UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
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(Mark
One)
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[X]
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the fiscal year ended December 31, 2019
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or
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the transition period from to
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Commission
file number: 1-14310
GLASSBRIDGE
ENTERPRISES, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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41-1838504
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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411
East 57th Street, Suite 1-A
New
York, New York
(Address
of principal executive offices)
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10022
(Zip
Code)
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(212)
220-3300
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $0.01 per share
Preferred
Stock Purchase Rights
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ]
No [X]
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes [X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one).
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Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer
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[X]
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Smaller
reporting company
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[X]
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Emerging
growth company
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
Aggregate
market value of voting and non-voting stock of the registrant held by non-affiliates of the registrant, based on the closing price
of $62.00 as reported on the OTCQB on June 28, 2019 (the last business day of the registrant’s most recently completed
second fiscal quarter), was $1.0 million.
The
number of shares outstanding of the registrant’s common stock on March 31, 2020 was 25,170.
DOCUMENTS
INCORPORATED BY REFERENCE
Selected
portions of the registrant’s definitive proxy statement on Schedule 14A for the registrant’s 2020 annual meeting of
stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
GLASSBRIDGE
ENTERPRISES, INC.
FORM
10-K
FOR
THE YEAR ENDED DECEMBER 31, 2019
TABLE
OF CONTENTS
Cautionary
Statements Regarding Forward-Looking Statements
We
may from time to time make written or oral forward-looking statements with respect to our future goals, including statements contained
in this Form 10-K, in our other filings with the U.S. Securities and Exchange Commission (“SEC”) and in our reports
to shareholders.
Certain
information which does not relate to historical financial information may be deemed to constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include information concerning
the launch of our asset management business and related investment vehicles, strategic initiatives and potential acquisitions,
the results of operations of our existing business lines, the impact of legal or regulatory matters on our business, as well as
other actions, strategies and expectations, and are identifiable by use of the words “believes,” “expects,”
“intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,”
“may,” “will,” “could,” “might,” or “continues” or similar expressions.
Such statements are subject to a wide range of risks and uncertainties that could cause our actual results in the future to differ
materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place
undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such
statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after
such date. Risk factors include various factors set forth from time to time in our filings with the SEC including the following:
the negative impacts of our delisting from the New York Stock Exchange (“NYSE”), including reduced liquidity and market
price of our common stock and the number of investors willing to hold or acquire our common stock; significant costs relating
to pending and future litigation; our ability to attract and retain talented personnel; the structure or success of our participation
in any joint investments; risks associated with any future acquisition or business opportunities; our need to consume resources
in researching acquisitions, business opportunities or financings and capital market transactions; our ability to integrate additional
businesses or technologies; the impact of our Reverse Stock Split (as defined herein) on the market trading liquidity of our common
stock; the market price volatility of our common stock; our need to incur asset impairment charges for intangible assets and goodwill;
significant changes in discount rates, rates of return on pension assets and mortality tables; our reliance on aging information
systems and our ability to protect those systems against security breaches; our ability to integrate accounting systems; changes
in tax guidance and related interpretations and inspections by tax authorities; our ability to raise capital from third party
investors for our asset management business; our ability to comply with extensive regulations relating to the launch and operation
of our asset management business; our ability to compete in the intensely competitive asset management business; the performance
of any investment funds we sponsor or accounts we manage; difficult market and economic conditions, including changes in interest
rates and volatile equity and credit markets; our ability to achieve steady earnings growth on a quarterly basis in our asset
management business; the significant demands placed on our resources and employees, and associated increases in expenses, risks
and regulatory oversight, resulting from the potential growth of our asset management business; our ability to establish a favorable
reputation for our asset management business; the lack of operating history of our asset manager subsidiary and any funds that
we may sponsor; our ability to realize the anticipated benefits of the third-party investment in our partially-owned data storage
business; decreasing revenues and greater losses attributable to our partially-owned data storage products; our ability to quickly
develop, source and deliver differentiated and innovative products; our dependence on third parties for new product introductions
or technologies; our dependence on third-party contract manufacturing services and supplier-provided parts, components and sub-systems;
our dependence on key customers, partners and resellers; foreign currency fluctuations and negative or uncertain global or regional
economic conditions as well as various factors set forth from time to time in Item 1A of this Form 10-K and from time to time
in our filings with the SEC.
PART
I
Item
1. Business.
General
GlassBridge
Enterprises, Inc. owns and operates an asset management business and a sports investment platform (the “Business”).
The Business is operated through majority owned Adara Enterprises, Corp. f/k/a Imation Enterprises Corp. (“Adara”)
and Sport-BLX, Inc. (“SportBLX”), among other subsidiaries.
As
used in this document, the terms “GlassBridge”, “the Company”, “we”, “us”, and
“our” mean GlassBridge Enterprises, Inc. and its subsidiaries and unless the context indicates otherwise.
Asset
Management Business
The Company operates
its diversified private asset management business through a number of subsidiaries that sponsor our fund offerings. We expect
our asset management business to earn revenues primarily by providing investment advisory services to third party investors through
our managed funds, as well as separate managed accounts.
Our
employees each support one or more of the subsidiaries identified below, which provide to our clients what we consider unique
and cutting-edge investment strategies. Since the end of 2019, we have added or augmented a number of strategies and continue
to seek and create additional ones. We may also look to acquire other asset managers to complement or supplement our business.
We
have established a full support infrastructure for our asset management business, including compliance, monitoring, reporting,
and operations capabilities that can support additional strategies and assets growth.
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GlassBridge
Investment Management LLC
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GlassBridge
Investment Management, which has applied for registration as a registered investment advisor with the SEC, manages approximately
$20 million in assets.
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Adara
Asset Management LLC
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Adara
Asset Management (“AAM”) registered as a commodity pool operator (CPO) with the National Futures Association in February
2020.
In
February 2017, we closed a Capacity and Services transaction with Clinton Group Inc. (“Clinton”), a registered investment
adviser controlled by George E. Hall (“Mr. Hall”) who beneficially owns 29.1% of our outstanding shares. This allowed
AAM to initially place up to $1 billion of investment capacity under Clinton’s management within Clinton’s quantitative
equity strategy for a five-year term. We have the option of expanding such investment capacity to $1.5 billion and to extend the
term for two subsequent one-year periods, subject to certain conditions. The Capacity and Services transaction was structured
to provide for the quick and efficient scaling of our asset management business.
AAM helps operate Arrive LLC (“Arrive”), the investment
arm of Roc Nation, a full-service entertainment company engaging in artist and athlete management, label publishing, touring, film/TV,
and new ventures. Arrive makes venture capital investments and serves as the general partner and investment manager to a third-party
fund. Leveraging Roc Nation’s cultural impact and institutional infrastructure, Arrive helps portfolio companies form an
emotional connection with their consumers, in addition to deploying strategic capital alongside top-tier financial institutions
in multi-stage deals. Arrive currently manages one third-party fund.
AAM
is general partner and investment manager to The Sports & Entertainment Fund LP (“S&E”), which currently
holds a $17.8 million investment. S&E seeks to acquire revenue share interests in athlete contracts and other sports
assets.
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GlassBridge
Capital LLC
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GlassBridge
Capital manages traditional liquid investments for third party clients and engages in a limited amount of proprietary trading.
Investment
advisory services include managing the composition of each fund’s portfolio (including the purchase, retention and disposition
of portfolio securities in accordance with the fund’s investment objectives, policies and restrictions), conducting investment
research, monitoring compliance with each fund’s investment restrictions and applicable laws and regulations, overseeing
the selection and continued employment of sub-advisors and monitoring such sub-advisors’ investment performance and adherence
to investment policies, risk management and compliance procedures, overseeing other service providers, maintaining public relations
and marketing programs for each of the funds, preparing and distributing regulatory reports and overseeing distribution through
third party financial intermediaries. We anticipate that our revenues will increase or decrease as our average assets under management
rises or falls. The percentage amount of the investment advisory fees may vary from fund to fund.
AAM’s
success will depend in large part on our ability to create attractive investment products and raise capital from third party investors.
If we are unable to raise capital from third party investors, we would be unable to collect management fees or deploy capital
into investments and potentially collect performance fees, which would adversely affect our ability to generate revenue and cash
flow from this business.
The
investment advisory industry is intensely competitive. We compete with many domestic and global competitors that may provide investment
products with similar features and objectives to those we offer. These institutions range from small boutique firms to large financial
institutions.
Poor
performance of any investment funds we sponsor or accounts we manage would adversely affect our ability to generate revenue, income
and cash flow, and could adversely affect our ability to raise capital for future investment funds and accounts.
Difficult
market and economic conditions, including, without limitation, changes in interest rates and volatile equity and credit markets,
can adversely affect our asset management business in many ways, including by reducing the value or performance of the investments
made by any investment funds we sponsor or accounts we manage and reducing our ability to raise or deploy capital, each of which
could adversely affect our revenue, earnings and cash flow and adversely affect our financial prospects and condition.
Any
revenue, earnings, net income and cash flow attributable to our asset management business is likely to be highly variable, which
may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of shares of our common
stock to decline and be volatile.
Sports
Investment Platform
GlassBridge
acquired its sports investment platform in 2019, by purchasing a controlling interest in SportBLX, a financial technology company
that enables a marketplace for sports assets, including revenue share interests in player earnings and equity interests in
teams. SportBLX partners with a registered broker-dealer to effect transactions in sports assets constituting securities.
SportBLX is focused initially on American professional sports like basketball, baseball and football.
SportBLX,
together with broker dealers, enables enthusiasts to use their
knowledge to engage passionately and invest in the athletes and sports teams they love, giving investors opportunities to participate
in the value creation that success in sports brings. SportBLX also enables institutional investors to invest in securities
tied to uncorrelated assets with attractive yields and the potential for equity-like returns backed by assets that participate
in an industry that has thrived for decades through multiple business cycles.
Company
History
GlassBridge
was incorporated as Imation Corp. in Delaware in 1996, from the spin-off of substantially all of 3M Company’s data storage
and imaging systems businesses. Until 2015, we primarily provided data storage and security solutions through our two legacy business
segments: Consumer Storage and Accessories and Tiered Storage and Security Solutions (the “Legacy Business”).
As
described in Notes to Consolidated Financial Statements – Note 5 – Discontinued Operations, in August
2018, the Company divested the Nexsan business, consisting of Nexsan Corporation, Connected Data Inc., and Transporter brand products,
acquired between 2012 and 2015 (the “Nexsan Business”).
In
February 2017, we changed our name to GlassBridge Enterprises, Inc. to reflect our new primary focus on asset management and delisted
our common stock from The New York Stock Exchange, at the beginning of August 2017, when our common stock began trading in
the OTC Markets Group under the symbol “GLAE”.
On January 4,
2019, for total consideration of $1,000,000, Sport-BLX issued to the Company shares of Sport-BLX common stock, constituting 9.0%
of the common stock outstanding after giving effect to the transaction. Immediately before the transaction, Mr. Hall, SportBLX’s
Executive Chairman and CEO, held 65.6% of SportBLX’s outstanding shares.
On
March 31, 2019, the Company sold all of its international subsidiaries (“Imation Subsidiaries”) to IMN Capital Holdings,
Inc. (“IMN Capital”). Certain Company subsidiaries, including the Imation Subsidiaries, are parties to legal proceedings
relating to payments that the Imation Subsidiaries made pursuant to European Union copyright levies (the “Subsidiary Litigation”).
As consideration for the sale, IMN Capital paid the Company $280,000 and agreed to pay the Company 25% of all net proceeds
from the Subsidiary Litigation. The Company recorded a one-time non-cash gain of approximately $10 million in connection with
the sale. See Item 3 for current status of extant litigation.
On
May 13, 2019, GlassBridge and the U.S. Pension Benefit Guaranty Corporation (the “PBGC”) entered into an agreement
to terminate the Imation Cash Balance Pension Plan based on the PBGC’s findings that (i) the Plan did not meet the minimum
funding standard required under Section 412 of the Internal Revenue Code of 1986, as amended; (ii) the Plan would be unable to
pay benefits when due; and (iii) the Plan should be terminated to protect the interests of the Plan participants. GlassBridge
and all other members of Seller’s controlled group were liable to the PBGC for all obligations under ERISA in connection
with the Plan’s termination. On October 1, 2019, the Company entered into a settlement agreement with the PBGC, pursuant
to which GlassBridge paid $3,000,000 to PBGC in settlement of these obligations.
On
August 20, 2019, the Company effected a 1:200 reverse common stock split.
On
October 1, 2019, the Company sold to Orix PTP Holdings, LLC (“Orix”), for $17,562,700, 20.1% of the outstanding stock
of Adara, until then a Company wholly owned subsidiary, together with two promissory notes of Adara to the Company in total principal
amount of $13,000,000. Adara issued the notes in consideration for the assignment by the Company to Adara of the right to receive
certain payments from IMN Capital and transfer by the Company to Adara of some of the Company’s SportBLX shares.
In connection with the transaction, Adara’s Board of Directors was expanded to five directors, including one director designated
by Orix. In addition, GlassBridge, Orix, and Adara entered into a Stockholders’ Agreement pursuant to which Orix may, among
other things, during the three months beginning April 1, 2021, sell back its Adara stock to GlassBridge, at book value, and, during
the term of the Stockholders Agreement, has the right to purchase all or a portion of GlassBridge’s Adara shares, at book
value plus 20%, subject to GlassBridge’s right to respond to the notice by purchasing all of Orix’s Adara shares at
that price.
On
December 12, 2019, the Company purchased from Joseph A. De Perio (“Mr. De Perio”) 17,076 shares of SportBLX
common stock in exchange for $606,198 in cash and a $5,455,782 principal amount promissory note bearing interest at a 5% annual
rate, due December 12, 2022. On the same date, the Company purchased from George E. Hall (“Mr. Hall”), 37,924 shares
of SportBLX common stock in exchange for $1,346,302 in cash and a $12,116,718 principal amount promissory note bearing 5% interest,
due December 12, 2022. Interest under the notes is payable in arrears on the first day of each calendar quarter in cash, or, at
the Company’s option, in shares of common stock of the Company at a price reflecting market value.
Mr.
De Perio owns 2.47% of the Company’s common stock, is a member of the Board of Directors of the Company, and is SportBLX’s
president. Mr. Hall beneficially owns approximately 29.1% of our outstanding shares.
On
December 18, 2019, we terminated our Services Agreement and Management Services Agreement, effective March 31, 2020, with
Clinton, as the Company began to provide for itself the services Clinton provided under the agreements.
At
December 31, 2019, we employed 17 people.
Executive
Officers
As
of April 3, 2020, the company has three executive officers.
Joseph
De Perio, age 41, is the Chairman of the Board of Directors. Mr. De Perio joined our Board on May 20, 2015. On March
22, 2017, the Board appointed Joseph De Perio to serve as its Chairman and as the Company’s principal executive officer,
effective on the same day. Previously, Mr. De Perio served as the Board’s Non-Executive Chairman. Mr. De Perio served as
a Senior Portfolio Manager of Clinton Relational Opportunity Master Fund, L.P. from October 2010
to December 2018; he also served in a similar capacity from 2006 until December 2007. From December 2007 until October
2010, Mr. De Perio was a Vice President at Millennium Management, L.L.C., a global investment management firm. Mr. De Perio was
a Private Equity Associate at Trimaran Capital Partners, a private investment firm, from 2004 until 2006 and an analyst and associate
in the mergers and acquisitions department at CIBC Oppenheimer, a national investment boutique, from 2000 until 2004. Mr. De Perio
served on the board of directors of Viking Systems, Inc., a leading worldwide developer, manufacturer and marketer of 3D and 2D
visualization solutions for complex minimally invasive surgery, from June 2011 until its sale to Conmed Corporation in October
2012, and Overland Storage, Inc. (f/k/a Overland Data, Inc.), a provider of data protection appliances, from April 2011 until
its sale to Sphere 3D Corporation in December 2014. Mr. De Perio also served on the board of directors of EveryWare Global, Inc.,
a provider of tabletop and food preparation products for the consumer and foodservice markets, from May 2013 until April 2015
when the company filed for protection under Chapter 11 of the United States Bankruptcy Code pursuant to a pre-packaged plan of
reorganization. Mr. De Perio received a B.A. in business economics and organizational behavior management with honors from Brown
University.
Daniel
A. Strauss, age 35, is our Chief Executive Officer. Mr. Strauss served as our Chief Operating Officer from March 2017
through December 2019. Mr. Strauss was a Portfolio Manager at Clinton from 2010 until 2019. Mr. Strauss
is currently the Chief Executive Office of Adara and is a member of the board of directors of Adara and SportBLX. Mr. Strauss
has over ten years of experience in corporate finance as a portfolio manager and investment analyst in private and public equity
through which he has developed a deep understanding of corporate finance and strategic planning activities. At Clinton, Mr. Strauss
was responsible for evaluating and executing private equity transactions across a range of industries. Post-investment,
Mr. Strauss was responsible for the ongoing management and oversight of Clinton’s portfolio investments. From 2008
to 2010, he worked for Angelo, Gordon & Co. as a member of the firm’s private equity and special situations area. Mr.
Strauss was previously with Houlihan Lokey, where he focused on mergers and acquisitions from 2006 to 2008. Mr. Strauss has served
on the boards of directors of Pacific Mercantile Bancorp (NASDAQ: PMBC) from August 2011 until December 2015 and Community Financial
Shares, Inc. (OTC: CFIS) from December 2012 until its sale to Wintrust Financial Corporation in July 2015. Mr. Strauss received
a Bachelor of Science in Finance and International Business from the Stern School of Business at New York University.
Francis Ruchalski,
CPA, age 56, is our Chief Financial Officer. Mr. Ruchalski is also currently the Chief Financial Officer of Clinton and a member
of its board of directors. He has been employed by Clinton since 1997. In addition, Mr. Ruchalski is the Chief Financial Officer
of SportBLX, a member of its board of directors and a member of the board of directors for Adara. Prior to joining Clinton, Mr.
Ruchalski was an audit manager with Anchin, Block & Anchin, LLP, a certified public accounting firm, from 1986 to 1997. Mr.
Ruchalski’s responsibilities while with Anchin, Block & Anchin LLP included client auditing and financial and taxation
planning. Mr. Ruchalski holds a bachelor of science in accounting from St. John’s University.
Availability
of SEC Reports
Our
SEC filings are available to the public from the SEC’s internet site at www.sec.gov. Our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended, and our proxy statements are available on the SEC’s internet
site. These reports are available through the SEC’s internet site as soon as they are published by the SEC, after we electronically
file the material with, or furnish it to, the SEC. You may read and copy any document we file at the SEC’s public reference
room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. The foregoing reports are available free of charge on our internet site, www.glassbridge.com,
and we make electronic or paper copies available on request.
A
copy of the GlassBridge code of ethics and charters for the committees of our Board may be obtained, free of charge, by sending
a written request to Corporate Secretary, GlassBridge Enterprises, Inc., 411 East 57th Street, Suite 1-A, New York,
New York 10022. Our code of ethics is part of our broader Business Conduct Policy, which may be obtained by written request to
the Corporate Secretary, as above. If we make any amendments to our code of ethics other than technical, administrative or other
non-substantive amendments, or grant any waiver, including any implicit waiver, from a provision of the code of ethics applicable
to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing
similar functions requiring disclosure under applicable SEC rules, we intend to disclose the nature of such amendment or waiver
via current report of Form 8-K and/or a separate release, as necessary. Our website address is www.glassbridge.com. No
information furnished via any website is incorporated by reference into this Annual Report on Form 10-K.
Our
business is subject to numerous risks, uncertainties and other factors that could have a material and adverse impact on our business,
prospects, financial condition, results of operations or cash flow. These risks, uncertainties and other factors, including the
ones discussed below, elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC, could materially and
adversely affect our business, prospects, financial condition, results of operations or cash flow. Investors should carefully
consider such risks, together with all the other information included in this Annual Report on Form 10-K, in evaluating us and
our common stock.
Risks
Related to our Company and Common Stock
Pending
and future litigation may lead us to incur significant costs.
We
are subject to various threatened legal actions in the ordinary course of our business. With respect to our Legacy
Business and Nexsan Business, claims have and may continue to arise from time to time alleging that we infringe on the intellectual
property rights of others. See Item 3 for descriptions of current litigations. Additionally, we are subject to allegations
of patent infringement by our competitors as well as by non-practicing entities, sometimes referred to as “patent trolls,”
who may seek monetary settlements from us.
Litigation
is always subject to many uncertainties and outcomes that are not predictable. Even when not merited, the defense of these lawsuits
may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. In addition, we
may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, which could
have a material adverse effect on our business, financial condition, results of operations or liquidity. We use legal and appropriate
means to contest litigation threatened or filed against us, but we have found there is a strong tendency toward litigation in
the patent area in our industry and this litigation environment poses a business risk. The outcome of litigation is often difficult
to predict, and the outcome of pending or future litigation may have a material adverse effect on our business, financial condition,
results of operations or liquidity.
Our
participation in any joint investment could be adversely affected by our lack of sole decision-making authority, our reliance
on a partner’s financial condition and disputes between us and our partners.
We
may hold partial ownership interests in businesses or otherwise acquire businesses jointly or establish joint ventures with third
parties, including equity positions that are not readily liquid. In such circumstances, we may not be in a position to exercise
significant decision-making authority regarding a target business, partnership or other entity if we do not own a substantial
majority of the equity interests of the target. These investments may involve risks not present were a third party not involved,
including the possibility that partners might become insolvent or fail to fund their shares of required capital contributions.
In addition, partners may have economic or other business interests or goals that are inconsistent with our business interests
or goals and may be in a position to take actions contrary to our policies or objectives. Such partners, some of which may possess
more industry or technical knowledge or have better access to capital and other resources, may also seek similar acquisition targets
as us and we may be in competition with them for such business combination targets. Disputes between us and partners may result
in litigation or arbitration that would increase our costs and expenses and divert a substantial amount of our management’s
time and effort away from our business. Consequently, actions by, or disputes with, partners might result in subjecting assets
owned by the partnership to additional risk. We may also, in certain circumstances, be liable for the actions of our third-party
partners. For example, in the future, we may agree to guarantee indebtedness incurred by a partnership or other entity. Such a
guarantee may be on a joint and several basis with our partner, in which case, we may be liable in the event such partner defaults
on its guarantee obligation.
Future
acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial
condition.
As
part of our strategic plan to use excess capital, including through acquisitions, we may acquire interests in a number of different
businesses, some of which may be outside of industries that have comprised our historical focus. We have in the past, and may
in the future, acquire businesses or make acquisitions, directly or indirectly through our subsidiaries, that involve unknown
risks, some of which will be particular to the industry in which the business or acquisition targets operate, including risks
in industries with which we are not familiar or experienced. Although we intend to conduct extensive business, financial and legal
due diligence in connection with the evaluation of future business or acquisition opportunities, there can be no assurance our
due diligence investigations will identify every matter that could have a material adverse effect on us. We may be unable to adequately
address the financial, legal and operational risks raised by such businesses or acquisitions, especially if we are unfamiliar
with the relevant industry. The realization of any unknown risks could expose us to unanticipated costs and liabilities and prevent
or limit us from realizing the projected benefits of the businesses or acquisitions, which could adversely affect our financial
condition and liquidity. In addition, our financial condition and results of operations may be adversely impacted depending on
the specific risks applicable to any business or company we acquire and our ability to address those risks.
We
could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that
are not ultimately consummated, which could materially adversely affect our financial condition and subsequent attempts to locate
and acquire or invest in another business.
We
anticipate that the investigation of each specific acquisition or business opportunity and the negotiation, drafting, and execution
of relevant agreements, disclosure documents, and other instruments with respect to such transaction will require substantial
management time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision
is made not to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs
incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached
relating to a specific acquisition, investment target or financing, we may fail to consummate the investment or acquisition for
any number of reasons, including those beyond our control. Any such event could consume significant management time and result
in a loss to us of the related costs incurred, which could adversely affect our financial position and our ability to consummate
other acquisitions and investments.
Additional
businesses or technologies we acquire could prove difficult to integrate, disrupt our ongoing business, dilute stockholder value
or have an adverse effect on our results of operations.
We
may engage in further acquisitions of businesses or technologies to augment our growth. Acquisitions involve challenges and risks
in negotiation, execution, valuation and integration. Even if successfully negotiated, closed and integrated, certain acquisitions
may not advance our business strategy, may fall short of expected return-on-investment targets or may fail. Any past or future
acquisition could also involve additional risks, including:
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potential
disruption of our ongoing business and distraction of management;
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difficulty
integrating the operations and products of the acquired business;
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use
of cash to fund the acquisition or for unanticipated expenses;
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limited
market experience in new businesses;
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exposure
to unknown liabilities, including litigation against the companies that we acquire;
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additional
costs due to differences in culture, geographical locations and duplication of key talent;
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delays
associated with or resources being devoted to regulatory review and approval and other ongoing compliance matters;
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acquisition-related
accounting charges affecting our balance sheet and operations;
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difficulty
integrating the financial results of the acquired business in our consolidated financial statements;
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controls
in the acquired business;
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potential
impairment of goodwill;
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dilution
to our current stockholders from the potential issuance of equity securities to consummate a proposed acquisition; and
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potential
loss of key employees or customers of the acquired company.
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In
the event that we enter into any acquisition agreements, closing of the transactions could be delayed or prevented by regulatory
approval requirements, including antitrust review or other conditions. We may not be successful in addressing these risks or any
other problems encountered in connection with any attempted acquisitions, and we could assume the economic risks of such failed
or unsuccessful acquisitions. We may not realize the expected benefits of any acquisitions as rapidly as, or to the extent anticipated
by, the marketplace, investors, financial analysts or industry analysts. Any such failure may have a material adverse impact on
our financial condition, results of operations and stock price.
The
market price of our common stock is volatile, and you may lose part or all your investment.
The
market price of our common stock has been, and may continue to be, volatile. Any of the factors discussed herein or such as the
following may affect the market price of our common stock:
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actual
or anticipated fluctuations in our operating results;
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actions
by our competitors;
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developments
with respect to patents or proprietary rights;
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litigation;
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changes
in key personnel;
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market
conditions and trends in the businesses and industries in which we operate;
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contraction
in our operating results or growth rates;
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the
potential impact of activist investors;
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changes
in financial estimates by securities analysts relating specifically to us or the industries in which we participate in general;
and
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any
future guidance we may provide to the public, any changes in such guidance or any difference between our guidance and actual
results.
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In
addition, general economic conditions may cause the stock market to experience extreme price and volume fluctuations from time
to time. In the past, stockholders have instituted securities class action litigation against various companies following periods
of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and attention
of management could be diverted from our business.
We
may incur asset impairment charges for intangible assets and goodwill in the future.
We
evaluate assets on our balance sheet, including such intangible assets and goodwill, annually in connection with our fiscal year
end reporting or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We monitor
factors or indicators, such as unfavorable variances from forecasted cash flows, established business plans or volatility inherent
to external markets and industries that would require an impairment test. The test for impairment of intangible assets requires
a comparison of the carrying value of the asset or asset group with their estimated undiscounted future cash flows. If the carrying
value of the asset or asset group is considered impaired, an impairment charge is recorded for the amount by which the carrying
value of the asset or asset group exceeds its fair value. The test for impairment of goodwill requires a comparison of the carrying
value of the reporting unit for which goodwill is assigned with the fair value of the reporting unit calculated based on discounted
future cash flows. If the carrying value of the reporting unit is greater than the fair value a second step is performed to calculate
any impairment. During the fourth quarter of 2018, the Company incurred impairment charges of $6.2 million related to intangible
assets that were acquired when we closed a transaction with Clinton on February 2, 2017. As of December 31, 2019,
the Company had goodwill of approximately $50.6 million as a result of the acquisition of a controlling interest in SportBLX,
Inc.
Risks
Related to our Asset Management Business
AAM
has limited performance history, and any fund we may sponsor will be in its formation stage, without an operating history upon
which prospective investors can evaluate the fund’s performance.
AAM
and any fund we may sponsor have no operating history upon which prospective investors can evaluate the fund’s performance.
Poor performance of any funds we may sponsor is likely to have a material adverse effect on our business, results of operations
and financial condition.
Our
Asset Management Business depends in large part on our ability to raise capital from third party investors. If we are unable to
raise capital from third party investors, we will be unable to collect management fees or deploy their capital into investments
and potentially collect performance fees, which would materially affect our ability to generate revenue and cash flow from our
asset management business.
Our
ability to raise capital from third party investors depends on a number of factors, including certain factors that are outside
our control. Certain factors, such as the performance of the stock market and the asset allocation rules or investment policies
to which such third-party investors are subject, could inhibit or restrict the ability of third party investors to make investments
in our funds or the asset classes in which our funds invest. There are no assurances that we can find or secure commitments from
investors. If economic conditions were to deteriorate or if we are unable to find enough investors, we might raise less than our
desired amount for a given fund. If we are unable to successfully raise enough capital, it could materially affect our ability
to generate revenue and cash flow from our Asset Management Business, which could adversely affect our financial prospects and
condition.
In
addition, we intend to negotiate terms for our funds and investments with potential investors. The outcome of such negotiations
could result in our agreement to terms that are materially less favorable to us than funds managed by our competitors. Such terms
could restrict our ability to raise funds with objectives or strategies that compete with existing funds, add additional expenses
and obligations for us in managing the fund or increase our potential liabilities, all of which could ultimately reduce our revenues.
Our
Asset Management Business is subject to extensive regulation, which increases our costs of doing business, and our failure to
comply with regulatory requirements may harm our financial condition.
Our
Asset Management Business is subject to extensive regulation in the United States, particularly by the SEC and the Commodity
Futures Trading Commission. We are or may become subject to regulation under the Securities Act of 1933, the Securities Exchange
Act of 1934, the Investment Advisers Act of 1940, the Commodity Exchange Act, and various other statutes, regulations and
rules. As a result of launching our Asset Management Business, we face increased costs in complying with newly applicable regulations,
and we could continue to experience higher costs if new rules and regulatory actions or legislation require us to spend more time,
hire additional personnel or buy new technology to comply with these rules and laws. The changes in laws or regulations could
also have a material adverse effect on us by limiting the sources of our revenues and increasing our costs. Our business may be
materially affected not only by securities regulations, but also by regulations of general application. For example, existing
and proposed tax legislation and other governmental regulations and policies, including the interest rate policies of the Federal
Reserve Board or cybersecurity regulation, could increase our compliance and other costs.
Although
we will strive to conduct our business in accordance with applicable laws or regulations, if we were found to have violated an
applicable law or regulation, we could be subject to fines, suspensions of personnel or other sanctions, including revocation
of our registration as an investment advisor. If a sanction were imposed against us or our personnel, even if only for a small
monetary amount, the adverse publicity related to such a sanction could harm our reputation, result in redemptions by investors
in the funds we may launch and impede our ability to attract new investors, all of which could result in a material adverse effect
to our business, results of operations and financial condition.
The
asset management business is intensely competitive.
The
asset management business is intensely competitive, with competition based on a variety of factors, including investment performance,
the quality of service provided to clients, investor liquidity and willingness to invest, fund terms, fees, brand recognition
and business reputation. Our Asset Management Business competes with many domestic and global competitors that may provide investment
products with similar features and objectives to those we offer. These institutions range from small boutique firms to large financial
institutions. We expect that competition will continue to increase. A number of factors serve to increase our competitive risks:
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a
number of our competitors have greater financial, technical, marketing and other resources and more personnel than we do;
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some
of our funds may not perform as well as competitors’ funds or other available investment products;
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several
of our competitors have significant amounts of capital, and many of them have similar investment objectives to ours, which
may create additional competition for investment opportunities;
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some
of our competitors may have a lower cost of capital;
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some
of our competitors may have access to funding sources that are not available to us, which may create competitive disadvantages
for us with respect to investment opportunities;
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some
of our competitors may be subject to less regulation and accordingly may have more flexibility to undertake and execute certain
businesses or investments than we can and/or bear less compliance expense than we do;
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some
of our competitors may have more flexibility than us in raising certain types of investment funds;
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some
of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow
them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make;
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some
of our competitors may be more successful than us in the development and implementation of new technology to address investor
demand for product and strategy innovation;
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there
are relatively few barriers to entry impeding new alternative asset fund management firms, and the successful efforts of new
entrants into our various businesses is expected to continue to result in increased competition;
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some
of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class
or geographic region than we do;
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some
investors may prefer to invest with an investment manager that is not publicly traded or is of a different size; and
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other
industry participants will from time to time seek to recruit our investment professionals and other employees away from us.
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This
competitive pressure could adversely affect our ability to make successful investments and may limit our ability to raise future
investment funds, any of which would adversely impact our business, revenue, results of operations and cash flow.
Privacy
and data security concerns, laws, or other regulations could expose us to liability or impair our operations.
Our
Asset Management Business requires collection of sensitive personal information. Privacy and data security are rapidly evolving
areas of concern and regulation. Changes in laws restricting or otherwise governing data and transfer thereof could be difficult
to comply with, result in increased costs, or impair our operations. Security measures that we implement may fail due to third-party
attack, employee error or sabotage, or other causes. Hacking techniques change frequently and therefore can be difficult to prevent.
In addition, service providers could suffer security breaches or data losses that affect investors’ information. A security
breach could damage our reputation, resulting in loss of investors, subject the Company to liability, or otherwise materially
adversely affect the Company’s business and financial performance.
Poor
performance of any investment funds we sponsor or accounts we manage would adversely affect our ability to generate revenue, income
and cash flow, and could adversely affect our ability to raise capital for future investment funds and accounts.
In
the event that any of our investment funds or accounts we manage were to perform poorly, our ability to generate revenue, income
and cash flow, and our ability to raise capital for future investment funds and accounts, would be adversely affected. Moreover,
we could experience losses on our investments of our own principal as a result of poor investment performance by our investment
funds. Poor performance of our investment funds could make it more difficult for us to raise new capital. Potential investors
in our funds will assess our investment funds’ performance and our ability to raise capital and avoid excessive redemption
levels will depend on our investment funds’ satisfactory performance. Accordingly, poor fund performance may deter future
investment in our funds and thereby decrease the capital invested in our funds and ultimately, our management fee revenue. Alternatively,
in the face of poor fund performance, investors could demand lower fees or fee concessions which would likewise decrease our revenue.
Difficult
market and economic conditions, including, without limitation, changes in interest rates and volatile equity and credit markets,
can adversely affect our Asset Management Business in many ways, including by reducing the value or performance of the investments
made by any investment funds we may sponsor or accounts we manage, including, without limitation, any fund managed by Clinton,
and reducing our ability to raise or deploy capital, each of which could adversely affect our revenue, earnings and cash flow
and adversely affect our financial prospects and condition.
Our
Asset Management Business is materially affected by conditions in the global financial markets and economic conditions or events
throughout the world that are outside our control, including but not limited to changes in interest rates, availability of credit,
inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices,
currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or
security operations). These factors may affect the level and volatility of securities prices and the liquidity and the value of
investments, and we may not be able to or may choose not to manage our exposure to these market conditions and/or other events.
In the event of a market downturn, each of our businesses could be affected in different ways. We are unable to predict whether
and to what extent uncertainty surrounding economic and market conditions will be reduced, and even in the absence of uncertainty,
adverse conditions and/or other events in particular sectors may cause our performance to suffer further.
Challenging
market and economic conditions may make it more difficult and competitive to find suitable investments for any investment funds
we may sponsor or accounts we manage, or to effectively raise or deploy capital. This could adversely affect our performance and
ability to raise new funds. During periods of difficult market conditions or slowdowns (which may be across one or more industries,
sectors or geographies), the value or performance of the investments made by any investment funds we may sponsor or accounts we
manage may be reduced, which could adversely affect our revenue, earnings and cash flow and adversely affect our financial prospects
and condition.
Difficult
economic conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance
of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially
reduce our revenue, net income and cash flow and adversely affect our financial prospects and condition.
A
financial downturn could adversely affect our operating results in a number of ways, and if the economy was to enter a recessionary
or inflationary period, it may cause our revenue and results of operations to decline by causing:
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our
AUM to decrease, lowering management fees and other income from our funds;
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adverse
conditions for the portfolio companies of our funds (e.g., decreased revenues, liquidity pressures increased difficulty in
obtaining access to financing and complying with the terms of existing financings, as well as increased financing costs);
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lower
investment returns, reducing performance fees; and
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material
reductions in the value of our fund investments, affecting our ability to realize performance fees from these investments.
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Lower
investment returns and such material reductions in value may result because, among other reasons, during periods of difficult
market conditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which our funds
invest may experience decreased revenues, financial losses, difficulty in obtaining access to financing and increased funding
costs. During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable
to meet their debt service obligations or other expenses as they become due, including expenses payable to us. In addition, during
periods of adverse economic conditions, our funds and their portfolio companies may have difficulty accessing financial markets,
which could make it more difficult or impossible to obtain funding for additional investments and harm our AUM and operating results.
Any
revenue, earnings, net income and cash flow attributable to our Asset Management Business is likely to be highly variable, which
may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of shares of our common
stock to decline and be volatile.
Any
revenue, earnings, net income and cash flow attributable to our asset management business is likely to be highly variable.
We may also experience fluctuations in our results, including our revenue and net income, from quarter to quarter due to a number
of factors, including changes in the valuations of our funds’ investments, changes in the amount of distributions, dividends
or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and
general economic and market conditions. The valuations of investments made by our funds could also be subject to high volatility
as a result of uncertainty regarding governmental policy with respect to, among other things, tax reform, financial services regulation,
international trade, immigration, healthcare, labor, infrastructure and energy. Achieving steady earnings growth on a quarterly
basis may be difficult, which could in turn cause the price of shares of our common stock to decline and be volatile.
The
potential future growth of our asset management business may place significant demands on our resources and employees,
and may increase our expenses, risks and regulatory oversight.
The
potential future growth of our asset management business may place significant demands on our infrastructure and our investment
team and other employees, which may increase our expenses. The potential inability of our systems to accommodate an increasing
volume of transactions could constrain our ability to expand our asset management businesses. We may face significant challenges
in maintaining and developing adequate financial and operational controls, implementing new or updated information and financial
systems, managing and appropriately sizing our work force, and updating other components of our business on a timely and cost-effective
basis. There can be no assurance that we will be able to manage the growth of our Asset Management Business effectively, or that
we will be able to continue to grow, and any failure to do so could adversely affect our ability to generate revenue and control
our expenses.
If
we are unable to establish a favorable reputation our ability to grow our asset management business could be limited, and
any damage to our reputation could harm our asset management business.
Our
success depends, in part, on establishing and maintaining a strong reputation in the investment community, Our reputation is vulnerable
to many threats that can be difficult or impossible to control, and costly or impossible to remediate even if they are without
merit or satisfactorily addressed. Our reputation may be impacted by many factors, including but not limited to, litigation, regulatory
inquiries or investigations, conflicts of interest, employee misconduct or rumors. Any damage to our reputation could result in
redemptions by investors in any funds we may sponsor or accounts we may manage and impede our ability to attract new investors
or negatively impact our relationships with third party intermediaries, all of which could result in a material adverse effect
to our business, results of operations and financial condition.
Our
asset management business is subject to extensive regulation, which increases our costs of doing business, and our failure to
comply with regulatory requirements may harm our financial condition.
Our
asset management business is subject to extensive regulation in the United States, particularly by the SEC. We are or may become
subject to regulation under the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940,
the Investment Advisers Act of 1940 and various other statutes, regulations and rules. As a result of launching our asset management
business, we face increased costs in complying with newly applicable regulations, and we could continue to experience higher costs
if new rules and regulatory actions or legislation require us to spend more time, hire additional personnel or buy new technology
to comply with these rules and laws. The changes in laws or regulations could also have a material adverse effect on us by limiting
the sources of our revenues and increasing our costs. Our business may be materially affected not only by securities regulations,
but also by regulations of general application. For example, existing and proposed tax legislation and other governmental regulations
and policies, including the interest rate policies of the Federal Reserve Board or cybersecurity regulation, could increase our
compliance and other costs.
Although
we will strive to conduct our business in accordance with applicable laws or regulations, if we were found to have violated an
applicable law or regulation, we could be subject to fines, suspensions of personnel or other sanctions, including revocation
of our registration as an investment advisor. If a sanction were imposed against us or our personnel, even if only for a small
monetary amount, the adverse publicity related to such a sanction could harm our reputation, result in redemptions by investors
in the funds we may launch and impede our ability to attract new investors, all of which could result in a material adverse effect
to our business, results of operations and financial condition.
Risks
Related to our Sports Investment Platform
Our
sports investment platform operates in a new area of finance.
Our
sports investment platform operates in a new area of finance. Whereas syndicated investing in sports teams is common, securitizing
earnings of sports players is not yet an established practice. The Company will have to structure transactions that are attractive
to investors, with little experience of its own or elsewhere as guidance. In addition, SportBLX will be required to effectively
market the securities to investors to be successful and may be required to rely on third-party registered broker-dealers in this
effort. To date, SportBLX has completed only one securitization and there can be no assurance of further transactions. Potential
investors may be unwilling to invest in a relatively untried form of transaction or demand higher returns to offset greater risk.
Our
sports investment platform is a relatively new business.
We
acquired a controlling interest in SportBLX only at the end of 2019, and SportBLX has been in business only since late 2018. Since
its formation, SportBLX has completed only one financing transaction as of the filing of this annual report. Accordingly, potential
investors in SportBLX-sponsored transactions have little basis on which to evaluate the quality of SportBLX offerings, and investors
in the Company will have little basis on which to gauge SportBLX’s contributions to the Company’s results of operations.
SportBLX
may not be able to identify investment opportunities that are sufficiently attractive that potential investors would want to invest
in them.
Our
sports investment platform will fail as a business, unless we develop a reputation for offering successful investments to investors.
Our ability to do so will depend greatly upon our ability in selecting attractive assets for investors. We cannot assure you that
we will be fully successful in these endeavors.
Our
business is sports-centric, and our success is tied to sports generally and, in particular, to changes in popularity of the sports
on which we choose to focus.
We
are largely dependent on the continued popularity of sports, generally, and, in particular, the popularity of the sports upon
which we have chosen to focus including basketball, baseball and football. Changes in popularity of these sports globally or in
particular, the United States, could be influenced by competition from other sports or alternative forms of entertainment. A change
in sports fans’ tastes, a change in perceptions relating to particular sports (for example, if a particular aspect of such
sports become unpopular due to safety or other considerations), or a popularity shift towards sports events that are currently
under-represented or not present in our portfolio, could result in reduced investment in our offerings and reduced revenue to
the Company.
Sports
related risks may negatively affect our business.
SportBLX
endeavors to structure its securities in athlete-based earnings streams such that investors have downside protection in their
investment. However, we cannot assure that we will be fully successful in the structuring endeavors. Securities based on sports
have inherent risks such as injury and poor performance, among others.
The
offer and sale of securities is highly regulated, and consequences of noncompliance can be severe.
The
offer, issuance, and sale, of securities are highly regulated by federal and state laws. To avoid registration and qualification
of securities that we offer, we rely on exemptions from these laws that, among other things, require us to have a reasonable basis
to believe that each person seeking to invest in securities that we offer is legally permitted to invest.
We
may be required to make our offerings through a registered broker dealer licensed to sell securities in the states in which investors
reside. We have engaged North Capital Private Securities Corporation (“NCPSC”), which is licensed to sell unregistered
securities in 53 U.S. states and territories to act in this capacity as well as to vet investors on our behalf. SportBLX may be
unable to operate its platform if NCPSC discontinues the engagement, or if we discontinue the engagement due to dissatisfaction
with NCPSC’s performance, and we are unable to find a suitable replacement. We cannot continue the engagement if we do not
reasonably believe that NCPSC’s determination of investors’ qualification is reliable.
Failure
by SportBLX to comply with securities laws could make the Company liable for severe penalties and rescission of securities sales,
as well as injunctions against SportBLX to cease operations. In addition, if SportBLX’s operations were considered broker-dealer
activity, SportBLX would have to cease operations until licensed as a broker-dealer, a substantial undertaking, and the Company
would realize material adverse effects on results of operations and financial condition.
Privacy
and data security concerns, laws, or other regulations could expose us to liability or impair our operations.
SportBLX’s
operations require it to collect sensitive personal information. Privacy and data security are rapidly evolving areas of concern
and regulation. Changes in laws restricting or otherwise governing data and transfer thereof could be difficult to comply with,
result in increased costs, or impair our operations. Security measures that we implement may fail due to third-party attack, employee
error or sabotage, or other causes. Hacking techniques change frequently and therefore can be difficult to prevent. In addition,
service providers could suffer security breaches or data losses that affect investors’ information. A security breach could
damage our reputation, resulting in loss of investors, subject the Company to liability, or otherwise materially, adversely affect
the Company’s business and financial performance.
If
we do not adapt to technological changes, the SportBLX platform may become less attractive to sports investors, which could have
a material and adverse impact on the SportBLX business.
The
internet industry is characterized by constant changes, including rapid technological evolution, continual shifts in customer
demands, frequent introductions of new products, and services and constant emergence of new industry standards and practices.
Thus, our success will depend, in part, on our ability to respond to these changes timely and cost-effectively; failure to do
so may cause use of the SportBLX platform to decline and our business to be materially and adversely affected.
Any
failure or interruptions in the internet infrastructure, bandwidth providers, data center providers, other third parties or our
own systems could adversely affect the SportBLX platform.
Our
platform depends on maintenance of the internet and other telecommunications services by third parties, including the Foundation.
