a) a fee in the amount of $200,000, which fee is non-refundable when paid and is fully-earned as of the date of this Amendment and due and payable on the earlier of (i) January 4, 2023 and (ii) the Maturity Date; and (b) a fee in the amount of $600,000, which fee is non-refundable when paid and is fully-earned as of the date of this Amendment and is due and payable on the earlier of (i) the date on which all Obligations (other than contingent indemnification obligations) have otherwise been paid in full and (ii) the Maturity Date. Borrowers hereby authorize Agent to charge Borrowers’ Loan Account in full payment of the applicable portion of the Forbearance Fee on the due date therefor in accordance with this Section 6.
7. Effectiveness of this Amendment. This Amendment shall become effective upon the satisfaction, as determined by Agent, of the following conditions (the “Eighth Amendment Effective Date”):
(a) Amendment. Agent shall have received this Amendment fully executed by the other parties hereto;
(b) Representations and Warranties. The representations and warranties set forth herein and in the Loan Agreement must true and correct in all material respects (without duplication of materiality qualifiers therein) as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct in all material respects (without duplication of materiality qualifiers therein) as of such earlier date), other than those representations and warranties which are incorrect solely as a result of the existence of the Specified Defaults; and
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(c) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as reasonably required by Agent in its Permitted Discretion.
8. Representations and Warranties. Each Loan Party represents and warrants as follows:
(a) Authority. Such Loan Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder, under the Loan Agreement (as amended or modified hereby) and under the other Loan Documents to which it is a party. The execution, delivery and performance by such Loan Party of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.
(b) Enforceability. This Amendment has been duly executed and delivered by each Loan Party. This Amendment, the Loan Agreement (as amended or modified hereby) and each other Loan Document is the legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained in the Loan Agreement and each other Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof, other than those representations and warranties which are incorrect solely as a result of the existence of the Specified Defaults.
(d) Due Execution. The execution, delivery and performance of this Amendment are within the power of each Loan Party, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on any Loan Party.
(e) No Default. Other than the Specified Defaults, no event has occurred and is continuing that constitutes a Default or an Event of Default.
(f) No Duress. This Amendment has been entered into without force or duress, of the free will of each Loan Party. Each Loan Party’s decision to enter into this Amendment is a fully informed decision and such Loan Party is aware of all legal and other ramifications of such decision.
(g) Counsel. Each Loan Party has read and understands this Amendment, has consulted with and been represented by legal counsel in connection herewith, and has been advised by its counsel of its rights and obligations hereunder and thereunder.
9. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AMENDMENT AND ALL SUCH RELATED LOAN DOCUMENTS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
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10. Counterparts; Facsimile Signatures. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by e-mail, Docusign, facsimile or other similar form of electronic transmission shall be deemed to be an original signature hereto.
11. | Reference to and Effect on the other Loan Documents. |
(a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement and each reference in the other Loan Documents to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement as modified and amended hereby.
(b) Except as specifically amended above, the Loan Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents.
(d) To the extent that any terms and conditions in any of the other Loan Documents shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby.
12. Ratification. Each Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Loan Agreement, as amended hereby, and the other Loan Documents effective as of the date hereof.
13. Integration. This Amendment, together with the Loan Agreement and the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.
14. Severability. If any part of this Amendment is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
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15. Waivers. Each Loan Party waives and renounces all rights that are waivable under Article 9 of the Uniform Commercial Code as such rights relate to such Loan Party’s relationship with Agent and Lenders, whether such rights are waivable before or after default, including, without limitation, those rights with respect to compulsory disposition of collateral (U.C.C. §§9- 610, 9-615 and 9-620), any right of redemption under U.C.C. §9-623, and any right to notice relating to disposition of collateral under U.C.C. §9-611.
16. Guarantors’ Acknowledgment. With respect to the amendments to the Loan Agreement effected by this Amendment, each Guarantor hereby acknowledges and agrees to this Amendment and confirms and agrees that its Guaranty (as modified and supplemented in connection with this Amendment) is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of this Amendment, each reference in such Guaranty to the Loan Agreement, “thereunder”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended or modified by this Amendment. Although Lender has informed the Guarantors of the matters set forth above, and each Guarantor has acknowledged the same, each Guarantor understands and agrees that Lender has no duty under the Loan Agreement, any Guaranty or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BORROWERS:
IMEDIA BRANDS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION RETAIL, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
FL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PW ACQUISITION COMPANY, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION MEDIA ACQUISITIONS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
JWH ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
NORWELL TELEVISION, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
867 GRAND AVENUE LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION INTERACTIVE, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PORTAL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
GUARANTORS: | ||
VVI FULFILLMENT CENTER, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
EP PROPERTIES, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
IMEDIA&123TV HOLDING GMBH | |||
By: | /s/ Timothy Peterman | ||
Name: | Timothy Peterman | ||
Its: | Managing Director |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
SIENA LENDING GROUP LLC, as Agent | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory |
By: | /s/ Steven Sanicola | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
SIENA LENDING GROUP LLC, as a Lender | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory |
By: | /s/ Steven Sanicola | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | ||
Name: | ||
Title: |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | ||
Name: | ||
Title: |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | ||
Name: | ||
Title: |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | /s/ ILLEGIBLE | |
Name: | ILLEGIBLE | |
Title: |
[Signature Page to Eighth Amendment to Loan and Security Agreement]
Exhibit A
Weekly (due on Wednesday of each week) | · commencing on the first Wednesday following the Eighth Amendment Effective Date, a rolling thirteen week cash flow forecast, in form and substance satisfactory to Agent, for the period commencing on the Sunday of the then current week and through the following thirteen week period, each to be (i) reviewed and approved by Huron Consulting Services LLC, and (ii) accompanied by a certificate signed by an Authorized Officer of Borrowing Agent to the effect that such forecast has been prepared on the basis of sound financial planning practices consistent with past budgets and financial statements, that such officer has no reason to question the reasonableness of any material assumptions on which such forecasts were prepared and the forecast has been thoroughly reviewed by the Borrowers, their management and their advisors, and
· commencing on the second Wednesday following the Eighth Amendment Effective Date, a report that sets forth, for the immediately preceding week, a comparison of the actual results for such week to the projected results for such week, together with a reasonably detailed narrative explanation of any material variances, in form and substance satisfactory to Agent.
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Weekly (due on Wednesday of each week) | · copies of all reports delivered by any Borrower to C&B Newco, LLC pursuant to Section 6 of the C&B Consignment Agreement (as in effect on November 23, 2022)
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Promptly upon request | · any information regarding the C&B Consignment Agreement and the transactions effectuated thereby that Agent may reasonably request from time to time |
Exhibit B
Schedule E
Financial Covenants
(a) Minimum Liquidity. After January 13, 2023, Borrowers shall not permit Minimum Liquidity to be less than $10,000,000 at any time. Notwithstanding anything to the contrary in Section 7.1 of the Loan Agreement, (i) during the Forbearance Period, the failure to comply with the first sentence of this clause (a) shall not constitute an Event of Default unless such failure continues for a period of three consecutive Business Days, and (ii) at all other times, the failure to comply with the first sentence of this clause (a) shall constitute an immediate Event of Default.
(b) Maximum Senior Net Leverage Ratio. Loan Parties shall maintain a Senior Net Leverage Ratio of not greater than the applicable ratio set forth in the table immediately below, and corresponding to the applicable time period, which shall be tested as of the last day of each fiscal quarter (the “Testing Date”) of Loan Parties:
Trailing Twelve Month Period | Senior Net Leverage Ratio |
Period ending on Testing Date April 30, 2022 | 3.50:1.00 |
Period ending on Testing Date July 30, 2022 | 3.90:1.00 |
Period ending on Testing Date October 29, 2022 | 4.10:1.00 |
Period ending on Testing Date January 28, 2023 | 3.25:1.00 |
Period ending on Testing Date April 29, 2023 | 2.80:1.00 |
Period ending on Testing Date July 30, 2023 | 2.65:1.00 |
Period ending on Testing Date October 29, 2023 and thereafter | 2.50:1.00 |
Exhibit 10.5
NINTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT AND FIRST AMENDMENT TO FORBEARANCE AGREEMENT
THIS NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND FIRST AMENDMENT TO FORBEARANCE AGREEMENT (this “Amendment”), dated as of February 1, 2023, is entered into by and among IMEDIA BRANDS, INC., a Minnesota corporation (“iMedia” or “Borrowing Agent”), VALUEVISION INTERACTIVE, INC., a Minnesota corporation (“Value Interactive”), VALUEVISION RETAIL, INC., a Delaware corporation (“Value Retail”), PW ACQUISITION COMPANY, LLC, a Minnesota limited liability company (“PW Acquisition”), FL ACQUISITION COMPANY, a Minnesota corporation (“FL Acquisition”), VALUEVISION MEDIA ACQUISITIONS, INC., a Delaware corporation (“Value Media”), JWH ACQUISITION COMPANY, a Minnesota corporation (“JWH Acquisition”), NORWELL TELEVISION, LLC, a Delaware limited liability company (“Norwell”), 867 GRAND AVENUE LLC, a Minnesota limited liability company (“867 Grand Avenue”), PORTAL ACQUISITION COMPANY, a Minnesota corporation (“Portal” and together with iMedia, Value Interactive, Value Retail, PW Acquisition, FL Acquisition, Value Media, JWH Acquisition, Norwell, 867 Grand Avenue and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers”), VVI FULFILLMENT CENTER, INC., a Minnesota corporation (“VVI Fulfillment”), EP PROPERTIES, LLC, a Minnesota limited liability company (“EP Properties”), IMEDIA&123TV HOLDING GMBH (“iMedia&123tv Holding” and together with VVI Fulfillment, and EP Properties, collectively, the “Guarantors”), SIENA LENDING GROUP LLC, as a lender (“Siena” and together with any other financial institutions who become part to the Loan Agreement referred to below from time to time, each a “Lender” and collectively, the “Lenders”) and SIENA LENDING GROUP LLC, as administrative and collateral agent for the Lenders (in such capacity, the “Agent”). Terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement defined below.
RECITALS
A. Agent, Lenders and Borrowers have previously entered into (i) that certain Loan and Security Agreement dated as of July 30, 2021 (as amended, modified and supplemented from time to time, the “Loan Agreement”), pursuant to which Lenders have made certain loans and financial accommodations available to Borrowers, and (ii) that certain Forbearance Agreement and Eighth Amendment to Loan and Security Agreement dated as of December 20, 2022 (the “Forbearance Agreement”).
B. The Specified Defaults (as defined in the Forbearance Agreement) have occurred and are continuing.
C. Borrowers have requested that the Agent and Lenders amend the Loan Agreement and the Forbearance Agreement as hereafter provided, and Agent and Lenders have agreed to such amendment subject to the terms and conditions set forth in this Amendment.
D. Borrowers and Guarantors are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement or any other Loan Document are being waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. | Acknowledgments by Loan Parties. Each Loan Party acknowledges and agrees as follows: |
(a) Acknowledgment of Debt. As of the close of business on January 31, 2023, each Loan Party is indebted, jointly and severally, to Lenders and Agent, without defense, deduction, setoff, claim or counterclaim, of any nature, under the Loan Agreement and the other Loan Documents in the aggregate principal amount of $42,619,982.76, plus accrued and continually accruing interest and all fees, costs and expenses.
(b) | Acknowledgment of Specified Defaults. That on and as of the date hereof: |
(i) the Specified Defaults exist and continue to exist under the Loan Agreement and other Loan Documents; (ii) neither the Agent nor any Lender has waived in any respect any or all of such Specified Defaults or their rights and remedies with respect thereto; and (iii) as a result of the Specified Defaults, except as expressly provided in the Forbearance Agreement, Agent and Lenders are permitted to immediately exercise all rights and remedies available under the Loan Documents, applicable law and/or otherwise.
(c) Acknowledgment that Liabilities Continue in Full Force and Effect. That the Loans and all other liabilities and obligations of the Borrowers under the Loan Documents shall, remain in full force and effect, and shall not be released, impaired, diminished or in any other way modified or amended as a result of the execution and delivery of this Amendment or by the agreements and undertakings of the parties contained herein.
(d) Acknowledgment of Perfection of Security Interest. As of the date hereof, the security interests and Liens granted to the Agent, for its benefit and the benefit of the Lenders, under the Loan Documents securing the Obligations are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Loan Documents.
2. | Ratification of Forbearance Agreement; Reservation of Rights. |
(a) Forbearance Agreement. The Forbearance Agreement, as amended by this Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders.
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(b) Preservation of Rights. By entering into this Amendment, Agent and Lenders do not waive the Specified Defaults or any other Event of Default that may be outstanding on the date hereof or any Event of Default that may occur after the date hereof (whether the same as, or similar to, the Specified Defaults or otherwise). The Specified Defaults and any other Events of Default which may be continuing on the date hereof or any Events of Default which may occur after the date hereof (whether the same as, or similar to, the Specified Defaults or otherwise) are hereby preserved. Agent and Lenders specifically reserve all options, rights and remedies available to it and them under the Loan Agreement, the other Loan Documents, applicable law or otherwise. Each Loan Party acknowledges and agrees that upon the occurrence and during the continuance of any Default or Event of Default (other than the Specified Defaults) or upon the expiration of the Forbearance Period (as defined in the Forbearance Agreement), (i) neither Agent nor any Lender is obligated or required to make any Loans or any other extension of credit to Borrowers under the Loan Agreement or the other Loan Documents and (ii) any Loans or other extensions of credit made by Agent or any Lender to Borrowers during the continuance of a Default or an Event of Default (other than the Specified Defaults) shall be made at the sole discretion of Agent or such Lender and shall not obligate Agent or any Lender to make any additional Loans or make any other extension of credit to Borrowers.
3. | Covenants. In consideration of the agreements set forth herein, Borrowers hereby covenant and agree as follows: |
(a) | [Reserved]. |
(b) Commencing on February 7, 2023, and on Tuesday of each week thereafter, Borrowers shall deliver to Agent a detailed projection and analysis of cash disbursements expected to be made by any Loan Party during such week, in form and substance satisfactory to Agent.
(c) Commencing on February 14, 2023, and on Tuesday of each week thereafter, Borrowers shall deliver to Agent a detailed summary of cash disbursements made by any Loan Party during the immediately preceding week, in form and substance satisfactory to Agent.
(d) On or before February 15, 2023, Borrowers shall deliver to Agent updated monthly business projections for Fiscal Year 2023 for the Loan Parties on a consolidated basis, which updated projections shall include profit and loss projections, balance sheet projections, income statement projections, cash flow projections and liquidity projections, including Borrowing Base calculations, together with appropriate supporting details and a statement of underlying assumptions used in preparing such projections.
(e) Borrowers shall promptly, and in any event within one Business Day following Borrowers’ receipt thereof, deliver to Agent copies of any amendment or modification to the commitment letter dated January 23, 2023 issued by PNC Bank, National Association to iMedia.
(f) Borrowers shall promptly, and in any event within one Business Day following Borrowers’ receipt thereof, deliver to Agent copies of each updated copy of the closing checklist and transaction calendar with respect to the Pontus Sale Leaseback.
(g) Borrowers shall promptly, and in any event within one Business Day following Borrowers’ receipt thereof, deliver to Agent a copy of the final “Notice to Close” (as defined in the Pontus Purchase Agreement).
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(h) Borrowers shall promptly, and in any event within one Business Day following Borrowers’ receipt thereof, deliver to Agent any (i) material amendment or modification to the draft master lease agreement being negotiated pursuant to the Pontus Purchase Agreement and (ii) amendment or modification to the pro forma sources and uses memo with respect to the Pontus Sale Leaseback.
(i) Borrowers shall provide evidence to Agent that the Deposit (as defined in the Pontus Purchase Agreement) has been made on or before the earlier of (i) four business days after receipt of the Notice to Close, and (ii) February 10, 2023.
Notwithstanding anything to the contrary in any Loan Document (including, without limitation, Section 7.1 of the Loan Agreement) the Borrowers’ failure to comply in all respects with any covenant in this Section 3 shall constitute an immediate Event of Default.
4. | Amendments to Loan Agreement and Forbearance Agreement. |
(a) Schedule B of the Loan Agreement is amended to add the following new definitions in the appropriate alphabetical order as follows:
“Availability Block” means an amount equal to $5,000,000.
“Ninth Amendment” means that certain Ninth Amendment to Loan and Security Agreement and First Amendment to Forbearance Agreement, dated as of the Ninth Amendment Effective Date, among the Agent, Lenders and Loan Parties.
“Ninth Amendment Effective Date” means February 1, 2023.
(b) Schedule B of the Loan Agreement is amended to amend and restate the definition of “Borrowing Base” as follows:
“Borrowing Base” means, as of any date of determination, the Dollar Equivalent Amount as of such date of determination of:
(a) the aggregate amount of Eligible Consumer Accounts of each Borrower multiplied by the Accounts Advance Rate; plus
(b) the aggregate amount of In-transit Credit Card Receipts multiplied by the Accounts Advance Rate (but in no event to exceed the In-transit Credit Card Receipts Sublimit); plus
(c) the aggregate amount of Eligible Portal Accounts of Portal multiplied by the Portal Accounts Advance Rate (but in no event to exceed the Portal Accounts Sublimit); plus
(d) the Net Orderly Liquidation Value of the applicable Eligible Inventory multiplied by the Inventory Advance Rate (but not to exceed the sublimit applicable to all Inventory); plus
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(e) the Net Orderly Liquidation Value of the applicable Eligible Slow Moving Inventory multiplied by the Inventory Advance Rate (but not to exceed the sublimit applicable to Eligible Slow Moving Inventory); plus
(f) the Net Orderly Liquidation Value of Eligible In-Transit Inventory multiplied by the Inventory Advance Rate (but not to exceed the sublimit applicable to Eligible In-Transit Inventory); minus
(g) all Reserves which Agent has established pursuant to Section 1.2, minus
1 (h) the Availability Block.
(c) Clause (a) to Schedule E of the Loan Agreement is amended and restated in its entirety as follows:
(a) | [Reserved]. |
(d) Section 2(a)(i) of the Forbearance Agreement is amended and restated in its entirety as follows:
“(i) February 28, 2023;”
(e) Section 3(d) of the Forbearance Agreement is amended and restated in its entirety as follows:
(d) In consideration for Agent and Lenders’ agreement to amend clause (a) to Schedule E of the Loan Agreement as set forth in the Ninth Amendment, as soon as reasonably practicable, but in any event within 10 Business Days after the Ninth Amendment Effective Date, Borrowers shall deliver to Agent:
(i) a customary German law guaranty and pledge agreement and appropriate stock certificates and stock transfer powers, granting Agent and Lenders, as security for the Obligations, a Lien in all of the Equity Interests issued by iMedia&123tv Holding GmbH and each of its direct and indirect Subsidiaries, including without limitation, 1-2-3.TV GmbH,
(ii) a customary opinion of Borrowers’ German counsel with respect to the deliverables described in the foregoing clause (i) and the following clause (iii), and
(iii) such other customary agreements, documents and deliverables reasonably requested by Agent, in consultation with Agent’s German counsel, in connection with the foregoing clauses (i) and (ii), in each case under this clause (d), in form and substance reasonably satisfactory to Agent.
1 NTD: for ease of reference, new language is included in italics.
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(f) Section 3(i) of the Forbearance Agreement is amended and restated in its entirety as follows: [Reserved]
5. | Release; Covenant Not to Sue. |
(a) Each Loan Party hereby absolutely and unconditionally releases and forever discharges Agent and each Lender, and any and all of their respective participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each a “Released Party”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of each Loan Party in providing this release that the same shall be effective as a bar to each and every claim, demand and cause of action specified.
(b) Each Loan Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each Loan Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised and discharged by any Loan Party pursuant to the above release. If any Loan Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Loan Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Released Party as a result of such violation.
6. Amendment Fee. In consideration of the agreements set forth herein, Borrowers hereby agree to jointly and severally pay to Agent for the ratable benefit of the Lenders, a fee in the amount of $100,000 (the “Amendment Fee”), which Amendment Fee is non-refundable when paid and is fully-earned as of the date of this Amendment and due and payable on the earliest of (i) February 28, 2023, (ii) the date on which the Pontus Sale Leaseback closing occurs, and (iii) the Maturity Date. Borrowers hereby authorize Agent to charge Borrowers’ Loan Account in full payment of the Amendment Fee on the due date therefor in accordance with this Section 6.
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7. Effectiveness of this Amendment. This Amendment shall become effective upon the satisfaction, as determined by Agent, of the following conditions (the “Ninth Amendment Effective Date”):
(a) Amendment. Agent shall have received this Amendment fully executed by the other parties hereto;
(b) | [Reserved]. ; |
(c) Representations and Warranties. The representations and warranties set forth herein and in the Loan Agreement must true and correct in all material respects (without duplication of materiality qualifiers therein) as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct in all material respects (without duplication of materiality qualifiers therein) as of such earlier date), other than those representations and warranties which are incorrect solely as a result of the existence of the Specified Defaults; and
(d) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as reasonably required by Agent in its Permitted Discretion.
8. Representations and Warranties. Each Loan Party represents and warrants as follows:
(a) Authority. Such Loan Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder, under the Loan Agreement (as amended or modified hereby) and under the other Loan Documents to which it is a party. The execution, delivery and performance by such Loan Party of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.
(b) Enforceability. This Amendment has been duly executed and delivered by each Loan Party. This Amendment, the Loan Agreement (as amended or modified hereby) and each other Loan Document is the legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained in the Loan Agreement and each other Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof, other than those representations and warranties which are incorrect solely as a result of the existence of the Specified Defaults.
(d) Due Execution. The execution, delivery and performance of this Amendment are within the power of each Loan Party, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on any Loan Party.
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(e) No Default. Other than the Specified Defaults, no event has occurred and is continuing that constitutes a Default or an Event of Default.
(f) No Duress. This Amendment has been entered into without force or duress, of the free will of each Loan Party. Each Loan Party’s decision to enter into this Amendment is a fully informed decision and such Loan Party is aware of all legal and other ramifications of such decision.
(g) Counsel. Each Loan Party has read and understands this Amendment, has consulted with and been represented by legal counsel in connection herewith, and has been advised by its counsel of its rights and obligations hereunder and thereunder.
9. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AMENDMENT AND ALL SUCH RELATED LOAN DOCUMENTS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
10. Counterparts; Facsimile Signatures. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by e-mail, Docusign, facsimile or other similar form of electronic transmission shall be deemed to be an original signature hereto.
11. | Reference to and Effect on the other Loan Documents. |
(a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement and each reference in the other Loan Documents to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement as modified and amended hereby.
(b) Except as specifically amended above, the Loan Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents.
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(d) To the extent that any terms and conditions in any of the other Loan Documents shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby.
12. Ratification. Each Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Loan Agreement, as amended hereby, and the other Loan Documents effective as of the date hereof.
13. Integration. This Amendment, together with the Loan Agreement and the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.
14. Severability. If any part of this Amendment is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
15. Waivers. Each Loan Party waives and renounces all rights that are waivable under Article 9 of the Uniform Commercial Code as such rights relate to such Loan Party’s relationship with Agent and Lenders, whether such rights are waivable before or after default, including, without limitation, those rights with respect to compulsory disposition of collateral (U.C.C. §§9- 610, 9-615 and 9-620), any right of redemption under U.C.C. §9-623, and any right to notice relating to disposition of collateral under U.C.C. §9-611.
16. Guarantors’ Acknowledgment. With respect to the amendments to the Loan Agreement effected by this Amendment, each Guarantor hereby acknowledges and agrees to this Amendment and confirms and agrees that its Guaranty (as modified and supplemented in connection with this Amendment) is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of this Amendment, each reference in such Guaranty to the Loan Agreement, “thereunder”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended or modified by this Amendment. Although Lender has informed the Guarantors of the matters set forth above, and each Guarantor has acknowledged the same, each Guarantor understands and agrees that Lender has no duty under the Loan Agreement, any Guaranty or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter.
[remainder of page intentionally blank]
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BORROWERS: | ||
IMEDIA BRANDS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its:CEO | ||
VALUEVISION RETAIL, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
FL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PW ACQUISITION COMPANY, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its:CEO | ||
VALUEVISION MEDIA ACQUISITIONS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
[Signature Page to Ninth Amendment to Loan and Security Agreement] |
JWH ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
NORWELL TELEVISION, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
867 GRAND AVENUE LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION INTERACTIVE, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PORTAL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
GUARANTORS: | ||
VVI FULFILLMENT CENTER, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
[Signature Page to Ninth Amendment to Loan and Security Agreement] |
EP PROPERTIES, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
IMEDIA&123TV HOLDING GMBH | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: Managing Director | ||
[Signature Page to Ninth Amendment to Loan and Security Agreement] |
SIENA LENDING GROU LLC, as Agent | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Steven Sanicola | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory | |
SIENA LENDING GROUP LLC, as a Lender | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Steven Sanicola | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
[Signature Page to Ninth Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director | |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director | |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | ||
Name: | ||
Title: |
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | ||
Name: | ||
Title: | ||
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | ||
Name: | ||
Title: | ||
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | /s/ ILLEGIBLE | |
Name: | ILLEGIBLE | |
Title: |
Exhibit 10.6
FORBEARANCE AGREEMENT, TENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT AND AMENDMENT TO FEE LETTER
THIS FORBEARANCE AGREEMENT, TENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND AMENDMENT TO FEE LETTER (this “Amendment”), dated as of April 10, 2023, is entered into by and among IMEDIA BRANDS, INC., a Minnesota corporation (“iMedia” or “Borrowing Agent”), VALUEVISION INTERACTIVE, INC., a Minnesota corporation (“Value Interactive”), VALUEVISION RETAIL, INC., a Delaware corporation (“Value Retail”), PW ACQUISITION COMPANY, LLC, a Minnesota limited liability company (“PW Acquisition”), FL ACQUISITION COMPANY, a Minnesota corporation (“FL Acquisition”), VALUEVISION MEDIA ACQUISITIONS, INC., a Delaware corporation (“Value Media”), JWH ACQUISITION COMPANY, a Minnesota corporation (“JWH Acquisition”), NORWELL TELEVISION, LLC, a Delaware limited liability company (“Norwell”), 867 GRAND AVENUE LLC, a Minnesota limited liability company (“867 Grand Avenue”), PORTAL ACQUISITION COMPANY, a Minnesota corporation (“Portal” and together with iMedia, Value Interactive, Value Retail, PW Acquisition, FL Acquisition, Value Media, JWH Acquisition, Norwell, 867 Grand Avenue and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers”), VVI FULFILLMENT CENTER, INC., a Minnesota corporation (“VVI Fulfillment”), EP PROPERTIES, LLC, a Minnesota limited liability company (“EP Properties”), IMEDIA&123TV HOLDING GMBH (“iMedia&123tv Holding” and together with VVI Fulfillment, and EP Properties, collectively, the “Guarantors”), SIENA LENDING GROUP LLC, as a lender (“Siena” and together with any other financial institutions who become part to the Loan Agreement referred to below from time to time, each a “Lender” and collectively, the “Lenders”) and SIENA LENDING GROUP LLC, as administrative and collateral agent for the Lenders (in such capacity, the “Agent”). Terms used herein without definition shall have the meanings ascribed to them in the Loan Agreement defined below.
RECITALS
A. Agent, Lenders and Borrowers have previously entered into (i) that certain Loan and Security Agreement dated as of July 30, 2021 (as amended, modified and supplemented from time to time, the “Loan Agreement”), pursuant to which Lenders have made certain loans and financial accommodations available to Borrowers, and (ii) that certain Forbearance Agreement and Eighth Amendment to Loan and Security Agreement dated as of December 20, 2022 (as amended by that certain Ninth Amendment to Loan and Security Agreement and First Amendment to Forbearance Agreement dated as of February 1, 2023 among Borrowers, Guarantors, Agent and Lenders, the “First Forbearance Agreement”).
B. The Specified Defaults (as defined in the First Forbearance Agreement) have occurred and are continuing. The Forbearance Period (as defined in the First Forbearance Agreement) expired on February 28, 2023.
C. Additional Events of Default have occurred and are continuing under (w) Section 7.1(r)(i) of the Loan Agreement as a result of the occurrence of certain events of default under the Term Debt Loan Documents, as more particularly described in that certain Notice of Default sent on behalf of Term Debt Lender to certain of the Loan Parties dated March 31, 2023, (x) Section 7.1(c)(1) of the Loan Agreement as a result of the Borrowers’ failure to timely deliver the financial statements and related Compliance Certificate for the (I) quarterly period ended January 28, 2023 required by Section 5.15(b) of the Loan Agreement and (II) the monthly period ended January 28, 2023 required by Section 5.15(c) of the Loan Agreement, and (y) Section 3(i) of the Ninth Amendment to Loan and Security Agreement and First Amendment to Forbearance Agreement dated as of February 1, 2023 as a result of the Borrowers’ failure to provide evidence to Agent that the Deposit (as defined in the Pontus Purchase Agreement) was made on or before the earlier of (i) four business days after receipt of the Notice to Close (as defined in the Pontus Purchase Agreement), and (ii) February 10, 2023, and (z) Section 3(i) of the First Forbearance Agreement as a result of the failure of the Pontus Sale Leaseback to close before February 14, 2023 (the foregoing Events of Default, the “New Defaults” and together with the Specified Defaults, the “Existing Defaults”).
D. Borrowers have requested that the Agent and Lenders forbear for a period of time from exercising their respective rights and remedies with respect to the Existing Defaults and Agent and Lenders have agreed to such forbearance subject to the amendments of the Loan Agreement, the First Forbearance Agreement and the Fee Letter as hereafter provided and the terms and conditions set forth in this Amendment.
E. Borrowers and Guarantors are entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Agent’s or any Lender’s rights or remedies as set forth in the Loan Agreement or any other Loan Document are being waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Acknowledgments by Loan Parties. Each Loan Party acknowledges and agrees as follows:
(a) Acknowledgment of Debt. As of the close of business on April 6, 2023, each Loan Party is indebted, jointly and severally, to Lenders and Agent, without defense, deduction, setoff, claim or counterclaim, of any nature, under the Loan Agreement and the other Loan Documents in the aggregate principal amount of $37,895,867.09, plus accrued and continually accruing interest and all fees, costs and expenses.
(b) Acknowledgment of Existing Defaults and Expiration of Forbearance Period. That on and as of the date hereof: (i) the Existing Defaults exist and continue to exist under the Loan Agreement and other Loan Documents; (ii) neither the Agent nor any Lender has waived in any respect any or all of such Existing Defaults or their rights and remedies with respect thereto; (iii) the Forbearance Period (as defined in the First Forbearance Agreement) expired on February 28, 2023; and (iv) as a result of the Existing Defaults and the expiration of the Forbearance Period (as defined in the First Forbearance Agreement), except as expressly provided in this Amendment, Agent and Lenders are permitted to immediately exercise all rights and remedies available under the Loan Documents, applicable law and/or otherwise.
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(c) Acknowledgment that Liabilities Continue in Full Force and Effect. That the Loans and all other liabilities and obligations of the Borrowers under the Loan Documents (including, without limitation, the First Forbearance Agreement) shall remain in full force and effect, and shall not be released, impaired, diminished or in any other way modified or amended as a result of the execution and delivery of this Amendment or by the agreements and undertakings of the parties contained herein.
(d) Acknowledgment of Perfection of Security Interest. As of the date hereof, the security interests and Liens granted to the Agent, for its benefit and the benefit of the Lenders, under the Loan Documents securing the Obligations are in full force and effect, are properly perfected and are enforceable in accordance with the terms of the Loan Documents.
2. Ratification of First Forbearance Agreement; Forbearance by Agent and Lenders.
(a) First Forbearance Agreement. The First Forbearance Agreement, as amended hereby, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders, it being understood, however, that the effectiveness of the forbearance of the Agent and Lenders is as set forth herein notwithstanding the termination of the Forbearance Period (as defined in the First Forbearance Period) in accordance with Section 2 of the First Forbearance Agreement.
(b) Forbearance Period. At the request of the Borrowers, the Agent and Lenders agree to forbear from accelerating the Obligations and from commencing and/or prosecuting the exercise of any rights and remedies, whether at law, in equity, by agreement or otherwise, available to the Agent and Lenders as a result of the Existing Defaults (including, without limitation, the right to refuse to fund any requested Loan or charge interest at the Default Rate, in each case, solely as a result of the Existing Defaults), from the date hereof until the earliest to occur of the following times: (i) Forbearance Expiration Date (as herein defined); (ii) the time at which (x) any representation or warranty made by a Loan Party under this Agreement shall prove to have been materially incorrect (without duplication of any materiality qualifiers therein) when made or deemed made or (y) any Loan Party fails to comply in any respect with its covenants set forth in this Agreement; or (iii) the occurrence of any Event of Default (other than the Existing Defaults) under any of the Loan Documents (the period beginning on the date hereof and terminating on the earliest of such dates being hereinafter referred to as the “Forbearance Period”). “Forbearance Expiration Date” means September 30, 2023; provided that if (x) prior to September 15, 2023, Borrowers deliver to Agent and Lenders an executed debt commitment letter for replacement financing sufficient to repay the Obligations in full at the closing thereof, the terms and conditions of which are acceptable to Agent and Lenders in their Permitted Discretion, then (y) the “Forbearance Expiration Date” shall automatically be amended to mean the earlier of (I) December 31, 2023 and (II) the date on which such debt commitment letter expires or is terminated.
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(c) Termination of Forbearance Period. Upon the termination of the Forbearance Period, all forbearances, deferrals and indulgences granted by the Agent and Lenders in Section 2(b) above shall automatically terminate, and the Agent and Lenders shall thereupon have, and shall be entitled to exercise, any and all rights and remedies which the Agent and/or Lenders may have upon the occurrence of an Event of Default, including, without limitation, the Existing Defaults.
(d) Preservation of Rights. By entering into this Agreement and agreeing to temporarily forbear from the exercise of rights and remedies under the terms of this Agreement, Agent and Lenders do not waive the Existing Defaults or any other Event of Default that may be outstanding on the date hereof or any Event of Default that may occur after the date hereof (whether the same as, or similar to, the Existing Defaults or otherwise). The Existing Defaults and any other Events of Default which may be continuing on the date hereof or any Events of Default which may occur after the date hereof (whether the same as, or similar to, the Existing Defaults or otherwise) are hereby preserved. The granting of the forbearance hereunder shall not be deemed a waiver of any options, rights and remedies of Agent and/or Lenders and shall not constitute a course of conduct or dealing on behalf of Agent or Lenders. Subject to the terms of this Agreement, Agent and Lenders specifically reserve all options, rights and remedies available to it and them under the Loan Agreement, the other Loan Documents, applicable law or otherwise. Each Loan Party acknowledges and agrees that upon the occurrence and during the continuance of any Default or Event of Default (other than the Existing Defaults), (i) neither Agent nor any Lender is obligated or required to make any Loans or any other extension of credit to Borrowers under the Loan Agreement or the other Loan Documents and (ii) any Loans or other extensions of credit made by Agent or any Lender to Borrowers during the continuance of a Default or an Event of Default (other than the Existing Defaults) shall be made at the sole discretion of Agent or such Lender and shall not obligate Agent or any Lender to make any additional Loans or make any other extension of credit to Borrowers.
3. Covenants; Consents. In consideration of the agreements set forth herein, Borrowers hereby covenant and agree as follows:
(a) Seller Note; Convertible Note Sale.
(i) On or before April 10, 2023, Borrowers shall have received net cash proceeds from the transactions described in Convertible Note Documents (the “Convertible Note Sale”) of not less than $3,500,000.
(ii) On or before April 11, 2023, Borrowers shall deliver to Agent a final, notarized amendment to the Seller Note (such term is used in this Amendment as defined in the First Amendment and Consent), in form and substance identical to the form amendment attached hereto as Exhibit A (or in a form otherwise agreed to by the Lenders) (such amendment, the “Seller Note Amendment”).
(iii) On or before April 13, 2023 Borrowers shall (x) use not less than $3,500,000 of the proceeds of the Convertible Note Sale to repay outstanding obligations owing under the Seller Note and (y) deliver evidence of such payment to Agent. Agent and Lenders agree that (A) Borrowers may make regularly scheduled payments on the Seller Note in accordance with the terms of the Seller Note (as in effect after giving effect to the Seller Note Amendment) beginning May 22, 2023, in each case, so long as (i) no Default or Event of Default has occurred and is continuing (other than the Existing Defaults) or would result from such payment, and (ii) after giving effect to any such payment, Excess Availability is not less than $10,000,000 and (B) Loan Parties shall be permitted to dispose of up to 10% of the Equity Interests issued by 1-2-3.TV GmbH in accordance with, and subject to the terms of, the Seller Note (as in effect after giving effect to the Seller Note Amendment), so long as Agent and Lenders retain valid and perfected first priority Liens on the remaining 90% of the Equity Interests issued by 1-2-3.TV GmbH.
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(b) Refinancing Milestones.
(i) On or before June 15, 2023, Borrowers shall deliver to Agent an executed letter of intent with respect to replacement financing sufficient to repay the Obligations in full at the closing thereof (the “Debt Refinancing”), the terms and conditions of which are acceptable to Agent and Lenders in their Permitted Discretion.
(ii) On or before September 15, 2023, Borrowers shall deliver to Agent an executed debt commitment letter with respect to the Debt Refinancing, the terms and conditions of which are acceptable to Agent and Lenders in their Permitted Discretion.
(iii) On or before September 30, 2023, Borrowers shall close the Debt Refinancing and repay the Obligations in full; provided that if Borrowers comply with Section 3(b)(ii) of this Amendment, then the date set forth in this clause (iii) shall be automatically extended to the earlier of (I) December 31, 2023 and (II) the date on which such debt commitment letter expires or is terminated.
(c) Slow Moving Inventory Sale Best Efforts. In connection with any sale of Slow Moving Inventory outside the ordinary course of business, which Agent and Lenders hereby agree will not violate Section 5.25(d) of the Loan Agreement, Borrowers and Lenders agree that the proceeds of each such sale will be paid to Agent on the closing date of such sale and applied by Agent as follows: (i) first, an amount equal to the amount included in the Borrowing Base pursuant to clause (e) of the definition thereof immediately prior to such sale shall be applied by Agent to repay the Revolving Loans, and (ii) second, the remaining amount of such proceeds shall be applied by Agent to repay the Revolving Loans, subject to Borrowers’ ability to reborrow Revolving Loans in accordance with the terms of the Loan Agreement.
