0001368365FALSE00013683652024-08-052024-08-05
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 5, 2024
Remark Holdings, Inc.
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| Delaware | | 001-33720 | | 33-1135689 |
| (State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
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800 S. Commerce Street Las Vegas, NV | | 89106 | | 702-701-9514 |
| (Address of principal executive offices) | | (Zip Code) | | (Registrant’s telephone number, including area code) |
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| (Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act: None
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| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
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. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Exchange Agreement
On August 5, 2024, Remark Holdings, Inc. (“Remark,” “we,” “us” or “our”) entered into an Exchange Agreement (the “Exchange Agreement”) with Mudrick Capital Management, L.P., on behalf of itself and the holders (the “Investors”) of certain outstanding promissory notes issued by us (the “Original Notes”) in the principal amount of $16,307,175.50 (the “Original Principal”) pursuant to which the Investors and Remark exchanged the Original Notes for newly-issued, secured convertible debentures issued by Remark (the “Secured Convertible Debentures”) in an aggregate principal amount equal to the sum of the Original Principal and accrued and unpaid interest on the Original Principal in the aggregate amount of $3,673,462.12.
The Secured Convertible Debentures mature on May 15, 2025 and bear interest at a rate of 20.5% per annum, and the interest is payable in kind by the issuance by Remark to the Investors of shares of Remark’s common stock as described below. The Secured Convertible Debentures are convertible, at the option of the Investors, at any time, into such number of shares of Remark common stock equal to the principal amount of the Secured Convertible Debentures converted plus all accrued and unpaid interest on such principal amount at a conversion price equal the closing price of the Remark’s common stock on the trading day immediately preceding the conversion date, subject to a floor price of $0.10, subject to (i) equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events and (ii) the availability of authorized shares of common stock which can be reserved for the purpose of such conversion.
In no event will the Investors be entitled to convert any portion of the Secured Convertible Debentures in excess of that portion which would result in beneficial ownership by it and its affiliates of more than 9.99% of the outstanding shares of common stock, unless such Investors deliver to Remark written notice at least sixty-one (61) days prior to the effective date of such notice that the provision be adjusted to 9.99%. The Secured Convertible Debentures provide that neither the Investors nor any affiliate may sell or otherwise transfer, directly or indirectly on any trading day any shares of Remark common stock an amount representing more than 10.0% of the trading volume of the common stock.
In addition, the Secured Convertible Debentures are redeemable by Remark at a redemption price equal to 100% of the sum of the principal amount of the Secured Convertible Debentures to be redeemed plus accrued interest, if any.
Upon the occurrence of events of default specified in the Secured Convertible Debentures, including the failure to pay the outstanding principal amount of the Secured Convertible Debentures and all accrued and unpaid interest thereon when due, the breach of the terms of the Exchange Agreement, the Secured Convertible Debentures or the Security Agreement (as defined below), the breach of Remark’s or the Guarantors (as defined below) representations and warranties in the Exchanges Agreement, the Secured Convertible Debentures or the Security Agreement, certain bankruptcy events with respect to Remark or the Guarantors, the failure to pay amounts due and payable under any indebtedness of Remark or a Guarantor in an amount in excess of $100,000 or a final judgment is entered against Remark or a Guarantor in an aggregate amount in excess of $100,000, all amounts owed under the Secured Convertible Debenture, together with default interest at 22.5% per annum, shall then become due and payable. In addition, the Collateral Agent (as defined below) shall have the right to exercise remedies set forth in the Security Agreement.
The Secured Convertible Debentures are guaranteed by certain direct and indirect subsidiaries of Remark (the “Guarantors”) and are secured by all the assets (wherever located, whether now owned or hereafter acquired) of Remark and the Guarantors pursuant to a Guaranty and Security Agreement dated as of August 5, 2024 (the “Security Agreement”), by and among Remark, as the Guarantors, the Investors and Argent Institutional Trust Company (the “Collateral Agent”).
The Exchange Agreement and Security Agreement contain customary representations, warranties, agreements and obligations of the parties. Among other things, in the Exchange Agreement each Investor represented to Remark, that it is an “accredited investor” (as such term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)), and Remark issued the Secured Convertible Debenture in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The foregoing descriptions of the Exchange Agreement, Secured Convertible Debentures and Security Agreement are qualified in their entirety by reference to the full text of such agreements, copies of which are attached hereto as Exhibit 10.1, 4.1 and 10.2, respectively, and each of which is incorporated herein in its entirety by reference.
Item 1.02 Termination of a Material Definitive Agreement.
The information set forth under Item 1.01 above of this Current Report on Form 8-K is incorporated by reference in this Item 1.02.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above of this Current Report on Form 8-K is incorporated by reference in this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 above of this Current Report on Form 8-K is incorporated by reference in this Item 3.02. The Secured Convertible Debentures issued, and the shares of common stock to be issued upon conversion, were, and will be, sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. The Investors are accredited investors who have purchased the securities as an investment in a private placement that did not involve a general solicitation. The shares of common stock to be issued upon conversion have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | Remark Holdings, Inc. |
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| Date: | August 7, 2024 | | By: | /s/ Kai-Shing Tao |
| | | Name: | Kai-Shing Tao |
| | | Title: | Chief Executive Officer |
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
REMARK HOLDINGS, INC.
SECURED CONVERTIBLE DEBENTURE
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| Issuance Date: August [●], 2024 | Principal Amount: $[_______________] |
FOR VALUE RECEIVED, REMARK HOLDINGS, INC., a corporation organized and existing under the laws of the State of Delaware (the “Issuer”), hereby promises to pay to [Holder], having its address at [____________] (the “Holder”), the initial principal sum of $[________________ (subject to adjustment as provided herein, the “Principal Amount”) and any accrued and unpaid interest and other fees payable under this Secured Convertible Debenture (this “Debenture”) on May 15, 2025 (the “Maturity Date”), unless earlier accelerated or converted to Conversion Shares, in each case, subject to the terms of this Debenture. The Issuer has the option to redeem this Debenture prior to the Maturity Date pursuant to Section 2(b). The Holder has the option to cause any outstanding principal and accrued interest, if any, on this Debenture to be converted into Common Stock of the Issuer, par value $0.001 per share (the “Common Stock”), at any time. The Issuer shall pay interest on the unpaid Principal Amount hereof at the rate of twenty and one half percent (20.5%) per annum from the Issuance Date until the same becomes due and payable in kind via Conversion Shares (as defined below), whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein.