Such services include maintenance of a reliable network backbone with the necessary speed, data capacity and security for providing
reliable internet access and services and reliable telecommunications systems that connect our operations. While the SportBLX
platform is designed to operate without interruption, we may experience interruptions and delays in services and availability
from time to time. We rely on systems as well as third-party vendors, including data center, bandwidth, and telecommunications
equipment providers, to provide our solutions. We do not maintain redundant systems or facilities for some of these services.
In the event of a catastrophic event with respect to one or more of these systems or facilities, we may experience an extended
period of system unavailability, which could negatively impact our relationship with SportBLX platform users.
We
face risks relating to third parties’ billing and payment systems or from other service provider failures.
The
billing and payment systems of third parties, such as online third-party payment processors, help us to maintain accurate records
of payments of sales proceeds by paying users and collecting such payments. Our business and results of operations could be adversely
affected if these third parties fail to accurately account for or calculate the revenues generated from of our services. Moreover,
if there are security breaches or failure or errors in the payment process of these third parties, user experience may be affected
and our business results may be negatively impacted.
We
also do not have control over the security measures of our third-party payment service providers, and security breaches of the
online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential customer
information and could, among other things, damage our reputation and the perceived security of all of the online payment systems
we use. In addition, there may be billing software errors that would damage customer confidence in these payment systems. If any
of the above were to occur, we may lose users, which may have an adverse effect on our business.
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Item
1B.
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Unresolved
Staff Comments.
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None.
Our
worldwide headquarters is in New York City. Our headquarters facility is in good operating condition suitable for the respective
use and is adequate for our current needs.
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Facility;
how held
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Function
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Segment(s)
Using
Space
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New
York, New York; leased
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Corporate
Headquarters, Administrative
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Corporate,
Asset Management
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Item
3. Legal Proceedings.
Not applicable.
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Item
4.
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Mine
Safety Disclosures.
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Not
Applicable.
PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
|
As
of February 28, 2020, there were 25,170 shares of our common stock, $0.01 par value, outstanding and held by 45 shareholders
of record. Our common stock is traded on the OTCQB under the symbol “GLAE”. Over-the counter
quotations reported by the OTCQB reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
No
dividends were declared or paid during 2020 or 2019. Any future dividend payments will depend on our earnings, capital
requirements, financial condition and other factors considered relevant by our Board. On August 22, 2019, we effected a 1:200
reverse split of our common stock, without any change in the par value per share and decreased the number of authorized shares
of our common stock from 10,000,000 to 50,000.
Unregistered
Sales of Equity Securities and Use of Proceeds
Not
applicable.
Issuer
Purchases of Equity Securities
Not
applicable.
|
|
Item
6.
|
Selected
Financial Data.
|
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
Company owns and operates an asset management
business and a sports investment platform through AAM and SportBLX (“Asset Management Business”), which are
respectively wholly owned and majority owned by Adara. GlassBridge Asset Management, LLC changed its name to Adara
Asset Management LLC (“AAM”) in 2020.
The
following discussion is intended to be read in conjunction with Item 1. Business and our Consolidated Financial Statements
and related Notes that appear elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements
that involve risks and uncertainties. GlassBridge’s actual results could differ materially from those anticipated due to
various factors discussed under “Cautionary Statements Regarding Forward-Looking Statements” and in Item 1A. Risk
Factors of this Annual Report on Form 10-K.
The
financial statements in this Annual Report on Form 10-K are presented on a consolidated basis and include the accounts of the
Company and our subsidiaries. See, Notes to Consolidated Financial Statements—Note 2 - Summary of Significant Accounting
Policies , for further information regarding consolidation. References to “GlassBridge,” the “Company,”
“we,” “us” and “our” are to GlassBridge Enterprises Inc., and its subsidiaries and consolidated
entities unless the context indicates otherwise. Our Consolidated Financial Statements are prepared in conformity with accounting
principles generally accepted in the United States of America (“GAAP”).
Introduction
GlassBridge
has, during recent periods, undergone significant changes. Until 2015, we primarily provided data storage and security solutions
through our two legacy business segments.
On
August 16, 2018, the Company sold its Nexsan business, acquired between 2012 and 2015, as set forth in Notes to Consolidated Financial
Statements-- Note 1 – Background and Basis of Presentation.
As
described in Notes to Consolidated Financial Statements—Notes 1–15, in a series of transactions during 2019,
the Company sold its international subsidiaries, acquired a controlling interest in SportBLX, and sold to Orix, for $17,562,700,
a 20.1% interest in Adara, which owns all of AAM and part of our SportBLX holdings, and two notes from Adara to the Company in
total principal amount of $13,000,000.
As
a result of these transactions, the Company now operates in two segments, an Asset Management Business, through
AAM, and a sports investment platform, through SportBLX—both owned by Adara.
Executive
Summary
Consolidated
Results of Continuing Operations for the Year Ended December 31, 2019
|
|
●
|
Revenue
of $0.1 million in 2019 was up $0.1 million compared with revenue of $0.0 million in 2018.
|
|
|
|
|
|
|
●
|
Selling,
general and administrative expense was $3.4 million in 2019, down $3.0 million compared with $6.4 million in
2018. The decrease from prior year is primarily due to corporate cost reductions.
|
|
|
|
|
|
|
●
|
Restructuring
and other expense was $0.1 million in 2019 compared to $(4.8) million in 2018.
|
|
|
|
|
|
|
●
|
Operating
loss from continuing operations was $3.4 million in 2019 compared to $8.3 million in 2018.
|
|
|
|
|
|
|
●
|
Other
income was $14.8 million in 2019, compared with $0.5 million expense in 2018.
|
|
|
|
|
|
|
●
|
The
income tax benefit was $0.0 million in 2019 as compared to $0.1 million in 2018.
|
|
|
|
|
|
|
●
|
Basic
and diluted income per share from continuing operations was $330.15 for 2019 compared with a loss per share
of $341.18 for 2018.
|
Consolidated
Cash Flow/Financial Condition for the Year Ended
December 31, 2019
|
|
●
|
Cash
and cash equivalents totaled $5.5 million as of December 31, 2019, compared with $4.9 million cash and cash equivalents
at December 31, 2018.
|
|
|
|
|
|
|
●
|
Cash
used in operating activities was $11.3 million in 2019 compared with cash used in operating activities of $10.5 million
in 2018. Cash used in operating activities in 2019 was primarily related to corporate expenditures, legal settlements and
related costs. Cash used in operating activities in 2018 was primarily related to operating loss and working capital changes.
|
|
|
|
|
|
|
●
|
Cash
used in investing activities was $3.3 million in 2019 compared with cash provided by investing activities of
$5.1 million in 2018. Cash used in investing activities in 2019 was primarily related to the purchase of SportBLX. Cash provided by investing activities in 2018 was primarily related to proceeds
from the sale of the Nexsan business.
|
|
|
|
|
|
|
●
|
Cash provided
by financing activities was $14.8 million in 2019 from proceeds of the sale of an equity interest in Adara
Enterprises Corp and proceeds from the Orix notes payable, compared with $0.0 million in 2018.
|
See
Analysis of Cash Flows section below for further information.
Results
of Operations
Net
Revenue
|
|
|
Years
Ended December 31,
|
|
|
Percent
Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
vs. 2018
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Net
revenue
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
|
NM
|
|
“NM”
- Indicates the Percent Change is not meaningful
Revenue
of $0.1 million in 2019 was up $0.1 million, compared with revenue of $0.0 million in 2018.
Selling,
General and Administrative (SG&A)
|
|
|
Years
Ended December 31,
|
|
|
Percent
Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
vs. 2018
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Selling,
general and administrative
|
|
$
|
3.4
|
|
|
$
|
6.4
|
|
|
|
(59.0
|
)%
|
|
As
a percent of revenue
|
|
|
3400.0
|
%
|
|
|
NM
|
|
|
|
|
|
SG&A
expense decreased in 2019 compared with 2018 by $3.0 million (or 59.0%) due to corporate cost reductions. The cost
reductions primarily relate to headcount reductions and legal costs.
Restructuring
and Other
The
components of our restructuring and other expense included in our Consolidated Statements of Operations were as follows:
|
|
|
Years
Ended December 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In
millions)
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
Severance
and related
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Total
restructuring
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
German
levy settlement
|
|
|
—
|
|
|
|
(5.0
|
)
|
|
Total
other
|
|
$
|
—
|
|
|
$
|
(5.0
|
)
|
|
Total
|
|
$
|
0.1
|
|
|
$
|
(4.8
|
)
|
Restructuring
Total
restructuring expense of $0.1 million, recorded for the year ended December 31, 2019, and $0.2 million, for
the year ended December 31, 2018, related to severance payments. See Note 8- Restructuring and Other Expense in
our Notes to Consolidated Financial Statements for information on Other expense.
Other
In
the fourth quarter of 2018, our former subsidiary Imation Europe B.V. (“IEBV”) and its German subsidiary finalized
a settlement agreement with the German collecting society that resulted in mutual releases and a one-time payment by IEBV of 150,000
Euros. As a result, the Company recorded a benefit in other of $5 million in continuing operations for the year ending December
31, 2018.
Operating
Loss From Continuing Operations
|
|
|
Years
Ended December 31,
|
|
|
Percent
Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
vs. 2018
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Operating
loss
|
|
$
|
(3.4
|
)
|
|
$
|
(8.3
|
)
|
|
|
(59.0
|
)%
|
|
As
a percent of revenue
|
|
|
(3,400.0
|
)%
|
|
|
NM
|
|
|
|
|
|
Operating
loss from continuing operations of $3.4 million decreased in 2019 by $4.9 million, compared with an operating
loss of $8.3 million in 2018.
Other
Income and (Expense)
|
|
|
Years
Ended December 31,
|
|
|
Percent
Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
vs. 2018
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Interest
expense
|
|
|
(0.3
|
)
|
|
|
(0.1
|
)
|
|
|
200.0
|
%
|
|
Net
income (loss) from AAM fund activities
|
|
|
—
|
|
|
|
(0.9
|
)
|
|
|
(100.0
|
)%
|
|
Other
income (expense), net
|
|
|
15.1
|
|
|
|
0.5
|
|
|
|
2,920.0
|
%
|
|
Total
other income (expense)
|
|
$
|
14.8
|
|
|
$
|
(0.5
|
)
|
|
|
(3,060.0
|
)%
|
|
As
a percent of revenue
|
|
|
NM
|
|
|
|
NM
|
|
|
|
|
|
NM
- Not meaningful
Total
other income was $14.8 million in 2019, compared to other expense of $0.5 million in 2018. Other income in 2019 primarily related
to a $12 million unrealized gain in the Arrive investment, net of a $1.2 million distribution, and a $3.0 million unrealized gain
in SportBLX. Other expense in 2018 primarily related to losses on AAM fund activities.
See
Asset Management Business discussion within the Segment Results section for additional information on net income from AAM fund
activities.
Income
Tax Benefit (Provision)
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Income
tax benefit (provision)
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Effective
tax rate
|
|
|
NM
|
|
|
|
NM
|
|
NM
- Not meaningful
The
income tax provision was $0.0 million in 2019, as compared to a $0.1 million benefit in 2018. The 2018 benefit was attributable
to a minimum tax credit refund. Because we maintain a valuation allowance related to our U.S. deferred tax assets the tax provision
generally represents discrete tax events that may occur from time to time. The effective tax rate for 2019 was not meaningful.
As
of December 31, 2019, and 2018, we had valuation allowances of $236.4 million and $230.6 million, respectively,
to account for deferred tax assets we have concluded are not considered to be more-likely-than-not to be realized in the future
due to our cumulative losses in recent years. The deferred tax assets subject to valuation allowance include certain operating
loss carryforwards, deferred tax deductions, capital loss carryforwards and tax credit carryforwards.
Income from discontinued operations
|
|
|
For
the Years Ended December 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In
millions)
|
|
Net
revenue
|
|
$
|
—
|
|
|
$
|
24.8
|
|
|
Cost
of goods sold
|
|
|
—
|
|
|
|
13.7
|
|
|
Gross
profit
|
|
|
—
|
|
|
|
11.1
|
|
|
Selling,
general and administrative
|
|
|
—
|
|
|
|
8.1
|
|
|
Research
and development
|
|
|
—
|
|
|
|
2.4
|
|
|
Restructuring
and other
|
|
|
—
|
|
|
|
(3.8
|
)
|
|
Other
income (expense)
|
|
|
1.3
|
|
|
|
(1.7
|
)
|
|
Income from discontinued operations, before income taxes
|
|
|
1.3
|
|
|
|
6.1
|
|
|
Gain
on sale of discontinued businesses, before income taxes
|
|
|
9.4
|
|
|
|
6.4
|
|
|
Income
tax benefit
|
|
|
1.0
|
|
|
|
0.3
|
|
|
Income
from discontinued businesses, net of income taxes
|
|
$
|
11.7
|
|
|
$
|
12.8
|
|
Discontinued
operations represent the results of operations from our legacy businesses and Nexsan business. For the year ended
December 31, 2019, income from discontinued operations primarily relates to the sale of the foreign subsidiaries. For the
year ended December 31, 2018, income from discontinued operations primarily relates to income on the sale of the Nexsan business
and lower operating expenses.
See
Note 5 - Discontinued Operations in our Notes to Consolidated Financial Statements for more information.
Segment
Results
With
the wind down of our legacy businesses substantially completed by the first quarter of 2016 and the sale of the Nexsan business
in the third quarter of 2018 and following the launch of AAM, the asset management business and the sports investment platform,
SportBlx, are our two reportable segments as of December 31, 2019. Results from the legacy businesses and Nexsan business
were reported within discontinued operations.
We
evaluate segment performance based on revenue and operating loss. The operating loss reported in our segments excludes corporate
and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported
consolidated results. Corporate and unallocated amounts include costs which are not allocated to the business segments in management’s
evaluation of segment performance such as litigation settlement expense, corporate expense and other expenses.
Information
related to our segments is as follows:
Asset
Management Business
|
|
|
Years Ended December 31,
|
|
|
Percent Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019 vs. 2018
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Net revenue
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
|
NM
|
|
|
Operating income (loss)
|
|
$
|
0.1
|
|
|
$
|
(4.5
|
)
|
|
|
(102.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percent of revenue
|
|
|
100
|
%
|
|
|
NM
|
|
|
|
|
|
NM
- Not meaningful
Revenue
from our asset management business primarily consists of management and performance fees paid by the funds under our management.
Sports
Investment Platform
|
|
|
Years Ended December 31,
|
|
|
Percent Change
|
|
|
|
2019
|
|
|
2018
|
|
|
2019 vs. 2018
|
|
|
|
(In millions)
|
|
|
|
|
Net revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
NM
|
|
Operating loss
|
|
$
|
(0.2
|
)
|
|
$
|
—
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a percent of revenue
|
|
|
NM
|
|
|
|
NM
|
|
|
|
NM
- Not meaningful
Corporate
and Unallocated
|
|
|
Years
Ended December 31,
|
|
|
Percent
Change
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
vs. 2018
|
|
|
|
|
(In
millions)
|
|
|
|
|
|
Corporate
and unallocated operating loss
|
|
$
|
(3.3
|
)
|
|
$
|
(3.3
|
)
|
|
|
0.0
|
%
|
|
Intangible
impairment
|
|
|
—
|
|
|
|
(6.2
|
)
|
|
|
(100.0
|
)%
|
|
Restructuring
and other
|
|
|
(0.1
|
)
|
|
|
4.8
|
|
|
|
(102.1
|
)%
|
|
Total
|
|
|
(3.4
|
)
|
|
|
(4.7
|
)
|
|
|
(27.7
|
)%
|
The
corporate and unallocated operating loss was flat from 2018 to 2019. Restructuring and other increased in 2019 compared
with 2018 by $4.9 million primarily due to the German levy settlement.
Financial
Position
Our
cash and cash equivalents balance, as of December 31, 2019, was $5.5 million, compared to cash of $4.9
million, as of December 31, 2018. See the Analysis of Cash Flows section below for more information.
Our
accounts payable balance, as of December 31, 2019, was $2.0 million, an increase of $1.6 million from $0.4
million, as of December 31, 2018.
Our
other current liabilities balance, as of December 31, 2019, was $1.5 million, compared to $3.3 million,
as of December 31, 2018.
Liquidity
and Capital Resources
Our
primary sources of liquidity include our cash and cash equivalents. Our primary operating liquidity needs relate to our working
capital and funding our operations.
We
had $5.5 million cash on hand as of December 31, 2019.
Our
liquidity needs for the next 12 months include the following: corporate expenses of approximately $3.2 million and any cash
shortfall associated with our businesses.
We
expect that our cash will provide liquidity sufficient to meet our needs for our operations and our obligations. We also plan
to raise additional capital if necessary, although no assurance can be made that we will be able to secure such financing, if
needed, on favorable terms or at all.
Cash
and Cash Equivalents
Cash
equivalents consist of highly liquid investments purchased with original maturities of three months or less. Restricted cash is
related to contractual obligations or restricted by management and is included in non-current assets on our Consolidated Balance
Sheets depending on the timing of the restrictions. The restricted cash balance in non-current assets of discontinued operations
as of December 31, 2019 was $0.0 million and as of December 31, 2018 was $0.4 million which related to cash set aside as indemnification
for certain customers.
Analysis
of Cash Flows
Cash
Flows Used in Operating Activities:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Net
income
|
|
$
|
23.1
|
|
|
$
|
4.1
|
|
|
Adjustments
to reconcile net income to net cash used in operating activities
|
|
|
(25.2
|
)
|
|
|
0.2
|
|
|
Changes
in operating assets and liabilities
|
|
|
(9.2
|
)
|
|
|
(14.8
|
)
|
|
Net
cash used in operating activities
|
|
$
|
(11.3
|
)
|
|
$
|
(10.5
|
)
|
Cash
flows from operating activities can fluctuate from period to period as many items can impact cash flows. Cash used in operating
activities for 2019 was primarily driven by corporate expenditures, legal settlements and related costs. Cash used in operating
activities for 2018 was primarily driven by changes in operating assets and liabilities.
Cash
Flows Provided by (Used in) Investing Activities:
|
|
|
Years Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In millions)
|
|
|
Capital expenditures
|
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
Purchase of SportBLX
|
|
|
(3.7
|
)
|
|
|
—
|
|
|
Purchases of investments
|
|
|
(1.3
|
)
|
|
|
—
|
|
|
Proceeds from fund distribution
|
|
|
1.3
|
|
|
|
—
|
|
|
Disbursement related to disposal group
|
|
|
(0.8
|
)
|
|
|
—
|
|
|
Proceeds from sale of assets and businesses
|
|
|
1.2
|
|
|
|
5.3
|
|
|
Net cash provided by (used in) investing activities
|
|
$
|
(3.3
|
)
|
|
$
|
5.1
|
|
Cash used in investing
activities in 2019 was primarily related to the purchase of SportBLX. Cash provided by investing activities in 2018 was primarily
related to the proceeds on the sale of the Nexsan business.
Cash
Flows Provided by (Used in) Financing Activities:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Proceeds
from sale of equity interest in Adara Enterprises Corp
|
|
|
4.6
|
|
|
|
—
|
|
|
Proceeds
from Orix notes payable
|
|
|
10.2
|
|
|
|
—
|
|
|
Net
cash provided by financing activities
|
|
$
|
14.8
|
|
|
$
|
—
|
|
Cash provided by financing
activities in 2019 primarily relates to the sale of an equity interest in Adara Enterprises Corp and proceeds for the Orix notes
payable. See Note 12 – Shareholders’ Equity for more information.
No
dividends were declared or paid during 2019 or 2018. Any future dividends are at the discretion of and subject to the approval
of our Board.
Related
Party Transactions
See
Note 15 - Related Party Transactions in our Notes to Consolidated Financial Statements for information on related
party transactions between the Company and GlassBridge’s Board of Directors and Executive Officers.
Off-Balance
Sheet Arrangements
Other
than the operating lease commitments discussed in Note 14 - Litigation, Commitments and Contingencies in the Notes
to Consolidated Financial Statements, we are not using off-balance sheet arrangements, including special purpose entities.
Critical
Accounting Policies and Estimates
The
discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenue, expenses and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates
to ensure they are consistent with historical experience and the various assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions and could materially impact our results of operations.
We
believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation
of our Consolidated Financial Statements:
Uncertain
Tax Positions. Our income tax returns are subject to review by various taxing authorities. As such, we record accruals for
items that we believe may be challenged by these taxing authorities. The threshold for recognizing the benefit of a tax return
position in the financial statements is that the position must more-likely-than-not be sustained by the taxing authorities based
solely on the technical merits of the position. If the recognition threshold is met, the tax benefit is measured and recognized
as the largest amount of tax benefit that, in our judgment, is greater than 50 percent likely to be realized. At December 31,
2019, our accrual related to uncertain tax positions and unrecognized tax benefits was reduced to $0.0 million, due to
selling foreign subsidiaries to which the amounts related.
Our
U.S. federal income tax returns for 2016 through 2019 are subject to examination by the Internal Revenue Service. With few exceptions,
we are no longer subject to examination by foreign tax jurisdictions or state and local tax jurisdictions for years before 2013.
The
ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any particular issue
may require the use of cash and could result in increased income tax expense. Favorable resolution could result in reduced income
tax expense. It is reasonably possible that our unrecognized tax benefits could increase or decrease significantly during the
next twelve months due to the resolution of certain U.S. and international tax uncertainties; however, it is not possible to estimate
the potential change at this time.
Intangibles.
We record all assets and liabilities acquired in purchase transactions, including intangibles, at estimated fair value. Intangible
assets with a definite life are amortized based on a pattern in which the economic benefits of the assets are consumed, typically
with useful lives ranging from one to 30 years. The initial recognition of intangible assets, the determination of useful lives
and, if necessary, subsequent impairment analysis require management to make subjective judgments concerning estimates of how
the acquired assets will perform in the future using certain valuation methods including discounted cash flow analysis. We evaluate
assets on our balance sheet, including such intangible assets, whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. Factors such as unfavorable variances from forecasted cash flows, established business
plans or volatility inherent to external markets and industries may indicate a possible impairment that would require an impairment
test. The test for impairment requires a comparison of the carrying value of the asset or asset group with their estimated undiscounted
future cash flows. If the carrying value of the asset or asset group is considered impaired, an impairment charge is recorded
for the amount by which the carrying value of the asset or asset group exceeds its fair value.
Goodwill.
We record all assets and liabilities acquired in purchase acquisitions, including goodwill, at fair value. The initial recognition
of goodwill and subsequent impairment analysis require management to make subjective judgments concerning estimates of how the
acquired assets will perform in the future using valuation methods including discounted cash flow analysis. Goodwill is the excess
of the cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination.
Goodwill is not amortized. We test the carrying amount of a reporting unit’s goodwill for impairment on an annual basis
during the fourth quarter of each year or if an event occurs or circumstances change that would warrant impairment testing during
an interim period.
Goodwill
is considered impaired when its carrying amount exceeds its implied fair value. The Company may assess qualitative factors to
determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including
goodwill. If we determine in this assessment that the fair value of the reporting unit is more than its carrying amount, we may
conclude that there is no need to perform Step 1 of the impairment test. We have an unconditional option to bypass the qualitative
assessment for any reporting unit in any period and proceed directly to performing Step 2 of the goodwill impairment test.
Step
1 of the impairment test involves comparing the fair value of the reporting unit to which goodwill was assigned to its carrying
amount. If fair value is deemed to be less than carrying value, Step 2 of the impairment test compares the implied fair value
of the reporting unit’s goodwill with the carrying amount of the reporting unit’s goodwill. If the carrying amount
of the reporting unit’s goodwill is greater than the implied fair value of the reporting unit’s goodwill, an impairment
loss must be recognized for the excess. This involves measuring the fair value of the reporting unit’s assets and liabilities
(both recognized and unrecognized) at the time of the impairment test. The difference between the reporting unit’s fair
value and the fair values assigned to the reporting unit’s individual assets and liabilities is the implied fair value of
the reporting unit’s goodwill.
Copyright
Levies. In many European Union (“EU”) member countries, the sale of recordable optical media is subject to a private
copyright levy. The levies are intended to compensate copyright holders with “fair compensation” for the harm caused
by private copies made by natural persons of protected works under the European Copyright Directive, which became effective in
2002 (the “Directive”). Levies are generally charged directly to the importer of the product upon the sale of the
products. Payers of levies remit levy payments to collecting societies which, in turn, are expected to distribute funds to copyright
holders. Levy systems of EU member countries must comply with the Directive, but individual member countries are responsible for
administering their own systems. Since implementation, the levy systems have been the subject of numerous litigation and law-making
activities. On October 21, 2010, the Court of Justice of the European Union (“CJEU”) ruled that fair compensation
is an autonomous European law concept that was introduced by the Directive and must be uniformly applied in all EU member states.
The CJEU stated that fair compensation must be calculated based on the harm caused to the authors of protected works by private
copying. The CJEU ruling made clear that copyright holders are only entitled to fair compensation payments (funded by levy payments
made by importers of applicable products, including the Company) when sales of optical media are made to natural persons presumed
to be making private copies. Within this disclosure, we use the term “commercial channel sales” when referring to
products intended for uses other than private copying and “consumer channel sales” when referring to products intended
for uses including private copying.
Since
the Directive was implemented in 2002, we estimate that we have paid in excess of $100 million in levies to various ongoing collecting
societies related to commercial channel sales. Based on the CJEU’s October 2010 ruling and subsequent litigation and law-making
activities, we believe that these payments were not consistent with the Directive and should not have been paid to the various
collecting societies. Accordingly, subsequent to the October 21, 2010 ECJ ruling, we began withholding levy payments to the various
collecting societies, and, in 2011, we reversed our existing accruals for unpaid levies related to commercial channel sales.
However, we continued to accrue, but not pay, a liability for levies arising from consumer channel sales, in all applicable jurisdictions,
except France due to certain court rulings. See Note 14 - Litigation, Commitments and Contingencies in the Notes
to Consolidated Financial Statements for discussion of these court rulings. As of December 31, 2019, and 2018, we had accrued
liabilities of $0.0 million and $0.3 million, respectively, associated with levies related to consumer channel sales
for which we are withholding payment. In addition, various decisions and enactments have established that the levy rates in various
countries improperly excluded from their calculations and assessments the private copying performed using computers and smartphones.
This in turn meant that, to the extent levy rates were determined to be retroactively excessive, the Company would be entitled
to a rebate on that basis as well.
Since
the October 2010 CJEU ruling, for as long as sales were made in these countries, we evaluated, quarterly, on a country-by-country
basis whether (i) levies should be accrued on current period commercial and/or consumer channel sales; and, (ii) accrued, but
unpaid, copyright levies on prior period consumer channel sales should be reversed. Our evaluation is made on a jurisdiction-by-jurisdiction
basis and considers ongoing and cumulative developments related to levy litigation and law-making activities within each jurisdiction
as well as throughout the EU.
In
connection with the sale of our overseas subsidiaries, in 2019, the Company is no longer liable for adverse outcomes and
may receive contingent payouts should our former subsidiary Imation Europe B.V. (“IEBV”) prevail in
litigation.
Claims
and Litigation. We record a liability when a loss from a pending or threatened claim or litigation is known or considered
probable and the amount can be reasonably estimated.
Recently
Issued Accounting Standards
See
Note 2 — Summary of Significant Accounting Policies in our Notes to Consolidated Financial Statements for disclosure
related to recently issued accounting standards.
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
Item
8. Financial Statements and Supplementary Data.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Shareholders and Board of Directors of GlassBridge Enterprises, Inc. and Subsidiaries
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of GlassBridge Enterprises, Inc. and Subsidiaries (the “Company”)
at December 31, 2019 and 2018 and the related consolidated statements of operations, comprehensive income, shareholders’
equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the
Company in accordance with the U.S federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Turner, Stone & Company, L.L.P.
Dallas,
Texas
April
3, 2020
We
have served as the Company’s auditor since 2018.
GLASSBRIDGE
ENTERPRISES, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For
the Years Ended December 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In
millions, except per share amounts)
|
|
Net
revenue
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
3.4
|
|
|
|
6.4
|
|
|
AAM
fund expenses
|
|
|
—
|
|
|
|
0.5
|
|
|
Impairment
charges:
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
—
|
|
|
|
6.2
|
|
|
Restructuring
and other
|
|
|
0.1
|
|
|
|
(4.8
|
)
|
|
Total
operating expenses
|
|
|
3.5
|
|
|
|
8.3
|
|
|
Operating
loss from continuing operations
|
|
|
(3.4
|
)
|
|
|
(8.3
|
)
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(0.3
|
)
|
|
|
(0.1
|
)
|
|
Net
income (loss) from AAM fund activities
|
|
|
—
|
|
|
|
(0.9
|
)
|
|
Unrealized
gain on Arrive investment
|
|
|
12.1
|
|
|
|
—
|
|
|
Unrealized
gain on SportBLX
|
|
|
3.0
|
|
|
|
—
|
|
|
Other
income (expense), net
|
|
|
—
|
|
|
|
0.5
|
|
|
Total
other income (expense)
|
|
|
14.8
|
|
|
|
(0.5
|
)
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
11.4
|
|
|
|
(8.8
|
)
|
|
Income
tax benefit
|
|
|
—
|
|
|
|
0.1
|
|
|
Income
(loss) from continuing operations
|
|
|
11.4
|
|
|
|
(8.7
|
)
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
Income
from discontinued operations, net of income taxes
|
|
|
1.3
|
|
|
|
6.4
|
|
|
Gain
on sale of discontinued businesses, net of income taxes
|
|
|
10.4
|
|
|
|
6.4
|
|
|
Income
from discontinued operations, net of income taxes
|
|
|
11.7
|
|
|
|
12.8
|
|
|
Net
Income
|
|
$
|
23.1
|
|
|
$
|
4.1
|
|
|
Less:
Net income attributable to noncontrolling interest
|
|
|
2.9
|
|
|
|
—
|
|
|
Net
Income attributable to GlassBridge Enterprises, Inc.
|
|
$
|
20.2
|
|
|
$
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per common share attributable to GlassBridge common shareholders — basic and diluted:
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
330.15
|
|
|
$
|
(341.18
|
)
|
|
Discontinued
operations
|
|
|
461.45
|
|
|
|
482.35
|
|
|
Net
Earnings
|
|
$
|
791.60
|
|
|
$
|
141.17
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
and diluted (in thousands)
|
|
|
25.5
|
|
|
|
25.5
|
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
GLASSBIRDGE
ENTERPRISES, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
For
the Years Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Net
income
|
|
$
|
23.1
|
|
|
$
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
pension adjustments, net of tax:
|
|
|
|
|
|
|
|
|
|
Liability
adjustments for defined benefit pension plans
|
|
|
—
|
|
|
|
(2.9
|
)
|
|
Reclassification
of adjustments for defined benefit plans recorded in net loss
|
|
|
0.1
|
|
|
|
0.4
|
|
|
Total
net pension adjustments
|
|
|
0.1
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
foreign currency translation:
|
|
|
|
|
|
|
|
|
|
Unrealized
foreign currency translation income
|
|
|
—
|
|
|
|
0.7
|
|
|
Total
net foreign currency translation
|
|
|
—
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other comprehensive income (loss), net of tax
|
|
|
0.1
|
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
23.2
|
|
|
$
|
2.3
|
|
|
Less:
Comprehensive income attributable to noncontrolling interest
|
|
|
2.9
|
|
|
|
—
|
|
|
Comprehensive
income attributable to GlassBridge Enterprises, Inc.
|
|
$
|
20.3
|
|
|
$
|
2.3
|
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
GLASSBRIDGE
ENTERPRISES, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
December
31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In
millions, except per
|
|
|
|
share
amounts)
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5.5
|
|
|
$
|
4.9
|
|
|
Short
term investments
|
|
|
0.2
|
|
|
|
—
|
|
|
Accounts
receivable, net
|
|
|
0.1
|
|
|
|
—
|
|
|
Prepaid
operating expenses
|
|
|
1.7
|
|
|
|
0.1
|
|
|
Other
current assets
|
|
|
1.1
|
|
|
|
1.1
|
|
|
Current
assets of discontinued operations
|
|
|
—
|
|
|
|
2.4
|
|
|
Total
current assets
|
|
|
8.6
|
|
|
|
8.5
|
|
|
Goodwill
(provisional)
|
|
|
50.6
|
|
|
|
—
|
|
|
Arrive
long term investment
|
|
|
14.8
|
|
|
|
4.0
|
|
|
Other
assets and other investments
|
|
|
2.4
|
|
|
|
2.1
|
|
|
Non-current
assets of discontinued operations
|
|
|
—
|
|
|
|
0.4
|
|
|
Total
assets
|
|
$
|
76.4
|
|
|
$
|
15.0
|
|
|
LIABILITIES
AND SHAREHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2.0
|
|
|
$
|
0.4
|
|
|
Other
current liabilities
|
|
|
1.5
|
|
|
|
3.5
|
|
|
Current
liabilities of discontinued operations
|
|
|
—
|
|
|
|
4.6
|
|
|
Total
current liabilities
|
|
|
3.5
|
|
|
|
8.5
|
|
|
Pension
liability
|
|
|
13.5
|
|
|
|
23.0
|
|
|
Stock
purchase agreement notes payable (See Note 15 – Related Party Transactions)
|
|
|
17.6
|
|
|
|
—
|
|
|
Orix
notes payable (See Note 12 – Shareholders’ Equity)
|
|
|
10.3
|
|
|
|
—
|
|
|
Other
liabilities
|
|
|
0.2
|
|
|
|
0.7
|
|
|
Other
liabilities of discontinued operations
|
|
|
—
|
|
|
|
2.2
|
|
|
Total
liabilities
|
|
|
45.1
|
|
|
|
34.4
|
|
|
See
Note 14 – Litigation, Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
Shareholders’
deficit:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value, authorized 0.2 million shares, none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
Common
stock, $.01 par value, authorized 50,000 shares
|
|
|
—
|
|
|
|
—
|
|
|
2019
– shares issued: 28,097, outstanding: 25,170
|
|
|
|
|
|
|
|
|
|
2018
– shares issued: 28,097, outstanding: 25,695
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
1,053.9
|
|
|
|
1,048.9
|
|
|
Accumulated
deficit
|
|
|
(1,002.7
|
)
|
|
|
(1,022.9
|
)
|
|
Accumulated
other comprehensive loss
|
|
|
(20.6
|
)
|
|
|
(20.7
|
)
|
|
Treasury
stock, at cost 2,927 shares at December 31,2019; 2,402 shares at December 31, 2018
|
|
|
(24.9
|
)
|
|
|
(24.7
|
)
|
|
Total
GlassBridge Enterprises, Inc. shareholders’ equity (deficit)
|
|
|
5.7
|
|
|
|
(19.4
|
)
|
|
Noncontrolling
interest
|
|
|
25.6
|
|
|
|
—
|
|
|
Total
shareholders’ equity (deficit)
|
|
$
|
31.3
|
|
|
$
|
(19.4
|
)
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
76.4
|
|
|
$
|
15.0
|
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
GLASSBRIDGE
ENTERPRISES, INC.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Accumulated
Other Comprehensive
|
|
|
Treasury
Stock
|
|
|
Non-controlling
|
|
|
Total
Shareholders’ Equity
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Shares
|
|
|
Amount
|
|
|
Interest
|
|
|
(Deficit)
|
|
|
|
|
(In
millions, except per share amounts)
|
|
|
Balance
as of December 31, 2017
|
|
|
28,097
|
|
|
$
|
—
|
|
|
$
|
1,050.8
|
|
|
$
|
(1,027.5
|
)
|
|
$
|
(18.9
|
)
|
|
|
2,820
|
|
|
$
|
(26.6
|
)
|
|
$
|
(4.7
|
)
|
|
$
|
(26.9
|
)
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7
|
|
|
|
8.8
|
|
|
Purchase
of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
|
|
|
|
0.0
|
|
|
|
|
|
|
|
0.0
|
|
|
Restricted
stock grants and other
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
|
(487
|
)
|
|
|
1.9
|
|
|
|
|
|
|
|
—
|
|
|
Net
change in cumulative translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.7
|
|
|
Pension
adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.5
|
)
|
|
ASC
606 adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
Reclassification
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
Balance
as of December 31, 2018
|
|
|
28,097
|
|
|
$
|
—
|
|
|
$
|
1,048.9
|
|
|
$
|
(1,022.9
|
)
|
|
$
|
(20.7
|
)
|
|
|
2,402
|
|
|
$
|
(24.7
|
)
|
|
$
|
—
|
|
|
$
|
(19.4
|
)
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.9
|
|
|
|
23.1
|
|
|
Purchase
of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
Restricted
stock grants and other
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
—
|
|
|
Pension
adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
Recognition
of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.7
|
|
|
|
27.5
|
|
|
Balance
as of December 31, 2019
|
|
|
28,097
|
|
|
$
|
—
|
|
|
$
|
1,053.9
|
|
|
$
|
(1,002.7
|
)
|
|
$
|
(20.6
|
)
|
|
|
2,927
|
|
|
$
|
(24.9
|
)
|
|
$
|
25.6
|
|
|
$
|
31.3
|
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
GLASSBRIDGE
ENTERPRISES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
For the Years Ended December
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In millions)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
23.1
|
|
|
$
|
4.1
|
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
0.1
|
|
|
|
2.2
|
|
|
Stock-based compensation
|
|
|
0.2
|
|
|
|
(0.3
|
)
|
|
Unrealized gain on Arrive investment
|
|
|
(12.1
|
)
|
|
|
—
|
|
|
Unrealized gain on SportBLX investment
|
|
|
(3.0
|
)
|
|
|
—
|
|
|
Intangible assets impairment
|
|
|
—
|
|
|
|
6.3
|
|
|
Pension settlement and curtailments
|
|
|
—
|
|
|
|
(2.5
|
)
|
|
Gain on sale of assets and businesses
|
|
|
(10.4
|
)
|
|
|
(6.4
|
)
|
|
Short term investment
|
|
|
—
|
|
|
|
0.7
|
|
|
Other, net
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(0.1
|
)
|
|
|
0.3
|
|
|
Inventories
|
|
|
—
|
|
|
|
0.8
|
|
|
Prepaid expenses
|
|
|
(1.6
|
)
|
|
|
—
|
|
|
Other assets
|
|
|
0.8
|
|
|
|
(2.3
|
)
|
|
Accounts payable
|
|
|
(5.6
|
)
|
|
|
(0.7
|
)
|
|
Other current liabilities
|
|
|
(2.7
|
)
|
|
|
—
|
|
|
Other liabilities
|
|
|
—
|
|
|
|
(12.9
|
)
|
|
Net cash used in operating activities
|
|
|
(11.3
|
)
|
|
|
(10.5
|
)
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
Purchase of SportBLX
|
|
|
(3.7
|
)
|
|
|
—
|
|
|
Purchase of investments
|
|
|
(1.3
|
)
|
|
|
—
|
|
|
Proceeds from fund distribution
|
|
|
1.3
|
|
|
|
—
|
|
|
Disbursement related to disposal group
|
|
|
(0.8
|
)
|
|
|
—
|
|
|
Proceeds from sale of assets and businesses
|
|
|
1.2
|
|
|
|
5.3
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(3.3
|
)
|
|
|
5.1
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of equity interest in Adara Enterprises Corp
|
|
|
4.6
|
|
|
|
—
|
|
|
Proceeds from Orix notes payable
|
|
|
10.2
|
|
|
|
—
|
|
|
Net cash provided by financing activities
|
|
|
14.8
|
|
|
|
—
|
|
|
Net change in cash and cash equivalents
|
|
|
0.2
|
|
|
|
(5.4
|
)
|
|
Cash and cash equivalents — beginning of year
|
|
|
5.3
|
|
|
|
10.7
|
|
|
Cash and cash equivalents — end of year
|
|
$
|
5.5
|
|
|
$
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash paid during the period:
|
|
|
|
|
|
|
|
|
|
Income taxes (net of refunds received)
|
|
$
|
(1.1
|
)
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities during the period:
|
|
|
|
|
|
|
|
|
|
Notes payable issued for purchase of SportBLX
|
|
|
17.6
|
|
|
|
—
|
|
|
Recognition of non-controlling interest – SportBLX
|
|
|
23.7
|
|
|
|
—
|
|
|
Recognition of non-controlling interest – Adara Enterprises Corp
|
|
|
1.0
|
|
|
|
—
|
|
|
Total non-cash investing and financing activities during the period
|
|
|
42.3
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) The following table provides a reconciliation of cash, cash equivalents and restricted
cash to amounts reported within the condensed consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5.5
|
|
|
$
|
4.9
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
Restricted cash included in non-current assets
of discontinued operations
|
|
$
|
—
|
|
|
$
|
0.4
|
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
5.5
|
|
|
$
|
5.3
|
|
The
accompanying notes are an integral part of these Consolidated Financial Statements.
GLASSBRIDGE
ENTERPRISES, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1 — Background and Basis of Presentation
Background
GlassBridge
Enterprises, Inc. owns and operates an asset management business
and a sports investment platform through majority owned Adara Enterprises, Corp. f/k/a Imation Enterprises Corp. (“Adara”)
and Sport-BLX, Inc. (“SportBLX”). Adara owns all of our asset management business, operated by Adara Asset Management,
LLC and part of our SportBLX holdings. GlassBridge Asset Management LLC changed its name to Adara Asset Management LLC (“AAM”)
in 2020.
As
used in this document, the terms “GlassBridge”, “the Company”, “we”, “us”, and
“our” mean GlassBridge Enterprises, Inc. and its subsidiaries unless the context indicates otherwise.
Basis
of Presentation
The
financial statements are presented on a consolidated basis and include the accounts of the Company, its wholly-owned subsidiaries,
and entities in which the Company owns or controls fifty percent or more of the voting shares and has the right to control. The
results of entities disposed of are included in the Consolidated Financial Statements up to the date of the disposal and, where
appropriate, these operations have been reflected as discontinued operations. Our Consolidated Financial Statements are prepared
in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All inter-company
balances and transactions have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments
necessary for a fair presentation have been included in the results reported.
The
operating results of our legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions
(the “Legacy Businesses”) and the Nexsan Business (which includes the “Nexsan Group” as defined below),
are presented in our Condensed Consolidated Statements of Operations as discontinued operations for all periods presented. Our
continuing operations in each period presented represents our “Asset Management Business,” which consists of our investment
advisory business conducted through AAM, as well as corporate expenses and activities not directly attributable to our
Legacy Businesses or the Nexsan Business. Assets and liabilities directly associated with our Legacy Businesses and Nexsan Business
and that are not part of our ongoing operations have been separately presented on the face of our Consolidated Balance Sheets
for all periods presented. See Note 5 - Discontinued Operations for further information.
On
August 16, 2018, the Company consummated the NXSN Transaction, wherein the Company, through a series of transactions, sold its
partially-owned subsidiary, the Nexsan Business, to StorCentric, Inc., a Delaware company affiliated with Drobo, Inc. See Note
5 - Discontinued Operations for further information.
On
March 31, 2019, the Company entered into a securities purchase
agreement (the “IMN Capital Agreement”) with IMN Capital Holdings, Inc., a Delaware corporation (“IMN Capital”)
whereby the Company sold its entire ownership of its international subsidiaries together with its entire ownership in Imation
Latin America Corp., a Delaware corporation (the “Imation Subsidiaries”). Certain subsidiaries of the Company,
including the Imation Subsidiaries, are parties to certain lawsuits, claims, and other legal proceedings concerning claims and
counterclaims relating to excess payments made by the Imation Subsidiaries relating to copyright levies in European Union (“EU”)
member states (the “Subsidiary Litigation”). Pursuant to the terms and subject to the conditions of the IMN Capital
Agreement, IMN Capital acquired from the Company the Company’s shares representing the Company’s ownership interests
in each of the Imation Subsidiaries (the “Subsidiary Sale”). Following the Subsidiary Sale, the Imation Subsidiaries
are no longer affiliates of the Company, and the Company has no interest in or to the Imation Subsidiaries except as explicitly
described in the IMN Capital Agreement. In consideration for the Subsidiary Sale, the Company shall receive certain compensation
from IMN Capital. As defined in the IMN Capital Agreement, a payment occurrence is the settlement or final adjudication as to
all demands, claims, counter-claims, cross-claims, third-party claims, damages, fees, costs and expenses, brought and raised on
any matters arising from or related to the Subsidiary Litigation (a “Payment Occurrence”). In connection with the
Subsidiary Sale, the purchase price furnished by IMN Capital to the Company (the “Purchase Price”) shall consist of
(i) $277,900 payable upon the execution of the IMN Capital Agreement and (ii) 75% of all net proceeds from Subsidiary Litigation
(which, for the avoidance of doubt, shall be calculated after the payment of (i) the retirement of the Germany pension liability;
(ii) contingency fees payable to attorneys engaged in connection with the Subsidiary Litigation; (iii) fees payable to Mach 5,
the litigation financing company and (iv) the payment of all applicable taxes including income taxes in connection with the Subsidiary
Litigation) (such payment, the “Contingent Payment”). The Company recorded a one-time non-cash gain of approximately
$10 million in connection with IMN Capital Agreement transaction.
The
Company’s continued operations and ultimate ability to continue as a going concern will depend on its ability to enhance
revenue and operating results, enter into strategic relationships or raise additional capital. The Company can provide no assurances
that all or any of such plans will occur; and if the Company is unable to return to profitability or otherwise raise sufficient
capital, there would be a material adverse effect on its business.
On
August 20, 2019, the Company effected a reverse split of our common stock, par value $0.01 per share at a ratio of 1:200 (the
“Reverse Stock Split”). On August 21, 2019 (the “Effective Date”), our common stock began trading on the
Reverse Stock Split-adjusted basis on the OTCQB at the opening of trading. In connection with the Reverse Stock Split, our common
stock began trading with a new CUSIP number at such time. There was no change to the Company’s stock symbol. All prior periods
have been retroactively adjusted to give effect to the reverse stock split. See Note 12 - Shareholders’ Equity for
further information.