(d) German Collateral Security. On or before May 12, 2023, Agent shall have received (i) customary German law security agreements granting Agent and Lenders Liens in substantially all of the receivables, accounts, inventory and intellectual property of iMedia&123tv Holding GmbH and each of its direct and indirect Subsidiaries, including without limitation, 1-2-3.TV GmbH, (ii) a customary opinion of Borrowers’ German counsel with respect to the deliverables described in the foregoing clause (i) and the following clause (iii), and (iii) such other customary agreements, documents and deliverables reasonably requested by Agent, in consultation with Agent’s German counsel, in connection with the foregoing clauses (i) and (ii), in each case under this clause (d), in form and substance reasonably satisfactory to Agent.
(e) Minnesota Real Estate.
(i) Loan Parties shall (A) use their best efforts to complete the Subdivision (as defined in that certain Master Lease Agreement dated as of the Tenth Amendment Effective Date between iMedia and Pontus IMP Portfolio, LLC (the “Master Lease”)) in accordance with the Master Lease as soon as practicable following the Tenth Amendment Effective Date, (B) promptly following completion of such Subdivision, exercise the Repurchase Right (as defined in the Master Lease as in effect on the date hereof), (C) exercise all of their rights and remedies with respect to the Subdivision and the Repurchase Right with diligence and in good faith, and (D) not agree to any amendment or modification to the Master Lease without the prior written consent of Agent.
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(ii) On or before May 5, 2023, Agent shall have received (A) a leasehold mortgage with respect to the Minnesota Property (as defined in the Master Lease as in effect on the date hereof), in form and substance satisfactory to Agent, (B) opinions of counsel, in form and substances satisfactory to Agent, covering such matters as Agent may request with respect to such leasehold mortgage, and (C) each other document required by the Loan Agreement, the leasehold mortgage, any related agreement or under applicable law or as requested by Agent in order to create, in favor of Agent, a perfected security interest in iMedia’s leasehold interest in the Minnesota Property.
(iii) Unless otherwise agreed in writing by Agent and Lenders, no later than 10 Business Days following the date on which the Closing (as defined in the Master Lease as in effect on the date hereof) occurs, Agent shall have received (A) a fee mortgage with respect to the Tenant Retained Parcel (as defined in the Master Lease as in effect on the date hereof), in form and substance satisfactory to Agent, (B) opinions of counsel, in form and substances satisfactory to Agent, covering such matters as Agent may request with respect to such fee mortgage, (C) if requested by Agent, fully paid mortgagee title insurance policies (or binding commitments to issue title insurance policies, marked to Agent’s satisfaction to evidence the form of such policies to be delivered with respect to the applicable such mortgage), in standard ALTA form, issued by a title insurance company satisfactory to Agent, in an amount equal to not less than the value of the Tenant Retained Parcel, insuring such mortgage to create a valid Lien on the Tenant Retained Parcel with no exceptions that Agent has not approved and with no survey exceptions, and (D) each other document required by the Loan Agreement, the fee mortgage, any related agreement or under applicable law or as requested by Agent in order to create, in favor of Agent, a perfected security interest in the Tenant Retained Parcel.
Notwithstanding anything to the contrary in any Loan Document (including, without limitation, Section 7.1 of the Loan Agreement) the Borrowers’ failure to comply in all respects with any covenant in Section 3(a), 3(c), 3(d) and 3(e) shall constitute an immediate Event of Default.
4. Amendments to Loan Agreement and Forbearance Agreement.
(a) Section 5.24(b) of the Loan Agreement is amended and restated as follows:
(b) Borrowers have furnished Agent a true, correct and complete copy of (i) each of the Seller Debt Documents and (ii) each of the Convertible Note Documents.
(b) Section 5.25(s) of the Loan Agreement is amended and restated as follows:
(s) agree, consent, permit or otherwise undertake to amend or otherwise modify any of the terms or provisions of (i) any Seller Debt Loan Document or (ii) any Convertible Note Documents.
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(b) Section 1(d)(iii) of Schedule A of the Loan Agreement is amended and restated as follows:
(iii) Sublimit on advances against all Eligible Slow Moving Inventory | (a) At all times prior to June 30, 2023, $2,000,000, (b) during the period commencing on June 30, 2023 and ending September 29, 2023, $1,500,000 and (c) at all times on and after September 30, 2023, $0; provided that the amounts set forth in the foregoing clauses (a) and (b) shall be reduced by the aggregate amount applied to repay Revolving Loans pursuant to Section 3(c)(i) of the Tenth Amendment. |
(b) Section 3 of Schedule A of the Loan Agreement is amended and restated as follows:
3. Interest Rate for Revolving Loans: | (i) at all times prior to March 15, 2023, 5.86448% per annum in excess of Term SOFR and (ii) at all times on and after March 15, 2023, 7.86448% per annum in excess of Term SOFR |
Or if the Base Rate is then in effect pursuant to Section 2.6, (i) at all times prior to March 15, 2023, 3.0% per annum in excess of the Base Rate and (ii) at all times on and after March 15, 2023, 5.0% per annum in excess of the Base Rate. |
(c) Schedule B of the Loan Agreement is amended to add the following new definitions in the appropriate alphabetical order as follows:
“Tenth Amendment” means that certain Tenth Amendment to Loan and Security Agreement and Second Amendment to Forbearance Agreement, dated as of the Tenth Amendment Effective Date, among the Agent, Lenders and Loan Parties.
“Tenth Amendment Effective Date” means April 10, 2023.
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(d) Schedule B of the Loan Agreement is amended to amend and restate the definition of “Availability Block” as follows:
“Availability Block” means an amount equal to (a) during the period commencing on the Tenth Amendment Effective Date and ending on April 30, 2023, $12,175,000, (b) during the period commencing on May 1, 2023 and ending on May 31, 2023, $12,375,000, (c) during the period commencing on June 1, 2023 and ending on June 30, 2023, $12,575,000, and (b) at all times on and after July 1, 2023, $13,000,000.
(e) Schedule B of the Loan Agreement is amended to amend the definition of “Permitted Indebtedness” by (i) deleting the “and” appearing before clause (l) thereof and (ii) inserting the following immediately after clause (l) thereof):
; and (m) unsecured Indebtedness outstanding under the Convertible Note Documents.
(f) Schedule B of the Loan Agreement is amended to add the definition of “Convertible Note Documents” as follows:
“Convertible Note Documents” means (i) the Loan Agreement dated on or about the Tenth Amendment Effective Date among iMedia, BMSF Enterprises, LLC, OCI-VB, LLC, Landel Hobbs, Benjamin Schrag, Tim Peterman, Daryl Porter, Aaron Reitfkopf, Michael Friedman, and Alan Aldworth (the “Convertible Note Purchase Agreement”), (ii) the Convertible Notes issued on or about the Tenth Amendment Effective Date by iMedia pursuant to the Convertible Note Purchase Agreement, and (iii) all other instruments, agreements and documents executed in connection therewith.
(g) Clause (b) of Schedule E of the Loan Agreement is amended and restated in its entirety to read as follows:
(b) [Reserved].
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5. Amendments to Fee Letter.
(a) Clause (e) of the Fee Letter is amended and restated as follows:
(e) Early Payment/Termination Premium. In the event that for any reason (including without limitation as a result of any voluntary or mandatory prepayment of the Loans, any acceleration of the Loans resulting from an Event of Default, any foreclosure and sale of Collateral, or any sale of Collateral in any bankruptcy or insolvency proceeding) all or any portion of Lenders’ Revolving Loan Commitments is terminated prior to the Scheduled Maturity Date, in each case pursuant to Section 1.8(b), Section 7.2 or otherwise, then in each such case, in addition to the payment of the subject principal amount and all unpaid accrued interest and other amounts due thereon, Borrowers immediately shall be required to pay to Agent for the ratable benefit of Lenders holding Revolving Loan Commitments an early payment/termination premium (an “Early Payment/Termination Premium”) (as liquidated damages and compensation for the cost of Lender being prepared to make funds available under the Loan Agreement with respect to such Loans during the scheduled term of the Loan Agreement) in an amount equal to the Applicable Percentage (as defined below) of the amount of the Total Revolving Loan Commitment at the time of any such termination. With respect to any such event, the “Applicable Percentage” shall be (i) 3.00%, if such event occurs on or before the first anniversary of the Closing Date, (ii) 2.00% if such event occurs after the first anniversary of the Closing Date, but on or before December 31, 2023, or (iii) 3.00% if such event occurs after December 31, 2023, but before the Scheduled Maturity Date. Borrowers acknowledge and agree that (x) the provisions of this paragraph shall remain in full force and effect notwithstanding any rescission by a Lender of an acceleration with respect to all or any portion of the Obligations pursuant to Section 7.2 or otherwise, (y) payment of any Early Payment/Termination Premium under this paragraph constitutes liquidated damages and not a penalty and (z) the actual amount of damages to a Lender or profits lost by a Lender as a result of such early payment or termination would be impracticable and extremely difficult to ascertain, and the Early Payment/Termination Premium under this paragraph is provided by mutual agreement of Borrowers and Agent as a reasonable estimation and calculation of such lost profits or damages of Borrowers and Lenders.
(b) A new clause (f) is hereby added to the Fee Letter to read as follows:
(f) Milestone Fees. For the ratable benefit of Lenders holding the Revolving Commitments, a fee equal to $100,000 (the “Milestone Fee”). The full amount of the Milestone Fee shall be deemed to be fully earned on the Tenth Amendment Effective Date and shall be payable in installments as follows: (i) an amount equal to $33,334 shall be due and payable on the date (if any) on which Borrowers breach their obligations under Section 3(b)(i) of this Amendment; provided that a portion of the Milestone Fee equal to $33,334 shall be deemed waived if Borrowers do not breach their obligations under Section 3(b)(i) of this Amendment, (ii) an amount equal to $33,333 shall be due and payable on the date (if any) on which Borrowers breach their obligations under Section 3(b)(ii) of this Amendment; provided that a portion of the Milestone Fee equal to $33,333 shall be deemed waived if Borrowers do not breach their obligations under Section 3(b)(ii) of this Amendment, and (iii) an amount equal to $33,333 shall be due and payable on the date (if any) on which Borrowers breach their obligations under Section 3(b)(iii) of this Amendment; provided that a portion of the Milestone Fee equal to $33,333 shall be deemed waived if Borrowers do not breach their obligations under Section 3(b)(iii) of this Amendment.
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6. Release; Covenant Not to Sue.
(a) Each Loan Party hereby absolutely and unconditionally releases and forever discharges Agent and each Lender, and any and all of their respective participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each a “Released Party”), from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which any Loan Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown. It is the intention of each Loan Party in providing this release that the same shall be effective as a bar to each and every claim, demand and cause of action specified.
(b) Each Loan Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such claims, demands, or causes of action and agree that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Loan Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.
(c) Each Loan Party, on behalf of itself and its successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Released Party above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Released Party on the basis of any claim released, remised and discharged by any Loan Party pursuant to the above release. If any Loan Party or any of its successors, assigns or other legal representatives violates the foregoing covenant, such Loan Party, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Released Party may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Released Party as a result of such violation.
7. Extension Fee. In consideration of the agreements set forth herein, Borrowers hereby agree to jointly and severally pay to Agent for the ratable benefit of the Lenders, a fee in the amount of $250,000 (the “Extension Fee”), which Extension Fee is non-refundable when paid and is fully-earned and due and payable on the date of this Amendment. Borrowers hereby authorize Agent to charge Borrowers’ Loan Account in full payment of the Extension Fee on the date of this Amendment in accordance with this Section 7.
8. First Forbearance Agreement Fee Amendment. In consideration of the agreements set forth herein, Section 6(b) of the First Forbearance Agreement is hereby amended and restated in its entirety as follows:
(b) a fee in the amount of $600,000, which fee is non-refundable when paid and is fully-earned as of the date of this Amendment and is due and payable on April 10, 2023.
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9. Effectiveness of this Amendment. This Amendment shall become effective upon the satisfaction, as determined by Agent, of the following conditions:
(a) Amendment. Agent shall have received this Amendment fully executed by the other parties hereto;
(b) Pontus Sale Leaseback. The Pontus Sale Leaseback shall have closed on terms and conditions acceptable to Agent, and Agent shall have received cash proceeds from such closing in an amount not less than $12,000,000 to be applied to the Obligations in accordance with the Loan Agreement;
(c) Convertible Note Financing. The Convertible Note Documents shall be fully executed and effective, with $3,300,000 of the gross proceeds thereof being held in an escrow account, to be released to Borrowers on April 10, 2023 and further applied in accordance with Section 3(a) of this Amendment;
(d) GreenLake Indebtedness. The Indebtedness evidenced by the Term Debt Documents shall have been repaid in full and the Term Debt Documents and all Liens granted to the Term Debt Lender under the Term Debt Documents shall have been terminated, on terms acceptable to Agent;
(e) Representations and Warranties. The representations and warranties set forth herein and in the Loan Agreement must true and correct in all material respects (without duplication of materiality qualifiers therein) as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct in all material respects (without duplication of materiality qualifiers therein) as of such earlier date), other than those representations and warranties which are incorrect solely as a result of the existence of the Existing Defaults; and
(f) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded, as reasonably required by Agent in its Permitted Discretion.
10. Representations and Warranties. Each Loan Party represents and warrants as follows:
(a) Authority. Such Loan Party has the requisite corporate power and authority to execute and deliver this Amendment, and to perform its obligations hereunder, under the Loan Agreement (as amended or modified hereby) and under the other Loan Documents to which it is a party. The execution, delivery and performance by such Loan Party of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions.
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(b) Enforceability. This Amendment has been duly executed and delivered by each Loan Party. This Amendment, the Loan Agreement (as amended or modified hereby) and each other Loan Document is the legal, valid and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained in the Loan Agreement and each other Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof, other than those representations and warranties which are incorrect solely as a result of the existence of the Existing Defaults.
(d) Due Execution. The execution, delivery and performance of this Amendment are within the power of each Loan Party, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on any Loan Party.
(e) No Default. Other than the Existing Defaults, no event has occurred and is continuing that constitutes a Default or an Event of Default.
(f) No Duress. This Amendment has been entered into without force or duress, of the free will of each Loan Party. Each Loan Party’s decision to enter into this Amendment is a fully informed decision and such Loan Party is aware of all legal and other ramifications of such decision.
(g) Counsel. Each Loan Party has read and understands this Amendment, has consulted with and been represented by legal counsel in connection herewith, and has been advised by its counsel of its rights and obligations hereunder and thereunder.
11. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AMENDMENT AND ALL SUCH RELATED LOAN DOCUMENTS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
12. Counterparts; Facsimile Signatures. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by e-mail, Docusign, facsimile or other similar form of electronic transmission shall be deemed to be an original signature hereto.
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13. Reference to and Effect on the other Loan Documents.
(a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement and each reference in the other Loan Documents to “the Loan Agreement”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement as modified and amended hereby.
(b) Except as specifically amended above, the Loan Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under the Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Agreement or any of the other Loan Documents.
(d) To the extent that any terms and conditions in any of the other Loan Documents shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended hereby.
14. Ratification. Each Loan Party hereby restates, ratifies and reaffirms each and every term and condition set forth in the Loan Agreement, as amended hereby, and the other Loan Documents effective as of the date hereof.
15. Integration. This Amendment, together with the Loan Agreement and the other Loan Documents, incorporates all negotiations of the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof.
16. Severability. If any part of this Amendment is contrary to, prohibited by, or deemed invalid under Applicable Laws, such provision shall be inapplicable and deemed omitted to the extent so contrary, prohibited or invalid, but the remainder hereof shall not be invalidated thereby and shall be given effect so far as possible.
17. Waivers. Each Loan Party waives and renounces all rights that are waivable under Article 9 of the Uniform Commercial Code as such rights relate to such Loan Party’s relationship with Agent and Lenders, whether such rights are waivable before or after default, including, without limitation, those rights with respect to compulsory disposition of collateral (U.C.C. §§9-610, 9-615 and 9-620), any right of redemption under U.C.C. §9-623, and any right to notice relating to disposition of collateral under U.C.C. §9-611.
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18. Guarantors’ Acknowledgment. With respect to the amendments to the Loan Agreement effected by this Amendment, each Guarantor hereby acknowledges and agrees to this Amendment and confirms and agrees that its Guaranty (as modified and supplemented in connection with this Amendment) is and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of this Amendment, each reference in such Guaranty to the Loan Agreement, “thereunder”, “thereof” or words of like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended or modified by this Amendment. Although Lender has informed the Guarantors of the matters set forth above, and each Guarantor has acknowledged the same, each Guarantor understands and agrees that Lender has no duty under the Loan Agreement, any Guaranty or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall create such a duty as to any transaction hereafter.
[remainder of page intentionally blank]
14
IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written.
BORROWERS:
IMEDIA BRANDS, INC.
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION RETAIL, INC.
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
FL ACQUISITION COMPANY
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
PW ACQUISITION COMPANY, LLC
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION MEDIA ACQUISITIONS, INC.
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Tenth Amendment to Loan and Security Agreement]
JWH ACQUISITION COMPANY
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
NORWELL TELEVISION, LLC
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
867 GRAND AVENUE LLC
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
VALUEVISION INTERACTIVE, INC.
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
PORTAL ACQUISITION COMPANY
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
GUARANTORS:
VVI FULFILLMENT CENTER, INC.
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
[Signature Page to Tenth Amendment to Loan and Security Agreement]
EP PROPERTIES, LLC
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
IMEDIA&123TV HOLDING GMBH
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: Managing Director |
Acknowledged and Agreed:
123TV INVEST GMBH
By: | /s/ Jean Sabatier | |
Name: Jean Sabatier | ||
Its: Managing Director |
123TV HOLDING GMBH
By: | /s/ Jean Sabatier | |
Name: Jean Sabatier | ||
Its: Managing Director |
123TV BETEILIGUNGS GMBH
By: | /s/ Jean Sabatier | |
Name: Jean Sabatier | ||
Its: Managing Director |
[Signature Page to Tenth Amendment to Loan and Security Agreement]
1-2-3.TV GMBH
By: | /s/ Eberhard Kuom | /s/ Michael Hoinka | ||
Name: | Eberhard Kuom | Michael Hoinka | ||
Its: | Managing Director | Managing Director |
1-2-PAY GMBH
By: | /s/ Jean Sabatier | |||
Name: | Jean Sabatier | |||
Its: | Managing Director |
[Signature Page to Tenth Amendment to Loan and Security Agreement]
SIENA LENDING GROUP LLC, as Agent |
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Renee Singer | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
SIENA LENDING GROUP LLC, as a Lender |
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Steven Sanicola | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
[Signature Page to Tenth Amendment to Loan and Security Agreement]
CRYSTAL FINANCIAL SPV LLC, as a Lender |
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender |
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender |
By: | /s/ Beatriz Hernandez | |
Name: | Beatriz Hernandez | |
Title: | EVP |
Exhibit A – Form of Seller Note Amendment
21
AMENDMENT AGREEMENT TO THE SHARE PURCHASE AGREEMENT AND FOuRTH AMENDMENT TO THE VENDOR LOAN AGREEMENT RELATING TO THE IMPULSE TRANSACTION
between
1. | Emotion Invest GmbH & Co. KG, Theatinerstraße 7, c/o Arcus Capital AG, 80333 Munich, Germany |
– “Seller 1”–
2. | BE Beteiligungen Fonds GmbH & Co. geschlossene Investmentkommanditgesellschaft, Hohenzollernring 72, 50672 Cologne, Germany |
– “Seller 2”–
3. | Iris Capital Fund II, 62 rue Pierre Charron, c/o Iris Capital Management, 75008 Paris, France |
– “Seller 3”; Seller 1,
Seller 2 and Seller 3
individually also a “Seller” and collectively the “Sellers” –
4. | iMedia & 123tv Holding GmbH, Bavariafilmplatz 7, 82031 Grünwald, Germany |
– “Purchaser”–
5. | 123tv Beteiligungs GmbH, Bavariafilmplatz 7, 82031 Grünwald, Germany |
– “123tv Beteiligungs”–
6. | iMedia Brands, Inc., 6740 Shady Oak Road, Eden Prairie, Minnesota 55344 USA |
– “iMedia” –
and
7. | 1-2-3.TV GmbH, Bavariafilmplatz 7, 82031 Grünwald, Germany |
– “1-2-3.TV” –
– The Parties under no. 1. through 7. individually also a “Party” and collectively the “Parties” –
22
Table of Content
Table of Content | 23 | |
Definitions | 24 | |
Recitals | 26 | |
1. | Definitions | 26 |
2. | Status | 27 |
3. | Amendment of the Due Dates under the Vendor Loan Agreement | 27 |
4. | Reduction of Purchase Price and Loan Amount | 29 |
5. | Sale and Transfer Participation in 1-2-3.TV | 32 |
6. | Waiver of Claims under SPA | 34 |
7. | Guarantees | 35 |
8. | Remedies | 37 |
9. | Cost and Expenses | 37 |
10. | Waiver of Conditions Precedents | 38 |
11. | Rights of Third Parties | 38 |
12. | Amendments; Notices | 38 |
13. | Choice of Law and Place of Jurisdiction | 38 |
14. | Severability | 39 |
23
Definitions
24
10% Call/Put Option | 12 |
10% Purchase Price | 11 |
10% SPA | 11 |
10% SPA Closing Date | 13 |
1-2-3.TV | 2 |
123tv Beteiligungs | 2 |
2-Years Waiting Period | 12 |
Agreement | 6 |
Condition Precedent | 8 |
Condition Subsequent | 8 |
Effective Date | 12 |
Fair Market Value | 12 |
Guarantee(s) | 13 |
Guarantor(s) | 13 |
iMedia | 2 |
Impulse Transaction | 6 |
Initial Principal Payment | 7 |
Initial Vendor Loan Agreement | 6 |
Loan Amount I | 8 |
Loan Amount II | 10 |
March 31, 2023 Installment | 7 |
Notice(s) | 16 |
Party | 3 |
Purchaser | 2 |
Quota | 7 |
Reduction Amount I | 8 |
Reduction Amount II | 9 |
Seller 1 | 2 |
Seller 2 | 2 |
Seller(s) | 2 |
Settlement Condition | 10 |
SHA | 11 |
Signing Date | 7 |
Sold Shares | 11 |
SPA | 6 |
Third Amendment to the Vendor Loan Agreement | 6 |
Total Loan Amount | 6 |
Vendor Loan Agreement | 6 |
25
RECITALS
(A) | The Sellers, the Purchaser and iMedia have entered into a share purchase agreement regarding the 1-2-3.TV group dated September 14/15/20/22, 2021 (part B of the role of deed no. H 3959/2021 of the notary public Sebastian Herrler, Munich; as amended from time to time the “SPA”) under which, inter alia, the Sellers have sold their (indirect) participation in 1-2-3.TV to the Purchaser against a certain purchase price (“Impulse Transaction”). |
(B) | In the context of the SPA, the Parties have entered into a vendor loan agreement dated September 14/15/20/22, 2021 (part C of the role of deed no. H 3959/2021 of the notary public Sebastian Herrler, Munich; “Initial Vendor Loan Agreement”) as amended under (i) a first amendment agreement dated November 5, 2021, (ii) a second amendment agreement dated May 26, 2022 and (iii) a third amendment agreement dated September 19, 2022 (“Third Amendment to the Vendor Loan Agreement”) (the Initial Vendor Loan Agreement as amended under (i) through (iii) the “Vendor Loan Agreement”) under which a portion of the claim of the Sellers against the Purchaser to pay the Purchase Price under the SPA in an amount of EUR 18,000,000 (“Total Loan Amount”) has been novated as an interest bearing vendor loan among the Sellers as lenders and the Purchaser as borrower. |
(C) | The Parties now wish to amend the SPA and reduce the Purchase Price and accordingly reflect this reduction of the Purchase Price by a corresponding reduction of the Vendor Loan Agreement (and its due date) by entering into and in accordance with the provisions of this agreement (“Agreement”). |
Now, therefore, the Parties agree as follows:
1. | Definitions |
Capitalized terms used in this Agreement which are not defined otherwise in this Agreement shall have the meaning attributed to them under the SPA or in the Vendor Loan Agreement, as the case may be.
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2. | Status |
2.1 | The Purchase Price under the SPA amounts to EUR 85,870,615.24. The Purchase Price minus the Total Loan Amount of EUR 18,000,000.00 has been paid by the Purchaser to the Sellers. |
2.2 | As per the date of this Agreement (“Signing Date”), the outstanding Loan Amounts under the Vendor Loan Agreement are as follows (in each case plus accrued interest): |
No. | Seller | Loan Amount in EUR (plus accrued interest) | Percentage of Loan Amount in Total Loan Amount (“Quota”) | Accrued interest in EUR until March 31, 2023 | ||||||||||||
1. | Seller 1 | 6,886,170.52 | 38.26 | % | 234,129.80 | |||||||||||
2. | Seller 2 | 6,615,633.36 | 36.75 | % | 224,931.53 | |||||||||||
3. | Seller 3 | 4,498,196.12 | 24.99 | % | 152,938.67 | |||||||||||
Total Loan Amount: | 18,000,000.00 | 100.00 | % | 612,000.00 |
2.3 | 123tv Beteiligungs holds all shares in 1-2-3.TV. |
3. | Amendment of the Due Dates under the Vendor Loan Agreement |
3.1 | The Parties (except for 123tv Beteiligungs) hereby agree to amend the Vendor Loan Agreement that deviating from Section 2.1 of the Third Amendment to the Vendor Loan Agreement the following shall apply. |
3.1.1 | The Purchaser shall make (i) on or before April 13, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) to the Sellers (pro rata to their respective Quota) an initial payment of EUR 3,000,000 on the Total Loan Amount, and (ii) on or before April 17, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) to the Sellers (pro rata to their respective Quota) (y) a second payment of EUR 200,000 on the Total Loan Amount (collectively with the payment under (i) above the “Initial Principal Payment”) and (z) payment of interest accrued on the Total Loan Amount until April 17, 2023 in the amount of EUR 612,000 ((i) and (ii) collectively the “April 13, 2023 Installment”). The Initial Principal Payment will be as follows: |
No. | Seller | Initial Principal Payment | ||||||
1. | Seller 1 | 1,224,208.09 | ||||||
2. | Seller 2 | 1,176,112.60 | ||||||
3. | Seller 3 | 799,679.31 | ||||||
Total April 13, 2023 Installment: | 3,200,000 |
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3.1.2 | The Purchaser shall make between June 1, 2023 and September 30, 2023 at the latest to the Sellers (pro rata to their respective Quota) payments (i) on the Loan Amount I (as defined below) in an amount that depends on the amount and the date of the payments as set out under Section 4.3 below, whereby the relevant dates set out in Section 4.3 below shall be considered due dates for payment of the relevant portion of the Loan Amount I, at the Purchaser’s sole discretion, and (ii) of accrued interest on Loan Amount I until the date of payment. |
3.1.3 | The Ordinary Maturity Date I and the Ordinary Maturity Date II shall not apply. |
3.2 | The amendment under Section 3.1.1 shall be subject to the condition subsequent (auflösende Bedingung) that receipt (i) of a partial payment of EUR 3,000,000 of the April 13, 2023 Installment by Sellers has not occurred prior to or upon the expiry of April 13, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) or (ii) of the remainder of the April 13, 2023 Installment by Sellers has not occurred prior to or upon the expiry of April 17, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) (“Condition Subsequent”). The amendments under Section 3.1.2 and 3.1.3 shall be subject to the condition precedent of receipt (i) of a partial payment of EUR 3,000,000 of the April 13, 2023 Installment by the Sellers prior to or upon the expiry of April 13, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) and (ii) of the remainder of the April 13, 2023 Installment by the Sellers prior to or upon the expiry of April 17, 2023 (or any other date mutually agreed via email between all Sellers and the Purchaser) (“Condition Precedent”). |
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4. | Reduction of Purchase Price and Loan Amount |
4.1 | Subject to the fulfilment or due waiver of the Condition Precedent, the Sellers, the Purchaser and iMedia hereby agree to reduce the Purchase Price under the SPA by EUR 3,200,000.00 (“Reduction Amount I”), whereby such Reduction Amount I shall be allocated among the Sellers according to their Quota as follows: |
No. | Seller | Share of Reduction Amount I in EUR | ||||||
1. | Seller 1 | 1,224,208.09 | ||||||
2. | Seller 2 | 1,176,112.60 | ||||||
3. | Seller 3 | 799,679.31 | ||||||
Total | 3,200,000.00 |
4.2 | A reduction of the Purchase Price under the SPA by the Reduction Amount I would result in a corresponding reduction of the Total Loan Amount. Therefore, the Parties (except for 123tv Beteiligungs) hereby agree, subject to the fulfilment or due waiver of the Condition Precedent, to allocate the Reduction Amount I to the Total Loan Amount under the Vendor Loan Agreement and reduce the Total Loan Amount by the Reduction Amount I according to their Quota with effect as of the fulfilment or due waiver of the Condition Precedent, whereby the Total Loan Amount reduced by (i) the Initial Principal Payment and (ii) the Reduction Amount I (if applicable) shall be the “Loan Amount I”: |
No. | Seller | Share of sum of the Initial Principal Payment and Reduction Amount I (EUR) | Loan Amount I in EUR | |||||||||
1. | Seller 1 | 2,448,416.18 | 4,437,754.33 | |||||||||
2. | Seller 2 | 2,352,225.20 | 4,263,408.17 | |||||||||
3. | Seller 3 | 1,599,358.62 | 2,898,837.50 | |||||||||
Total | 6,400,000.00 | 11,600,000.00 |
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4.3 | Subject to the fulfilment or due waiver of the Condition Precedent the Sellers, the Purchaser and iMedia hereby agree to reduce the Purchase Price under the SPA by an additional aggregate amount as set out below, which depends on amount and the date of the payments made by the Purchaser on the Loan Amount I as set out below, (“Reduction Amount II”), whereby the Reduction Amount II shall be allocated among the Sellers according to their Quota: |
Payment in EUR | Payment Date | Reduction Amount II in EUR | Discount on Amount equal to Loan Amount I minus 10% Purchase Price in % | ||||||||
3,800,000 | On or before June 1, 2023 | 3,800,000 | 50.00 | % | |||||||
4,750,000 | After June 1, 2023 and on or before June 30, 2023 | 2,850,000 | 37.50 | % | |||||||
5,700,000 | After June 30, 2023 and on or before July 31, 2023 | 1,900,000 | 25.00 | % | |||||||
6,650,000 | After July 31, 2023 and on/or before September 29, 2023 | 950,000 | 12.50 | % | |||||||
7,600,000 | After September 29, 2023 | 0 | 0.00 | % |
4.4 | A reduction of the Purchase Price under the SPA by the Reduction Amount II would result in a corresponding reduction of the Loan Amount I. Therefore, the Parties (except for 123tv Beteiligungs) hereby agree, subject to the fulfilment or due waiver of the Condition Precedent, to allocate the Reduction Amount II to the Loan Amount I and reduce the Loan Amount I by the Reduction Amount II with effect as of the receipt of (y) the payments as per the table below (columns 1 and 2) by the Sellers to be allocated among the Sellers according to their Quota as set out below, and (z) interest accrued on the Loan Amount I until date of payment pursuant to (y) above, whereby the Loan Amount I reduced by (i) the payments as per the table below (columns 1 and 2) and (ii) the Reduction Amount II shall be the “Loan Amount II”: |
Payment in EUR | Payment Date | Reduction A mount II in EUR | Discount on Amount equal to Loan Amount I minus 10% Purchase Price in EUR | Loan Amount II in EUR | |||||||||||
3,800,000 | On or before June 1, 2023 | 3,800,000 | 50.00 | % | 4,000,000 | ||||||||||
4,750,000 | After June 1, 2023 and on or before June 30, 2023 | 2,850,000 | 37.50 | % | 4,000,000 | ||||||||||
5,700,000 | After June 30, 2023 and on or before July 31, 2023 | 1,900,000 | 25.00 | % | 4,000,000 | ||||||||||
6,650,000 | After July 31, 2023 and on/or before September 29, 2023 | 950,000 | 12.50 | % | 4,000,000 | ||||||||||
7,600,000 | After September 29, 2023 | 0 | 0.00 | % | 4,000,000 |
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4.5 | Without prejudice to Section 5 (Sale and Transfer Participation in 1-2-3.TV), the Loan Amount II shall be due and payable in full together with all accrued interest on September 29, 2023. |
4.6 | The Parties (except for 123tv Beteiligungs) agree that interest shall be accrued and payable on the relevant principal amounts of the Loan Amount, the Loan Amount I and the Loan Amount II as the case maybe in accordance with the Vendor Loan Agreement as amended by this Agreement. |
4.7 | Except as specifically provided in this Section 4, the SPA shall not be amended, and the provisions of the SPA shall remain in full force and effect. |
4.8 | The Parties (except for 123tv Beteiligungs) acknowledge and agree that the payments under the Vendor Loan Agreement as amended by this Agreement may be made by iMedia on behalf of the Purchaser directly to the Sellers with debt releasing effect for the Purchaser. |
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4.9 | Subject to the condition precedent of the full satisfaction or due waiver or settlement of the claims for payments of the Loan Amount, the Loan Amount I andthe Loan Amount II, including by the legally effective sale and transfer of the Sold Shares in accordance with Section 5 below, as well as accrued interest in accordance with the Vendor Loan Agreement as amended by this Agreement (“Settlement Condition”), the Parties (except for 123tv Beteiligungs) agree that (i) all claims under the Vendor Loan Agreement as amended by this Agreement among the Parties (except for 123tv Beteiligungs) (irrespective whether actual or contingent, known or unknown) are settled and each Party waives any and all such claims under the Vendor Loan Agreement as amended by this Agreement against all other Parties (except for 123tv Beteiligungs) (irrespective whether actual or contingent, known or unknown) without prejudice to any other secondary rights of the relevant Parties for breach of contract, and (ii) Section 2.7 of the Initial Vendor Loan Agreement shall not apply. |
4.10 | Notwithstanding anything stated in this Agreement, the Purchaser shall be entitled to repay fully or partially the Loan Amount at any time without any early repayment penalty to be paid. |
5. | Sale and Transfer Participation in 1-2-3.TV |
5.1 | Subject to the fulfilment or due waiver of the Condition Precedent, the Sellers as purchaser and 123tv Beteiligungs as seller undertake to enter into an agreement (“10% SPA”) under which 123tv Beteiligungs sells and transfers to the Sellers shares each in the nominal value of EUR 1 in 1-2-3.TV, the total amount of the nominal value of which are equal to 10% of the outstanding share capital of 1-2-3.TV, together with all rights attaching to the Sold Shares including the rights to receive dividends unless dividends were paid before or on December 31, 2022 pursuant to the allocation as follows (“Sold Shares”): |
No. | Seller | Indirect Ownership Interest in 1-2-3.TV | Nominal Value of Sold Shares | |||||||||
1. | Seller 1 | 3.826 | % | 6,969 | ||||||||
2. | Seller 2 | 3.675 | % | 6,694 | ||||||||
3. | Seller 3 | 2.499 | % | 4,552 | ||||||||
Total | 10.00 | % | 18,215 |
5.2 | Subject to the fulfilment or due waiver of the Condition Precedent, the Sellers and 123tv Beteiligungs undertake to execute the 10% SPA and a shareholders’ agreement relating to 1-2-3.TV among each other (“SHA”) as reasonably possible after the Singing Date, however, at the latest by April 30, 2023 provided that: |
5.2.1 | The aggregate purchase price for the Sold Shares shall be equal to EUR 4,000,000 (allocated pro rata to the Sold Shares) (“10% Purchase Price”) and shall not be payable in cash but by assigning a claim of the Sellers against the Purchaser for payment of the Loan Amount II (i.e. an amount of EUR 4,000,000) under the Vendor Loan Agreement as amended by this Agreement. |
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5.2.2 | Under the SHA (i) 123tv Beteiligungs shall be granted a customary drag along right and an approval right for the transfer of the Sold Shares and (ii) the Sellers shall be granted a customary tag along right and a customary right of free transfer of the Sold Shares held to another Seller or a legal entity which is affiliated in the meaning of Sections 15 seqq. German Stock Corporation Act or managed or advised by the same legal entity as the respective Seller. |
5.2.3 | In case any payments of 1-2-3.TV on the Total Loan Amount, the Loan Amount I respectively the Loan Amount II made upon approval or request by the Sellers pursuant to Section 8.1 of the Initial Vendor Loan Agreement should (i) give rise to any expenses (Aufwand) (in particular for the reason that the corresponding repayment claims of 1-2-3.TV towards the Purchaser is not or ceases to be valuable) which reduce 1-2-3.TV’s trailing twelve (12) month EBITDA used for the determination of the Fair Market Value (as defined below) or (ii) have otherwise a negative effect for the purpose of determining the Fair Market Value, such effects shall be normalized for purposes of the determination of 1-2-3.TV’s trailing twelve (12) month EBITDA and net debt, as the case may be, each as used for the calculation of the Fair Market Value. |
5.2.4 | The SHA provides for a call/put option (“10% Call/Put Option”) to re-purchase by 123tv Beteiligungs all Sold Shares, which either the Purchaser or the Sellers (jointly) can choose to exercise after a two (2) years’ period beginning of this Agreement (“2-Years Waiting Period”), whereby the following shall be agreed: |
(a) | The 10% Call/Put Option can only be validly exercised within three (3) months after the expiry of the 2-Years Waiting Period towards the relevant other Parties. |
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(b) | The total purchase price for the Sold Shares under the 10% Call/Put Option shall be equal to 10% of the Fair Market Value of 1-2-3.TV as per the end of 2-Years Waiting Period (“Effective Date”), however, not less than EUR 2,000,000.00. The “Fair Market Value” shall be equal to eight (8) times 1-2-3.TV’s trailing twelve (12) month normalized EBITDA minus any outstanding net debt of 1-2-3.TV as per the Effective Date (in each case to be determined based on the consolidated financial statements of 1-2-3.TV as of the Effective Date to be established in accordance with German GAAP and past practice), it being understood that any shareholder loans granted by the Purchaser and its Affiliates until the transfer in rem of the Sold Shares under the 10% Call/Put Option shall not qualify as debt. The SHA will provide that 123tv Beteiligungs provides for a calculation of the Fair Market Value and a customary dispute resolution mechanism with a neutral expert according to Section 317 German Civil Code being appointed if the Sellers and the 123tv Beteiligungs do not agree upon an objection against the 123tv Beteiligungs’ calculation. |
5.3 | The Purchaser, iMedia and 1-2-3.TV hereby consent to and undertake vis-à-vis the Sellers to procure that all relevant approvals are obtained to effect the transactions set out under Section 5. |
5.4 | The Purchaser, iMedia and 1-2-3.TV undertake vis-à-vis the Sellers to procure that the Sold Shares will be sold and transferred free of third party rights under the 10% SPA. |
5.5 | The Sellers shall be entitled to withdraw from the undertaking under Sections 5.1 and 5.2 it the transaction contemplated under Sections 5.1 and 5.2 are not fulfilled by April 30, 2023 by giving written notice to the Purchaser. |
6. | Waiver of Claims under SPA |
Subject to the fulfilment or due waiver of the Settlement Condition, the Parties agree that the Purchaser hereby unconditionally and irrevocably waives any Purchaser’s Claims (as defined in clause 15.1 of the SPA), any Leakage Claims (as defined in clause 15.2 of the SPA), any Tax Indemnification Claims as well as any further potential claims and remedies of the Purchaser against the Sellers under or in connection with a breach of the Sellers’ Guarantees (as defined in clause 13.1 of the SPA) or a breach of the Sellers’ Covenants (as defined in clause 14.4 of the SPA) or under the tax indemnity pursuant to clause 18 of the SPA (irrespective whether actual or contingent, known or unknown), in each case except for the Insured Claims without prejudice to any provisions on exclusion or time-limitation of such claims under the SPA and the fact that the Purchaser has not asserted any such Claims against the Sellers.