1.Issuance.
(a)This Debenture is being issued pursuant to that certain Exchange Agreement dated as of August [●], 2024 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Exchange Agreement”), between the Issuer and Mudrick Capital Management, L.P., on behalf of itself, the Holder and certain other holders of previously issued notes, in exchange for that uncertificated note registered in the name of the Holder in the principal amount of $[●] issued by the Issuer pursuant to that certain Note Purchase Agreement dated as of March 14, 2023 between the Issuer, the Guarantors (as defined therein) party thereto and TMI Trust Company (now known as Argent Institutional Trust Company), as Note Agent. Capitalized terms used but not defined herein shall have the meanings set forth in the Exchange Agreement. This Debenture is also subject to the provisions of the Exchange Agreement, is secured and guaranteed in accordance with the terms of that certain Guaranty and Security Agreement dated as of August [●], 2024 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement”),
168365.00101/135787911v.6
by and among the Issuer, the affiliates of the Issuer party hereto as Guarantors, the Holder and other holders of secured convertible debentures issued by the Issuer, and Argent Institutional Trust Company, as collateral agent for the benefit of the Holder and such other holders (in such capacity, the “Collateral Agent”), and further is subject to the following additional provisions:
(b)This Debenture has been issued subject to investment representations of the Holder and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the “Securities Act”), and other applicable state and foreign securities laws. The Holder may transfer or assign this Debenture (or any part thereof) without the prior consent of the Issuer, and the Issuer shall cooperate with any such transfer. In the event of any proposed transfer of this Debenture, the Issuer may require, prior to issuance of a new Secured Convertible Debenture in the name of such other Person, that it receive reasonable transfer documentation including legal opinions that the issuance of such new Secured Convertible Debenture in such other name does not and will not cause a violation of the Securities Act or any applicable state or foreign securities laws or is exempt from the registration requirements of the Securities Act. Prior to due presentment for transfer of this Debenture to which the Issuer has consented, the Issuer and any agent of the Issuer may treat the Person in whose name this Debenture is duly registered on the Issuer's books and records of outstanding debt securities and obligations (the “Debenture Register”) as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture be overdue, and neither the Issuer nor any such agent shall be affected by notice to the contrary.
2.Conversion at Holder’s Option.
(a)At any time or from time to time on or after the Issuance Date, the Holder is entitled to convert the Conversion Amount (as defined below) into shares of Common Stock (the “Conversion Shares”), at a conversion price for each share of Common Stock (the “Conversion Price”) equal to the closing price of the Issuer’s common stock on the trading day immediately preceding the Conversion Date (defined below), provided, however that at no time shall the Conversion Price be less than the floor price of $0.10, subject to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events. The Holder’s ability to convert the Conversion Amount (as defined below) into Conversion Shares shall be subject to the availability of authorized shares of Common Stock which can be reserved for the purpose of such conversion. For purposes of this Debenture, the “Conversion Amount” shall mean the sum of (A) all or any portion of the outstanding Principal Amount of this Debenture upon exercise of its right of conversion plus (B) any accrued and unpaid on such Principal Amount. Conversion shall be effectuated by delivering by facsimile, email or certified mail, return receipt requested, to the Issuer and the transfer agent and registrar for the Common Stock (the “Transfer Agent”) of the completed form of conversion notice attached hereto as Annex A (the “Notice of Conversion”), executed by the Holder this Debenture evidencing the Holder's intention to convert this Debenture or a specified portion hereof. No fractional shares of Common Stock or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which notice of conversion is given (the “Conversion Date”) shall be deemed to be the date on which the Issuer and the Transfer Agent receives the Notice of Conversion (such receipt being evidenced by electronic
confirmation of delivery by facsimile or email or confirmation of delivery, as applicable); provided, that any notice received after 5pm (ET) shall be deemed to be received on the next business day. Delivery of a Notice of Conversion to the Transfer Agent shall be given by the Holder to the facsimile number, email or address, as applicable, provided to the Holder by the Issuer (or such other contact facsimile number, email or address as may be designated by the Transfer Agent to the Holder). Delivery of a Notice of Conversion to the Issuer shall be given by the Holder pursuant to the notice provisions set forth in Section 7(e) of the Exchange Agreement. The Conversion Shares must be delivered to the Holder within two (2) business days from the date of receipt by the Issuer and the Transfer Agent of the Notice of Conversion (the “Deadline”). Conversion shares shall be delivered by DWAC so long as the Common Stock is eligible for clearing through the Depository Trust Company (“DTC”) via the DTC’s Deposit Withdrawal Agent Commission or “DWAC” system and active and in good standing for DWAC issuance by the Transfer Agent, unless the Holder expressly requests delivery in certificated form or the Conversion Shares are in the form of restricted stock and are required to bear a restrictive legend. Conversion Shares shall be deemed delivered (i) if delivered by DWAC, upon deposit into the Holder’s brokerage account, or (ii) if delivered in certificated form, upon the Holder’s actual receipt of the Conversion Shares in certificated form at the address specified by the Holder in the Notice of Conversion, as confirmed by written receipt. All expenses incurred by the Holder for the issuance and clearing of the Common Stock into which this Debenture is convertible shall immediately and automatically be added to the balance of this Debenture at such time as the expenses are incurred by Holder. In addition to the foregoing, if on or prior to the Deadline the Issuer shall fail to deliver such Conversion Shares as provided herein and, if after the Deadline, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Issuer, then the Issuer shall, within two (2) trading days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other reasonable and customary out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Issuer’s obligation to deliver such Conversion Shares as provided herein shall terminate, or (ii) promptly honor its obligation to deliver to the Holder such Conversion Shares as provided herein and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing sales price of the Common Stock on the date of exercise. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Issuer’s failure to timely deliver the Conversion Shares to which the Holder is entitled upon the conversion of this Debenture as required pursuant to the terms hereof.