Note
2 — Summary of Significant Accounting Policies
Use
of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions
that affect the reported asset and liability amounts and the contingent asset and liability disclosures at the date of the financial
statements, as well as the revenue and expense amounts reported during the period. Actual results could differ from those estimates.
Foreign
Currency. For our international operations, where the local currency has been determined to be the functional currency, assets
and liabilities are translated at year-end exchange rates with cumulative translation adjustments included as a component of shareholders’
equity. Income and expense items are translated at average foreign exchange rates prevailing during the year. Income and losses
from foreign currency transactions are included in our Consolidated Statements of Operations.
Cash
Equivalents. Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the
time of purchase. The carrying amounts reported in our Consolidated Balance Sheets for cash equivalents approximate fair value.
Restricted
Cash. Cash related to contractual obligations or restricted by management for specific use is classified as restricted and
is included in non-current assets on our Consolidated Balance Sheets depending on the timing of the restrictions. As of December
31, 2019, and December 31, 2018, we had $0.0 million and $0.4 million, respectively, in non-current assets of discontinued operations
which relates to cash set aside as indemnification for certain customers.
Investments.
Investment securities are classified into one of three categories: (1) held-to-maturity, (2) available-for-sale, or (3) trading.
The Company’s short-term investment balances as of December 31, 2019 and 2018 included trading securities, which are measured
at fair value. The corresponding income or loss associated with these trading securities is reported in our Consolidated Statements
of Operations as a component of “Other income (expense), net”. Trading securities are bought and held principally
for the purpose of selling them in the near term therefore are only held for a short period of time.
Fair
Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability, or the exit price in an orderly transaction between market participants on the measurement date. A three-level hierarchy
is used for fair value measurements based upon the observability of the inputs to the valuation of an asset or liability as of
the measurement date. Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly
or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable
inputs. A financial instrument’s level within the hierarchy is based on the highest level of any input that is significant
to the fair value measurement. The Company measures certain assets and liabilities including cash and cash equivalents, and investments
in trading securities at their estimated fair value on a recurring basis. The Company’s non-financial assets such as goodwill
and intangible assets are recorded at fair value on a nonrecurring basis.
Trade
Accounts Receivable and Allowances. Trade accounts receivable are stated net of estimated allowances, which primarily represent
estimated amounts associated with customer returns, discounts on payment terms and the inability of certain customers to make
the required payments. When determining the allowances, we take several factors into consideration, including prior history of
accounts receivable credit activity and write-offs, the overall composition of accounts receivable aging, the types of customers
and our day-to-day knowledge of specific customers. Changes in the allowances are recorded as reductions of net revenue or as
bad debt expense (included in selling, general and administrative expense), as appropriate, in our Consolidated Statements of
Operations. In general, accounts which have entered into an insolvency action, have been returned by a collection agency as uncollectible
or whose existence can no longer be confirmed are written off in full and both the receivable and the associated allowance are
removed from our Consolidated Balance Sheet. If, subsequent to the write-off, a portion of the account is recovered, it is recorded
as a reduction of bad debt expense in our Consolidated Statements of Operations at the time cash is received.
Intangible
Assets. We record all assets and liabilities acquired in purchase acquisitions, including intangibles, at estimated fair value.
The initial recognition of intangible assets, the determination of useful lives and, if necessary, subsequent impairment analyses
require management to make subjective estimates of how the acquired assets will perform in the future using certain valuation
methods.
Impairment
of Long-Lived Assets. We periodically review the carrying value of our property and equipment and our intangible assets, including
goodwill, to test whether current events or circumstances indicate that such carrying value may not be recoverable. For the testing
of long-lived assets that are “held for use,” if the tests indicate that the carrying value of the asset group that
contains the long-lived asset being evaluated is greater than the expected undiscounted cash flows to be generated by such asset
or asset group, an impairment loss would be recognized. The impairment loss is determined by the amount by which the carrying
value of such asset group exceeds its estimated fair value. We generally measure fair value by considering sale prices for similar
assets or by discounting estimated future cash flows from such assets using an appropriate discount rate. Management judgment
is necessary to estimate the fair value of assets and, accordingly, actual results could vary significantly from such estimates.
Restructuring.
Restructuring generally includes significant actions involving employee-related severance charges, contract termination costs,
and impairment or accelerated depreciation/amortization of assets associated with such actions. These charges are reflected in
the quarter when the actions are probable and the amounts are estimable, which is typically when management approves the associated
actions. Contract termination and other charges primarily reflect costs to terminate a contract before the end of its term or
costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company. Asset
impairment charges related to intangible assets and property, plant and equipment reflect the excess of the assets’ carrying
values over their fair values.
Revenue Recognition.
The Company recognizes revenue in light of the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts
with Customers. Revenue is recognized when control of goods has transferred to customers. For the majority of the Company’s
customer arrangements, control transfers to customers at a point-in-time when goods/services have been delivered as that is generally
when legal title, physical possession and risks and rewards of goods/services transfers to the customer. Revenue is recognized
at the transaction price which the Company expects to be entitled. The majority of the Company’s customer arrangements contain
a single performance obligation for services as the promise for services is not separately identifiable from other
promises in the contracts and, therefore, not distinct. The Company may also enter into customer arrangements that involve intellectual
property out-licensing, multiple performance obligations, services and non-standard terms and conditions.
Income
Taxes. We are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves
estimating our actual current tax obligations based on expected taxable income, statutory tax rates and tax credits allowed in
the various jurisdictions in which we operate. Tax laws require certain items to be included in our tax returns at different times
than the items are reflected in our results of operations. Some of these differences are permanent, such as expenses that are
not deductible in our tax returns, and some are temporary differences that will reverse over time. Temporary differences result
in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets. We must assess the likelihood that
our deferred tax assets will be realized and establish a valuation allowance to the extent necessary.
We
record income taxes using the asset and liability approach. Under this approach, deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between the book and tax basis of assets and liabilities. We
measure deferred tax assets and liabilities using the enacted statutory tax rates that are expected to apply in the years in which
the temporary differences are expected to be recovered or paid.
We
regularly assess the likelihood that our deferred tax assets will be recovered in the future. In accordance with accounting rules,
a valuation allowance is recorded to the extent we conclude a deferred tax asset is not considered to be more-likely-than-not
to be realized. We consider all positive and negative evidence related to the realization of the deferred tax assets in assessing
the need for a valuation allowance. If we determine it is more-likely-than-not that we will not realize all or part of our deferred
tax assets, an adjustment to the deferred tax asset will be charged to earnings in the period such determination is made.
Our
income tax returns are subject to review by various taxing authorities. As such, we record accruals for items that we believe
may be challenged by these taxing authorities. The threshold for recognizing the benefit of a tax return position in the financial
statements is that the position must be more-likely-than-not to be sustained by the taxing authorities based solely on the technical
merits of the position. If the recognition threshold is met, the tax benefit is measured and recognized as the largest amount
of tax benefit that, in our judgment, is greater than 50 percent likely to be realized.
Treasury
Stock. Our repurchases of shares of common stock are recorded at cost as treasury stock and are presented as a reduction of
shareholders’ equity. When treasury shares are reissued, we use a last-in, first-out method, and the difference between
repurchase cost and fair value at reissuance is treated as an adjustment to equity.
Stock-Based
Compensation. Stock-based compensation awards classified as equity awards are measured at fair value at the date of grant
and expensed over their vesting or service periods.
The
fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions
used in the valuation model are supported primarily by historical indicators and current market conditions. Expected volatilities
are based on historical volatility of our stock and are calculated using the historical weekly close rate for a period of time
equal to the expected term. The risk-free rate for the contractual life of the option is based on the U.S. Treasury yield curve
in effect at the time of grant. We use historical data and management judgment to estimate option exercise and employee termination
activity within the valuation model. The expected term of stock options granted is based on historical data and represents the
period of time that stock options granted are expected to be outstanding. It is calculated on an aggregated basis and estimated
based on an analysis of options already exercised and any foreseeable trends or changes in recipients’ behavior. In determining
the expected term, we consider the vesting period of the awards, the contractual term of the awards, historical average holding
periods, stock price history, impacts from recent restructuring initiatives and the relative weight for each of these factors.
The dividend yield, if applicable, is based on the latest dividend payments made on or announced by the date of the grant. Forfeitures
are estimated based on historical experience and current demographics. See Note 9 - Stock-Based Compensation for
further information regarding stock-based compensation.
Income
(Loss) per Common Share. Basic income (loss) per common share is calculated using the weighted average number of shares outstanding
during the year. Unvested restricted stock and treasury shares are excluded from the calculation of basic weighted average number
of common shares outstanding. Once restricted stock vests, it is included in our common shares outstanding.
Diluted
income (loss) per common share is computed on the basis of the weighted average basic shares outstanding plus the dilutive effect
of our stock-based compensation plans using the “treasury stock” method. Since the exercise price of our stock options
is greater than the average market price of the Company’s common stock for the period, we did not include dilutive common
equivalent shares for these instruments in the computation of diluted income (loss) per common share because the effect would
be anti-dilutive. See Note 3 - Income (Loss) per Common Share for our calculation of weighted average basic and diluted
shares outstanding.
Adoption
of New Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a right-of-use (“ROU”) model
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than
12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition
in the income statement. The Company adopted this ASU in the first quarter of 2019 and there was no material impact to its consolidated
results of operations and financial condition.
In
February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU seeks to help entities reclassify certain stranded
income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax
Reform Act”), enacted on December 22, 2017. ASU 2018-02 was issued in response to concerns regarding current guidance in
GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the
effect included in income from continuing operations in the reporting period that includes the enactment date, even in situations
in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other
comprehensive income, rather than net income, and as a result the stranded tax effects would not reflect the appropriate tax rate.
The amendments of this ASU allow an entity to make a reclassification from accumulated other comprehensive income to retained
earnings for the stranded tax effects, which is the difference between the historical corporate income tax rate of 35.0% and the
newly enacted corporate income tax rate of 21.0%. The amendments of this ASU may be applied either at the beginning of the period
(annual or interim) of adoption or retrospectively to each of the period(s) in which the effect of the change in the U.S. federal
corporate tax rate in the Tax Reform Act is recognized. The Company adopted this ASU in the first quarter of 2019 and there was
no material impact to its consolidated results of operations and financial condition.
New
Accounting Pronouncements to Be Adopted
In
August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates,
amends, and adds disclosure requirements for fair value measurements. The amended and new disclosure requirements primarily relate
to Level 3 fair value measurements. For the Company, the ASU is effective as of January 1, 2020. The removal and amendment of
certain disclosures may be early adopted with retrospective application while the new disclosure requirements are to be applied
prospectively. As this ASU relates only to disclosures, there will be no impact to the Company’s consolidated results of
operations and financial condition.
In
August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans, which makes minor
changes to the disclosure requirements related to defined benefit pension and other postretirement plans. The ASU requires a retrospective
transition approach. For the Company, the ASU is effective as of January 1, 2021. As this ASU relates only to disclosures, there
will be no impact to the Company’s consolidated results of operations and financial condition.
Note
3 — Income (Loss) per Common Share
The
following table sets forth the computation of the weighted average basic and diluted income (loss) per share:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions, except per share amounts)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Income (loss)
from continuing operations
|
|
$
|
11.4
|
|
|
$
|
(8.7
|
)
|
|
Income
from discontinued operations, net of income taxes
|
|
|
11.7
|
|
|
|
12.8
|
|
|
Net
income
|
|
$
|
23.1
|
|
|
$
|
4.1
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted
average number of diluted shares outstanding during the period - basic and diluted (in thousands)
|
|
|
25.5
|
|
|
|
25.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) per common share attributable to GlassBridge common shareholders — basic and diluted:
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
330.15
|
|
|
$
|
(341.18
|
)
|
|
Discontinued
operations
|
|
|
461.45
|
|
|
|
482.35
|
|
|
Net
income
|
|
$
|
791.60
|
|
|
$
|
141.17
|
|
|
Anti-dilutive
shares excluded from calculation
|
|
|
—
|
|
|
|
—
|
|
Note
4 – Business Combination
During
the first ten months of 2019, the Company entered into three Common Stock Purchase Agreements (the “SportBLX Purchase Agreement”)
with SportBLX, Inc., a Delaware corporation (“SportBLX”), purchasing a total of 13,519 shares of SportBLX common stock
for total consideration of $1,788,379.
On
December 12, 2019, the Company acquired a controlling interest of 50.7% in SportBLX by purchasing an additional 55,000 shares
for total consideration of $19.5 million, in two separate stock purchase agreements. The Company entered into a Common Stock Purchase
Agreement with Joseph A. De Perio (the “De Perio Agreement”) pursuant to which the Company purchased 17,076 shares
of SportBLX common stock in exchange for consideration of $6,061,980. On the same date, the Company entered into a Common Stock
Purchase Agreement with George E. Hall (the “Hall Agreement” and, together with the De Perio Agreement, the “Stock
Purchase Agreements”) pursuant to which the Company purchased 37,924 shares of SportBLX common stock for consideration of
$13,463,020. Joseph De Perio is a member of the Board of Directors of the Company, owns 2.47% of the Company’s outstanding
common stock and is SportBLX’s president. George E. Hall is the beneficial holder of approximately 29.1% of the Company’s
outstanding common stock and is the Executive Chairman and CEO of SportBLX.
The
aggregate consideration paid by the Company in the business combination is $21,313,378.72.
|
Date
|
|
Description
|
|
Shares
Acquired
|
|
Per
Share Price
|
|
Consideration
|
|
January
4, 2019
|
|
SportBLX
Purchase Agreement
|
|
|
10,526
|
|
|
$
|
95.0029
|
|
|
$
|
1,000,000
|
|
|
September
16, 2019
|
|
SportBLX
Purchase Agreement
|
|
|
679
|
|
|
|
263.4074
|
|
|
|
178,854
|
|
|
October
18, 2019
|
|
SportBLX
Purchase Agreement
|
|
|
2,314
|
|
|
|
263.4074
|
|
|
|
609,525
|
|
|
|
|
|
|
|
13,519
|
|
|
|
|
|
|
|
1,788,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
12, 2019
|
|
De
Perio Agreement
|
|
|
17,076
|
|
|
|
355.0000
|
|
|
|
6,061,980
|
|
|
December
12, 2019
|
|
Hall
Agreement
|
|
|
37,924
|
|
|
|
355.0000
|
|
|
|
13,463,020
|
|
|
|
|
|
|
|
55,000
|
|
|
|
|
|
|
|
19,525,000
|
|
|
Total
shares and consideration
|
|
|
|
|
68,519
|
|
|
|
|
|
|
$
|
21,313,379
|
|
The
following table presents the provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:
|
Cash
and cash equivalents
|
|
$
|
3,365
|
|
|
Sundry
receivable
|
|
|
14,772
|
|
|
Investment
– Race Horses
|
|
|
220,000
|
|
|
Investment
– BLX Trading Corp
|
|
|
4,600
|
|
|
TANGIBLE
ASSETS ACQUIRED
|
|
|
242,737
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
712,160
|
|
|
Accrued
expenses
|
|
|
50,000
|
|
|
Accrued
interest payable
|
|
|
27,796
|
|
|
Note
payable
|
|
|
2,000,000
|
|
|
TANGIBLE
LIABILITIES ASSUMED
|
|
|
2,789,956
|
|
|
NET
TANGIBLE LIABILITIES ASSUMED
|
|
|
(2,547,219
|
)
|
|
|
|
|
|
|
|
Goodwill
|
|
|
50,552,094
|
|
|
INTANGIBLE
ASSETS ACQUIRED
|
|
|
50,552,094
|
|
|
|
|
|
|
|
|
Consideration
|
|
|
21,313,379
|
|
|
Unrealized
gain
|
|
|
3,010,866
|
|
|
Total
GlassBridge Enterprises, Inc. interest
|
|
|
24,324,245
|
|
|
Noncontrolling
interests
|
|
|
23,680,630
|
|
|
|
|
$
|
48,004,875
|
|
The following
table provides unaudited pro forma information for the periods presented as if the SportBLX acquisition had occurred January 1,
2018:
|
|
|
Year Ended December 31
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(in millions)
|
|
|
Revenues
|
|
$
|
(0.1
|
)
|
|
$
|
—
|
|
|
Loss from continuing operations
|
|
$
|
(10.6
|
)
|
|
$
|
(8.3
|
)
|
As
a result of the acquisition, the Company, will seek revenues by creating an online marketplace for sports assets, including revenue
share interests in player and racehorse earnings and equity interests in teams. SportBLX partners with a registered broker-dealer
to effect transactions in sports assets constituting securities. SportBLX enables enthusiasts to use their knowledge to engage
passionately and invest in the athletes and sports teams they love, giving investors opportunities to participate in the value
creation that success in sports brings.
SportBLX
is offering a new asset class and is the first company to bring it to the market. Sports is a multi-billion dollar industry with
economic and non-economic factors that make it very unique. The leadership at SportBLX brings over thirty years of experience
in the financial industry with experience in securitizing, structuring and trading. This unique combination accounts for the goodwill
of $50,552,094 arising from the acquisition.
None
of the goodwill recognized is expected to be deductible
for income tax purposes. The fair value allocation has not yet been completed and all amounts are provisional.
Note
5 — Discontinued
Operations
The
NXSN Sale
Background
of Sale
On
August 16, 2018, the Company completed the disposition of its entire interest in the Nexsan Business, as described herein.
On
August 16, 2018, we simultaneously acquired all of the capital stock of NXSN Acquisition Corp. (together with its subsidiaries,
“NXSN”) from Humilis Holdings Private Equity LP f/k/a Spear Point Private Equity LP (“Humilis”) and sold
all of the capital stock of the Nexsan Group (as defined herein)(collectively the “NXSN Sale”) to StorCentric, Inc.
(the “Buyer”), a newly-incorporated Delaware company affiliated with Drobo, Inc., a Delaware corporation (“Drobo”)
for $5,675,000. As previously reported, NXSN owned all of the issued and outstanding shares of capital stock (the “Nexsan
Shares”) of Nexsan Corporation, a Delaware corporation (“Nexsan”); and Nexsan owns all of the outstanding capital
stock of the following companies: Nexsan Technologies Limited, an England and Wales entity (“Nexsan UK”), Nexsan Technologies
Incorporated, a Delaware corporation (“Nexsan US”), Connected Data, Inc., a California corporation (“Connected
Data”), 6360319 Canada Inc and 6360246 Canada Inc, Canadian corporations (“First Canadian Entity” and collectively
with Nexsan UK, Nexsan US, Connected Data, the “Direct Subsidiaries”); and First Canadian Entity owns all of the outstanding
capital stock of Nexsan Technologies Canada, Inc., a Canadian corporation (“Nexsan Canada” and collectively with the
Second Canadian Entity, the “Indirect Subsidiaries” and the Indirect Subsidiaries collectively with the Direct Subsidiaries
and Nexsan, the “Nexsan Group”).
Prior
to the NXSN Sale, we owned fifty percent of the common stock of NXSN and a Senior Secured Convertible Note of NXSN dated January
23, 2017 (the “NXSN Note”) in the original principal amount of $25,000,000 which Note was declared in default on November
14, 2017. The NXSN Note is secured in favor of the Company by that certain Guaranty and Security Agreement dates as of January
23, 2017 by and among NXSN, Nexsan, the Company and the other participants thereto (the “NXSN Security Agreement”)
pursuant to which inter alia Nexsan, Connected Data and Nexsan US, collectively, had guaranteed the obligations of NXSN under
the NXSN Note (collectively, the “Nexsan Guaranty”). We had pledged the NXSN Note as security for that certain GlassBridge
Enterprises, Inc. Secured Promissory Note dated September 28, 2017 (the “GlassBridge Note”) issued in favor of IOENGINE,
LLC, a Delaware limited liability company(“IOENGINE”) in the original principal amount of $4,000,000 pursuant to that
certain Pledge Agreement dated September 28, 2017 by and between the Company and IOENGINE (the “GlassBridge Pledge Agreement”),
in connection with the settlement of litigation with IOENGINE.
The
Company had acquired from Connected Data a Promissory Note dated May 15, 2015 made by Drobo initially in favor of Connected Data
(including the related along, the “Drobo Note”).
Description
of Sale and Material Agreements
As
the first step in the NXSN Transaction, the Company caused NXSN to enter into an Exchange Agreement dated as of August 16, 2018
with Humilis (the “NXSN-Humilis Agreement”) pursuant to which NXSN agreed to grant Humilis an option to purchase the
Nexsan Shares (the “Share Option”), equal to an aggregate of 140,000,500 shares of NXSN common stock and 5,600,000
shares of NXSN preferred stock, as set forth in an assignable Option Agreement dated as of an even date with the NXSN-Humilis
Agreement (the “Option Agreement”) in exchange, inter alia, for the transfer to the Company of all of Humilis’
equity interests in NXSN.
Such
Option Agreement was then assigned to Humilis Holdings LLC, an affiliate of Humilis, which, in turn, assigned the Option Agreement
to Buyer pursuant to an Assignment of Contract by and between Humilis Holdings LLC and Buyer (the “Buyer-Humilis Assignment”),
after which Buyer exercised the Share Option in accordance with the terms of the Option Agreement by entering into that certain
Stock Purchase Agreement, dated August 16, 2018 (the “SPA”), by and among StorCentric, Inc., as Buyer, NXSN, as Seller,
and the Company as Parent, contemplating gross proceeds in the amount of $5,675,000 (the “SPA Gross Proceeds”).
Subject
to the terms and conditions of the SPA and the ancillary agreements referred to in the SPA (the “Ancillary Agreements”)
(i) the Company and NXSN caused the Nexsan Guaranty and all encumbrances on the Nexsan Shares and the assets and business of Nexsan
and the Nexsan Subsidiaries, including under the NXSN Security Agreement to be released, (ii) NXSN transferred all right, title
and interest in and to the Nexsan Shares to Buyer free and clear of all encumbrances, (iii) Buyer paid off any and all amounts
due and owing under the GlassBridge Note out of the purchase price otherwise payable to NXSN in accordance with that certain Pre-Pay
Agreement dated as of August 13, 2018 by and among IOENGINE, the Company and Scott McNulty (the “IOENGINE Pre-Payment Agreement”),
being Two Million Two Hundred Fifty Thousand Dollars ($2,250,000; (iv) in accordance with that certain Settlement Agreement and
Mutual Release dated August 10, 2018 entered into inter alia, by NXSN, Nexsan US and Humilis (the “NTI A/R Settlement Agreement”)
regarding the Receivables Litigation (as defined in the SPA), Nexsan US paid the Payment (as defined therein); (v) Buyer paid
NXSN the Consideration described in the SPA to NXSN as payment in full for the purchase of the Shares, (vi) the Company delivered
a certification that the original signed Drobo Note cannot be located (with appropriate indemnities) to Buyer and the Drobo Note
was deemed to be cancelled, and (vii) all obligations of the Nexsan and the Nexsan Subsidiaries toward the Company or NXSN (other
than the obligations under the SPA) were extinguished.
The SPA also provided
for the placement in an Escrow Account $650,000 of the Consideration (the “Escrowed Funds”) to be held as a possible
source of indemnification by NXSN and the Company for any indemnifiable costs or liabilities arising within 18 months of the NXSN
Transaction. Escrowed funds of $610,760, net of claims, were remitted to the Company on February 19, 2020. Furthermore,
The SPA provided for the working capital adjustment toward the SPA Gross Proceeds based on the difference between the actual working
capital on July 31, 2018 and the working capital target.
Upon
deducting the Escrowed Funds and payment made to IOENGINE pursuant to the IOENGINE Pre-Payment Agreement from the SPA Gross Proceeds,
the Company received a cash payment of Two Million Seven Hundred Seventy-five Thousand Dollars ($2,775,000.00) in connection with
the SPA.
The
Legacy Businesses
In
September 2015, the Company adopted a restructuring plan (the “Restructuring Plan”) approved by the Board of Directors
of the Company (the “Board”) which began the termination process of our Legacy Businesses. Strategically, our Board
and management determined that there was not a viable plan to make the Legacy Businesses successful and, accordingly, we began
to aggressively wind down these businesses in an accelerated manner via the Restructuring Plan. On January 4, 2016, the Company
closed on the sale of its Memorex trademark and receivables associated with two associated trademark licenses to DPI Inc., a St.
Louis-based branded consumer electronics company for $9.4 million. The Restructuring Plan also called for the aggressive rationalization
of the Company’s corporate overhead and focused on reducing our operating losses. As of December 31, 2016, the wind-down
of our Legacy Businesses was substantially complete. We have effectively terminated all employees associated with our Legacy Businesses
and ceased all operations, including revenue-producing activities. As of December 31, 2019, we have substantially collected all
our outstanding receivables and settled all of our outstanding payables associated with these businesses.
On
December 28, 2018, GlassBridge entered into a Purchase Agreement with Hilco IP Services LLC d/b/a Hilco Streambank, a Delaware
limited liability company as purchaser (the “Purchaser”), whereby Purchaser would acquire GlassBridge’s right,
title and interest in and to certain IPv4 internet protocol addresses for an aggregate purchase price of $950,000 (the “Address
Purchase Agreement”) to be held in escrow subject to the subsequent sale of the IPv4 addresses. On February 15, 2019, GlassBridge
and Purchaser entered into a Letter Agreement to complete the transactions contemplated in the Address Purchase Agreement (the
“Letter Agreement”). Pursuant to the terms of the Letter Agreement: (1) GlassBridge (i) delivered an executed bill
of sale to Purchaser, (ii) delivered ten (10) blank signed American Registry for Internet Numbers (“ARIN”) Officer
Attestation Forms (the “ARIN Forms’) to Purchaser and (iii) designated Purchaser or Purchaser’s designee, as
applicable, as a point of contact on GlassBridge’s ARIN accounts as necessary; and (2) Purchaser instructed the escrow agent
to release $750,000 to GlassBridge, with $200,000 to remain in escrow.
On
March 31, 2019, the Company entered into a securities purchase agreement with IMN Capital Holdings, Inc., a Delaware company (“IMN
Capital”) to sell its entire ownership of its international subsidiaries and Imation Latin America Corp., a Delaware corporation
(the “Imation Subsidiaries”) (the “Subsidiary Sale”). In connection with the sale, the purchase price
furnished by IMN Capital to the Company consisted of (i) $277,900 payable upon the execution of the IMN Capital Agreement and
(ii) 75% of all net proceeds from subsidiary litigation (which, for the avoidance of doubt, shall be calculated after the payment
of (i) the retirement of the Germany pension liability; (ii) contingency fees payable to attorneys engaged in connection with
the Subsidiary Litigation; (iii) fees payable to Mach 5, the litigation financing company and (iv) the payment of all applicable
taxes including income taxes in connection with the subsidiary litigation). The Company recorded a one-time non-cash gain of approximately
$10.0 million in connection with IMN Capital Agreement transaction.
Results
of Discontinued Operations
The
operating results for the Legacy Businesses and the Nexsan Business are presented in our Consolidated Statements of Operations
as discontinued operations for all periods presented and reflect revenues and expenses that are directly attributable to these
businesses that were eliminated from our ongoing operations.
The
key components of the results of discontinued operations were as follows:
|
|
|
For
the Years Ended
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Net
revenue
|
|
$
|
—
|
|
|
$
|
24.8
|
|
|
Cost
of goods sold
|
|
|
—
|
|
|
|
13.7
|
|
|
Gross
profit
|
|
|
—
|
|
|
|
11.1
|
|
|
Selling,
general and administrative
|
|
|
—
|
|
|
|
8.1
|
|
|
Research
and development
|
|
|
—
|
|
|
|
2.4
|
|
|
Restructuring
and other
|
|
|
—
|
|
|
|
(3.8
|
)
|
|
Other
income (expense)
|
|
|
1.3
|
|
|
|
(1.7
|
)
|
|
Income from discontinued operations, before income taxes
|
|
|
1.3
|
|
|
|
6.1
|
|
|
Gain
on sale of discontinued businesses, before income taxes
|
|
|
9.4
|
|
|
|
6.4
|
|
|
Income
tax benefit
|
|
|
1.0
|
|
|
|
0.3
|
|
|
Income from discontinued businesses, net of income taxes
|
|
$
|
11.7
|
|
|
$
|
12.8
|
|
Net
income of discontinued operations for year ended December 31, 2019 decreased by $1.1 million compared to the year
ended December 31, 2018.
Restructuring
and other for the year ended December 31, 2018, includes the net loss attributable to a noncontrolling interest of $0.6
million.
The
depreciation and amortization expenses recorded as part of income (loss) from discontinued operations (included in selling, general
and administrative and research and development expenses in table above) were $0.0 and $0.3 million for the year ended December
31, 2019 and 2018, respectively.
Lease
expense recorded as part of income (loss) from discontinued operations (included in selling, general and administrative expenses
in table above) were $0.0 million and $0.5 million for the years ending December 31, 2019 and 2018, respectively. This expense
was related to the Nexsan Business and the Company is no longer obligated under the lease.
The
income tax (provision) benefit related to discontinued operations was $1.0 million and $0.3 million for the years ended December
31, 2019 and 2018, respectively. See Note 11 - Income Taxes for additional information.
There
were no current assets of discontinued operations as of December 31, 2019. Current assets of discontinued operations of $2.4 million
as of December 31, 2018 included $0.7 million of accounts receivable, $1.0 million related to the funds held in escrow for the
Address Purchase Agreement and $0.7 million of other current assets. The decrease of the current assets in 2019 was primarily
due to the sale of the Imation Subsidiaries.
Current
liabilities of discontinued operations were $0.0 million as of December 31, 2019. Current liabilities of discontinued operations
of $4.6 million as of December 31, 2018 included $1.7 million of accounts payable, $1.0 million due to CMC, and $2.2 million
of other current liability amounts. The decrease of the current liabilities in 2018 was primarily due to the divestiture of the
Nexsan Business.
Other
liabilities of discontinued operations were $0.0 million as of December 31, 2019. Other liabilities of discontinued operations
of $2.2 million as of December 31, 2018 included $0.5 million of withholding tax, $0.6 million of tax contingencies, and $1.1
million of other liabilities.
Note
6 — Supplemental Balance Sheet Information
Additional
supplemental balance sheet information is provided below.
Other
current assets of $2.8 million as of December 31, 2019 include $1.7 million of prepaid professional service fees to a related
party, $0.5 million for a tax refund to be received in 2020 and $0.6 million of escrowed funds related to the NXSN Transaction.
For more information regarding the NXSN Transaction, see Note 5 – Discontinued Operations.
Total
assets of as of December 31, 2019 include a $14.8 million investment in Arrive LLC (“Arrive”). The Company recognized
a $12 million unrealized gain on the Arrive investment from the prior year, net of a $1.2 million distribution. The Arrive investment
was $4.0 million as of December 31, 2018, which is consistent with our stated strategy of exploring a diverse range of new strategic
asset management business opportunities for our portfolio. Historically, we accounted for such investment under the cost method
of accounting. The adoption of ASU No. 2016-01 in the first quarter of 2018 effectively eliminated the cost method of accounting,
and the carrying value of this investment is written down, or impaired, to fair value when a decline in value is considered to
be other-than-temporary. Our strategic investment in equity securities does not have a readily determinable fair value; therefore,
the new guidance was adopted prospectively. As of December 31, 2019, there were no indicators of impairment for this investment.
The Company will assess the investment for potential impairment, quarterly.
Other
assets and other investments of $2.4 million include a $0.9 million investment in the Möbius Fund SCA SICAV-RAIF. In January
2020, the Company contributed an addition $0.4 million to the investment due to market downturn. The investment subsequently ended
and resulted in a $1.3 million loss that will be realized in the first quarter of 2020. A $0.5 million minimum tax credit is also
included in other assets and other investments as of December 31, 2019. Other assets as of December 31, 2018 include a $1.1 million
minimum tax refund, escrowed funds related to the NXSN Transaction of $0.7 million and $0.3 million of other assets. For more
information regarding the NXSN Transaction, see Note 5 - Discontinued Operations.
Other
current liabilities (included as a separate line item in our Consolidated Balance Sheets) include the following:
|
|
|
December
31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Accrued
payroll
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Levy
accruals
|
|
|
—
|
|
|
|
0.3
|
|
|
Pension
minimum contributions
|
|
|
—
|
|
|
|
1.9
|
|
|
Other
current liabilities
|
|
|
1.4
|
|
|
|
1.1
|
|
|
Total
other current liabilities
|
|
$
|
1.5
|
|
|
$
|
3.5
|
|
Other
current liabilities as of December 31, 2019, included accruals for professional services fees of $0.7 million and fees related
to insurance and other claims of $0.4 million.
As
of December 31, 2019, pension liabilities were $13.5 million. Following a payment made on October 3, 2019 in fulfillment of a
settlement agreement with the Pension Benefit Guaranty Corporation, the Company is no longer obligated for this liability, as
of January 6, 2020. Pension liabilities were $23.0 million as of December 31, 2018. See Note 10 – Retirement Plans
for additional information on the pension liability.
Stock
purchase agreements as of December 31, 2019, include notes payable of $12.1 million and $5.5 million to George E. Hall and Joseph
A. De Perio, respectively, in conjunction with the Stock Purchase Agreement for shares of SportBLX common stock. See Note 15 –
Related Party Transactions for additional information.
As
of December 31, 2019, the Company has a note payable of $13.0 million in connection with a Securities Purchase Agreement with
Orix PTP Holdings, LLC. See Note 15 – Related Party Transactions for additional information.
Note
7 — Debt
Debt
and notes payable consists of the following:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Pension
liability
|
|
$
|
13.5
|
|
|
$
|
25.1
|
|
|
Stock purchase
agreement notes payable (see Note 15 – Related Party Transactions)
|
|
|
17.6
|
|
|
|
—
|
|
|
Orix notes payable
|
|
|
13.0
|
|
|
|
—
|
|
|
Deferred financing
costs
|
|
|
(2.7
|
)
|
|
|
|
|
|
Other
liabilities
|
|
|
0.2
|
|
|
|
2.9
|
|
|
Total
long term debt
|
|
|
41.6
|
|
|
|
28.0
|
|
Pension
liabilities of $13.5 million as of December 31, 2019 are not included in the maturity schedule below as the Company is no longer
obligated for the liability as of January 6, 2020. See Note 10 – Retirement Plans for additional information on the pension
liability.
Stock
purchase agreement notes payable bear interest at a 5% annual rate and mature on December 12, 2022. The interest under the notes
is payable in arrears on the first day of each calendar quarter, or, at the Company’s option, in shares of common stock
of the Company at a price reflecting market value.
The
Orix notes payable bear interest at a 7.5% annual rate and mature on September 30, 2026. Principal payments are due annually,
commencing on March 31, 2021 and thereafter on March 31 of each year until maturity. The first two principal installments are
$3,461,538 each and the remaining installments are $519,231 each. All accrued interest is due and payable in arrears, commencing
on September 30, 2020 and thereafter on September 30 of each year until maturity.
Scheduled
maturities of the Company’s long-term debt, as they exist as of December 31, 2019, in each of the next four fiscal years
and thereafter are as follows:
|
Fiscal
years ending in
|
|
(in
millions)
|
|
|
2020
|
|
$
|
—
|
|
|
2021
|
|
|
5.0
|
|
|
2022
|
|
|
22.6
|
|
|
2023
|
|
|
0.8
|
|
|
2024
|
|
|
0.7
|
|
|
2025
and thereafter
|
|
|
1.5
|
|
|
Total
|
|
|
30.6
|
|
Note
8 — Restructuring and Other Expense
Restructuring
expenses generally include severance and related charges, lease termination costs and other costs related to restructuring programs.
Employee-related severance charges are largely based upon distributed employment policies and substantive severance plans. Generally,
these charges are reflected in the period in which the Board approves the associated actions, the actions are probable, and the
amounts are estimable which may occur prior to the communication to the affected employee(s). This estimate considers all information
available as of the date the financial statements are issued.
Restructuring
and Other Expense
The
components of our restructuring and other expense for our continuing operations included in our Consolidated Statements of Operations
were as follows:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Restructuring
Expense:
|
|
|
|
|
|
|
|
|
|
Severance
and related
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Total
restructuring
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
Other
Expense:
|
|
|
|
|
|
|
|
|
|
German
levy settlement
|
|
|
—
|
|
|
|
(5.0
|
)
|
|
Total
other
|
|
$
|
—
|
|
|
$
|
(5.0
|
)
|
|
Total
|
|
$
|
0.1
|
|
|
$
|
(4.8
|
)
|
Note
9 — Stock-Based Compensation
Stock
compensation consisted of the following:
|
|
|
|
Years
Ended December 31,
|
|
|
|
|
|
2019
|
|
|
|
2018
|
|
|
|
|
|
(In
millions)
|
|
|
Stock
compensation expense
|
|
$
|
—
|
|
|
$
|
—
|
|
The
2011 Incentive Plan was approved and adopted by our shareholders on May 4, 2011 and became effective immediately. The 2011 Incentive
Plan was amended and approved by our shareholders on May 8, 2013. The 2011 Incentive Plan permits the grant of stock options,
SARs, restricted stock, restricted stock units, dividend equivalents, performance awards, stock awards and other stock-based awards.
The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2011 Incentive
Plan is 4,671. The number of shares available for awards, as well as the terms of outstanding awards, is subject to adjustments
as provided in the 2011 Incentive Plan for stock splits, stock dividends, recapitalization and other similar events. Awards may
be granted under the 2011 Incentive Plan until the earlier to occur of May 3, 2021 or the date on which all shares available for
awards under the 2011 Incentive Plan have been granted; provided, however, that incentive stock options may not be granted after
February 10, 2021.
Stock-based
compensation awards issued under the 2011 Incentive Plan generally have a term of ten years and, for employees, vest over a three-year
period. Exercise prices of awards issued under these plans are equal to the fair value of the Company’s stock on the date
of grant.
As
of December 31, 2019, there were 879 outstanding stock-based compensation awards under the 2011 Incentive Plan. As of December
31, 2019, there were no shares available for grant under our 2011 Incentive Plan.
Stock
Options
The
following table summarizes our stock option activity:
|
|
|
Stock
Options
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
Outstanding December 31,
2017
|
|
|
947
|
|
|
$
|
16,962.00
|
|
|
|
1.8
|
|
|
Canceled
|
|
|
(834
|
)
|
|
|
16,992.00
|
|
|
|
|
|
|
Outstanding December 31, 2018
|
|
|
113
|
|
|
$
|
16,734.00
|
|
|
|
0.2
|
|
|
Canceled
|
|
|
(113
|
)
|
|
|
16,734.00
|
|
|
|
0.2
|
|
|
Granted
|
|
|
1,360
|
|
|
|
106.00
|
|
|
|
9.7
|
|
|
Vested
|
|
|
(481
|
)
|
|
|
106.00
|
|
|
|
9.7
|
|
|
Outstanding December
31, 2019
|
|
|
879
|
|
|
$
|
106.00
|
|
|
|
9.7
|
|
|
Exercisable as
of December 31, 2019
|
|
|
481
|
|
|
$
|
106.00
|
|
|
|
9.7
|
|
The
Company granted 1,360 options during the year ended December 31, 2019. As of December 31, 2019 there are 879 shares outstanding
and 481 exercisable stock options remaining. The aggregate intrinsic value of all outstanding stock options was $0.0 million as
of December 31, 2018. There were no options exercised in 2019. No options were granted or exercised during the year ended December
31, 2018.
Total
stock-based compensation expense associated with stock options related to continuing operations recognized in our Consolidated
Statements of Operations for the years ended December 31, 2019 and 2018 was $0.0 million and (0.3) million, respectively. As of
December 31, 2019, unrecognized compensation expense related to outstanding stock options was immaterial.
No
related stock-based compensation was capitalized as part of an asset for the years ended December 31, 2019 or 2018.
Restricted
Stock
The
following table summarizes our restricted stock activity:
|
|
|
Restricted
Stock
|
|
|
Weighted
Average Grant
Date Fair Value Per Share
|
|
|
Nonvested
as of December 31, 2017
|
|
|
1,070
|
|
|
$
|
706.00
|
|
|
Granted
|
|
|
801
|
|
|
|
226.00
|
|
|
Vested
|
|
|
(1,491
|
)
|
|
|
336.00
|
|
|
Forfeited
|
|
|
(230
|
)
|
|
|
972.00
|
|
|
Nonvested
as of December 31, 2018
|
|
|
150
|
|
|
$
|
1,406.00
|
|
|
Vested
|
|
|
(75
|
)
|
|
|
1,406.00
|
|
|
Forfeited
|
|
|
(75
|
)
|
|
|
1,406.00
|
|
|
Nonvested
as of December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
Of
the restricted stock granted during the year ended December 31, 2018, none of the shares were performance-based. There were no
shares granted during the year ended December 31, 2019.
The
total fair value of shares that vested during the years 2019 and 2018 was $0.1 million and $0.5 million, respectively.
Total
stock-based compensation expense associated with restricted stock relating to continuing operations recognized in our Consolidated
Statements of Operations for the years ended December 31, 2019 and 2018 was $0.0 million and $0.3 million, respectively. This
expense would result in a related tax benefit of $0.0 million and $0.1 million for the years ended December 31, 2019 and 2018,
respectively. However, these tax benefits are included in the U.S. deferred tax assets which are subject to a full valuation allowance,
and, due to the valuation allowance, we did not recognize the related tax benefit in 2019 or 2018. As of December 31, 2019,
there was no longer any unrecognized compensation expense related to outstanding restricted stock.
No
related stock-based compensation was capitalized as part of an asset for the years ended December 31, 2019 or 2018.
Stock
Appreciation Rights (SARs)
The
Company’s remaining SARs expired on December 31, 2017, and were cancelled in 2018 since the stock price and performance
conditions were not met. We had not recorded any compensation expense associated with these SARs based on the applicable accounting
rules. The Company did not grant any SARs for the years ended December 31, 2019 and 2018.
Note
10 — Retirement Plans
Pension
Plans
GlassBridge
and the U.S. Pension Benefit Guaranty Corporation (the “PBGC”) entered into an agreement on May 13, 2019 to terminate
the Imation Cash Balance Pension Plan (the “Plan”) based on the PBGC’s findings that (i) the Plan did not meet
the minimum funding standard required under Section 412 of the Internal Revenue Code of 1986, as amended; (ii) the Plan would
be unable to pay benefits when due and (iii) the Plan should be terminated in order to protect the interests of the Plan participants.
GlassBridge and all other members of Seller’s controlled group (within the meaning of 29 U.S.C. §1301(a)(14)) (collectively,
and including the Company, the “Controlled Group Members”)) were jointly and severally liable to the PBGC for all
liabilities under Title IV of ERISA in connection with the Plan’s termination, including unfunded benefit liabilities, due
and unpaid Plan contributions, premiums, and interest on each of the foregoing (the “Pension Liabilities”), as a result
of which a lien in favor of the Plan, on all property of each Controlled Group Member, arose and was perfected by PBGC (the “Lien”).
On October 1, 2019, the Company entered into a settlement agreement (“Settlement Agreement”) with the PBGC. Pursuant
to the terms of the Settlement Agreement, GlassBridge paid $3,000,000 in cash to PBGC on October 3, 2019 (the “Settlement
Payment”). Per the terms of the Settlement Agreement and following the Settlement Payment on October
3, 2019, the PBGC will be deemed to have released all Controlled Group Members from the Lien as of January 6, 2020.
Note
11 — Income Taxes
The
components of loss from continuing operations before income taxes were as follows:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
U.S.
|
|
$
|
11.4
|
|
|
$
|
(13.8
|
)
|
|
International
|
|
|
—
|
|
|
|
5.0
|
|
|
Total
|
|
$
|
11.4
|
|
|
$
|
(8.8
|
)
|
The
components of the income tax (provision) benefit from continuing operations were as follows:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
International
|
|
|
—
|
|
|
|
—
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
International
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
0.1
|
|
The
income tax provision from continuing operations differs from the amount computed by applying the statutory United States income
tax rate (21 percent) because of the following items:
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Tax
at statutory U.S. tax rate
|
|
$
|
2.4
|
|
|
$
|
1.9
|
|
|
State
income taxes, net of federal benefit
|
|
|
0.5
|
|
|
|
0.6
|
|
|
Net
effect of international operations
|
|
|
—
|
|
|
|
(4.0
|
)
|
|
Valuation
allowances
|
|
|
(28.6
|
)
|
|
|
30.8
|
|
|
Tax
on unremitted earnings of foreign subsidiaries
|
|
|
(0.4
|
)
|
|
|
0.5
|
|
|
U.S.
tax on foreign earnings
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
Stock-based
compensation
|
|
|
0.3
|
|
|
|
(0.3
|
)
|
|
Net
effect of subsidiary sale
|
|
|
25.0
|
|
|
|
(29.2
|
)
|
|
Minimum
tax credit refundable
|
|
|
—
|
|
|
|
0.1
|
|
|
Reclassification
to discontinued operations and other
|
|
|
0.8
|
|
|
|
(0.1
|
)
|
|
Income
tax (provision) benefit
|
|
$
|
—
|
|
|
$
|
0.1
|
|
Tax
legislation from the Tax Cuts and Jobs Act (“Tax Reform Act”) passed on December 22, 2017 has been incorporated into
the tax provision. The Tax Reform Act made broad and complex changes to the U.S. tax code, including, but not limited to, (1)
reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum
tax (“AMT”) and changing how existing AMT credits can be realized; (3) creating a new limitation on deductible interest
expense; and (4) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning
after December 31, 2017.