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7. | Guarantees |
7.1 | The Purchaser, iMedia, 123tv Beteiligungs and 1-2-3.TV (each a “Guarantor” and collectively the “Guarantors”) hereby each guarantee to the Sellers as joint debtors by way of an independent guarantee (selbständiges Garantieversprechen) pursuant to Section 311 para. 1 BGB that the statements set forth in Sections 7.2 through 7.4 (each a “Guarantee” and collectively the “Guarantees”) are true and correct as of the date of this Agreement and as of the date of the in rem (mit dinglicher Wirkung) transfer of the Sold Shares to the Sellers (“10% SPA Closing Date”). The Guarantees shall neither constitute a quality agreement within the meaning of Section 434 para. 2 BGB (Beschaffenheitsvereinbarung) nor shall they be construed as a guarantee within the meaning of Sections 443, 444 BGB (Garantie für die Beschaffenheit der Sache). |
7.2 | Capacity |
7.2.1 | The Guarantors are validly existing and in good standing and have the requisite power and authority to enter into and consummate this Agreement. |
7.2.2 | This Agreement establishes binding obligations of the respective Guarantor against the respective Party in accordance with its respective terms. The Guarantors are not obligated to obtain consents from third parties (including government authorities or other sovereign entities) to enter into or consummate this Agreement or to notify any such third party of entering into or consummation of this Agreement. Claims, other rights of any kind and legal relationships of the Guarantors and its Affiliates are not revoked, terminated, amended or impaired in any other way due to entering into or consummation of this Agreement, and the conclusion and consummation of this Agreement do not establish any termination rights, claw back rights or other rights of the relevant contractual partners of the Guarantors and its Affiliates |
7.2.3 | By entering into and performing this Agreement, the Guarantors and its Affiliates are neither infringing any third party rights nor breaching any other kind of obligation, including those arising under (i) statutes, ordinances, articles of association, international treaties, administrative regulations, judgments, resolutions, decisions, permits or other (individual regulatory) decisions or other rules issued by a supranational, international, national, regional or local body, establishment, government authority or any court, tribunal or other sovereign entity or an arbitration tribunal as well as customary rules and practices or (ii) contracts or other contractual obligations |
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7.3 | No Insolvency, etc. |
No insolvency, reorganisation or similar proceedings in Germany or abroad have been applied for or instituted against the assets of any of the Guarantor or their respective Affiliates, and no compulsory judicial enforcement proceedings or any similar measures have been applied for or instituted against all or some of assets of any of the Guarantor or their respective Affiliates. There are no circumstances which would justify the institution of such proceedings or any actions seeking to void or challenge this agreement under bankruptcy or insolvency law.
7.4 | Corporate Matters relating to 1-2-3.TV and Subsidiaries |
7.4.1 | As per the 10% SPA Closing Date, 123tv Beteiligungs is the sole and unrestricted legal and beneficial owner of the Sold Shares. 123tv Beteiligungs is entitled to freely dispose of the Sold Shares without such disposal infringing any rights of a third party. As per the 10% SPA Closing Date, the Sold Shares (i) are free and clear of any liens, encumbrances or other third party rights, and there are no pre-emptive rights, rights of first refusal, options or other rights of any third party to purchase or acquire any of the Shares, (ii) are not subject to any trust arrangements (Treuhandverhältnis), silent partnership (stille Beteiligung), sub-participations (Unterbeteiligung) or similar arrangements and (iii) are not subject to any commitment to give or create any such encumbrance or such right and, no person has claimed to be entitled to any encumbrance or such right in writing. |
7.4.2 | Except for 1-2 Play GmbH (which is dormant), 1-2-3.TV holds no shares or contractual participations in other entities and is not obliged to acquire such shares or contractual participations in other entities. |
7.4.3 | The Sold Shares are fully paid in, have not been repaid and are not subject to any contribution obligation (Nachschusspflicht). No hidden contributions in kind (verdeckte Sacheinlage) in respect of any of the Sold Shares have been made. |
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7.4.4 | No insolvency, reorganisation or similar proceedings in Germany or abroad have been applied for or instituted against the assets of any of 1-2-3.TV, and no compulsory judicial enforcement proceedings or any similar measures have been applied for or instituted against all or some of assets of 1-2-3.TV. There are no circumstances which would justify the institution of such proceedings or any actions seeking to void or challenge this agreement under bankruptcy or insolvency law. |
7.4.5 | No measures relating to the dissolution (Auflösung), liquidation (Liquidation) or reorganization of 1-2-3.TV or the cessation of the business of any Group Company have been taken or are immanent. |
8. | Remedies |
In the event of a breach of a Guarantee, (i) the Guarantors shall put the respective Seller, into the position such Seller would have been in if the respective Guarantee had not been breached (restitution in kind – Naturalrestitution), or (ii) if the Guarantors are unable to achieve the restitution in kind within ten (10) Business Days after having been notified by the respective Seller or finally refuse the restitution in kind, or restitution in kind is impossible or unreasonable, pay monetary damages (Schadensersatz in Geld) to the respective Seller in accordance with the legal principles of calculation of damages, mitigation of damages and offsetting of advantages (Schadensberechnung, Schadensminderung und Vorteilsanrechnung) pursuant to sections 249 et seqq. of the German Civil Code (BGB). Sections 377 German Commercial Code (HGB) and 442 BGB shall not apply. Any claims of any of the Sellers against 1-2-3.TV under this Section 8 shall be deferred, but not excluded, to the extent a payment of 1-2-3.TV on such claim would infringe applicable capital maintenance rules.
9. | Cost and Expenses |
9.1 | The cost of notarization of this Agreement, the 10% SPA and the SHA shall be borne by the Purchaser. |
9.2 | Each of the Parties shall bear its own legal and other costs and expenses incurred in connection with the execution, implementation and consummation of this Agreement, including all previous negotiations and communications. |
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10. | Waiver of Conditions Precedents |
The Parties agree that the Sellers may unilaterally waive any conditions precedents set out in this Agreement, which all shall be deemed conditions precedents in the meaning of Section 158 para. 1 German Civil Code, by joint declaration in writing vis-à-vis the Purchaser.
11. | Rights of Third Parties |
Except as set forth in the immediately succeeding sentence, and as explicitly otherwise provided for in this Agreement, this Agreement shall only grant rights to the Parties and shall not constitute a contract for the benefit of third parties (kein Vertrag zugunsten Dritter) or a contract with protective effect for third parties (kein Vertrag mit Schutzwirkung zugunsten Dritter). Notwithstanding anything to the contrary herein, each Party hereby ratifies and reaffirms the validity and enforceability of Section 2.6 of the Initial Vendor Loan Agreement, and acknowledges and agrees that the Senior Indebtedness described in Section 2.6(x) thereof as in effect on the date hereof continues to constitute Senior Indebtedness thereunder.
12. | Amendments; Notices |
12.1 | Any amendment of or notice or other declaration (the “Notice(s)”) under or in connection with this Agreement shall be made in writing (in Schriftform) unless a notarization or any other stricter form is required by mandatory law or in this Agreement. The written form shall include exchange of letters, fax and exchange of emails if scans of the under- signed documents are attached but no other transmission by way of telecommunication. The electronic form shall not suffice to comply with the written form requirement. |
12.2 | All Notices to be given to a Party or any of them hereunder shall be addressed as set out in the SPA. |
13. | Choice of Law and Place of Jurisdiction |
13.1 | This Agreement shall be governed by and construed in accordance with the substantive laws of Germany without recourse to the conflicts of laws provisions. |
13.2 | Any dispute, controversy or claim arising from or in connection with this Agreement or its validity shall be exclusively and finally settled by three arbitrators in accordance with the Arbitration Rules of the German Institution of Arbitration e. V. (DIS) as in effect from time to time without recourse to the ordinary courts of law. The place of arbitration shall be Munich, Germany. The language of the arbitral proceedings shall be English. Documents originally prepared for purposes other than the relevant proceeding in the German language do not have to be translated into the English language (unless so required by arbitration tribunal). |
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13.3 | In the event that mandatory applicable law requires any matter arising out of or in connection with this Agreement and its execution to be decided upon by an ordinary court of law, the competent courts in Munich, Germany, shall have the exclusive jurisdiction. |
14. | Severability |
If any provision of this Agreement should be or become wholly or partially void (nichtig), ineffective (unwirksam) or unenforceable (undurchsetzbar), the validity, effectiveness and enforceability of the other provisions of this Agreement shall not be affected thereby. Any such invalid, ineffective or unenforceable provision shall be deemed replaced by such valid, effective and enforceable provision as comes closest to the economic intent and purpose of the invalid, ineffective or unenforceable provision as regards subject-matter, extent (Maß), time, place and scope (Geltungsbereich). The aforesaid shall apply mutatis mutandis to any gap (Lücke) in this Agreement. This Section 14 shall not merely operate as a shift of the burden of proof (Beweislastumkehr) but Section 139 BGB shall be contracted out in its entirety.
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Exhibit 10.7
SIENA LENDING GROUP LLC
9 W Broad Street, Fifth Floor
Stamford, CT 06902
as of April 10, 2023
iMedia Brands, Inc.
6740 Shady Oak Road
Eden Prairie, Minnesota 55344
Attention: Chief Financial Officer
Telephone: 952-943-6000
Facsimile: 952-943-6111
Email: mwageman@imediabrands.com
Re: | Agreement re Chief Transformation Officer, Special Committee of Board of Directors and Investment Banker |
Ladies and Gentlemen:
Reference is made to (a) that certain Loan and Security Agreement dated as of July 30, 2021 (as amended, restated, supplemented or modified from time to time, the “Loan Agreement”) among IMEDIA BRANDS, INC., a Minnesota corporation (“iMedia”), VALUEVISION INTERACTIVE, INC., a Minnesota corporation (“Value Interactive”), VALUEVISION RETAIL, INC., a Delaware corporation (“Value Retail”), PW ACQUISITION COMPANY, LLC, a Minnesota limited liability company (“PW Acquisition”), FL ACQUISITION COMPANY, a Minnesota corporation (“FL Acquisition”), VALUEVISION MEDIA ACQUISITIONS, INC., a Delaware corporation (“Value Media”), JWH ACQUISITION COMPANY, a Minnesota corporation (“JWH Acquisition”), NORWELL TELEVISION, LLC, a Delaware limited liability company (“Norwell”), 867 GRAND AVENUE LLC, a Minnesota limited liability company (“867 Grand Avenue”), PORTAL ACQUISITION COMPANY, a Minnesota corporation (“Portal” and together with iMedia, Value Interactive, Value Retail, PW Acquisition, FL Acquisition, Value Media, JWH Acquisition, Norwell, 867 Grand Avenue and any other Person who from time to time becomes a Borrower under the Loan Agreement, collectively, the “Borrowers”), VVI FULFILLMENT CENTER, INC., a Minnesota corporation (“VVI Fulfillment”), EP PROPERTIES, LLC, a Minnesota limited liability company (“EP Properties”), IMEDIA&123TV HOLDING GMBH (“iMedia&123tv Holding” and together with VVI Fulfillment, and EP Properties, collectively, the “Guarantors”), SIENA LENDING GROUP LLC, as a lender (“Siena” and together with any other financial institutions who become part to the Loan Agreement referred to below from time to time, each a “Lender” and collectively, the “Lenders”) and SIENA LENDING GROUP LLC, as administrative and collateral agent for the Lenders (in such capacity, the “Agent”) and (b) that certain Forbearance Agreement, Tenth Amendment to Loan and Security Agreement and Amendment to Fee Letter dated as of the date hereof (the “Forbearance Agreement”) among the Loan Parties, Agent and Lenders. Capitalized definitional terms used in this letter agreement (this “Agreement”) and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.
In consideration of the agreements set forth in the Loan Agreement and the Forbearance Agreement, Loan Parties, Agent and Lenders hereby agree as follows:
(1) Independent Directors. Borrowers shall appoint and continue to maintain at all times during the Forbearance Period a special committee of its board of directors (the “Special Committee”) comprised solely of Independent Directors (as herein defined) reasonably acceptable to Agent. The Special Committee shall be comprised of not less than three members. Borrowers shall cause the Special Committee to be maintained at all times during the Forbearance Period (as defined in the Forbearance Agreement). The Special Committee shall be appointed pursuant to, and shall have the power and authority set forth in, the resolution of the board of directors substantially in the form attached hereto as Exhibit A. Such resolution shall remain in full force and effect at all times during the Forbearance Period, and shall not be amended or modified in any respect during the Forbearance Period. For purposes hereof “Independent Director” shall have the meaning set forth on Exhibit B hereof.
(2) Chief Transformation Officer. Borrowers shall retain and continue to use at all times during the Forbearance Period, a chief transformation officer reasonably acceptable to the Agent (the “CTO”) (it being acknowledged and agreed that Huron Consulting Group is an acceptable chief transformation officer), pursuant to the terms of an engagement letter in form and substance satisfactory to the Agent and Lenders, which shall in any event include the scope and authority set forth on Exhibit C hereto. The CTO’s responsibilities shall be consistent with the engagement letter and Exhibit C hereto, and the CTO shall report directly to the Special Committee. Such engagement and scope and authority shall remain in full force and effect at all times during the Forbearance Period, and shall not be amended or modified in any respect during the Forbearance Period. Agent and Lenders are authorized to communicate directly with the CTO (including, without limitation, without any Loan Party or any member of the Special Committee being present) regarding all matters directly relating to the services to be rendered by the CTO to Loan Parties, including, without limitation, to discuss all financial reports, business information, findings, recommendations and opinions of the CTO. The CTO shall be authorized and requested by Loan Parties to provide Agent and Lenders with copies of all final reports to the Loan Parties prepared by the CTO.
(3) Investment Banker. No later than ten (10) Business Days following the date hereof, Borrowers shall retain, and thereafter continue to use at all times during the Forbearance Period, an investment banker acceptable to the Agent (the "Banker") (it being acknowledged and agreed that each of Houlihan Lokey and Jeffries is an acceptable investment bank), pursuant to the terms of an engagement letter in form and substance satisfactory to the Agent. The Banker’s responsibilities shall be consistent with the engagement letter, and the Banker shall report directly to the Special Committee. Agent and Lenders are authorized to communicate directly with the Banker (including, without limitation, without any Loan Party or any member of the Special Committee being present) regarding all matters directly relating to the services to be rendered by the Banker to Loan Parties, including, without limitation, to discuss all financial reports, business information, findings, recommendations and opinions of the Banker. The Banker shall be authorized and requested by Loan Parties to provide Agent and Lenders with copies of all final reports to the Loan Parties prepared by the Banker.
(4) Effect of Agreement. Notwithstanding anything to the contrary in any Loan Document (including, without limitation, Section 7.1 of the Loan Agreement) the Borrowers’ failure to comply in all respects with any covenant in Section (1), (2) or (3) of this Agreement shall constitute an immediate Event of Default. This Agreement is a Loan Document.
(5) Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AGREEMENT WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
(6) Counterparts; Facsimile Signatures. This Agreement may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by e-mail, Docusign, facsimile or other similar form of electronic transmission shall be deemed to be an original signature hereto.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above written.
BORROWERS: | ||
IMEDIA BRANDS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION RETAIL, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
FL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PW ACQUISITION COMPANY, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION MEDIA ACQUISITIONS, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
JWH ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
NORWELL TELEVISION, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
867 GRAND AVENUE LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
VALUEVISION INTERACTIVE, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
PORTAL ACQUISITION COMPANY | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
GUARANTORS: | ||
VVI FULFILLMENT CENTER, INC. | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO | ||
EP PROPERTIES, LLC | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: CEO |
IMEDIA&123TV HOLDING GMBH | ||
By: | /s/ Timothy Peterman | |
Name: Timothy Peterman | ||
Its: Managing Director |
SIENA LENDING GROUP LLC, as Agent | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Renee Singer | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory | |
SIENA LENDING GROUP LLC, as a Lender | ||
By: | /s/ Renee Singer | |
Name: | Renee Singer | |
Title: | Authorized Signatory | |
By: | /s/ Renee Singer | |
Name: | Steven Sanicola | |
Title: | Authorized Signatory |
CRYSTAL FINANCIAL SPV LLC, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director | |
CRYSTAL FINANCIAL LLC D/B/A SLR CREDIT SOLUTIONS, as a Lender | ||
By: | /s/ Mirko Andric | |
Name: | Mirko Andric | |
Title: | Senior Managing Director | |
NORTH MILL CAPITAL LLC D/B/A SLR BUSINESS CREDIT, as a Lender | ||
By: | /s/ Beatriz Hernandez | |
Name: | Beatriz Hernandez | |
Title: | EVP |
Exhibit A
Special Committee Charter
IMEDIA BRANDS, INC.
Special Committee Charter
Effective: April 3, 2023
Purpose
The Special Committee (the “Committee”) is appointed by the board of directors (the “Board”) of iMedia Brands, Inc. (the “Company”) to oversee on behalf of the Board, among other things:
· | the Company’s engagement of a financial advisor (the “Financial Advisor”); |
· | the activities of the Company’s Chief Transformation Officer (the “CTO”); |
· | the Company’s selection and engagement of an investment banker (the “Banker”) to lead the exploration of Strategic Transactions (as defined herein); |
· | the Company’s overall balance sheet transformation process, including working capital enhancements, cost reduction initiatives and entry into any material and/or non-ordinary course contractual arrangements; and |
· | the Company’s investment and cash management policies and implementation thereof. |
· | a potential financial restructuring of the Company and its subsidiaries, including potential strategic transactions, recapitalizations, financings, amendments, waivers, and material sales outside the ordinary course of business, among other transactions (the “Strategic Transactions”). |
Consistent with this function, the Committee should encourage continuous improvement of, and foster adherence to, the company’s policies, procedures, and practices at all levels.
Membership
The Committee shall consist of three (3) directors who meet the independence requirements of the Securities and Exchange Commission and the NASDAQ Stock Market applicable to members of the audit committee of the Company. Each independent director shall possess experience with the legal, business, and/or financial considerations that may be relevant or applicable to one or more Strategic Transactions that may be considered. The members of the Committee shall be appointed by and may be replaced by the Board, and the Committee may be dissolved by a vote of the Board. Members of the Board and management may attend Committee meetings by invitation of the Committee. No member of the Committee shall be an executive officer or employee of the Company, nor shall any member have any commercial relationship with the Company. For these purposes, serving as a director of the Company (including receipt of compensation in that capacity) shall not disqualify an individual from serving on the Committee.
Committee members are appointed by the Board to serve until their successors are duly appointed or until their retirement, resignation, death or removal by the Board. One member is appointed by the Board to serve as the Committee’s chairperson.
The initial members of the Committee shall be Landel Hobbs, Jill Frizzley, and Steven G. Panagos.
Authority
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee shall have the authority, in its sole discretion, to retain or obtain the advice of independent legal, accounting or other advisers, as it deems necessary to carry out its duties, including complete authority to approve their fees and other retention terms. The Committee shall receive appropriate funding from the Company, as reasonably determined by the Committee, for the payment of (i) compensation to any adviser in connection with any Strategic Transaction, including the Financial Advisor and the Banker; (ii) compensation to any outside legal, accounting or other advisers retained by the Committee; and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.
The Committee shall have the sole power and authority on behalf of the Board to review, discuss, consider, examine, evaluate, investigate, analyze, assess, explore, respond to, communicate regarding, solicit, pursue, negotiate (or authorize others to negotiate) any Strategic Transaction, including the forms of all requisite documentation or agreements in connection with any Strategic Transaction. The Committee shall additionally have the sole power and authority to recommend, or not recommend, any Strategic Transaction and, if necessary and appropriate, recommend that the Board submit any such Strategic Transaction to the Company’s stockholders for their approval. The Committee shall not have the ability to enter into any such Strategic Transaction without approval of the Board.
The Committee shall have the sole authority and direct responsibility to appoint and retain or replace professionals on behalf of the Company with respect to one or more Strategic Transactions, including the Financial Advisor and the Banker, each at the expense of the Company, as well as to determine its advisors’ compensation and terms of engagement, and to oversee the work of its advisors in connection with its scope of authority. The CTO shall report directly to the Committee and perform his or her activities as directed by the Committee.
Meetings and Communications
The Committee shall meet as often as it determines necessary. The Committee is empowered to hold at any time such meetings as any member of the Committee may deem necessary or appropriate. The Committee will cause to be kept adequate minutes of all its proceedings, and shall report regularly to the Board regarding its actions. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or other electronic technology), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board.
The Committee is to maintain free and open communications with its and the Company’s advisors, the CTO, and financial and senior management.
The Committee shall make regular reports to the full Board on the results of the Committee’s actions and make such recommendations as deemed appropriate by the Board and/or Committee.
Responsibilities
The Committee is hereby delegated authority on behalf of the Board (collectively, the “Responsibilities”) to hold exclusive authority to:
1. | Oversee the CTO. |
2. | Cause the Company to establish an investment and cash management policy for the Company’s cash and investment assets, including with respect to cash disbursements, and to review the Company’s prior investment cash management policies and disbursements, which shall be under the day-to-day supervision of the CTO and the CTO’s designees. |
3. | Review and approve modifications of the Company’s investment and cash management policies. |
4. | Oversee the CTO’s administration of these policies, including the appointment of investment consultants, advisors, custodians, and managers of the Company’s cash and investment assets, and retain sole authority to approve material disbursements. |
5. | Oversee and direct the Company’s efforts to replace its existing current asset-based loan facility (the “ABL”), and make recommendations to the Board regarding any transaction with respect to the Company and its applicable subsidiaries entering-into one more or modifications, amendments, forbearances, and/or refinancings with respect to the ABL. |
6. | Oversee the CTO’s efforts to monetize the Company’s assets, including slow moving inventory, its working capital accounts, real estate, intellectual property, or other fixed assets, and recommend any material sales of such assets to the Board. |
7. | Oversee the Banker selected by the Board in its assessments of strategic alternatives and “go to market” plan and review the Company’s pursuit of other strategic alternative activities, if any, recommended by the Company’s investment bank. |
7. | Be directly responsible for the appointment, compensation, retention and oversight of the work of (i) the Financial Advisor and (ii) the Banker to assist the Company with respect to Strategic Transactions. |
8. | Provide guidance and direction on proposed initiatives to improve Company performance with respect to working capital enhancements and cost saving, and other transformational initiatives. |
9. | Without limiting the foregoing, oversee and direct the evaluation of Strategic Transactions by the Company and its advisors, and to make recommendations to the Board with respect to the foregoing (and, for the avoidance of doubt, Board approval shall be required for the ultimate disposition of material lines of business). |
10. | [Reserved]. |
11. | Evaluate at least annually the performance of, and make recommendations to the Board and/or any duly appointed Committee of the Board, with respect to the compensation of, the Chief Executive Officer and CTO. |
12. | Review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval. |
13. | Annually review the performance of the advisors. |
14. | Causing one or more of the Company’s subsidiaries to act in furtherance of the foregoing. |
13. | Any other responsibilities expressly delegated to the Committee by the Board from time to time. |
Limitation of Committee’s Role
To the fullest extent permitted by law, each member of the Committee, in exercising such member’s duties hereunder, shall be entitled to rely in good faith on the expertise and knowledge of, and accuracy and completeness of the information, reports, opinions and statements provided to the Committee by, management, officers and employees of the Company, independent auditors, investment advisors, legal counsel, and other advisors in carrying out its oversight responsibilities. It is not the duty of the Committee to plan or conduct audits, determine that the Company’s financial statements and disclosures are complete, accurate, and in accordance with generally accepted accounting principles and applicable rules and regulations, or to make specific investment asset management decisions. These are the responsibilities of the independent auditor and management. Management is also responsible for establishing and maintaining an appropriate system of (i) internal controls and procedures for financial reporting and (ii) disclosure controls and procedures in accordance with applicable law.
The Committee, absent Board approval and/or revisions to this Charter, shall not have the unilateral right to hire, fire or alter the compensation of the Company’s executive officers or to cause the sale or disposition of the Company, whether as a going concern or with respect to all or substantially all of the Company’s assets.
Votes Required for Action
A majority of the members of the Committee shall be present at any meeting of the Committee in order to constitute a quorum for the transaction of business at such meeting, and the act of a majority present shall be the act of the Special Committee.
Access to Information
The Committee and its advisors shall have full access to all information, records and other materials of the Company and its subsidiaries, including any information, records and materials pertaining to any proposed Strategic Transaction. The Company shall cause the officers, management personnel and other employees of the Company and its subsidiaries to cooperate with the Committee (including by attending meetings and discussions with the Committee, at the request of the Committee) and to provide any such information, and take any such actions, as requested by it or its advisors in furtherance of the Committee’s duties.
Indemnification
The Company shall indemnify, defend and hold harmless the members of the Committee, and each of them, to the maximum extent permitted by applicable law, from and against any and all losses, costs, expenses, damages and claims, including but not limited to, attorneys’ fees and expenses and court costs, directly or indirectly incurred by them (or any of them) in connection with their activities as members of the Committee or the activities, decisions or determinations of the Committee and, to the maximum extent permitted by applicable law and as set forth in the Bylaws of the Company, the Company (and its subsidiaries and successors and assigns) shall promptly advance all fees, costs and expenses (including attorneys’ fees) incurred by any such member of the Committee with respect to any and all such claims; provided that the foregoing shall not limit in any way any indemnification that the members of the Committee are otherwise entitled to.
Amendment of Charter
This Charter may be amended by a vote of the full Board.
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Exhibit B
Independent Director
“Independent Director” means a person other than an executive officer or employee of any Loan Party or any other individual having a relationship which, in the opinion of the iMedia’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. For purposes of this rule, "Family Member" means a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person's home.
The following persons shall not be considered independent:
(A) a director who is, or at any time during the past three years was, employed by a Loan Party;
(B) a director who accepted or who has a Family Member who accepted any compensation from the Loan Parties in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:
(i) compensation for board or board committee service;
(ii) compensation paid to a Family Member who is an employee (other than an executive officer) of the Loan Parties; or
(iii) benefits under a tax-qualified retirement plan, or non-discretionary compensation.
Provided, however, that in addition to the requirements contained in this paragraph (B), audit committee members are also subject to additional, more stringent requirements under Nasdaq Marketplace Rule 5605(c)(2).
(C) a director who is a Family Member of an individual who is, or at any time during the past three years was, employed by a Loan Party as an executive officer;
(D) a director who is, or has a Family Member who is, a partner in, or a controlling Shareholder or an executive officer of, any organization to which a Loan Party made, or from which a Loan Party received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:
(i) payments arising solely from investments in a Loan Party’s securities; or
(ii) payments under non-discretionary charitable contribution matching programs.
Exhibit C
CTO Scope
1. Provide guidance and oversight to assist the Loan Parties with:
a. Replacement of Loan Agreement.
b. Monetization of certain assets (including slow-moving inventory), and/or
c. Pursuit of other strategic alternatives identified by its Banker.
2. Evaluate and develop with the Loan Parties, the Banker and other advisors analyses and presentations with respect to strategic alternatives being considered by the Loan Parties;
3. Assist the Banker and the Loan Parties’ counsel and other advisors in the implementation and execution of the ongoing sale process, including but not limited to design and presentation of material to the Agent and Lenders and investors regarding terms of such sales;
4. Maintain, with assistance from iMedia’s Treasurer, the Loan Parties’ financial and liquidity planning, including:
a. Maintain a 13-week cash flow forecast, supporting borrowing base calculation, and variance reporting requirements (i.e., budget versus actuals).
b. Lead weekly cash management meetings with the Loan Parties;
c. Lead weekly status updates with the Agent, Lenders and their advisors;
d. Oversee, in concert with iMedia’s office of the Chief Financial Officer (“CFO”), the management of cash disbursements, including:
i. Authorization of payments relating to accounts payables and other financial obligations; and
ii. Communication of past-due payments or expected timing to satisfy past due obligations with third-party vendors.
e. Reconcile cash between the general ledger and bank balance weekly.
5. Approve, in consultation with the Special Committee, all negotiations and agreements with each Company's major customers, secured creditors (including the Agent and Lenders), and any other holders of secured or unsecured debt;
6. Prepare, update, and deliver all information requested by the Agent and Lenders and their advisors under the Loan Documents;
7. Deliver guidance and direction on proposed initiatives to improve performance with respect to:
a. Working capital enhancements;
b. Cost saving and other transformation initiatives; and
c. Guidance prior to entering any material and/or non-ordinary course contractual agreements.
8. Monitor the Loan Parties’ activities and communications with its outside accounting firm.
9. Assist in negotiations/communications with its key constituents.
10. Provide such other services as requested by the Special Committee and agreed by the CTO.
Exhibit 10.8
MASTER LEASE AGREEMENT
April 10, 2023
LANDLORD:
Pontus IMB Portfolio, LLC, a Delaware limited liability company
TENANT:
iMedia Brands, Inc., a Minnesota corporation
LEASE AGREEMENT
This Master Lease Agreement (this “Lease”), dated for reference purposes only as of April 10, 2023 (the “Effective Date”), is made by and between Pontus IMB Portfolio, LLC, a Delaware limited liability company (“Landlord”), and iMedia Brands, Inc., a Minnesota corporation (“Tenant”), with reference to the recitals set forth below.
RECITALS
A. Landlord is the owner of certain properties located at (i) 6740 Shady Oak Lane, Eden Prairie, Minnesota (the “Minnesota Property”); (ii) 4811 Nashville Road, Bowling Green, Kentucky; and (iii) 4813 Nashville Road, Bowling Green, Kentucky (the “Kentucky Property,” and collectively with the Minnesota Property, the “Property” or “Properties”). Legal Descriptions of the Properties are attached as Exhibit A to this Lease.
B. The Property for purposes hereof includes all of Landlord’s right, title and interest in and to all easements, appurtenances and rights relating to the Property, including without limitation, the machinery, equipment and systems necessary for the operation of the Property, including, (i) all apparatus, equipment, fixtures or articles, whether in single units or centrally controlled, used to supply heat, air-conditioning, water, lights, power, ventilation or other services; (ii) water heaters, boilers, sinks, water closets, water basins, pipes, faucets, or other plumbing fixtures; (iii) lighting, light fixtures and signage supports; and (iv) all items of equipment attached to the Property such that its separation therefrom will materially injure the Property, including the racking systems and any related accessories (collectively, the “Property Equipment.”); provided that the Property Equipment shall not include (i) the software system that operates the sorting equipment located on the Kentucky property, and (ii) any personal property purchased by Tenant which has an initial cost basis of under $25,000.
C. Landlord desires to lease the Properties to Tenant and Tenant desires to lease the Properties from Landlord pursuant to the provisions of this Lease.
Article 1. DEFINITIONS
The following terms, when used in this Lease, shall have the meaning set forth in this Article 1.
1.1 Affiliates. The term “Affiliate(s)” means with respect to any specified Person, any other Person(s) directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” (including, with correlative meanings, “controlling”, “controlled by”, and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and, it being understood and agreed that with respect to a corporation, limited liability company or partnership, control shall mean direct or indirect ownership of 50% or more of the voting stock or limited liability company interest or general partnership interest or voting interest in any such corporation, limited liability company or partnership.
1.2 Environmental Condition. The term “Environmental Condition” means the presence of Hazardous Materials on or about the Properties (including the air, soil, sediment, surface water, groundwater, sewer, septic system, or waste treatment, storage, or disposal systems), in violation of Environmental Laws.
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1.3 Environmental Laws. The term “Environmental Laws” means any and all applicable federal, state, or local laws, statutes, ordinances, orders, codes, rules, regulations, judgments, decrees, injunctions or agreements with any Governmental Entity, relating to the protection of human health or the environment, the release, discharge or disposal of any material or substance, the safety, health or Environmental Condition of property transferred, natural resource damages, pipelines, or human health and safety. Environmental Laws also include civil or common law doctrines (including without limitation negligence, nuisance, trespass, strict liability, personal injury, property damage, and product liability) to the extent that claims under such doctrines arise out of the presence of, release of, or exposure to a Hazardous Material.
1.4 Intentionally Deleted.
1.5 Hazardous Material. The term “Hazardous Material” means any hazardous or toxic substances, materials or wastes, which are regulated under any applicable Environmental Laws including without limitation, any material, waste or substance which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, or (iv) included in the definition of “hazardous” or “dangerous” “material” “substance” or “waste” or words of similar import under applicable Environmental Laws.
1.6 Lease Year. The term “Lease Year” shall mean the first twelve (12) full calendar months after the Commencement Date (as defined in Section 3.1) and each subsequent twelve (12) month period thereafter during the term and any extensions. If the Commencement Date is other than the first day of the calendar month, then the first Lease Year also will include the partial calendar month in which the Commencement Date occurs.
1.7 Party. The term “Party” means each of Landlord and Tenant.
1.8 Person. The term “Person” means any individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, trust, estate, unincorporated organization or Governmental Authority; references to any Person includes reference to any successors in title and permitted assigns.
1.9 Release. The term “Release” means any spilling, leaking, seeping, pumping, pouring, emitting, emptying, injecting, discharging, escaping, leaching, dumping, disposing or releasing of a Hazardous Material into the environment (including the air, soil, sediment, surface water, groundwater, sewer, septic system, or waste treatment, storage, or disposal systems) of any kind whatsoever, including the abandonment or discarding of barrels, containers, tanks or other receptacles containing or previously containing a Hazardous Material.
1.10 Remediation. The term “Remediation” means investigating, monitoring, correcting, cleaning-up, implementing corrective action, or remediating of an Environmental Condition, (including, but not limited to, tests, inspections, borings, engineering studies, surveys, appraisals, environmental studies, ‘operations, excavations, well installations, soil and groundwater sampling, activities associated with the construction, operation or maintenance of remediation, together with treatment equipment and systems for the treatment of contaminated soil, groundwater and free product and measures to contain, monitor or limit contamination), which is required to address an Environmental Condition, comply with Environmental Laws, or fulfill the terms of a written agreement with, or written order or directive from, a Governmental Entity or a litigation settlement or judgment.
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1.11 Tenant Retained Parcel. The term “Tenant Retained Parcel” means that portion of the Minnesota Property that is identified as Lot 1 of the Subdivision Map attached Exhibit A-1 (the “Subdivision Map”) as the Tenant Retained Parcel.
Article 2. CONDITION OF PROPERTY
2.1 Landlord leases to Tenant and Tenant leases from Landlord the Properties in their “AS IS, WHERE IS, WITH ALL FAULTS” condition with no representations or warranties whatsoever and on the terms and conditions set forth in this Lease. By affixing its initials below, Tenant acknowledges and agrees that: (i) no representations have been or are made, or responsibility assumed by Landlord with respect to the Properties, their operations, or the condition or repair of the Properties, or as to any fact, circumstance, thing or condition which may affect or relate to the Properties, except as specifically set forth in this Lease; (ii) the Properties are leased in their “AS IS, WHERE IS, WITH ALL FAULTS” condition as of the Commencement Date; and (iii) Landlord shall have no obligation to alter, restore, improve, repair or develop the Properties, and further shall have no obligation to remove therefrom any parties or items of personal property, or other trade fixtures or equipment which may be upon the Properties.
Article 3. TERM
3.1 Primary Term. The effective date (the “Commencement Date”) of this Lease shall be the date of execution and delivery of this Lease by both parties. The expiration date (the “Expiration Date”) of this Lease shall be April 30, 2048 (the “Original Lease Term”). Except as otherwise expressly stated, the terms and conditions of this Lease shall remain in effect during the Term (as defined below), including any extension, renewal or holdover of the Term, unless terminated. Concurrently with the execution hereof, a Memorandum of Lease substantially in the form of Exhibit B, attached hereto and incorporated herein, shall be recorded by and at the expense of Tenant with respect to the Properties. The term (“Term”), as used herein, shall be the period from the Commencement Date through the Expiration Date as may be extended, unless sooner terminated as hereinafter set forth.
3.2 Option Period.
(a) Tenant shall have the option to extend the term of this Lease for up to two (2) separate option periods of ten (10) years each upon and subject to the terms set forth in this Section 3.2. The first option period (the “First Option Period”) shall commence at the expiration of the Original Lease Term. The second option period (the “Second Option Period”) shall commence at the expiration of the First Option Period. The First Option Period and the Second Option Period are sometimes referred to herein collectively as the “Option Periods” and individually as an “Option Period.” Each Option Period shall continue for a period of ten (10) years from the commencement date of such Option Period. Except as otherwise expressly provided herein, all of the terms and conditions of this Lease applicable to the Original Lease Term shall continue to apply during each Option Period.