(b)If at any time the Conversion Price as determined hereunder for any conversion would be less than the par value of the Common Stock, then at the sole discretion of the Holder, the Conversion Price hereunder may equal such par value for such conversion and the Conversion Amount for such conversion may be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the Conversion Amount to the extent necessary to cause the number of conversion shares issuable upon such conversion to
equal the same number of conversion shares as would have been issued had the Conversion Price not been adjusted by the Holder to the par value price. Notwithstanding the foregoing, unless the Holder delivers to the Issuer written notice at least sixty-one (61) days prior to the effective date of such notice that the provisions of this paragraph (the “Limitation on Ownership”) shall be adjusted to 9.99% with respect to the Holder, in no event shall a holder of Debenture have the right to convert Debenture into, nor shall the Issuer issue to such Holder, shares of Common Stock to the extent that such conversion would result in the Holder and its affiliates together beneficially owning more than 9.99% of the then issued and outstanding shares of Common Stock. For purposes hereof, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulation 13D-G under the Exchange Act. In addition, in no event shall a holder nor any affiliate thereof have the right to sell, dispose or otherwise transfer, directly or indirectly, (including, without limitation, any sales, short sales, swaps or any derivative transactions that would be equivalent to any sales or short positions) on any trading day any shares of Common Stock of the Issuer in an amount representing more than ten percent (10.0%) of the trading volume of the Common Stock (which cumulative trading volume shall include pre-market, market and post-market trading volume for such date) on such trading day.
3.Redemption at the Issuer’s Option.
(a)So long as no Event of Default (as defined in Section 4(a)) shall have occurred and be continuing (whether or not such Event of Default has been declared by the Holder), the Issuer may at its option call for redemption all or part of this Debenture, with the exception of any portion thereof which is the subject of a previously-delivered Notice of Conversion, as follows:
(i)The portion of this Debenture called for redemption shall be redeemable by the Issuer, upon not more than two (2) calendar days written notice, for an amount (the “Redemption Price”) equal to One Hundred percent (100%) of the sum of the Principal Amount so redeemed plus accrued interest, if any. The date upon which this Debenture is redeemed and paid shall be referred to as the “Redemption Date” (and, in the case of multiple redemptions of less than the entire outstanding Principal Amount, each such date shall be a Redemption Date with respect to the corresponding redemption).
(ii)On the Redemption Date and upon presentment for redemption, the Issuer shall pay to the Holder the Redemption Price. In the case of a partial redemption, the Issuer shall also issue a new Secured Convertible Debenture to the Holder for the Principal Amount remaining outstanding after the Redemption Date.
(iii)To effect a redemption, the Issuer shall provide a written notice to the Holder(s) not more than two (2) calendar days prior to the Redemption Date (the “Redemption Notice”), setting forth the following:
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| 3. | the aggregate Principal Amount of this Debenture being called for redemption; and |
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| 4. | in the case of a partial redemption, a statement advising the Holder that after the Redemption Date a substitute Debenture will be issued by the Issuer after deduction the portion thereof called for redemption, at no cost to the Holder, if the Holder so requests. |
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(b)Notwithstanding the foregoing, in the event the Issuer issues a Redemption Notice but fails to fund the redemption on the Redemption Date, then such Redemption Notice shall be null and void, and (i) the Holder(s) shall be entitled to convert this Debenture previously the subject of the Redemption Notice, and (ii) the Issuer may not redeem such Debenture for at least thirty (30) days following the intended Redemption Date that was voided, and the Issuer shall be required to pay to the Holder(s) the Redemption Price simultaneously with the issuance of a Redemption Notice in connection with any subsequent redemption pursued by the Issuer.
4.Default; Acceleration.
(a)At the option of the Holder, this Debenture and the indebtedness evidenced hereby shall become due and payable without further notice or demand, and notwithstanding any prior waiver of any breach or default or other indulgence, upon the occurrence any of the following (each, an “Event of Default”):
(i)the Issuer fails to pay the outstanding principal amount of this Debenture, and all accrued and unpaid interest thereon, at the Maturity Date, upon acceleration, or otherwise, unless such amounts are converted to Common Stock;
(ii)any breach or failure to perform any of the other terms of this Debenture, the Exchange Agreement or the Security Agreement after the earlier of (1) knowledge thereof by the Issuer or (2) notice thereof to the Issuer and such breach or failure continues unremedied for five (5) days; provided that such five (5) day cure period shall not apply with respect to the other clauses of this Section 4, the provisions of Section 10 of the Security Agreement, or with respect to any breach having and adverse impact in the sole discretion of the Holder on the ShareCare Shares, Remark SPV or the pledge of the equity interests of Holdco SPV;
(iii)any representation, warranty or other statement made or deemed made by or on behalf of the Issuer pursuant to or in connection with the Exchange Agreement or any Grantor pursuant to or in connection with the Security Agreement shall be incorrect in any material respect as of the date made or deemed made (except that such materiality qualifier shall not be applicable to any representations or warranties that already are
qualified or modified as to materiality or “material adverse effect” in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification);
(iv)any act by, against, or relating to any Grantor, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other Person, pursuant to court action or otherwise, over all, or any part of such Grantor’s property;
(v)any assignment for the benefit of the creditors of any Grantor, or the occurrence of any other involuntary liquidation of any Grantor; the failure by any Grantor to generally pay the debts of such Grantor as they mature; adjudication of bankruptcy or insolvency relative to such Grantor; filing by any Grantor under, or the entry of an order for relief or similar order with respect to any Grantor in any proceeding pursuant to, Title 11 of the United States Code entitled “bankruptcy” (the “Bankruptcy Code”) or any other federal bankruptcy law;
(vi)the default of any Grantor for failure to pay amounts due and payable under any indebtedness of such Grantor in an amount in excess of $100,000, whether individually or in the aggregate (subject to any applicable cure periods, forbearance or forgiveness), if the effect of such default is to accelerate the maturity of any such indebtedness or to permit the holder or holders of any such indebtedness, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity or, if such indebtedness is a guaranty, to call upon such guaranty in advance of nonpayment of the guaranteed indebtedness;
(vii)a final judgment or judgments shall be entered against any Grantor in an aggregate amount in excess of $100,000, whether individually or in the aggregate (net of insurance proceeds, if any), and such judgment or judgments shall remain unstayed, unvacated, undischarged or unsatisfied for thirty (30) calendar days;