The
tax law change that had a significant impact on the Company’s 2017 and 2018 tax provisions is the ability to realize minimum
tax credit carryovers as cash refunds, with the elimination of the corporate alternative minimum tax. A tax benefit of $2.1 million
was recorded in continuing operations in 2017 and was increased by another $0.1 in 2018 when the IRS announced a sequestration
reduction would not apply to the refund. The Company received a $1.1 million cash refund in 2019, and will receive $0.5
million in 2020 and $0.3 million in each of 2021 and 2022.
Tax
reform changes related to international subsidiaries did not impact the 2019 tax provision since the subsidiaries were sold in
2019.
Tax
laws require certain items to be included in our tax returns at different times than the items are reflected in our results of
operations. Some of these items are temporary differences that will reverse over time. We record the tax effect of temporary differences
as deferred tax assets and deferred tax liabilities in our Consolidated Balance Sheets.
In
2019 and 2018 the net cash paid for income taxes, relating to both continuing and discontinued operations, was $0.0 million and
$0.4 million, respectively.
The
components of net deferred tax assets and liabilities were as follows:
|
|
|
As
of December 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(In
millions)
|
|
Compensation
and employee benefits
|
|
|
—
|
|
|
|
0.3
|
|
|
Tax
credit carryforwards
|
|
|
21.4
|
|
|
|
22.2
|
|
|
Net
operating loss carryforwards
|
|
|
144.1
|
|
|
|
147.3
|
|
|
Accrued
liabilities and other reserves
|
|
|
—
|
|
|
|
0.2
|
|
|
Pension
|
|
|
3.4
|
|
|
|
4.2
|
|
|
Intangible
assets, net
|
|
|
—
|
|
|
|
2.5
|
|
|
Capital
losses
|
|
|
26.9
|
|
|
|
9.5
|
|
|
Other,
net
|
|
|
40.6
|
|
|
|
44.4
|
|
|
Total
deferred tax assets
|
|
|
236.4
|
|
|
|
230.6
|
|
|
Valuation
allowance
|
|
|
(236.4
|
)
|
|
|
(230.6
|
)
|
|
Net
deferred tax assets
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Unremitted
earnings of foreign subsidiaries
|
|
|
(0.2
|
)
|
|
|
(0.5
|
)
|
|
Total
deferred tax liabilities
|
|
|
(0.2
|
)
|
|
|
(0.5
|
)
|
|
Valuation
allowance
|
|
|
—
|
|
|
|
—
|
|
|
Total
deferred tax liabilities
|
|
|
(0.2
|
)
|
|
|
(0.5
|
)
|
|
Net
deferred tax liabilities
|
|
$
|
(0.2
|
)
|
|
$
|
(0.5
|
)
|
We
regularly assess the likelihood that our deferred tax assets will be recovered in the future. A valuation allowance is recorded
to the extent we conclude a deferred tax asset is not considered more-likely-than-not to be realized. We consider all positive
and negative evidence related to the realization of the deferred tax assets in assessing the need for a valuation allowance.
Our
accounting for deferred tax consequences represents our best estimate of future events. A valuation allowance established or revised
as a result of our assessment is recorded through income tax provision in our Consolidated Statements of Operations. Changes in
our current estimates due to unanticipated events, or other factors, could have a material effect on our financial condition and
results of operations.
We
maintain a valuation allowance related to our deferred tax assets. The valuation allowance was $236.4 million and $230.6
million as of December 31, 2019 and 2018, respectively. The deferred tax asset changes and corresponding valuation allowance changes
in 2019 compared to 2018 were due primarily to an increase in capital loss carryforwards from the sale of foreign subsidiaries,
deductible for tax only when the company earns capital gains.
The
net deferred tax liability not offset by valuation allowance of $0.2 million relates to foreign tax withholding on unremitted
foreign earnings.
The
table below shows the components of our deferred tax balances as they are recorded on our Consolidated Balance Sheets:
|
|
|
As
of December 31
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Deferred
tax liability - non-current
|
|
|
(0.2
|
)
|
|
|
(0.5
|
)
|
|
Total
|
|
$
|
(0.2
|
)
|
|
$
|
(0.5
|
)
|
Federal
net operating loss carryforwards totaling $597.0 million will begin expiring in 2029. The Company had analysis performed
by outside consultants to confirm that none of the federal net operating loss carryovers should be limited by Section 382. This
limitation could result if there is a more than 50 percent ownership shift in the GlassBridge shares within a three-year testing
period. No such ownership shift has occurred through December 31, 2019.
The
Company’s $597.0 million in federal net operating loss carryforwards generated through 2017 continue to be subject
to the historical tax rules that allow carryforward for 20 years from origin, with the ability to offset 100 percent of future
taxable income. Any future year tax losses will be subject to the Tax Reform Act limitations which, while having indefinite life,
can offset only 80 percent of future taxable income.
We
have state income tax loss carryforwards of $323.6 million, which will expire at various dates up to 2037. We have U.S. and foreign
tax credit carryforwards of $21.4 million, $17.5 million of which will expire between 2020 and 2022,
and the remainder of which will expire between 2023 and 2032. Federal capital losses of $107.7 million will
expire between 2020 and 2024.
Our
income tax returns are subject to review by various U.S. and foreign taxing authorities. As such, we record accruals for items
that we believe may be challenged by these taxing authorities. The threshold for recognizing the benefit of a tax return position
in the financial statements is that the position must be more-likely-than-not to be sustained by the taxing authorities based
solely on the technical merits of the position. If the recognition threshold is met, the tax benefit is measured and recognized
as the largest amount of tax benefit that, in our judgment, is greater than 50 percent likely to be realized.
A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
Millions)
|
|
|
Beginning
Balance
|
|
$
|
0.6
|
|
|
$
|
0.9
|
|
|
Additions:
|
|
|
|
|
|
|
|
|
|
Additions
for tax positions of current years
|
|
|
—
|
|
|
|
—
|
|
|
Additions
for tax positions of prior years
|
|
|
—
|
|
|
|
—
|
|
|
Reductions:
|
|
|
|
|
|
|
|
|
|
Reductions
for tax positions of prior years
|
|
|
(0.4
|
)
|
|
|
—
|
|
|
Settlements
with taxing authorities
|
|
|
—
|
|
|
|
—
|
|
|
Reductions
due to lapse of statute of limitations
|
|
|
—
|
|
|
|
(0.3
|
)
|
|
Total
|
|
|
0.2
|
|
|
|
0.6
|
|
The
total amount of unrecognized tax benefits as of December 31, 2019 was reduced by $0.4 million to $0.2 million with the sale of
the foreign subsidiaries and elimination of corresponding international tax issues. It is reasonably possible that the amount
of the unrecognized tax benefits could increase or decrease during the next twelve months; however, it is not possible to reasonably
estimate the effect on the unrecognized tax benefit at this time.
Our
federal income tax returns for 2016 through 2019 are subject to examination by the Internal Revenue Service. For state purposes,
the statutes of limitation vary by jurisdiction. With few exceptions, we are no longer subject to examination for years before
2013.
Note
12 — Shareholders’ Equity
Reverse
Stock Split
On
August 20, 2019, the Company filed an Amendment (the “Amendment”)
to the Restated Certificate of Incorporation, as amended, of the Company (the “Articles”) with the Secretary of State
of the State of Delaware to: (i) effect a reverse split of our common stock at a ratio of 1:200 (the “Reverse Stock
Split”) and (ii) effect an amendment allowing the stockholders of the Company to act by written consent in lieu of meeting,
subject to certain limitations (the “Written Consent Amendment”).
On
August 21, 2019 (the “Effective Date”), our common stock began trading on the Reverse Stock Split-adjusted basis on
the OTCQB at the opening of trading. In connection with the Reverse Stock Split, our common stock began trading with a new CUSIP
number at such time. There was no change to the Company’s stock symbol.
No
fractional shares of common stock were issued in connection with the Reverse Stock Split. If, as a result of the Reverse Stock
Split, a stockholder would otherwise have held a fractional share, a stockholder, in lieu of the issuance of such fractional share,
was entitled, upon surrender to the exchange agent of a certificate(s) representing its pre-split shares or upon conversion of
its shares held in book-entry, to receive a cash payment equal to the fraction to which the stockholder would otherwise be entitled,
multiplied by $106, which is the closing price per share (as adjusted to give effect to the Reverse Stock Split) on the OTCQB
on the closing date immediately prior to the Effective Date.
EQ
by Equiniti (“EQ”), the Company’s transfer agent, acted as the exchange agent for the Reverse Stock Split, and
provided instructions to stockholders of record regarding the process for exchanging shares. EQ issued all of the post-Reverse
Stock Split shares through its paperless Direct Registration System (“DRS”).
Treasury
Stock
On
May 2, 2012, our Board of Directors authorized a share repurchase program that allowed for the repurchase of 2,500 shares of common
stock. On November 14, 2016, our Board authorized a new share repurchase program under which we may repurchase up to 2,500 of
our outstanding shares of common stock. This authorization replaces the Board’s previous share repurchase authorization
from May 2, 2012. Under the share repurchase program, we may repurchase shares from time to time using a variety of methods, which
may include open market transactions and privately negotiated transactions.
Since
the inception of the November 14, 2016 authorization, we have repurchased 780 shares of common stock for $0.3 million and, as
of December 31, 2019, we had authorization to repurchase 1,720 additional shares.
During
the year ended December 31, 2019, the Company purchased 450 of treasury shares for $28,434. During the year ended 2018, the Company
purchased 70 shares for $13,575. The treasury stock held as of December 31, 2018 was acquired at an average price of $8,496.47
per share. The following is a summary of treasury share activity:
|
|
|
Treasury
Shares
|
|
|
Balance
as of December 31, 2017
|
|
|
2,820
|
|
|
Purchases
|
|
|
70
|
|
|
Restricted
stock grants and other
|
|
|
(488
|
)
|
|
Balance
as of December 31, 2018
|
|
|
2,402
|
|
|
Purchases
|
|
|
450
|
|
|
Forfeitures
and other
|
|
|
75
|
|
|
Balance
as of December 31, 2019
|
|
|
2,927
|
|
Accumulated
Other Comprehensive Loss
Accumulated
other comprehensive loss and related activity consisted of the following:
|
|
|
Defined
Benefit Plans
|
|
|
Total
|
|
|
|
|
(In
millions)
|
|
|
Balance
as of December 31, 2018
|
|
$
|
(20.7
|
)
|
|
$
|
(20.7
|
)
|
|
Amounts
reclassified from accumulated other comprehensive loss, net of tax
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Net
current period other comprehensive income (loss)
|
|
|
0.1
|
|
|
|
0.1
|
|
|
Balance
as of December 31, 2019
|
|
$
|
(20.6
|
)
|
|
$
|
(20.6
|
)
|
(1)
No income tax expense was recorded for liability adjustments for defined benefit plans for the year ended December 31, 2019.
Details
of amounts reclassified from Accumulated other comprehensive loss and the line item in our Consolidated Statement of Operations
for the year ended December 31, 2019 are as follows:
|
|
|
Amounts
Reclassified
from Accumulated
Other Comprehensive Loss
|
|
|
Affected
Line Item in the Statement Where Net
Loss is Presented
|
|
|
|
(In
millions)
|
|
|
|
|
Amortization
of net actuarial loss
|
|
|
0.1
|
|
|
Other
Income (Expense)
|
|
Total
reclassifications for the period
|
|
$
|
0.1
|
|
|
|
Income
taxes are not provided for foreign translation relating to permanent investments in international subsidiaries. Reclassification
adjustments are made to avoid double counting in comprehensive loss items that are also recorded as part of net loss and are presented
net of taxes in the Consolidated Statements of Comprehensive Loss.
Non-Controlling
Interest
On
October 1, 2019, the Company sold to Orix PTP Holdings, LLC (“Orix”), for $17,562,700, 20.1% of the outstanding
stock of Adara, until then a Company wholly owned subsidiary, together with two promissory notes of Adara to the Company in
total principal amount of $13,000,000 (the “Orix Transaction”). Adara issued the notes in consideration for the assignment by the Company to Adara of
the right to receive payments from IMN Capital described above and transfer by the Company to Adara of some of
Company’s SportBLX shares. In connection with the transaction, Adara’s Board of Directors was expanded to five
directors, including one director designated by Orix. In addition, GlassBridge, Orix, and Adara entered into a
Stockholders’ Agreement pursuant to which Orix may, among other things, during the three months beginning April 1,
2021, sell back its Adara stock to GlassBridge, at book value, and, during the term of the Stockholders Agreement, has the
right to purchase all or a portion of GlassBridge’s Adara shares, at book value plus 20%, subject to
GlassBridge’s right to respond to the notice by purchasing all of Orix’s Adara shares at that
price.
382
Rights Agreement
On
August 6, 2015, the Board of Directors adopted a rights plan intended to avoid an “ownership change” within the meaning
of Section 382 of the Code, and thereby preserve the current ability of the Company to utilize certain net operating loss carryforwards
and other tax benefits of the Company and its subsidiaries (the “Tax Benefits”). If the Company experiences an “ownership
change,” as defined in Section 382 of Code, the Company’s ability to fully utilize the Tax Benefits on an annual basis
will be substantially limited, and the timing of the usage of the Tax Benefits and such other benefits could be substantially
delayed, which could therefore significantly impair the value of those assets. The rights plan is intended to act as a deterrent
to any person or group acquiring “beneficial ownership” of 4.9% or more of the Company’s outstanding shares
of common stock, without the approval of the Board. The description and terms of the Rights (as defined below) applicable to the
rights plan are set forth in the 382 Rights Agreement, dated as of August 7, 2015 (the “Rights Agreement”), by and
between the Company and Wells Fargo Bank, N.A., as Rights Agent.
As
part of the Rights Agreement, the Board authorized and declared a dividend distribution of one right (a Right) for each outstanding
share of the Company’s common stock, to stockholders of record at the close of business on September 10, 2015. Each Right
entitles the holder to purchase from the Company a unit consisting of one one-hundredth of a share (a “Unit”) of Series
A Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Stock”) at a purchase price
of $15.00 per Unit, subject to adjustment (the “Purchase Price”). Until a Right is exercised, the holder thereof,
as such, will have no separate rights as a stockholder of the Company, including the right to vote or to receive dividends in
respect of Rights.
Under
the Rights Agreement, an Acquiring Person is any person or group of affiliated or associated persons (a “Person”)
who is or becomes the beneficial owner of 4.9% or more of the outstanding shares of the Company’s common stock other than
as a result of repurchases of stock by the Company, dividends or distribution by the Company, stock issued under certain benefit
plans or certain inadvertent actions by stockholders. For purposes of calculating percentage ownership under the Rights Agreement,
outstanding shares of the Company’s common stock include all of the shares of common stock actually issued and outstanding.
Beneficial ownership is determined as provided in the Rights Agreement and generally includes, without limitation, any ownership
of securities a Person would be deemed to actually or constructively own for purposes of Section 382 of the Code or the Treasury
Regulations promulgated thereunder. The Rights Agreement provides that the following shall not be deemed an Acquiring Person for
purposes of the Rights Agreement: (i) the Company or any subsidiary of the Company and any employee benefit plan of the Company,
or of any subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant
to the terms of any such plan or (ii) any Person that, as of August 7, 2015, is the beneficial owner of 4.9% or more of the shares
of Common Stock outstanding (such Person, an “Existing Holder”) unless and until such Existing Holder acquires beneficial
ownership of additional shares of common stock (other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding shares of common stock or pursuant to a split or subdivision of the outstanding shares of common stock) in
an amount in excess of 0.5% of the outstanding shares of common stock.
The
Rights Agreement provides that a Person shall not become an Acquiring Person for purpose of the Rights Agreement in a transaction
that the Board determines is exempt from the Rights Agreement, which determination shall be made in the sole and absolute discretion
of the Board, upon request by any Person prior to the date upon which such Person would otherwise become an Acquiring Person,
including, without limitation, if the Board determines that (i) neither the beneficial ownership of shares of common stock by
such Person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize
or endanger the availability to the Company of the Tax Benefits or (ii) such transaction is otherwise in the best interests of
the Company.
Initially,
the Rights will not be exercisable and will be attached to all common stock representing shares then outstanding, and no separate
Rights certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate
from the common stock and become exercisable and a distribution date (a “Distribution Date”) will occur upon the earlier
of (i) 10 business days (or such later date as the Board shall determine) following a public announcement that a Person has become
an Acquiring Person or (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a
tender offer, exchange offer or other transaction that, upon consummation thereof, would result in a Person becoming an Acquiring
Person.
Until
the Distribution Date, common stock held in book-entry form, or in the case of certificated shares, common stock certificates,
will evidence the Rights and will contain a notation to that effect. Any transfer of shares of common stock prior to the Distribution
Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred on the books
and records of the Rights Agent as provided in the Rights Agreement.
If
on or after the Distribution Date, a Person is or becomes an Acquiring Person, each holder of a Right, other than certain Rights
including those beneficially owned by the Acquiring Person (which will have become void), will have the right to receive upon
exercise common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to
two times the Purchase Price.
In
the event that, at any time following the first date of a public announcement that a Person has become an Acquiring Person or
that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board
becomes aware of the existence of an Acquiring Person (any such date, the Stock Acquisition Date), (i) the Company engages in
a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages
in a merger or other business combination transaction in which the Company is the surviving corporation and the common stock of
the Company is changed or exchanged or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have
the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the Purchase Price.
At
any time following the Stock Acquisition Date and prior to an Acquiring Person obtaining shares that would lead to a more than
50% change in the outstanding common stock, the Board may exchange the Rights (other than Rights owned by such Person which have
become void), in whole or in part, for common stock or Preferred Stock at an exchange ratio of one share of common stock, or one
one-hundredth of a share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock having
equivalent rights, preferences and privileges), per Right, subject to adjustment.
The
Rights and the Rights Agreement will expire on the earliest of (i) 5:00 P.M. New York City time on August 7, 2021, which was extended
by stockholder approval on June 18, 2018, pursuant to a Resolution of the Board of Directors at its Meeting on April 13, 2018,
(ii) the time at which the Rights are redeemed or exchanged pursuant to the Rights Agreement, (iii) the date on which the Board
determines that the Rights Agreement is no longer necessary for the preservation of material valuable Tax Benefits or is no longer
in the best interest of the Company and its stockholders, (iv) the beginning of a taxable year to which the Board determines that
no Tax Benefits may be carried forward and (v) the first anniversary of the adoption of the Agreement if stockholder approval
has not been received by or on such date.
At
any time until the earlier of the Distribution Date or the expiration date of the Rights, the Company may redeem the Rights in
whole, but not in part, at a price of $0.001 per Right. Immediately upon the action of the Board ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.
Note
13 — Business Segment Information and Geographic Data
The
Legacy Businesses and Nexsan Business are presented in our Consolidated Statements of Operations as discontinued operations and
are not included in segment results for all periods presented. See Note 5 - Discontinued Operations for further
information about these divestitures.
As
of December 31, 2019, the asset management business and sports investment platform are our reportable segments.
We
evaluate segment performance based on revenue and operating loss. The operating loss reported in our segments excludes corporate
and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported
consolidated results. The corporate and unallocated operating loss includes costs which are not allocated to the business segments
in management’s evaluation of segment performance such as litigation settlement expense, corporate expense and other expenses.
|
|
|
Years
Ended December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Operating
income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
Asset
management business
|
|
|
0.1
|
|
|
|
(3.6
|
)
|
|
Sports
investment platform
|
|
|
(0.2
|
)
|
|
|
(3.6
|
)
|
|
Total segment operating
loss
|
|
|
(0.1
|
)
|
|
|
(3.6
|
)
|
|
Corporate and unallocated
|
|
|
(3.2
|
)
|
|
|
(3.3
|
)
|
|
Intangible impairment
|
|
|
—
|
|
|
|
(6.2
|
)
|
|
Restructuring and
other
|
|
|
(0.1
|
)
|
|
|
4.8
|
|
|
Total
operating loss
|
|
|
(3.4
|
)
|
|
|
(8.3
|
)
|
|
Interest expense
|
|
|
(0.3
|
)
|
|
|
(0.1
|
)
|
|
Net income (loss)
from AAM fund activities
|
|
|
—
|
|
|
|
(0.9
|
)
|
|
Other income (expense),
net
|
|
|
15.1
|
|
|
|
(0.5
|
)
|
|
Income
(loss) from continuing operations before income taxes
|
|
$
|
11.4
|
|
|
$
|
(8.8
|
)
|
Restructuring
and other for the year ended December 31, 2019 includes severance cost. Restructuring and other for the year ended December 31,
2018, includes severance costs of $0.2 million and a gain on the German levy settlement of $5.0 million. See Note 8 - Restructuring
and Other Expenses for more information.
Note
14 — Litigation, Commitments and Contingencies
Indemnification
Obligations
In
the normal course of business, we periodically enter into agreements that incorporate general indemnification language. Performance
under these indemnities would generally be triggered by a breach of terms of the contract or by a supportable third-party claim.
There have historically been no material losses related to such indemnifications. As of December 31, 2019, and 2018, estimated
liability amounts associated with such indemnifications were not material.
Environmental
Matters
Our
Legacy Business operations and indemnification obligations resulting from our spinoff from 3M subject us liabilities arising from
a wide range of federal, state and local environmental laws. For example, from time to time we have received correspondence from
3M notifying us that we may have a duty to defend and indemnify 3M with respect to certain environmental claims such as remediation
costs. Environmental remediation costs are accrued when a probable liability has been determined and the amount of such liability
has been reasonably estimated. These accruals are reviewed periodically as remediation and investigatory activities proceed and
are adjusted accordingly. We did not have any environmental accruals as of December 31, 2019. Compliance with environmental regulations
has not had a material adverse effect on our financial results.
Operating
Leases
We
incur rent expense under operating leases, which primarily relate to office space. Most long-term leases include one or more options
to renew at the then fair rental value for a period of approximately one to three years. The following table sets forth the components
of net rent expense for the years ended December 31:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
(In
millions)
|
|
|
Minimum
lease payments
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Contingent
rentals
|
|
|
—
|
|
|
|
—
|
|
|
Total
rental expense, net
|
|
$
|
—
|
|
|
$
|
0.1
|
|
The
Company does not have any long-term lease obligations as of December 31, 2019.
Note
15 - Related Party Transactions
On
January 1, 2019, the Company and Clinton Group Inc. (“Clinton”)
entered into a management service agreement (the “Management Service Agreement”), pursuant to which Clinton agreed
to provide certain services to the Company.
Prior to being
appointed our Chief Executive Officer and Chief Financial Officer, respectively, Daniel A. Strauss served as our Chief Executive
Officer, and Francis Ruchalski served as our Chief Financial Officer, pursuant to the terms of the Amended and Restated Services
Agreement we entered into with Clinton on March 31, 2019 (the “Amended Services Agreement”) replacing in its entirety
that certain Services Agreement we entered into with Clinton on March 2, 2017. Clinton also made available other employees of
Clinton as necessary to manage certain business functions as deemed necessary in the sole discretion of Clinton to provide other
management services. The Amended Services Agreement was terminated on December 18, 2019.
Clinton
paid Mr. Strauss and Mr. Ruchalski compensation and benefits under the Amended Service Agreement through December 15, 2019,
and they became employees of the Company on December 18, 2019 and December 16, 2019, respectively.
As of December 31, 2019,
the Company paid Clinton $2,400,000 under the Amended Services Agreement and the Management Services Agreement, recorded
$1,170,833 and $500,000 within “Selling, general and administrative” in our Consolidated Statements of Operations
for the twelve months ended December 31, 2019 and 2018, respectively.
In January 2019,
for total consideration of $1,000,000, Sport-BLX Inc. issued to the Company shares of Sport-BLX common stock, constituting 9.0%
of the common stock outstanding after giving effect to the transaction. Immediately before the transaction, George E. Hall (“Mr.
Hall”), SportBLX’s Executive Chairman and CEO, held 65.6% of SportBLX’s outstanding shares. Mr. Hall owns beneficially
approximately 29.1% of the Company’s outstanding common stock.
On September
13, 2019, the Board approved a success fee in connection with the completion of the Orix Transaction and the pension settlement
to Clinton. The Board approved a fee equal to 15% of the cash consideration, for its work on the Orix Transaction and 10% of the
difference between the gross pension liabilities and the settlement payment. Accordingly, the Company paid Clinton a success fee
of $2,635,000 related to the Orix Transaction and $1,348,385 related to the pension settlement.
On
December 12, 2019, the Company purchased from Mr. Hall 37,924 shares of SportBLX common stock in exchange for $1,346,302 in cash
and a $12,116,718 principal amount promissory note bearing interest at a 5% annual rate, due December 12, 2022. On the same date,
the Company purchased from Joseph A. De Perio (“Mr. De Perio”) 17,076 shares of SportBLX common stock in exchange for
$606,198 in cash and a $5,455,782 principal amount promissory note bearing 5% interest, due December 12, 2022. Interest under
the notes is payable in arrears on the first day of each calendar quarter in cash, or, at the Company’s option, in shares
of common stock of the Company at a price reflecting market value. Mr. De Perio owns 2.47% of the Company’s common stock,
is a member of the Board of Directors of the Company, and is SportBLX’s president.
In connection
with the successful consummation of a settlement with the PBGC, the Board voted on May 3, 2019 to furnish to Clinton a one-time
cash payment of $250,000 in consideration of Clinton’s efforts regarding the same.
On November
15, 2019, the Company, and Clinton Special Opportunities Fund LLC (“CSO”) entered into a Credit Facility Letter Agreement
(the “Letter Agreement”) pursuant to which the Company extended to CSO a one-year revolving credit facility in the
aggregate principal amount up to $1,000,000. The loan is evidenced by a grid note bearing interest at a 10% annual rate, which
matures November 15, 2020 (the “Note”). CSO’s obligations under the Letter Agreement and the Note are secured
by security interests in all of CSO’s assets, including all of CSO’s Company common stock, and guaranteed by Mr. Hall,
CSO’s sole member. As of December 31, 2019, CSO borrowed $250,000 under the Letter Agreement.
On December
6, 2019, SportBLX issued an unsecured demand note, effective as of October 1, 2019, to the Company in the aggregate principal
amount of up to $1,750,000 (the “Demand Note-1”), which superseded the demand note issued on October 1, 2019, by the
Company in favor of SportBLX for $1,000,000. The Demand Note-1 bears interest at an 8% annual rate and matures upon the earlier
to occur of (a) demand by the Company, or (b) April 1, 2020. As of December 31, 2019, SportBLX borrowed $1,750,000 under the Demand
Note-1.
On December
27, 2019, SportBLX issued an unsecured demand note, effective as of December 27, 2019, to the Company in the aggregate principal
amount of $250,000 (the “Demand Note-2”). The Demand Note-2 bears interest at an 8% annual rate and matures upon the earlier
to occur of (a) demand by the Company, or (b) April 1, 2020. As of December 31, 2019 SportBLX borrowed $250,000 under the Demand
Note-2.
Note
16 – Subsequent Events
On
March 20, 2020, Glassbridge Athlete LLC (the “Borrower”), a wholly owned subsidiary of the Company borrowed $16,000,000
from Orix pursuant to the terms of a Secured Promissory Note Agreement dated as of March 17, 2020 (the “Loan”). Interest
on the Loan is payable via “PIK” (payment in kind) at the rate of 5%, and is payable on a quarterly basis and is capitalized.
All accrued and unpaid interest, along with all unpaid principal, is due and payable on the date that is 18 months from the initial
funding date. Orix owns 20.1% of Adara Enterprises Corp., of which the Corporation owns the remaining 79.9%.
The
Loan is secured by a lien on substantially all of the assets of the Borrower pursuant to a Security Agreement, as well as by a
pledge of the Corporation’s equity interests in Borrower.
The
proceeds of the Loan, along with an additional $1.8 million contributed by the Borrower, were used to fund the purchase of limited
partnership interests by the Borrower in The Sports & Entertainment Fund, L.P. (the “Fund”). The Fund seeks to
invest in entities that enter into revenue sharing agreements, or savings and investment agreements, or other transactions with
professional athletes. Adara Asset Management LLC, a wholly-owned subsidiary of Adara Enterprises Corp., is the general partner
and investment manager of the Fund.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
Item
9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures. Based on an evaluation of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) as of December 31, 2019, the end of the period covered by this Annual Report on Form 10-K, our
Chief Executive Officer, Daniel Strauss, and Chief Financial Officer, Francis Ruchalski, have concluded that the
disclosure controls and procedures were effective.
Changes
in Internal Controls. During the quarter ended December 31, 2019, there was no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Management’s
Report on Internal Control over Financial Reporting. Management of GlassBridge is responsible for establishing and maintaining
adequate internal control over financial reporting. GlassBridge’s internal control system is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
GlassBridge
management assessed the effectiveness of GlassBridge’s internal control over financial reporting as of December 31, 2019.
In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control — Integrated Framework version 2013. Based on our assessment, we concluded that, as of
December 31, 2019, GlassBridge’s internal control over financial reporting was effective, based on those criteria.
Item
9B. Other Information.
None.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
Pursuant
to General Instruction G(3) to Form 10-K, the information required by Item 10 with respect to directors of the Company set forth
under the heading “Proposal No. 1 Election of Directors” in the Company’s definitive proxy statement to be filed
within 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K is incorporated herein by reference.
The
information required by Item 10 with respect to executive officers of the Company is contained under the caption “Executive
Officers” in Item 1 of this Annual Report on Form 10-K.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning the Audit and Finance Committee and audit committee financial
expert disclosure set forth under the headings “Director Independence and Determination of Audit Committee Financial Expert”
and “Meetings of the Board and Board Committees” in the Company’s definitive proxy statement to be filed within
120 days following the end of the fiscal year covered by this Annual Report on Form 10-K is incorporated herein by reference.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning compliance with Section 16(a) of the Exchange Act by officers
and directors of the Company set forth under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”
in the Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by
this Annual Report is incorporated herein by reference.
We
adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer/controller,
or persons performing similar functions and all our other employees. Our code of ethics is part of our broader Business Conduct
Policy, which is posted on our website. The Internet address for our website is http://www.glassbridge.com and the Business Conduct
Policy may be found on the “Corporate Governance” web page, which can be accessed from the “Investor Relations”
page, which can be accessed from the main web page. If we make any amendments to our code of ethics other than technical, administrative
or other non-substantive amendments, or grant any waiver, including any implicit waiver, from a provision of the code of ethics
applicable to our principal executive officer, principal financial officer, principal accounting officer or controller or persons
performing similar functions requiring disclosure under applicable SEC rules, we intend to disclose the nature of such amendment
or waiver on our website. The information on our website is not incorporated by reference into this Annual Report on Form 10-K.
Item
11. Executive Compensation.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning director and officer executive compensation and related matters
set forth under the headings “Compensation Discussion and Analysis,” “Compensation Committee Report,”
“Compensation of Named Executive Officers” and “Board of Directors - Compensation of Directors” in the
Company’s definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this Annual
Report on Form 10-K is incorporated herein by reference.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning compensation committee interlocks and insider participation set
forth under the heading “Compensation Committee Interlocks and Insider Participation” in the Company’s definitive
proxy statement to be filed within 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K is
incorporated herein by reference.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning shares of common stock of the Company beneficially owned by management
set forth under the headings “Information Concerning Solicitation and Voting - Security Ownership of Certain Beneficial
Owners” and “Information Concerning Solicitation and Voting - Security Ownership of Management” in the Company’s
definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this Annual Report on Form
10-K is incorporated herein by reference.
Equity
Compensation Plan Information
The
following table gives information about our common stock that may be issued under all our existing equity compensation plans as
of December 31, 2019, including the 2011 Stock Incentive Plan, 2008 Stock Incentive Plan, the 2005 Stock Incentive Plan and the
2000 Stock Incentive Plan. As of December 31, 2019, options and restricted stock had been granted under the 2000 Stock Incentive
Plan, 2005 Stock Incentive Plan and 2008 Stock Incentive Plan, and options, restricted stock, restricted stock units and stock
appreciation rights had been granted under the 2011 Stock Incentive Plan. Our shareholders have approved all the compensation
plans listed below. No additional awards may be granted under the plans.
|
Equity
Compensation Plans Approved by Shareholders
|
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
|
|
|
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the
First Column)
|
|
|
2011
Stock Incentive Plan
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
2008
Stock Incentive Plan
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
2005
Stock Incentive Plan
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
Total
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
Item
13. Certain Relationships and Related Transactions and Director Independence.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning certain relationships and related party transactions and director
independence set forth under the headings “Information Concerning Solicitation and Voting - Related Person Transactions
and Related Person Transaction Policy,” “Board of Directors - Director Independence and Determination of Audit Committee
Financial Expert” and “Board of Directors - Meetings of the Board and Board Committees” in the Company’s
definitive proxy statement to be filed within 120 days following the end of the fiscal year covered by this Annual Report on Form
10-K is incorporated herein by reference.
Item
14. Principal Accountant Fees and Services.
Pursuant
to General Instruction G(3) to Form 10-K, information concerning principal accounting fees and services set forth under the heading
“Audit and Other Fees and Audit and Finance Committee Pre-Approval Policy” in the Company’s definitive proxy
statement to be filed within 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K is incorporated
herein by reference.
PART
IV
Item
15. Exhibits and Financial Statement Schedules.
List
of Documents Filed as Part of this Report
1.
Financial Statements
2.
Financial Statement Schedules
All
financial statement schedules are omitted because of the absence of the conditions under which they are required or because the
required information is included in the Consolidated Financial Statements or the notes thereto.
3.
Exhibits
The
following exhibits are filed as part of this report:
|
Number
|
|
Description
of Exhibit
|
|
3.1
|
|
Restated
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to Registration Statement on Form 10,
No. 1-14310).
|
|
|
|
|
|
3.2
|
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on
Form 8-K, filed on February 21, 2017).
|
|
|
|
|
|
3.3
|
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed on August 22, 2019).
|
|
|
|
|
|
3.4
|
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, filed on
February 21, 2017).
|
|
|
|
|
|
4.1
|
|
Rights
Agreement, dated as of August 7, 2015, by and between the Company and Wells Fargo Bank, N.A., as Rights Agent (incorporated
by reference to Exhibit 4.1 on Imation’s Current Report on Form 8-K, filed August 11, 2015).
|
|
|
|
|
|
4.2†
|
|
Description of Securities.
|
|
|
|
|
|
10.1†
|
|
Unsecured Demand Note, dated December 27, 2019, issued by Sport-BLX, Inc. to the Company.
|
|
|
|
|
|
10.2†
|
|
Stock Purchase Agreement, dated December 12, 2019, between Joseph A. De Perio and the Company.
|
|
|
|
|
|
10.3†
|
|
Unsecured Demand Note, dated December 6, 2019 and effective October 1, 2019, issued by Sport-BLX, Inc. to the Company.
|
|
|
|
|
|
10.4†
|
|
Credit Facility Letter Agreement, dated November 15, 2019, between the Company and Clinton Special Opportunities Fund LLC.
|
|
10.5
|
|
Promissory
Note, dated September 30, 2019, issued by the Company to Imation Enterprises Corp. (incorporated by reference to Exhibit 10.1
to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.6
|
|
Promissory
Note, dated September 30, 2019, issued by the Company to Imation Enterprises Corp. (incorporated by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.7
|
|
Securities
Purchase Agreement, dated October 1, 2019, between the Company and Orix PTP Holdings, LLC (incorporated by reference to Exhibit
10.3 to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.8
|
|
Stockholders
Agreement, dated September 27, 2019, by and among the Company, Imation Enterprises Corp., and Orix PTP Holdings, LLC (incorporated
by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.9
|
|
Agreement
Relating to the Assignment and Assumption of Promissory Notes, dated September 27, 2019, between the Company, Orix PTP Holdings,
LLC, and Imation Enterprises Corp. (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form
10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.10
|
|
Assignment
of Claims Agreement, dated September 30, 2019, by and among the Company and Imation Enterprises Corp. (incorporated by reference
to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.11
|
|
Equity
Assignment Agreement, dated September 30, 2019, by and among the Company, Imation Enterprises Corp and Sport-BLX, Inc. with
respect to Sections 5, 6, 8, 9, 10, 11, 12 and 13 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly
Report on Form 10-Q, filed on November 8, 2019).
|
|
|
|
|
|
10.12
|
|
Settlement
Agreement, dated October 1, 2019, between the Company and Pension Benefit Guaranty Corporation (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on October 7, 2019).
|
|
|
|
|
|
10.13
|
|
Securities
Purchase Agreement, dated October 1, 2019, between the Company and Orix PTP Holdings, LLC (incorporated by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K, filed on October 7, 2019).
|
|
|
|
|
|
10.14
|
|
Agreement
for Appointment of Trustee and Termination of Plan between the Company and Pension Benefit Guaranty Corporation (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on April 30, 2019).
|
|
|
|
|
|
10.15
|
|
Pre-Pay
Agreement, dated March 28, 2019, by and between CMC Magnetics Corporation and the Company (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K, filed on April 2, 2019).
|
|
|
|
|
|
10.16
|
|
Securities
Purchase Agreement, dated March 31, 2019, between the Company and IMN Capital Holdings Inc. (incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on April 2, 2019).
|
|
|
|
|
|
10.17
|
|
Amended
and Restated Services Agreement, dated March 29, 2019, between the Company and Clinton Group, Inc. (incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on April 2, 2019).
|
|
|
|
|
|
10.18
|
|
Amended
and Restated Letter Agreement, dated April 29, 2016, by and between the Company and Clinton Group, Inc. (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2016).
|
|
|
|
|
|
10.19
|
|
Stock
Purchase Agreement, dated as of November 22, 2016, by and between the Company and NXSN Acquisition Corp. (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on November 22, 2016).
|
|
|
|
|
|
10.20
|
|
Amendment
No. 1 to Stock Purchase Agreement, dated as of December 12, 2016, by and between the Company and NXSN Acquisition Corp. (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 12, 2016).
|
|
|
|
|
|
10.21
|
|
Subscription
Agreement, dated as of November 22, 2016, by and between the Company and Clinton Group, Inc. (incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on November 22, 2016).
|
|
|
|
|
|
10.22
|
|
Amendment
No. 1 to Subscription Agreement, dated as of January 9, 2017, by and between the Company and Clinton Group, Inc. (incorporated
by reference to Annex A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on January 10, 2017).
|
|
|
|
|
|
10.23
|
|
Senior
Secured Convertible Note, dated as of January 23, 2017, payable by NXSN Acquisition Corp. to the Company (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 27, 2017).
|
|
|
|
|
|
10.24
|
|
Guaranty
and Security Agreement, dated as of January 23, 2017, by and among the Company, NXSN Acquisition Corp., Nexsan Corporation
and the other grantors party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form
8-K, filed on January 27, 2017).
|
|
|
|
|
|
10.25
|
|
Capacity
and Services Agreement, dated as of February 2, 2017, by and among Clinton Group, Inc., the Company and GlassBridge Asset
Management, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on February
3, 2017).
|
|
|
|
|
|
10.26
|
|
Registration
Rights Agreement, dated as of February 2, 2017, by and between the Company and Madison Avenue Capital Holdings, Inc. (incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on February 3, 2017).
|
|
|
|
|
|
10.27
|
|
Letter
Agreement, dated as of February 2, 2017, by and between the Company and Madison Avenue Capital Holdings, Inc. (incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on February 3, 2017).
|
|
|
|
|
|
10.28*
|
|
Services
Agreement, dated as of March 2, 2017, by and between the Company and Clinton Group, Inc. (incorporated by reference to Exhibit
10.96 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016).
|
|
10.29
|
|
Settlement
Agreement, dated as of September 15, 2017, by and among the Company, CMC Magnetics Corporation, Imation Corporation Japan
and Imation Europe B.V. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed
on September 18, 2017).
|
|
|
|
|
|
10.30
|
|
Promissory
Note, dated September 15, 2017, issued by Imation Corporation Japan to CMC Magnetics Corporation (incorporated by reference
to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on September 18, 2017).
|
|
|
|
|
|
10.31
|
|
Guarantee,
dated as of September 15, 2017, made by the Company in favor of CMC Magnetics Corporation (incorporated by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K, filed on September 18, 2017).
|
|
|
|
|
|
10.32
|
|
Settlement
Agreement, dated as of September 28, 2017, by and among the Company, IOENGINE, LLC and Scott McNulty (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on September 28, 2017).
|
|
|
|
|
|
10.33
|
|
Secured
Promissory Note, dated September 28, 2017, issued by the Company to IOENGINE, LLC (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K, filed on September 28, 2017).
|
|
|
|
|
|
10.34
|
|
Pledge
Agreement, dated September 28, 2017, by and between the Company and IOENGINE, LLC (incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K, filed on September 28, 2017).
|
|
|
|
|
|
10.35
|
|
Litigation
Finance & Management Agreement, dated as of May 21, 2018 and effective as of May 1, 2018, by and between Imation Europe
B.V. and Mach 5 B.V. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on
May 23, 2018)
|
|
|
|
|
|
10.36
|
|
Exchange
Agreement, dated as of August 16, 2018 among GlassBridge Enterprises, Inc. and Humilis Holdings Private Equity LP. (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.37
|
|
Option
Agreement, dated as of August 16, 2018 among GlassBridge Enterprises, Inc. and Humilis Holdings Private Equity LP. (incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.38
|
|
Assignment
of Contract, dated as of August 16, 2018 among GlassBridge Enterprises, Inc. and Humilis Holdings LLC. (incorporated by reference
to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.39
|
|
Securities
Purchase Agreement, dated as of August 16, 2018 among GlassBridge Enterprises, Inc. and StorCentric, Inc. (incorporated by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.40
|
|
Pre-Pay
Agreement, dated as of August 13, 2018 among IOENGINE, GlassBridge Enterprises, Inc. and Scott McNulty. (incorporated by reference
to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.41
|
|
Settlement
Agreement and Mutual Release, dated as of August 10, 2018 among NXSN Acquisition Corp., Nexsan Technologies Incorporated and
Humilis Holdings Private Equity LP. (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form
8-K, filed on August 21, 2018)
|
|
|
|
|
|
10.42
|
|
Settlement
Agreement, dated as of December 21, 2018, by and among Zentralstelle für private Überspielungsrechte (ZPÜ)
Gesellschaft des bürgerlichen Rechts, and its members; and TME GmbH, Imation Europe B.V. and GlassBridge Enterprises,
Inc. (formerly: Imation, Corp.) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
filed on December 28, 2018)
|
|
|
|
|
|
10.43†**
|
|
Secured Promissory Note Agreement, dated March 17, 2020, by and among Glassbridge Athlete, LLC, Orix PTP Holdings, LLC and the Company.
|
|
|
|
|
|
10.44†**
|
|
Security Agreement, dated March 17, 2020, between Glassbridge Athlete, LLC and Orix PTP Holdings, LLC.
|
|
|
|
|
|
10.45†
|
|
Pledge Agreement, dated March 17, 2020, between the Company and Orix PTP Holdings, LLC
|
|
|
|
|
|
21.1†
|
|
Subsidiaries
of GlassBridge Enterprises, Inc.
|
|
|
|
|
|
24.1†
|
|
Power
of Attorney (included on signature page)
|
|
|
|
|
|
31.1†
|
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
31.2†
|
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
32.1†
|
|
Certification
of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
32.2†
|
|
Certification
of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
101†
|
|
The
following financial statements from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted
in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements
of Comprehensive Loss, (iii) Consolidated Statements Balance Sheets, (iv) Consolidated Statements of Shareholders’ Equity,
(v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and
including detailed tags.
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*
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Items
that are management contracts or compensatory plans or arrangements required to be filed as an exhibit pursuant to Item 15(b)
of Form 10-K.
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**
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Confidential treatment has
been requested. Confidential material has been redacted.
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†
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Filed
herewith
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Item
16. Form 10-K Summary.
None.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
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GlassBridge
Enterprises, Inc.
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By:
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/s/
Daniel Strauss
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Daniel
Strauss
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Chief
Executive Officer
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Date:
April 3, 2020
POWER
OF ATTORNEY
Each
person whose signature appears below constitutes and appoints Joseph De Perio and Daniel Strauss his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K, and to file the
same, with all, exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and perform each, and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or the substitute of any or all of them, may lawfully
do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/
Joseph De Perio
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Chairman
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April
3, 2020
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Joseph
De Perio
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/s/
Daniel Strauss
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Chief
Executive Officer
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April
3, 2020
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Daniel
Strauss
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/s/
Francis Ruchalski
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Chief
Financial Officer
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April
3, 2020
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Francis
Ruchalski
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/s/
Robert Searing
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Director
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April
3, 2020
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Robert
Searing
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/s/
Alex Spiro
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Director
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April 3, 2020
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Alex
Spiro
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/s/
Robert G. Torricelli
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Director
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April 3, 2020
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Robert
G. Torricelli
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Exhibit
4.2
DESCRIPTION
OF REGISTRANT’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
References
to “Glassbridge” and the “Company” herein are, unless the context otherwise indicates, only to Glassbridge
Enterprises , Inc. and not to any of its subsidiaries. As of December 31, 2019, the end of the period covered by this Annual Report
on Form 10-K, Glassbridge has two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the Company’s Preferred Stock Purchase Rights and Common Stock.
The
following description of the Company’s capital stock and provisions of the Company’s Amended and Restated Certificate
of Incorporation, Bylaws and the Delaware General Corporation Law are summaries and are qualified in their entirety by reference
to the Company’s Amended and Restated Certificate of Incorporation and Company’s Amended and Restated Bylaws. Copies
of these documents have been filed with the SEC as exhibits to the Annual Report on Form 10-K to which this description has been
filed as an exhibit. Pursuant to the Company’s Amended and Restated Certificate of Incorporation, the Company’s authorized
capital stock consists of 50,000 shares of common stock, par value of $0.01 per share (referred to as the Company’s common
stock), and 25,000,000 shares of preferred stock, par value $0.01 per share (referred to as the Company’s preferred stock),
to be designated from time to time by the Company’s Board of Directors.