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(b) To validly extend the Lease Term for the First Option Period, (i) Tenant must deliver to Landlord written notice of Tenant’s election to so extend not later than twelve (12) months prior to the expiration of the Original Lease Term; and (ii) as of both the date such written notice is delivered to Landlord and as of the date the First Option Period is scheduled to commence, there shall be no existing default or Event of Default under this Lease.
(c) To validly extend the Lease Term for the Second Option Period, (i) Tenant must have validly extended this Lease for the First Option Period, (ii) Tenant shall deliver to Landlord written notice of Tenant’s election to so extend not later than twelve (12) months prior to the expiration of the First Option Period; and (iii) as of both the date such written notice is delivered to Landlord and as of the date the Second Option Period is scheduled to commence, there shall be no existing default or Event of Default under this Lease.
(d) Time is of the strictest essence in the performance of each provision of this Section 3.2. Either party, upon request of the other, shall execute and acknowledge, in form suitable for recording, an instrument confirming any Option Period, with the party requesting such recordation paying all applicable recording costs and transfer taxes.
3.3 Surrender of Properties; Holding Over. On the last day or sooner termination of the term of this Lease, Tenant shall quit and surrender the Properties, together with all alterations, and improvements thereon and thereto, in a broom clean condition, vacant and free of all tenancies and any leasehold rights created therein by Tenant and, subject to Section 24.7, in the same or better condition and repair as was present as of the Commencement Date, normal wear and tear, casualty and condemnation excepted, and shall surrender all keys for the Properties to Landlord at the place then fixed for the payment of rent and shall inform Landlord of all combinations of locks, safes, and vaults, if any, in the Properties. If Tenant does not do so with respect to the Properties, then after expiration of this Lease, Tenant will, with respect to such Properties only, become a month-to-month tenant-at-will upon the applicable conditions of this Lease. If Tenant holds over in possession after the expiration or earlier termination of this Lease, then such holding over shall not be deemed to extend the Lease Term or renew this Lease, but rather the tenancy thereafter shall continue as a tenancy at sufferance pursuant to the terms and conditions contained in this Lease, at one hundred fifty (150%) of the Base Rent otherwise then applicable (in addition to all Additional Rent); and, if Landlord has delivered at least thirty (30) days written notice to Tenant that Landlord is contractually obligated to deliver a Property to a third party after the Expiration Date or earlier termination of this Lease or Landlord must commence making alterations to the applicable Property and Tenant fails to surrender such Property to Landlord on or before the later of the end of such thirty (30) day notice period or the Expiration Date or earlier termination of this Lease, Tenant shall be responsible for the consequences of any unauthorized holdover and shall indemnify, defend, protect (with counsel selected by Landlord) and hold Landlord Parties wholly free and harmless of, from and against any and all actual damages, losses, costs, expenses and claims arising therefrom, including reasonable attorneys’ fees and costs. This Article will survive expiration or termination of this Lease. Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease.
Article 4. BASE MONTHLY RENT
4.1 Net-Net-Net Lease. This is a net-net-net lease. It is the intention of Landlord and Tenant that the Base Monthly Rent (as defined below) and other sums and charges provided herein shall be absolutely net to Landlord. Except as otherwise specifically set forth in this Lease, Tenant shall pay, as Additional Rent, all costs, charges, obligations, assessments, and expenses of every kind and nature against or relating to the Properties or the use, occupancy, area, possession, leasing, operation, management, maintenance, or repair thereof, which may arise or become due during the term hereof, or which may pertain to this transaction, whether or not now customary or within the contemplation of the parties hereto, and which, except for the execution and delivery of this Lease, would have been payable by Landlord. Tenant shall be solely responsible for the operation, management and maintenance of the Properties as provided in this Lease and Landlord shall not be entitled to receive any fees or costs in connection therewith, except only in the event Tenant fails to perform its obligations under this Lease and Landlord incurs expenses to cure such failure as expressly provided in this Lease.
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4.2 Base Monthly Rent. As used herein, subject to the annual increases as hereinafter provided, the initial annual “Base Rent” for the Properties shall be $4,536,000.00, payable in equal monthly installments of $378,000.00. Tenant shall pay to Landlord Base Rent, in advance, without demand therefor, on or before the first day of each and every calendar month during the Lease Term, and if the Commencement Date is not the first day of a calendar month, the Base Rent for that month shall be prorated based upon a thirty (30) day month and the actual number of days from and after the Commencement Date to the end of the calendar month. Base Rent shall be paid by automatic debit, wire transfer or such other automatic transfer method that is acceptable to Landlord in its sole and absolute discretion.
4.3 Base Rent Increase. On each Adjustment Date (as defined below) throughout the Lease Term (including any Option Periods, subject to subsection (c), below), the monthly Base Rent immediately prior to such Adjustment Date shall be increased by three percent (3.0%) over the prior year’s Base Rent. The term “Adjustment Date” shall mean the date, occurring once each calendar year, which falls on the anniversary of the Commencement Date, unless such date is a day other than the first day of a month, in which case the Adjustment Date shall be the first day of the next succeeding month.
4.4 Base Rent Increase/Option Periods. On the first day of the First Option Period and each year thereafter, including during the Second Option Period, the Base Rent will be increased by three percent (3.0 %) over the prior year’s Base Rent.
4.5 Security Deposit. Upon the execution of this Lease, Tenant shall deliver a security deposit to Landlord for the Properties, and at all times maintain a Security Deposit equal to twelve (12) months of the initial monthly Base Rent (“Security Deposit”). The Security Deposit shall be held by Landlord without liability for interest (unless required by Law) as security for the performance of Tenants obligations. The Security Deposit is not an advance payment of Rent or a measure of damages. Landlord may use all or a portion of the Security Deposit to satisfy past due Rent, Additional Rent, or to cure any Default by Tenant. If Landlord uses any portion of the Security Deposit, Tenant shall, within five (5) business days after demand, restore the Security Deposit to the required amount. Landlord shall return any unapplied portion of the Security Deposit to Tenant within forty-five (45) days after the later to occur of: (a) determination of the final Rent due from Tenant; or (b) the later to occur of the Termination Date or the date Tenant surrenders the Properties to Landlord in compliance with this Lease. Landlord may assign the Security Deposit to a successor, transferee or lender and, following the assignment, Landlord shall have no further liability for the return of the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its other accounts. Tenant acknowledges and agrees that Tenant shall, at Landlord’s request, upon no less than thirty (30) days’ prior written notice, convert the security deposit to a standby, unconditional, irrevocable, transferable letter of credit, in form and substance acceptable to Landlord in its reasonable discretion.
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Notwithstanding anything to the contrary contained herein, provided that no Event of Default by Tenant under this Lease has occurred during the Term, at the point that all of the following metrics have been achieved (collectively, the “Metrics”):
(a) | Consolidated EBITDA (unadjusted) exceeds $40.0 million; and |
(b) | Fixed Charge Coverage Ratio (as defined by Tenant’s senior lender) is greater than 2.0x; and |
(c) | Tenant’s net liquidity is greater than $15.0 million. |
The Metrics will be tested annually following Tenant’s fiscal year end. In the event that the Metrics are tested but have not been achieved, then the Security Deposit will remain in place. At such time as the Metrics are tested and have been achieved, Tenant may reduce the Security Deposit to six (6) months of the then current monthly Base Rent.
Further notwithstanding anything to the contrary contained herein, provided that (i) no Event of Default by Tenant under this Lease has occurred during the Term, and (ii) the Metrics set forth above are satisfied, and the following Metrics have been achieved:
(a) | Consolidated EBITDA (unadjusted) exceeds $70.0 million; and |
(b) | Total leverage (total debt / adjusted EBITDA) is less than 3.0x; and |
(c) | Tenant has successfully refinanced corporate bonds maturing in 2026 with new long-term debt; and |
(d) | Tenant is in compliance with all financial covenants associated with all outstanding debt instruments. |
The Metrics will be tested annually following Tenant’s fiscal year end. In the event that the Metrics are tested but have not been achieved, then the Security Deposit will remain in place. At such time as the Metrics are tested and have been achieved, Tenant may reduce the Security Deposit to three (3) months of the then current monthly Base Rent.
Article 5. ADDITIONAL RENT
5.1 As used herein, “Additional Rent” means any and all fees, expenses, taxes and charges of every kind and nature arising in connection with or relating to the Properties (other than Base Rent) that arise prior to or during the Term, including, without limitation: (i) any and all taxes (including, without limitation, Real Estate Taxes (as defined below) and any applicable tax on rental of real property and any applicable discretionary sales surtax), fees, utility service charges, maintenance expenses, insurance premiums, and other costs, and any amounts owed by Tenant under any indemnity to Landlord hereunder; (ii) all actual fees and penalties that may accrue on any amounts due from Tenant hereunder if Tenant fails to pay such amounts in a timely manner; (iii) all other damages, costs and expenses (including, without limitation, reasonable Landlord’s and Landlord’s Lender’s attorneys’ fees and other legal and court costs) that Landlord may suffer or incur in enforcing this Lease (whether or not any formal action is brought by Landlord against Tenant) or in otherwise taking actions permitted under this Lease following an Event of Default by Tenant; (iv) any and all other sums which may become due, or costs and expenses that may be incurred by Landlord, by reason of any default or Event of Default by Tenant under this Lease; and (v) any and all actual and reasonable costs of maintaining, repairing and restoring the Properties. In addition, “Additional Rent” includes any rent or other income received by Tenant from any subtenant of the Property to the extent applicable to periods after the expiration or termination of this Lease as to the Property. “Additional Rent” also includes any fees, charges, fines, costs, assessments, taxes, demands, orders, directives, or other requirements by any governmental agency asserting jurisdiction, or under any Environmental Laws which arise from or relate to Tenant's use of, or Tenant's activities at, the Properties, including, but not limited to, any applicable fees, and any consultant or attorneys' fees related to or arising under any Environmental Laws.
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5.2 Without limiting anything contained in subsection (a), above, Tenant shall pay, as Additional Rent all Real Estate Taxes (as hereinafter defined). As used herein, the term “Real Estate Taxes” means all taxes and general and special assessments and other impositions in lieu thereof, as a supplement thereto and any other tax that is measured by the value of land and assessed on a uniform basis against the owners of land, including any substitution in whole or in part therefor due to a future change in the method of taxation, in each case assessed against, or allocable or attributable to, the Properties and accruing during the Lease. Real Estate Taxes will be prorated if the Lease commences or terminates with respect to a Property during a taxable period. If by law, any general or special assessment or like charge may be paid in installments without any penalty or interest whatsoever, then such assessment may be paid in such installments, and Tenant shall be liable for the entire portion thereof as it becomes due. If such assessment or charge may be payable in installments with interest, Tenant may pay such assessment or charge in installments, provided that if such installments extend beyond the Lease, Landlord shall have the option to repay all remaining installments coming due following the Lease without interest. Notwithstanding the foregoing, in no event shall Tenant be required to pay any net income taxes (i.e., taxes which are determined taking into account deductions for depreciation, interest, taxes and ordinary and necessary business expenses), estate, gift, inheritance or other taxes in lieu thereof of Landlord or franchise taxes (unless imposed in lieu of other taxes that would otherwise be the obligations of Tenant under this Lease, including, without limitation, any “gross receipt tax” or any similar tax based upon gross income or receipts of Landlord which does not take into account deductions from depreciation, interest, taxes or ordinary or necessary business expenses) or inheritance, estate, gift or any similar taxes of Landlord, or any tax imposed with respect to the sale, exchange or other disposition by Landlord, in whole or in part, of the Property or Landlord’s interest in this Lease.
5.3 Tenant shall pay all Real Estate Taxes directly to the collecting authority no less than fifteen (15) business days prior to the delinquency date thereof and shall provide Landlord upon Landlord’s written request, or if Tenant has engaged an outside tax service, periodically as such reports are provided to Tenant, reports on Real Estate Taxes due and paid for the specified reporting period, together with such backup documentation as Landlord may request. Notwithstanding the foregoing, upon the occurrence of both of the following events, Tenant shall pay Real Estate Taxes to Landlord (the “Real Estate Taxes Reserve”) in lieu of the applicable collecting authority: (i) delivery to Tenant of a written request therefor from Landlord, and (ii) the existence of any default or breach of this Section 5.3 by Tenant, or any Event of Default under any provision in this Lease (the foregoing clause (ii) may be hereinafter referred to as a “Real Estate Taxes Reserve Trigger”). Following the imposition of a Real Estate Tax Reserve, in the event Tenant completes a twelve (12) consecutive month period without the occurrence of a Real Estate Taxes Reserve Trigger, then following written request by Tenant, Landlord shall disburse any funds in the Real Estate Taxes Reserve to Tenant, and Tenant shall no longer be obligated to pay the Real Estate Taxes to Landlord in lieu of the applicable collecting authority until the occurrence of another Real Estate Taxes Reserve Trigger. If Tenant fails to pay the appropriate party (Landlord or the collecting authority, as provided herein) all Real Estate Taxes when due hereunder, then Tenant shall, without limiting any other remedies available to Landlord, reimburse Landlord for any and all penalties or interest, or portion thereof, incurred by Landlord as a result of such nonpayment or late payment by Tenant.
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Article 6. USE OF THE PROPERTIES; COMPLIANCE; FINANCIAL COVENANTS
6.1 Use of the Properties.
(a) Tenant may use the Properties as they are generally used on the Commencement Date, including for warehouse, office, distribution and television studios (each use, a “Use” and collectively “Uses”), but for no other uses without the prior written consent of Landlord. Notwithstanding the foregoing, Tenant may use the Tenant Retained Parcel for any lawful use. Tenant has or will obtain, prior to the Commencement Date, all necessary permits, consents, licenses and other permissions required for the lawful operation of each Property for the Uses thereon and shall comply with all applicable laws, codes, ordinances and regulations, including all zoning and other use restrictions and regulations applicable to the Properties.
(b) Tenant covenants and agrees that it shall not install and, it shall during the term of this Lease prevent any sublessee or other occupant of the Properties from installing, any water well or other water tank, pump or related equipment for the storage or use of potable water at the Properties. In addition, Tenant covenants and agrees that it shall not improve or use, and shall prohibit any sublessee or other occupant of the Properties from using or improving, the Properties for residential purposes.
6.2 Compliance. Tenant, at Tenant’s sole expense, shall promptly comply with all applicable statutes, ordinances, rules, regulations, orders, covenants and restrictions of record, and requirements, including Environmental Laws, in effect during the term or any part (or extension) of the term hereof, regulating the applicable Uses by Tenant of each Property, including, without limitation, the obligation at Tenant’s cost, to alter, maintain, or restore the Properties in compliance and conformity with all laws relating to the condition, use or occupancy of the Properties during the term (including, without limitation, any and all requirements as set forth in the Americans with Disabilities Act and any Environmental Law) as soon as practicable after any such requirements shall arise and regardless of (i) whether such laws require structural or non-structural improvements, (ii) whether the improvements were foreseen or unforeseen, and (iii) the period of time remaining in the term. Notwithstanding anything contained in this Section 6.2. to the contrary or the obligations of any other person, Tenant shall alter, maintain or restore the Properties compliance and conformity with all applicable laws relating to the condition, use or occupancy of the Properties.
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6.3 Covenant to Operate. Notwithstanding anything contained herein to the contrary, Tenant covenants and agrees that it shall continuously operate the Properties (other than the Tenant Retained Parcel) for the Use. Tenant shall have no obligation to conduct any portion of its business in the Tenant Retained Parcel. In the event Tenant elects to remodel or reconstruct any improvements on the Properties, Tenant shall use commercially reasonable efforts to commence and thereafter diligently pursue to completion any such restoration, remodeling, replacement or reconstruction. The aforementioned obligations of Tenant are referred to herein as the “Covenant to Operate.” Tenant shall indemnify, defend, and protect Landlord, and hold Landlord harmless from and against any and all loss, cost, damage, expense, liability (including, without limitation, court costs and reasonable attorneys’ fees) incurred in connection with Tenant’s breach of the Covenant to Operate.
6.4 Books and Records. Tenant shall keep accurate books and records of account of the Properties and the financial performance of Tenant sufficient to permit the preparation of financial statements in accordance with generally accepted accounting principles as in effect in the United States of America from time to time (“GAAP”), or if Tenant’s books, as applicable, are not kept in accordance with GAAP, in accordance with sound accounting principles consistently applied. Tenant shall provide, or cause to be provided, to Landlord, in addition to any other financial statements required under this Lease, the following financial statements and information:
(a) Promptly and in any event within one-hundred eighty (180) days after the end of each of Tenant’s fiscal years, audited statements of financial position of Tenant as of the end of each such calendar year, including a balance sheet and statement of profits and losses, expenses and retained earnings, changes in financial position and cash flows for such calendar year, which statements shall be duly certified by an officer of Tenant to fairly represent the financial condition of Tenant, as of the date thereof, prepared by Tenant in accordance with GAAP, and accompanied by a statement of the regionally recognized accounting firm retained by Tenant, that such financial statements present fairly, in all material respects, the financial condition of Tenant as of the end of the calendar year being reported on and that the results of the operations and cash flows for such year were prepared, and are being reported on, in conformity with GAAP, or in accordance with sound accounting principles consistently applied;
(b) Promptly and in any event within forty-five (45) days after the end of each calendar quarter, internally prepared statements of financial position of Tenant as of the end of each such calendar year, including a balance sheet and statement of profits and losses, expenses and retained earnings, changes in financial position and cash flows for such calendar quarter.
(c) Promptly and in any event within forty-five (45) days after the end of each calendar quarter, profit/loss statements in respect to each Property for the trailing twelve (12) month period; and
(d) Promptly and in any event within forty-five (45) days after the end of each calendar quarter, any covenant compliance certificates required under Tenant’s senior credit facility;
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(e) Such other information with respect to the Properties or Tenant that may be reasonably requested from time to time by Landlord, for such other purpose as Landlord reasonably determines, and all such financial information shall be provided within a reasonable time after the applicable request; and
(f) In addition to the foregoing, Tenant shall include Landlord as a “notice party” in connection with any written notice sent by Siena Lending concerning a default by Tenant under any loan documents entered into by Tenant.
Article 7. PROPERTY PAYMENTS, ASSESSMENTS AND UTILITIES
7.1 Tenant’s Required Payments. In addition to Additional Rent, Tenant acknowledges and agrees it is obligated to and shall perform all obligations of the owner of the Properties under, and pay all costs and expenses which the owner of the Properties may be required to pay in accordance with, any reciprocal easement agreements or any other documents or instruments of record now (or of record in the future if created or filed by or with the consent of Tenant) affecting the Properties, herein referred to collectively as the “REAs.” Tenant shall promptly comply with all of the terms and conditions of the REAs during the term of this Lease. Landlord shall not amend any REAs or add new REAs during the Term without Tenant’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.
7.2 Assessments. If any assessment for a capital improvement made by a public or governmental authority shall be levied or assessed against the Properties, and the assessment is payable either in a lump sum or on an installment basis, then Tenant shall have the right to elect the basis of payment; provided however, that throughout the entire term of this Lease, Tenant shall pay all assessments that accrue during or are otherwise allocable to the term of this Lease.
7.3 Utility Payments. Tenant shall promptly pay when due all charges for water, gas, electricity, and all other utilities furnished to or used upon the Properties, including all charges for installation, termination, and relocations of such service. Landlord, at its option, may require Tenant to furnish Landlord with evidence of payment of such charges upon ten (10) business days’ written notice to Tenant.
7.4 Tenant’s Right to Contest Utility Charges, Contest Taxes and Seek Reduction of Assessed Valuation of the Properties. Tenant, at Tenant’s sole cost and expense, shall have the right, at any time, to seek a reduction in the assessed valuation of the Properties or to contest any taxes (including Real Estate Taxes) or utility charges that are to be paid by Tenant; provided however, Tenant shall (i) give Landlord written notice of any such intention to contest at least ten (10) business days before any delinquency could occur; (ii) indemnify and hold Landlord harmless from all liability on account of such contest; (iii) take such action as is necessary to remove the effect of any lien which attached to any of the Properties or the improvements thereon due to such contest; and (iv) in the event of a final determination adverse to Tenant, prior to enforcement, foreclosure or sale, pay the amount involved together with all penalties, fines, interest, costs, and expenses which may have accrued. Tenant may use any means allowed by statute to protest Taxes or utility charges as defined in this Section 7.4 as long as Tenant remains current as to all other terms and conditions of this Lease. If the protested Taxes have not been paid, then at Landlord’s request Tenant shall furnish to Landlord a surety bond issued by an insurance company qualified to do business in the state where the Properties are located. The amount of bond shall equal one hundred ten percent (110%) of the total amount of Taxes in dispute. The bond shall hold Landlord and the Properties harmless from any damage arising out of the proceeding or contest and shall insure the payment of any judgment that may be rendered. If Tenant seeks a reduction or contests any Taxes or utility charges, the failure on Tenant’s part to pay the Taxes or utility charges shall not constitute a default as long as Tenant complies with the provisions of this Section. In connection with any such contest, Tenant shall receive from any refund or rebate obtained from such contest the sum of all reasonable costs relating to such contest plus any refund or rebate received by Tenant or Landlord with respect to periods for which such amounts were (or are to be) paid by Tenant.
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7.5 Landlord Not Required to Join in Proceedings or Contest Brought by Tenant. Landlord shall not be required to join in any proceeding or contest brought by Tenant unless (a) the provisions of applicable law require that the proceeding or contest be brought by or in the name of Landlord or the owner of the Properties or (b) if Tenant’s counsel reasonably believes that Landlord’s non-participation in such suit may adversely affect the outcome of such proceedings. In either such case, Landlord shall join in the proceeding or contest or permit it to be brought in Landlord’s name, as long as Tenant agrees to pay or, at Landlord’s option, reimburse, Landlord for any cost or expense relating thereto or arising as a result thereof. Tenant, on final determination of the action, proceeding or contest, shall immediately pay or discharge any decision or judgment rendered, together with all costs, charges, interest, and penalties incidental to the decision or judgment.
Article 8. FURNITURE, FIXTURES AND EQUIPMENT
8.1 Furniture, Fixtures, and Equipment. During the term, Tenant may, at Tenant’s sole cost and expense, place or install such furniture, trade fixtures, equipment, machinery, furnishings, face plates of signage and other articles of movable personal property (collectively, “Tenant’s Personal Property”) on the Properties as may be reasonably necessary for the conduct of Tenant’s business. It is expressly understood that the term Tenant’s Personal Property as used herein shall in no event extend to the Property Equipment. Tenant shall keep the Property Equipment on the Properties (other than the Tenant Retained Parcel) in good working order and repair, shall replace the Property Equipment as necessary, shall not remove the Property Equipment from the Properties and shall not permit any lien or other encumbrance to attach to the Property Equipment. Tenant may, from time to time, retire or replace the Property Equipment with new items of equipment purchased by Tenant, in which event such replaced equipment shall constitute the Property Equipment. All Property Equipment shall be the property of Landlord, and Tenant shall execute such instruments and documents as Landlord may require to evidence such ownership by Landlord.
8.2 Tenant Financing. Tenant may finance or lease Tenant’s Personal Property at any time and from time to time during the term of this Lease. Tenant may, at its option, remove and replace Tenant’s Personal Property periodically during the term of this Lease.
8.3 Removal of Tenant’s Personal Property at Expiration of Lease. At the expiration or earlier termination of the Lease, all Tenant’s Personal Property (but not the Property Equipment) shall be removed by Tenant. Tenant shall immediately make such repairs to and restoration of the Properties as may be necessary to repair any damage to the Properties from the removal of all such Tenant’s Personal Property. Any of such Tenant’s Personal Property not so removed within a reasonable time shall be deemed abandoned, and Landlord may cause such property to be removed from the Properties and disposed of, but the cost of any such removal shall be payable by Tenant upon written demand therefor by Landlord. The provisions of this paragraph shall survive the expiration or earlier termination of this Lease.
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8.4 Right to Affix Signs. Tenant shall have the right to decorate the Properties and affix signs customarily used in its business upon the windows, doors, interior and exterior walls of the Properties, and such free-standing signs as may seem appropriate to Tenant and are authorized by any governmental authority having jurisdiction over the Properties and permitted by any covenants, conditions and restrictions encumbering the Properties. Upon the expiration or earlier termination of the Lease, Tenant shall remove such signs within a reasonable time following receipt of written notice from Landlord; provided, however, in no event may Tenant remove free-standing signage (such as pole-mounted or monument signs) from the Properties. Tenant promptly shall make such repairs and restoration of the Properties as are necessary to repair any damage to the Properties from the removal of the signs.
Article 9. MAINTENANCE AND REPAIRS OF THE PROPERTIES
9.1 Obligation to Maintain the Properties. Tenant, at its sole cost and expense, shall maintain each of the Properties (other than the Tenant Retained Parcel) and each part thereof, structural and non-structural, in good order, condition and repair (including all sidewalks, driveways, landscaping, trash enclosures, and trash compacting and loading areas on the Properties), in a neat and clean condition), and repair or replace, in good condition and in compliance with applicable law, all: (i) structural parts of the buildings and other improvements located on the Properties, including without limitation, the foundations, bearing and exterior walls, subflooring and roof; (ii) utility systems within or serving the Properties, including unexposed electrical, gas, plumbing, and sewage systems, including, without limitation, those portions of the systems lying outside the improvements; (iii) window frames, gutters and downspouts on the improvements in which the Properties are located; (iv) heating, ventilating, and air-conditioning systems servicing the Properties; (v) the exterior grounds, landscaping, sidewalks, curbs, gutters, fences, and parking and paved areas of the Properties; (vi) the Property Equipment; and (vii) the interior and all other portions of the Properties and shall make any necessary Repairs thereto, interior and exterior, whether extraordinary, foreseen or unforeseen but subject to the casualty and condemnation provisions of this Lease. When used in this Article 9, the term “Repairs” includes all such replacements, renewals, alterations, additions and betterments necessary for Tenant to properly maintain each of the Properties in good order and condition and in compliance will all applicable laws. The adequacy of any and all Repairs to the Properties required or conducted pursuant to this Article 9 shall be measured by and meet, at minimum, all of the following standards: (1) at least equal in quality of material and workmanship to the condition of the relevant Property(ies) prior to the need for such Repairs; (2) avoidance of any and all structural damage or injury to the building or persons therein; and (3) any and all repairs, replacements or upgrades necessary to ensure compliance with the rules and regulations of all government agencies having jurisdiction over the relevant Property(ies), including all Environmental Laws and shall conform to the requirements of any covenants, conditions, restrictions or other permitted encumbrances which are of record. Landlord shall have no duty whatsoever to maintain, replace, upgrade, or repair any portion of the Property(ies), and Tenant hereby expressly waives the right to make repairs at the expense of Landlord, which right may be provided for under applicable law now or hereafter in effect; provided that Landlord shall be obligated to make any repair or replacement that is necessitated by the intentional misconduct or gross negligence of Landlord. Tenant’s obligation to maintain, repair or replace the Tenant Retained Parcel and its related Property Equipment shall be strictly limited to maintaining the Tenant Retained Parcel and its related Property Equipment in compliance with applicable laws.
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9.2 Repair Notice. If Tenant fails or neglects to commence and diligently proceed with all necessary repairs or fulfill its other obligations as set forth above (for the purposes hereof, the receipt by Tenant of a building permit (if necessary under applicable law to commence the applicable repair) shall be deemed to constitute the commencement of a repair under this Article) within thirty (30) days after the later of (i) the reasonable period necessary to obtain any required building permit, and (ii) receipt of written notice of the need therefor describing the applicable repair or other obligation (a “Repair Notice”) (except in emergency situations involving risk of further damage to the Property(ies) or injury to persons, in which case no such grace period shall be applicable, and Tenant shall be obligated to commence immediately all necessary repairs and diligently proceed to complete same), then Landlord or its agents may enter the Property(ies) for the purpose of making such repairs or fulfilling such obligations. All out of pocket costs and expenses incurred as a consequence of such Landlord’s action shall be paid by Tenant to Landlord within thirty (30) days after Landlord delivers to Tenant copies of invoices for such repairs or other obligations. Such invoices shall be prima facie evidence of the payment of the charges to be paid by Tenant.
Article 10. ALTERATIONS AND IMPROVEMENTS
10.1 Right to Make Alterations. Subject to the provisions of this Article 10, Tenant shall have the right to make changes, alterations or additions (collectively, “Alterations”) to the Properties that are required and necessary, in Tenant’s reasonable judgment, to operate the Use on the Properties. In addition, if the Alterations constitute a Minor Project, as defined below, or are strictly to the Tenant Retained Parcel, then Tenant may make such Alteration without prior written consent of Landlord (such Minor Project, together with required and necessary repairs, each a “Pre-Approved Alteration”); provided, however, in no event shall any Alterations be made which, after completion, would: (i) reduce or adversely affect the value of the Building as they exist at the time that such Alterations are proposed; or (ii) affect the structural integrity of the Building. Tenant will provide Landlord notice and a description of any Alterations that are not Pre-Approved Alterations. Any and all Alterations made by Tenant shall be at Tenant’s sole cost and expense. Prior to the commencement of construction, (but excluding non-structural minor maintenance or repair projects and cosmetic refresh projects involving only painting, carpeting, floor covering and installation of moveable replacement Property Equipment, unless the cost exceeds $500,000.00 (a “Minor Project”)), Tenant shall deliver promptly to Landlord detailed cost estimates for any such proposed Alterations, as well as all drawings, plans and other information regarding such Alterations (such estimates, drawings, plans and other information are collectively referred to herein as the “Alteration Information”). Delivery of the Alteration Information shall not be required for Pre-Approved Alterations. For Alterations other than Pre-Approved Alterations, Tenant must obtain Landlord’s prior written consent before making such Alteration, but Landlord agrees not to unreasonably withhold, condition or delay its consent to such Alteration. Landlord’s review of any Alteration Information shall in no event constitute any representation or warranty of Landlord regarding (x) the compliance of any Alteration Information with any governmental or legal requirements, (y) the presence or absence of any defects in any Alteration Information, or (z) the safety or quality of any of the Alterations constructed in accordance with any plans or other Alteration Information. Landlord’s review of any of the Alteration Information shall not preclude recovery by Landlord against Tenant based upon the Alterations, the Alteration Information, or any defects therein. In making any and all Alterations, Tenant also shall comply with all of the following conditions:
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(a) No Alterations shall be undertaken until Tenant shall have (i) procured and paid for, so far as the same may be required, all necessary permits and authorizations of all governmental authorities having jurisdiction over such Alterations, and (ii) delivered to Landlord prior to commencing any such Alterations written evidence of all such required permits and authorizations. Landlord shall, to the extent necessary (but at no cost, expense, or risk of loss to Landlord), join in the application for such permits or authorizations whenever necessary, promptly upon written request of Tenant.
(b) Any and all structural Alterations of the Building shall be performed under the supervision of an architect and/or structural engineer.
(c) Except for Pre-Approved Alterations, Tenant shall notify Landlord at least fifteen (15) days prior to commencing any Alterations so as to permit, and Tenant shall permit, Landlord access to the relevant Property(ies) in order to post and keep posted thereon such notice(s) as may be provided or required by applicable law to disclaim responsibility for any construction on the relevant Property(ies).
(d) Any and all Alterations shall be conducted and completed in a commercially reasonable time period (subject to the terms of Article 10), in a good and workmanlike manner, and in compliance with all applicable laws, municipal ordinances, building codes and permits, and requirements of all governmental authorities having jurisdiction over the relevant Property(ies), and of the local Board of Fire Underwriters, if any; and, upon completion of any and all Alterations, Tenant shall obtain and deliver to Landlord a copy of the amended certificate of occupancy for the relevant Property(ies), if required under applicable law or by governmental authority. To the extent reasonably practicable, any and all Alterations shall be made and conducted so as not to disrupt Tenant’s business.
(e) The cost of any and all Alterations shall be promptly paid by Tenant so that the Property at all times shall be free of any and all liens for labor and/or materials supplied for any Alterations subject to the next succeeding sentence. In the event any such lien shall be filed, Tenant shall, within five (5) days after receipt of notice of such lien, deliver written notice to Landlord thereof, and Tenant shall, within thirty (30) days after receipt of notice of such lien, discharge the same by bond or payment of the amount due the lien claimant. However, Tenant may in good faith contest such lien provided that within such thirty (30) day period Tenant provides Landlord with a surety bond or other form of security reasonably acceptable to Landlord, protecting against said lien. Upon written request from Landlord, Tenant shall provide Landlord promptly with evidence reasonably satisfactory to Landlord that all contractors, subcontractors or materialmen have been paid in full with respect to such Alterations and that their lien rights have been waived or released. In the event Tenant fails to either discharge such lien or protect against such lien in accordance with the foregoing, then Landlord shall have the option (but not the obligation) to pay such lien or post a bond to protect against such lien and pass through such costs to Tenant as Additional Rent.
(f) Any and all Alterations to the Properties shall become the property of Landlord upon termination of this Lease (except for Tenant’s Personal Property). Landlord may, nonetheless, require Tenant to remove any fixtures, equipment, alterations and other improvements installed on the Property(ies) (the “Additional Improvements”), and restore the Property(ies) to its original condition, reasonable wear and tear and damage caused by casualty or condemnation excepted; provided that Landlord informed Tenant in writing at the time that Landlord approved Tenant’s request to install the Additional Improvements that such Additional Improvements must be removed by Tenant at the end of the Term (failing which Tenant shall not be required to remove such Additional Alterations). In addition, Tenant shall not be required to remove any fixtures, equipment, alterations and other improvements installed on the Property(ies) existing on the Propery(ties) on the Commencement Date. In the event that Landlord so elects, and Tenant fails to remove the Additional Improvements, Landlord may remove the Additional Improvements at Tenant’s cost, and Tenant shall pay Landlord on demand all reasonable costs actually incurred in removing Additional Improvements and restoration of the Premises as required.
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Article 11. INDEMNITY AND INSURANCE
11.1 Indemnification.
(a) As used in this Lease, (w) “Landlord Parties” means, collectively, Landlord, Landlord’s Affiliates and Landlord’s Lenders; (x) “Landlord’s Affiliates” means Landlord’s members, partners, officers, directors, shareholders, employees, agents or any person or entity that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with Landlord (for purposes of this definition, the term “control,” “controlled by” or “under common control with” means the power, direct or indirect, to direct or cause the direction of the management and policies of Landlord, whether through the ownership of voting stock, by contract, as trustee or executor, or otherwise); and (y) “Landlord’s Lenders” means any persons or entities providing financing to Landlord or Landlord’s Affiliates, secured by a mortgage, deed of trust, deed to secure debt or similar interest, encumbering Landlord’s fee simple interest in the Properties or portion thereof (whether or not any such person or entity is also a Landlord’s Lender). To the extent not prohibited by law, none of the Landlord Parties shall be liable, under any circumstances, and Tenant hereby releases all Landlord Parties, for any loss, injury, death or damage to person or property (including but not limited to the business or any loss of income or profit therefrom) of Tenant, Tenant’s members, officers, directors, shareholders, agents, employees, contractors, customers, invitees, or any other person in or about the Properties, whether the same are caused by (a) fire, explosion, falling plaster, steam, dampness, electricity, gas, water, rain; or (b) breakage, leakage or other defects of sprinklers, wires, appliances, plumbing and plumbing fixtures, water or gas pipes, roof, air conditioning, lighting fixtures, street improvements, or subsurface improvements; or (c) theft, acts of God or nature, acts of the public enemy, riot, strike, insurrection, civil unrest, war, court order, requisition or order of governmental body or authority; or (d) any act or omission of any other occupant of the Properties; or (e) operations in construction of any private, public or quasi-public work; or (f) Landlord’s reentering and taking possession of the Properties in accordance with the provisions of this Lease or removing and storing the property of Tenant as herein provided; or (g) any other cause, including damage or injury which arises from the condition of the Properties, from occupants of adjacent property, from the public, or from any other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same are inaccessible to Tenant, or which may arise through repair, alteration or maintenance of any part of the Properties or failure to make any such repair, from any condition or defect in, on or about the Properties; provided, however, that the foregoing release set forth in this Section 11.1 shall not be applicable to any claim against a Landlord Party to the extent, and only to the extent, that such claim is directly attributable to the gross negligence or willful misconduct of such Landlord Party, as determined by a final, non-appealable judgment (or by a judgment which such Landlord Party elects not to appeal) by a court of competent jurisdiction. Without limiting the foregoing, Tenant hereby waives any right to any direct or indirect consequential or punitive damages against any Landlord Parties arising out of any claim in connection with or related to this Lease, the Properties, or any portion thereof.
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(b) In addition to any and all other obligations of Tenant under this Lease (including, without limitation, under any indemnity or similar provision set forth herein), to the extent permitted by law, Tenant hereby agrees to fully and forever indemnify, protect, defend (with counsel selected by Landlord) Landlord, and hold all Landlord Parties free and harmless or, from and against any losses, cost, damage, expense and/or liability (including, without limitation, court costs and reasonable attorneys’ fees) incurred in connection with or arising at any time and from any cause whatsoever in or about the Properties, claims, demands, actions, causes of action, settlements, obligations, duties, indebtedness, debts, controversies, remedies, choses in action, liabilities, costs, penalties, fines, damages, injury, judgments, forfeiture, or expenses (including, without limitation reasonable attorneys’, consultant, testing and investigation and expert fees and court costs), whether known or unknown, whether liquidated or unliquidated: (a) arising out of or in any way related to or resulting directly or indirectly from: (i) the use, occupancy or activities of Tenant, its subtenants, agents, employees, contractors or invitees in or about the Properties; (ii) any failure on the part of Tenant to comply with any applicable law, code or regulation, including, without limitation, all Environmental Laws; (iii) any Event of Default under this Lease (including, without limitation, as a result of any termination by Landlord, following an Event of Default, of any sublease, license, concession, or other consensual arrangement for possession entered into by Tenant and affecting the Properties; (iv) any other loss, injury or damage described in this Section 11.1(b); (v) in connection with mold at the Properties; or (vi) work or labor performed, or materials or supplies furnished to or at the request of Tenant or in connection with obligations incurred by or performance of any work done for the account of Tenant in, on or about the Properties; and (b) whether heretofore now existing or hereafter arising out of or in any way related to or resulting directly or indirectly from the presence or Release at, on, under, to or from the Properties of Hazardous Materials in violation of Environmental Law. All of the personal or any other property of Tenant kept or stored at, on or about the Properties shall be kept or stored at the sole risk of Tenant. Without limiting the foregoing, Tenant shall pay on demand all reasonable out-of-pocket fees and costs of Landlord (including, without limitation, reasonable attorneys’ fees and costs) in connection with any enforcement by Landlord of the terms of this Lease and any amendment to this Lease requested by Tenant.