(viii)the Collateral Trustee shall for any reason cease to hold a valid and enforceable, perfected, first priority Lien on the Collateral, subject only to Permitted Liens;
(ix)the termination of existence, dissolution, or liquidation of any Grantor or the ceasing to carry on actively any substantial part of such Grantor’s current business;
(x)the occurrence of any of the following: (1) a sale of all or substantially all of a Grantor’s assets other than to another Grantor, (2) a merger, consolidation or business combination transaction of the Issuer with or into another corporation, limited liability company or other entity, in each case pursuant to which stockholders of the Issuer prior to such merger, consolidation or business combination transaction own less than fifty percent (50%) of the voting interests in the surviving or resulting entity, (3) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of 50% or more of Issuer’s then outstanding voting securities, (4) individuals who on the date of this Debenture constituted the Board of Directors of the Issuer (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Issuer was approved by a vote of at least a majority of the directors of the Issuer then still in office who were either directors on the date of this Debenture, or whose election or nomination for election was previously approved) cease for any reason to constitute a majority of the Board of Directors of the Issuer or (5) Kai-Shing Tao shall cease to be involved in the day to day operations and management of the business of the Grantors;
(xi)the Issuer or any Guarantor (as defined in the Security Agreement), transfers or causes or permits to be transferred to RAAD Productions, LLC or RAAD Promotions, LLC any assets;
(xii)the Issuer fails, or fails to cause its Transfer Agent, to issue shares of Common Stock to the Holder upon exercise by the Holder of the conversion rights in accordance with the terms of this Debenture, or fails to remove any restrictive legend on such shares as and when such legend removal is otherwise lawful; or
(xiii)if, at any time after the date of this Debenture, the Holder is unable to (1) obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage firm (and respective clearing firm), and the Issuer’s transfer agent in order to facilitate the Holder’s conversion of any portion of this Debenture into free trading shares of the Common Stock pursuant to Rule 144, and/or (2) thereupon deposit such shares into the Holder’s brokerage account; provided that the Holder provides standard documentation required for such opinion letter and applicable laws would allow for a legend removal on such shares.
The failure of the Holder to exercise any right or option after the occurrence of an Event of Default shall not constitute a waiver of the right to exercise the same at any other time. Notwithstanding the foregoing, if an Event of Default specified in Section 4(a)(iv) or 4(a)(v), then the outstanding principal amount outstanding under this Debenture, together with all accrued and unpaid interest in respect thereof and all other indebtedness or obligations owing to the Holder hereunder and Milbank LLP on account of the Milbank Fees shall immediately become due and payable, in each case without the giving of any notice or other action by the Holder or Milbank LLP, which notice or other action is expressly waived by the Issuer.
(b)Upon the occurrence and during the continuance of an Event of Default, the rate of interest otherwise applicable hereunder will be increased by two percent (2% or 200 basis points) (the “Default Rate”) for so long as the Event of Default remains uncured.
(c)Upon the occurrence and continuation of any Event of Default, the Collateral Agent shall have the rights and remedies set forth in the Security Agreement.
5.Miscellaneous.
(a)No provision of this Debenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional to convert this Debenture into Common Stock, at the time, place, and rate herein prescribed. This Debenture is a direct obligation of the Issuer.
(b)If, at any time after the Issuance Date, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Issuer shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Issuer or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Issuer, then the Holder of this Debenture shall thereafter have the right to convert this Debenture within ten days of such event and receive upon conversion of this Debenture, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Debenture been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Debenture to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of this Debenture) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Issuer shall not effectuate any transaction described in this Section 5(b) unless (i) it first gives at least fifteen (15) days prior written notice of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Debenture), (ii) the resulting successor or acquiring entity (if not the Issuer) assumes by written instrument all of the obligations of this Debenture, and (iii) the Holder provides written consent to the Issuer with respect to the consummation of the transaction described in this Section 5(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)If, at any time while any portion of this Debenture remains outstanding, the Issuer effectuates a forward stock split or reverse stock split of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its Common Stock, the Conversion Price shall be equitably adjusted to reflect such action.
(d)All payments contemplated hereby to be made “in cash” shall be made by wire transfer of immediately available funds in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated hereby shall be made to the Holder to an account designated by the Holder to the Issuer and if the Holder has not designated any such accounts at the address last appearing on this Debenture Register of the Issuer as designated in writing by the Holder from time to time; except that the
Holder may designate, by notice to the Issuer, a different delivery address for any one or more specific payments or deliveries.
(e)The Holder, by acceptance hereof, agrees that this Debenture is being acquired for investment and that the Holder will not offer, sell or otherwise dispose of this Debenture or the shares of Common Stock issuable upon conversion thereof except in compliance with the terms of this Debenture and the Exchange Agreement and under circumstances which will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.
(f)This Debenture shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to the exclusive jurisdiction and venue of the state courts located in the County of New York and/or federal courts located in the Southern District of New York in connection with any dispute arising under this Agreement, and each waives any objection based on forum non conveniens. This provision is intended to be a “mandatory” forum selection clause and governed by and interpreted consistent with New York law. Each of the parties hereby consents to the exclusive jurisdiction and venue of any state or federal court having its situs in the County of New York, and each waives any objection based on forum non conveniens. To the extent determined by such court, the Issuer shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under this Debenture or the Exchange Agreement.
(g)Nothing contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Issuer, unless and to the extent converted in accordance with the terms hereof.
(h)This Debenture may be amended only by the written consent of the parties hereto. Notwithstanding the foregoing, the Principal Amount of this Debenture shall automatically be reduced by any and all Conversion Amounts (to the extent that the same relate to principal hereof). In the absence of manifest error, the outstanding Principal Amount of this Debenture on the Holder’s book and records shall be the correct amount.