Common
Stock
Holders
of common stock are entitled to one vote per share on any matter to be voted upon by stockholders. All shares rank equally as
to voting and all other matters. The shares of common stock have no preemptive or conversion rights, no redemption or sinking
fund provisions, are not liable for further call or assessment and are not entitled to cumulative voting rights. For as long as
such stock is outstanding, the holders of common stock are entitled to receive ratably any dividends when and as declared from
time to time by Company’s board of directors out of funds legally available for dividends. Upon a liquidation or dissolution
of the Company, whether voluntary or involuntary, creditors will be paid before any distribution to holders of common stock. After
such distribution, holders of common stock are entitled to receive a pro rata distribution per share of any excess amount.
As
of February 28, 2020, there were 25,170 shares of common stock outstanding.
Preferred
Stock Purchase Right
In
2015, the Board of Directors adopted a rights plan intended to avoid an “ownership change” within the meaning of Section
382 of the Code, and thereby preserve the current ability of the Company to utilize certain net operating loss carryforwards and
other tax benefits of the Company and its subsidiaries (the “Tax Benefits”). If the Company experiences an “ownership
change,” as defined in Section 382 of Code, the Company’s ability to fully utilize the Tax Benefits on an annual basis
will be substantially limited, and the timing of the usage of the Tax Benefits and such other benefits could be substantially
delayed, which could therefore significantly impair the value of those assets. The rights plan is intended to act as a deterrent
to any person or group acquiring “beneficial ownership” of 4.9% or more of the Company’s outstanding shares
of common stock, without the approval of the Board. The description and terms of the Rights (as defined below) applicable to the
rights plan are set forth in the 382 Rights Agreement, dated as of August 7, 2015 (the “Rights Agreement”), by and between
the Company and Wells Fargo Bank, N.A., as Rights Agent.
As
part of the Rights Agreement, the Board authorized and declared a dividend distribution of one right (a Right) for each outstanding
share of the Company’s common stock, to stockholders of record at the close of business on September 10, 2015. Each Right
entitles the holder to purchase from the Company a unit consisting of one one-hundredth of a share (a “Unit”) of Series
A Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred Stock”) at a purchase price
of $15.00 per Unit, subject to adjustment (the “Purchase Price”). Until a Right is exercised, the holder thereof, as
such, will have no separate rights as a stockholder of the Company, including the right to vote or to receive dividends in respect
of Rights.
Under
the Rights Agreement, an Acquiring Person is any person or group of affiliated or associated persons (a “Person”) who
is or becomes the beneficial owner of 4.9% or more of the outstanding shares of the Company’s common stock other than as
a result of repurchases of stock by the Company, dividends or distribution by the Company, stock issued under certain benefit
plans or certain inadvertent actions by stockholders. For purposes of calculating percentage ownership under the Rights Agreement,
outstanding shares of the Company’s common stock include all of the shares of common stock actually issued and outstanding.
Beneficial ownership is determined as provided in the Rights Agreement and generally includes, without limitation, any ownership
of securities a Person would be deemed to actually or constructively own for purposes of Section 382 of the Code or the Treasury
Regulations promulgated thereunder. The Rights Agreement provides that the following shall not be deemed an Acquiring Person for
purposes of the Rights Agreement: (i) the Company or any subsidiary of the Company and any employee benefit plan of the Company,
or of any subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant
to the terms of any such plan or (ii) any Person that, as of August 7, 2015, is the beneficial owner of 4.9% or more of the shares
of Common Stock outstanding (such Person, an “Existing Holder”) unless and until such Existing Holder acquires beneficial
ownership of additional shares of common stock (other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding shares of common stock or pursuant to a split or subdivision of the outstanding shares of common stock) in
an amount in excess of 0.5% of the outstanding shares of common stock.
The
Rights Agreement provides that a Person shall not become an Acquiring Person for purpose of the Rights Agreement in a transaction
that the Board determines is exempt from the Rights Agreement, which determination shall be made in the sole and absolute discretion
of the Board, upon request by any Person prior to the date upon which such Person would otherwise become an Acquiring Person,
including, without limitation, if the Board determines that (i) neither the beneficial ownership of shares of common stock by
such Person, directly or indirectly, as a result of such transaction nor any other aspect of such transaction would jeopardize
or endanger the availability to the Company of the Tax Benefits or (ii) such transaction is otherwise in the best interests of
the Company.
Initially,
the Rights will not be exercisable and will be attached to all common stock representing shares then outstanding, and no separate
Rights certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate
from the common stock and become exercisable and a distribution date (a “Distribution Date”) will occur upon the earlier
of (i) 10 business days (or such later date as the Board shall determine) following a public announcement that a Person has become
an Acquiring Person or (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a
tender offer, exchange offer or other transaction that, upon consummation thereof, would result in a Person becoming an Acquiring
Person.
Until
the Distribution Date, common stock held in book-entry form, or in the case of certificated shares, common stock certificates,
will evidence the Rights and will contain a notation to that effect. Any transfer of shares of common stock prior to the Distribution
Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred on the books
and records of the Rights Agent as provided in the Rights Agreement.
If
on or after the Distribution Date, a Person is or becomes an Acquiring Person, each holder of a Right, other than certain Rights
including those beneficially owned by the Acquiring Person (which will have become void), will have the right to receive upon
exercise common stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to
two times the Purchase Price.
In
the event that, at any time following the first date of a public announcement that a Person has become an Acquiring Person or
that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board
becomes aware of the existence of an Acquiring Person (any such date, the Stock Acquisition Date), (i) the Company engages in
a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages
in a merger or other business combination transaction in which the Company is the surviving corporation and the common stock of
the Company is changed or exchanged or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have
the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the Purchase Price.
At
any time following the Stock Acquisition Date and prior to an Acquiring Person obtaining shares that would lead to a more than
50% change in the outstanding common stock, the Board may exchange the Rights (other than Rights owned by such Person which have
become void), in whole or in part, for common stock or Preferred Stock at an exchange ratio of one share of common stock, or one
one-hundredth of a share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock having
equivalent rights, preferences and privileges), per Right, subject to adjustment.
The
Rights and the Rights Agreement will expire on the earliest of (i) 5:00 P.M. New York City time on August 7, 2021, which was extended
by stockholder approval on June 18, 2018, pursuant to a Resolution of the Board of Directors at its Meeting on April 13, 2018,
(ii) the time at which the Rights are redeemed or exchanged pursuant to the Rights Agreement, (iii) the date on which the Board
determines that the Rights Agreement is no longer necessary for the preservation of material valuable Tax Benefits or is no longer
in the best interest of the Company and its stockholders, (iv) the beginning of a taxable year to which the Board determines that
no Tax Benefits may be carried forward and (v) the first anniversary of the adoption of the Agreement if stockholder approval
has not been received by or on such date.
At
any time until the earlier of the Distribution Date or the expiration date of the Rights, the Company may redeem the Rights in
whole, but not in part, at a price of $0.001 per Right. Immediately upon the action of the Board ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of Rights will be to receive the $0.001 redemption price.
Preferred
Stock
Under
the Company’s Amended and Restated Certificate of Incorporation, the Company’s board of directors has authority to
issue up to 25,000,000 shares of preferred stock without stockholder approval. The Company’s board of directors may also
determine or alter for each class of preferred stock the voting powers, designations, preferences, and special rights, qualifications,
limitations, or restrictions as permitted by law. The Company’s board of directors may authorize the issuance of preferred
stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common
stock. Issuing preferred stock provides flexibility in connection with possible acquisitions and other corporate purposes, but
could also, among other things, have the effect of delaying, deferring or preventing a change in control of Glassbridge and may
adversely affect the market price of the Company’s common stock and the voting and other rights of the holders of common
stock.
The
Company’s board of directors will fix the rights, preferences, privileges, qualifications and restrictions of the preferred
stock of each series that Glassbridge issues in the certificate of designation relating to that series. This will include:
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the
title and stated value;
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the
number of shares being authorized;
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the
liquidation preference per share;
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the
purchase price per share;
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the
currency for which the shares may be purchased;
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the
dividend rate per share, dividend period and payment dates and method of calculation for dividends;
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whether
dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate;
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the
Company’s right, if any, to defer payment of dividends and the maximum length of any such deferral period;
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the
procedures for any auction and remarketing, if any;
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the
provisions for a sinking fund, if any;
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the
provisions for redemption or repurchase, if applicable, and any restrictions on the Company’s ability to exercise those
redemption and repurchase rights;
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●
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any
listing of the preferred stock on any securities exchange or market;
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●
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whether
the preferred stock will be convertible into the Company’s common stock or other securities of the Company, and, if
applicable, the conversion period, the conversion price, or how it will be calculated, and under what circumstances it may
be adjusted;
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●
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voting
rights, if any, of the preferred stock;
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●
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restrictions
on transfer, sale or other assignment, if any;
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the
relative ranking and preferences of the preferred stock as to dividend rights and rights if the Company liquidates, dissolves
or winds up its affairs;
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●
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any
limitations on issuances of any class or series of preferred stock ranking senior to or on a parity with the series of preferred
stock being issued as to dividend rights and rights if the Company liquidates, dissolves or winds up its affairs; and
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●
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any
other specific terms, rights, preferences, privileges, qualifications or restrictions of the preferred stock.
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As
of February 28, 2020, there were no shares of preferred stock outstanding.
Certain
Anti-Takeover Effects of Delaware Law and Provisions of Glassbridge’s Amended and Restated Certificate of Incorporation
and Bylaws
The
Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws include a number of provisions
that may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to
negotiate with the Company’s board of directors rather than pursue non-negotiated takeover attempts. These provisions include:
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●
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No
written consent of stockholders. The Company’s Amended and Restated Certificate of Incorporation provides that all
stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders
may not take any action by written consent in lieu of a meeting.
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●
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Meetings
of stockholders and the board. A majority of the total number of authorized directors shall constitute a quorum at any
meeting of the board of directors. The Company’s Amended and Restated Bylaws limit the business that may be conducted
at an annual meeting of stockholders to those matters properly brought before the meeting.
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Advance
notice requirements. The Company’s Amended and Restated Bylaws establish advance notice procedures with regard to
stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before
meetings of stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to
Glassbridge’s corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely,
notice must be received at the Company’s principal executive offices not later than the close of business on the 90th
day, prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information
specified in the Amended and Restated Bylaws.
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Amendment
to bylaws and certificate of incorporation. As required by the Delaware General Corporation Law, any amendment of the
Company’s Amended and Restated Certificate of Incorporation must first be approved by a majority of the Company’s
board of directors and 80 percent of the voting power of all of the shares of capital stock issued and outstanding and entitled
to vote generally in any election of directors, voting together as a single class. The Company’s Amended and Restated
Bylaws may be amended by the affirmative vote of a majority vote of the directors then in officeor by the affirmative vote
of at least 80 percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote
generally in any election of directors, voting together as a single class.
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●
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Blank
check preferred stock. As described above, the Company’s Amended and Restated Certificate of Incorporation authorizes
25,000,000 shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable Glassbridge’s
board of directors to render more difficult or to discourage an attempt to obtain control of Glassbridge by means of a merger,
tender offer, proxy contest, or otherwise. For example, if in the due exercise of its fiduciary obligations, the Company’s
board of directors were to determine that a takeover proposal is not in the best interests of the Company or its stockholders,
the board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private
offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder
or stockholder group. In this regard, the Company’s Amended and Restated Certificate of Incorporation grants the board
of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The
issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders
of shares. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may
have the effect of delaying, deterring, or preventing a change in control of Glassbridge.
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In
addition, Glassbridge is subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section
203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested
stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless
the business combination is approved in a prescribed manner. A “business combination” includes, among other things,
a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested
stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to the
determination of interested stockholder status, 15% or more of the corporation’s voting stock.
Because
of these provisions, persons considering unsolicited tender offers or other unilateral takeover proposals may be more likely to
negotiate with the Company’s board of directors rather than pursue non-negotiated takeover attempts. As a result, these
provisions may make it more difficult for stockholders to benefit from transactions that are opposed by an incumbent board of
directors.
DEMAND
NOTE
|
December
27, 2019
|
$250,000
|
BORROWER:
Sport-BLX, Inc., a Delaware corporation (“Borrower”), having an office at 33 Newman Springs Road, Tinton Falls, New
Jersey 07724
LENDER:
GlassBridge Enterprises, Inc. (“Lender”), having an office at 411 East 57th Street, Suite 100, New
York, New York 10022, Attention: Daniel Strauss
WHEREAS,
Borrower seeks to borrow from Lender, amounts not to exceed $250,000; and
WHEREAS,
Lender is willing to extend credit to borrow and may, at Lender’s sole discretion, may make advances to Borrower on the
terms and conditions set forth herein.
NOW
THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, Borrower agrees as follows:
Promise
to Pay. For value received, and intending to be legally bound, Borrower promises to pay to the order of the Lender on demand
the principal sum of up to Two Hundred Fifty Thousand Dollars ($250,000.00), or if less, the amounts actually borrowed from Lender
as set forth on the schedule attached hereto, plus interest as agreed below and all fees and costs (including without limitation
attorneys’ fees and disbursements whether for internal or outside counsel) the Lender incurs in order to collect any amount
due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize upon any guaranty
or other security for the payment of this Note (“Expenses”). Lender is hereby authorized to record on Schedule I hereto,
and any continuation sheets which Lender may attach thereto, (a) the date and amount of each Advance to Borrower made by Lender
(“Advances”), and (b) the date and amount of each payment or prepayment of principal of any Advances. No failure to
so record or any error in so recording shall affect the obligation of Borrower to repay the Advances hereunder, together with
interest thereon, as provided in this Note, and the outstanding principal balance of the Advances as set forth in Schedule I shall
be presumed to be correct. Advances shall be used to repay existing trade indebtedness, repurchase common stock, and for other
general corporate purposes.
Request
for Advance. Borrower shall request Advances from the Lender in writing not less than one business day prior to the requested
date of such Advance, unless otherwise waived by Lender. Advances shall be in an amount of not less than $50,000.
Interest.
The unpaid principal balance of this Note shall earn interest calculated on the basis of a 360-day year for the actual number
of days in each year (365 or 366), from and including the date the proceeds of this Note are disbursed to, but not including,
the date all amounts hereunder are paid in full, at a rate per year which shall be fixed at 8.00%.
Upfront
Fee: In consideration for the Lender extending credit to the Borrower, the Borrower agrees to pay to Lender an upfront fee
in the amount of $2,500, which shall be fully earned on the date the first Advance is made hereunder, and shall be payable out
of the proceeds of the first Advance.
Due
on Demand. This is a demand Note and all amounts referenced hereunder shall become immediately due and payable upon demand
by the Lender; provided, however, that all amounts due hereunder shall automatically become immediately due and payable if Borrower
or any guarantor or endorser of this Note commences or has commenced against it any bankruptcy or insolvency proceeding. Borrower
hereby waives protest, presentment and notice of any kind in connection with this Note. Absent demand for payment in full, interest
shall be due and payable monthly.
Default
Rate. If the Lender has not actually received any payment under this Note within ten (10) days after its due date, from and
after such tenth day the interest rate for all amounts outstanding under this Note shall automatically increase to five (5) percentage
points above the otherwise applicable rate per year, and any judgment entered hereon or otherwise in connection with any suit
to collect amounts due hereunder shall bear interest at such default rate.
Payments;
Due Date. Payments shall be made in immediately available United States funds at the Lender’s office set forth above,
or to any other location given in writing by the Lender to the Borrower. Accrued and unpaid interest shall be payable to Lender
on the last business day of each calendar quarter, and all accrued and unpaid interest, plus all outstanding principal amounts
and other fees and expenses, shall be payable in full upon the earlier to occur of (a) demand by Lender, or (b) April 1, 2020.
Interest
Accrual; Application of Payments. Interest will accrue at the rate set forth herein and shall be paid no later than the last
day of each month. All payments (excluding voluntary prepayments of principal) will be applied as of the date each payment is
received and processed. Payments may be applied in any order in the sole discretion of the Lender, but, prior to a payment default,
may be applied chronologically (i.e., oldest Advance first) to unpaid amounts due and owing, in the following order: first to
accrued interest, then to principal, then to escrow (if any), then to late charges and other fees, and then to all other Expenses.
Late
Charges. If Borrower fails to pay, within five (5) days of its due date, any amount due and owing pursuant to this Note or
any other agreement executed and delivered to the Lender in connection with this Note, Borrower shall immediately pay to the Lender
a late charge equal to the greatest of (a) $50.00, or (b) five percent (5%) of the delinquent amount.
Representations
and Warranties. Borrower represents that it is duly organized and in good standing or duly constituted in the state of its
organization is duly authorized to do business in all jurisdictions material to the conduct of its business; that the execution,
delivery and performance of this Note have been duly authorized by all necessary regulatory and corporate action or by its governing
instrument; that this Note has been duly executed by an authorized officer and constitutes a binding obligation enforceable against
Borrower and not in violation of any law, court order or agreement by which Borrower is bound; and that Borrower’s performance
is not threatened by any pending or threatened litigation. None of Borrower’s assets are subject to any lien or encumbrance.
Covenants:
Borrower agrees that so long as this Note remains unpaid, it shall not incur any indebtedness for borrowed money without the Lender’s
prior written consent other than trade indebtedness incurred in the ordinary course of business. Borrower will pay or discharge
when due all taxes, assessments and governmental charges or levies imposed upon Borrower unless such amounts are being diligently
contested in good faith by appropriate proceedings provided that adequate reserves with respect thereto are maintained on the
books of Borrower in conformity with GAAP. Without first obtaining Lender’s prior written consent, Borrower shall not change
(i) its name as it appears in the official filings in the state of its formation, (ii) the type of legal entity it is, (iii) its
state of formation or (iv) amend its certificate of incorporation, by laws or other organizational document.
Revival.
To the extent that Borrower makes a payment or Lender receives any payment or proceeds for Borrower’s benefit which are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under the United States Bankruptcy Code or any other bankruptcy law, common
law or equitable cause, then, to such extent, the obligations of Borrower hereunder intended to be satisfied shall be revived
and shall continue as if such payment or proceeds had not been received by Lender.
Miscellaneous.
This Note, together with any related loan letter agreement, security agreements and/or guaranties, contains the entire agreement
between the Lender and Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement
and representation previously made by the Lender. All rights and remedies of the Lender under applicable law and this Note or
amendment of any provision of this Note are cumulative and not exclusive. No single, partial or delayed exercise by the Lender
of any right or remedy shall preclude the subsequent exercise by the Lender at any time of any right or remedy of the Lender without
notice. No waiver or amendment of any provision of this Note shall be effective unless made specifically in writing by the Lender.
No course of dealing or other conduct, no oral agreement or representation made by the Lender, and no usage of trade, shall operate
as a waiver of any right or remedy of the Lender. No waiver of any right or remedy of the Lender shall be effective unless made
specifically in writing by the Lender. Borrower agrees that in any legal proceeding, a copy of this Note kept in the Lender’s
course of business may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower
and its successors and assigns and shall inure to the benefit of the Lender and its successors and assigns. If a court deems any
provision of this Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only. Singular
number includes plural and neuter gender includes masculine and feminine as appropriate.
Notices.
Any demand or notice hereunder or under any applicable law pertaining hereto shall be in writing and duly given if delivered
to Borrower (at its address on the Lender’s records) or to the Lender (at the address on page one and separately to the
Lender officer responsible for Borrower’s relationship with the Lender). Such notice or demand shall be deemed sufficiently
given for all purposes when delivered (i) by personal delivery and shall be deemed effective when delivered, or (ii) by mail or
courier and shall be deemed effective three (3) business days after deposit in an official depository maintained by the United
States Post Office for the collection of mail or one (1) business day after delivery to a nationally recognized overnight courier
service (e.g., Federal Express). Notice by e-mail is not valid notice under this or any other agreement between Borrower and the
Lender.
Governing
Law; Jurisdiction. This Note will be interpreted in accordance with the laws of the State of New York excluding its conflict
of laws rules. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE
OF NEW YORK IN NEW YORK COUNTY AND CONSENTS THAT THE LENDER MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT BORROWER’S
ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS NOTE WILL PREVENT THE LENDER FROM
BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY SECURITY
OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges
and agrees that the venue provided above is the most convenient forum for both the Lender and Borrower. Borrower waives any objection
to venue and any objection based on a more convenient forum in any action instituted under this Note.
Waiver
of Jury Trial. BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWER
AND THE LENDER MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS RELATED
HERETO. BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE LENDER WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS JURY TRIAL WAIVER. BORROWER ACKNOWLEDGES THAT THE LENDER
HAS BEEN INDUCED TO ENTER INTO THIS NOTE BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.
[Signature
Page Follows]
Acknowledgment.
Borrower acknowledges that it has read and understands all the provisions of this Note, including the Governing Law; Jurisdiction
and Waiver of Jury Trial, and has been advised by counsel as necessary or appropriate.
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SPORT-BLX,
INC.
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By:
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/s/
Cesar A. Baez
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Name:
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Cesar
A. Baez
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Title:
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Acting
Chair, Related Party Transaction Committee
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SCHEDULE
I
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Date
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Amount
of
Advance
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Amount
of
Principal
Payment
or
Prepayment
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December
27, 2019
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$250,000
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STOCK
PURCHASE AGREEMENT
This
STOCK PURCHASE AGREEMENT, dated as of December 12, 2019 (this “Purchase Agreement”), is entered into by and
between Joseph A. De Perio (the “Seller”) and GlassBridge Enterprises, Inc., a Delaware corporation (the “Buyer”).
WHEREAS,
the Seller desires to sell to Buyer all of the shares of Sport-BLX, Inc., a Delaware corporation (the “Company”)
set forth beside the Seller’s name on Schedule I hereto (the “Company Stock”) and Buyer desires
to purchase such Company Stock from the Seller on the terms and subject to the conditions provided herein;
NOW,
THEREFORE, in consideration of the mutual agreements and covenants contained herein, the Seller and the Buyer hereby agree as
follows:
1.
Purchase of Company Stock; Purchase Price.
(a)
Sale of Company Stock. The Seller hereby sells, assigns, transfers, conveys and delivers to Buyer, free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any kind or nature whatsoever
(“Liens”), effective at the closing of the transactions contemplated by this Purchase Agreement (the “Closing”),
the Company Stock. Buyer hereby accepts delivery of such Company Stock and hereby purchases such Company Stock from the Seller
at the Closing.
(b)
Consideration.
(i)
Closing Payment. At the Closing, Buyer shall pay to the Seller an amount in cash equal to Six Hundred and Six Thousand
One Hundred and Ninety Eight Dollars ($606,198) (the “Closing Payment”).
(ii)
Promissory Note. Five Million Four Hundred Fifty Five Thousand Seven Hundred Eighty Two Dollars ($5,455,782) shall be payable
in the form of a promissory note (the “Promissory Note”) made by Buyer payable to the Seller in the form attached
to this Purchase Agreement as Exhibit A.
(c)
Closing Deliverables. The following actions shall be taken at Closing:
(i)
The Seller will deliver certificates representing the Company Stock, duly endorsed (and accompanied by duly executed stock powers
attached hereto as Exhibit B), for transfer to Buyer.
(ii)
The Buyer will deliver the Closing Payment by wire transfer of immediately available funds to an account specified in writing
by Seller prior to the Closing.
(iii)
The Buyer will deliver the Promissory Note, duly executed.
2.
Representations, Warranties and Covenants of the Seller. The Seller hereby represents, warrants and covenants to the Buyer
as follows:
(a)
Authority. The Seller has full power and authority and legal capacity to execute and deliver this Purchase Agreement and
to perform his obligations pursuant to this Purchase Agreement and to consummate the transactions contemplated hereby. This Purchase
Agreement has been duly and validly executed and delivered by the Seller and constitutes the legal, valid and binding obligations
of the Seller, enforceable against the Seller in accordance with its terms.
(b)
Ownership of Company Stock. The Seller is the record and beneficial owner of Company Stock as set forth on Schedule
I, has good and valid title to such Company Stock, free and clear of any Liens, proxy obligations, voting restriction, limitation
on disposition, adverse claim of ownership or use or other encumbrance of any kind, and is transferring such Company Stock to
the Buyer, pursuant to this Purchase Agreement, free and clear of any Liens.
(c)
No Conflicts. The execution and delivery by the Seller of this Purchase Agreement does not, and the performance by the
Seller of his obligations under this Purchase Agreement and the consummation of the transactions contemplated hereby will not:
(i) conflict with or result in a violation or breach of any of the Company’s Certificate of Incorporation, Bylaws or other
organizational documents or any other contract, agreement, commitment, arrangement or understanding (whether written or oral,
whether formal or informal) with regard to the Seller; or (ii) conflict with or result in a violation or breach of any law applicable
to the Seller or his assets or properties.
(d)
Legal Proceedings. There are no judicial, administrative or arbitral actions, suits, proceedings (public or private) or
claims or any other proceedings, in each case, by or before a governmental entity or arbitral proceeding, pending or, to the knowledge
of the Seller, threatened against the Seller or any of his assets or properties which could reasonably be expected to result in
the issuance of a decree, injunction, judgment, order, award, ruling, assessment or writ by a court, restraining, enjoining or
otherwise prohibiting or making illegal the performance of the Seller’s obligations contemplated by this Purchase Agreement.
(e)
Brokers. The Seller has not used any broker or finder in connection with the transactions contemplated hereby and there
are no claims by any person under any agreement with the Seller for brokerage commissions, finder’s fees or agent’s
commissions or like payment.
3.
Representations, Warranties and Covenants of the Buyer. The Buyer hereby represents, warrants and covenants to the Seller
as follows:
(a)
(i) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation,
(ii) it has all necessary power and authority to execute and deliver this Purchase Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby, (iii) the execution and delivery of this Purchase Agreement by the Buyer
and the consummation by the Buyer of the transactions contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Buyer are necessary to authorize this Purchase Agreement
or to consummate the transactions contemplated hereby, and (iv) this Purchase Agreement has been duly executed and delivered by
the Buyer and, assuming the due authorization, execution and delivery by Seller, constitutes the legal, valid and binding obligation
of the Buyer, enforceable against the Buyer in accordance with its terms.
(b)
The Buyer has not used any broker or finder in connection with the transactions contemplated hereby and there are no claims by
any person under any agreement with the Buyer for brokerage commissions, finder’s fees or agent’s commissions or like
payment.
4.
Expenses and Taxes. Each party will be responsible for all of such party’s own costs and expenses incurred in connection
with this Purchase Agreement and the transactions contemplated hereby. Seller shall pay all sales, use stamp, transfer, service,
recording and like taxes or fees, if any, imposed by any governmental authority in connection with the transfer and assignment
of the Company Stock.
5.
Further Assurances. Subject to the terms and conditions contained in this Purchase Agreement, each party shall use such
party’s best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by this Purchase Agreement.
6.
Amendment. This Purchase Agreement may be amended only by a written agreement signed by the parties.
7.
Waiver of Compliance. Except as otherwise provided in this Purchase Agreement, any failure of a party to comply with any
representation, warranties, covenant or condition contained herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance
with such representation, warranties, covenant or condition does not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
8.
Governing Law. This Agreement shall be governed by, interpreted under and construed in accordance with the internal laws
of the State of New York without giving effect to principles of conflicts of laws. Any action, suit or proceeding to enforce any
provision of, or based on any matter arising out of or in connection with, this Purchase Agreement or the transactions contemplated
hereby shall be brought in any federal court located in the Southern District of the State of New York or any New York state court
located in the Borough of Manhattan, and the parties agrees to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts therefrom) and each party waives (to the full extent permitted by law) any objection it may have to the laying
of venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding has been brought
in an inconvenient forum.
9.
Counterparts. This Purchase Agreement may be executed in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
10.
Captions. The captions contained in this Purchase Agreement are solely for purposes of reference, are not part of the agreement
of the parties and do not in any way affect the meaning or interpretation of this Purchase Agreement.
11.
Entire Agreement. This Purchase Agreement and the Promissory Note embodies the entire understanding and agreement of the
parties, and there are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly
set forth or referred to herein or therein, with respect to the subject matter of this Purchase Agreement. This Purchase Agreement
supersedes, replaces and terminates all prior agreements and understandings between the parties with respect to the subject matter
of this Purchase Agreement.
13.
Waiver of Jury Trial. THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS PURCHASE AGREEMENT OR ANY OTHER DOCUMENT,
INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED PARTIES.
[signature
page follows]
IN
WITNESS WHEREOF, the parties have duly executed this Purchase Agreement as of the date first written above.
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BUYER:
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GLASSBRIDGE
ENTERPRISES, INC.
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By:
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/s/
Daniel Strauss
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Name:
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Daniel
Strauss
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Title:
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Chief
Executive Officer
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SELLER:
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/s/
Joseph A. De Perio
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Name:
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Joseph
A. De Perio
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SCHEDULE
I
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SELLER
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COMPANY
STOCK
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PRICE
PER SHARE
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Joseph
A. De Perio
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17,076
shares
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$355.00
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EXHIBIT
A
FORM
OF PROMISSORY NOTE
(attached)
EXHIBIT
B
ASSIGNMENT
SEPARATE FROM CERTIFICATE
(attached)
ASSIGNMENT SEPARATE
FROM CERTIFICATE
FOR
VALUE RECEIVED, Joseph A. De Perio hereby sells, assigns and transfers to GlassBridge Enterprises, Inc., a Delaware corporation,
Seventeen Thousand Seventy Six (17,076) shares of Common Stock, par value $0.001 per share, of Sport-BLX, Inc., a Delaware corporation
(the “Company”), standing in his name on the books of the Company represented by book entry shares, and does hereby
irrevocably constitute and appoint _______________, to transfer said stock on the books of the Company with full power of substitution
in the premises.
This
Assignment Separate from Certificate is delivered and may only be used in accordance with the Stock Purchase Agreement dated as
of December 12, 2019.
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Dated:
December 12, 2019
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/s/
Joseph A. De Perio
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Joseph
A. De Perio
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DEMAND NOTE
As of October 1, 2019 Up to $1,750,000
BORROWER (Name): Sport-BLX, Inc., a
Delaware corporation (“Borrower”)
(Address of chief executive office): 510 Madison
Avenue, 9th Floor, New York, New York 10022
LENDER: GlassBridge Enterprises, Inc. (“Lender”), having an office at 510 Madison Avenue, 9th Floor, New York, New York 10022, Attention: Daniel Strauss
WHEREAS, Borrower seeks to borrow from
Lender, amounts not to exceed $1,750,000; and
WHEREAS, Lender is willing to extend
credit to borrow and may, at Lender’s sole discretion, may make advances to Borrower on the terms and conditions set forth
herein.
NOW THEREFORE, for good and valuable
consideration, the receipt of which is hereby acknowledged, Borrower agrees as follows:
Promise
to Pay. For value received, and intending to be legally bound, Borrower promises to pay to the order of the Lender on demand
the principal sum of up to One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00), or if less, the amounts actually
borrowed from Lender as set forth on the schedule attached hereto, plus interest as agreed below and all fees and costs (including
without limitation attorneys’ fees and disbursements whether for internal or outside counsel) the Lender incurs in order
to collect any amount due under this Note, to negotiate or document a workout or restructuring, or to preserve its rights or realize
upon any guaranty or other security for the payment of this Note (“Expenses”). Lender is hereby authorized to record
on Schedule I hereto, and any continuation sheets which Lender may attach thereto, (a) the date and amount of each Advance to Borrower
made by Lender (“Advances”), and (b) the date and amount of each payment or prepayment of principal of any Advances.
No failure to so record or any error in so recording shall affect the obligation of Borrower to repay the Advances hereunder, together
with interest thereon, as provided in this Note, and the outstanding principal balance of the Advances as set forth in Schedule
I shall be presumed to be correct. Advances shall be used to repay existing trade indebtedness, repurchase common stock, and for
other general corporate purposes.
Request for Advance. Borrower shall
request Advances from the Lender in writing not less than one business day prior to the requested date of such Advance, unless
otherwise waived by Lender. Advances shall be in an amount of not less than $50,000.
Interest. The unpaid principal balance
of this Note shall earn interest calculated on the basis of a 360-day year for the actual number of days in each year (365 or 366),
from and including the date the proceeds of this Note are disbursed to, but not including, the date all amounts hereunder are paid
in full, at a rate per year which shall be fixed at 8.00%.
Upfront Fee: In consideration for the
Lender extending credit to the Borrower, the Borrower agrees to pay to Lender an upfront fee in the amount of $17,500, which shall
be fully earned on the date the first Advance is made hereunder, and shall be payable out of the proceeds of the first Advance.
Due on Demand. This is a demand Note
and all amounts referenced hereunder shall become immediately due and payable upon demand by the Lender; provided, however, that
all amounts due hereunder shall automatically become immediately due and payable if Borrower or any guarantor or endorser of this
Note commences or has commenced against it any bankruptcy or insolvency proceeding. Borrower hereby waives protest, presentment
and notice of any kind in connection with this Note. Absent demand for payment in full, interest shall be due and payable monthly.
Default Rate. If the Lender has not
actually received any payment under this Note within ten (10) days after its due date, from and after such tenth day the interest
rate for all amounts outstanding under this Note shall automatically increase to five (5) percentage points above the otherwise
applicable rate per year, and any judgment entered hereon or otherwise in connection with any suit to collect amounts due hereunder
shall bear interest at such default rate.
Payments; Due Date. Payments shall be
made in immediately available United States funds at the Lender’s office set forth above, or to any other location given
in writing by the Lender to the Borrower. Accrued and unpaid interest shall be payable to Lender on the last business day of each
calendar quarter, and all accrued and unpaid interest, plus all outstanding principal amounts and other fees and expenses, shall
be payable in full upon the earlier to occur of (a) demand by Lender, or (b) April 1, 2020.
Interest Accrual; Application of Payments.
Interest will accrue at the rate set forth herein and shall be paid no later than the last day of each month. All payments (excluding
voluntary prepayments of principal) will be applied as of the date each payment is received and processed. Payments may be applied
in any order in the sole discretion of the Lender, but, prior to a payment default, may be applied chronologically (i.e., oldest
Advance first) to unpaid amounts due and owing, in the following order: first to accrued interest, then to principal, then to escrow
(if any), then to late charges and other fees, and then to all other Expenses.
Late Charges. If Borrower fails to pay,
within five (5) days of its due date, any amount due and owing pursuant to this Note or any other agreement executed and delivered
to the Lender in connection with this Note, Borrower shall immediately pay to the Lender a late charge equal to the greatest of
(a) $50.00, or (b) five percent (5%) of the delinquent amount.
Representations and Warranties. Borrower
represents that it is duly organized and in good standing or duly constituted in the state of its organization is duly authorized
to do business in all jurisdictions material to the conduct of its business; that the execution, delivery and performance of this
Note have been duly authorized by all necessary regulatory and corporate action or by its governing instrument; that this Note
has been duly executed by an authorized officer and constitutes a binding obligation enforceable against Borrower and not in violation
of any law, court order or agreement by which Borrower is bound; and that Borrower’s performance is not threatened by any
pending or threatened litigation. None of Borrower’s assets are subject to any lien or encumbrance.
Covenants: Borrower agrees that so long
as this Note remains unpaid, it shall not incur any indebtedness for borrowed money without the Lender’s prior written consent
other than trade indebtedness incurred in the ordinary course of business. Borrower will pay or discharge when due all taxes, assessments
and governmental charges or levies imposed upon Borrower unless such amounts are being diligently contested in good faith by appropriate
proceedings provided that adequate reserves with respect thereto are maintained on the books of Borrower in conformity with GAAP.
Without first obtaining Lender’s prior written consent, Borrower shall not change (i) its name as it appears in the official
filings in the state of its formation, (ii) the type of legal entity it is, (iii) its state of formation or (iv) amend its certificate
of incorporation, by laws or other organizational document.
Revival. To the extent that Borrower
makes a payment or Lender receives any payment or proceeds for Borrower’s benefit which are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver, custodian or
any other party under the United States Bankruptcy Code or any other bankruptcy law, common law or equitable cause, then, to such
extent, the obligations of Borrower hereunder intended to be satisfied shall be revived and shall continue as if such payment or
proceeds had not been received by Lender.
Miscellaneous. This Note, together with
any related loan letter agreement, security agreements and/or guaranties, contains the entire agreement between the Lender and
Borrower with respect to the Note, and supersedes every course of dealing, other conduct, oral agreement and representation previously
made by the Lender. All rights and remedies of the Lender under applicable law and this Note or amendment of any provision of this
Note are cumulative and not exclusive. No single, partial or delayed exercise by the Lender of any right or remedy shall preclude
the subsequent exercise by the Lender at any time of any right or remedy of the Lender without notice. No waiver or amendment of
any provision of this Note shall be effective unless made specifically in writing by the Lender. No course of dealing or other
conduct, no oral agreement or representation made by the Lender, and no usage of trade, shall operate as a waiver of any right
or remedy of the Lender. No waiver of any right or remedy of the Lender shall be effective unless made specifically in writing
by the Lender. Borrower agrees that in any legal proceeding, a copy of this Note kept in the Lender’s course of business
may be admitted into evidence as an original. This Note is a binding obligation enforceable against Borrower and its successors
and assigns and shall inure to the benefit of the Lender and its successors and assigns. If a court deems any provision of this
Note invalid, the remainder of the Note shall remain in effect. Section headings are for convenience only. Singular number includes
plural and neuter gender includes masculine and feminine as appropriate.
Notices. Any demand or notice hereunder
or under any applicable law pertaining hereto shall be in writing and duly given if delivered to Borrower (at its address on the
Lender’s records) or to the Lender (at the address on page one and separately to the Lender officer responsible for Borrower’s
relationship with the Lender). Such notice or demand shall be deemed sufficiently given for all purposes when delivered (i) by
personal delivery and shall be deemed effective when delivered, or (ii) by mail or courier and shall be deemed effective three
(3) business days after deposit in an official depository maintained by the United States Post Office for the collection of mail
or one (1) business day after delivery to a nationally recognized overnight courier service (e.g., Federal Express). Notice by
e-mail is not valid notice under this or any other agreement between Borrower and the Lender.
Governing Law; Jurisdiction. This Note
will be interpreted in accordance with the laws of the State of New York excluding its conflict of laws rules. BORROWER HEREBY
IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN NEW YORK COUNTY AND
CONSENTS THAT THE LENDER MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT BORROWER’S ADDRESS SET FORTH ABOVE FOR PROVIDING
NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS NOTE WILL PREVENT THE LENDER FROM BRINGING ANY ACTION, ENFORCING ANY
AWARD OR JUDGMENT OR EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY SECURITY OR AGAINST ANY PROPERTY OF BORROWER
WITHIN ANY OTHER COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower acknowledges and agrees that the venue provided
above is the most convenient forum for both the Lender and Borrower. Borrower waives any objection to venue and any objection based
on a more convenient forum in any action instituted under this Note.
Waiver of Jury Trial. Borrower
and the Lender hereby knowingly, voluntarily, and intentionally waive any right to trial by jury Borrower and the Lender may have
in any action or proceeding, in law or in equity, in connection with this note or the transactions related hereto. Borrower represents
and warrants that no representative or agent of the Lender has represented, expressly or otherwise, that the Lender will not, in
the event of litigation, seek to enforce this jury trial waiver. Borrower Acknowledges that the Lender has been induced to enter
into this note by, among other things, the provisions of this Section.
[Signature Page Follows]
Acknowledgment. Borrower acknowledges
that it has read and understands all the provisions of this Note, including the Governing Law; Jurisdiction and Waiver
of Jury Trial, and has been advised by counsel as necessary or appropriate.
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SPORT-BLX, INC.
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By:
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/s/ Cesar A. Baez
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Name:
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Cesar A. Baez
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Title:
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Acting Chair, Related Party Transaction Committee
|
CREDIT
FACILITY LETTER AGREEMENT
November
15, 2019
Clinton
Special Opportunities Fund LLC
510 Madison Avenue, 9th Floor
New
York, NY 10022
Attention: George E. Hall
Dear
George:
The
undersigned, GlassBridge Enterprises, Inc. (the “Lender”), hereby agrees to loan to Clinton Special Opportunities
Fund LLC (the “Borrower”) from time to time until November 15, 2020 (the “Maturity Date”), in one or more
advances, the aggregate principal amount of up to $1,000,000. Accrued and unpaid interest on loans made under this Agreement shall
be repaid by the Borrower on the last business day of February, May, August, and on the Maturity Date, and and all unpaid principal
shall be payable in full on the Maturity Date. All such advances shall be made on the terms and conditions contained in, and with
a repayment obligation to be evidenced by, the attached promissory note.
The
proceeds of the loans described herein are to be used by the Borrower for general working capital and liquidity purposes. Any
request for an advance under the promissory note shall be received by Lender not less than three (3) business days prior to the
requested date of such advance unless waived by Lender in Lender’s sole discretion.
The
Borrower agrees that upon the execution of this letter agreement, it shall pay to Lender, an origination fee in the amount of
$20,000, which you agree may be paid from the proceeds of the initial loan made by Lender. The entire amount of the origination
fee shall be fully earned and shall be due and payable on the date of the execution of this letter agreement.
As
a condition precedent to the making of the initial advance by the Lender, the Borrower is required to provide us with: (i) an
executed copy of this letter agreement, (ii) an executed copy of the promissory note annexed hereto, (iii) an executed copy of
the Pledge and Security Agreement in favor of Lender securing Borrower’s obligations to Lender under the promissory note,
(iv) an executed guaranty by George E. Hall in favor of Lender guaranteeing Borrower’s obligations to Lender under the promissory
note, and (v) such other documents as the Lender may reasonably request.
The
loans shall be secured by the collateral described in the Pledge and Security Agreement, which shall include all of the Borrower’s
personal property including, but not limited to, Borrower’s ownership interests in GlassBridge Enterprises, Inc.
For
the avoidance of doubt, this letter agreement shall survive the making of the loans to be made by us to you hereunder and shall
remain in effect so long as the promissory note or any of the obligations thereunder shall remain unpaid.
All
notices, demands or requests relating to any matter set forth herein shall be in writing and shall be served by delivery, certified
U.S. mail, return receipt requested, or by a reputable commercial carrier that provides a receipt. All such notices, demands or
requests shall be with postage thereon fully prepaid, and addressed to the party so to be served at its address stated below,
or at such other address as such party shall have specified by notice as provided herein. Any such notice, demand or request shall
be deemed effective on the day of actual delivery or upon the fifth business day after the date of mailing, whichever is earlier
in time. Notices shall be addressed as follows:
If
to Borrower, to Borrower at the address set forth above.
If
to the undersigned, to it at the following address:
GlassBridge
Enterprises, Inc.
510 Madison Avenue, 9th Floor
New York, NY 10022
Attention: Daniel Strauss
This
letter agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without
regard to conflicts of law principles. This letter agreement may be executed in any number of counterparts, each of which shall
be deemed an original and all of which taken together shall constitute one and the same instrument. Delivery by either party to
this letter agreement of an executed counterpart hereof by facsimile, PDF or other electronic transmission shall constitute good
and effective delivery hereof for all purposes hereof.
[Signature
Page Follows]
If
the foregoing correctly reflects our understanding, please countersign this letter agreement in the space provided below and sign
the attached promissory note, whereupon this will become a binding agreement between us.
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GLASSBRIDGE
ENTERPRISES, INC.
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By:
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/s/
Joseph De Perio
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Name:
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Joseph
De Perio
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Title:
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Executive
Chairman
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Accepted
and agreed as of the
date first above written.
CLINTON
SPECIAL OPPORTUNITIES
FUND LLC
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By:
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/s/
George E. Hall
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Name:
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George
E. Hall
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Title:
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Member
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PROMISSORY
NOTE
November
15, 2019
FOR
VALUE RECEIVED, the undersigned, Clinton Special Opportunities Fund LLC (“Borrower”), hereby promises to pay
to GlassBridge Enterprises, Inc. (along with any other registered holder hereof, “Lender”), or registered assigns,
an amount equal to the sum of all amounts that shall have been advanced (each such advance, an “Advance”) to
Borrower by Lender pursuant to the letter agreement, dated as of the date hereof (the “Credit Agreement”),
between Borrower and Lender, and then remains unpaid, in lawful money of the United States of America, together with (a)
interest at the applicable Interest Rate (as hereinafter defined) for each Advance on the principal amount of such Advance, in
the case of each such Advance for the period beginning on (and including) the date of such Advance and ending on (but excluding)
the date on which such Advance is paid in full, and (b) all charges, amounts and other sums due and payable hereunder.
This Note is being made by Borrower to evidence Borrower’s obligation to repay amounts advanced by Lender pursuant to the
Credit Agreement, and shall be secured by the collateral described in the Pledge and Security Agreement dated as of even date
herewith by and between the Borrower and the Lender (as such agreement may be amended, amended and restated, supplemented, or
otherwise modified from time to time, the “Security Agreement”, and the Security Agreement, together with the
letter agreement of even date herewith between the Borrower and the Lender are, together with this Promissory Note, referred to
as the “Loan Documents”). All amounts outstanding hereunder shall be repaid in full on or before November 15,
2020 (the “Maturity Date”).