(c) The provisions of this Article 11 are Surviving Obligations (defined below). To the extent permitted by applicable laws, Tenant hereby waives the provisions of any applicable laws restricting the release of claims, or extent of release of claims, which Tenant does not know or suspect to exist at the time of release, which, if known, would have materially affected Tenant’s decision to agree to the release contained in this Article 11. In this regard, Tenant hereby agrees, represents, and warrants to Landlord that Tenant realizes and acknowledges that factual matters now unknown to Tenant may hereafter give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are presently unknown, unanticipated and unsuspected, and Tenant further agrees, represents and warrants that the release provided hereunder has been negotiated and agreed upon in light of that realization and that Tenant nevertheless hereby intends to release, discharge and acquit the parties set forth herein above from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are in any manner set forth in or related to this Lease, the Properties and all dealings in connection therewith. For purposes of this Lease, “Surviving Obligations” means any obligations of Tenant under this Lease, actual or contingent, which arise on or prior to the expiration or prior termination of this Lease or which survive such expiration or termination by their own terms.
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11.2 Insurance.
(a) Insurance Company Requirement. Insurance required by this Lease shall be issued by companies holding a general policyholder’s rating of A/VIII or better as set forth in the most current issue of Best’s Insurance Guide or A- and better by S&P, and authorized to do business in the state in which the Properties are located. If this publication is discontinued, then another insurance rating guide or service generally recognized as authoritative shall be substituted by Landlord.
(b) Insurance Certificate Requirements. Tenant shall deliver to Landlord evidence of the existence and amounts of the insurance with additional insured endorsements and loss payable clauses as required herein. Tenant shall deliver to Landlord a Certificate of Liability Insurance in connection with Tenant’s liability policy(ies), and an Evidence of Property Insurance in connection with Tenant’s property policy(ies). No policy shall be cancelable or subject to reduction of coverage or other modification that reduces the then-current coverage limits except after thirty (30) days’ prior written notice to Landlord. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to any insurance coverage, shall be deemed to limit or restrict in any way the liability of Tenant arising under or out of this Lease.
(c) Blanket Policies. The insurance required to be maintained herein may be carried under blanket policies. The insurance shall provide for payment of loss to Landlord and Landlord shall be reflected as an additional insured.
(d) Minimum Acceptable Insurance Coverage Requirements.
(i) Tenant shall, at Tenant’s expense, obtain and keep in full force during the term of this Lease a Commercial General Liability policy of bodily injury and property damage insurance written on an occurrence basis insuring Tenant (with Landlord as an additional insured) against any liability arising out of ownership, use, occupancy, or maintenance of the Properties and all of their appurtenant areas. The insurance shall be in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in aggregate per Property; provided however, following receipt of written notice to Tenant, the limits of such insurance may be increased from time to time during the term of the Lease to such amount as may be deemed commercially reasonable by Landlord in the area where the Properties are located for properties reasonably similar to the Properties. The policy shall provide blanket contractual liability coverage. However, the limits of the insurance shall not limit the liability of Tenant. In addition, Tenant shall, at Tenant’s expense, obtain and keep in full force during the term of this Lease an umbrella liability policy in an amount not less than Ten Million Dollars ($10,000,000) in excess of primary insurance. The insurance to be maintained by Tenant pursuant to this Section (d) shall be primary and not contributory to any other insurance maintained by Landlord.
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(ii) Tenant shall, at Tenant’s expense, obtain and keep in force during the term of this Lease a “Special Form” (as such term is used in the insurance industry) policy of property insurance covering loss or damage to the Properties. The insurance shall be in an amount not less than the full guaranteed replacement cost of the building(s). The policy shall contain only standard printed exclusions; include an agreed value endorsement waiving any co-insurance penalty, and an ordinance or law coverage endorsement covering increased costs resulting from changes in laws or codes, demolition and removal of the damaged structure, and terrorism. Tenant shall have commercially reasonable deductibles for such insurance; provided that only if the Properties generate an annual cash flow of at least $1,000,000 for two (2) consecutive years, then the deductible can be an amount up to $50,000.
(iii) Equipment Breakdown (also known as boiler and machinery) Insurance covering the full replacement cost.
(iv) If any of the Properties are located in Flood Zone A or V as defined by the Federal Emergency Management Agency (FEMA), Tenant shall, at Tenant’s expense, obtain and keep in force during the term of this Lease a policy of insurance covering loss or damage due to flood with respect to those Properties, which shall include National Flood and Excess Flood insurance.
(v) Tenant shall also obtain and keep in force during the term of this Lease a policy of Business Interruption insurance covering a period of eighteen (18) months. This insurance shall cover all Taxes and insurance costs for the same period in addition to eighteen (18) months’ lease rent amount.
(vi) Tenant shall also obtain and keep in force during the term of this Lease a worker’s compensation policy, insuring against and satisfying Tenant’s obligations and liabilities under the worker’s compensation laws of the state in which each of the Properties are located, including Employer’s Liability insurance, in an amount of not less than One Million Dollars ($1,000,000).
(vii) Should any financial assurance requirements pursuant to Environmental Laws be imposed on Tenant’s use of, or activities at, the Properties, Tenant promptly and timely shall comply with those requirements as they take effect. Tenant shall maintain, in form and content acceptable to Landlord (and only containing those exclusions and exceptions acceptable to Landlord) pollution liability insurance in favor of Landlord which names Landlord as, an additional insured as set out in Section 11.2(e) herein, and any third parties which might be affected, in an amount of at least One Million Dollars ($1,000,000) per occurrence providing coverage for the investigation and/or remediation of any Hazardous Materials released at, on, under or from the Properties, property damage (including, without limitation, natural resource damages) and compensation for personal injuries, specifically including all pre-existing conditions. Tenant shall provide a certificate of insurance evidencing such required coverage prior to the Commencement Date, and such certificate shall provide that the policy may not be cancelled or amended in any material respect without thirty (30) days’ prior written notice to Landlord.
(e) Additional Insureds. Tenant shall name as additional insureds (by way of a CG 20 26 endorsement or similar endorsement) and loss payees on all insurance, Landlord, Landlord’s Mortgagee, Landlord’s successor(s), assignee(s), nominee(s), nominator(s), and agents with an insurable interest as follows:
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TENANT, ITS OFFICERS, DIRECTORS, MEMBERS AND ALL SUCCESSOR(S), ASSIGNEE(S), SUBSIDIARIES, CORPORATIONS, PARTNERSHIPS, PROPRIETOR-SHIPS, JOINT VENTURES, FIRMS, AND INDIVIDUALS AS HERETOFORE, NOW, OR HEREAFTER CONSTITUTED ON WHICH THE NAMED INSURED HAS THE RESPONSIBILITY FOR PLACING INSURANCE AND FOR WHICH SIMILAR COVERAGE IS NOT OTHERWISE MORE SPECIFICALLY PROVIDED.
11.3 Mortgage Endorsement. If requested by Landlord, the policies of insurance required to be maintained hereunder shall bear a standard first mortgage endorsement in favor of any holder or holders of a first mortgage lien or security interest in the property with loss payable to such holder or holders as their interests may appear; provided that insurance proceeds relating to a casualty shall be applied as described in Section 12.
11.4 Renewals, Lapses or Deficiencies. Tenant shall, within ten (10) business days prior to the expiration of such policies, furnish Landlord with renewal certificates of insurance or renewal binders. Should Tenant fail to provide to Landlord the renewals or renewal binders, or in the event of a lapse or deficiency of any insurance coverage specified herein for any reason, Landlord may immediately replace the deficient insurance coverage with a policy of insurance covering the Properties of the type and in the limits set forth above. Upon written notice from Landlord of the placement of insurance, Tenant shall immediately pay to Landlord, as Additional Rent, an amount equal to the total cost of premiums and expense of such insurance placement plus reasonable handling fees. Tenant shall not do or permit to be done anything that shall invalidate the insurance policies. If Tenant does or permits to be done anything which shall increase the cost of the insurance policies, then upon Landlord’s demand Tenant shall immediately pay to Landlord, as Additional Rent, an amount equal to the additional premiums attributable to any acts or omissions or operations of Tenant causing the increase in the cost of insurance.
11.5 Waiver of Subrogation. Each of Landlord and Tenant hereby waives and releases any and all right of recovery against the other, including, without limitation, their respective employees and agents, arising during the term of this Lease for any and all loss (including, without limitation, loss of rental) or damage to property located within or constituting a part of the Properties that is covered by the insurance required to be maintained herein. This waiver is in addition to any other waiver or release contained in this Lease. Tenant shall have its insurance policies issued in such form as to waive any right of subrogation that might otherwise exist, and shall provide written evidence thereof to Landlord upon written request.
Article 12. PARTIAL AND TOTAL DESTRUCTION OF THE PROPERTIES
12.1 Restoration. If at any time during the Lease Term, any Property (other than the Tenant Retained Parcel) or any part thereof shall be damaged or destroyed by fire or other casualty of any kind or nature, Tenant shall promptly apply for all necessary permits, but in any event not later than 60 days after the final adjustment of insurance with respect to the casualty (or, if an uninsured casualty, after the date of damage or destruction), subject to Force Majeure extension, and upon issuance of such permits thereafter diligently proceed to repair, replace or rebuild such Property (but not the Tenant Retained Parcel) as nearly as possible to their condition and character immediately prior to such damage with such variations and Alterations required by Tenant to conform to design standards then in effect for the Property in accordance with the Use or changes in applicable law and building regulations (the “Restoration Work”). In no event shall the repair or replacement of a casualty at a Property extend beyond any applicable period which would cause a default under, or provide any person with a right to purchase a Property, under a real property covenant or restriction affecting such Property. If the Tenant Retained Parcel is damaged during the Term, Tenant may elect in its sole discretion whether to complete the Restoration Work or any portion thereof; provided that in any event, the Tenant Retained Parcel must remain in compliance with applicable laws.
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12.2 All property and casualty insurance proceeds payable to Landlord or Tenant (except (i) insurance proceeds payable to Tenant on account of Tenant’s Personal Property and any portion of insurance proceeds related to improvements on the Tenant Retained Parcel provided that Landlord has received sufficient funds to restore the Property back to its original condition; and (ii) insurance proceeds payable from comprehensive general public liability insurance, or any other liability insurance) at any time as a result of casualty to the Properties shall be paid jointly to Landlord and Tenant for purposes of payment for the cost of the Restoration Work, except as may be otherwise expressly set forth herein. Landlord and Tenant shall cooperate in order to obtain the largest possible insurance award lawfully obtainable and shall execute any and all consents and other instruments and take all other actions necessary or desirable in order to effectuate same and to cause such proceeds to be paid as hereinbefore provided. The proceeds of any such insurance in the case of loss shall, to the extent necessary, be used first for the Restoration Work with the balance, if any, payable to Tenant. If insurance proceeds as a result of a casualty to the relevant Property(ies) are insufficient to complete the Restoration Work necessary by reason of such casualty, then Tenant shall be responsible for the payment of such amounts necessary to complete such work.
12.3 This Lease shall not be affected in any manner by reason of the total or partial destruction to any Property or any part thereof and Tenant, notwithstanding any law or statute, present or future, waives all rights to quit or surrender any Property or any portion thereof because of the total or partial destruction of any Property (prior to the expiration of the Lease). Base Rent and Additional Rent required to be paid by Tenant hereunder shall not abate as a result of any casualty.
Article 13. CONDEMNATION
13.1 Vesting Date. If 50% or more of any Property, or more than 50% of the existing access to or from any Property, or if reasonable means of access to or from any Property, shall be taken for any public or quasi-public use under any statute or by right of eminent domain, or by purchase in lieu thereof and such taking makes such Property unusable for the purposes set forth in Article IV (a “Total Taking”), then this Lease shall terminate as to such Property as of the date that possession has been so taken (the "Vesting Date").
13.2 Condemnation.
(a) In the event of a taking of less than 50% of any Property or 50% of the access thereto, Tenant may elect to terminate this Lease as to such entire Property (and not just the portion thereof so taken) and not restore such Property if, by reason of the taking, the taking shall result in a diminution in value of more than 25% of the Property and as a result of such taking Tenant’s business at the Property has been materially and adversely affected. Tenant’s business at the Property will be deemed materially adversely affected only if there is (i) a taking of a portion of the Building located at any Property making the Building obsolete or not reasonably usable for Tenant’s Use in substantially the same manner as before such taking, (ii) a taking of access to the Property in which an alternative access is not available, or (iii) a taking of a significant number of parking spaces where the remaining spaces are inadequate for Tenant’s Use or violates applicable laws and alternative parking spaces are not available, or (iv) a taking that would preclude use of the Property for its current use under applicable zoning or other use regulations.
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(b) In the event of a Total Taking described in Section 13.1, or Tenant elects by reason of any of the events described in Section 13.2(a) to terminate the Lease as to a Property (“Condemned Property”), Tenant shall give written notice to Landlord of its intention to so terminate within 60 days after the Vesting Date or the date of such taking, and this Lease shall terminate with respect to the Condemned Property as of the date of such taking. In the event the condemning authority revokes or terminates its condemnation proceeding, Landlord, prior to the date set for termination of this Lease with respect to the Condemned Property may, by notice to Tenant, elect to rescind such termination. In the event of such termination, however, Tenant shall pay to Landlord, prior to such termination date, an amount equal to the Base Rent and any then accrued Additional Rent in each case payable under this Lease to the date of such termination, and neither party shall have any further rights or liabilities under this Lease with respect to the Condemned Property (except for rights and liabilities that explicitly survive termination or expiration of the Lease as set forth herein). With respect to any items of Additional Rent which are payable by Tenant in the event of such termination, but which are not then ascertainable, Tenant shall pay to Landlord an amount equal to such Additional Rent as and when the same is determined. The covenants and agreements with respect to the adjustment and payment of items of Additional Rent shall survive the termination of this Lease.
13.3 Termination. In the event of a taking resulting in the termination of this Lease with respect to a Condemned Property pursuant to the provisions of Sections 13.1 or 13.2, the parties hereto agree to cooperate in applying for and in prosecuting any claim for such taking and further agree that the aggregate net award shall be distributed as follows:
(a) Landlord shall have the unqualified right to pursue its remedies against the condemnor for the full value of Landlord's fee interest and other property interests in and to the Properties (excluding the Tenant Retained Parcel) including, without limitation, the Building and Property Equipment.
(b) Tenant shall have the right to pursue its remedies against the condemnor for the full value of Tenant's leasehold estate and the Property Equipment including, without limitation, the interruption of its business, loss of goodwill, and moving expenses, provided that any such claim does not serve to diminish, in any respect, Landlord’s potential award.
13.4 Reconstruction. In case of a taking of less than 50% of any Property or 50% of the access thereto, Tenant shall proceed with diligence (subject to reasonable time periods for purposes of adjustment of any award and unavoidable delays) to repair or reconstruct the affected Property to a complete architectural unit (all such repair, reconstruction and work being referred to in this Article as “Reconstruction Work”). Landlord shall reimburse Tenant for the cost of the Reconstruction Work up to and not exceeding the net compensation amount realized by Landlord as a result of such taking (i.e., the gross amount of the compensation received by Landlord from the taking authority less all costs and expenses reasonably incurred by Landlord in pursuing, prosecuting, and/or recovering its claim to such award). All Reconstruction Work shall be performed pursuant to (and subject to) the requirements for Alterations set forth in Article 10.
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13.5 Base Rent Reduction. In case of a taking of less than 50% of a Property, or less than 50% of the access thereto, and if this Lease is not terminated as to such Property as provided in Section 13.2 above, the Base Rent payable hereunder shall, from and after the date of such taking, be reduced by an amount equal to the product of (i) 6.0% multiplied by (ii) the net condemnation proceeds retained by Landlord after the application of any such proceeds to the repair, restoration, or replacement necessitated by the condemnation.
13.6 Temporary Taking Compensation. Any compensation for a temporary taking shall be payable to Tenant without participation by Landlord, except to the proportionate extent such temporary taking extends beyond the end of the Lease Term, and there shall be no abatement of Rent as a result thereof.
13.7 Base Rent Reduction Due to Lease Termination. Upon a condemnation event in which the Lease is terminated with respect to a Condemned Property, Tenant shall pay all Base Rent and Additional Rent and other charges with respect to the Condemned Property to the date of termination. After such date, Base Rent due under this Lease shall be reduced by a fraction of the Base Rent, which fraction will have a numerator equal to the net condemnation proceeds retained by Landlord in such Condemned Property (as determined in connection with the condemnation proceeding or the agreement between the condemnor and Landlord in settlement of such proceeding) and the denominator of which equals the sum of the greater of the (i) then-current appraised value of all of the Properties (including the condemned Property but excluding the Tenant Retained Parcel) or (ii) Landlord’s total cost basis in the Property(ies). The cost of any appraisals shall be paid out of applicable condemnation proceeds.
Article 14. ASSIGNMENT AND SUBLETTING
14.1 Tenant’s Right of Assignment and Subletting. Tenant shall not voluntarily or by operation of law assign or sublease its interest in this Lease or in the Properties, without first obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Any such assignment or sublease made without Landlord’s consent shall be voidable and, at Landlord’s election, shall constitute a default under this Lease. Notwithstanding the foregoing, Landlord shall not unreasonably withhold its consent to any sublease request provided that such sublease (i) prohibits any noxious use, (ii) does not release Tenant from any obligation under this Lease, (iii) such sublease does not extend beyond the Term, and (iv) Landlord is named as a notice party in the sublease; and (v) Landlord receives copies of all sublease documents reasonably requested. It shall not be unreasonable for Landlord to withhold its consent to any proposed sublease if the proposed transferee or sublessee does not meet certain reasonable criteria, including, but not limited to, the transferee’s financial condition, the nature, quality and character of the transferee, the identity or business character of the transferee, the nature of the use and occupancy and the transferee’s business experience. Tenant shall promptly reimburse Landlord for any actual costs incurred by Landlord relating to any request for an assignment or sublease as set forth in this Article 14.
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14.2 Permitted Assignment. Notwithstanding Section 14.1 above, Tenant may assign this Lease without Landlord’s consent (a “Permitted Assignment”) and Tenant shall be released from liability under this Lease from and after the effective date of such Permitted Assignment, provided that: (i) Tenant has not previously received written notice from Landlord of an Event of Default that is continuing as of the effective date of such assignment; (ii) no later than ten (10) days after the effective date of such assignment, Landlord is provided with written notice and copies of all conveyance or transfer documents in connection with such assignment; (iii) such Permitted Assignment occurs in connection with a sale of all or substantially all of Tenant’s assets, stock or other interests (or the stock or interests of Tenant’s corporate parents (i.e. a direct or indirect change of control), and (iv) the third party assignee has (a) an investment grade credit rating as provided for by S&P / Moody’s, or (b) creditworthiness substantially equal to or superior than that of Tenant at the time of such assignment with evidence of such creditworthiness provided to Landlord, based on standards reasonably determined by the Landlord.
14.3 Subletting. Tenant shall have the right to sublet any portion of the Property at any time without Landlord’s consent (a) to any sublessee that is owned by or under common control of Tenant, or (b) to any sublessee of the Tenant Retained Parcel. Otherwise, Landlord’s consent shall be required for any subletting of the Property, which consent shall not be unreasonably withheld, conditioned or delayed, provided that such sublease (i) prohibits any Noxious Use, (ii) does not release Tenant from any of its obligations under the Lease, (iii) does not extend beyond the primary term of the Lease, and (iv) Landlord is named as notice party and receives copies of all sublease documentation reasonably requested by Landlord. Upon any sublease, Landlord may require the Tenant and subtenant to execute a subordination, non-disturbance and attornment agreement in form reasonably acceptable to Landlord, Tenant and subtenant; provided that the terms of such sublease shall not be modified thereby. In addition, if the subtenant or Landlord requests the other to execute a subordination, non-disturbance and attornment agreement in connection with such sublease, subtenant or Landlord will not unreasonably withhold or delay its consent to such agreement, provided that in the event of the cancellation or termination of this Lease for any reason whatsoever or of the surrender of this Lease by operation of law prior to the expiration date of the sublease, subtenant shall make full and complete attornment to Landlord under either the terms of this Lease or the terms of the sublease, in Landlord’s sole and absolute discretion. In the event that this Lease is terminated or cancelled, and Landlord, following request by a subtenant, elects to apply the terms of this Lease to a subtenant, Base Rent for the Properties subleased to such subtenant shall be determined by fair market value appraisal obtained by Landlord at the time of termination of this Lease, but not less than any allocation of Base Rent to the Property in this Lease.
14.4 Landlord’s Option to Preserve Subtenancies. In the event of Tenant’s surrender of this Lease or the termination of this Lease in any other manner as provided herein, Landlord may, at its option, either terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord thereunder. No merger shall result from Tenant’s sublease of the Properties under this Section 14.4, Tenant’s surrender of this Lease, or the termination of this Lease in any other manner.
14.5 Tenant’s Assignment of All Rent from Subletting as Security for Tenant’s Obligations. Tenant immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from any subletting of all or a part of the Properties (other than the Tenant Retained Parcel) as permitted by this Lease, which assignment shall become effective immediately upon an uncured Event of Default. Until a default by Tenant beyond any applicable cure period, Tenant may collect and retain all rents from any subletting of all or a part of the Properties (other than the Tenant Retained Parcel). In the event of a material default by Tenant beyond any applicable cure period, Landlord, as assignee, or a receiver for Tenant appointed on Landlord’s application, may collect the rent and apply it toward Tenant’s obligations under this Lease.
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14.6 Continuing Obligation of Tenant. Except as otherwise expressly provided herein, no transfer permitted by this Article 14 shall release Tenant or any guarantor of Tenant’s obligations under this Lease or change Tenant’s primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Landlord’s acceptance of rent from any other person is not a waiver of any provision of this Article 14. Consent to one transfer is not a consent to any subsequent transfer. If Tenant’s transferee defaults under this Lease past any applicable cure period, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant’s liability under this Lease, except that Tenant shall not be liable for any extension of the term or increase in rentals made without Tenant’s prior written consent.
14.7 Landlord’s Right of Assignment. This Lease shall be fully assignable by the Landlord or its successors and assigns. From and after the effective date of any such assignment, provided that the assignee has expressly assumed Landlord’s obligations hereunder, Landlord will be released from any liability thereafter arising with respect to the Properties. Without limiting the foregoing, Tenant agrees that Landlord may agree with any purchaser or assignee of the Properties to provide (or have a Landlord’s Affiliate provide) asset management and/or act as servicer regarding the Properties, provided that such services shall not interfere with or impede Tenant’s use and occupancy of the Properties.
14.8 Creation of New Leases. Notwithstanding anything to the contrary in this Lease, at any time and from time to time, Landlord may, without consent or approval from Tenant: (i) sever this Lease with respect to one or more of the Properties and thereby remove such Property(ies) from this Lease and subject such Property(ies) to one or more new lease agreements (each, a “New Lease”) that will be on substantially the same terms and conditions as are in this Lease (except for (A) revisions to the amount of Base Rent which shall be determined by Landlord and allocated to such Property(ies), (B) revisions to the annual escalation of Base Rent as set forth below, (C) the commencement date of such New Lease, which shall be set forth therein and (D) the deletion of this Section 14.8 from such New Lease), which New Lease will be for the purpose of transferring title to such Property and the New Lease to a third party; (ii) sever this Lease with respect to one or more of the Properties, and cause such Property(ies) to be subject to one or more separate lease agreements between Landlord and Tenant upon substantially the same terms and conditions as this Lease, except for revisions to the description of the Property(ies) and the amount of Base Rent; or (iii) assign to a third party any part of this Lease or any lease agreement created pursuant to this Section 14.8. The landlord under any such New Lease is referred to herein as the “Successor Landlord”. The Base Rent under the New Lease may be increased, at Landlord’s sole election, by an amount that will cause the aggregate Base Rent over the remaining term of the New Lease, after accounting for the revised rent escalation structure set forth below, to be equal to the aggregate Base Rent payable for such Properties over the remaining term of this Lease if this Lease had not been amended and restated. The new Base Rent will become effective as of the date Landlord (or Successor Landlord) and Tenant execute the New Lease (such increase being referred to as the "Base Rent Increase"). The new rent, as established under the Base Rent Increase will escalate by two percent (2.0%) per annum. Notwithstanding anything to the contrary herein, while Landlord may modify the Base Rent and escalations as provided herein, in no event will the aggregate amount of modified Base Rent and escalations for the remainder of the Term exceed the aggregate amount of the original Base Rent and escalations for the remainder of the Term before such modifications. The New Lease shall be executed by Tenant within ten (10) days after request from Landlord to sever this Lease as provided herein. In the event that Tenant does not execute the New Lease within such ten (10) day period, and Tenant does not further execute the New Lease following a second notice of five (5) days, then an automatic Event of Default will be deemed to have occurred and Landlord shall have all remedies provided under this Lease. Any New Leases may, at Landlord’s election, contain default provisions that cross-default the New Leases with each other or with this Lease provided that all such cross-defaulted leases are held by one landlord or affiliated landlords.
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14.9 Tenant’s Leasehold Financing. Notwithstanding anything to the contrary herein, Tenant may, without the prior consent of Landlord, encumber, hypothecate or mortgage its leasehold estate and Tenant’s Personal Property herein (the “Leasehold Mortgage”). The Leasehold Mortgage shall encumber only Tenant’s interest under this Lease, and in no event shall the right granted herein to the Tenant to mortgage or otherwise encumber the Tenant’s leasehold interest be deemed or interpreted as a subordination by the Landlord of the Landlord’s interest in this Lease or fee interest in the Property(ies), it being expressly agreed that, under no circumstances, shall the Tenant have any right to mortgage or encumber the Landlord’s interest in this Lease or fee interest in the Property(ies).
Article 15. DEFAULT AND TERMINATION
15.1 Event of Default. The occurrence of any of the following events (each an “Event of Default”) shall constitute a default under this Lease by Tenant:
(a) Nonpayment of Base Rent. Failure to pay any installment of Base Rent hereunder when payment is due; provided, however, notwithstanding the occurrence of such a default, Landlord shall not be entitled to exercise its remedies set forth below other than the imposition of a Late Fee and default interest, as set forth below, unless and until Landlord shall have given Tenant notice of such default and a period of five (5) business days from the actual receipt of such notice shall have elapsed without such default being cured ; provided that Landlord shall only be required to provide one (1) notice for a default under this Section 15.1(a) during any twelve (12) month period of the Lease, and any subsequent default following receipt of such 1st notice under this Section 15.1(a) during such 12-month period shall be an immediate Event of Default in which event Landlord may serve a written five (5) days’ notice of termination of this Lease or any portion thereof upon Tenant, and, upon the expiration of such five (5) days, this Lease or any portion thereof and the Term hereunder shall end and expire as fully and completely as if the date of expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this Lease and the term hereof and Tenant shall then quit and surrender the Premises to Landlord but Tenant shall remain liable as hereinafter provided.
(b) Nonpayment of Additional Rent. Failure to pay any amount of Additional Rent on or before the date when due and such failure continuing for twenty-one (21) days following delivery to Tenant by Landlord of written notice specifying such failure.
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(c) Insolvency. If at any time during the Term, (i) proceedings in bankruptcy are instituted (voluntarily or involuntarily) by or against Tenant, that result in the filing of a voluntary petition or the entry of an order for relief, or (ii) Tenant files, or any creditor or other person files against Tenant, any petition in bankruptcy (i.e., seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief) under the Bankruptcy Code of the United States of America (or under any other present or future federal or state statute, law or regulation of similar intent or application), and such filing is not vacated or withdrawn within sixty (60) days thereafter, or (iii) a trustee or receiver is appointed to take possession of any of the Property, or of all or substantially all of the business or assets of Tenant, and such appointment is not vacated or withdrawn and possession restored to Tenant within sixty (60) days thereafter, or (iv) a general assignment or arrangement is made by Tenant for the benefit of creditors, or (v) any sheriff, marshal, constable or other duly-constituted public official takes possession of any of the Properties, or of all or substantially all of the business or assets of Tenant by authority of any attachment, execution, or other judicial seizure proceedings, and if such attachment or other seizure remains undismissed or undischarged for a period of sixty (60) days after the levy thereof, or (vi) Tenant files an answer admitting or failing timely to contest a material allegation of a petition filed against Tenant, respectively, in any such proceeding; or (viii) within ninety (90) days after the commencement of any proceeding against Tenant seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed. In the event that under applicable law the trustee in bankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, within such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of the affirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenant’s obligations under this Lease.
(d) Misrepresentation. The discovery by Landlord that any representation, warranty or financial statement given to Landlord by Tenant, or any affiliate of Tenant, was materially false or misleading when given.
(e) Required Documents. The failure by Tenant to deliver any of the documents required pursuant to this Lease (the “Required Documents”), within the time periods required pursuant to such sections. In addition to any rights or remedies otherwise set forth herein, if Tenant fails to provide to Landlord or its designee any of the Required Documents within the applicable time periods set forth in this Lease, Tenant shall pay to Landlord, at Landlord’s option and in its discretion, an amount equal to $500 per diem for each Required Document (up to a maximum of $10,000 per document) that is not delivered within five (5) days after written notice thereof.
(f) Financial Information; Property Exclusions; Liens. Tenant fails in any of its obligations set forth in Section 6.4, where any such failure continues for a period of fifteen (15) days after written notice of such failure is delivered by Landlord to Tenant; or any claim of lien is recorded against any Property, and such claim of lien continues for thirty (30) days without discharge (by bonding or other means available pursuant to applicable law), satisfaction or provision for payment being made by or on behalf of Tenant.
(g) Insurance. Any failure of Tenant to maintain the policies of insurance required under this Lease, and such breach continues for a period of five (5) business days after written notice of such failure is delivered to Tenant.
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(h) Other Obligations. The failure by Tenant to timely perform any obligation, agreement or covenant under this Lease, other than those matters specified in Sections 15.1(a)-(g) above and any such failure continues for a period of thirty (30) days after written notice of such failure is delivered to Tenant; provided, however, if Tenant's failure to comply cannot reasonably be cured within such thirty (30) days period, Tenant shall be allowed up to sixty (60) additional days (for a total of ninety (90) days) to cure the failure so long as Tenant begins the cure within such thirty (30) day period and diligently pursues the cure to completion. Any notice delivered pursuant to this Section 15.1 shall be in lieu of, and not in addition to, any notice required by law.
15.2 Landlord’s Remedies. Landlord shall have any one or more of the following remedies after the occurrence of an uncured default by Tenant. These remedies are not exclusive; they are cumulative in addition to any remedies now or later allowed by law, in equity, or otherwise:
(i) Landlord shall have the right, with or without notice or demand, immediately upon expiration of any applicable grace period specified herein, to terminate this Lease (or Tenant’s possession to all or any of the Properties), and at any time thereafter recover possession of all or any of the Properties and expel and remove therefrom Tenant and any other person occupying the same by any lawful means, and repossess and enjoy all or any of the Properties without prejudice to any of the remedies that Landlord may have under this Lease. If Tenant fails to so surrender the Properties, then Landlord, without prejudice to any other remedy it has for possession of the Properties or arrearages in rent or other damages, may re-enter and take possession of the Properties and expel or remove Tenant and any other person or entity occupying the Properties or any part thereof, without being liable for any damages, whether caused by negligence of Landlord or otherwise. If Landlord elects to terminate this Lease (or to terminate Tenant’s right of possession), Landlord shall also have the right to reenter the Property or any portion thereof and take possession of and remove all personal property of Tenant, if any, in the Properties. If Landlord elects to terminate this Lease and/or Tenant’s right to possession, or if Tenant’s right to possession is otherwise terminated by operation of law, Landlord may recover as damages from Tenant the following: (i) all Rent then due under this Lease through the date of termination; (ii) the worth at the time of the award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided (discounted by the discount rate of the Federal Reserve Bank of San Francisco plus one percent (1%), (iv) the cost of reletting the Properties, including without limitation, the anticipated period of vacancy until the Properties can be re-let at its respective fair market rental value; and (v) any other costs and expenses that Landlord may reasonably incur in connection with the Event of Default, including but not limited to, tenant improvement costs; reasonable attorneys’ fees; brokers’ commissions; any costs required to return the Properties to the condition required at the end of the Term; the costs of refurbishment, alterations, renovation and repair of the Property; and removal (including the repair of any damage caused by such removal) and storage (or disposal) of Tenant’s personal property, equipment, fixtures, alterations, tenant improvements and any other items which Tenant is required under this Lease to remove but does not remove; and (vi) all other monetary damages allowed under applicable law. Efforts by Landlord to mitigate the damages caused by the Event of Default (or Tenant’s Default under this Lease) shall not waive Landlord’s right to recover damages under the foregoing provisions.
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As used in this subsection (i), the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). To the extent permitted by applicable laws, Tenant hereby waives for Tenant and all those claiming under Tenant all right now or hereafter existing, including, without limitation, any rights to redeem by order or judgment of any court or by any legal process or writ, Tenant’s right of occupancy of the Properties after any termination of this Lease. Tenant hereby waives for Tenant and all those claiming under Tenant all right now or hereafter existing, to redeem by order or judgment of any court or by any legal process or writ, Tenant’s right of occupancy of the Properties after any termination of this Lease.
(ii) If Landlord does not elect to terminate this Lease, then this Lease shall continue in effect, and Landlord may enforce all of its rights and remedies under this Lease, including, without limitation, the right to recover Rent as it becomes due, and Landlord, without terminating this Lease, may exercise all of the rights and remedies of a landlord under law. Landlord shall not be deemed to have terminated this Lease except by an express statement in writing. Acts of maintenance or preservation, efforts to relet the Properties, or the appointment of a receiver upon application of Landlord to protect Landlord’s interest under this Lease shall not constitute an election to terminate Tenant’s right to possession unless such election is expressly stated in writing by Landlord. Notwithstanding any such reletting without such termination, Landlord may at any time thereafter elect to terminate Tenant’s right to possession and this Lease. If Landlord elects to relet the Properties or any portion thereof for the account of Tenant, the rent received by Landlord from such reletting shall be applied as follows: first, to the payment of any and all costs of such reletting (including, without limitation, attorneys’ fees, alterations and repairs to any of the Property, and tenant improvement costs, if any); second, to the payment of any and all indebtedness other than Rent due hereunder from Tenant to Landlord; third, to the payment of any and all Rent due and unpaid hereunder; and the balance, if any, shall be held by Landlord and applied in payment of future Rent as it becomes due. If the rent received from the reletting is less than the sum of the costs of reletting, other indebtedness due by Tenant, and the Rent due by Tenant, then Tenant shall pay the deficiency to Landlord promptly upon demand by Landlord. Such deficiency shall be calculated and paid monthly.
(iii) Landlord may pursue any other remedy now or hereafter available to Landlord under the laws and judicial decisions of States in which the Properties are located in addition to and not as an alternative remedy to those provided hereunder.
(iv) In the event Tenant incurs any monetary default related to any existing indebtedness that secures the Properties and which is not cured within one hundred and fifty (150) days, Landlord shall have the right terminate the Lease.
(v) Upon the occurrence of an Event of Default, Landlord shall have all rights and remedies hereunder and under applicable law immediately. Except only as may be required by statute which cannot be waived lawfully, (i) Landlord shall have no obligation to give any notice after an Event of Default as a condition to Landlord’s pursuit of any right or remedy; and (ii) Landlord shall have no obligation to accept the attempted or purported cure of, or to waive, any Event of Default, regardless of tender of delinquent payments or other performance by Tenant, or any other event or condition whatsoever; and Tenant shall not have any right to cure any Event of Default, and no right to cure shall be implied. Without limiting the foregoing, after the occurrence of any Event of Default (irrespective of whether or not the same consists of an ongoing condition, a one-time occurrence, or otherwise), the same shall be deemed to continue at all times thereafter; provided, however, that such Event of Default shall cease to continue only if Landlord executes and delivers a written agreement in which Landlord expressly states that such Event of Default has ceased to continue. Landlord shall not be obligated under any circumstances whatsoever to execute and deliver any such writing until such default is cured. Without limitation, this Section shall govern in any case where reference is made in this Lease to (x) any “cure” (whether by use of such word or otherwise) of any Event of Default, (y) “during an Event of Default” or “the continuance of an Event of Default” (in each case, whether by use of such words or otherwise), or (z) any condition or event which continues beyond the time when the same becomes an Event of Default.
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(vi) Nothing in this Article shall be deemed to affect Tenant’s obligation to indemnify, defend, protect and hold harmless Landlord and the other Landlord Parties under this Lease.
The term “Rent” as used in this Section 15.2 means all sums payable by Tenant pursuant to the Lease, including, without limitation, all Base Monthly Rent, Additional Rent, Taxes, and insurance.
15.3 Whether or not Landlord elects to terminate this Lease or Tenant’s right to possession of the Properties on account of any default by Tenant, Landlord shall have all rights and remedies at law or in equity, including, but not limited to, the right to re-enter the Properties and, to the maximum extent provided by law, Landlord shall have the right to terminate any and all subleases, licenses, concessions, or other consensual arrangements for possession entered into by Tenant and affecting the Properties or, in Landlord’s sole discretion, may succeed to Tenant’s interest in such subleases, licenses, concessions, or arrangements. In the event of Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, concessions, or arrangements, Tenant shall have no further right to or interest in the rent or other consideration receivable thereunder as of the date of notice by Landlord of such election.
15.4 Waiver of Notice/Performance by Landlord. Notwithstanding any provision herein, (a) if Tenant is required to comply with any governmental requirement, Tenant shall not be entitled to notice of default from Landlord and right to cure beyond the period within which such compliance may be required by applicable law or government agency; and (b) if in Landlord’s reasonable determination the continuance of any default by Tenant for the full period of notice provided for herein will constitute a threat of injury or harm to persons, or damage or loss of value to property, Landlord may, with or without notice, elect to perform those acts with respect to which Tenant is in default for the account and at the expense of Tenant. If by reason of such governmental requirement or default by Tenant, Landlord is compelled or elects to pay any sum of money (including, without limitation, attorneys’ fees, consultant fees, testing and investigation fees, expert fees and court costs), such sums so paid by Landlord, plus an administrative charge of fifteen percent (15%) of such sums, shall be due to Landlord from Tenant within ten (10) days after written demand therefor from Landlord, in addition to any other amounts to be paid by Tenant under this Lease.