(i)In the event of any inconsistency between the provisions of this Debenture and any provisions of the Exchange Agreement or the Security Agency Agreement (collectively, the “Transaction Documents”), the provisions of this Debenture shall prevail.
(j)The Issuer specifically acknowledges and agrees that in the event of a breach or threatened breach by the Issuer of any provision hereof or of any other Transaction Document, the Holder will be irreparably damaged, and that damages at law would be an inadequate remedy if this Debenture or such other Transaction Document were not specifically enforced. Therefore, in the event of a breach or threatened breach by the Issuer, the Holder shall be entitled, in addition to all other rights and remedies, to an injunction restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree for a specific performance of the provisions of this Debenture and the other Transaction Documents.
(k)No waivers or consents in regard to any provision of this Debenture may be given other than by an instrument in writing signed by the Holder.
(l)Notwithstanding any provision in this Debenture or the related transaction documents to the contrary, the total liability for payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions, or other sums which may at any time be deemed to be interest, shall not exceed the limit imposed by the usury laws of the jurisdiction governing this Debenture or any other applicable law. In the event the total liability of payments of interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions or other sums which may at any time be deemed to be interest, shall, for any reason whatsoever, result in an effective rate of interest, which for any month or other interest payment period exceeds the limit imposed by the usury laws of the jurisdiction governing this Debenture, all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice by, between, or to any party hereto, be applied to the reduction of the outstanding principal balance due hereunder immediately upon receipt of such sums by the Holder, with the same force and effect as though the Issuer had specifically designated such excess sums to be so applied to the reduction of the principal balance then outstanding, and the Holder had agreed to accept such sums as a penalty-free payment of principal; provided, however, that the Holder may, at any time and from time to time, elect, by notice in writing to the Issuer, to waive, reduce, or limit the collection of any sums in excess of those lawfully collectible as interest, rather than accept such sums as a prepayment of the principal balance then outstanding. It is the intention of the parties that the Issuer does not intend or expect to pay, nor does the Holder intend or expect to charge or collect any interest under this Debenture greater than the highest non-usurious rate of interest which may be charged under applicable law.
[Signature Page Follows]
IN WITNESS WHEREOF, the Issuer has caused this Debenture to be duly executed by an officer thereunto duly authorized as of the date of issuance set forth above.
REMARK HOLDINGS, INC.
By: ______________________
Kai-Shing Tao
Chief Executive Officer
The foregoing Debenture
is hereby confirmed and accepted
as of the date first above written.
[NAME OF HOLDER]
By: Mudrick Capital Management, LP,
its Investment Manager
By: ____________________
Glenn Springer
Chief Financial Officer
ANNEX A
REMARK HOLDINGS, INC.
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert this Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of the Principal Amount of the above Debenture into Shares of Common Stock of Remark Holdings, Inc.., a Delaware corporation (the “Issuer”), according to the conditions hereof, as of the date written below. After giving effect to the conversion requested hereby, the outstanding Principal Amount of such debenture is $____________________, absent manifest error.
Pursuant to this Debenture, certificates representing Common Stock upon conversion must be delivered (including delivery by DWAC or DRS) to the undersigned within two (2) business days from the date of delivery of the Notice of Conversion to the Transfer Agent.
Conversion Date
Applicable Conversion Price
Signature
Print Name
Address
____________________________________________________________________________
EXCHANGE AGREEMENT
This Exchange Agreement (this “Agreement”), dated as of August 5, 2024, is made by and between Remark Holdings, Inc., a Delaware corporation (the “Company”), and Mudrick Capital Management, L.P., on behalf of itself and the holders (each entity listed on Schedule 1 hereto) of the Original Notes (as defined below) (collectively, the “Holder”).
WHEREAS, the Holder holds promissory notes of the Company in the aggregate principal amount of $16,307,175.50 (the “Original Notes”, and the aggregate principal amount the “Original Principal”); and
WHEREAS, the Original Notes have accrued interest in the aggregate amount of $3,673,462.12 that remains unpaid as of the date of this Agreement (the “Original Unpaid Accrued Interest”); and
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to exchange with the Holder, and the Holder desires to exchange with the Company, the Original Notes for secured convertible promissory debentures of the Company in the form attached hereto as Exhibit A in an aggregate principal amount equal to the sum of the Original Principal and the Original Unpaid Accrued Interest (the “Secured Convertible Debentures”).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Holder agree as follows:
1.Terms of the Exchange. The Company and the Holder agree that the Holder will exchange the Original Notes held by the Holder and will relinquish any and all other rights it may have under the Original Notes in exchange for the Secured Convertible Debentures.
2.Closing.
(a)General. Upon consummation of the conditions set forth herein, a closing shall occur at the principal offices of the Company, or such other location as the parties shall mutually agree. At closing, the Company shall deliver to the Holder the Secured Convertible Debentures. Upon closing, any and all obligations of the Company to Holder under the Original Notes shall be fully satisfied, the documents evidencing the Original Notes shall be cancelled and the Holder will have no remaining rights, powers, privileges, remedies or interests under the Original Notes.
(b)Conditions to Closing. The following shall be conditions precedent to the closing:
(i)the Holder shall have received an opinion from Company counsel reasonably satisfactory to the Holder;
(ii)the parties shall have executed this Agreement;
(iii)the fully executed Secured Convertible Debentures shall have been issued and delivered; and
(iv)the Holder shall have received a fully executed copy of the Guaranty and Security Agreement dated as of the date hereof by and among the Issuer, the Guarantors party
thereto, the Holder and Argent Institutional Trust Company, as collateral agent for the benefit of the Holder.
3.Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
4.Representations and Warranties of the Holder. The Holder represents and warrants as of the date hereof and as of the closing to the Company as follows:
(a)Authorization; Enforcement. The Holder has the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Holder and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Holder and no further action is required by the Holder. This Agreement has been (or upon delivery will have been) duly executed by the Holder and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Holder enforceable against the Holder in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. The Holder owns good and marketable title to the Original Notes, free and clear of any liens or encumbrances and the Original Notes have not been pledged to any third party. The Holder has not entered into any agreement or understanding with any person or entity to dispose of the Original Notes. The exchange by the Holder and the consummation of the transactions herein, does not by itself or with the passage of time violate or infringe upon the rights of any third parties or result or could reasonably result in any claims against the Holder or the Company. No proceedings relating to the Original Notes are pending or, to the knowledge of the Holder, threatened before any court, arbitrator or administrative or governmental body that would adversely affect the Holder’s right and ability to surrender and exchange the Original Notes for the Secured Convertible Debentures.