1. Interest;
Mandatory Prepayments. (a) Interest on the amount of each Advance shall accrue in arrears at the Interest Rate for such
Advance and shall be due and payable on each anniversary of this Note, for the period from (and including) the date of such
Advance or, if later, the most recent date on which interest has been paid on such Advance, and on the date of payment in
full. The term “Interest Rate” shall mean, for each Advance, ten percent (10%) per annum.
(b)
Interest on the unpaid principal balance of each Advance shall at all times be computed on the basis of a 365-day year for the
period beginning on (and including) the date of such Advance and ending on the date on which such Advance is paid in full.
2. Default.
The entire unpaid principal amount of this Note, together with all accrued and unpaid interest and all other sums due
hereunder, shall, at the option of Lender and after written notice to Borrower, become immediately due and payable, upon the
failure of Borrower to make any payment of principal, interest or other sums due hereunder without notice from Lender or upon
the occurrence of any other default under any other Loan Document.
3.
Waiver. Borrower hereby waives presentment and demand for payment, notice of dishonor, valuation and appraisement, protest
and notice of protest with respect to this Note.
4. Voluntary
and Mandatory Prepayments. Subject to Section 5, Borrower may prepay this Note without premium or penalty, in whole or in
part, at any time, together with all accrued and unpaid interest at the time of such prepayment and all other sums due
hereunder. Accrued and unpaid interest hereunder shall be repaid by the Borrower on the last business day of February, May,
August, and on the Maturity Date, and all unpaid principal shall be repaid in full on the Maturity Date. Amounts repaid
hereunder may be reborrowed until the business day prior to the Maturity Date.
5. Application
of Payments. Unless Lender elects otherwise, all payments and prepayments on account of the indebtedness evidenced by
this Note shall be applied in the following order of priority: first, to the payment of all fees, costs and expenses
incurred by Lender pursuant to the Loan Documents; second, to the payment of any accrued and unpaid interest (applied
to pay interest outstanding on some or all of the outstanding Advances, as determined by Borrower); and third, to
repayment of the then remaining principal balance of the indebtedness evidenced by this Note (applied to some or all of the
outstanding Advances, as determined by Borrower).
6. Advances.
Lender is hereby authorized to record on Schedule I hereto, and any continuation sheets which Lender may attach thereto,
(a) the date and amount of each Advance to Borrower made by Lender pursuant to the Credit Agreement
(“Advances”), and (b) the date and amount of each payment or prepayment of principal of any
Advances. No failure to so record or any error in so recording shall affect the obligation of Borrower to repay the Advances
hereunder, together with interest thereon, as provided in this Note, and the outstanding principal balance of the Advances as
set forth in Schedule I shall be presumed to be correct.
7. Transfer.
This Note is a registered instrument and is assignable or transferable only upon surrender of this Note for registration or
assignment or transfer, duly endorsed to the assignee or transferee, or accompanied by a written instrument of transfer duly
executed, by the Lender or by his attorney duly authorized in writing.
8. Indemnity.
If there is any default under this Note and this Note is placed in the hands of any attorney for collection or is collected
through any court including any bankruptcy court, the Borrower promises and agrees to pay to the Lender his attorneys’
fees, court costs and all other expenses incurred in collecting or attempting to collect or securing or attempting to secure
this Note as provided by the laws of the State of New York, or any other applicable law.
9. Miscellaneous.
(a) All payments shall be made in lawful money of the United States of America, in immediately available funds.
(b)
This Note shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and permitted
assigns (in the case of Lender, permitted registered assigns), and shall not be assigned by Borrower without the prior
written consent of Lender. Lender may assign this Note without the prior written consent of Borrower.
(c)
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. ALL DISPUTES BETWEEN THE BORROWER AND THE LENDER, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY
OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE COURTS TO WHICH AN
APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TO PROCEED AGAINST THE BORROWER IN ANY LOCATION REASONABLY SELECTED BY THE LENDER TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE LENDER. THE BORROWER AGREES THAT HE WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR
CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE LENDER. THE BORROWER WAIVES ANY OBJECTION THAT HE MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH THE LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON FORUM NON CONVENIENS. THE BORROWER (AND BY ITS RECEIPT HEREOF, THE LENDER) HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING
TO (I) THIS PROMISSORY NOTE OR (II) ANY CONDUCT, ACTS OR OMISSIONS OF THE LENDER OR ANY OF ITS RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
(d)
Any term of this Note may be amended or modified or the observance of any term of this Note may be waived (either generally
or in a particular instance) only with the written consent of the Borrower and the Lender.
(e)
The terms and provisions of this Note are severable. In the event of the unenforceability or invalidity of any one or more of
the terms, covenants, conditions or provisions of this Note under federal, state or other applicable law, such
unenforceability or invalidity shall not render any other term, covenant, condition or provision hereunder unenforceable or
invalid.
IN
WITNESS WHEREOF, Borrower has duly executed and delivered this Note as of the day and year first written above.
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CLINTON
SPECIAL OPPORTUNITIES FUND LLC
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By:
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/s/
George E. Hall
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Name:
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George
E. Hall
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Title:
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Member
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SCHEDULE
I
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Date
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Amount
of
Advance
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Amount
of
Principal
Payment or
Prepayment
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11/15/19
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$250,000
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Exhibit 10.43
SECURED
PROMISSORY NOTE AGREEMENT
DATED
AS OF MARCH 17, 2020
BY
AND AMONG
GLASSBRIDGE
ATHLETE, LLC,
AS
BORROWER,
ORIX
PTP HOLDINGS, LLC,
AS
LENDER,
AND
GLASSBRIDGE
ENTERPRISES, INC.,
FOR
THE LIMITED PURPOSES OF SECTIONS 4 AND 5 HEREOF
SECURED
PROMISSORY NOTE AGREEMENT
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Original
Principal Amount: $16,000,000
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Effective
Date: March 17, 2020
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FOR
VALUE RECEIVED, GlassBridge Athlete, LLC, a Delaware limited liability company (the “Borrower”), hereby unconditionally
promises to pay to the order of ORIX PTP Holdings, LLC, a Delaware limited liability company, or its assigns (the “Lender”),
the principal amount of SIXTEEN MILLION U.S. DOLLARS ($16,000,000), together with all accrued and unpaid interest thereon, on
or prior to the Maturity Date (as defined below) pursuant to the provisions of this Secured Promissory Note (this “Note”).
The
Borrower promises to pay interest on the outstanding principal amount of the Loan advanced under this Note for the period from
and including the date of such advance to but excluding the date such advance shall be repaid in full, at the applicable interest
rate as set forth in Section 2.2. Any principal not repaid when due shall bear interest from and including the date due
to but excluding the date on which such amount is repaid in full at a rate per annum equal to the Default Rate.
Accrued
interest on the Loan shall be payable in accordance with Section 2.2(b) and on the Maturity Date; provided, however,
that in the event of any prepayment of the Loan, accrued interest on the principal amount shall be payable in accordance with
Section 2.5.
All
payments under this Note shall be made in lawful money of the United States, in immediately available funds and without set-off,
deduction or counterclaim. Any extension of time for the repayment of the principal outstanding under this Note resulting from
the due date falling on a non-Business Day shall be included in the computation of interest.
The
Borrower hereby waives presentment, notice of dishonor, protest and any other notice or formality with respect to this Note except
for such notice as provided herein.
1.
Definitions and Interpretation.
1.1
Definitions. The terms listed below shall be defined as follows:
“Administrative
Agent” shall mean the Person acting, at the time of determination, in the capacity as administrator for certain cash
management, transaction, financial and bookkeeping, registrar and transfer agent and other administrative services for the Athlete
Company in connection with the Swap Transaction under an Administrative Services Agreement, including any such Person’s
successors in interest and permitted assigns, which Administrative Agent shall be mutually acceptable to the Borrower and the
Lender in the Lender’s reasonable discretion. The initial Administrative Agent shall be BNP Paribas Financial Services,
LLC.
“Administrative
Services Agreement” shall mean any administrative services agreement, between an Administrative Agent and an Athlete
Company, or any replacement administrative services agreement between such Administrative Agent and Athlete Company.
“Affiliate”
shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled
by, such Person. As used in this definition, “control” (including, with its correlative meanings, “controlled
by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of securities or membership or partnership or other
ownership interests, by contract or otherwise); provided, that, in any event, any Person which owns directly or indirectly
30% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation
or 30% or more of the membership or partnership or other ownership interests of any other Person (other than as a limited partner
of such other Person) will be deemed to control such corporation or other Person.
“Anti-Money
Laundering Laws” shall mean any laws or regulations relating to money laundering or terrorist financing, including the
Bank Secrecy Act, 31 U.S.C. sections 5301 et seq.; the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA PATRIOT Act); Laundering of Monetary Instruments,
18 U.S.C. section 1956; Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section
1957; the Financial Record keeping and Reporting of Currency and Foreign Transactions Regulations, 31 C.F.R. Part 103; and any
similar laws or regulations currently in force or hereafter enacted.
“Athlete”
shall mean each professional athlete listed on Schedule 3 (as such Schedule may be subject to change pursuant to Section
5(s)).
“Athlete
Company” shall mean, collectively or individually, depending on the context, the single-purpose company or companies
listed on Schedule 3 (as such Schedule may be subject to change pursuant to Section 5(s)), formed and owned, directly
or indirectly, by the Athlete(s) in connection with the Swap Transaction(s).
“Athlete
Fund” shall mean The Sports & Entertainment Fund, L.P., a Cayman exempted limited partnership under the Cayman ELP
Law.
“Athlete
Fund Documents” shall mean each of the following documents executed and delivered with respect to the Athlete Fund:
(i) the Third Amended and Restated Exempted Limited Partnership Agreement of The Sports & Entertainment Fund, L.P., dated
January 31, 2020 (as it may be further amended); (ii) the Section 9 Statement filed with the Registrar on July 28, 2014 pursuant
to the Cayman ELP Law, the Section 10 Statement filed with the Registrar on March 23, 2016 pursuant to the Cayman ELP Law, and
the Section 10 Statement filed with the Registrar on January 8, 2020 pursuant to the Cayman ELP Law; (iii) the Confidential Private
Offering Memorandum relating to the offering of limited partnership interests of The Sports & Entertainment Fund, L.P. dated
January 2020 (the “Memorandum”); (iv) any Supplement(s) to the Memorandum; (v) investor subscription documents
for limited partnership interests in the Athlete Fund (including subscription documents by the Borrower for the Athlete Fund Interests);
(vi) any Investment Management Agreement between the Athlete Company and GlassBridge Investment Management, LLC, including the
investment guidelines attached thereto; and (vi) Letter Agreement between GlassBridge Investment Management, LLC and the Athlete
Fund, dated February 26, 2020 (re: further limitations on the investment guidelines).
“Athlete
Fund Interests” shall mean the Class D and Class E interests in the Athlete Fund.
“Basic
Documents” shall mean this Note, the Security Agreements, and any other document or instrument now existing or hereafter
entered into that relates to any extensions of credit at any time made available by the Lender to the Borrower.
“Borrowing
Date” shall mean the date the Loan is made pursuant to Section 2(a).
“Borrowing
Notice” shall mean a borrowing notice to be delivered by the Borrower to the Lender, substantially in the form of Exhibit
A attached hereto.
“Business
Day” shall mean any day other than a Saturday, Sunday or any other day on which commercial banks are authorized or required
to close in New York, New York.
“Cayman
ELP Law” shall mean the Exempted Limited Partnership Law (as amended) of the Cayman Islands.
“Cayman
Registrar” shall mean the Registrar of Exempted Limited Partnerships in the Cayman Islands.
“Change
of Control” shall mean an event or any series of events by which (a) GlassBridge ceases to have the power, directly
or indirectly, to vote or direct the voting of membership interests carrying the voting rights to elect all of the board of directors
of the Borrower or (b) GlassBridge ceases to own legally and beneficially 100% of the membership or economic interests of the
Borrower.
“Code”
shall mean the United States Internal Revenue Code of 1986, as amended from time to time, and any successor statute.
“Collateral”
shall mean, collectively, the Security Agreement Collateral and the Pledge Agreement Collateral.
“Custodial
Agent” shall mean the Person acting, at the time of determination, in the capacity as custodian of cash and securities
for an Athlete Company in connection with the Swap Transaction under a Custodial Agreement, including its successors in interest
and permitted assigns, which Custodial Agent shall be mutually acceptable to the Borrower and the Lender in the Lender’s
reasonable discretion. The initial Custodial Agent shall be SunTrust Robinson Humphrey, Inc.
“Custodial
Agreement” shall mean any account agreement, between a Custodial Agent and an Athlete Company, or any replacement account
agreement between such Custodial Agent and Athlete Company.
“Debtor
Relief Law” shall mean each of Title 11 of the United States Code and all other applicable liquidation, conservatorship,
bankruptcy, fraudulent transfer, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments,
or similar Laws in effect from time to time affecting the rights of creditors generally.
“Default”
shall mean any event that with the passage of time or giving notice would result in an Event of Default.
“Default
Rate” shall mean, in respect of any amount not paid when due, the rate per annum equal to the sum of the interest rate
set forth in Section 2.2(a) plus two percent (2.0%) per annum; provided, that the Default Rate shall not exceed
the maximum rate of interest permitted to be charged in accordance with applicable law.
“Documentation”
shall have the meaning assigned to such term in Section 3(h).
“Dollars”
and “$” shall mean lawful money of the United States of America.
“Effective
Date” shall mean the “Effective Date” first written above.
“Event
of Default” shall have the meaning assigned to such term in Section 6.
“GAAP”
shall mean generally accepted accounting principles in the United States, consistently applied.
“GlassBridge”
shall mean GlassBridge Enterprises, Inc., a Delaware corporation.
“Governmental
Approvals” shall mean (a) any authorizations, consents, approvals, licenses, rulings, permits, tariffs, rates, certifications,
filings, registrations, variances, orders, judgments, decrees by or with a relevant Governmental Authority and (b) any required
notice to, any declaration of or with, or any registration by or with, any relevant Governmental Authority.
“Governmental
Authority” shall mean any national, state, municipal, territorial, or local government, any political subdivision thereof
or any other governmental department, commission, board, judicial, public, regulatory or statutory instrumentality, authority,
body, agency, bureau or entity, any of which has the authority to bind a party at law or having jurisdiction over the Borrower,
the Athlete Fund or GlassBridge.
“Indebtedness”
of any Person shall mean (a) indebtedness created, issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities or the sale of property of such Person to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property of such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price for any property of such Person; (c) any indebtedness of others secured by a Lien or other encumbrance on
any property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) all obligations
of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions
for the account of such Person (whether contingent or otherwise); (e) obligations of such Person in respect of surety bonds or
similar instruments (whether contingent or otherwise); (f) obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) any property of such Person to the extent such obligations are required to
be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles
applied on a consistent basis (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board); and (g) indebtedness of others as described in clauses (a) through (f) above in any manner guaranteed by such Person or
as to which such Person has an obligation substantially the economic equivalent of a guarantee.
“Investment
Company Act” shall mean the Investment Company Act of 1940, as amended.
“Lien”
shall mean any lien, mortgage, security interest, collateral assignment, pledge, assignment, charge, title retention agreement,
or encumbrance of any kind, and any other right of or arrangement with any creditor (whether based on common law, constitutional
provision, statute or contract) to have its claim satisfied before the claims of general creditors of the owner of the property
or assets out of any property or assets, or their proceeds.
“Loan”
shall mean the loan made to the Borrower by the Lender evidenced by this Note.
“Material
Adverse Effect” shall mean any event, condition or occurrence of whatever nature that would result in a material adverse
change in (a) the business, results of operations, condition or financial condition of the Borrower, (b) the ability of the Borrower
to perform its obligations under the Basic Documents or Athlete Fund Documents to which it is a party, (c) the value of the Collateral,
or (d) the validity, priority and enforceability of the Lender’s Liens on the Collateral.
“Maturity
Date” shall mean the date that is eighteen (18) months after the Borrowing Date.
“Obligations”
shall mean, collectively, the Loan, and all present and future Indebtedness, liabilities, and obligations (including, without
limitation, indemnities), and all renewals, increases and extensions thereof, or any part thereof, now or in the future owed to
Lender by Borrower under this Note or any other Basic Document, together with all interest accruing thereon (including interest
accruing thereon during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding under any Debtor
Relief Law, regardless of whether allowed or allowable in such proceeding), reasonable fees, costs and expenses (including, without
limitation, all reasonable and documented attorneys’ fees and out-of-pocket expenses incurred in the enforcement or collection
thereof) payable under the Basic Documents or in connection with the protection of rights or exercise of remedies under the Basic
Documents, in each case, whether direct or indirect, absolute or contingent, now or hereafter existing or arising, or due or to
become due.
“Obligors”
shall mean the Borrower, GlassBridge and the Athlete Fund.
“OFAC”
shall mean the United States Department of Treasury Office of Foreign Assets Control.
“OFAC
Laws” shall mean any laws, regulations, and Executive Orders relating to the economic sanctions programs administered
by OFAC, including the International Emergency Economic Powers Act, 50 U.S.C. sections 1701 et seq.; the Trading with the Enemy
Act, 50 App. U.S.C. sections 1 et seq.; and the Office of Foreign Assets Control, Department of the Treasury Regulations, 31 C.F.R.
Parts 500 et seq. (implementing the economic sanctions programs administered by OFAC).
“OFAC
SDN List” shall mean the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC.
“OFAC
Violation” has the meaning assigned to such term in Section 5(t)(v).
“Parent
Pledge Agreement” shall mean that certain Pledge Agreement (Parent) by GlassBridge in favor of the Lender, dated as
of the date hereof.
“Permitted
Indebtedness” shall mean (a) the Loan and other Indebtedness under the Basic Documents; and (b) trade payables or other
similar Indebtedness incurred in the ordinary course of business.
“Permitted
Liens” shall mean (a) any Liens created pursuant to the Basic Documents or the Athlete Fund Documents; and (b) Liens
imposed by law for taxes that are not yet due or that are being contested in good faith by the Borrower and for which adequate
reserves have been set aside therefor or that are secured by a bond reasonably acceptable to the Lender.
“Person”
shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization
or government (or any agency, instrumentality or political subdivision thereof).
“PIK
Interest” has the meaning assigned to such term in Section 2.2(b).
“PJW
Ltd.” shall mean PJW Ltd., a Cayman exempted company limited by shares under the Companies Law (2018 Revision) (as amended)
of the Cayman Islands.
“PJW
Swap Termination Notice” has the meaning assigned to such term in Section 2.5(c).
“PJW
Swap Transaction” has the meaning assigned to such term in Section 2.5(c).
“Pledge
Agreement Collateral” shall mean all of the Collateral, as defined in the Parent Pledge Agreement.
“Pledged
Equity Interests” shall mean all of the issued and outstanding membership interests of GlassBridge in the Borrower.
“Principal
Amount” shall mean the outstanding principal amount of this Note at any time, which shall include any PIK Interest as
provided herein.
“Principal
and Interest Payment Date” shall mean each of the dates specified in Schedule 1, which shall be the quarterly
anniversary dates of the Borrowing Date. The Lender shall complete Schedule 1 after receiving the Borrowing Notice and
disbursing the Loan, which Schedule 1 shall be deemed final and conclusive absent manifest error.
“Secured
Party” shall mean ORIX PTP Holdings, LLC, a Delaware limited liability company, in its capacity as the secured party
under the Security Agreements.
“Security
Agreement” shall mean that certain Security Agreement by Borrower in favor of the Lender, dated as of the date hereof.
“Security
Agreement Collateral” shall mean all of the Collateral, as defined in the Security Agreement.
“Security
Agreements” shall mean (i) the Parent Pledge Agreement and (ii) the Security Agreement.
“Swap
Documents” shall mean (i) each of the agreements executed and delivered with respect to the transaction (or series of
transactions) involving Athlete Company and the Athlete Fund and related to the earnings of Athlete as described on Schedule
3 (as such Schedule may be subject to change pursuant to Section 5(s)), (ii) any Custodial Agreement, and (iii) any
Administrative Services Agreement.
“Swap
Transaction” shall mean the transaction (or series of transactions) contemplated by the Swap Documents.
“Then
Outstanding Amount” shall mean (i) the outstanding Principal Amount plus (ii) the then accrued but unpaid interest
on the Loan plus (iii) any other amount that may be owing and due on the Loan or this Note as provided herein, all as of
the applicable determination date.
“Transfer”
shall mean any transfer, sale, lease, assignment, option, grant or similar arrangement, whether effected directly or indirectly.
“USA
Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26, 2001), as amended.
1.2
Certain Rules of Interpretation.
In
this Note, unless otherwise indicated, the singular includes the plural and the plural the singular; words importing any gender
include the other gender; references to statutes or regulations are to be construed as including all statutory or regulatory provisions
consolidating, amending or replacing the statute or regulation referred to; references to “writing” include printing,
typing, lithography and other means of reproducing words in a tangible visible form; the words “including,” “includes”
and “include” shall be deemed to be followed in each instance by the words “without limitation”; references
to articles, sections (or subdivisions of sections), exhibits, annexes or schedules are to this Note; references to agreements
and other contractual instruments shall be deemed to include all subsequent amendments, extensions and other modifications to
such agreements or instruments (without, however, limiting any prohibition on any such amendments, extensions and other modifications
by the terms of this Note); and references to Persons include their respective successors and permitted assigns and, in the case
of any government authorities, Persons succeeding to their respective functions and capacities.
2.
Loan.
(a)
Loan Disbursement. Subject to the satisfaction or waiver of the conditions precedent set forth in Section 3 and
the delivery by Borrower to Lender of a Borrowing Notice in accordance with Section 2.4, the Lender shall disburse sixteen
million Dollars ($16,000,000) to Borrower. The date such funds are disbursed is referred to herein as the “Borrowing
Date.” Notwithstanding any other provision of this Note to the contrary, the parties hereby agree that in the event
that the conditions precedent set forth in Section 3 are not satisfied or waived on or before March 24, 2020, (i) this
Note shall automatically terminate in all respects (without any further action on the part of any party hereto) and shall be of
no further force and effect except as set forth in this Note, (ii) any requirement for notice with respect to the termination
of the Note is hereby waived, and (iii) the Lender shall be under no obligation to disburse or otherwise provide funds to the
Borrower pursuant to this Note or the other Basic Documents.
(b)
Reborrowings. Amounts repaid under this Note, whether before, on or after their scheduled due date, may not be reborrowed.
2.2
Interest.
(a)
The Borrower shall pay to the Lender interest on the then outstanding Principal Amount until the Maturity Date, at a rate per
annum equal to five percent (5.0%). Interest with respect to the Loan shall be payable on the basis of a year of 360 days for
the actual number of days elapsed. Following the occurrence of and during the continuance of any Event of Default, the interest
payable by the Borrower on the Then Outstanding Amount of the Loan will be equal to the Default Rate.
(b)
All interest accrued pursuant to Section 2.2(a) shall be due and payable to the Lender: (i) on each Principal and Interest
Payment Date and (ii) on the Maturity Date. Notwithstanding the foregoing, the Borrower shall pay interest in kind (“PIK
Interest”) on each Principal and Interest Payment Date. PIK Interest shall be calculated at a rate per annum equal to
five percent (5.0%) and shall be paid-in-kind by being capitalized and added to the Principal Amount, effective as of such Principal
and Interest Payment Date, and shall thereafter accrue interest until repaid at the same rate as the Principal Amount.
2.3
Maturity Date. Except as otherwise provided herein, the Then Outstanding Amount of the Loan shall be due and payable on
the Maturity Date and shall accrue interest as set forth in this Note.
2.4
Borrowing Notice. To request the disbursement of sixteen million Dollars ($16,000,000) by the Lender, the Borrower shall
submit a completed Borrowing Notice and all documents required as conditions precedent pursuant to Section 3 by 12:00 noon
New York time at least two (2) Business Days prior to the requested date of borrowing of the Loan (which date shall be a Business
Day), unless a shorter period is otherwise agreed to by the Lender.
2.5
Principal.
(a)
Periodic Payments. On each Principal and Interest Payment Date, the Borrower shall pay to the Lender, until the Loan is
fully repaid, all proceeds of any payments received by the Borrower from the Fund in connection with the Athlete Fund Interests,
after taking into account payments of interest under Section 2.2(a); provided, however, that the final principal
repayment installment of the Loan shall be repaid on the Maturity Date and in any event shall be in an amount equal to the aggregate
Then Outstanding Amount of the Loan on such date.
(b)
Prepayments. The Borrower shall have the right to make optional prepayments of the outstanding principal of the Loan at
any time and in any amount to the Lender. The Borrower shall give the Lender notice of any such optional prepayment by 12:00 noon
New York time on the Business Day prior to the date of such proposed prepayment (which date shall be a Business Day); provided,
that the date specified in such notice as the prepayment date shall be a Principal and Interest Payment Date. Prepayments made
pursuant to this Section 2.5(b) shall be applied first to the accrued and unpaid interest of the Loan and second to the
principal of the Loan.
(c)
Termination of PJW Swap Transaction. In order to ensure that funds will be available for Borrower to repay the Loan in
full at the Maturity Date (or earlier, following the occurrence of an Event of Default (including any applicable notice and cure
periods associated therewith)), GlassBridge shall cause the Athlete Fund to terminate the transaction under the Swap Documents
entered into between PJW Ltd. (as the Athlete Company) and the Athlete Fund (the “PJW Swap Transaction”), on
or before the date that is the earlier of (i) ten (10) Business Days prior to the Maturity Date and (ii) the occurrence of an
Event of Default. In furtherance thereof, (i) on or before the date that is ten (10) Business Days prior to the Maturity Date
and (ii) promptly (but no later than one Business Day) following the occurrence of an Event of Default (including any applicable
notice and cure periods associated therewith), GlassBridge shall cause the Athlete Fund (or the general partner of the Athlete
Fund) to send an irrevocable written notice of termination to PJW Ltd. in accordance with that certain letter agreement, dated
February 26, 2020, between PJW Ltd. and GlassBridge (the “PJW Swap Termination Notice”), effective on a date
no later than the Business Day preceding the Maturity Date (or effective immediately in the case of the occurrence of an Event
of Default); and GlassBridge shall cause the Athlete Fund (or the general partner of the Athlete Fund) to send a copy of the PJW
Swap Termination Notice simultaneously to the Lender. In the event that the Athlete Fund (or the general partner of the Athlete
Fund) fails to send the irrevocable PJW Swap Termination Notice to PJW Ltd. (i) on or before the date that is ten (10) Business
Days prior to the Maturity Date or (ii) promptly (but no later than one Business Day) following the occurrence of an Event of
Default (including any applicable notice and cure periods associated therewith), GlassBridge and the general partner of the Athlete
Fund hereby authorize the Lender, for and on behalf of such general partner, to send a written notice of termination of the PJW
Swap Transaction to PJW Ltd. on behalf of the Athlete Fund (or the general partner of the Athlete Fund), effective on a date no
later than the Business Day preceding the Maturity Date (or effective immediately in the case of the occurrence of an Event of
Default).
2.6
Payment Mechanics.
(a)
Manner of Payments. All payments of interest and principal shall be made in lawful money of the United States of America
no later than 4:00 PM on the date on which such payment is due by wire transfer of immediately available funds to the Lender’s
account at a bank specified by the Lender in writing to the Borrower from time to time.
(b)
Application of Payments. All payments made hereunder shall be applied first, to accrued and unpaid interest with respect
to the Loan, and second, to the outstanding Principal Amount of the Loan in the inverse order of maturity.
(c)
Scheduling of Payments. The Borrower authorizes the Lender to record the date and amount of the Loan made by the Lender
and of each repayment or prepayment of principal thereunder, and the Borrower agrees that all such notations shall constitute
prima facie evidence of the matters noted in the absence of manifest error. No failure to make any such notations, nor any errors
in making any such notations, shall affect the validity of the Obligations.
3.
Conditions Precedent. The obligation of
the Lender to make the disbursement of the Loan under this Note is subject to the satisfaction by the Borrower, or waiver by the
Lender, of each of the following conditions precedent on or before the Borrowing Date, and in the case of any documents, schedules
or certificates described below, delivery in form and substance reasonably satisfactory to the Lender:
(a)
receipt by the Lender of a Borrowing Notice, which shall be duly authorized, executed and delivered by the Borrower, in accordance
with Section 2.4;
(b)
receipt by the Lender of certificates signed by authorized officers of each Obligor, attaching the certificates of formation,
other organizational documents, good standing certificates and incumbency certificates, each as in effect on the Effective Date
and the Borrowing Date, and resolutions regarding the authorization, execution and delivery of each Basic Document, Athlete Fund
Document and Swap Document to which such Person is a party;
(c)
receipt by the Lender of (i) the Basic Documents, (ii) executed copies of each Athlete Fund Document and Swap Document, each certified
by the Obligor party thereto as true, correct and complete in all material respects and in form and substance reasonably satisfactory
to the Lender, (iii) an executed copy of the contract dated as of July 3, 2019 between Paul Jamaine (P.J.) Washington Jr. and
Hornets Basketball, LLC, a member of the National Basketball Association (“PJW Player Contract”), as received
by the Borrower, and (iv) the organizational documents of the Athlete Company;
(d)
each Basic Document, Athlete Fund Document and Swap Document delivered to the Lender pursuant to Section 3(c) to which
any Obligor is a party shall be in full force and effect, shall not have been amended, modified or supplemented from the agreements
delivered to the Lender pursuant to Section 3(c) (or if amended, modified or supplemented, such amendment, modification
or supplement shall have been consented to in writing by the Lender, in its sole discretion) and shall constitute a legally valid
and binding obligation of such Obligor, enforceable against such Obligor in accordance with its respective terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors’ rights generally and the application of general principles of equity;
(e)
each representation and warranty set forth in Section 4 shall be true and correct in all respects as of the Effective Date
and the Borrowing Date (or if such representation and warranty relates solely to an earlier date, as of such date);
(f)
creation and perfection of all security interests in, pledges of and Liens with respect to the Collateral required to be delivered
as of the Effective Date, which shall have attached and shall constitute valid and enforceable first-priority Liens on the Collateral
(subject to Permitted Liens);
(g)
receipt by the Lender of evidence reasonably satisfactory to it that all financing statements and other instruments or documents
necessary to be filed in accordance with the Security Agreements have been filed or will be filed in connection with the funding
of the Loan;
(h)
in order for Lender to comply with the requirements under Title III of the USA Patriot Act, each Person that shall become an Obligor
as of the Effective Date shall provide to the Lender certain information or supporting documentation (collectively, “Documentation”)
requested by the Lender as of the Effective Date. Lender shall, as required by the USA Patriot Act, verify and record any Documentation
provided by such Obligor to validate such Obligor’s identity. Documentation that may be requested from such Obligor may
include, but is not limited to, a Federal Employer Identification Number (FEIN), a certificate of good standing to validate such
Obligor’s corporate existence, a certificate of incumbency to authenticate the management of such Obligor, and other government
issued certified documents to validate such Obligor’s authorization to conduct business, and all such Documentation shall
be true and correct on the Borrowing Date; and
(i)
no Default or Event of Default has occurred and is continuing.
4.
Representations.
The
Borrower and GlassBridge (for itself and on behalf of the Athlete Fund) jointly and severally represent and warrant to the Lender
as of the date hereof that:
(a)
Each of the Borrower, GlassBridge and the Athlete Fund is duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has all requisite power and authority to carry on its business as now conducted. It
has all requisite power and authority to (i) execute and deliver each Basic Document, Athlete Fund Document and Swap Document
to which it is a party, (ii) grant to the Secured Party a first-priority security interest in the Collateral (subject to the Permitted
Liens), and (iii) perform all of its obligations under each Basic Document, Athlete Fund Document and Swap Document to which it
is a party.
(b)
The execution and delivery by each of the Borrower, GlassBridge and the Athlete Fund of each Basic Document, Athlete Fund Document
and Swap Document to which such Person is a party and the performance by such Person of all of its obligations thereunder: (i)
will not violate or be in conflict with any term or provision of (A) any applicable law (including any applicable usury or similar
laws), or (B) any judgment, order, writ, injunction, decree or consent of any court or other judicial authority applicable to
such Person or its property; (ii) will not violate, be in conflict or inconsistent with, result in a breach of, or constitute
a default (with or without the giving of notice or the passage of time or both) under, any term or provision of any document,
agreement or instrument to which such Person is a party; and (iii) except as specifically contemplated by the Basic Documents,
the Athlete Fund Documents or the Swap Documents, will not result in the creation or imposition of any Lien upon any of the assets
and properties of the Borrower or any other Obligor.
(c)
Each of the Basic Documents, the Athlete Fund Documents and the Swap Documents to which the Borrower, GlassBridge and the Athlete
Fund is a party constitutes a legal, valid and binding obligation of such Person, enforceable against it in accordance with its
respective terms and provisions, except as such enforceability may be affected by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting creditors rights generally and the application of general principles of equity. Each such Basic
Document, Athlete Fund Document and Swap Document has been duly authorized, executed and delivered by the Borrower, GlassBridge
and the Athlete Fund and to the best of the knowledge of the Borrower and GlassBridge after due inquiry, each other party who
is a signatory thereto.
(d)
No consent, approval or authorization of, or registration, declaration or filing with, any Governmental Authority or any other
Person is required for the due and valid execution, delivery and performance by the Borrower of the Basic Documents, the Athlete
Fund Documents and the Swap Documents to which it is a party, other than those consents, approvals or authorizations of, or registrations,
declarations or filings with, such Governmental Authorities or such other Persons that have been made or obtained (i) on or prior
to the Effective Date, (ii) or with respect to the disbursement of the Loan, on or prior to the Borrowing Date, or that is not
required on or prior to the Effective Date or, as applicable, the Borrowing Date.
(e)
There are no actions, suits, proceedings or investigations by or before any arbitrator or Governmental Authority now pending against
or, to the knowledge of the Borrower and GlassBridge, threatened against or affecting the Borrower or the Athlete Fund that would
reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Neither the Borrower nor the Athlete
Fund is in default with respect to any judgment, order, writ, injunction, decree or consent of any court or other judicial authority
applicable to it or its property that would result in a Material Adverse Effect on the ability of the Borrower or the Athlete
Fund to comply with its obligations under the Basic Documents and the Athlete Fund Documents to which such Person is a party.
(f)
The Borrower has filed, or has caused to be filed on behalf of itself, all federal, state and local tax returns that it is required
to file, and has paid, or has caused to be paid, all taxes that it is required to pay to the extent due or, to the extent not
so paid, has established adequate reserves for the payment thereof as required by GAAP.
(g)
Neither the Borrower nor the Athlete Fund has conducted any business other than (i) the business contemplated by the Basic Documents,
the Athlete Fund Documents and the Swap Documents, (ii) the entrance into and performance of its obligations under this Note and
(iii) the performance of the activities contemplated by Section 5(a). Neither the Borrower nor the Athlete Fund has any
Indebtedness other than Permitted Indebtedness. All material liabilities and assets of the Borrower and the Athlete Fund are set
forth on Schedule 2 and neither the Borrower nor the Athlete Fund is a party to nor bound by any material contract other
than the Basic Documents, the Athlete Fund Documents and the Swap Documents.
(h)
The Borrower has good title to all of its personal property and assets except to the extent there would be no Material Adverse
Effect on the Borrower’s ability to comply with the Obligations, and none of its assets or properties is subject to any
Liens or other encumbrances, other than Permitted Liens.
(i)
All of the Athlete Fund Documents and the Swap Documents set forth on Schedule 3 will be in effect prior to the Borrowing
Date and there are no other agreements, arrangements or understanding with respect to the transaction (or series of transactions)
involving PJW Ltd. and the Athlete Fund and related to the earnings of the applicable Athlete. True, correct and complete copies
of the final documents of each of (i) the PJW Player Contract, as received by the Borrower, (ii) the organizational documents
of the Athlete Company, (iii) the Athlete Fund Documents, and (iv) the Swap Documents have been furnished to the Lender for review
and in the cases of all documents specified in foregoing clauses (ii) – (iv) inclusive are attached as Annex 1 hereto.
To the knowledge of the Borrower and GlassBridge, without any independent investigation, no rights or interests in the PJW Player
Contract have been granted or assigned to any Person other than the Athlete Fund.
(j)
Each of the Borrower and the Athlete Fund is in compliance with all applicable laws, except to the extent that any non-compliance
would not result in a Material Adverse Effect.
(k)
Neither the Borrower nor the Athlete Fund is subject to regulation under the Employee Retirement Income Security Act of 1974,
as amended.
(l)
The Borrower is not an investment company or a company controlled by an investment company within the meaning of the Investment
Company Act.
(m)
To the knowledge of the Borrower and GlassBridge after due inquiry, neither the Borrower nor GlassBridge has provided to the Lender
any information in the documents set forth on Schedule 4 in respect of this Note or any other Basic Document, the Athlete
Fund Documents or the Swap Documents which contains a material misstatement of fact or that omits to state any material fact necessary
to make the statements made therein, in light of the circumstances under which they were made, not misleading, in each case when
such information is taken as a whole; provided, that with respect to projected financial information (the “Projections”),
the Borrower and GlassBridge represent and warrant only that such information was prepared in good faith based upon reasonable
assumptions at the time the Projections were prepared and delivered to the Lender and the Projections are not to be viewed as
facts and that actual results during the period or periods covered by the Projections may differ from such Projections.
(n)
Neither the Borrower nor GlassBridge: (i) has admitted in writing its inability to pay its debts as its debts become due; (ii)
has made an assignment for the benefit of creditors, or petitioned or applied to any tribunal for the appointment of a custodian,
receiver or trustee for its or a substantial part of its assets; (iii) has commenced any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation; (iv) has had any such petition filed, or any such proceeding commenced
against it, in which an adjudication is made or order for relief is entered or which remains undismissed for a period of sixty
(60) days; (v) has had a receiver, custodian or trustee appointed for all or a substantial part of its property; or (vi) has taken
any action effectuating, approving or consenting to any of the events described in clauses (i) through (v) above.
(o)
The Borrower is a direct, wholly-owned subsidiary of GlassBridge. The Borrower has no equity interests in any Person other than
the Athlete Fund Interests.
(p)
No Default or Event of Default has occurred and is continuing.
(q)
The representations and warranties of the Borrower and the Athlete Fund contained in the Basic Documents, the Athlete Fund Documents
and the Swap Documents to which each such Person is a party other than this Note are, as of the time made or deemed made thereunder,
true and correct in all material respects.
(r)
No event, condition or occurrence of whatever nature has occurred that would constitute a Material Adverse Effect.
(s)
Neither Borrower, nor, to the knowledge of the Borrower and GlassBridge after due inquiry, any persons or entities holding any
legal or beneficial interest whatsoever in Borrower (whether directly or indirectly) (i) appear on the OFAC SDN List; (ii) are
included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any
kind to, or otherwise associated with any of the persons or entities referred to or described in the OFAC SDN List; or (iii) have
conducted business with or engaged in any transaction with any person or entity named on any of the OFAC SDN List or any person
or entity included in, owned by, controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services
of any kind to, or otherwise associated with any of the persons or entities referred to or described in the OFAC SDN List.
5.
Covenants. The Borrower and GlassBridge
hereby jointly and severally covenant and agree that until the repayment in full of the Loan and any other amounts owing hereunder
other than indemnities, the Borrower and GlassBridge shall (or shall cause their respective Affiliates or another Person to),
unless the Lender waives such compliance in writing, perform all of the covenants set forth in this Section 5:
(a)
Use of Proceeds. The Borrower shall use the proceeds of the Loan, together with a $1.8 million capital contribution made
by GlassBridge to Borrower, to purchase the Athlete Fund Interests, and not for any other purpose.
(b)
Additional Information. The Borrower and GlassBridge shall promptly provide such information regarding the Swap Transaction,
and the financial affairs of the Borrower or the Athlete Fund as shall be reasonably requested by the Lender; provided,
that if any such requested information is not in the possession of the Borrower or GlassBridge, such Person shall only be obligated
to use commercially reasonable efforts to obtain such requested information from third parties.
(c)
Books and Records. The Borrower and GlassBridge shall keep and maintain the books of account and the financial records
for the Borrower and the Athlete Fund at its address identified on the signature pages to this Note in accordance with GAAP. The
Lender shall have the right, upon reasonable advance notice to the Borrower or GlassBridge and at reasonable times during usual
business hours, to audit, examine and make copies of the books of account and other records of the Borrower and the Athlete Fund
as applicable, and to discuss the financial condition and business of the Borrower or the Athlete Fund with its respective authorized
representatives. The Lender may exercise such rights through any employee of the Lender or through any independent public accountant,
legal counsel, or any other consultant acting on behalf of the Lender; provided, that such Persons shall agree and comply
with the confidentiality obligations set forth in Section 11(i).
(d)
Indebtedness. The Borrower shall not incur, nor shall the Borrower or GlassBridge (x) take any action or (y) fail to take
any action within its control, to cause the Athlete Fund to incur, any Indebtedness except for Permitted Indebtedness. For the
avoidance of doubt, notwithstanding anything to the contrary herein, nothing herein shall restrict capital raising activities
by GlassBridge or any other Person, on behalf of the Athlete Fund. Such activities may include seeking equity investors to enable
the Athlete Fund to engage in additional swap transactions involving professional athletes other than the Athlete.
(e)
Liens. Borrower shall not, nor shall Borrower or GlassBridge cause or take any action to cause the Athlete Fund to, incur,
create, assume or suffer to exist any Liens or other encumbrances (except for Permitted Liens) upon (i) the Athlete Fund Interests
or any Swap Document or (ii) any of its other properties or assets that, in the case of the foregoing clause (ii), could reasonably
be expected to have a Material Adverse Effect.
(f)
Existence; Purpose. Except as otherwise expressly permitted under this Note or the other Basic Documents, (i) the Borrower
shall maintain and preserve Borrower’s existence as a Delaware limited liability company, (ii) GlassBridge shall not (x)
take any action or (y) fail to take any action within its control, that causes the Athlete Fund to fail to maintain and preserve
its existence as a Cayman exempted limited partnership under the Cayman ELP Law, (iii) the Borrower shall engage only in the business
of the purchasing, financing and/or ownership of the Athlete Fund Interests, and (iv) GlassBridge shall not (x) take any action
or (y) fail to take any action within its control, that causes the Athlete Fund to fail to engage only in the business of the
operation of the Swap Transaction and similar transactions involving other professional athletes.
(g)
Contractual Obligations. (i) the Borrower shall perform, and the Borrower and GlassBridge shall not (x) take any action
or (y) fail to take any action within its control, that causes the Athlete Fund to fail to perform, all of its respective material
contractual obligations under the Swap Documents and the Athlete Fund Documents and (ii) the Borrower shall maintain and preserve,
and the Borrower and GlassBridge not (x) take any action or (y) fail to take any action within its control, that causes the Athlete
Fund to fail to maintain and preserve, all of the Athlete Fund’s material rights under the Swap Documents and the Athlete
Fund Documents. The Borrower and GlassBridge shall not take any action or fail to take any action that causes the Athlete Fund
to fail to pay and perform all of its respective material contractual obligations.
(h)
No Amendments or Waivers to Material Agreements. The Borrower shall not, and the Borrower and GlassBridge shall not take
any action to, without the prior written consent of the Lender, (i) enter into any new Athlete Fund Document (including any agreement
with a limited partner in the Athlete Fund, including by way of a supplement to the Memorandum) or new Swap Document (including
any agreement with a new Athlete or Athlete Company), (ii) cancel or terminate, or accept or consent to a cancellation or termination
of, any Athlete Fund Document or Swap Document to which it is a party, (iii) amend, supplement or modify in any respect, or enter
into any amendment, supplement or modification to, any Athlete Fund Document or Swap Document to which it is a party, or (iv)
waive or consent to (x) any violation or breach of any provision of any Athlete Fund Document or Swap Document to which it is
a party or (y) any default or event of default under any Athlete Fund Document or Swap Document to which it is a party. The Borrower
and GlassBridge shall provide the Lender promptly after execution thereof by the Borrower or the Athlete Fund, as applicable,
with copies of each Athlete Fund Document or Swap Document and any amendment or other modification or waiver of compliance with
any Athlete Fund Document or Swap Document.
(i)
Compliance with Laws. The Borrower shall, and the Borrower and GlassBridge shall not (x) take any action or (y) fail to
take any action within its control, that causes the Athlete Fund to fail to comply with (i) all laws and regulations applicable
to the Borrower and the Athlete Fund (including compliance with the Securities Act of 1933, as amended, the Investment Company
Act, the Investment Advisers Act of 1940, as amended, the applicable rules of the Commodity Futures Trading Commission and the
National Futures Association, and the safe harbor from registration as a broker-dealer for associated persons of a private fund
under Rule 3a4-1 of the Securities Exchange Act of 1934, as amended) and (ii) all permits applicable to the Borrower and the Athlete
Fund (including, if required, the appropriate notice of exemption from registration as a commodity pool operator with the National
Futures Association), unless, in any case, (i) or (ii), the failure to do so would not reasonably be expected to have a Material
Adverse Effect. The Borrower and GlassBridge shall not (x) take any action or (y) fail to take any action within its control,
that causes the Athlete Fund to fail to obtain and maintain any permit reasonably necessary for the Swap Transaction.
(j)
Liquidation; Dissolution. The Borrower shall not, and the Borrower and GlassBridge shall not (x) take any action or (y)
fail to take any action within its control, that causes the Athlete Fund to, liquidate or dissolve, or combine, merge or consolidate
with or into any other entity.
(k)
Transfer of Membership Interests. The Borrower and GlassBridge shall not cause, make, suffer to exist, permit or consent
to any creation, sale, assignment or transfer of (i) any direct ownership interests of GlassBridge in the Borrower; or (ii) any
direct or indirect ownership interests of the Borrower or GlassBridge in the Athlete Fund, except, in each case, with the Lender’s
prior written consent; provided, however, that solely with respect to the assignment or transfer set forth in sub-clause
(ii) above, no consent of the Lender shall be required for transfers of interests in the Athlete Fund if the Loan (including all
principal and interests) has been repaid in full.