15.5 Late Charge. In addition to any interest charged to Tenant under this Section 15.5, if any payment of Base Rent or Additional Rent is not received by Landlord from Tenant when such payment is due to Landlord hereunder, such payment shall be deemed delinquent and cause Landlord to incur additional administrative expense in connection with this Lease. Landlord and Tenant agree that such cost to Landlord is difficult to anticipate or ascertain, and agree that a reasonable estimate of such additional cost to Landlord will cause Tenant to incur a late fee of five percent (5%) on each such delinquent payment (the “Late Fee”), due and payable immediately with the delinquent Base Rent or delinquent Additional Rent, as the case may be.
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15.6 Interest. Tenant hereby acknowledges that late payment by Tenant of Base Rent, Additional Rent and/or any other sums due by Tenant hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges. Accordingly, in addition to any Late Fee due from Tenant hereunder, any sum due by Tenant under this Lease which is not paid when due shall bear interest at the greater of twelve percent (12%) per annum of such sums (including on the amount of the Late Fee, from the date it is incurred), or the maximum rate allowed under applicable law, from the date such sum becomes due and payable by Tenant hereunder until paid, unless otherwise expressly provided in this Lease. Payment of interest and Late Fees shall be in addition to any expenses incurred as Additional Rent on account of such delinquent payment of Base Rent or Additional Rent.
15.7 Right of Landlord to Re-Enter. In the event of any termination of this Lease, Landlord shall have the immediate right to enter upon and repossess the Properties, and any personal property of Tenant may be removed from the Properties and stored in any public warehouse at the risk and expense of Tenant.
15.8 Surrender of Properties. No act or thing done by Landlord or any agent or employee of Landlord during the Term shall be deemed to constitute an acceptance by Landlord or a surrender of either or both of the Properties unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to either of the Properties to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Properties or effect any partial or full termination of this Lease, whether or not the keys are thereafter retained by Landlord and, notwithstanding such delivery, Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been terminated properly. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Properties.
15.9 Form of Payment After Default. Without limiting any other obligation of Tenant under this Lease, if Tenant fails to pay any amount due to Landlord under this Lease within the applicable notice and cure periods set forth in this Lease, or if Tenant attempts to pay any such amount by drawing a check on an account with insufficient funds, then Landlord shall have the right to require that any and all subsequent amounts paid by Tenant to Landlord under this Lease (to cure a default or otherwise) be paid in the form of cashier’s or certified check drawn on an institution acceptable to Landlord, or any other reasonable and lawful form approved by Landlord in its sole and absolute discretion, notwithstanding that Landlord may have previously accepted payments from Tenant in a different form.
15.10 Acceptance of Rent Without Waiving Rights. Payment by Tenant shall be deemed to be other than on account of the earliest sum due from Tenant hereunder, nor shall any endorsement or statement by Tenant on any check or any letter accompanying such payment be deemed an accord and satisfaction of any amount in dispute between Tenant and Landlord or otherwise. Landlord may accept any and all of Tenant’s payments without waiving any right or remedy under this Lease, including but not limited to the right to commence and pursue an action to enforce rights and remedies under a previously served notice of default, without giving Tenant any further notice or demand.
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15.11 Remedies Cumulative. All rights, privileges, elections, and remedies of Landlord are cumulative and not alternative with all other rights and remedies hereunder, at law or in equity to the fullest extent permitted by law. The exercise of one or more rights or remedies by Landlord shall not impair Landlord’s rights to exercise any other right or remedy to the fullest extent permitted by law. The remedies available to Landlord pursuant to this Article 15 shall survive the expiration or termination of this Lease
15.12 Tenant’s Default. If Tenant is in default of the Lease beyond any applicable cure period, then:
(a) For so long as Landlord does not terminate Tenant’s right to possession of the Properties, if Tenant obtains Landlord’s sole and absolute consent, Tenant will have the right to assign or sublet its interest in the Lease, but Tenant will not be released from liability.
(b) All costs of de-identification of the Properties shall be paid by Tenant whether or not Landlord terminates this Lease.
15.13 Default by Landlord. Landlord shall be in default if Landlord fails to perform any provision of this Lease required of it and the failure is not cured within thirty (30) days after written notice has been given to Landlord. If, however, the failure cannot reasonably be cured within the cure period, Landlord shall not be in default of this Lease if Landlord commences to cure the failure within the cure period and diligently and in good faith continues to cure the failure. Notices given under this Section 15.13 shall specify the alleged breach and the applicable Lease provisions. If Landlord shall at any time default beyond the applicable notice and cure period, Tenant shall have the right, for so long as such default is continuing, to cure such default on Landlord’s behalf. Any sums expended by Tenant in doing so, and all reasonably necessary incidental costs and expenses incurred in connection therewith, shall be payable by Landlord to Tenant within thirty (30) days following demand therefor by Tenant, provided, however, that Tenant shall not be entitled to any deduction or offset against any rent otherwise payable to Landlord under this Lease, and in no event may Tenant terminate this Lease in the event of a default by Landlord.
Article 16. RIGHT OF INSPECTION
Landlord and Landlord’s authorized representatives shall have the right after written notice to Tenant, to enter upon the Properties at all reasonable hours for the purpose of inspecting the Properties or of making repairs, additions or alterations in or upon the Properties (following Tenant’s failure to cure any breach of such obligations), and for the purpose of exhibiting the Properties to prospective tenants, purchasers or others. Provided Tenant is not in default beyond any applicable cure period, Landlord shall not exhibit any “for sale” signs during the term of the Lease, except during the last twelve (12) months of the Term of this Lease.
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Article 17. WAIVER OF BREACH
No waiver by Landlord of any breach of any one or more of the terms, covenants, conditions, or agreements of this Lease shall be deemed to imply or constitute a waiver of any succeeding or other breach. Failure of Landlord to insist upon the strict performance of any of the terms, conditions, covenants, and agreements of this Lease shall not constitute or be considered as a waiver or relinquishment of Landlord’s rights to subsequently enforce any default, term, condition, covenant, or agreement, which shall all continue in full force and effect. The rights and remedies of Landlord under this Lease shall be cumulative and in addition to any and all other rights and remedies which Landlord has or may have.
Article 18. NOTICES
18.1 Notice Requirements. All notices, requests, or demands herein provided to be given or made, or which may be given or made by either party to the other, shall be given or made only in writing and shall be deemed to have been duly given: (i) when delivered personally at the address set forth below, or to any agent of the party to whom notice is being given, or if delivery is rejected when delivery was attempted; or (ii) on the date delivered when sent via Overnight Mail via nationally recognized overnight air carrier service (e.g., Federal Express, UPS, DHL, etc.), properly addressed and postage prepaid; or (iii) on the date sent via electronic transmission if, within forty eight (48) hours of such transmission, a copy of such notice is also sent by one of the methods provided in subsection (i), (ii) or (iv) hereunder; or (iv) upon delivery, or if delivery is rejected when delivery was attempted of properly addressed first class mail, postage prepaid with return receipt requested. The proper address to which notices, requests, or demands may be given or made by either party shall be the address set forth at the end of this Section or to such other address or to such other person as any party shall designate. Such address may be changed by written notice given to the other party in accordance with this Section.
If to Landlord:
Pontus IMB Portfolio
c/o Pontus Capital
Attn: Michael Press
875 Prospect Street, Suite 303
La Jolla, California 92037
Phone Number: (858) 344-8182
Email: mpress@pontuscapital.com
With a copy to:
Foley & Lardner LLP
301 E Pine Street, Suite 1200
Orlando, Florida 32801
Attn: Pamela M. Brown
Phone Number: (407) 244-3271
Email: pbrown@foley.com
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If to Tenant:
iMedia Brands, Inc.
6740 Shady Oak Road
Eden Prairie, MN 55344
Attn: CEO
Phone Number: (952) 943-6158
Email:
With a copy to:
iMedia Brands, Inc.
6740 Shady Oak Road
Eden Prairie, MN 55344
Attn: General Counsel
Phone Number: (952) 943-6517
Email:
18.2 Payments Under Lease. Rent and all other payments due to Landlord under this Lease shall be paid in lawful money of the United States of America without offset or deduction to the name and at the address first given above or to such other persons or parties or at such other places as Landlord may from time to time designate in writing.
Article 19. RELATIONSHIP OF THE PARTIES
This Lease shall not be deemed or construed by the parties, nor by any third party, as creating the relationship of (i) principal and agent, (ii) partnership, or (iii) joint venture between the parties. Neither the method of computation of rent nor any other provision of this Lease, nor any acts of the parties are other than in the relationship of Landlord and Tenant.
Article 20. SUBORDINATION, ATTORNMENT AND ESTOPPEL
20.1 Subordination and Non-Disturbance.
(a) This Lease and the leasehold estate created hereby shall be, at the option and upon written declaration of Landlord, subject, subordinate, and inferior to the lien and estate of any liens, trust deeds, and encumbrances (“Mortgages”), and all renewals, extensions, or replacements thereof, now or hereafter imposed by Landlord upon the Properties; provided, however, Landlord shall use reasonably efforts to provide Tenant with an SNDA setting forth that so long as Tenant is not in default hereunder, Tenant’s rights and obligations hereunder shall remain in force and Tenant’s right to possession shall be upheld. The SNDA may contain additional provisions as are customarily requested by secured lenders with liens encumbering real property security similar to the Properties, including, without limitation, Tenant’s agreement to attorn as set forth in Section 20.1(b) below. Tenant shall, within ten (10) days following a request by Landlord, execute and acknowledge any subordination agreement in the form substantially set forth in Exhibit C attached hereto, which form shall be subject to the reasonable approval of Tenant and Landlord’s Lender, or other documents required to establish of record the priority of any such encumbrance over this Lease.
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(b) Attornment. In the event of foreclosure of any Mortgage, whether superior or subordinate to this Lease, then (i) this Lease shall continue in force; (ii) Tenant’s quiet possession shall not be disturbed if Tenant is not in default beyond any applicable cure period hereunder; (iii) Tenant shall attorn to and recognize the mortgagee or purchaser at foreclosure sale (“Successor Landlord of Lender”) as Tenant’s landlord for the remaining term of this Lease; and (iv) the Successor Landlord shall not be bound by (a) any payment of rent for more than one month in advance; (b) any amendment, modification, or ending of this Lease without the Successor Landlord’s consent after the Successor Landlord of Lender’s name is given to Tenant, unless the amendment, modification, or ending is specifically authorized by the original Lease and does not require Landlord’s prior agreement or consent; and (c) any liability for any act or omission of a prior landlord. At the request of the Successor Landlord of Lender, Tenant shall execute a new lease for the Properties, setting forth all of the provisions of this Lease except that the term of the new lease shall be for the balance of the term of this Lease.
(c) Estoppel Certificate. Each of Landlord and Tenant shall execute and deliver to the other, within ten (10) days after receipt of a request therefor, any estoppel certificate or other statement to be furnished to the requesting party or any prospective purchaser of or any lender against the Properties or Tenant’s leasehold interest hereunder. In the event that Landlord does not deliver the executed estoppel certificate after such ten (10) day notice, then following a second notice of five (5) without receipt of such estoppel certificate, Tenant may act as Landlord’s attorney-in-fact and execute such estoppel certificate on Landlord’s behalf. Such estoppel certificate shall acknowledge and certify each of the following matters, to the extent each may be true: that the Lease is in effect and not subject to any rental offsets, claims, or defenses to its enforcement; the commencement and expiration dates of the term; that Tenant is paying rent on a current basis; that any improvements required to be furnished under the Lease have been completed in all respects; that the Lease constitutes the entire agreement between Tenant and Landlord relating to the Properties; that Tenant has accepted the Properties and is in possession thereof; that the Lease has not been modified, altered, or amended except in specified respects by specified instruments; that the affirming party has no notice of any prior assignment, hypothecation, or pledge of rents or the Lease; and such other matters as reasonably may be requested.
Article 21. ATTORNEYS’ FEES
21.1 Recovery of Attorneys’ Fees and Costs of Suit. A party in default of this Lease (“Defaulting Party”) shall reimburse the other party (“Non-Defaulting Party”), upon demand, for any reasonable costs or expenses incurred by the Non-Defaulting Party in connection with any breach or default under this Lease by such Defaulting Party beyond any applicable cure period; whether or not suit is commenced or judgment entered. Such costs shall include legal fees and costs incurred for the negotiation of a settlement, enforcement of rights, or otherwise. Furthermore, if any action for breach of or to enforce the provisions of this Lease is commenced, the court in such action shall award to the party in whose favor a judgment is entered, a reasonable sum as attorneys’ fees and costs. Such attorneys’ fees and costs shall be paid by the non-prevailing party in such action. Tenant acknowledges and confirms that Landlord may impose reasonable administrative, processing or servicing fees, and collect attorneys’ fees, costs and expenses incurred by Landlord or its servicer or management company, in connection with: (i) any request for release or substitution of any of the Properties, whether or not approved in writing by Landlord; (ii) the procurement of consents, waivers and approvals with respect to any of the Properties or any matter related to this Lease; (iii) the review of any assignment or sublease or proposed assignment or sublease or the preparation or review of any subordination or non-disturbance agreement; and (iv) inspections required to make certain determinations under this Lease.
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21.2 Party to Litigation. Tenant shall indemnify Landlord against and hold Landlord harmless from all costs, expenses, demands, and liability incurred by Landlord if Landlord becomes or is made a party to any claim or action (i) instituted by any third party against Tenant, or by or against any person holding any interest under or using the Properties by license of or agreement with Tenant; (ii) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; (iii) otherwise arising out of or resulting from any action or transaction of Tenant or such other person; or (iv) necessary to protect Landlord’s interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. Tenant shall defend Landlord against any such claim or action at Tenant’s expense with counsel reasonably acceptable to Landlord or, at Landlord’s election, Tenant shall reimburse Landlord for any legal fees or costs incurred by Landlord in any such claim or action.
Article 22. CONSENT
Landlord shall have no liability for damages resulting from, nor may Tenant terminate this Lease as a result of any default by Landlord or Landlord’s failure to give any consent, approval, or instruction reserved to Landlord. Tenant’s sole remedy in any such event shall be an action for injunctive relief.
Article 23. AUTHORITY TO MAKE LEASE; COVENANT OF QUIET ENJOYMENT
23.1 Full Power and Authority to Enter Lease. The parties covenant and warrant that each has full power and authority to enter into this Lease.
23.2 Quiet Enjoyment. Landlord covenants, represents and warrants that Tenant shall have and enjoy full, quiet, and peaceful possession of the Properties, their appurtenances and all rights and privileges incidental thereto during the term, as against all persons claiming by, through, or under Landlord, subject to the provisions of this Lease and any title exceptions or defects of title in existence on the Commencement Date or created after the Commencement Date by Tenant.
23.3 No Violation of Covenants and Restrictions. Tenant leases the Properties subject to all encumbrances, covenants, conditions, restrictions, easements, rights of way, and all other matters of record affecting the Properties. Tenant shall not violate, permit a violation, or cause Landlord to violate any recorded covenants and restrictions affecting the Properties. Tenant shall defend, indemnify, and hold harmless Landlord from any costs or expenses incurred from such a violation.
Article 24. HAZARDOUS MATERIAL
24.1 Environmental Compliance. Tenant shall comply with all laws, including Environmental Laws, relating to the use, storage, transportation, disposal, dispensing, sale or Release of Hazardous Materials at the Properties arising from and after the Commencement Date. Without limiting the foregoing, Tenant shall comply with all laws and any groundwater monitoring wells or other monitoring or Remediation environmental equipment located or installed on the Properties, their construction, operation, maintenance, calibration and alarm systems, and promptly shall implement any and all upgrade requirements promulgated by any government agency having jurisdiction at the earliest possible time, but in no event, no later than any applicable deadline announced or promulgated by the government agency. Tenant shall provide Landlord with copies of all reports, studies, complaints, claims, directives, citations, demands, inquiries, notices of violation, or orders relating to any Release at the Properties, at any time, or any alleged non-compliance with Environmental Laws at the Properties, reasonably promptly (and in no event later than thirty (30) days) after such documents are provided to or generated by Tenant). Tenant also shall promptly notify Landlord of any Release at, on, under or from any Property and promptly shall perform Remediation of any Environmental Conditions as required under Section 24.2 below. All reporting, investigation and/or Remediation requirements under any Environmental Law with respect to any and all Environmental Conditions existing or occurring at the Properties prior to or during the term of this Lease shall not be the responsibility of Tenant.
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24.2 Tenant’s Responsibility for Hazardous Materials. Environmental Conditions currently or previously existing or Releases occurring at the Properties shall be the responsibility of Tenant and Tenant shall be liable for and responsible for Remediation of any such Environmental Conditions and Releases in accordance with Environmental Laws, including without limitation, at Tenant’s sole cost (i) Remediation of such Environmental Conditions and Releases as directed by any governmental agency, as required by Environmental Laws; (ii) damages, costs, expenditures and claims for injury to persons, property, the Properties and surrounding air, land, surface water, sediment, and ground water resulting from such Environmental Conditions or Releases; (iii) claims by any governmental agency or third party associated with injury to surrounding air, land, surface water, sediment and ground water or other damage resulting from such Environmental Conditions or Releases; (iv) damages for injury to the buildings, fixtures, appurtenances, equipment and other personal property of Landlord to the extent caused by such Environmental Conditions or Releases; (v) fines, costs, fees, assessments, taxes, demands, orders, directives or any other requirements imposed in any manner by any governmental agency asserting jurisdiction, or under any Environmental Laws with respect to such Environmental Conditions or Releases; (vi) damages, costs and expenditures for injury to natural resources to the extent caused by such Environmental Conditions or Releases as directed by any governmental agency or otherwise as required by applicable law, including Environmental Laws; and (vii) compliance with Environmental Laws regarding the use, storage, transportation, release, disposal, dispensing or sale of Hazardous Materials.
24.3 Tenant’s Environmental Indemnification. Tenant shall indemnify, defend (with counsel acceptable to Landlord) and hold each Landlord Party harmless from any and all claims, demands, directives, requirements, orders, suits, judgments, damages, natural resources damage, injuries, fees, penalties, fines, assessments, taxes, costs (including without limitation, reasonable attorneys’ fees, consultant fees and expert fees), liabilities or losses asserted against or incurred by Landlord, which arise from: (i) Hazardous Materials present or Released in violation of Environmental Laws or in excess of applicable reporting standards at or from the Properties prior to or during the Term; (ii) any violation of Environmental Laws by Tenant with respect to the Properties prior to or during the Term; (iii) Tenant’s breach of its obligations, responsibilities and undertakings in this Article; (iv) claims by a governmental entity or unaffiliated third-party or requirements of governmental entities arising out of Hazardous Materials present or Released at, on or from the Properties prior to or during the Lease Term; (v) only in the event the Properties can no longer be used for the Permitted Use, diminution in value of the Properties arising as a sole and direct result of the presence or Release of Hazardous Materials at the Properties prior to or during the Lease Term or the removal or remediation thereof; or (vi) only in the event and to the extent that the Properties cannot temporarily or permanently be used for the Permitted Use, loss of rent at the Properties arising as a sole and direct result of the presence or Release of Hazardous Materials at the Properties prior to or during the Lease Term or the removal or remediation thereof, provided that Landlord proves that such rent was lost as a sole and direct result of such Release of Hazardous Materials and/or the removal or remediation thereof, and provided further that, with respect to (v) and (vi) above, Landlord shall have the obligation to reasonably mitigate such damages (hereinafter collectively referred to as “Environmental Losses”). This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by Environmental Laws because of Hazardous Materials present in the soil or ground water on, under or emanating from the Properties arising from Hazardous Materials present or Released at, on or from the Properties prior to or during the Term. Provided that Tenant timely conducts a Termination Investigation (as defined below), Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease for a period of ten (10) years, provided that Tenant’s obligations shall continue to survive with respect to (i) any claims for defense or indemnification by Landlord asserted hereunder against Tenant within such ten (10) year period; and (ii) any Environmental Losses (including without limitation, any claims, demands, directives, orders, or suits) asserted against or incurred by Tenant within such ten (10) year period.
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24.4 Records. Tenant shall maintain inventory reconciliation records and release detection and monitoring records and reporting records for any releases of Hazardous Substances, in accordance with applicable Environmental Laws. Tenant shall make, such records available for inspection by Landlord upon reasonable request made by advance (i.e., at least two business days) written notice during normal business hours.
24.5 Tenant’s Notification Obligation. Tenant promptly shall notify Landlord of any of the following: (i) any correspondence or communication received by Tenant from any governmental agency regarding the Properties or Tenant’s operation of the Properties alleging a Release on a Property or violation of Environmental Law; (ii) any material change in Tenant’s operations on the Properties that will change or has the potential to change Tenant’s obligations or liabilities under the Environmental Laws in any material respect; and (iii) any Releases or suspected Releases of any and all Hazardous Materials at or from the Properties.
24.6 Landlord’s Right of Entry. In Landlord’s sole discretion and at Landlord’s sole cost and expense, Landlord, or its representatives or consultants, shall have the right, upon reasonable prior written notice and at times which will have the least impact on the operations of Tenant’s business, to enter upon the Properties for the purpose of conducting a non-invasive environmental audit or assessment to assure that the Properties are in compliance with any applicable Environmental Laws and to participate in any ongoing or planned inspection, tests, borings, measurements, investigation or assessment in order to determine the presence of Hazardous Materials; provided, however, that Landlord shall have the right to conduct Phase II Environmental Assessments if the non-invasive environmental assessment obtained in accordance with this Section 24.6 recommends obtaining a Phase II Environmental Assessment. Notwithstanding anything to the contrary in this Article 24, Landlord shall not be entitled to claim or seek indemnity or defense under this Article 24 above where the relevant Environmental Condition or Remediation obligation results solely from the gross negligence or willful misconduct of Landlord (its agent or contractor) in conducting any below ground investigation of soil or groundwater or other surface or sub-surface water, unless and except for such investigations as are required by Environmental Laws.
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24.7 Termination Investigation. Upon the expiration or earlier termination of this Lease with respect to a Property, (“End of the Term”), Landlord may, at Tenant’s sole cost and expense, conduct a phase I non-invasive environmental site assessment of such Property or all of the Properties (“End of Term Phase I”) using a reputable, nationally-recognized environmental consultant selected by Landlord. In the event and to the extent that, as a result of the End of Term Phase I, an environmental consultant identifies Recognized Environmental Conditions (as defined in the ASTM Standard El 527-05 or its equivalent in any amended or superseding ASTM Standard for Phase I environmental site assessments in effect at the End of the Term) (“RECs”) and the environmental consultant recommends a Phase II to confirm the presence or absence of a Release of Hazardous Materials or other conditions associated with such RECs (“Termination Investigation”), then Landlord may, in its sole and absolute discretion, elect to conduct an invasive investigation of any applicable Property (“Phase II”) at Tenant’s sole cost and expense. Tenant shall have the right to be present and split samples taken during the Phase II. If the Termination Investigation reveals violations of applicable Environmental Laws or environmental conditions which require reporting or notice to any governmental agency under applicable Environmental Laws (“Violations or Conditions”), Tenant, at its sole cost and expense, shall promptly undertake such further action as may be necessary or required to cure, investigate or remediate any such Violations or Conditions that are required by Environmental Laws to meet the applicable legal standards for properties similar to the applicable Property (“Cure All Violations and Remediate All Conditions”). Tenant shall obtain Landlord’s approval (not to be unreasonably conditioned, withheld or delayed) of any proposed plans to cure or remediate any Violations or Conditions (including any proposed institutional or engineering controls), as well as the consultant Tenant proposes to retain to conduct or perform the work. Expiration or termination of this Lease shall not relieve Tenant of its obligations hereunder to Cure All Violations and Remediate All Conditions. If Tenant has not Cured All Violations and Remediated All Conditions as set forth herein prior to the End of the Term, then Landlord hereby agrees to grant Tenant, for the limited purpose of carrying out the provisions of this Section, a right and license to enter upon any of the Properties following the expiration or earlier termination of this Lease and continuing until such time as Tenant has Cured All Violations and Remediated All Conditions or otherwise satisfied its obligations under this Article. Said right and license shall be granted by way of a license agreement at the End of the Term, which license agreement shall be in form and substance reasonably acceptable to Landlord and Tenant, and for the avoidance of doubt, Tenant’s entry upon any of the Properties in connection with such cure and remediation shall not be considered a holding-over under this Lease.
24.8 Records Retention. Tenant shall maintain inventory reconciliation records and release detection and monitoring records and reporting records for releases of Hazardous Materials in accordance with applicable Environmental Laws. Tenant shall make such records available for inspection by Landlord during the Term at Tenant’s offices upon reasonable prior written notice, during normal business hours.
24.9 Survival. Provisions of this Article 24 shall survive until ten (10) years after the expiration or earlier termination of the tenancy.
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Article 25. GENERAL PROVISIONS
25.1 Recitals. The Recitals set forth above are hereby incorporated by this reference.
25.2 Gender; Number. The use of (i) the neuter gender includes the masculine and feminine and (ii) the singular number includes the plural, whenever the context requires.
25.3 Captions. Captions in this Lease are inserted for the convenience of reference only and do not define, describe, or limit the scope or the intent of this Lease or any of its terms.
25.4 Exhibits. All attached exhibits are a part of this Lease and are incorporated in full by this reference. Except as specifically provided herein, if any provision contained in any exhibit hereto is inconsistent or in conflict with any provisions of this Lease, the provisions of this Lease shall supersede the provisions of such exhibit and shall be paramount and controlling.
25.5 Entire Agreement. This Lease contains the entire agreement between the parties relating to the transactions contemplated hereby and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged into this Lease.
25.6 Drafting. This Lease shall not be construed more strictly against one party than the other because it may have been drafted by one of the parties or its counsel, each having contributed substantially and materially to the negotiation and drafting hereof.
25.7 Modification. No modification, waiver, amendment, discharge, or change of this Lease shall be valid unless it is in writing and signed by the party against which the enforcement of the modification, waiver, amendment, discharge, or change is or may be sought.
25.8 Joint and Several Liability. If any party consists of more than one person or entity, the liability of each such person or entity signing this Lease shall be joint and several.
25.9 Enforceability. Tenant warrants and represents that the terms of this Lease are fully enforceable in the locality in which the Properties are located. In the event any provision contained in this Lease is inconsistent or in conflict with local law, custom, or practice, the provisions of this Lease shall supersede and shall be paramount and controlling.
25.10 Severability. In the event any term, covenant, condition, or provision of this Lease is held to be invalid, void, or otherwise unenforceable by any court of competent jurisdiction, the fact that such term, covenant, condition, or provision is invalid, void, or otherwise unenforceable shall in no way affect the validity or enforceability of any other term, covenant, condition, or provision of this Lease.
25.11 Successors and Assigns. Except as otherwise provided herein, all terms of this Lease shall be binding upon, inure to the benefit of, and be enforceable by the parties and their respective legal representatives, successors, and assigns.
25.12 Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent, and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that, except as otherwise expressly provided under this Lease, if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord’s expense or to any offset of the rent or other amounts owing hereunder against Landlord; provided, however, the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and an opportunity is granted to Landlord and such holder to correct such violation as provided above.
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25.13 Information Provided. Tenant warrants and represents that all information Tenant has provided to Landlord is accurate and correct in all material respects and Tenant acknowledges that Landlord has relied upon such information in entering into this Lease.
25.14 Limitation of Landlord’s Liability. Notwithstanding anything contained in this Lease to be contrary, Landlord shall not incur any liability beyond Landlord’s interest in the Properties upon a breach of this Lease, and Tenant shall look exclusively to such interest in the Properties for the payment and discharge of any obligations imposed upon Landlord under this Lease.
25.15 True Lease. Landlord and Tenant agree that this Lease constitutes a true lease and not a financing or other form of transaction, and is intended to constitute an operating lease. In furtherance of the foregoing, Landlord and Tenant each waives any claim or defense based upon the characterization of this Lease as anything other than a true lease and operating lease and irrevocably waives any claim or defense which asserts that this Lease is anything other than a true lease. Landlord and Tenant covenant and agree that they will not assert that this Lease is anything but a true lease. Landlord and Tenant each stipulate and agree not to challenge the validity, enforceability or characterization of this Lease of the Properties as a true lease and further stipulate and agree that nothing contained in this Lease creates or is intended to create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like. Landlord and Tenant each shall support the intent of the parties that this Lease of the Properties pursuant to this Lease is a true lease and does not create a joint venture, partnership (either de jure or de facto), equitable mortgage, trust, financing device or arrangement, security interest or the like, if, and to the extent that, any challenge occurs. For the purposes of any assumption, rejection or assignment of this Lease under 11 U.S.C. Section 365 or any amendment or successor section thereof, this is one indivisible and non-severable lease dealing with all Properties which must be assumed, rejected or assigned as a whole with respect to all (and only all) of the Properties.
25.16 Force Majeure. If either party shall be prevented or delayed from punctually performing any obligation or satisfying any condition under this Lease by any condition beyond the reasonable control of such party, exclusive of financial inability of a party (including, without limitation, any of the following if beyond the control of (and not caused by) such party: strike, lockout, labor dispute, civil unrest, inability to obtain labor, materials or reasonable substitutes thereof, acts of God, present or future governmental restrictions, regulations or control, insurrection, and sabotage), then the time to perform such obligation or satisfy such condition shall be extended by the delay caused by such event, but only for a reasonable period of time not to exceed, in any event, ninety (90) days. Notwithstanding the preceding, the provisions of this Section 25.16 shall in no event operate to delay the Commencement Date or to excuse Tenant from the payment of all Rent as and when due under this Lease
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25.17 No Punitive Damages. Landlord shall not be liable to Tenant, or any of Tenants Affiliates, for any punitive, special, speculative, treble or exemplary damages connected with this Lease, regardless of whether a claim is based in contract, tort (including negligence), strict liability, violation of any applicable deceptive trade practices act, or similar legal requirement or any other legal or equitable principle, even if advised of the possibility of such claims, unless such claim is made by a third party against a party hereto.
25.18 Waiver of Trial by Jury. Landlord and Tenant do hereby waive trial by jury in any action, proceeding or counterclaim brought by either party against the other, upon any matters whatsoever arising out of or in any way connected with this Lease, Tenant’s use or occupancy of the Properties and/or any claim of injury or damage. It further is agreed that in the event Landlord commences any summary proceeding for non-payment of rent or additional rent, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding.
25.19 Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original. The counterparts shall together constitute but one agreement. Any signature on a copy of this Lease or any document necessary or convenient thereto sent by facsimile shall be binding upon transmission by facsimile and the facsimile copy may be utilized for the purposes of this Lease.
25.20 Confidentiality. Landlord requires and Tenant agrees to keep the economic terms and conditions of this Lease confidential from all third parties, except as Tenant may be required to disclose such economic terms and conditions to Tenant’s accountant, attorney or as required by applicable law, or in connection with any actual or proposed assignment, sublease, financing or corporate transaction by such party or an actual or proposed sale of the Properties by Landlord (including, without limitation, the listing and marketing of the Properties for sale. Tenant understands that a disclosure of the economic terms and conditions to unauthorized third (3rd) parties may have a severe economic impact on the Landlord. The parties further specifically agree that a breach of this Article “Confidentiality of Lease Terms” shall constitute a material breach under this Lease.
25.21 Patriot Act.
(a) Tenant represents and warrants that neither Tenant nor its officers, directors, or immediate parent entity (each such owner, a “Beneficial Owner”) (a) is a Person (as defined below) whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (b) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2, or (c) is a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order; provided, however, the covenant contained in this sentence shall not apply to any Person to the extent that such Person’s interest is in or through a U.S. Publicly-Traded Entity. A “U.S. Publicly-Traded Entity” is an entity whose securities are listed on a national securities exchange or quoted on an automated quotation system in the U.S. or a wholly-owned subsidiary of such an entity. If Tenant shall at any time determine that an officer, director or Beneficial Owner of Tenant is or has become subject to Executive Order 13224 or is a Person listed on the list referenced in foregoing clause (c) or subject to the limitations or prohibitions referenced in such clause, Tenant will take such steps as a result of such determination as may be required by applicable law. As used in this Article XLII, “Person” means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, or any other entity, any government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
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(b) Tenant represents and warrants that Tenant is in compliance with (a) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001), and each of the officers, directors and Beneficial Owners of Tenant is in compliance with such statutes, enabling legislation or executive orders to the extent applicable to such Persons; provided, however, the covenant contained in this sentence shall not apply to any Person to the extent that such Person’s interest is in or through a U.S. Publicly-Traded Entity.
(c) In the event of a transfer of such title, Landlord (and in the case of any subsequent transfers, the then grantor) shall be relieved from and after the date of such transfer, of all liability with respect to Landlord's obligations thereafter to be performed, provided that any Security Deposit in the hands of Landlord or the grantor at the time of such transfer in which Tenant has an interest shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall, subject to the above, be binding on Landlord's successors and assigns only during their respective periods of ownership.
(d) In the event that Landlord sells the Properties, Landlord may transfer and deliver any security given by Tenant to secure the faithful performance of the provisions of this Lease to the purchaser of the real property. Upon such transfer being made, Landlord shall be exonerated from any further liability with respect to said security.
Article 26. tenant retained parcel
26.1 Tenant’s Acquisition of Tenant Retained Parcel. Tenant was the prior owner of the Minnesota Property. Prior to the Commencement Date, Tenant commenced the process of subdividing the Minnesota Property so that Tenant could retain fee ownership of the Tenant Retained Parcel (the “Subdivision”). The Subdivision could not be completed prior to the Commencement Date so the Tenant Retained Parcel was, subject to the terms of this Section 26, conveyed to Landlord and included in the Property under this Lease. Commencing on April 1, 2025 (the “Subdivision Outside Date”), Tenant shall, at its sole cost, use commercially reasonable efforts to complete the Subdivision reflected on the proposed Subdivision Map at Tenant’s expense. Landlord shall reasonably cooperate in assisting Tenant in completing the Subdivision at no expense to Landlord, provided that the proposed Subdivision shall not cause any violations of any laws with respect to Minnesota Parcel, including compliance with zoning and parking laws and regulations. Notwithstanding the foregoing, on that date which is sixty (60) days prior to Tenant’s good faith estimate of the completion of the Subdivision, Tenant must provide Landlord with prior written notice of such date of completion (the “Subdivision Completion Notice”), and Landlord shall have such sixty (60) day timeframe to advise Tenant whether Landlord intends to exercise Landlord’s Purchase Rights as set forth in Section 26.5 below. If Landlord advises Tenant that it intends to exercise Landlord’s Purchase Rights, then upon the Subdivision, Landlord shall assign Landlord’s Purchase Rights to an Affiliate of Landlord or an Affiliate of Landlord’s now-current managing member (the “Landlord Purchasing Entity”), and the Landlord Purchasing Entity shall purchase the Tenant Retained Parcel concurrently with the Subdivision for the TRP Purchase Price. Notwithstanding anything contained in this Section 26.1 to the contrary, Tenant may commence and complete the Subdivision prior to the Subdivision Outside Date, subject to the terms set forth in Section 26.5 below.
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The parties acknowledge and agree that Tenant has executed a loan amendment with Tenant’s current lender, Siena Lending, as of the execution date of this Lease (“Lender”) to extend the maturity of its loan facility (the “Facility”) to no earlier than September 30, 2023, with at least one 90-day extension. In the event that either: (i) the refinance of the Facility on terms and conditions materially similar, particularly in regard to loan term, availability and covenants, with the PNC Commitment Letter dated January 23, 2023, or on terms and conditions acceptable to Landlord in its sole discretion (the “Refinance”) does not occur prior to September 30, 2023, or (ii) in the event Tenant has delivered to Lender and Lender has approved, prior to September 15, 2023, an acceptable executed commitment letter for the Refinance to Lender and Tenant does not refinance Tenant’s Facility prior to December 31, 2023, or (iii) proceedings in bankruptcy are instituted (voluntarily or involuntarily) by or against Tenant, then (x) even if Tenant has completed the Subdivision, the TRP Purchase Price as set forth in Section 26.5(a) below shall be deleted in its entirety and replaced with $100 and may be exercised by Landlord at any time after the December 31, 2023, and (y) if the Subdivision is not yet completed, Tenant’s Subdivision right and Repurchase Right in this Section 26 will terminate. In the event that Tenant’s Subdivision right and Repurchase Right are terminated, Landlord will purchase Tenant’s rights to solely utilize the improvements on the Tenant Retained Parcel for $100 (“Landlord Purchase”), the Lease will continue with respect to the Tenant Retained Property, and Tenant will continue to have the sublease rights in Section 26.2. Following such Landlord Purchase, Landlord will have the right to subdivide the Minnesota Property, at its sole cost and expense.
If any proceedings in bankruptcy are instituted (voluntarily or involuntarily) by or against Tenant, or the Refinance of the Facility has not occurred as provided above, beginning on the earlier of the bankruptcy filing, October 1, 2023 or January 1, 2024, as applicable, and (i) if the Subdivision has not occurred, or (ii) if the Subdivision has occurred and the Tenant Retained Parcel has been conveyed to Tenant and Landlord has exercised the Landlord’s Purchase Right for $100 and the Tenant Retained Parcel is subjected to the Lease as required under Section 26.2, Landlord will have the right to terminate this Lease with respect to the Tenant Retained Parcel by providing Tenant at least thirty (30) days prior written notice, but without automatically terminating any existing TRP Sublease. At Landlord’s discretion, Landlord may terminate any existing TRP Sublease upon one hundred eighty (180) days’ notice. In connection with Landlord’s termination of the Lease with respect to the Tenant Retained Parcel, Landlord must pay to Tenant a “Termination Fee” as follows: (a) $3,000,000 if the termination occurs after December 31, 2023 but before April 1, 2025; or (b) $6,000,000 if the termination occurs on or after April 1, 2025. If Landlord fails to timely pay the Termination Fee by the termination date identified in Landlord’s notice of termination, this Lease will continue in full force and effect with respect to the Tenant Retained Parcel.