(b)Tax Advisors. The Holder has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. With respect to such matters, the Holder relied solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Holder understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
(c)Information Regarding Holder. The Holder is an “accredited investor,” as such term is defined in Rule 501 of Regulation D promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act and is not subject to any “bad actor” disqualification event in Rule 506(d)(1)(i)-(viii) of the Securities Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Holder to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with
respect to the proposed purchase, which represents a speculative investment. The Holder has the authority and is duly and legally qualified to purchase and hold the Secured Convertible Debentures. The Holder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. The Holder is acquiring the Secured Convertible Debentures for such Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same; and, except as contemplated by this Agreement, the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness, or commitment providing for the disposition thereof.
(d)Legend. The Holder understands that the Secured Convertible Debentures will be issued pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws, and except as set forth below, the Secured Convertible Debentures and any shares of the Company’s common stock (the “Shares”) issuable upon conversion thereof shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, A “NO-ACTION” LETTER FROM THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”) WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
(e)Removal of Legends. Certificates evidencing the Shares shall not be required to contain the legend set forth in Section 4(d) above or any other legend (i) while a registration statement covering the resale of such securities is effective under the Securities Act, (ii) following any sale of such shares pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company), (iii) if such shares are eligible to be sold, assigned or transferred under Rule 144 and the Holder is not an affiliate of the Company (provided that the Holder provides the Company with reasonable assurances that such shares are eligible for sale, assignment or transfer under Rule 144 which shall include an opinion of the Holder’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Holder provides the Company with an opinion of counsel to the Holder, in a generally acceptable form, to the effect that such sale, assignment or transfer of the shares may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the Commission).
(f)Restricted Securities. The Holder understands that: (i) the Secured Convertible Debentures and the Shares (the “Securities”) have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (1) subsequently registered thereunder, (2) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Holder, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (3) the Holder provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); and (ii) any sale of the Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person (as defined herein) through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Commission promulgated thereunder.
(g)No Conflicts. The execution, delivery and performance by the Holder of this Agreement and the consummation by the Holder of the transactions contemplated hereby will not (i) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Holder, except in the case of clause (i) or (ii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Holder to perform its obligations hereunder.
(h)Information. The Holder and the Holder’s advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and exchange for the Shares which have been requested by the Holder. The Holder and the Holder’s advisors, if any, have been afforded the opportunity to ask questions of the Company. The Holder understands that such Holder’s investment in the Shares involves a high degree of risk. The Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to the acquisition of the Secured Convertible Debentures.
5.Representations, Warranties and Covenants of the Company. The Company hereby makes the following representations, warranties and covenants to the Holder:
(a)Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement and the Secured Convertible Debentures and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the board of directors of the Company or the Company’s stockholders in connection therewith, including, without limitation, the issuance of the Secured Convertible Debentures. This Agreement has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b)Organization and Qualification. The Company is duly organized and validly existing and in good standing under the laws of the jurisdiction in which it is formed, and has the requisite power and
authorization to own its properties and to carry on its business as now being conducted and as presently proposed to be conducted. The Company is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents.
(c)No Conflict. The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Secured Convertible Debentures) will not (i) result in a violation of the Company’s certificate of incorporation or other organizational documents of the Company, any capital stock of the Company or bylaws of the Company, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations applicable to the Company or by which any property or asset of the Company is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.
(d)No Consents. The Company is not required to obtain any consent from, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date of this Agreement, and the Company is not aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(e)Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Secured Convertible Debentures is exempt from registration under the Securities Act pursuant to the exemption provided by Section 4(a)(2) thereof.
(f)Issuance of the Secured Convertible Debentures. The issuance of the Secured Convertible Debentures is duly authorized by the Company and free from all taxes, liens, charges and other encumbrances imposed by the Company other than restrictions on transfer provided for therein, and the Shares, when issued in accordance with the terms of the Secured Convertible Debentures, will be duly and validly issued, fully paid and non-assessable, free from all taxes, liens, charges and other encumbrances imposed by the Company other than restrictions on transfer provided for in such documents.
(g)Shares of Common Stock. The Secured Convertible Debentures will be convertible into shares of the Company’s Common Stock (the “Conversion Shares”) and the Company has duly authorized and reserved a number of shares of Common Stock for issuance as the Conversion Shares and, when issued, the Conversion Shares will be validly issued, fully paid and non-assessable, and the issuance of any such Conversion Shares will not be subject to any preemptive or similar rights.
(h)Milbank Fees. The Company shall pay to Milbank LLP (“Milbank”) an amount equal to $116,732.81 (the “Milbank Fees”), which represents the unpaid fees and disbursements of Milbank incurred to the date hereof in connection with the Original Notes, the exchange of the Original Notes for the Secured Convertible Debentures and any related documentation. The Milbank Fees shall be earned upon delivery of each invoice to the Company and shall be due and payable to Milbank for its own account in immediately available funds in installments of the lesser of (i) $25,000 and (ii) the remaining unpaid balance of the Milbank Fees, on the first business day of each month beginning on September 2, 2024. Once paid, the Milbank Fees or any part thereof payable hereunder shall not be refundable under any circumstances, except as otherwise agreed in writing by the Company and Milbank. This Section 5(h) and the Company’s obligations to pay the Milbank Fees shall survive the termination of this Agreement and the payment in full of the Secured Convertible Debentures.
(i)Post-Closing Covenant. Within 60 days of the date of this Agreement (or such later date as the Holder may, in its sole discretion, agree to in writing), the Company shall have delivered to the Holder deposit account control agreements covering the operating accounts of the Company and each Guarantor that are maintained with East West Bank and City National Bank, such agreements to be in form and substance reasonably satisfactory to the Holder.