(l)
Organizational Changes. The Borrower shall not, nor shall the Borrower and GlassBridge take any action to cause the Athlete
Fund to, (i) amend, alter or repeal any provision of its organizational documents, (ii) change its company structure or its jurisdiction
of organization, nor (iii) change its fiscal year, in each case, without the Lender’s prior written consent, such consent
not to be unreasonably withheld or delayed.
(m)
Notice Requirements. The Borrower and GlassBridge shall promptly, upon acquiring knowledge or notice or giving notice,
as the case may be, give written notice (and deliver the documents or reports, as applicable, that are the subject of such notices)
to the Lender of:
(i)
any litigation, investigation or proceeding pending or, to the knowledge of the Borrower and GlassBridge, threatened against the
Borrower or the Athlete Fund;
(ii)
any notice of a material violation of any law by the Borrower or the Athlete Fund for which Loan have been made;
(iii)
any Default or Event of Default;
(iv)
any notice of default or claim of force majeure under any Swap Documents or any Athlete Fund Documents;
(v)
any other event, condition or occurrence that would reasonably be likely to result in a Material Adverse Effect;
(vi)
any material adverse change, or any event or circumstance that would reasonably be likely to change the status of the Swap Transaction;
and
(vii)
any change in the name of the Borrower or the Athlete Fund.
(n)
Investments; Sale of Assets. Other than as permitted under Section 5(r), the Borrower shall not, without the prior
written consent of the Lender, (i) make an investment in any of its Affiliates, (ii) transfer, sell, lease or assign any of its
property to any of its Affiliates, or (iii) enter into any contract or agreement under which it incurs liabilities to any of its
Affiliates, except administrative services agreements or other similar types of agreements entered into in the ordinary course
of business and upon fair and reasonable terms no less favorable to the Borrower than it would obtain in a comparable arm’s
length transaction with a party not an Affiliate of the Borrower. Additionally, Borrower and GlassBridge shall, within two (2)
Business Days after occurrence, give Lender notice of any transactions of Borrower or the Athlete Fund with any Affiliate of the
Borrower or GlassBridge and copies of all relevant documents in connection therewith.
(o)
Annual Financial Statements. The Borrower and GlassBridge shall provide to the Lender as soon as available and in any event
within 120 days after the end of each fiscal year of the Borrower, GlassBridge and their respective subsidiaries, the audited
balance sheet and related consolidated statements of income, operations and cash flows of the Borrower, GlassBridge and their
respective subsidiaries, as of the end of and for such year, setting forth in each case in comparative form of the figures for
the previous fiscal year, all reported on by an independent public accountant of recognized national standing (in respect of all
time periods subsequent to the year ending December 31, 2019, without a “going concern” or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of income, operations and cash flows of the Borrower,
GlassBridge and their respective subsidiaries, in accordance with GAAP consistently applied.
(p)
Quarterly Financial Statements. The Borrower and GlassBridge shall provide to the Lender as soon as available and in any
event within 45 days after the end of each of the first three quarterly fiscal periods of each fiscal year of the Borrower, unaudited
consolidated statements of income, operations and cash flows of the Borrower, GlassBridge and their respective subsidiaries, for
such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated
balance sheet at the end of such period, setting forth in each case in comparative form the corresponding figures for the corresponding
period in the preceding fiscal year accompanied by a certificate of an authorized officer of the Borrower and GlassBridge, respectively,
which certificate shall state that such financial condition and results of income, operations and cash flows of the Borrower,
GlassBridge and their respective subsidiaries, were prepared in accordance with GAAP, consistently applied, as at the end of and
for such period (subject to normal year-end audit adjustments). In addition, the Borrower and GlassBridge shall monitor on a quarterly
basis their compliance with respect to maintaining an exclusion from the status of an “investment company” required
to be registered under the Investment Company Act, and shall provide to the Lender as soon as available and in any event within
15 days after the end of each quarterly fiscal period of each fiscal year, a compliance summary report with respect to compliance
with the requirements for maintaining such exclusion under the Investment Company Act.
(q)
Taxes. The Borrower shall pay, and the Borrower and GlassBridge shall not (x) take any action or (y) fail to take any action
within its control, that causes the Athlete Fund to fail to pay, all taxes that such Person is required to pay to the extent due;
provided, however, that the Borrower and the Athlete Fund, as applicable, shall not be obligated to pay such taxes to the
extent any of them is contesting the validity or amount of any such tax by appropriate proceedings as long as such Person has
established adequate reserves for the payment thereof as and to the extent required by GAAP.
(r)
Fund Interests. The Borrower shall not Transfer any Athlete Fund Interests or any of its rights or interests in or under
any Swap Documents to any Person, other than: (i) to the Secured Party pursuant to the Security Agreements, or (ii) to a third
party, but only upon the prepayment in full of the Loan, except, in each case, with the Lender’s prior written consent.
The Borrower shall not, and the Borrower and GlassBridge shall not (x) take any action or (y) fail to take any action within its
control, that causes the Athlete Fund to, take any actions or fail to take any action that would reasonably be likely to reduce
the value or marketability of the Athlete Fund Interests or the Collateral or that could materially impair the Lien of the Security
Agreements.
(s)
Additional Swap Transactions. The parties hereto acknowledge and agree that the sole Swap Transaction entered into on or
prior to the Borrowing Date is the transaction under the Swap Documents entered into between PJW Ltd. (as the Athlete Company)
and the Athlete Fund, as reflected on Schedule 3. The Borrower may request the addition of any one or more Athlete Company
and corresponding Swap Transaction, in all instances subject to the prior written approval of the Lender, and upon such approval
and the receipt by Lender of executed copies of the corresponding Swap Documents, Lender shall update Schedule 3 to reflect
the addition of such Athlete Company and corresponding Swap Documents. In addition, GlassBridge shall cause the books and records
of the Athlete Fund to reflect such changes, as applicable.
(t)
Compliance with Anti-Money Laundering and OFAC Laws.
(i)
Borrower shall comply at all times with the requirements of all Anti-Money Laundering Laws.
(ii)
Borrower shall provide Lender any information regarding Borrower, its Affiliates, and its Subsidiaries necessary for Lender to
comply with all Anti-Money Laundering Laws.
(iii)
Borrower shall comply at all times with the requirements of all OFAC Laws.
(iv)
Borrower shall not, and shall cause its Affiliates and Subsidiaries and any persons or entities holding any legal or beneficial
interest whatsoever therein (whether directly or indirectly) not to, conduct business with or engage in any transaction with any
person or entity named in the OFAC SDN List or any person or entity included in, owned by, controlled by, acting for or on behalf
of, providing assistance, support, sponsorship, or services of any kind to, or otherwise associated with any of the persons or
entities referred to or described in the OFAC SDN List.
(v)
If Borrower obtains actual knowledge or receives any written notice that Borrower, any Affiliate, Subsidiary or any person or
entity holding any legal or beneficial interest whatsoever therein (whether directly or indirectly) is named on the OFAC SDN List
(such occurrence, an “OFAC Violation”), Borrower shall immediately (i) give written notice to the Lender of
such OFAC Violation, and (ii) comply with all applicable laws with respect to such OFAC Violation (regardless of whether the party
included on the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Laws, and
Borrower hereby authorizes and consents to the Lender’s taking any and all steps Lender deems necessary, in its sole discretion,
to comply with all applicable laws with respect to any such OFAC Violation, including the requirements of the OFAC Laws (including
the “freezing” and/or “blocking” of assets and reporting such action to OFAC). Upon Lender’s request
from time to time, Borrower shall deliver a certification confirming its compliance with the covenants set forth in this Section
(v).
(u)
Post-Closing Obligations. It shall deliver the items listed on Schedule 5 by the dates set forth therein, each duly
executed and delivered by the parties thereto and in form and substance reasonably satisfactory to the Lender. The parties acknowledge
that the failure of the Borrower or GlassBridge, as the case may be, to deliver any item listed on Schedule 5 shall not,
in and of itself, constitute a Material Adverse Effect.
6.
Events of Default. The occurrence of any
of the following events, conditions or circumstances shall constitute an event of default under this Note (each, an “Event
of Default”):
(a)
The Borrower shall fail to pay (i) any principal amount of the Loan made under this Note within five (5) Business Days after the
date on which such interest or fee becomes due and payable under this Note (it being understood and agreed that the Borrower shall
pay the PIK Interest as provided in Section 2.2(b)); (ii) any interest accrued on the Loan or any fee in respect of the
Loan within five (5) Business Days after the date on which such interest or fee becomes due and payable under this Note; (iii)
any other amount payable by the Borrower hereunder within ten (10) days after any such other amount or payment becomes due and
payable and notice thereof is given to the Borrower;
(b)
Any representation or warranty made by any party (other than the Lender or the Secured Party) in any Basic Document to which it
is a party, or in any certificate furnished pursuant to any such document, shall prove to have been incorrect in any material
respect as of the date made (unless such representation or warranty expressly relates only to an earlier date), and in each case,
any adverse effect of such incorrect misrepresentation or warranty is not eliminated or addressed to the reasonable satisfaction
of the Lender within a period of thirty (30) days after receipt of notice by such Person;
(c)
The Borrower shall fail to perform or observe any of the covenants set forth in Sections 5(a), (c), (d),
(e), (f), (h), (j), (k), (l), (m), (n), (o), (p), (r),
(t);
(d)
The Borrower shall fail to perform or observe any of the Obligations (other than as set forth in Sections 6(a) or (c)
above) to which it is a party and, in each case, such failure shall continue unremedied for a period of thirty (30) days after
receipt of notice or actual knowledge thereof by such Person, if such failure can reasonably be remedied within such thirty (30)
day period as long as the Borrower is using diligent efforts to remedy such failure;
(e)
The Borrower or GlassBridge: (i) shall admit in writing its inability to pay its debts as its debts become due; (ii) shall make
an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver
or trustee for its or a substantial part of its assets; (iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have had any such petition filed, or any such proceeding
shall have been commenced against it, in which an adjudication is made or order for relief is entered or which remains undismissed
for a period of sixty (60) days; (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of
its property; or (vi) shall take any action effectuating, approving or consenting to any of the events described in clauses (i)
through (v);
(f)
The Borrower or GlassBridge shall dissolve or for any reason cease to be in existence;
(g)
The Borrower or GlassBridge is required to register or shall become an “investment company” subject to registration
under the Investment Company Act;
(h)
Unless as a result of the acts or omissions of the Lender (i) any Security Agreement shall fail to provide the Secured Party with
security interests in and to the Collateral intended to be created thereby, shall cease to be in full force and effect, or is
declared null and void and the Borrower shall fail to execute such additional security agreements as may be requested by the Lender
or the Secured Party to remedy such event; or (ii) the validity or enforceability of any Security Agreement is contested in a
legal proceeding by any party to such Security Agreement, other than by the Lender or the Secured Party;
(i)
Except as permitted under this Note, any failure by the Borrower to have good title to all of its real property and good title
to all of its personal property and assets, which failure would have a Material Adverse Effect on the Borrower’s ability
to comply with the Obligations;
(j)
A Change of Control shall occur and be continuing;
(k)
Any permit required to be obtained or maintained by the Athlete Fund under any Swap Documents shall be revoked or cancelled by
the issuing governmental authority having jurisdiction, or any such permit shall otherwise fail to be in full force and effect,
or the Athlete Fund shall fail to comply with any such permit, in each case, which revocation, cancellation or failure would reasonably
be expected to have a Material Adverse Effect, and in each case, if any adverse effect of such revocation, cancellation or failure
is not remedied to the reasonable satisfaction of the Lender within sixty (60) days after receipt of written notice thereof by
such Person;
(l)
A final judgment or judgments shall be entered against the Borrower or the Athlete Fund, by a court of competent jurisdiction
in an aggregate amount of not less than $150,000, other than (i) a judgment which is fully covered by a posted bond or discharged
within thirty (30) days after its entry, or (ii) a judgment, the execution of which is effectively stayed within thirty (30) days
after its entry but only for thirty (30) days after the date on which such stay is terminated or expires; or
(m)
Any Swap Documents shall cease for any reason to be in full force and effect; or any default by the Athlete Fund or the Athlete
Company shall occur under any Swap Document (after giving effect to all applicable cure periods in such Swap Document that is
approved in advance in writing by the Lender).
Upon
the occurrence and during the continuation of an Event of Default, the Lender may, by notice to the Borrower, declare the Then
Outstanding Amount of the Loan due and payable, whereupon the same shall become and be forthwith due and payable without presentment,
demand, protest or further notice or other formalities of any kind, all of which are hereby expressly waived by the Borrower;
provided, that in the case of an Event of Default described in Section 6(e), Section 6(f) or Section 6(g),
the Then Outstanding Amount of the Loan shall be immediately due and payable thereupon, without notice or action on the part of
Lender or any other Person.
7.
Indemnification. The Borrower agrees to
indemnify and hold the Lender and the Secured Party together with its respective directors, officers, employees, agents and consultants
harmless from and against all claims, damages, losses, liabilities, costs, deficiencies and documented expenses and damages, including
investigative costs, settlement costs and reasonable legal, accounting or other expenses for investigating or defending against
any actions or threatened actions (collectively, the “Losses”), arising out of or in connection with (i) the
execution or delivery of each Basic Document, including this Note, and the performance by any Person of its obligations under
such Basic Documents, (ii) the making of the Loan and (iii) the use of the proceeds of the Loan, and any prospective claim, litigation,
investigation or proceeding related to any of the foregoing, but excluding, in each case, any such Losses incurred by reason of
bad faith, gross negligence or willful misconduct of any Person indemnified hereunder. The Lender and/or the Secured Party, as
applicable, shall promptly notify the Borrower of any claim under this Section 7. The Borrower may elect to assume the
defense of any action, proceeding or dispute with a third party in respect of which a claim is to be made under this Section
7; provided, however, that if the Borrower assumes control of the defense of any such action, proceeding or dispute,
the Borrower shall not agree or conclude any settlement that affects the Lender or the Secured Party without the prior written
approval of the Lender or the Secured Party, as applicable (such approval not to be unreasonably withheld). In the event the Borrower
assumes control of the defense of any such action, proceeding or dispute, the Borrower shall not be liable to the Lender or the
Secured Party for any legal fees and expenses of additional counsel incurred by the Lender or the Secured Party in connection
with such defense; provided, however, that each of the Lender and the Secured Party shall have the right to employ its
own counsel whose reasonable legal fees and expenses shall be indemnified by the Borrower if (A) there is or could reasonably
be expected to be a conflict of interest between the Lender or the Secured Party, as applicable, and the Borrower in connection
with the defense of such action, proceeding or dispute, or (B) there is a specific defense available to the Lender or the Secured
Party, as applicable, which is different from or additional to those available to the Borrower, (C) it is reasonably necessary
to protect the interests of the Lender or the Secured Party, as applicable, to the extent such interests differ from the interests
of the Borrower, or (D) the Lender or the Secured Party determines that the Borrower is not defending such action diligently or
in a manner deemed appropriate by the Lender or the Secured Party.
8.
Security. The Obligations are secured
by the Collateral.
9.
Governing Law; Submission to Jurisdiction.
This Note shall be governed by, and construed in accordance with, the laws of the State of New York (without regard to conflict
of laws provisions thereof other than Section 5-1401 of the New York General Obligations Law). The Borrower agrees that any legal
action or proceeding arising out of or relating to this Note or any other Basic Document, or any legal action or proceeding to
execute or otherwise enforce any judgment obtained against the Borrower, for breach hereof or thereof, or against any of its properties,
may be brought in the courts of the State of New York sitting in New York County or the United States District Court for the Southern
District of New York by the Lender may elect. The Borrower hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of such courts for purposes of any such legal action or proceeding. Service of process by the Lender in any such
dispute shall be binding on the Borrower if sent to the Borrower by registered or certified mail, at the addresses specified on
the signature page of this Note. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in any other jurisdiction.
THE
PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO JURY TRIAL IN ANY ACTION RELATED TO THIS NOTE, ANY OTHER BASIC DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. IN ADDITION, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS NOTE OR ANY OTHER BASIC DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.
Assignments. This Note shall be binding
on, and shall inure to the benefit of each of the Borrower, the Lender, the Secured Party, and their respective successors and
permitted assigns; provided, that neither the Borrower nor GlassBridge may assign or transfer its respective rights or
obligations under this Note without the prior written approval of the Lender; and provided, further, that the Lender may not assign
or otherwise transfer its rights and obligations under this Note or the Loan to any other Person without the prior written consent
of the Borrower (which consent shall not be unreasonably withheld, delayed or conditioned) unless (i) such assignment or transfer
is to an Affiliate of any Lender or (ii) an Event of Default has occurred and is continuing, in each such case consent of the
Borrower is not necessary. Any such Person to whom the Lender assigns its rights pursuant to this Section 10 shall then
become vested with all the rights granted to such Lender under this Note and with respect to the Loan. Upon such assignment or
transfer, such Lender shall provide to the Borrower the name, address and contact information of the permitted assignee or transferee.
11.
Miscellaneous.
(a)
The provisions of this Note are intended to be severable. If for any reason any provision of this Note shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction
or the remaining provisions thereof in any jurisdiction.
(b)
No amendment, modification or supplement to any provision of this Note shall be effective unless the same shall be in writing
and signed by the Borrower, the Lender (or, after any assignment contemplated by Section 10, other holder hereof) and,
solely with respect to any amendment, modification or supplement that would adversely affect the rights of the Secured Party.
(c)
The waiver of any breach of any of the provisions of this Note shall not be construed to be a waiver of any subsequent breach
or default of the same or other provisions. No waiver of any of the provisions of this Note shall be valid or binding unless set
forth in writing and duly executed by the Person against whom enforcement of the waiver is sought and the Lender. No failure on
the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right.
(d)
The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
(e)
Unless otherwise agreed in writing, notices shall be given to the Lender and the Borrower at their respective addresses set forth
on the signature pages to this Note. Notices under this Note shall be effective (i) when personally delivered to a party hereto,
upon receipt as shown by messenger receipt, (ii) when mailed to such addressee, upon receipt of a signed confirmation from such
addressee, or (iii) when sent to such addressee by facsimile, upon receipt of the addressor’s facsimile machine confirmation
or other verifiable electronic receipt.
(f)
The provisions of Sections 7, 9 and 11 of this Note shall survive the repayment of the Loan and any termination
of this Note.
(g)
This Note and any agreement, document or instrument attached hereto or referred to herein integrate all the terms and conditions
mentioned herein or incidental hereto and supersede all oral negotiations and prior writings with respect to the subject matter
hereof.
(h)
This Note may be executed in one or more facsimile counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
(i)
The Lender and the Secured Party agree to keep confidential, in accordance with its customary procedures for handling confidential
information of this nature, any non-public information supplied to it by the Borrower in relation to the Swap Documents, the Governmental
Approvals, the Borrower or GlassBridge; provided, that such information does not include information that (i) was publicly
known or otherwise known to it prior to the time of such disclosure and (ii) subsequently becomes publicly known through no act
or omission by it or any Person acting on its behalf.
[Signature
pages follow]
IN
WITNESS WHEREOF, the Borrower has executed this Note as of the date first set forth above.
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GlassBridge Athlete, LLC,
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a Delaware limited liability company
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By:
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/s/
Daniel Strauss
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Name:
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Daniel
Strauss
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Title:
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President
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Address for Notices:
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GlassBridge Athlete, LLC
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Attention: Chief Executive Officer
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411 East 57th Street, Suite 1A
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New York, New York 10022
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E-mail:
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with a copy (which shall not constitute notice) to:
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Loeb & Loeb LLP
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345 Park Avenue
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New York, New York 10154
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E-mail: lrothenberg@loeb.com
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Attention: Lloyd L Rothenberg, Esq.
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[Signature
Page to Secured Promissory Note Agreement]
IN
WITNESS WHEREOF, for the limited purposes of Sections 4 and 5 of this Note, GlassBridge has executed this Note as of the date
first set forth above.
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GlassBridge Enterprises, Inc.,
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a Delaware corporation
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By:
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/s/
Daniel Strauss
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Name:
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Daniel
Strauss
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Title:
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CEO
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Address for Notices:
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GlassBridge Enterprises, Inc.
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Attention: Chief Executive Officer
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411 East 57th Street, Suite 1A
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New York, New York 10022
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E-mail: dstrauss@glassbridge.com
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with a copy (which shall not constitute notice) to:
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Loeb & Loeb LLP
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345 Park Avenue
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New York, New York 10154
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E-mail: lrothenberg@loeb.com
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Attention: Lloyd L Rothenberg, Esq.
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[Signature
Page to Secured Promissory Note Agreement]
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Agreed and accepted:
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ORIX PTP Holdings, LLC,
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a Delaware limited liability company
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By:
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/s/
Paul Wilson
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Name:
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Paul
Wilson
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Title:
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President
of ORIX Corporate Capital, Inc. (sole member of ORIX PTP Holdings)
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Addresses for Notices:
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ORIX Corporation USA
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1717 Main Street, Suite 1100
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Dallas, Texas 75201
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E-mail: Benjamin.Price@orix.com
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Attention: Benjamin Price, Assistant General Counsel
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ORIX Corporation USA
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280 Park Avenue
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New York, NY 10017
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E-mail: Gregory.Raykher@orix.com
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Attention: Gregory Raykher
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ORIX Corporation USA
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280 Park Avenue
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New York, NY 10017
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E-mail: Neil.Winward@orix.com
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Attention: Neil Winward
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with a copy (which shall not constitute notice) to:
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Norton Rose Fulbright US LLP
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1301 Avenue of the Americas
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New York, New York 10019
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E-mail: sheldon.nussbaum@nortonrosefulbright.com
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Attention: Sheldon G. Nussbaum, Esq.
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[Signature
Page to Secured Promissory Note Agreement]
Exhibit
A
Notice
of Borrowing
March
[●], 2020
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TO:
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ORIX
PTP HOLDINGS, LLC (the “Lender”)
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FROM:
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GLASSBRIDGE
ATHLETE, LLC (the “Borrower”)
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RE:
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Borrowing
Notice
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Reference
is made to the Secured Promissory Note Agreement, dated as of March 17, 2020 (the “Note”), between the Borrower and
the Lender. Capitalized terms used and not defined herein shall have the meanings given to them in the Note.
The
Borrower hereby requests a disbursement of sixteen million Dollars ($16,000,000) pursuant to Section 2.4 of the Note and
makes the following certifications:
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(1)
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The
requested disbursement date (a Business Day) (i.e., the Borrowing Date) is March [ ], 2020.
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(2)
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The
Lender shall disburse the requested disbursement to [The Sports & Entertainment Fund, L.P. c/o BNP Paribas Financial Services,
LLC on behalf of the Borrower / the Borrower in reimbursement for amounts previously paid, other than from proceeds of Loan,
by the Borrower to The Sports & Entertainment Fund, L.P. c/o BNP Paribas Financial Services, LLC] via wire transfer to
the following account at:
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[______________________
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______________________
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______________________
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______________________]
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(3)
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The
Borrower certifies hereby that each condition precedent set forth in Section 3 of the Note to the requested disbursement has
been satisfied or waived as of the date hereof and will be satisfied or waived as of the date of the requested disbursement
set forth in paragraph (1) above.
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(4)
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The
Borrower certifies hereby that each Basic Document, Athlete Fund Document and Swap Document delivered to the Lender pursuant
to Section 3(c) of the Note to which any Obligor is a party is in full force and effect, has not been amended, modified or
supplemented from the agreements delivered to the Lender pursuant to Section 3(c) of the Note without the consent of the Lender,
and constitutes a legally valid and binding obligation of such Obligor, enforceable against such Obligor in accordance with
its respective terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors’ rights generally and the application of general principles
of equity.
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(5)
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The
Borrower certifies hereby that each representation and warranty made by it in Section 4 of the Note is true and correct as
of the Borrowing Date (unless such representation and warranty relates only to an earlier date).
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(6)
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The
Borrower certifies hereby that it is in full compliance with all of the covenants set forth in Section 5 of the Note, from
and after the Effective Date.
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|
|
(7)
|
The
Borrower certifies hereby that no Default or Event of Default has occurred and is continuing as of the Borrowing Date.
|
IN
WITNESS WHEREOF, the undersigned executes this Borrowing Notice on the date first set forth above.
|
|
GlassBridge Athlete, LLC,
|
|
|
a Delaware limited liability company
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
Schedule
1
Principal
and Interest Payment Dates
Note:
The table below assumes a Borrowing Date as of March 18, 2020. The table below will be updated by Lender after receiving the Borrowing
Notice and disbursing the Loan, which shall be deemed final and conclusive absent manifest error.
|
Date
|
|
Capitalized Interest
|
|
|
Principal Repayment
|
|
|
March 31, 2020
|
|
$
|
28,888.89
|
|
|
|
—
|
|
|
June 30, 2020
|
|
$
|
202,587.35
|
|
|
|
—
|
|
|
September 30, 2020
|
|
$
|
207,402.20
|
|
|
|
—
|
|
|
December 31, 2020
|
|
$
|
207,769.16
|
|
|
|
—
|
|
|
March 31, 2021
|
|
$
|
210,395.13
|
|
|
|
—
|
|
|
June 30, 2021
|
|
$
|
213,054.29
|
|
|
|
—
|
|
|
Maturity Date
|
|
$
|
189,667.74
|
|
|
$
|
17,259,764.75
|
|
Schedule
2
Material
Liabilities and Assets
Borrower:
None.
Athlete
Fund: None.
Schedule
3
Athlete
Fund Documents and Swap Documents
As
of Effective Date
Athlete
Fund Documents:
|
|
i.
|
Third
Amended and Restated Exempted Limited Partnership Agreement of The Sports & Entertainment Fund, L.P., dated January 31,
2020;
|
|
|
|
|
|
|
ii.
|
the
Section 9 Statement filed with the Registrar on July 28, 2014 pursuant to the Cayman ELP Law, the Section 10 Statement filed
with the Registrar on March 23, 2016 pursuant to the Cayman ELP Law, and the Section 10 Statement filed with the Registrar
on January 8, 2020 pursuant to the Cayman ELP Law;
|
|
|
|
|
|
|
iii.
|
Confidential
Private Offering Memorandum relating to the offering of limited partnership interests of The Sports & Entertainment Fund,
L.P. dated January 2020 (the “Memorandum”);
|
|
|
|
|
|
|
iv.
|
Supplement
to the Memorandum dated January 2020;
|
|
|
|
|
|
|
v.
|
The
investor subscription documents by Borrower for the Athlete Fund Interests;
|
|
|
|
|
|
|
vi.
|
Investment
Management Agreement between PJW Ltd. and GlassBridge Investment Management, LLC, dated February 26, 2020, including the investment
guidelines attached thereto; and
|
|
|
|
|
|
|
vii.
|
Letter
Agreement between GlassBridge Investment Management, LLC and the Athlete Fund, dated February 26, 2020 (re: re: further limitations
on the investment guidelines).
|
Swap
Documents:
|
Professional
Athlete
|
|
Athlete
Company
|
|
Swap
Documents
|
|
Paul
Jamaine (P.J.) Washington Jr.
Contract
with Hornets Basketball, LLC, a member of the National Basketball Association, dated as of July 3, 2019
|
|
PJW
Ltd., a Cayman exempted company limited by shares under the Companies Law (2018 Revision) (as amended) of the Cayman Islands
|
|
i.
ISDA 2002 Master Agreement, between PJW Ltd. and the Athlete Fund, together with the Schedule thereto, each dated as of
February 26, 2020, and the Confirmation thereto
ii.
Savings and Investment Agreement between Paul Jamaine (P.J.) Washington Jr. and PJW Ltd., dated as of February 26, 2020
iii.
Letter Agreement between PJW Ltd. and GlassBridge Enterprises Inc. dated as of February 26, 2020 (re: swap termination
right)
iv.
Custodial Agreements between SunTrust Robinson Humphrey, Inc. and PJW Ltd.
v.
Administrative Services Agreement between BNP Paribas Financial Services, LLC and PJW Ltd. and Cash Account Agreement
between BNP Paribas acting through its New York branch, PJW Ltd. and GlassBridge Investment Management, LLC
|
Schedule
4
Investment
Documents
Financial
Model & Projections for The Sports & Entertainment Fund, L.P. (March 12, 2020 - August 1, 2029), dated March 11, 2020
Schedule
5
Post-Closing
Deliverables
None.
Annex
1
Copies
of Documents
The
following documents annexed to this Exhibit have been omitted:
Amended
and Restated Memorandum and Articles of Association of PJW Ltd., a Cayman Islands Exempted Company Limited by Shares
Third
Amended and Restated Exempted Limited Partnership Agreement of The Sports & Entertainment Fund, L.P., a Cayman Islands exempted
limited partnership
The
Sports & Entertainment Fund, L.P., Amended and Restated Confidential Private Offering Memorandum relating to the offering
of Class A Interests and Paired Classes of Interests
The
Sports & Entertainment Fund, L.P., Supplement to Confidential Private Offering Memorandum relating to the offering of Paired
Classes of Interests
Investment
Management Agreement between PJW Ltd. and GlassBridge Investment Management LLC
Letter
Agreement, dated February 6, 2020, between GlassBridge Investment Management LLC and The Sports & Entertainment Fund, L.P.,
relating to the swap agreement between The Sports & Entertainment Fund, L.P. and PJW Ltd.
ISDA
2002 Master Agreement, dated February 26, 2020, between The Sports & Entertainment Fund, L.P. and PJW Ltd. (“Swap Agreement”)
Savings
and Investment Agreement, dated February 26, 2020, between Paul Jamaine (P.J.) Washington, Jr. (“Athlete”) and PJW
Ltd., pursuant to which PJW Ltd. shall make an upfront payment and Athlete makes periodic contributions to PJW Ltd.
Letter
Agreement, dated February 26, 2020, between PJW Ltd. and GlassBridge Enterprises, Inc., pursuant to which PJW Ltd. agrees to terminate
the Swap Agreement at the request of The Sports & Entertainment Fund, L.P., subject to conditions
Administrative
Services Agreement, dated March __, 2020, between PJW Ltd. and BNP Paribas Financial Services, LLC
Account
Agreement between SunTrust Robinson Humphrey and PJW Ltd.
Cash
Account Agreement, dated _____, 2020, between BNP Paribas Acting through Its New York branch and GlassBridge Investment Management
LLC
Exhibit
10.44
SECURITY
AGREEMENT
THIS
SECURITY AGREEMENT (as amended, restated, amended and restated, modified or supplemented and in effect from time to time, this
“Agreement”) is entered into as of March 17, 2020, by GlassBridge Athlete, LLC, a Delaware limited liability
company, as grantor (“Grantor”), for the benefit of ORIX PTP Holdings, LLC, a Delaware limited liability
company, as Lender (as defined in the Note) (together with any successor Lender under the Note, “Secured Party”).
W
I T N E S S E T H:
WHEREAS,
Grantor, GlassBridge Enterprises, Inc., a Delaware corporation, and Lender have entered into that certain Secured Promissory Note
Agreement of even date herewith (as from time to time amended, restated, supplemented or otherwise modified, the “Note”);
and
WHEREAS,
the execution and delivery of this Agreement is a condition precedent to the obligation of Lender to extend credit to the Grantor
pursuant to the Note.
NOW,
THEREFORE, in consideration of the foregoing and as an inducement to Secured Party to enter into the Note and extend credit to
Grantor, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Section
1. Definitions.
(a)
When used herein, the terms Account, Account Debtor, Cash Proceeds, Certificated Security, Chattel Paper, Commercial Tort Claim,
Deposit Account, Document, Electronic Chattel Paper, Equipment, Financial Asset, Fixtures, General Intangibles, Goods, Health-Care-Insurance
Receivable, Inventory, Instrument, Investment Property, Letter of Credit Rights, Payment Intangibles, Proceeds, Security, Security
Entitlement, Supporting Obligations and Uncertificated Security have the respective meanings assigned thereto in the UCC (as defined
below).
(b)
Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note.
(c)
The following terms have the following meanings (such definitions to be applicable to both the singular and plural forms of such
terms):
Collateral
means all property and rights of Grantor in which a security interest is granted hereunder. Notwithstanding anything herein
to the contrary, in no event shall “Collateral” include, and Grantor shall not be deemed to have granted a security
interest in, any contract, lease, license or other agreement which by its terms prohibits the granting of a security interest
therein (except to the extent such prohibition is unenforceable pursuant to the provisions of Article 9 of the UCC); provided,
however, that Grantor will use commercially reasonable efforts to promptly obtain consent to the collateral assignment thereof
and the granting of a security interest therein to Secured Party and, at such time such consent is obtained, the contract, lease,
license or other agreement shall constitute “Collateral” hereunder, and provided, further, that notwithstanding the
foregoing, the term “Collateral” shall include any and all proceeds arising from such excluded property to the extent
that the assignment or encumbering of such proceeds is not subject to the same or similar prohibitions or restrictions.
Computer
Hardware and Software means all of Grantor’s rights (including rights as licensee and lessee) with respect to: (a)
computer and other electronic data processing hardware, including all integrated computer systems, central processing units, memory
units, display terminals, printers, computer elements, card readers, disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories, peripheral devices and other related computer hardware; (b) all software programs designed for
use on the computers and electronic data processing hardware described in clause (a) above, including all operating system software,
utilities and application programs in whatsoever form (source code and object code in magnetic tape, disk or hard copy format
or any other listings whatsoever); (c) any firmware associated with any of the foregoing; and (d) any documentation for hardware,
software and firmware described in clauses (a), (b) and (c) above, including flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes.
Intellectual
Property means all: trade secrets and other proprietary information; trademarks, service marks, business names, Internet
domain names, designs, logos, trade dress, slogans, indicia and other source and/or business identifiers, and the goodwill of
the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter
be issued thereon throughout the world; copyrights (including copyrights for computer programs and software) and copyright registrations
or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights; unpatented inventions (whether or not patentable); patent applications and patents; industrial
designs, industrial design applications and registered industrial designs; license agreements related to any of the foregoing
and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, source codes, object
codes and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past,
present and future infringements of any of the foregoing; and all common law and other rights throughout the world in and to all
of the foregoing.
Non-Tangible
Collateral means, collectively, Grantor’s Accounts and General Intangibles.
Obligations
means all obligations (monetary or otherwise) of Grantor under the Note, any other Basic Document or any instrument executed
in connection therewith, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.
Obligor
means a Person that, with respect to an obligation secured by a security interest in the Collateral, (a) owes payment
or other performance on the obligation, (b) has provided property or other security or credit support other than the Collateral
to secure payment or other performance of the obligation, or (c) is otherwise accountable in whole or in part for payment or other
performance of the obligation. The term does not include issuers or nominated persons under a letter of credit.
Organizational
I.D. Number means the organizational identification number assigned to Grantor by the applicable governmental unit or
agency of the jurisdiction of organization for Grantor.
Patents
means all of the following now owned or hereafter acquired by Grantor: (a) all letters patent of the United States or
any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or any
other country, including registrations, recordings and pending applications in the United States Patent and Trademark Office or
any similar offices in any other country, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed
or claimed therein.
Receivable(s)
means all Accounts and all right, title and interest in any returned goods, together with all right, title, securities
and guarantees with respect thereto, including any rights to stoppage in transit, replevin, reclamation and re-sales, and all
related security interests, Liens, charges, encumbrances and pledges, whether voluntary or involuntary, in each ease whether now
existing or owned or hereafter arising or acquired.
Security
Interest is defined in Section 2.
Trademarks
means all of the following now owned or hereafter acquired by Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business
identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations
and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office, any State of the United States or any similar
offices in any other country or any political subdivision thereof, and all extensions or renewals thereof, (b) all goodwill associated
therewith or symbolized thereby, and (c) all other assets, rights and interests that uniquely reflect or embody such goodwill.
Type
of Organization means the kind or type of entity of Grantor, such as a corporation, limited partnership or limited liability
company.
UCC
means the Uniform Commercial Code as in effect in the State of New York on the date of this Agreement, as it may be amended
or modified from time to time hereafter; provided, however, that, as used in Section 5 hereof, UCC shall mean the
Uniform Commercial Code as in effect from time to time in any applicable jurisdiction.
Section
2. Grant of Security Interest. As security for the payment and performance of all Obligations, Grantor hereby assigns to
Secured Party, and grants to Secured Party a continuing security interest (the “Security Interest”)
in, all of the following property of Grantor whether now or hereafter existing or acquired, regardless of where located, all of
Grantor’s:
(a)
Accounts;
(b)
cash and Cash Proceeds;
(c)
Certificated Securities;
(d)
Chattel Paper, including Electronic Chattel Paper;
(e)
Computer Hardware and Software and all rights with respect thereto, including, any and all licenses, options, warranties, service
contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications,
and any substitutions, replacements, additions or model conversions of any of the foregoing;
(f)
Commercial Tort Claims;
(g)
Deposit Accounts and all cash held in such Deposit Accounts (other than Excluded Accounts);
(h)
Documents;
(i)
Financial Assets;
(j)
General Intangibles, including, without limitation, Payment Intangibles;
(k)
Goods (including all of its Equipment, Fixtures and Inventory), and all embedded software, accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor;
(l)
Instruments;
(m)
Intellectual Property;
(n)
Investment Property;
(o)
Letter of Credit Rights;
(p)
Security Entitlements;
(q)
Supporting Obligations;
(r)
Uncertificated Securities; and
(s)
to the extent not included in the foregoing, all other personal property of any kind or description;
together
with all books, records, writings, databases, information and other property relating to, used or useful in connection with, or
evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds, products, offspring, rents, issues,
profits and returns of and from any of the foregoing.
Section
3. Representations and Warranties. Grantor represents and warrants to Secured Party, as of the Closing Date and as of each
other date required under any Basic Document, that:
(a)
No financing statement or other instrument similar in effect covering all or any part of the Collateral or listing Grantor as
debtor is on file in any recording office, except such as have been filed in favor of the Secured Party pursuant to this Agreement
or as otherwise permitted under the Basic Documents.
(b)
Grantor is and will be the owner of all Collateral, free of all Liens, claims, security interests and encumbrances whatsoever,
other than the Permitted Liens, with full power and authority to execute this Agreement and perform its obligations hereunder,
and to subject the Collateral to the security interest hereunder.
(c)
All material information required to be delivered under the Basic Documents with respect to Collateral and Account Debtors set
forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by Grantor to Secured Party
is and will be true and correct in all material respects as of the date furnished.
(d)
The execution and delivery of this Agreement and the performance by Grantor of its obligations hereunder are within Grantor’s
powers, have been duly authorized by all necessary action, have received all necessary governmental approval (if any shall be
required), and do not contravene or conflict, in any material respect, with any provision of law or of the articles of incorporation,
certificate of formation, by-laws, limited liability company agreement, limited partnership agreement or any similar governing
documents of Grantor or of any material agreement, indenture, instrument or other document, or any material judgment, order or
decree, which is binding upon Grantor.
(e)
This Agreement is a legal, valid and binding obligation of Grantor, enforceable in accordance with its terms, except that the
enforceability of this Agreement may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization,
moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and by general principles
of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(f)
The Security Interest in the Collateral created by this Agreement will be duly perfected once the appropriate actions required
for perfection under applicable law has been taken by the Secured Party. The creation, attachment and perfection of the Security
Interest do not require the consent of any third party. Once perfected in accordance with this clause (f), the Security Interest
will constitute a first and prior Lien on the Collateral.
(g)
Grantor’s chief executive office and principal place of business are as set forth on Schedule I hereto; Schedule
I also sets forth each location where Grantor maintains a place of business, maintains any Inventory, or owns or leases
any real property.
(h)
Grantor is duly organized, validly existing and in good standing under the laws of the state set forth on Schedule II
hereto, except where the failure to do so would not reasonably be expected to result in a Material Adverse Event; Schedule
II sets forth the Type of Organization, Organizational I.D. Number and federal taxpayer identification number of Grantor.
(i)
Grantor’s exact legal name is as set forth on the signature pages of this Agreement and on Schedule II; Schedule
III sets forth all of Grantor’s prior legal names and prior Types of Organizations, and lists all mergers or other
reorganizations to which Grantor has been subject, within the five (5) year period immediately preceding the Closing Date.
(j)
Schedule IV hereto contains a complete listing of all of Grantor’s registered Intellectual Property that is
subject to any registration statutes.
(k)
Schedule V hereto contains a complete listing of all of Grantor’s Instruments, Investment Property, Letter-of-Credit
Rights, Chattel Paper, Documents and Commercial Tort Claims.
(l)
Except as set forth on Schedule VI hereto, Grantor has no tangible Collateral located outside of the United States.
(m)
Schedule VIII hereto contains a complete listing of all of Grantor’s Collateral that is subject to certificate
of title statutes.
(n)
As of the Closing Date, Schedule IX hereto contains a complete listing of all of Grantor’s Deposit Accounts
(other than Excluded Accounts) and other bank accounts, including locations and applicable account numbers.
(o)
None of Grantor’s Equipment is a Fixture to real estate unless such real estate is owned by Grantor and is subject to a
mortgage in favor of Secured Party, or if such real estate is leased, is subject to a landlord's agreement in favor of Secured
Party on terms acceptable to Secured Party.
(p)
Any amounts due to Grantor under the Collateral are not subject to any material setoff, counterclaim, defense, allowance or adjustment
(other than discounts for prompt payment shown on the invoice) or to any material dispute, objection or complaint by any Account
Debtor or other Obligor.
(q)
Grantor has the right to use all of its registered Patents and Trademarks material to Grantor’s business and such Patents
and Trademarks owned, controlled, or acquired by Grantor, or which Grantor has a right to use: (i) are subsisting and have not
been adjudged or claimed to be invalid or unenforceable (either in whole or in part) and Grantor is not aware of any basis for
such a claim, (ii) are valid and enforceable, (iii) are in the name of Grantor, and (iv) are properly recorded and/or filed in
the United States Patent and Trademark Office. Grantor’s right, title and interest in such Intellectual Property is free
and clear of any Liens (other than Permitted Liens), registered user agreements, or covenants by Grantor not to sue third Persons
or licenses.
(r)
Grantor has properly completed all necessary filings, payments, renewals and obligations in the United States Patent and Trademark
Office to maintain the registered Patents and Trademarks material to Grantor’s business as fully valid and enforceable,
except with respect to any Patent or Trademark that Grantor shall reasonably determine is of immaterial economic value to it in
its ordinary course of business.
(s)
To the actual knowledge of Grantor, no claim has been made that the ownership or use of any of the registered Patents and Trademarks,
or the manufacture, use or sale of any product made in accordance therewith or service rendered thereunder, does violate the rights
of any third Person, and Grantor has no actual knowledge of any third party rights which may be infringed or otherwise violated
by the use of any of the registered Patents and Trademarks material to the operations of Grantor.
(t)
Grantor has reasonably maintained all trade secrets material to the operations of Grantor in accordance with applicable law and
prudent industry practices.
Section
4. Certificates, Schedules and Reports. Grantor will from time to time, as Secured Party may reasonably request, deliver
to Secured Party such schedules, certificates and reports respecting the Collateral at the time subject to the Security Interest
hereunder, and the items or amounts received by Grantor in full or partial payment of any of the Collateral, as Secured Party
may reasonably request. Any such schedule, certificate or report shall be executed by an authorized officer of Grantor and shall
be in such form and detail as Secured Party may specify in its reasonable discretion.
Section
5. Agreements of Grantor.
(a)
Grantor, at Secured Party’s request, at any time and from time to time, shall execute and deliver, if applicable, to Secured
Party such financing statements, amendments and any other necessary documents, including Instruments, and do such acts as Secured
Party deems reasonably necessary in order to establish and maintain valid, attached and perfected Security Interests in the Collateral
in favor of Secured Party, free and clear of all Liens and claims and rights of third parties whatsoever except Permitted Liens.
Grantor hereby irrevocably authorizes Secured Party at any time, and from time to time, to file in any appropriate jurisdiction
any initial financing statements and amendments thereto that (i) indicate the Collateral (A) as “all assets of Grantor,”
“the Collateral described in the Security Agreement” or words of similar effect, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement
or amendment is filed, or (B) as being of an equal or lesser scope or with greater detail, and (ii) contain any other information
required by Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency
or filing office acceptance of any financing statement or amendment, including, without limitation, (A) whether Grantor is an
organization, the Type of Organization and the Organization ID Number issued to Grantor and (B) in the case of a financing statement
filed as a fixture filing or indicating Collateral to be extracted or timber to be cut, a sufficient description of the real property
to which the Collateral relates.
(b)
During the term of this Agreement, Grantor agrees to:
(i)
keep all of the Collateral (other than with respect to Goods in transit between facilities, temporary warehousing for up to thirty
(30) days, or sales or leases of assets permitted by the Note) at, and will not maintain any place of business at any location
other than, its address(es) shown on Schedule I hereto or at such other addresses of which Grantor shall have given
Secured Party not less than twenty (20) days’ prior written notice;
(ii)
stamp on its records concerning the Collateral, and add on all Chattel Paper and Instruments, each with a face value in excess
of $100,000, constituting a portion of the Collateral, a notation, in form reasonably satisfactory to Secured Party, of the Security
Interest of Secured Party hereunder or, upon the reasonable request of Secured Party, deliver to Secured Party any such Chattel
Paper and Instruments, each with a face value in excess of $100,000, constituting a portion of the Collateral, together with transfer
powers duly executed in blank;
(iii)
promptly notify Secured Party in writing of any change in any material fact or circumstance represented or warranted by Grantor
with respect to any of the Collateral, and promptly notify Secured Party in writing of any material claim, action or proceeding
challenging the Security Interest or affecting title to all or any material portion of the Collateral or the Security Interest
and, at Secured Party’s request, appear in and defend any such action or proceeding at Grantor’s expense;
(iv)
not sell, lease, assign or create or permit to exist any Lien on any Collateral other than Permitted Liens except for the sale
or lease of its assets in accordance with Section 5(n) of the Note;
(v)
not (A) permit any of its Equipment to become a Fixture to real property unless such real property is owned by Grantor and is
subject to a mortgage in favor of Secured Party, or if such real property is leased, is subject to a landlord's agreement in favor
of Secured Party on terms reasonably acceptable to Secured Party, or (B) permit any of its Equipment to become an accession to
any other personal property unless such personal property is subject to a first priority Lien in favor of Secured Party.