For the avoidance of doubt, upon Tenant closing on its Refinance of the Facility prior to September 30, 2023 or December 31, 2023 as set forth above, the terms of this Section 26, including the terms regarding Tenant’s Subdivision rights and Repurchase Right will not in any way be affected.
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26.2 Sublease. So long as the Tenant Retained Parcel is subject to this Lease, Tenant shall have the right to sublease the Tenant Retained Parcel subject to the terms and conditions set forth in Article 14 above (“TRP Sublease”). Tenant shall collect and retain all rents from any TRP Sublease. Any TRP Sublease will be subject to Landlord’s commercially reasonable consent, which will not be unreasonably conditioned, withheld or delayed. In the event Tenant exercises its Repurchase Right as outlined in 26.3 hereof and Landlord or Landlord Purchase Entity thereafter purchases the Tenant Retained Parcel pursuant to Section 26.5 hereof for $100, the Landlord, Landlord Purchasing Entity and Tenant will enter an amendment to the Lease such that the Lease terms hereof will once again apply to the Tenant Retained Parcel, without any increase or other change to Base Rent provided hereunder. The amendment will provide that Tenant will pay the apportioned Rent to Landlord and Landlord Purchasing Entity separately, if required. For the avoidance of doubt, in such circumstance the Tenant shall also retain its right under this Lease to collect and retain all rents from any TRP Sublease during the Term of this Lease without an attendant increase to the then-current Base Rent.
26.3 Repurchase Right. Subject to and in accordance with the terms of this Section 26.3, provided that there is not an Event of Default under this Lease, within ten (10) days after all third party approvals and signatures of the Subdivision plat are received and Tenant’s proforma owner’s policy of title insurance are prepared and delivered to Landlord, Landlord shall convey fee title by special warranty deed to the Tenant Retained Parcel to Tenant (or Tenant’s designated Affiliate) for a purchase price of One Hundred Dollars ($100) (the “Purchase Price”) and all costs associated with such closing, including, without limitation, reasonable costs and fees of Landlord (including reasonable attorneys’ fees) (the “Repurchase Right”) in connection with the Repurchase Right. The closing of such conveyance (“Closing”) shall take place at the offices of First American Title Insurance Company (the “Title Company”). The actual date of Closing shall be referred to herein as, the “Closing Date”. The Closing shall be an escrow closing so each Party will deliver any applicable closing documents and funds to the Title Company on or before the Closing Date. Tenant acknowledges and agrees that this Repurchase Right is an integral part of this Lease.
(a) At Closing, Landlord shall deliver (i) a deed in the same form that Seller received for the Tenant Retained Parcel, (ii) Landlord’s signature to the Subdivision plat mylars, (iii) Landlord’s counterpart to the Reciprocal Easement and Operating Agreement (the “REA”), in the form agreed upon between Landlord and Tenant, and (iv) a commercially reasonable and customary title affidavit required by the title company.
(b) At Closing, Tenant shall deliver to the Title Company Tenant’s counterpart to the REA, the Purchase Price and all other costs, fees or expenses to complete the Closing, including any Real Estate Taxes and transfer or deed taxes.
(c) At Closing, Landlord and Tenant shall execute a modification to this Lease to remove the Tenant Retained Parcel from the description of the Properties. The Rent shall not be affected by the conveyance of the Tenant Retained Parcel to Tenant.
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(d) If Landlord fails to close as required herein, Tenant may, in addition to any other remedies provided at law or equity, pursue specific performance to compel Landlord’s conveyance of the Tenant Retained Parcel as provided herein.
26.4 Tenant Right of First Offer. If, for any reason, the Subdivision is not completed pursuant to Section 26.3 above, provided that there is not an Event of Default under this Lease, Tenant shall have a right of first offer to purchase the Minnesota Property (the “Tenant ROFO”) as more fully set forth in this Section 26.4 until the Subdivision is completed and the Tenant Retained Parcel is conveyed to Tenant pursuant to Section 26.3. For the avoidance of doubt, only the original Tenant to this Lease (not any assignees or sublessees) shall have the Tenant ROFO.
(a) If, prior to completion of the Subdivision and conveyance of the Tenant Retained Parcel to Tenant pursuant to Section 26.3, Landlord desires to sell the Minnesota Property to any third-party purchaser (“Purchaser”), then Landlord shall, as a condition to such sale, first offer the Minnesota Property to Tenant, by providing notice in writing of its intent to market the property (“Tenant ROFO Notice”). Tenant may, within twenty (20) days of receipt of the Tenant ROFO Notice, offer to purchase the Minnesota Property in writing and specify in detail all material terms of the proposed purchase including the closing date (“Tenant ROFO Offer”). Following receipt of the Tenant ROFO Offer, then Landlord shall be free to sell or transfer the Minnesota Property to a third party at a price higher than what Tenant offered to Landlord in the Tenant ROFO Offer.
(b) Notwithstanding anything to the contrary in the last sentence of Section 26.4(a) above, if at any time within nine (9) months of the Tenant ROFO Offer, Landlord desires to sell the Minnesota Property to Tenant, then Tenant shall be required to purchase the Minnesota Property under the terms and conditions set forth in the Tenant ROFO Offer using Landlord’s standard form of purchase and sale agreement.
(c) Anything herein to the contrary notwithstanding, the right of first offer herein granted shall not apply to (i) any sale or transfer by Landlord to any Landlord Purchasing Entity, including, without limitation, any partners or joint venturers, (ii) a sale or transfer in connection with (or in lieu of) a condemnation of the Minnesota Property, or (ii) a sale or transfer of the Minnesota Property in connection with a foreclosure of any mortgage (or similar security instrument), or the first subsequent transfer thereafter.
(d) The right of first offer set forth herein will be subject and subordinate to the lien of any Mortgage encumbering the Minnesota Property, and in furtherance thereof, Tenant agrees that upon request from any lender, Tenant will deliver to such lender and to Landlord such documentation evidencing such subordination as such lender may reasonably require.
26.5 Landlord Right of Purchase. Following the Closing Date as defined in Section 26.3 above, the Landlord Purchasing Entity shall have a right to purchase the Tenant Retained Parcel (the “Landlord Purchase Rights”) as more fully set forth in this Section 26.5.
(a) At any time after the Closing Date, the Landlord Purchasing Entity shall have the option to purchase the Tenant Retained Parcel for (i) Three Million Dollars ($3,000,000.00) if the Subdivision is completed after the later of (x) October 1, 2023, or (y) the date of the Refinance, on terms and conditions materially similar, particularly in regard to loan term, availability and covenants, with that certain PNC Commitment Letter dated January 23, 2023, or on terms and conditions acceptable to Landlord in its sole discretion, or (ii) Six Million Dollars ($6,000,000.00) if the Subdivision is completed after the Subdivision Outside Date (the “TRP Purchase Price”); it being understood that in no event shall be Subdivision occur prior to October 1, 2023, and if the Subdivision is completed prior to October 1, 2023, then the Repurchase Right set forth in Section 26.3 above shall become null and void and of no further force and effect. Landlord shall provide Tenant with written notice of its intent to purchase the Tenant Retained Parcel, and the parties shall work together in good faith to consummate the closing as soon as reasonably practicable (the “TRP Closing”), provided that if Landlord exercises any right to terminate a TRP Sublease, Landlord has the right to delay Closing until a mutually agreeable date after the TRP Sublease has terminated. Closing costs shall be allocated between the parties pursuant to local custom, and the TPR Closing shall take place at the offices of First American Title Insurance Company using the office of Landlord’s choice.
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(b) If, after the Closing Date, Tenant desires to sell the Tenant Retained Parcel to any Purchaser, and Landlord does not exercise its rights under Section 26.1 above, then Tenant shall, as a condition to such sale, first offer the Tenant Retained Parcel to Landlord at the TRP Purchase Price (the “TRP ROFO Notice”). Landlord or the Landlord Purchasing Entity may, within fifteen (15) days of receipt of the TRP ROFO Notice, elect to purchase the Tenant Retained Parcel in writing under the terms and conditions set forth in Section 26.5(a) above, and a TRP Closing shall occur within sixty (60) days following Landlord’s election to purchase the Tenant Retained Parcel. If Landlord does not timely deliver the TRP ROFO Notice to Tenant, then Tenant shall be free to sell or transfer the Tenant Retained Parcel to a third party.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.
LANDLORD: | TENANT: | ||
Pontus IMB Portfolio, LLC, a Delaware limited liability company |
iMedia Brands, Inc., a Minnesota corporation | ||
By: Pontus IMB Managing Member, LLC, a Delaware limited liability company its Manager | /s/ Timothy Peterman | ||
Date: 4/7/2023 | |||
By: | /s/ Scott Stokas | ||
Date: 4/7/2023 |
Signature Page to Master Lease
by and between
Pontus IMB Portfolio, LLC and iMedia Brand, Inc.
MASTER LEASE AGREEMENT
EXHIBIT “A”
LEGAL DESCRIPTIONS
1. Kentucky Property
Parcel 1:
BEING LOT 1 OF "SUBDIVISION REVISION OF LOTS 1 & 2 OF THE LEON TARTER & GARLAND REEVES PROPERTY SUBDIVISION" AS SHOWN OF RECORD IN PLAT BOOK 42, PAGES 27-29, IN THE WARREN COUNTY CLERK'S OFFICE, WARREN COUNTY, KENTUCKY.
BEING A PORTION OF THE SAME PROPERTY CONVEYED TO VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION FROM DSC VENTURE 100, A KENTUCKY PARTNERSHIP, BY DEED DATED DECEMBER 11, 1996 AND OF RECORD IN DEED BOOK 736, PAGE 262, IN THE WARREN COUNTY CLERK'S OFFICE; AND, BEING A PORTION OF THE SAME PROPERTY CONVEYED TO VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION FROM LEON TARTER AND GARLAND REEVES, A KENTUCKY PARTNERSHIP, AND RHEA K REEVES, WIFE OF GARLAND REEVES, BY DEED DATED DECEMBER 11, 1996 AND OF RECORD IN DEED BOOK 736, PAGE 258, IN THE WARREN COUNTY CLERK'S OFFICE.
Parcel 2:
BEING LOT 1-1 OF "SUBDIVISION REVISION OF LOTS 1 & 2 OF THE LEON TARTER & GARLAND REEVES PROPERTY SUBDIVISION" AS SHOWN OF RECORD IN PLAT BOOK 42, PAGES 27-29, IN THE WARREN COUNTY CLERK'S OFFICE, WARREN COUNTY, KENTUCKY.
BEING THE SAME PROPERTY CONVEYED TO WARREN COUNTY, KENTUCKY FROM VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION BY DEED DATED DECEMBER 1, 2014, AND OF RECORD IN DEED BOOK 1088, PAGE 37, IN THE WARREN COUNTY CLERK’S OFFICE.
2. Minnesota Property
Real property in the City of Eden Prairie, County of Hennepin, State of Minnesota, described as follows:
Lot 1, Block 1, Shady Oak Industrial Park Third Addition, according to the recorded plat thereof, Hennepin County Minnesota; except that part of Lot 1, Block 1, Shady Oak Industrial Park Third Addition which lies westerly of Line 1 described below:
Line 1. Commencing at the southeast corner of said Lot 1, Block 1, SHADY OAK INDUSTRIAL PARK THIRD ADDITION; thence westerly along the south line of said Lot 1 on an azimuth of 273 degrees 14 minutes 16 seconds for 254.31 feet to the point of beginning of Line 1 to be described; thence on an azimuth of 345 degrees 06 minutes 52 seconds for 190.55 feet; thence on an azimuth of 349 degrees 49 minutes 38 seconds for 509.12 feet to a point hereinafter referred to as Point "A"; thence on an azimuth of 350 degrees 37 minutes 54 seconds for 133.00 feet to the northwest line of said Lot 1 and there terminating.
(abstract property)
EXHIBIT “A-1”
SUBDIVISION MAP
EXHIBIT “B”
MEMORANDUM OF LEASE
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this “Memorandum”) is entered into as of February ____, 2023 by and between ______________________ whose mailing address is ____________________ (“Landlord”) and iMEDIA BRANDS, INC., a Minnesota corporation whose mailing address is 6740 Shady Oak Road, Eden Prairie, MN 55344 (“Tenant”).
RECITALS
A. Landlord is the fee owner of certain improved real property, which is legally described on the attached Exhibit A (the “Land”) and commonly known as 4811 and 4813 Nashville Road, Bowling Green, Kentucky (the “Buildings”). Collectively, the Land and the Buildings are hereinafter referred to as the “Premises.”
B. Tenant desires to lease from Landlord, and Landlord desires to lease to Tenant, the Premises.
NOW THEREFORE, Landlord and Tenant agree as follows:
1. Demise. That for and in consideration of the covenants and agreements contained in that certain Master Lease Agreement dated _____________, 2023, between Landlord, as landlord, and Tenant, as tenant (the “Lease”), covering the Premises, Landlord demises and leases unto Tenant, and Tenant leases from Landlord for the term specified below, the Premises, all in accordance with the terms and provisions of the Lease.
2. Term. The Lease has an initial term commencing on the Commencement Date (as such term is defined and used in the Lease) and expiring on [September 30, 2045]. As more specifically set forth in the Lease, Tenant has the right to extend the term of the Lease for two (2) separate ten (10) year renewal terms, commencing immediately upon the expiration of the Original Lease Term.
3. Conflict; Amendment. This Memorandum is not a complete summary of the Lease nor may any provisions of this Memorandum be used in interpreting the provisions of the Lease. If there is any conflict between this Memorandum and the Lease, the Lease shall control. In addition, the Lease may be amended by Landlord and Tenant from time to time without the preparation or filing of an additional Memorandum.
4. Defined Terms. Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in the Lease.
5. Miscellaneous. This Memorandum may be executed in any number of counterparts. All of the signatures to this Memorandum taken together constitute one and the same Memorandum, and any of the parties hereto may execute this Memorandum by signing any such counterpart. This Memorandum shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
6. Expiration. Tenant shall upon expiration or earlier termination of the Lease execute and acknowledge a written termination in recordable form, of this Memorandum.
[Remainder of page intentionally left blank]
SIGNATURE PAGE
TO
MEMORANDUM OF LEASE
IN WITNESS WHEREOF, Landlord has executed this Memorandum of Lease as of the date first above written.
LANDLORD: | ||
By: | ||
Name: | ||
Title: | ||
STATE OF _______________)
)ss.
COUNTY OF _____________)
The foregoing instrument was acknowledged before this ______ day of ________, 2023, by ________________, the ______________ of _____________, on behalf of the _____________.
Notary Public |
SIGNATURE PAGE
TO
MEMORANDUM OF LEASE
IN WITNESS WHEREOF, Tenant has executed this Memorandum of Lease as of the date first above written.
TENANT: | ||
iMEDIA BRANDS, INC., a Minnesota corporation | ||
By: | ||
Name: | ||
Its: | ||
STATE OF _______________)
)ss.
COUNTY OF _____________)
The foregoing instrument was acknowledged before me this ______ day of __________, 2023, by ________________, the ________________ of iMedia Brands, Inc., a Minnesota corporation, on behalf of the corporation.
Notary Public |
THIS INSTRUMENT WAS DRAFTED BY:
Faegre Drinker Biddle & Reath LLP (BSB)
2200 Wells Fargo Center
90 South 7th Street
Minneapolis, MN 55402
EXHIBIT A
Legal Description of Land
Parcel 1:
BEING LOT 1 OF "SUBDIVISION REVISION OF LOTS 1 & 2 OF THE LEON TARTER & GARLAND REEVES PROPERTY SUBDIVISION" AS SHOWN OF RECORD IN PLAT BOOK 42, PAGES 27-29, IN THE WARREN COUNTY CLERK'S OFFICE, WARREN COUNTY, KENTUCKY.
BEING A PORTION OF THE SAME PROPERTY CONVEYED TO VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION FROM DSC VENTURE 100, A KENTUCKY PARTNERSHIP, BY DEED DATED DECEMBER 11, 1996 AND OF RECORD IN DEED BOOK 736, PAGE 262, IN THE WARREN COUNTY CLERK'S OFFICE; AND, BEING A PORTION OF THE SAME PROPERTY CONVEYED TO VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION FROM LEON TARTER AND GARLAND REEVES, A KENTUCKY PARTNERSHIP, AND RHEA K REEVES, WIFE OF GARLAND REEVES, BY DEED DATED DECEMBER 11, 1996 AND OF RECORD IN DEED BOOK 736, PAGE 258, IN THE WARREN COUNTY CLERK'S OFFICE.
Parcel No. _____________________
Parcel 2:
BEING LOT 1-1 OF “SUBDIVISION REVISION OF LOTS 1 & 2 OF THE LEON TARTER & GARLAND REEVES PROPERTY SUBDIVISION” AS SHOWN OF RECORD IN PLAT BOOK 42, PAGES 27-29, IN THE WARREN COUNTY CLERK’S OFFICE.
BEING THE SAME PROPERTY CONVEYED TO WARREN COUNTY, KENTUCKY FROM VVI FULFILLMENT CENTER, INC., A MINNESOTA CORPORATION BY DEED DATED DECEMBER 1, 2014, AND OF RECORD IN DEED BOOK 1088, PAGE 37, IN THE WARREN COUNTY CLERK’S OFFICE.
Parcel No. _____________________
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (this “Memorandum”) is entered into as of February ____, 2023 by and between ______________________ whose mailing address is ____________________ (“Landlord”) and iMEDIA BRANDS, INC., a Minnesota corporation whose mailing address is 6740 Shady Oak Road, Eden Prairie, MN 55344 (“Tenant”).
RECITALS
C. Landlord is the fee owner of certain improved real property, which is legally described on the attached Exhibit A (the “Land”) and commonly known as 6700 and 6740 Shady Oak Road, Eden Prairie, MN (the “Buildings”). Collectively, the Land and the Buildings are hereinafter referred to as the “Premises.”
D. Tenant desires to lease from Landlord, and Landlord desires to lease to Tenant, the Premises.
NOW THEREFORE, Landlord and Tenant agree as follows:
1. Demise. That for and in consideration of the covenants and agreements contained in that certain Master Lease Agreement dated _______________, 2023, between Landlord, as landlord, and Tenant, as tenant (the “Lease”), covering the Premises, Landlord demises and leases unto Tenant, and Tenant leases from Landlord for the term specified below, the Premises, all in accordance with the terms and provisions of the Lease.
2. Term. The Lease has an initial term commencing on the Commencement Date (as such term is defined and used in the Lease) and expiring on [September 30, 2045]. As more specifically set forth in the Lease, Tenant has the right to extend the term of the Lease for two (2) separate ten (10) year renewal terms, commencing immediately upon the expiration of the Original Lease Term.
3. Right of First Offer. Tenant has certain rights of first offer to purchase a portion of the Premises as more particularly set forth in the Lease.
4. Conflict; Amendment. This Memorandum is not a complete summary of the Lease nor may any provisions of this Memorandum be used in interpreting the provisions of the Lease. If there is any conflict between this Memorandum and the Lease, the Lease shall control. In addition, the Lease may be amended by Landlord and Tenant from time to time without the preparation or filing of an additional Memorandum.
5. Defined Terms. Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in the Lease.
6. Miscellaneous. This Memorandum may be executed in any number of counterparts. All of the signatures to this Memorandum taken together constitute one and the same Memorandum, and any of the parties hereto may execute this Memorandum by signing any such counterpart. This Memorandum shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
7. Expiration. Tenant shall upon expiration or earlier termination of the Lease execute and acknowledge a written termination in recordable form, of this Memorandum. If this Memorandum is filed in the office of the Hennepin County Registrar of Titles, then upon the filing of any such termination, the Registrar is hereby authorized and directed to delete from the pertinent Certificate of Title any memorial of this Memorandum and of the termination instrument.
[Remainder of page intentionally left blank]
SIGNATURE PAGE
TO
MEMORANDUM OF LEASE
IN WITNESS WHEREOF, Landlord has executed this Memorandum of Lease as of the date first above written.
LANDLORD: | ||
By: | ||
Name: | ||
Title: |
STATE OF _______________)
)ss.
COUNTY OF _____________)
The foregoing instrument was acknowledged before this ______ day of ________, 2023, by ________________, the ______________ of _____________, on behalf of the _____________.
Notary Public |
SIGNATURE PAGE
TO
MEMORANDUM OF LEASE
IN WITNESS WHEREOF, Tenant has executed this Memorandum of Lease as of the date first above written.
TENANT: | ||
iMEDIA BRANDS, INC., a Minnesota corporation | ||
By: | ||
Name: | ||
Its: | ||
STATE OF _______________)
)ss.
COUNTY OF _____________)
The foregoing instrument was acknowledged before me this ______ day of __________, 2023, by ________________, the ________________ of iMedia Brands, Inc., a Minnesota corporation, on behalf of the corporation.
Notary Public |
THIS INSTRUMENT WAS DRAFTED BY:
Faegre Drinker Biddle & Reath LLP (BSB)
2200 Wells Fargo Center
90 South 7th Street
Minneapolis, MN 55402
EXHIBIT A
Legal Description of Land
Real property in the City of Eden Prairie, County of Hennepin, State of Minnesota, described as follows:
Lot 1, Block 1, Shady Oak Industrial Park Third Addition, according to the recorded plat thereof, Hennepin County Minnesota; except that part of Lot 1, Block 1, Shady Oak Industrial Park Third Addition which lies westerly of Line 1 described below:
Line 1. Commencing at the southeast corner of said Lot 1, Block 1, SHADY OAK INDUSTRIAL PARK THIRD ADDITION; thence westerly along the south line of said Lot 1 on an azimuth of 273 degrees 14 minutes 16 seconds for 254.31 feet to the point of beginning of Line 1 to be described; thence on an azimuth of 345 degrees 06 minutes 52 seconds for 190.55 feet; thence on an azimuth of 349 degrees 49 minutes 38 seconds for 509.12 feet to a point hereinafter referred to as Point "A"; thence on an azimuth of 350 degrees 37 minutes 54 seconds for 133.00 feet to the northwest line of said Lot 1 and there terminating.
(abstract property)
EXHIBIT “C”
SNDA
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
_________________________________
_________________________________
_________________________________
_________________________________
(Space Above For Recorder's Use)
AGREEMENT OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
THIS AGREEMENT OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT ("Agreement") is made as of ___________________, by and among ___________________________, a _______________________ ("Lessor"), ___________________________, a _______________________ ("Lessee"), and ___________________________, a _______________________ (collectively "Lender"), with respect to the following recitals.
RECITALS
A. Lessor is the owner of a certain tract of land with improvements thereon ("Property"), and said land is more fully described on Exhibit A-1 through A-__ attached hereto and incorporated herein by this reference; and
B. Pursuant to that certain lease ("Lease") dated as of ______________ between Lessor and Lessee, Lessor did lease, let and demise certain premises in the Property as more fully described in Lease (the "Premises") to Lessee for the period of time and upon the covenants, terms and conditions therein stated; and
C. By making a Loan, Lender has or is about to become the owner of an indebtedness and holder of a certain Promissory Note, secured by that certain (i) _________________________________ ("Security Instrument"), to be recorded in the Official Records of _________________ County, Florida, constituting a first lien upon the Property, and (ii) ____________________________; and
D. Lender desires that the Lease be subordinated to the Security Instrument, and that Lessee, at Lessor's sole option, agree to attorn to the purchaser at foreclosure of the Security Instrument in the event of such foreclosure or to Lender in the event of collection of the rent by Lender.
In consideration of the covenants, terms, conditions and agreements herein contained, and in consideration of other good and valuable consideration, each to the other, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree, covenant and warrant as follows:
1. That the terms, covenants, provisions and conditions of the Lease and the rights of the Lessee thereunder are and will continue to be subordinate to the Security Instrument, and the lien thereof, and to any renewal, substitution, extension or replacement thereof.
2. (A) After notice is given by Lender that the Security Instrument is in default and that the rentals under the Lease should be paid to Lender, Lessee will attorn to Lender and pay to Lender, or pay in accordance with the directions of Lender, all rentals and other monies due and to become due to Lessor under the Lease or otherwise in respect of the Property; and such payments shall be made regardless of any right of set-off, counterclaim or other defense which Lessee may have against Lessor, whether as the tenant under the Lease or otherwise.
(B) In addition, if Lender (or its nominee or designee) shall succeed to the rights of Lessor under the Lease through possession or foreclosure action, delivery of a deed or otherwise, or another person purchases the Property upon or following foreclosure of the Security Instrument, then at the request of Lender (or its nominee or designee) or such purchaser (Lender, its nominees and designees, and such purchaser, each being a "Successor-Lessor"), Lessee shall attorn to and recognize Successor-Lessor as Lessee's landlord under the Lease and shall promptly execute and deliver any instrument that Successor-Lessor may reasonably request to evidence such attornment. Upon such attornment, the Lease shall continue in full force and effect as, or as if it were, a direct lease between Successor-Lessor and Lessee upon all terms, conditions and covenants as are set forth in the Lease, except that Successor-Lessor shall not:
(i) be liable for any previous act or omission of Lessor under the Lease;
(ii) be subject to any off-set, defense or counterclaim which shall have theretofore accrued to Lessee against Lessor;
(iii) be bound by any modification of the Lease or by any previous prepayment of rent or additional rent for more than one (1) month which Lessee might have paid to Lessor, unless such modification or prepayment shall have been expressly approved in writing by Lender;
(iv) be liable for any security deposited under the Lease unless such security has been physically delivered to Lender; and
(v) be responsible for the performance of (or contribution toward) any work to be done by the landlord under the Lease to render the Premises ready or available for occupancy by Tenant, or required to remove any person occupying the Premises or any part thereof; or.
3. If any Successor-Lessor succeeds to the interest of Lessor under the Lease, such Successor-Lessor and Lessee hereby agree that, for so long as Lessee complies with and performs its obligations under the Lease, Successor-Lessor shall not disturb Lessee's possession of the Premises. Notwithstanding the foregoing, in the event Lessee fails to comply with and perform its obligations under the Lease, Successor-Lessor may elect to terminate the Lease, and in such event, Lessee shall be deemed to have assigned to Successor-Lessor each and every lease regarding the Property that Lessee assumed pursuant to the Lease, or entered into subsequent to the Lease, without any further act or deed on the part of Successor-Lessor, Lessee, or otherwise. Without limiting the foregoing, Lessee shall execute and deliver any and all additional instruments and documents that any Successor-Lessor shall request to evidence or effect such assignment.
4. Lessee shall promptly notify Lender of any default by Lessor under the Lease and of any act or omission of Lessor which would give Lessee the right to cancel or terminate the Lease or to claim a partial or total eviction. In the event of a default by Lessor under the Lease which would give Lessee the right, immediately or after the lapse of a period of time, to cancel or terminate the Lease or to claim a partial or total eviction, or in the event of any other act or omission of Lessor which would give Lessee the right to cancel or terminate the Lease, Lessee shall not exercise such right (i) until Lessee has given written notice of such default, act or omission to Lender and (ii) unless Lender has failed, within sixty (60) days after Lender receives such notice, to cure or remedy the default, act or omission or, if such default, act or omission shall be one which is not reasonably capable of being remedied by Lender within such sixty (60) day period, until a reasonable period for remedying such default, act or omission shall have elapsed following the giving of such notice and following the time when Lender shall have become entitled under the Security Instrument to remedy the same (which reasonable period shall in no event be less than the period to which Lessor would be entitled under the Lease or otherwise, after similar notice, to effect such remedy), provided that Lender shall with due diligence give Lessee written notice of its intention to and shall commence and continue to, remedy such default, act or omission. If Lender cannot reasonably remedy a default, act or omission of Lessor until after Lender obtains possession of the Property, Lessee may not terminate or cancel the Lease or claim a partial or total eviction by reason of such default, act or omission until the expiration of a reasonable period necessary for the remedy after Lender secures possession of the Property. Notwithstanding anything to the contrary herein or in the Lease, within ten (10) days following receipt of Lender’s written request, Lessee shall deliver to Lender copies of all written reports required to be delivered to Lessor under the Lease.
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5. Except as specifically provided in this Agreement, Lender shall not, by virtue of this Agreement, the Security Instrument or any other instrument to which Lender may be a party, be or become subject to any liability or obligation to Lessee under the Lease.
6. All notices, demands, requests and other communications made hereunder shall be in writing and shall be properly given and deemed delivered on the date of delivery if sent by personal delivery or nationally recognized overnight courier and on the third business day following mailing if sent by certified or registered mail, postage prepaid, return receipt requested, as follows:
If to Lender: | |
If to Lessee: | |
7. The agreements herein contained shall bind and inure to the benefit of the successors and assigns in interest of the parties hereto and, without limiting such, the agreement of the Lender shall specifically be binding upon any purchaser of the Property at a sale foreclosing the Security Instrument.
8. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which taken together shall constitute one and the same agreement. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages.
9. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of _______________ (without regard to conflicts of law).
[END OF TEXT; SIGNATURES FOLLOW ON NEXT PAGES]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
WITNESSES: | "LESSOR:" | |||
____________________________________________________, a | ||||
Name: | By: | |||
Name: | ||||
Its: | ||||
Name: |
WITNESSES: | "LESSEE" | |||
____________________________________________________, a | ||||
Name: | By: | |||
Name: | ||||
Its: | ||||
Name: |
[SIGNATURE PAGE TO AGREEMENT OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT]
WITNESSES: | "LENDER:" | |||
____________________________________________________, a | ||||
Name: | By: | |||
Name: | ||||
Its: | ||||
Name: |
[SIGNATURE PAGE TO AGREEMENT OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT]
[PROPER NOTARY BLOCKS TO BE ADDED
Exhibit 10.9
April 7, 2023
VIA E-MAIL
iMedia Brands, Inc.
Attn: Tim Peterman
6740 Shady Oak Road
Eden Prairie, MN 55344
Email: tpeterman@imediabrands.com
Re: | iMedia Post-Closing Obligations |
Dear Tim:
This letter agreement (this “Agreement”) sets forth the agreement by and among Pontus IMB Portfolio, LLC (“Buyer”), EP Properties, LLC and VVI Fulfillment Center, Inc. (together, “Seller”) and iMedia Brands, Inc. (“Tenant”) with respect to certain repairs required to be made to the property located at 6740 Shady Oak Lane, Eden Prairie, MN (the “Minnesota Property”), 4811 Nashville Road, Bowling Green, KY, and 4813 Nashville Road, Bowling Green, KY, as more particularly described on Exhibit A attached to the Lease (together, the “Kentucky Property,” and collectively with the Minnesota Property, the “Property”).
Seller and Buyer entered into those certain Purchase and Sale Agreement and Joint Escrow Instructions dated December 20, 2022, as amended by that certain Conditional Purchase Acceptable dated January 30, 2023, that certain Notice to Close dated February 24, 2023, and that certain Amended Notice to Close dated March 9, 2023 (collectively, the “Purchase Agreement”) for the purchase and sale of the Property wherein Buyer agreed to purchase the Property from Seller and Seller agreed to sell the Property to Buyer. Upon the sale of the Property, Tenant will lease the Property from Buyer pursuant to that certain Lease Agreement dated as of the date hereof (“Lease”). Capitalized terms not otherwise defined in this Agreement shall have the meaning ascribed to such terms in the Lease. Pursuant to the Purchase Agreement and the Notice to Close, Buyer's obligation to purchase the Property is expressly conditioned upon certain Seller deliverables, including but not limited to (i) Buyer's approval of all due diligence reports, including the Property Condition Assessment (“PCA”) for the Property and Phase I Environmental Site Assessment (“Phase I”), and (ii) Seller obtaining a loan amendment from Siena Lending to extend the maturity date to no earlier than September 30, 2023 with at least one 90-day extension, and on terms and conditions acceptable to Purchaser in its sole and absolute discretion.
The parties acknowledge that Buyer approved the PCA and Phase I prepared by GRS Group, dated December 5, 2022, and ECI Environmental Services, dated February 23, 2023, which identified certain items in need of repair to the Property as summarized in Exhibit “A” attached hereto and as further described in the PCA and Phase I (collectively referred to herein as “Repairs”). Buyer has agreed to proceed with the acquisition of the Property notwithstanding the Repairs, provided Tenant agrees, as part of the Lease and this post closing agreement, to be responsible for Repairs on the terms and conditions set forth below. Notwithstanding the foregoing, if there is an inconsistency or ambiguity between the Lease and this Agreement, then this Agreement shall supersede as it relates to the Exhibit A items.
Tenant shall make the necessary Repairs, within twelve (12) months following the date of this Agreement (unless indicated otherwise in Exhibit A) and provide written evidence of the same including photographs to be delivered to Buyer. All such Repairs shall be completed in accordance with Article 9 of the Lease.
Tenant’s failure to timely proceed with and diligently pursue the Repairs with respect to the Property shall constitute an Event of Default under the Lease and, and subject to applicable notice and cure periods for non-monetary Events of Default under the Lease, Buyer shall have all of the rights and remedies available to Landlord under the Lease, including, without limitation, those set forth in Article 15 of the Lease, and Buyer shall have the right to recover from Tenant all fees, costs and penalties incurred by Buyer in connection with such Event of Default, including the recovery of an administrative fee of fifteen percent (15%) of any amounts due to Buyer. Without limiting the generality of the foregoing, in the event Tenant has not timely completed the Repairs as set forth herein, Buyer shall have the right, but not the obligation, upon written notice to Tenant, to cause the Repairs to be completed by a licensed contractor of Buyer’s choosing. The costs incurred by Buyer in completing the Repairs shall be payable by Tenant as Additional Rent under the Lease within ten (10) days of receipt of a demand therefor. This Agreement shall be subject to the terms of the Lease.
[this page intentionally left blank]
By affixing the authorized signatures below, the parties acknowledge and agree to the foregoing. This Agreement may be signed in counterparts and delivered by e-mail or facsimile, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. This Agreement will survive the Closing (as defined in the Purchase Agreement). This Agreement will be binding on each party’s successors and assigns.
Pontus IMB Portfolio, LLC, a Delaware limited liability company | |||
By: | Pontus IMB Managing Member, LLC, a Delaware limited liability company | ||
By: | /s/ Scott Stokas |
This letter is acknowledged and the terms and conditions agreed by:
iMedia Brands, Inc.,
a Minnesota corporation
By: | /s/ Timothy Peterman | |
Name: | Timothy Peterman | |
Its: | Chief Executive Officer |
EXHIBIT A
At the Closing described in the Purchase Agreement, Seller shall deliver to Buyer as a part of the closing escrow the amount of $958,550, which is the total amount of all Repairs set forth below (the “Repair Costs”). Buyer shall hold the Repair Costs in reserve and shall release the Repair Costs to Seller upon the completion of the Repairs in a manner reasonably acceptable to Buyer and in accordance with the terms and conditions under Article 9 of the Lease.
4811 Nashville Road
● | Paving and Parking Repairs: Cracking of asphalt pavement in the northeast drive area needs to be replaced to limit further deterioration. In addition, the concrete pavement at the property entrance needs to be repaired to limit further deterioration. |
o | $38,750 |
o | To be completed within six months |
● | Roof: Evidence of past leaks were observed at various isolated areas within the warehouse, so tenant shall engage a licensed roofing contractor to survey the roof membrane and penetrations and identify any areas that need to be repaired (i.e., resealing, penetrations, debris removal, etc.). |
o | $3,000 |
4813 Nashville Road
● | Storm Water Management: The gravel detention area needs to be repaired with a new gravel bed and underground infiltration lines to prevent sediment clogging and allow drainage during stormwater events. |
o | $30,000 |
6740 Shady Oak Lane
● | Roof: Replace roof and membrane with TPO (Thermoplastic Polyolefin) or a PVC (Poly Vinyl Chloride) with a 20-year warranty. Landlord to review and approve roofing scope of work and contractor agreement. |
o | $690,000 |
● | HVAC: Several HVAC units are between 28 and 35 years old, so tenant shall engage a licensed HVAC contractor to survey all older units for their functionality and efficiency, and tenant shall replace any units that are not functioning correctly. |
o | $166,800 |
● | Building Structure: The entrance on the east side of the building needs to be repaired to prevent further deterioration. |
o | $30,000 |
o | To be completed within six months |
● | Life / Safety: Complete fire extinguisher inspections, obtain elevator permits, complete elevator load tests. |
o | To be completed within three months |
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Exhibit 99.1 |
iMedia Reports Fourth Quarter 2022 and Full-Year 2022 Results
Subsequent to Year-End, Completes $48 million Sale-Leaseback. Reduces Debt by $53 million
Fiscal 2022 Net Sales were $545 million, a 1% Decrease to Fiscal 2021
Q4 2022 Net Sales were $134 million, a 31% Decrease to Q4 2021
MINNEAPOLIS, MN – April 12, 2023 – iMedia Brands, Inc. (the “Company” or “iMedia”) (NASDAQ: IMBI, IMBIL) today announced results for the fourth quarter and full-year ended January 28, 2023.
The Company also announced that on April 10, 2023, it simultaneously completed its previously announced sale-leaseback transaction with Pontus Net Lease Advisors, LLC, a division of Pontus Capital (“SLB”), together with multiple supporting transactions that materially reduced the Company’s level of debt outstanding by $53 million. The Company also entered into a forbearance agreement with its senior lenders for a period of six months from the SLB date, these events are defined collectively as its Debt Reduction Event (“DRE”).
The Company’s debt today, after giving effect to the DRE, is approximately $123 million, which is approximately 41% lower than the Company’s $207 million debt level at the end of Q1 2022.