6.Release by Holder. In consideration of the foregoing, the Holder releases and discharges Company, Company’s officers, directors, principals, control persons, past and present employees, insurers, successors, and assigns (“Company Parties”) from all actions, cause of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity, which against Company Parties ever had, now have or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever, whether or not known or unknown, arising under the Original Notes. It being understood that this Section 6 shall be limited in all respects to only matters arising under or related to the Original Notes and shall under no circumstances constitute a release, waiver or discharge with respect to the Secured Convertible Debentures or any Exchange Documents or limit the Holder from taking action for matters with respect to the Secured Convertible Debentures or any Exchange Document or events that may arise in the future.
7.Miscellaneous.
(a)Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.
(b)Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed under the laws of the State of New York, without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York, City of New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(c)Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
(d)Counterparts/Execution. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.
(e)Notices. Any notice or communication permitted or required hereunder shall be in writing and shall be deemed sufficiently given if hand-delivered or sent (i) postage prepaid by registered mail, return receipt requested, or (ii) by email, to the respective parties as set forth below, or to such other address as either party may notify the other in writing.
If to the Company, to:
Remark Holdings, Inc.
800 S. Commerce Street
Las Vegas, NV 89106
Attn: Kai-Shing Tao, Chief Executive Officer
Email:
If to the Holder, to:
Mudrick Capital Management, L.P.
527 Madison Ave, 6th Floor
New York, NY 10022
Attn: Glenn Springer
(f)Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between the parties. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.
(g)Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| | | | | | | | |
| | |
| REMARK HOLDINGS, INC. |
| By: | /s/ Kai-Shing Tao | |
| Kai-Shing Tao | |
| Chief Executive Officer | |
| | |
| MUDRICK CAPITAL MANAGEMENT, L.P., |
| on behalf of its affiliated funds and managed accounts |
| | |
| By: | /s/ Glenn Springer | |
| Glenn Springer | |
| Chief Financial Officer | |
[Signature Page – Exchange Agreement]
GUARANTY AND SECURITY AGREEMENT
GUARANTY AND SECURITY AGREEMENT dated as of August 5, 2024 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”), by and among Remark Holdings, Inc., a Delaware corporation (the “Issuer”), the affiliates of the Issuer party hereto (the “Guarantors” and, collectively with the Issuer, the “Grantors”), the holders of the Debentures (as defined below) party hereto (collectively, the “Holders”), and Argent Institutional Trust Company, as collateral agent for the benefit of the Holders (in such capacity, the “Collateral Agent”).
RECITALS
WHEREAS, on the date hereof, the Issuer will issue to the Holders its Secured Convertible Debentures dated the date hereof in an aggregate principal amount of $19,980,637.62 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Debentures”; capitalized terms used but not defined herein shall have the meaning assigned to such term in the Debentures), pursuant to that certain Exchange Agreement dated as of the date hereof (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Exchange Agreement”) by and between the Issuer and Mudrick Capital Management, L.P., on behalf of itself and the other Holders, each Guarantor listed on the signature pages thereto and each of the Holders of the Debentures; and
WHEREAS, as a condition precedent to the acceptance of the Debentures, the Holders require each Grantor grant to the Collateral Agent a security interest in such Grantor’s assets pursuant to the terms of this Agreement to secure the payment and performance in full of the Issuer’s obligations in respect of the Debentures (including, for the avoidance of doubt, payment of the Milbank Fees) (collectively, the “Secured Obligations”) and each Grantor (other than the Issuer) to guarantee the Secured Obligations.
NOW, THEREFORE, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Guarantee.
(a)Each Guarantor unconditionally and irrevocably guarantees, jointly with the other Guarantors, and severally, as a primary obligor and not merely as a surety, irrespective of the validity and enforceability of the Debentures or the obligations of the Issuer thereunder, the due and punctual payment and performance of all Secured Obligations, whether now or hereafter existing, due, owing or incurred in any manner, whether actual or contingent, whether incurred solely or jointly with any other Person and whether as principal or surety, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, together in each case with all renewals, modifications, consolidations or extensions thereof. Anything contained in this Agreement to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to a maximum aggregate amount equal to the greatest
168365.00101/135769978v.8
amount that would not render such Guarantor’s obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any provisions of applicable state law (collectively, the “Fraudulent Transfer Laws”), in each case after giving effect to all other liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws and after giving effect as assets of such Guarantor to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, contribution, reimbursement, indemnity or similar rights of such Guarantor pursuant to applicable law or any agreement providing for an equitable allocation among such Guarantor and other affiliates of the Issuer of obligations arising under guaranties by such parties. If any Guarantor’s liability hereunder is limited pursuant to this paragraph to an amount that is less than the total amount of the Secured Obligations, then it is understood and agreed that the portion of the Secured Obligations for which such Guarantor is liable hereunder shall be the last portion of the Secured Obligations to be repaid.
(b)Each Guarantor guarantees that the Secured Obligations will be paid in accordance with the terms of this Agreement and the Debentures, regardless of any law or regulation now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Holders with respect hereto and thereto. The obligations of each Guarantor are independent of the Secured Obligations of each other Guarantor or the obligations of the Issuer, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Agreement, irrespective of whether any action is brought against the Issuer or any other Guarantor or whether the Issuer or any other Guarantor is joined in any such action or actions. This Agreement is an absolute and unconditional guaranty of payment when due, and not of collection, by each Guarantor, jointly and severally with each other Guarantor.
(c)Except with respect to the Fraudulent Transfer Laws, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including the existence of any claim, set-off or other right which any Guarantor may have at any time against any other Person, whether in connection herewith or any unrelated transactions. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Secured Obligations and would be owed by the Issuer under the Debentures or any other Guarantor under this Agreement but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Issuer or such other Guarantor.