(vi)
upon request of Secured Party, (A) cause to be noted on the applicable certificate, in the event any of its Equipment with a value
in excess of $100,000 individually, is covered by a certificate of title, the security interest of Secured Party in the Equipment
covered thereby, and (B) deliver all such certificates to Secured Party or its designees;
(vii)
take all steps reasonably necessary to protect, preserve and maintain all of its rights in the Collateral;
(viii)
except as listed on Schedule VI, keep all of the tangible Collateral in the United States;
(ix)
promptly notify Secured Party in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting
of Investment Property, Letter-of-Credit Rights or Electronic Chattel Paper, in each case, with a value in excess of $100,000;
(x)
promptly notify Secured Party in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting
of Documents or Instruments, in each case, with a value in excess of $100,000;
(xi)
with respect to Collateral in the possession of a third party, other than Certificated Securities and Goods covered by a Document,
use commercially reasonable efforts to obtain an acknowledgment from the third party that it is holding the Collateral for benefit
of Secured Party;
(xii)
promptly notify Secured Party in writing upon incurring or otherwise obtaining a Commercial Tort Claim, in excess of $250,000,
after the date hereof against any third party, and, upon the request of Secured Party, promptly enter into an amendment to this
Agreement, and do such other acts or things deemed appropriate by Secured Party to give Secured Party a security interest in such
Commercial Tort Claim;
(xiii)
take other action reasonably requested by Secured Party to insure the attachment, perfection and, first priority of, and the ability
of Secured Party to enforce, the security interests in any and all of the Collateral including, without limitation:
1)
complying, in all material respects, with any provision of any statute, regulation or treaty of the United States as to any Collateral
if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Secured Party to enforce,
the security interests in such Collateral;
2)
use commercially reasonably efforts in obtaining governmental and other third party consents and approvals, including without
limitation any consent of any licensor, lessor or other Person obligated on Collateral with respect to any Collateral material
to the operations in Grantor’s business;
3)
use commercially reasonable efforts in obtaining waivers from mortgagees and landlords in form and substance satisfactory to Secured
Party; and
4)
taking all reasonable and necessary actions required by the UCC in effect from time to time or by other law, as applicable in
any relevant UCC jurisdiction, or by other material laws as applicable in any foreign jurisdiction;
(xiv)
to the extent any of the Collateral is or becomes a “security” within the meaning of Article 8 of the UCC is governed
by Article 8 of the UCC, to (x) ensure such Collateral is certificated, (y) promptly deliver the certificates representing such
Collateral to Secured party, and (z) promptly deliver powers of equity for such Collateral, executed in blank;
(xv)
not change its state of formation or organization or Type of Organization without providing Secured Party with at least twenty
(20) days’ prior written notice (or such shorter period in Secured Party’s reasonable discretion); and
(xvi)
not change its legal name without providing Secured Party with at least ten (10) days’ prior written notice (or such shorter
period in Secured Party’s reasonable discretion).
(c)
Whenever an Event of Default has occurred and is continuing, Secured Party shall have the right to bring suit to enforce any or
all of the Intellectual Property or licenses thereunder, in which event Grantor shall at the request of Secured Party do any and
all lawful acts and execute any and all proper documents required by Secured Party in aid of such enforcement and Grantor shall
promptly, upon demand, reimburse and indemnify Secured Party for all costs and expenses incurred by Secured Party in the exercise
of its rights in accordance with the Note. Notwithstanding the foregoing, Secured Party shall have no obligation or liability
regarding the Collateral or any part thereof by reason of, or arising out of, this Agreement.
Section
6. Default; Rights and Remedies of Secured Party upon a Default
.
If an Event of Default shall have occurred and be continuing, Secured Party shall have the following rights and remedies:
(a)
Secured Party may exercise any or all of the remedies available to it under this Agreement, the other Basic Documents, at law,
in equity or otherwise;
(b)
Grantor shall hold in trust (and not commingle with its other assets) for Secured Party all Collateral that is Chattel Paper,
Instruments or Documents at any time received by it and promptly deliver same to Secured Party, unless Secured Party at its option
gives Grantor written permission to retain such Collateral; at Secured Party’s request, each contract, Chattel Paper, Instrument
or Document so retained shall be marked to state that it is assigned to Secured Party and each instrument shall be endorsed to
the order of Secured Party (but failure to so mark or endorse shall not impair the Security Interest);
(c)
Grantor irrevocably appoints Secured Party its true and lawful attorney with full power of substitution, in the name of Grantor,
for the sole use and benefit of Secured Party, but at Grantor’s expense, to the extent permitted by law, to file claims
under any insurance policies of Grantor, to receive, receipt and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary
to effect the collection, compromise or settlement of any claims under any such insurance policies;
(d)
Grantor irrevocably appoints Secured Party its true and lawful attorney with full power of substitution, in the name of Grantor,
for the sole use and benefit of Secured Party, but at Grantor’s expense, to the extent permitted by law, to exercise, all
or any of the following powers with respect to all or any of Grantor’s Collateral (to the extent necessary to pay the Obligations
in full):
(i)
to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof;
(ii)
to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto;
(iii)
to take control of, sell, lease, license or otherwise dispose of the same or the Proceeds thereof, as fully and effectually as
if Secured Party were the absolute owner thereof;
(iv)
to extend the time of payment of any or all thereof and to make any allowance or other adjustment with reference thereto;
(v)
to endorse Grantor’s name on any notes, acceptances, checks, drafts, money orders or other evidences of payment on Collateral
that may come into Secured Party’s possession;
(vi)
to sign Grantor’s name on any invoice or bill of lading relating thereto, on any drafts against Obligors or other Persons
making payment with respect thereto, on assignments and verifications of accounts or other Collateral and on notices to Obligors
making payment with respect thereto;
(vii)
to send requests for verification of obligations to any Obligor; and
(viii)
to do all other acts and things reasonably necessary to carry out the intent of this Agreement.
If,
following the occurrence of an Event of Default, any Obligor or Account Debtor fails to make payment on any Collateral when due,
Secured Party is authorized, in its sole discretion, either in its own name or in Grantor’s name, to take such action as
Secured Party reasonably shall deem appropriate for the collection of any amounts owed with respect to Collateral or upon which
a delinquency exists. Regardless of any other provision of this Agreement, however, Secured Party shall not be liable for its
failure to collect, or for its failure to exercise diligence in the collection of, any amounts owed with respect to Collateral
except for its own fraud, gross negligence, or willful misconduct, nor shall it be under any duty to anyone except Grantor to
account for funds that it shall actually receive under this Agreement. A receipt given by Secured Party to any Obligor or Account
Debtor shall be a full and complete release, discharge, and acquittance to such Obligor or Account Debtor, to the extent of any
amount so paid to Secured Party. Secured Party may apply or set off amounts paid and the deposits against any liability of Grantor
to Secured Party.
(e)
Secured Party’s sale of less than all the Collateral shall not exhaust Secured Party’s rights under this Agreement
and Secured Party is specifically empowered to make successive sales until all the Collateral is sold. If the proceeds of a sale
of less than all the Collateral shall be less than the Obligations, this Agreement and the Security Interest shall remain in full
force and effect as to the unsold portion of the Collateral just as though no sale had been made. In the event any sale under
this Agreement is not completed or is, in Secured Party’s opinion, defective, such sale shall not exhaust Secured Party’s
rights under this Agreement and Secured Party shall have the right to cause a subsequent sale or sales to be made. Any and all
statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale
under this Agreement as to nonpayment of the Obligations, or as to the occurrence of any Event of Default, or as to Secured Party’s
having declared all of such Obligations to be due and payable, or as to notice of time, place and terms of sale and the properties
to be sold having been duly given, or as to any other act or thing having been duly done by Secured Party, shall be taken as prima
facie evidence of the truth of the facts so stated and recited. Secured Party may appoint or delegate any one or more Persons
as agent to perform any act or acts necessary or incident to any sale held by Secured Party, including the sending of notices
and the conduct of sale, but such acts must be done in the name and on behalf of Secured Party. In connection with the sale of
Collateral that constitutes Securities, Secured Party is authorized, but not obligated, to limit prospective purchasers to the
extent deemed necessary or desirable by Secured Party to render such sale exempt from registration requirements of the Securities
Act of 1933, as amended, and any applicable state securities laws, and no sale so made in good faith by Secured Party shall be
deemed not be “commercially reasonable” because so made.
(f)
In addition to any and all other rights afforded to Secured Party in this Section 6, Secured Party may exercise
all the rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised)
with respect to any Collateral and, if cash shall be insufficient to pay all the Obligations in full, sell, lease, license or
otherwise dispose of the Collateral or any part thereof in accordance with the provisions of the UCC. Notice of any such sale
or other disposition shall be given to Grantor as required under this Section 6 or as required by applicable law.
Section
7. Application of Proceeds.
(a)
If an Event of Default shall have occurred and be continuing, Secured Party may apply the proceeds of any sale or other disposition
of all or any part of the Collateral, in the following order of priorities:
(i)
first, to pay the expenses of such sale or other disposition, including reasonable compensation to Secured Party and counsel
for Secured Party, and all expenses, liabilities and advances incurred or made by Secured Party in connection with this Agreement,
and any other amounts then due and payable in connection with this Agreement;
(ii)
second, to pay all interest (including post-petition interest) and other fees payable under the Note, until payment in
full of all such interest and fees shall have been made;
(iii)
third, to pay the unpaid principal of the Obligations, until payment in full of the principal of all Obligations shall
have been made (or so provided for);
(iv)
fourth, to pay all other Obligations, until payment in full of all such other Obligations shall have been made (or so provided
for); and
(v)
finally, to pay to Grantor, or as a court of competent jurisdiction may direct, any surplus then remaining from the proceeds
of the Collateral owned by it.
Secured
Party may make such distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof.
(b)
All distributions made by Secured Party pursuant to this section shall be final (except in the event of manifest error).
Section
8. Existence of Default. Regarding the existence of any Default for purposes of this Agreement, Grantor agrees that the
Obligors or Account Debtors on any Collateral may rely upon written certification from Secured Party that such a Default exists
and Grantor expressly agrees that Secured Party shall not be liable to Grantor for any claims, damages, costs, expenses or causes
of action of any nature whatsoever in connection with, arising out of, or related to Secured Party’s exercise of any rights,
powers or remedies under any Basic Document except for its own fraud, negligence, or willful misconduct.
Section
9. Limitation on Duty in Respect of Collateral.
(a)
Beyond the exercise of reasonable care in the custody and preservation thereof, Secured Party will have no duty as to any Collateral
in its possession or control or in the possession or control of any bailee or any income therefrom or as to the preservation of
rights against prior parties or any other rights pertaining thereto. Secured Party will be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially
equal to that which it accords its own property, and will not be liable or responsible for any loss or damage to any Collateral,
or for any diminution in the value thereof, by reason of any act or omission of any bailee selected by Secured Party in good faith
or by reason of any act or omission by Secured Party pursuant to instructions from Grantor, except to the extent that such liability
arises from Secured Party’s gross negligence or willful misconduct.
(b)
To the extent that applicable law imposes duties on Secured Party to exercise remedies in a commercially reasonable manner, Grantor
acknowledges and agrees that it is not commercially unreasonable for Secured Party (i) to fail to incur expenses reasonably deemed
significant by Secured Party to prepare Collateral for disposition or otherwise to complete raw material or work-in-process into
finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the
collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against
Account Debtors or other Persons obligated on Collateral or to remove Liens or encumbrances on or any adverse claims against Collateral,
(iv) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the
use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications
or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether
or not in the same business as Grantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to
hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose
of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, including, without limitation, any
warranties of title, (xi) to purchase insurance of credit enhancements to insure Secured Party against risks of loss, collection
or disposition of Collateral, or to provide to Secured Party a guaranteed return from the collection or disposition of Collateral,
or (xii) to the extent deemed appropriate by Secured Party, to obtain the services of other brokers, investment bankers, consultants
and other professionals to assist Secured Party in the collection or disposition of any of the Collateral. Grantor acknowledges
that the purpose of this section is to provide non-exhaustive indications of what actions or omissions by Secured Party would
not be commercially unreasonable in Secured Party’s exercise of remedies against the Collateral and that other actions or
omissions by Secured Party shall not be deemed commercially unreasonable solely on account of not being indicated in this section.
Without limitation upon the foregoing, nothing contained in this section shall be construed to grant any right to Grantor or to
impose any duties on Secured Party that would not have been granted or imposed by this Agreement or by applicable law in the absence
of this section.
(c)
The Security Interest is given to secure the prompt, unconditional and complete payment and performance of the Obligations when
due, and is given as security only. Secured Party does not assume, and shall not be liable for, any of Grantor’s liabilities,
duties or obligations under, or in connection with, the Collateral. Secured Party’s acceptance of this Agreement, or its
taking any action in carrying out this Agreement, does not constitute Secured Party’s approval of the Collateral or Secured
Party’s assumption of any obligation under or in connection with the Collateral. This Agreement does not affect or modify
Grantor’s obligations with respect to the Collateral.
Section
10. Fraudulent Conveyance. Notwithstanding anything contained in this Agreement to the contrary, Grantor agrees that if,
but for the application of this Section 10, the Obligations or any Security Interest would constitute a preferential
transfer under 11 U.S.C. § 547, a fraudulent conveyance under 11 U.S.C. § 548 (or any successor section of that statute)
or a fraudulent conveyance or transfer under any state fraudulent conveyance or fraudulent transfer law or similar Law in effect
from time to time (each a “Fraudulent Conveyance”), then the Obligations and each affected Security
Interest will be enforceable to the maximum extent possible without causing the Obligations or any Security Interest to be a Fraudulent
Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this Section 10.
Section
11. General.
(a)
Unless otherwise provided hereunder, any consent, notice, or other communication under or in connection with this Agreement must
be given as prescribed in the Note.
(b)
No delay on the part of Secured Party in the exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by Secured Party of any right or remedy shall preclude other or further exercise thereof or the exercise of
any other right or remedy.
(c)
This Agreement shall remain in full force and effect until all Obligations have been paid in full and no commitment under the
Note or any other Basic Document remains outstanding. If at any time all or any part of any payment theretofore applied by Secured
Party to any of the Obligations is or must be rescinded or returned by Secured Party for any reason whatsoever (including the
insolvency, bankruptcy or reorganization of Grantor), such Obligations shall, for the purposes of this Agreement, to the extent
that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application
by Secured Party, and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such Obligations,
all as though such application by Secured Party had not been made.
(d)
Section 9 of the Note is hereby incorporated into this Agreement by reference, shall apply herein mutatis mutandis and
shall have the same force and effect as if expressly set forth herein.
(e)
THIS AGREEMENT, THE NOTE AND THE OTHER BASIC DOCUMENTS, INCLUDING BUT NOT LIMITED TO, THE PROVISIONS RELATING TO GOVERNING
LAW, JURY WAIVER, VENUE, SERVICE OF PROCESS AND ARBITRATION, CONSTITUTE THE ENTIRE UNDERSTANDINGS BETWEEN THE PARTIES AND SUPERSEDE
ALL PRIOR WRITTEN OR ORAL AGREEMENTS AND ANY CONTEMPORANEOUS ORAL AGREEMENTS WITH RESPECT TO THE SUBJECT MATTER HEREOF.
(f)
The rights and privileges of Secured Party hereunder shall inure to the benefit of its successors and assigns. Grantor may not
assign or transfer its rights hereunder or any interest herein or delegate its duties hereunder without the prior written consent
of Secured Party. No amendment of this Agreement shall be effective unless such amendment shall be in writing signed by Grantor
and Secured Party.
(g)
This Agreement may be executed and delivered (including by facsimile or Portable Document Format (pdf) transmission) in any number
of counterparts with the same effect as if all signatories had signed the same document. Facsimile and other electronic copies
of manually-signed originals shall have the same effect as manually-signed originals and shall be binding on Grantor and Secured
Party. All counterparts must be construed together to constitute one and the same instrument.
[Signatures
Appear on Following Page]
IN
WITNESS WHEREOF, this Security Agreement has been duly executed as of the day and year first above written.
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GRANTOR:
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GLASSBRIDGE ATHLETE, LLC,
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a Delaware limited liability company
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By:
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/s/
Daniel Strauss
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Name:
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Daniel
Strauss
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Title:
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President
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[Signature
Page to Security Agreement]
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SECURED PARTY:
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ORIX PTP HOLDINGS, LLC
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a Delaware limited liability company
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By:
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/s/
Paul Wilson
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Name:
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Paul
Wilson
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Title:
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President
of ORIX Corporate Capital, Inc. (sole member of ORIX PTP Holdings)
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[Signature
Page to Security Agreement]
SCHEDULE
I
TO
SECURITY AGREEMENT
CHIEF
EXECUTIVE OFFICE AND OTHER ADDRESSES OF GRANTOR
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1.
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GlassBridge
Athlete, LLC
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411
E 57th Street Suite 1-A New York NY 10022
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SCHEDULE
II
TO
SECURITY AGREEMENT
STATE
OF FORMATION OR ORGANIZATION
|
Information
Required
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Grantor
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Exact
Legal Name:
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GLASSBRIDGE
ATHLETE, LLC
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State
of Organization:
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Delaware
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Type
of Organization:
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Limited
liability company
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Organizational
I.D. Number:
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7781937
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Federal
Taxpayer I.D. Number
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84-4832519
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Place
of Business (or, if more than one, the
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411
E 57th Street Suite 1-A NY NY 10022
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Chief
Executive Office):
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SCHEDULE
III
TO
SECURITY AGREEMENT
TRADE
NAMES, PRIOR LEGAL NAMES AND TYPES OF ORGANIZATION, ETC.
Grantor’s
prior legal names and Types of Organizations were:
GlassBridge
Athlete, LLC
SCHEDULE
IV
TO
SECURITY AGREEMENT
INTELLECTUAL
PROPERTY
Patents:
none
Copyrights:
none
SCHEDULE
V
TO
SECURITY AGREEMENT
INSTRUMENTS,
ETC.
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Instruments:
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-
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none
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Investment
Property:
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-
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none
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Letter-of-Credit
Rights:
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-
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none
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Chattel
Paper:
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-
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none
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Documents:
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-
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none
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Commercial
Tort Claims:
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-
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none
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SCHEDULE
VI
TO
SECURITY AGREEMENT
COLLATERAL
NOT LOCATED IN THE UNITED STATES
None
SCHEDULE
VIII
TO
SECURITY AGREEMENT
COLLATERAL
SUBJECT TO CERTIFICATE OF TITLE STATUTE
None
SCHEDULE
IX
TO
SECURITY AGREEMENT
LIST
OF DEPOSIT ACCOUNTS AND OTHER BANK ACCOUNTS
The
following information has been omitted:
Signature
Bank
ABA
[***]
Account
Name: GlassBridge Athlete, LLC
Acct#
[***]
Exhibit
10.45
PLEDGE
AGREEMENT
(PARENT)
THIS
PLEDGE AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”)
is entered into as of March 17, 2020 (the “Closing Date”), by GlassBridge Enterprises, Inc.,
a Delaware corporation (“Pledgor”), for the benefit of ORIX PTP Holdings, LLC, a Delaware limited
liability company, as lender (“Lender”).
RECITALS
A.
Pledgor owns membership interests in GlassBridge Athlete, LLC, a Delaware limited liability company (“Borrower”),
representing one hundred percent (100%) of the issued and outstanding membership interests of Borrower.
B.
Pledgor, Borrower and Lender have entered into that certain Secured Promissory Note Agreement of even date herewith (as amended,
restated, amended and restated, supplemented or otherwise modified from time to time, the “Note”).
C.
As the owner of 100% of the outstanding membership interests of the Borrower, Pledgor will receive the benefits of the transactions
contemplated by the Note.
D.
The board of directors of Pledgor has determined that Pledgor’s execution, delivery and performance of this Agreement may
reasonably be expected to benefit Pledgor, directly or indirectly, and are in the best interests of Pledgor.
E.
Pledgor has agreed to grant to Lender a security interest in, and pledge and assign to Lender the Collateral described herein,
to secure the payment and performance of the Obligations when due.
F.
It is expressly understood between Pledgor, Borrower and Lender that the execution and delivery of this Agreement is a condition
precedent to the obligation of the Lender to extend credit under the Note.
NOW,
THEREFORE, in consideration of the foregoing and as an inducement to Lender to enter into the Note and extend credit to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1.
Certain Definitions. CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS AGREEMENT HAVE THE MEANINGS GIVEN THEM IN THE NOTE
OR IN THE UCC. If the definition given a term in the Note conflicts with the definition given that term in the UCC, the Note definition
shall control to the extent allowed by applicable law. Terms used in this Agreement which are not capitalized but which are defined
in the UCC, shall have the meaning given them in the UCC. If the definition given a term in Chapter 9 of the UCC conflicts with
the definition given that term in any other chapter of the UCC, the Chapter 9 definition shall control. As used in this Agreement:
“Agreement”
means this Agreement together with all schedules and annexes attached hereto, and all amendments, restatements, and supplements
to this Agreement, the schedules and exhibits.
“Borrower”
is defined in the recitals hereto.
“Closing
Date” is defined in the introductory paragraph hereto.
“Collateral”
is defined in Section 3 of this Agreement.
“Equity
Power” means an equity power, substantially in the form of Annex A to this Agreement, executed and
delivered by Pledgor to Lender in connection with this Agreement.
“Equity
Securities” means, with respect to any Person (other than an individual), all of such Person’s issued and
outstanding:
(i)
capital stock (including but not limited to common stock and preferred stock), partnership interests, membership interests, equity
interests, profits interests, warrants, options or other rights for the purchase or acquisition from such Person of shares of
capital stock or other equity or profits interests of such Person;
(ii)
all of the securities convertible into or exchangeable for shares of capital stock, equity or profits interests, warrants, rights
or options for the purchase or acquisition from such Person of such shares or interests; and
(iii)
all of the other equity or profit interests in such Person, whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are outstanding on any date of determination.
“Fraudulent
Conveyance” is defined in Section 5 of this Agreement.
“Initial
Pledged Interests” is defined Section 3 of this Agreement.
“Note”
is defined in the Recitals.
“Obligor”
is defined in Section 12(b) of this Agreement.
“Pledged
Interests” is defined Section 3 of this Agreement.
“Pledgor”
is defined in the introductory paragraph hereto and includes, without limitation, Pledgor as a debtor-in-possession, and any receiver,
trustee, liquidator, conservator, custodian, or similar party hereafter appointed for Pledgor or all or substantially all of Pledgor’s
assets pursuant to any liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar Law from time to time in effect affecting the rights of creditors generally.
“Security
Interest” means the security interests granted, and the transfers, pledges and collateral assignments made, under
Section 3 of this Agreement.
“UCC”
means (a) generally, and with respect to the definitions above, the Uniform Commercial Code, as adopted in the State of New York,
as amended from time to time, and (b) with respect to rights in states other than the State of New York, the Uniform Commercial
Code as enacted in the applicable state, as amended from time to time.
“Voting
Interests” means, of any Person, the capital stock, membership interests or other equity interests issued by such
Person which has voting power for the election of directors, managers or individuals performing similar functions.
2.
Secured Promissory Note. This Agreement is being executed and delivered pursuant to the terms and conditions of the Note
and the other Basic Documents. Each Security Interest is a “Lien” referred to in the Note.
3.
Security Interest. In order to secure the full and complete payment and performance of the Obligations when due, Pledgor
hereby grants to Lender a continuing security interest in, and pledges and assigns to Lender all of its rights, title and interest
in and to the following (collectively, the “Collateral”):
(a)
the Equity Securities described in attached Schedule 1 (the “Initial Pledged Interests”),
whether or not evidenced or represented by any certificated security or other instrument, the certificates representing the Initial
Pledged Interests, all options and other rights, contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property (including, but not limited to, any membership or other equity dividend
and any distribution in connection with a membership or other equity split) from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Interests;
(b)
any other Equity Securities of the Borrower at any time and from time to time acquired by Pledgor (together with the Initial Pledged
Interests, the “Pledged Interests”), the certificates representing such Equity Securities, all options
and other rights, contractual or otherwise, in respect thereof and all dividends, distributions, cash, instruments, investment
property and other property (including, but not limited to, any membership or other equity dividend and any distribution in connection
with a stock or other equity split) from time to time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the foregoing;
(c)
all security entitlements of Pledgor in any and all of the foregoing; and
(d)
all proceeds (including proceeds of proceeds) of any and all of the foregoing;
in
each case, whether now owned or hereafter acquired by Pledgor and howsoever its interest therein may arise or appear (whether
by ownership, security interest, Lien, claim or otherwise).
4.
No Assumption or Modification. The Security Interest is given to secure the prompt, unconditional and complete payment
and performance of the Obligations when due, and is given as security only. Lender neither assumes nor shall be liable for Pledgor’s
liabilities, duties, or obligations under or in connection with the Collateral. Neither Lender’s acceptance of this Agreement
nor its taking any action in carrying out this Agreement shall constitute Lender’s approval of the Collateral or Lender’s
assumption of any obligation under or in connection with the Collateral. This Agreement does not affect or modify Pledgor’s
obligations with respect to the Collateral.
5.
Fraudulent Conveyance. Notwithstanding anything contained in this Agreement to the contrary, Pledgor agrees that if, but
for the application of this Section 5, the Obligations or any Security Interest would constitute a preferential
transfer under 11 U.S.C. § 547, a fraudulent conveyance under 11 U.S.C. § 548 (or any successor section), or a fraudulent
conveyance or transfer under any state’s fraudulent conveyance or fraudulent transfer Law or similar Law in effect from
time to time (each a “Fraudulent Conveyance”), then the Obligations and each affected Security Interest
will be enforceable against Pledgor to the maximum extent possible without causing the Obligations or any Security Interest to
be a Fraudulent Conveyance, and shall be deemed to have been automatically amended to carry out the intent of this Section
5.
6.
Representations and Warranties. Pledgor hereby represents and warrants to Lender as of the Closing Date and each other
date required under any Basic Document as follows:
(a)
Pledgor has full power and capacity to execute and deliver this Agreement and to perform fully his obligations hereunder. The
execution, delivery and performance by Pledgor of this Agreement are within Pledgor’s lawful powers and have been duly authorized
by the board of directors, board of managers, general partner, managing member or other applicable governing body of Pledgor,
and no other corporate or equivalent action on the part of Pledgor is necessary to authorize this Agreement.
(b)
The execution and delivery by Pledgor of this Agreement and Pledgor’s performance of its obligations under this Agreement
(i) do not require action by, or filing with, any Governmental Authority or any action by any other Person (other than
any action taken or filing made on or before the Closing Date), (ii) do not violate any provision of Pledgor’s organizational
documents, (iii) do not violate, in any material respect, any provision of Law or any order of any Governmental Authority, in
each case applicable to Pledgor, (iv) do not violate, in any material respect, or constitute a material breach of, any material
agreements to which it is a party (and no default exists on the part of Pledgor under any material agreement to which it is a
party), and (v) will not result in the creation or imposition of any Lien on any asset of Pledgor other than Permitted Liens.
(c)
This Agreement has been duly executed by Pledgor and constitutes the legal, valid, and binding obligation of Pledgor, enforceable
against Pledgor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
and similar laws affecting creditors’ rights generally and by general principles of equity (whether considered in a proceeding
in equity or at law), and except to the extent the indemnification provisions contained herein may be limited by applicable federal
or state securities laws.
(d)
Pledgor has received and will receive the benefits of the transactions contemplated by the Note, and such benefits constitute
good and valuable consideration for the Security Interest.
(e)
The Pledged Interests are duly authorized, validly issued, fully paid and non-assessable, and the transfer of the Pledged Interests
is not subject to any restrictions other than restrictions imposed by applicable securities and corporate laws.
(f)
Pledgor owns the Collateral free and clear of all Liens except for the Permitted Liens.
(g)
The information contained in Schedule 1 attached to this Agreement is true and accurate and sufficiently describes
all of the Collateral.
(h)
Pledgor has reviewed this Agreement and the other Basic Documents and has had the opportunity to review their respective rights
and responsibilities thereunder with counsel. Pledgor understands these rights and responsibilities and shall comply therewith.
7.
Covenants. Pledgor shall:
(a)
Promptly notify Lender of any material change in any fact represented or warranted by Pledgor with respect to any of the Collateral.
(b)
Promptly notify Lender upon its acquisition of any Equity Securities of the Borrower subsequent to the execution of this Agreement
and, if applicable, deliver to Lender any certificates (together with Equity Powers executed in blank) representing such Equity
Securities.
(c)
Promptly notify Lender of any claim, action or proceeding materially and adversely affecting the security interest granted and
the pledge and assignment made under Section 3 or title to any of the Collateral, and, if an Event of Default has
occurred and is continuing, at the request of Lender, appear in and defend, at Pledgor’s expense, any such action or proceeding.
(d)
Except as may be permitted under the Note, not sell, assign or otherwise dispose of any Collateral.
(e)
Not create, incur or suffer to exist any Lien upon any of the Collateral (other than Permitted Liens).
(f)
At Pledgor’s expense and Lender’s reasonable request, file or cause to be filed such applications and take such other
actions to obtain the consent or approval of any Governmental Authority to Lender’s rights hereunder, including, without
limitation, the right to sell all the Collateral upon the occurrence and during the continuance of an Event of Default without
additional consent or approval from such Governmental Authority (and, because Pledgor agrees that Lender’s remedies at law
for failure of Pledgor to comply with this provision would be inadequate and that such failure would not be adequately compensable
in damages, Pledgor agrees that its covenants in this provision may be specifically enforced).
(g)
To the extent any of the Pledged Interests is or becomes a “security” within the meaning of Article 8 of the UCC and
is governed by Article 8 of the UCC, such interest shall be certificated, and the certificates representing such Pledged Interests
shall be promptly delivered to Lender together with Equity Powers executed in blank.
(h)
From time to time promptly execute and deliver to Lender all such other assignments, certificates, supplemental documents, and
financing statements (if appropriate) and amendments thereto, and do all other acts or things as Lender may reasonably request
in order to more fully create, evidence, perfect, continue and preserve the priority of the Security Interest.
8.
Default; Remedies. Should an Event of Default occur and be continuing, Lender may, at its election, exercise any and all
rights available to a secured party under the UCC, in addition to any and all other rights afforded by the Note, at law, in equity,
or otherwise, including, without limitation applying by appropriate judicial proceedings for appointment of a receiver for all
or part of the Collateral (and Pledgor hereby consents to any such appointment).
9.
Notice. Reasonable notification of the time and place of any public sale of the Collateral, or reasonable notification
of the time after which any private sale or other intended disposition of the Collateral is to be made, shall be sent to Pledgor
and to any other person entitled to notice under the UCC. It is agreed that notice sent or given not less than ten (10) calendar
days prior to the taking of the action to which the notice relates is reasonable for the purposes of this Section 9.
10.
Sales of Securities. Pledgor recognizes that the Lender may deem it impracticable to effect a public sale of all or any
part of the Pledged Interests or any other securities constituting Collateral. Lender is authorized, but not obligated, to limit
prospective purchasers to the extent deemed necessary or desirable by Lender to render such sale exempt from the registration
requirements of the Securities Act, and any applicable state securities laws, and no sale so made in good faith by Lender shall
be deemed not to be “commercially reasonable” because so made. Lender may make one or more private sales of any such
securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities
for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any
such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have
been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been
made in a commercially reasonable manner and that the Lender shall have no obligation to delay the sale of any such securities
for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the
Securities Act. Pledgor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised
on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York
(to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately
in the manner described above to not less than fifteen (15) bona fide offerees shall be deemed to involve a “public
disposition” for the purposes of Section 9-610(c) of the UCC, notwithstanding that such sale may not constitute a “public
offering” under the Securities Act, and that the Lender may, in such event, bid for the purchase of such securities.
11.
Application of Proceeds. Lender shall apply the proceeds of any sale or other disposition of the Collateral in accordance
with Section 2.5(b) of the Note. Any surplus remaining shall be delivered to Pledgor or as a court of competent jurisdiction may
direct. If the proceeds of the Collateral are insufficient to pay the Obligations in full, Pledgor shall remain liable for any
deficiency.
12.
Other Rights of Lender.
(a)
Performance. In the event Pledgor shall fail to perform any of its obligations hereunder with respect to the Collateral,
then Lender may, at its option, but without being required to do so, take such action which Pledgor is required, but has failed
or refused, to take. Any sum which may be expended or paid by Lender under this Section 12(a) (including, without
limitation, court costs and reasonable attorneys’ fees) shall bear interest from the dates of expenditure or payment at
the Default Rate until paid and, together with such interest, shall be payable by Pledgor within 30 days after receipt by Pledgor
of written notice of such documented costs and expenses, and shall be part of the Obligations.
(b)
Collection. Upon notice from Lender, each Person obligated with respect to any of the Collateral, whether as an issuer,
account debtor or otherwise (an “Obligor”) is hereby authorized and directed by Pledgor to make payments
on any of the Collateral (including, without limitation, dividends and other distributions) directly to Lender, regardless of
whether Pledgor was previously making collections thereon. Subject to Section 12(e) hereof, until such notice is
given, Pledgor is authorized to retain and expend all payments made on Collateral. Lender shall have the right in its own name
or in the name of any Pledgor to compromise or extend time of payment with respect to all or any portion of the Collateral for
such amounts and upon such terms as Lender may determine; to demand, collect, receive, receipt for, sue for, compound and give
acquittances for any and all amounts due or to become due with respect to Collateral; to take control of cash and other proceeds
of any Collateral; to endorse the name of any Pledgor on any notes, acceptances, checks, drafts, money orders or other evidences
of payment on Collateral that may come into the possession of Lender; to send requests for verification of obligations to any
Obligor; and to do all other acts and things necessary to carry out the intent of this Agreement. If any Obligor fails or refuses
to make payment on any Collateral when due, Lender is authorized, in its sole reasonable discretion, either in its own name or
in the name of Pledgor, to take such action as Lender shall deem appropriate for the collection of any such amounts. The foregoing
rights granted to Lender under this Section 12(b) may only be exercised when an Event of Default has occurred and
is continuing. Regardless of any other provision hereof, Lender shall not be liable for its failure to collect, or for its failure
to exercise diligence in the collection of, any amounts owed with respect to Collateral, nor shall they be under any duty whatsoever
to anyone except Pledgor to account for funds that Lender shall actually receive hereunder. Without limiting the generality of
the foregoing, Lender shall have no responsibility for ascertaining any maturities, calls, conversions, exchanges, offers, tenders
or similar matters relating to any Collateral, or for informing Pledgor with respect to any of such matters (irrespective of whether
Lender actually has, or may be deemed to have, knowledge thereof). The receipt by Lender of any such payment from any Obligor
shall be a full and complete release, discharge and acquittance to such Obligor, to the extent of any amount so paid to Lender.
(c)
Record Ownership of Securities. When an Event of Default has occurred and is continuing, Lender at any time may have the
Collateral registered in its name, or in the name of its nominee or nominees, as pledgee; and Pledgor shall execute and deliver
to Lender all such proxies, powers of attorney, dividend coupons or orders and other documents as Lender may reasonably request
for the purpose of enabling Lender to exercise the voting rights and powers which it is entitled to exercise hereunder and to
receive the dividends and other payments which it is authorized to receive and retain hereunder. Nothing in this Agreement shall
prohibit the issuance of cash dividends by Borrower if such distribution is permitted under the Note.
(d)
Voting of Securities. So long as no Event of Default has occurred and is continuing, Pledgor shall be entitled to exercise
all voting rights pertaining to the Collateral. After the occurrence and during the continuance of an Event of Default, the right
to vote the Collateral shall be vested exclusively in Lender. To this end, and only so long as no Event of Default has occurred
and is continuing Pledgor irrevocably appoints Lender the proxy and attorney-in-fact of Pledgor, with full power of substitution,
to vote and to act with respect to the Collateral, subject to the understanding that such proxy may not be exercised unless an
Event of Default has occurred and is continuing. The proxy herein granted is coupled with an interest, is irrevocable, and shall
continue until the Obligations have been paid and performed in full.
(e)
Certain Proceeds. Any and all dividends or distributions in property made on or in respect of the Collateral, and any proceeds
of the Collateral, whether such dividends, distributions, or proceeds result from a subdivision, combination or reclassification
of the Equity Securities of any Person or as a result of any merger, consolidation, acquisition or other exchange of assets to
which Pledgor may be a party, or otherwise, shall be part of the Collateral hereunder, shall, if received by Pledgor, be held
in trust for the benefit of Lender, and shall forthwith be delivered to Lender (accompanied by proper instruments of assignment
and/or stock and/or bond powers executed by the Pledgor in accordance with Lender’s instructions) to be held subject to
the terms hereof. Prior to the occurrence and continuation of an Event of Default, any cash proceeds of Collateral which come
into the possession of Lender may, at the Pledgor’s option, be applied in whole or in part to the Obligations, or be released
in whole or in part to or on the written instructions of the Pledgor(s) for any general or specific purpose not in violation of
the Note, or be retained in whole or in part by Lender as additional Collateral. Upon the occurrence and continuation of an Event
of Default, any cash proceeds of Collateral may, at Lender’s option, be applied to the Obligations. Any dividends, distributions
or other payments received in respect of the Collateral that are received by Pledgor contrary to the provisions of this clause
(e) shall be received in trust for the benefit of Lender, shall be segregated from the other funds of Pledgor and shall immediately
be paid over to Lender as Collateral in the same form as so received.
(f)
Financing Statements. Pledgor hereby irrevocably authorizes Lender at any time, and from time to time, to file in any jurisdiction
any initial financing statements and amendments thereto that (i) (A) indicate the Collateral as “the Collateral described
in the Pledge Agreement,” (B) describe the Collateral in terms similar to those used in Section 3, or (B)
otherwise describe the Collateral as being of an equal or lesser scope or with greater detail, regardless of whether any particular
asset comprised in the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement
or amendment is filed, and (ii) contain any other information required by Article 9 of the UCC of the jurisdiction wherein such
financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement or
amendment.
13.
Miscellaneous.
(a)
Term. Upon payment in full of the Obligations and termination of Lender’s commitment to lend under the Note without
Lender having exercised its rights under this Agreement, this Agreement shall terminate; provided that no Obligor on any
of the Collateral shall be obligated to inquire as to the termination of this Agreement, but shall be fully protected in making
payment directly to Lender, which payment shall be promptly paid over to Pledgor after termination of this Agreement.
(b)
Notice. Any notice or communication required or permitted under this Agreement must be given as prescribed in the Note.
(c)
Note. In the event of any conflict or inconsistency between the terms hereof and the Note, the terms of the Note shall
be controlling and this Agreement shall be deemed to be amended to conform to the terms of the Note. The provisions of Section
9 of the Note are hereby incorporated mutatis mutandis and shall have the same force and effect as if expressly set forth
herein.
(d)
Multiple Counterparts and Facsimile Signatures. This Agreement may be executed in any number of counterparts with the same
effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the
same instrument. This Agreement may be transmitted and signed by facsimile or PDF, and facsimile or PDF copies of manually-signed
originals shall have the same effect as manually-signed originals and shall be binding on Pledgor and Lender.
(e)
Binding Effect; Survival. This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective
successors and permitted assigns. Unless otherwise provided, all covenants, agreements, indemnities, representations and warranties
made in any of the Basic Documents survive and continue in effect as long as the Obligations are outstanding or the Lender’s
commitment to lend under the Note is in effect.
(f)
Amendments. This Agreement may be amended, modified, supplemented or be the subject of a waiver only by a writing executed
by Lender and Pledgor.
(g)
Entirety. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES ON THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
[Signatures
appear on the next page.]
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.
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PLEDGOR:
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GLASSBRIDGE
ENTERPRISES, INC.,
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a Delaware corporation
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By:
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/s/
Daniel Strauss
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Name:
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Daniel
Strauss
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Title:
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CEO
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[Signature
Page to Pledge Agreement (Parent)]
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LENDER:
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ORIX PTP HOLDINGS, LLC
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a Delaware limited liability company
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By:
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/s/
Paul Wilson
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Name:
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Paul
Wilson
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Title:
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President
of ORIX Corporate Capital, Inc. (sole member of ORIX PTP Holdings)
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[Signature
Page to Pledge Agreement (Parent)]
SCHEDULE
1
Pledged Interests
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Pledgor
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Issuer
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Pledged
Interests
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Percentage
Interest
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GlassBridge Enterprises, Inc.
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GlassBridge Athlete, LLC
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100%
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TOTAL:
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100%
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Schedule 1 to Pledge Agreement
ANNEX
A
TO
PLEDGE AGREEMENT
FORM
OF EQUITY POWER
FOR
VALUE RECEIVED, the undersigned does hereby sell, assign and transfer unto ____________________ (_____) Units of Membership Interest
of _________________, a _________________ (the “Company”), registered in its name on the books of the
Company [represented by Certificate No. ____ herewith], and does hereby irrevocably constitute and appoint __________________
as its attorney to transfer said units on the books of the Company with full power of substitution in the premises.
Dated:
_______________,_____
__________________________________________
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[or,
for an individual Pledgor]
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__________________________________________
________________
Annex A to Pledge Agreement
INSTRUCTIONS
TO PLEDGOR: Please do not fill in any blanks other than the signature line. The purposes of this Equity Power is to enable
Lender and/or its assignee(s) to acquire the pledged interests upon an Event of Default without requiring additional signatures
on the part of Pledgor.
IN
THE PRESENCE OF
______________________________________
[WITNESS]
Annex A to Pledge Agreement
Exhibit
21.1
Subsidiaries
of the Company as of April 2, 2020
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Subsidiary*
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Jurisdiction
of Organization
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Adara
Asset Management, LLC
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Delaware
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Adara
Enterprises Corp.
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Delaware
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GlassBridge
Arrive Investor, LLC
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Delaware
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GlassBridge
Athlete, LLC
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Delaware
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GlassBridge
Capital, LLC
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Delaware
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GlassBridge
Investment Management, LLC
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Delaware
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GlassBridge
Multi Strategy GP, LLC
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Delaware
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GlassBridge
Multi Strategy Onshore, LP
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Delaware
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GlassBridge
Quant Strategy GP, LLC
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Delaware
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GlassBridge
Quant Strategy Onshore, LP
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Delaware
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Memorex
Products Inc.
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Delaware
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NXSN
Acquisition Corp.
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Delaware
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Sport-BLX,
Inc.
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Delaware
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*Certain
subsidiaries listed are indirectly and/or partially-owned.
Exhibit
31.1
Certification
Pursuant to Section 302
of
the Sarbanes-Oxley Act of 2002
I,
Daniel Strauss, certify that:
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1.
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I
have reviewed this annual report on Form 10-K of GlassBridge Enterprises, Inc.;
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
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3.
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Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
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4.
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The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
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(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
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(b)
|
Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
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(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed
in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
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(a)
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All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
|
April 3, 2020
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By:
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/s/
Daniel Strauss
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Daniel
Strauss,
|
|
|
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Chief
Executive Officer
|
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Exhibit
31.2
Certification
Pursuant to Section 302
of
the Sarbanes-Oxley Act of 2002
I,
Francis Ruchalski, certify that:
|
1.
|
I
have reviewed this annual report on Form 10-K of GlassBridge Enterprises, Inc.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
|
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3.
|
Based
on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
|
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4.
|
The
registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
|
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
|
|
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(b)
|
Designed
such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
|
|
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(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed
in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
|
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5.
|
The
registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
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|
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(a)
|
All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
|
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant’s internal control over financial reporting.
|
April 3,
2020
|
By:
|
/s/
Francis Ruchalski
|
|
|
|
Francis
Ruchalski,
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|
|
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Chief
Financial Officer
|
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Exhibit
32.1
Certification
Pursuant to
Section 906
of the Sarbanes-Oxley Act of 2002
In
connection with the Annual Report of GlassBridge Enterprises, Inc. (the “Company”) on Form 10-K for the period
ended December 31, 2019, as filed with the Securities and Exchange Commission (the “Report”), I, Daniel
Strauss, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002, that:
|
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
|
|
|
(2)
|
The
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
April 3, 2020
|
/s/
Daniel Strauss
|
|
|
Daniel
Strauss,
|
|
|
Chief
Executive Officer
|
|
Exhibit
32.2
Certification
Pursuant to
Section 906
of the Sarbanes-Oxley Act of 2002
In
connection with the Annual Report of GlassBridge Enterprises, Inc. (the “Company”) on Form 10-K for the period
ended December 31, 2019, as filed with the Securities and Exchange Commission (the “Report”), I, Francis
Ruchalski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
|
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(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
|
|
|
(2)
|
The
information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
|
April 3, 2020
|
/s/
Francis Ruchalski
|
|
|
Francis
Ruchalski,
|
|
|
Chief
Financial Officer
|
|