Company’s DRE Completed on April 10, 2023
1. | Sale Leaseback Transaction (“SLB”): $48 million in gross proceeds from the SLB for three of the Company’s four buildings. Net proceeds were $42 million after deduction of lease deposit and fees. B. Riley Real Estate advised the Company. | |
2. | Private Investment in Public Equity (“PIPE”): $3.5 million in gross proceeds from the Company’s PIPE that closed on April 10, 2023. Several investors purchased notes in a private placement bearing 7.75% interest that are convertible upon satisfaction of certain conditions to common stock and warrants to purchase 0.85 shares of common stock. The conversion price per share of common stock and warrant to purchase 0.85 shares of common stock represents a $0.10625 premium to the average closing price of the Company’s common stock on the 5-day period preceding April 10, 2023. The warrants are exercisable per share of common stock at 110% of the closing price on the date prior to entry into the purchase agreement. Certain iMedia Directors and the Company’s Chief Executive Officer invested an aggregate of $300,000 in the PIPE. The Company will seek an increase in authorized shares at its 2023 annual shareholder meeting to provide sufficient shares to permit full conversion of this convertible debt. | |
3. | Green Lake Term Loan: The Company retired 100% of its $29 million Green Lake term loan. | |
4. | 123.tv Seller Note Amendment: The Company entered into an amendment to reduce $12 million of the outstanding principal amount of the $20 million 123.tv Seller Notes issued by iMedia & 123tv Holding GmbH and guaranteed by the Company (“123tv Notes”). As consideration for the amendment, the Company will pay $3.5 million in cash and provide the 123tv Noteholders with a 10% common equity grant in the Company’s 123.tv business by April 30, 2023. In addition, subject to certain conditions, the Company has until September 29, 2023 to make a $3.8 million cash payment to the 123tv Noteholders to reduce the remaining principal outstanding based on certain discounts depending on the date and amounts of the payments. |
5. | Application of SLB Proceeds to Senior ABL Facility: The Company applied $12 million of the SLB proceeds to its ABL revolving line of credit in connection with the ABL forbearance described below, which is then available for reborrowing in accordance with the terms of the ABL revolving loan agreement. | |
6. | Senior ABL Forbearance: Effective upon closing of the SLB transaction, the Company executed its tenth amendment with its senior asset-based lenders (the “Lenders”), under its revolving credit facility agented by Siena Lending Group LLC (“ABL Agent”), for a six-month forbearance term that is extendable another three months at the Company’s election upon satisfaction of certain conditions. The forbearance is intended to provide the Company adequate time to replace or refinance the ABL credit facility in fiscal 2023. Key terms of the forbearance amendment include removal of the Net Senior Debt Leverage Ratio covenant, an adjusted availability block, an amendment fee of $850,000, a 200-basis-point increase in interest rate, additional potential milestone fees and early termination fees, and application of $12 million of the new SLB proceeds to reduce outstanding borrowings under the senior ABL revolving line of credit and which is available for reborrowing in accordance with the terms of the ABL revolving loan agreement. |
CEO Commentary – Tim Peterman, CEO
“2022 was a productive year but not an easy one. As we discussed during our Capital Markets Day in February 2022, our priorities this past year were to integrate our 2021 strategic acquisitions, reduce our content distribution expenses, and strengthen our balance sheet. We successfully completed the first two priorities, but the strengthening of our balance sheet was delayed until this week.
While we were pleased to finally complete our Debt Reduction Event, especially since we exceeded our original debt reduction goals, the delay created an unexpected liquidity challenge in Q4 that required the Company to shift its focus to maximizing short-term cash optimization opportunities to fund principal loan repayments on our revolver loan. This restricted our working capital and negatively impacted our Q4 financial performance.
With the Debt Reduction Event behind us, our teams are now focused again on the operational fundamentals that produced eight sequential quarters of strong financial performance, and I want to thank our employees and vendors who continue to demonstrate the entrepreneurial grit that makes our journey such a vibrant and durable endeavor.”
Fourth Quarter & Full Year 2022 Financial Highlights and Recent Events:
· | Fiscal 2022 Working Capital: For the full year 2022, the Company generated $53 million in cash from its working capital, which is a $96 million improvement in cash generated from working capital compared to the same prior year period. | |
· | Q4 Liquidity Challenge: The Company and ABL Agent worked collaboratively during Q4 to navigate an unexpected and material decline in the Company’s borrowing base availability. | |
· | Fiscal 2022 Net Sales were $545 million, which was a $6 million, or 1%, decrease compared to the same prior year period. Management notes its full year net sales performance absorbed an estimated $50 million negative net sales impact driven by ShopHQ Networks’ proactive content distribution disruptions, including the seven-month DISH disruption, and a negative net sales impact driven by the Company’s Q4 liquidity challenge. | |
· | Q4 Net Sales were $134 million, which was a $60 million, or 31%, decrease compared to the same prior year period. Management notes its Q4 net sales were impacted by the Company’s unexpected liquidity challenge and an estimated $10 million negative net sales impact driven by ShopHQ Networks’ proactive content distribution disruptions. |
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· | Q4 Net Loss was $24 million compared to a $5 million net loss for the same prior year period. Management notes the $19 million increase in net loss was driven primarily by the impact from the Company’s unexpected liquidity challenge; an estimated $4 million increase in interest expense; and the negative net income impact from ShopHQ Networks’ content distribution disruptions. | |
· | Q4 Adjusted EBITDA was $2 million, compared to $15 million for the same prior year period. As noted above, the unexpected liquidity challenge and proactive content distribution disruptions were the primary drivers of the $13 million decrease. | |
· | Fiscal 2022 Net Loss was $70 million compared to a $22 million net loss for the same prior year period. The $48 million increase was driven primarily by a one-time $13 million charge for Shaq licensing termination, an estimated $13 million increase in interest expense, the negative impact from the Company’s Q4 liquidity challenge, and the negative impact from the ShopHQ Networks’ proactive content distribution disruptions. | |
· | Fiscal 2022 Adjusted EBITDA was $25 million, compared to $42 million for the same prior year period. The decrease was driven primarily by the Q4 Adjusted EBITDA decline of $12 million, as noted above. |
The information in this release relating to the Company’s goodwill and intangible assets and its asset-based lending arrangement with Siena Lending Group LLC are preliminary and subject to completion of the Company’s related year-end financial reporting processes and possible changes, including but not limited to ongoing review for impairment and potential write-down of all or a portion of those balances. Accordingly, the Company anticipates extending its Form 10-K filing date under Rule 12b-25.
Consolidated Fourth Quarter and Year-to-Date 2022 Results
For the Three-Month Periods Ended | For the Twelve-Month Periods Ended | |||||||||||||||||||||||
January 28, 2023 | January 29, 2022 | Change | January 28, 2023 | January 29, 2022 | Change | |||||||||||||||||||
Net Sales | 133.5 | 193.8 | -31 | % | 544.6 | 551.1 | -1 | % | ||||||||||||||||
Gross Margin % | 36.8 | % | 38.3 | % | (150 bps | ) | 38.6 | % | 40.4 | % | (180 bps | ) | ||||||||||||
Net loss attributable to non-controlling interest | 0.0 | (0.7 | ) | 100 | % | (0.4 | ) | (1.0 | ) | 59 | % | |||||||||||||
Net loss attributable to shareholders | (24.2 | ) | (5.0 | ) | -380 | % | (70.0 | ) | (22.0 | ) | -218 | % | ||||||||||||
EPS | (0.82 | ) | (0.27 | ) | 206 | % | (2.63 | ) | (1.19 | ) | 121 | % | ||||||||||||
Adjusted EBITDA | 2.5 | 15.1 | -84 | % | 25.4 | 41.6 | -39 | % |
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Segment Fourth Quarter and Year-to-Date 2022 Highlights
For the Three-Month Periods Ended | For the Three-Month Periods Ended | |||||||||||||||||||||||||||||||
January 28, 2023 | January 29,2022 | |||||||||||||||||||||||||||||||
Entertainment | Consumer Brands | Media Commerce Services | Consolidated | Entertainment | Consumer Brands | Media Commerce Services | Consolidated | |||||||||||||||||||||||||
Net Sales | 114.0 | 10.1 | 9.4 | 133.5 | 165.4 | 15.1 | 13.2 | 193.8 | ||||||||||||||||||||||||
Gross Profit | 42.7 | 3.8 | 2.5 | 49.1 | 63.5 | 7.3 | 3.4 | 74.2 | ||||||||||||||||||||||||
Operating Income (Loss) | (16.0 | ) | 0.0 | 0.7 | (15.3 | ) | (1.9 | ) | 0.7 | 0.8 | (0.3 | ) | ||||||||||||||||||||
Adjusted EBITDA | -0.3 | 1.8 | 1.0 | 2.5 | 11.6 | 1.9 | 1.6 | 15.1 |
For the Twelve-Month Periods Ended | For the Twleve-Month Periods Ended | |||||||||||||||||||||||||||||||
January 28, 2023 | January 29,2022 | |||||||||||||||||||||||||||||||
Entertainment | Consumer Brands | Media Commerce Services | Consolidated | Entertainment | Consumer Brands | Media Commerce Services | Consolidated | |||||||||||||||||||||||||
Net Sales | 455.6 | 42.7 | 46.2 | 544.6 | 478.9 | 44.3 | 27.8 | 551.1 | ||||||||||||||||||||||||
Gross Profit | 177.8 | 20.0 | 12.6 | 210.4 | 192.6 | 22.0 | 8.1 | 222.6 | ||||||||||||||||||||||||
Operating Income (Loss) | (58.4 | ) | 6.6 | 4.9 | (46.9 | ) | (13.5 | ) | 1.6 | 1.2 | (10.7 | ) | ||||||||||||||||||||
Adjusted EBITDA | 8.0 | 9.8 | 7.6 | 25.4 | 32.5 | 5.6 | 3.6 | 41.6 |
Entertainment & Consumer Brands Segments’ Fourth Quarter and 2022 Key Operating Metrics
For the Three-Month Periods Ended | For the Twleve-Month Periods Ended | |||||||||||||||||||||||
Description | January 28, 2023 | January 29, 2022 | Change | January 28, 2023 | January 29, 2022 | Change | ||||||||||||||||||
Net Units (000s) | 2,948 | 4,754 | -38.0 | % | 11,640 | 10,014 | 16.0 | % | ||||||||||||||||
Average Selling Price (ASP) | $ | 38 | $ | 35 | 11.0 | % | $ | 39 | $ | 47 | -19.0 | % | ||||||||||||
Return Rate % | 16.3 | % | 17.0 | % | 71 bps | 17.0 | % | 16.4 | % | (64 bps | ) | |||||||||||||
Total Customers - 12 Month Rolling (000s) | 1,263 | 1,585 | -20.0 | % |
For the Three-Month Periods Ended | For the Twleve-Month Periods Ended | |||||||||||||||||||||||
% of Net Merchandise Sales by Category | January 28, 2023 | January 29, 2022 | Change | January 28, 2023 | January 29, 2022 | Change | ||||||||||||||||||
Jewlery & Watches | 35 | % | 36 | % | (72 bps | ) | 36 | % | 38 | % | (201 bps | ) | ||||||||||||
Home & Consumer Electronics | 23 | % | 20 | % | 164 bps | 20 | % | 17 | % | 284 bps | ||||||||||||||
Beauty & Health | 21 | % | 23 | % | (177 bps | ) | 21 | % | 24 | % | (353 bps | ) | ||||||||||||
Fashion & Accessories | 21 | % | 21 | % | 85 bps | 23 | % | 21 | % | 271 bps | ||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Liquidity and Capital Resources
As of January 28, 2023, total unrestricted cash was $7.2 million, compared to $11.3 million in unrestricted cash as of the same prior year period. On April 10, 2023, the Company completed its DRE, which reduced its debt by $53 million to approximately $123 million.
Outlook
The Company is in the process of engaging a national investment bank to lead an RFP process on behalf of the Company to replace the Company’s senior lenders as quickly as practical.
Q1 Net Sales: The Company anticipates Q1 Net Sales to continue to be negatively impacted by the Q4 liquidity challenge, and expects to report Q1 net sales of $105 million, a 31% year-over-year decline.
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Q1 Net Income: The Company anticipates positive Q1 Net Income driven primarily by several one-time gains related to the DRE completed April 10, 2023. The Company today has over $390 million in NOLs and does not expect to have any federal cash tax payments on the DRE transactions nor the Company’s 2023 Net Income.
Q1 Adjusted EBITDA: In anticipation of this short-term Q1 net sales pressure and to ensure the Company can produce stable profitability and cash flow, in February 2023 the Company completed a cost reduction event that reduced annual operating expenses by over $20 million. The Company anticipates Q1 Adjusted EBITDA to be approximately $1 million.
A reconciliation of adjusted EBITDA is not available on a forward-looking basis without unreasonable efforts because we are unable to predict with reasonable certainty the ultimate outcome and timing of certain significant items, including mergers and acquisitions, other transactions, settlements, integration activities, customer concessions, restructuring activities, and certain tax related events. These items are uncertain, depend on various factors and could have a material impact on earnings and cash flow measures determined in accordance with U.S. generally accepted accounting principles (“GAAP”) for the applicable future period.
Q4 2022 Earnings Conference Call
As previously announced, the Company will hold a conference call and webcast this morning, April 12, at 8:30 a.m. Eastern time to discuss its financial results for the fourth quarter and full year ended January 28, 2023. The Company will report its financial results in a press release prior to the conference call.
· | Date: Wednesday, April 12, 2023 | |
· | Time: 8:30 a.m. Eastern time (7:30 a.m. Central time) | |
· | U.S. dial-in number: 1-877-407-9039 | |
· | International dial-in number: 1-201-689-8470 | |
· | Conference ID: 1373 6484 | |
· | Webcast link: iMedia Brands 4Q earnings webcast |
The conference call and webcast will be broadcast live and available for replay via the investor relations section of the iMedia Brands website at www.imediabrands.com. The replay of the conference call will be available after 11:30 a.m. Eastern time on the same day through April 26, 2023.
· | Toll-free replay number: 1-844-512-2921 | |
· | International replay number: 1-412-317-6671 | |
· | Replay ID: 1373 6484 |
About iMedia Brands, Inc.
iMedia Brands, Inc. (NASDAQ: IMBI, IMBIL) is a global media company capitalizing on the convergence of entertainment, ecommerce, and advertising. The Company owns and operates four television networks, which are ShopHQ, ShopBulldogTV, ShopHQHealth and 123tv. ShopHQ, the company’s flagship television network with a thirty-year history, is nationally distributed in the U.S. to over 90 million homes via its affiliation agreements in cable, satellite, and broadcast, and reach viewers through its social platforms and its OTT Ap on Roku, Apple TV, Amazon Fire and Samsung Smart-televisions.
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iMedia’s common stock is traded on the NASDAQ Global Market stock exchange under the ticker IMBI. iMedia’s 8.5% bonds are also publicly traded on the NASDAQ Global Market under the ticker IMBIL and pay holders 8.5% interest quarterly in arrears on March 31, June 30, September 30, and December 31.
Investors:
Ken Cooper
kcooper@imediabrands.com
(952) 943-6119
Media:
press@imediabrands.com
(952) 943-6125
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iMedia Brands, Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
January 28, | January 29, | |||||||
2023 | 2022 | |||||||
(Unaudited) | Audited | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 7,187 | $ | 11,295 | ||||
Restricted Cash | 1,500 | 1,893 | ||||||
Accounts receivable, net | 50,576 | 78,947 | ||||||
Inventories | 111,707 | 116,256 | ||||||
Current portion of television broadcast rights, net | 20,090 | 27,521 | ||||||
Prepaid expenses and other | 10,296 | 18,340 | ||||||
Total current assets | 201,356 | 254,252 | ||||||
Property and equipment, net | 45,303 | 48,225 | ||||||
Television broadcast rights, net | 57,002 | 74,821 | ||||||
Goodwill | 92,933 | 99,050 | ||||||
Intangible assets, net | 26,673 | 27,940 | ||||||
Other assets | 20,481 | 18,359 | ||||||
$ | 443,748 | $ | 522,647 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 105,093 | $ | 89,046 | ||||
Accrued liabilities | 40,698 | 44,388 | ||||||
Current portion of television broadcast rights obligation | 28,404 | 31,921 | ||||||
Current portion of operating lease liabilities | 2,479 | 2,331 | ||||||
Current portion of long term debt | 6,950 | 14,031 | ||||||
Deferred revenue | 89 | 427 | ||||||
Total current liabilities | 183,713 | 182,144 | ||||||
Long term broadcast rights liability | 62,074 | 81,268 | ||||||
Long-term debt, net | 169,819 | 176,432 | ||||||
Long-term operating lease liabilities | 3,131 | 5,169 | ||||||
Deferred tax liability | 5,227 | 5,285 | ||||||
Other long term liabilities | 2,741 | 2,986 | ||||||
Total liabilities | 426,705 | 453,284 | ||||||
Commitments and Contingencies Shareholders' equity: | ||||||||
Preferred stock | - | - | ||||||
Common stock | 296 | 216 | ||||||
Warrants | - | - | ||||||
Additional paid-in capital | 563,515 | 538,627 | ||||||
Accumulated Other Comprehensive Income/(loss) | (7,260 | ) | (2,428 | ) | ||||
Accumulated deficit | (539,508 | ) | (469,463 | ) | ||||
Total shareholders' equity | 17,043 | 66,951 | ||||||
Equity of the Non-Controlling Interest | - | 2,412 | ||||||
Total equity | 17,043 | 69,363 | ||||||
$ | 443,748 | $ | 522,647 |
7
IMEDIA BRANDS, INC
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)
For the Three-Month Periods Ended | For the Twelve-Month Periods Ended | |||||||||||||||
January 28, 2023 | Janaury 29, 2022 | January 28, 2023 | Janaury 29, 2022 | |||||||||||||
Net sales | 133,513 | 193,809 | 544,555 | 551,134 | ||||||||||||
Cost of sales | 84,407 | 119,607 | 334,189 | 328,518 | ||||||||||||
Gross profit | 49,106 | 74,202 | 210,366 | 222,616 | ||||||||||||
Gross profit % | 36.8 | % | 38.3 | % | 38.6 | % | 40.4 | % | ||||||||
Operating expense: | ||||||||||||||||
Distribution and selling | 38,526 | 49,605 | 149,186 | 158,512 | ||||||||||||
General and administrative | 17,101 | 14,020 | 67,394 | 38,589 | ||||||||||||
Depreciation and amortization | 8,636 | 10,879 | 36,057 | 35,606 | ||||||||||||
Restructuring costs | 147 | — | 4,637 | 634 | ||||||||||||
Total operating expense | 64,410 | 74,504 | 257,274 | 233,341 | ||||||||||||
Operating loss | (15,304 | ) | (302 | ) | (46,908 | ) | (10,725 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income and other | 175 | 175 | 199 | |||||||||||||
Interest expense | (9,016 | ) | (5,405 | ) | (24,718 | ) | (11,727 | ) | ||||||||
Change in fair value of contract liability, net | — | — | 1,937 | — | ||||||||||||
Loss on divestiture | — | — | — | — | ||||||||||||
Loss on debt extinguishment | — | — | (884 | ) | (663 | ) | ||||||||||
Total other expense, net | (8,841 | ) | (5,405 | ) | (23,490 | ) | (12,191 | ) | ||||||||
Loss before income taxes | (24,145 | ) | (5,707 | ) | (70,398 | ) | (22,916 | ) | ||||||||
Income tax provision | (15 | ) | (65 | ) | (62 | ) | (110 | ) | ||||||||
Net loss | (24,160 | ) | (5,772 | ) | (70,460 | ) | (23,026 | ) | ||||||||
Less: Net loss attributable to non-controlling interest | — | (735 | ) | (415 | ) | (1,018 | ) | |||||||||
Net loss attributable to shareholders | (24,160 | ) | (5,037 | ) | (70,045 | ) | (22,008 | ) | ||||||||
Net loss per common share | (0.82 | ) | (0.23 | ) | (2.61 | ) | (1.14 | ) | ||||||||
Net loss per common share — assuming dilution | (0.82 | ) | (0.27 | ) | (2.63 | ) | (1.19 | ) | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 29,492,756 | 21,563,924 | 26,824,668 | 19,362,062 | ||||||||||||
Diluted | 29,492,756 | 21,563,924 | 26,824,668 | 19,362,062 |
8
IMEDIA BRANDS, INC
AND SUBSIDIARIES
Reconciilation of Net Loss to Adjusted EBITDA
(Unaudited)
For the Three-Month Periods Ended January 28, 2023 | For the Three-Month Periods Ended January 29, 2022 | |||||||||||||||||||||||||||||||
Entertainment | Consumer Brands | Media Commerce Services | Consolidated | Entertainment | Consumer Brands | Media Commerce Services | Consolidated | |||||||||||||||||||||||||
Net Loss | (24,161 | ) | (5,038 | ) | ||||||||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Television Broadcast Rights Amortization | 6,014 | 7,836 | ||||||||||||||||||||||||||||||
Depreciation and Amortization, Other | 3,287 | 3,961 | ||||||||||||||||||||||||||||||
Interest, net | 9,016 | 5,405 | ||||||||||||||||||||||||||||||
Tax | 15 | 65 | ||||||||||||||||||||||||||||||
EBITDA (as defined) | (6,888 | ) | 136 | 923 | (5,829 | ) | 9,471 | 1,607 | 1,151 | 12,229 | ||||||||||||||||||||||
A reconciliation of EBITDA to Adjusted EBITDA is as follows: | ||||||||||||||||||||||||||||||||
EBITDA (as defined) | (6,888 | ) | 136 | 923 | (5,829 | ) | 9,471 | 1,607 | 1,151 | 12,229 | ||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Transaction, Settlement and Integration costs, net | 5,592 | 1,634 | (22 | ) | 7,204 | 1,180 | 291 | 470 | 1,941 | |||||||||||||||||||||||
Non-Cash Share-Based Compensation | 937 | 937 | 935 | 935 | ||||||||||||||||||||||||||||
Loss on Debt Extinguishment | - | - | ||||||||||||||||||||||||||||||
One Time Customer Adjustments | - | - | ||||||||||||||||||||||||||||||
Restructuring Costs | 96 | 52 | 148 | - | ||||||||||||||||||||||||||||
Adjusted EBITDA | (263 | ) | 1,770 | 953 | 2,460 | 11,586 | 1,898 | 1,621 | 15,105 |
For the Twelve-Month Periods Ended January 28, 2023 | For the Twelve-Month Periods Ended January 29, 2022 | |||||||||||||||||||||||||||||||
Entertainment | Consumer Brands | Media Commerce Services | Consolidated | Entertainment | Consumer Brands | Media Commerce Services | Consolidated | |||||||||||||||||||||||||
Net Loss | (70,045 | ) | (22,008 | ) | ||||||||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Television Broadcast Rights Amortization | 25,704 | 26,956 | ||||||||||||||||||||||||||||||
Depreciation and Amortization, Other | 13,643 | 12,406 | ||||||||||||||||||||||||||||||
Interest, net | 24,718 | 11,526 | ||||||||||||||||||||||||||||||
Loss on divestiture | - | - | ||||||||||||||||||||||||||||||
Change in fair value of warrant liability | (1,937 | ) | - | |||||||||||||||||||||||||||||
Tax | 62 | 110 | ||||||||||||||||||||||||||||||
EBITDA (as defined) | (21,143 | ) | 7,400 | 5,888 | (7,855 | ) | 23,964 | 3,282 | 1,744 | 28,990 | ||||||||||||||||||||||
A reconciliation of EBITDA to Adjusted EBITDA is as follows: | ||||||||||||||||||||||||||||||||
EBITDA (as defined) | (21,143 | ) | 7,400 | 5,888 | (7,855 | ) | 23,964 | 3,282 | 1,744 | 28,990 | ||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||
Transaction, Settlement and Integration costs, net | 19,867 | 2,365 | 1,480 | 23,712 | 3,550 | 2,304 | 1,843 | 7,697 | ||||||||||||||||||||||||
Non-Cash Share-Based Compensation | 3,998 | 3,998 | 3,320 | 3,320 | ||||||||||||||||||||||||||||
Loss on Debt Extinguishment | 884 | 884 | 663 | 663 | ||||||||||||||||||||||||||||
One Time Customer Adjustments | - | 341 | 341 | |||||||||||||||||||||||||||||
Restructuring Costs | 4,375 | 261 | 4,636 | 625 | 8 | 633 | ||||||||||||||||||||||||||
Adjusted EBITDA | 7,981 | 9,765 | 7,629 | 25,375 | 32,463 | 5,594 | 3,587 | 41,644 |
Adjusted EBITDA
EBITDA represents net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines adjusted EBITDA as EBITDA excluding non-operating gains (losses); executive and management transition costs; one-time customer concessions; restructuring costs; non-cash impairment charges and write downs; transaction, settlement, and integration costs, net; rebranding costs; and non-cash share-based compensation expense. The Company has included the “adjusted EBITDA” measure in its EBITDA reconciliation in order to adequately assess the operating performance of its segments and in order to maintain comparability to its analyst's coverage and financial guidance, when given. Management believes that the adjusted EBITDA measure allows investors to make a meaningful comparison between its business operating results over different periods of time with those of other similar companies. In addition, management uses adjusted EBITDA as a metric to evaluate operating performance under the Company’s management and executive incentive compensation programs. EBITDA and adjusted EBITDA are both non-GAAP measures and should not be construed as an alternative to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with GAAP and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of the comparable GAAP measure, net income (loss) to adjusted EBITDA in this release.
9
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This document contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact, including statements regarding the amounts to be received by the Company in connection with the debt reduction events, the Company's use of proceeds related thereto, the Company’s future available liquidity, the replacement of the Company’s senior asset based lending credit facility, the Company's new DISH Network agreement, and the Company's expected performance for the remainder of fiscal 2023 are forward-looking. The Company often use words such as anticipates, believes, estimates, expects, intends, seeks, predicts, hopes, should, plans, will, or the negative of these terms and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These statements are based on management's current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): variability in consumer preferences, shopping behaviors, spending and debt levels; the general economic and credit environment, including COVID-19; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on sales and sales promotions; pricing and gross sales margins; the level of cable and satellite distribution for the Company’s programming and the associated fees or estimated cost savings from contract renegotiations; the Company’s ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom the Company has contractual relationships, and to successfully manage key vendor and shipping relationships and develop key partnerships and proprietary and exclusive brands; the ability to manage operating expenses successfully and the Company’s working capital levels and liquidity availability; the ability to remain compliant with the Company’s credit facilities covenants; customer acceptance of the Company’s branding strategy and its repositioning as a video commerce Company; the ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns; changes to the Company’s management and information systems infrastructure; challenges to the Company’s data and information security; changes in governmental or regulatory requirements; including without limitation, regulations of the Federal Communications Commission and Federal Trade Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting the Company’s operations; significant events (including disasters, weather events or events attracting significant television coverage) that either cause an interruption of television coverage or that divert viewership from its programming; disruptions in the Company’s distribution of its network broadcast to customers; the Company’s ability to protect its intellectual property rights; the Company’s ability to obtain and retain key executives and employees; the Company’s ability to attract new customers and retain existing customers; changes in shipping costs; expenses related to the actions of activist or hostile shareholders; the Company’s ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits of television programming; logistics costs including the price of gasoline and transportation; and the risks described from time to time in the Company’s reports filed with the SEC, including, but not limited to, the Company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. The Company is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
10
1 1 Investor Relations Supplement Q4 & Full - Year 2022 April 12, 2023 Exhibit 99.2
2 2 Safe Harbor Information This presentation contains certain “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 . Any statements contained herein that are not statements of historical fact, including statements regarding the amounts to be received by iMedia Brands, Inc . (the “Company”) in connection with the debt reduction events, the Company's use of proceeds related thereto, the Company’s future available liquidity, the replacement of the Company’s senior asset - based lending credit facility, the Company's new DISH Network agreement, and the Company's expected performance for the remainder of fiscal 2023 and beyond are forward - looking . The Company often use words such as anticipates, believes, estimates, expects, intends, seeks, predicts, hopes, should, plans, will, or the negative of these terms and similar expressions to identify forward - looking statements, although not all forward - looking statements contain these words . These statements are based on management's current expectations and accordingly are subject to uncertainty and changes in circumstances . Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to) : variability in consumer preferences, shopping behaviors, spending and debt levels ; the general economic and credit environment ; interest rates ; seasonal variations in consumer purchasing activities ; the ability to achieve the most effective product category mixes to maximize sales and margin objectives ; competitive pressures on sales and sales promotions ; pricing and gross sales margins ; the level of cable and satellite distribution for the Company’s programming and the associated fees or estimated cost savings from contract renegotiations ; the Company’s ability to establish and maintain acceptable commercial terms with third - party vendors and other third parties with whom the Company has contractual relationships, and to successfully manage key vendor and shipping relationships and develop key partnerships and proprietary and exclusive brands ; the ability to manage operating expenses successfully and the Company’s working capital levels and liquidity availability ; the ability to remain compliant with the Company’s credit facilities covenants ; customer acceptance of the Company’s branding strategy and its repositioning as a video commerce Company ; the ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns ; changes to the Company’s management and information systems infrastructure ; challenges to the Company’s data and information security ; changes in governmental or regulatory requirements, including without limitation regulations of the Federal Communications Commission and Federal Trade Commission, and adverse outcomes from regulatory proceedings ; litigation or governmental proceedings affecting the Company’s operations ; significant events (including disasters, weather events or events attracting significant television coverage) that either cause an interruption of television coverage or that divert viewership from its programming ; disruptions in the Company’s distribution of its network broadcast to customers ; the Company’s ability to protect its intellectual property rights ; the Company’s ability to obtain and retain key executives and employees ; the Company’s ability to attract new customers and retain existing customers ; changes in shipping costs ; expenses related to the actions of activist or hostile shareholders ; the Company’s ability to offer new or innovative products and customer acceptance of the same ; changes in customer viewing habits of television programming ; logistics costs including the price of gasoline and transportation ; and the risks described from time to time in the Company’s reports filed with the Securities and Exchange Commission, including, but not limited to, the Company’s most recent annual report on Form 10 - K, quarterly reports on Form 10 - Q, and current reports on Form 8 - K . Investors are cautioned not to place undue reliance on forward - looking statements, which speak only as of the date of this announcement . The Company is under no obligation (and expressly disclaims any such obligation) to update or alter its forward - looking statements whether as a result of new information, future events or otherwise .
3 3 2021 Transform Company’s Growth Trajectory Strategic : Acquired three businesses to drive transformation of the Company from an orphan underperforming TV network into a global media company operating four television networks that use its first - party data and cross - promotion to engage the same boomer - demographic consumer with in multiple sales channels : t - commerce, e - commerce, digital a dvertising , and brick and mortar retail . Financial : E very quarter in fiscal 2021 the Company met or beat consensus . Executive Summary - 2021 & 2022 Achievements Position Company For a Strong 2023 2022 Integrate 2021 Acquisitions & Strengthen Balance Sheet The Company’s Priorities at Capital Markets Day in Feb 2022 : Integrate 2021 Acquisitions, Reduce Content Distribution Expense, and Strengthen the Company’s Balance Sheet . Integrate 2021 Acquisitions : Launched best - performing ShopHQ Networks’ brands on 1 - 2 - 3 . tv and completed 123 tv integration despite war in Ukraine’s continued impact on Europe . Launched 123 tv auction widget on ShopHQ Networks . Expanded digital advertising offering to include OTT inventory and Company first - party data . Expanded Christopher & Banks retail footprint . Terminated underperforming Shaq partnership, which enables ShopHQ Networks’ to engage more customers with its returning big brands from QVC & HSN : J Girard, Anushka and Gems En Vogue . Reduce Content Distribution Expense : Successfully completed ShopHQ’s DISH renewal in December after absorbing a seven - month disruption . Company now positioned to achieve company milestone in 2023 to reduce content distribution as a % of net sales . Strengthen Balance Sheet : Successfully completed the Company’s Debt Reduction Event in Q 1 2023 that consisted of multiple transactions that reduced Company debt by $ 53 million . The Company’s debt today is approximately $ 123 million, which is approximately 41 % lower than the Company’s $ 207 million debt level at the end of Q 1 2022 .
4 4 1. Recent Debt Reduction Event (“DRE”) : On April 10 th the Company completed its Debt Reduction Event that was comprised of the simultaneous closing of multiple transactions that collectively reduced the Company’s debt by $ 53 million . The Company’s debt today is approximately $ 123 million, which is approximately 41 % lower than the Company’s $ 207 million debt level at the end of Q 1 2022 . 2. Q 4 Financial Performance : The Company and ABL Agent worked collaboratively during Q 4 to navigate an unexpected and material decline in the Company’s borrowing base availability . As part of that collaboration process, the Company shifted its focus to maximizing short - term cash optimization opportunities to fund principal loan repayments . This restricted the Company’s working capital and negatively impacted its Q 4 financial performance . See Slides 5 through 6 for details See Slides 7 through 13 for details Executive Summary - 2021 & 2022 Achievements Position Company For a Strong 2023
5 5 Debt Reduction Event – Multiple Simultaneous Transactions Closed on 4.10.23
6 6 Sources of Cash 1 . Sale Lease Back Net Proceeds $ 42 million 2 . PIPE Equity Raise $ 3 . 5 million Reductions of Debt 3 . 100 % of $ 28 . 5 million Green Lake Term Loan 4 . $ 12 million reduction of $ 20 million 123 . tv Seller Notes 5 . $ 12 million reduction of ABL loan balance Debt Reduction Event – Simultaneous Closings of Multiple Transactions $ in millions IMBI Debt Capitalization Interest Q1'2022 (4/30/2022) Q4'2022 (1/31/2023) 4/10/2023 Estimate 5 - Year Non - Amort Bonds 8.5% $80.0 $80.0 $80.0 Siena ABL 10.0% $61.1 $45.5 $29.0 123TV Seller Note 8.5% $20.0 $20.0 $7.0 Synacor Seller Note 8.5% $7.0 $4.0 $3.0 GCP Convertible Note 8.5% $10.6 $3.1 $3.1 Green Lake Real Estate Loan 10.0% $28.5 $28.5 $0.0 TOTAL DEBT $207.2 $181.1 $123 iMedia Board Members and CEO personally invested $300k in the PIPE Debt Reduction Event Overview
7 7 Q4 and Full - Year 2022 Financial Performance
8 8 Q4 and Full - Year 2022 Financial Performance Eight Quarters of Solid Year over Year Net Sales Performance Interrupted by Q4 2022 Liquidity Challenge • Q1 and Q2 Net Sales Growth Strong @ 27%. • Q3 Net Sales Performance Includes Negative Impact From Company’s DISH Disruption Regarding Cost Negotiations • Q4 Net Sales Performance Includes Negative Impact From Liquidity Challenge and Dish Disruption. 1Q20 1Q21 1Q22 2Q20 2Q21 2Q22 3Q20 3Q21 3Q22 4Q20 4Q21 4Q22 Net Sales $95.8 $113.2 $154.5 $124.5 $113.4 $133.2 $109.0 $130.7 $123.3 $124.8 $193.8 $133.5 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 $200.0 Net Sales (in millions) Company’s largest Q4 decline in 20+ years Q 4 Net Sales declined $ 60 million compared to same prior year period, driven by two short - term events : • Q 4 Liquidity Challenge • ShopHQ Networks’ carriage disruptions designed to secure future cost reductions .
Private and Confidential | 9 Private and Confidential | 9 9 Q4 Liquidity Challenge = Company Repaid L enders $19 million in December & January – Pressured Working Capital t o Fund Ope rations Q4 and Full - Year 2022 Financial Performance
Private and Confidential | 10 Private and Confidential | 10 10 • Q 4 2022 Jewelry inventory purchases of $ 5 million were $ 6 million less than same prior year period, or a 55 % reduction . • Q 4 2022 Jewelry sales were $ 12 million, a $ 10 million decline compared to the same prior year period, or a 56 % reduction . • Jewelry Inventory in December was $ 7 million, which was $ 7 million lower than the same point prior year, a 50 % reduction . Q4 and Full - Year 2022 Financial Performance ShopHQ Could Not Fund Jewelry Receipts in Q4, which reduced ShopHQ’s most productive category ’s net sales and profitability
Private and Confidential | 11 Private and Confidential | 11 11 • Q 4 2022 Watches airtime increased 37 % over the same prior year period, to absorb reduction in airtime from the Jewelry category . • Q 4 2022 Watches productivity, or dollars per minute (DPM $ ), decreased 43 % over the same prior year period . Q4 and Full - Year 2022 Financial Performance ShopHQ Forced To Over - Rotate Watch Category To Compensate For Jewelry Decline, which reduced Watch Net Sales DPM By 43%.
Private and Confidential | 12 Private and Confidential | 12 12 Q4 and Full - Year 2022 Financial Performance iMDS Could Not Fund Payments To Advertisers & Publishers which reduced Its Q4 Win %, # of Publishers, Revenue Per Publisher, CPM & Net Sales 72 74 76 78 80 82 84 86 88 90 92 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 August September October November December January Revenue # Publishers $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 0 100,000,000,000 200,000,000,000 300,000,000,000 400,000,000,000 500,000,000,000 600,000,000,000 Oct-22 Nov-22 Dec-22 Jan-23 Sum of Requests Sum of Revenue Digital Advertising - Syndication Supply Digital Advertising - Owned or Managed Supply
13 13 We Believe We Are On The Right Path In Building Our Interactive Media Company. Q4 and Full - Year 2022 Financial Performance 2020 2021 2022 T Commerce $425,393 $471,571 $426,386 E Commerce $22,389 $35,495 $48,624 Digital & TV Advertising $0 $22,024 $45,530 OTT - SaaS & DTC $2,254 $2,281 $1,553 VIP Program $4,134 $9,763 $9,962 Brick & Mortar Retail $0 $10,000 $12,500 Total iMedia Net Sales $454,170 $551,134 $544,555 Net Sales Growth % -9% 21% -1% % of Net Sales from Physical Inventory 99% 94% 90% % of Net Sales from Digtial Products 1% 6% 10% Our Growth Strategy's Impact: Gross Margin Target 36.8% 40.0% 42.0% Gross Margin Actual 36.8% 40.4% 38.6% iMedia's Browth Strategy - Drive Sales Growth of Digital Products Rather Than Physical Products Beginning in 2019 , the Company established a growth strategy and entrepreneurial culture focused on operating four television networks - ShopHQ , 123 tv, ShopBulldogTV , and ShopHQHealth - each of which have been uniquely crafted to focus on the same boomer - demographic consumer and to drive multiple revenue streams : T - Commerce, E - Commerce, Digital Advertising, OTT SaaS, and brick - and - mortar retail . Our diversified revenue model and singular focus on one customer demographic enables us to accelerate the share growth of net sales from digital products and reduce the historical reliance on the sale of physical inventory products that require logistics expenses and working capital . This shift is important because it positions the Company to improve its margins and working capital, which in turn is expected to enable the Company to grow revenue in both robust and challenging macro - economic environments .
14 14
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