(d)Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be released, discharged or otherwise affected or impaired by, and each Guarantor hereby waives:
(i)any change in the manner, place, time or terms of payment of any Secured Obligation or any other amendment, supplement or modification to this Agreement or the Debentures;
(ii)any release, non-perfection or invalidity of any direct or indirect security for any Secured Obligation, any sale, exchange, surrender, realization upon, offset against or other action in respect of any direct or indirect security for any Secured Obligation;
(iii)any change in the existence, structure or ownership of any party or any insolvency, examinership, bankruptcy, reorganization, arrangement, readjustment, composition, liquidation or other similar proceeding affecting any party or its assets or any resulting disallowance, release or discharge of all or any portion of any Secured Obligation;
(iv)the existence of any claim, set-off or other right which any Guarantor may have at any time against any other Person, whether in connection herewith or any unrelated transaction; provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim;
(v)any invalidity or unenforceability relating to or against the Issuer for any reason of the Debentures or any other agreement or instrument evidencing or securing any Secured Obligation or any provision of applicable law purporting to prohibit the payment by any party of any Secured Obligation;
(vi)any failure by any Holder: (1) to file or enforce a claim against the Issuer or its estate (in a bankruptcy, examinership or other proceeding); (2) to give notice of the existence, creation or incurrence by the Issuer of any new or additional indebtedness or obligation under or with respect to the Secured Obligations; (3) to commence any action against the Issuer; (4) to disclose to any Guarantor any facts which any Holder may now or hereafter know with regard to the Issuer; or (5) to proceed with due diligence in the collection, protection or realization upon any collateral securing the Secured Obligations;
(vii)any direction as to application of payment by any other Person
(viii)any act or failure to act by any Holder or the Issuer which may deprive any Guarantor of any right to subrogation, contribution or reimbursement against any other Grantor or any right to recover full indemnity for any payments made by such Guarantor in respect of the Secured Obligations; or
(ix)any other act or omission to act or delay of any kind by any other entity, Person or circumstance whatsoever which might, but for the provisions of this clause, constitute a legal or equitable discharge of any Guarantor’s obligations hereunder (except that a Guarantor may assert the defense of payment in full of the Secured Obligations).
(e)Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to any Holder in respect of any obligations guaranteed hereby until payment in full of all Secured Obligations. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders, on the other hand, (i) the maturity of the Secured Obligations may be accelerated as provided in Section 4, notwithstanding any stay, injunction or other prohibition preventing such acceleration, and (ii) in the event of any such acceleration, the Secured Obligations shall forthwith become due and payable by the Guarantors.
2.Collateral; Security Interest.
(a)To secure the payment and performance in full of all of the Secured Obligations, each Grantor hereby pledges, grants and assigns to the Collateral Agent, for the benefit of the Holders, a continuing security interest in all goods, inventory, equipment, instruments, promissory notes, documents, accounts, chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), commercial tort claims, investment property (including the Pledged Interests), financial assets, supporting obligations, any other contract rights or rights to the payment of money, insurance claims and proceeds, and all general intangibles, including, without limitation, all payment intangibles, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, software (including any copyrights, trademarks and trade secrets of the software), customer lists, goodwill, and all licenses, leases, permits, agreements of any kind or nature, wherever located, whether now owned or hereafter acquired or arising and all accessions and improvements to, substitutions and replacements for and rents, profits and products and proceeds thereof (collectively, but excluding the Excluded Assets (as defined below), the “Collateral”).
(b)Notwithstanding the foregoing, the Collateral shall not include (i) any property where the granting of a security interest in such property would be prohibited by agreement, applicable law or regulation or, with respect to any pledge of equity interests owned by any Grantor in any entity that is not wholly-owned by such Grantor, the organizational documents of such entity (in each case, only to the extent that such contractual provisions are not rendered ineffective by applicable law or otherwise unenforceable), in each case, to the extent that a grant of a security interest therein would violate or invalidate such agreement or create a right of termination in favor of any other party thereto (other than any Grantor) after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code, other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition, and (ii) those assets as to which the Holders and Issuer agree in writing shall be excluded where the costs and burdens of obtaining a security interest therein or perfection thereof outweigh the benefit to Holders of the security to be afforded thereby (collectively, the “Excluded Assets”); provided, however, “Excluded Assets” shall not include any proceeds, substitutions or replacements of Excluded Assets (unless such proceeds, substitutions or replacements would in and of themselves constitute Excluded Assets).
(c)Each Grantor hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any applicable Uniform Commercial Code jurisdiction any initial financing statements, amendments or modifications thereto or continuations thereof that (i) indicate the Collateral (1) as all assets of such Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code, or (2) as being of an equal or lesser scope or with greater detail, and (ii) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code for the sufficiency or filing office acceptance of any financing statement or amendment. Each Grantor hereby further irrevocably authorizes the Collateral Agent to file intellectual property security agreements with respect to the Collateral with the United States Patent and Trademark Office or United States Copyright Office (or any successor office), as applicable.
(d)At any time and from time to time, each Grantor will duly execute, deliver and file with appropriate agencies such further instruments and documents, provide such further information and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers granted herein. Further to ensure the attachment, perfection and first priority of (subject to Permitted Liens (as defined below), and the ability of the Collateral Agent to enforce, the security interest in the Collateral, each Grantor agrees, in each case at such Grantor’s own expense, that if any Grantor shall at any time hold or acquire any promissory notes or tangible chattel paper, deposit accounts, securities or investment property, electronic chattel paper, letter of credit rights, or commercial tort claims, or any Collateral shall come into possession of a bailee, such Grantor shall immediately notify the Collateral Agent thereof and take any action reasonably requested by the Collateral Agent to insure the attachment, perfection and first priority of, and the ability of the Collateral Agent to enforce, the security interest granted to Collateral Agent in any and all of the Collateral.
(e)In addition to the rights and remedies hereunder, upon the occurrence of an Event of Default (as defined in the Debentures) , the Collateral Agent shall have the right to enter and remain upon the premises of any Grantor without cost or charge to the Collateral Agent, and use the same, together with materials, supplies, books and records of such Grantor for the purpose of collecting and liquidating the Collateral, or for preparing for sale and conducting the sale of the Collateral, whether by foreclosure, auction or otherwise. In addition, the Collateral Agent may remove Collateral, or any part thereof, from such premises and/or any records with respect thereto, in order to effectively collect or liquidate such Collateral.
(f)Failure by the Collateral Agent to exercise any right, remedy or option under this Agreement or applicable law, or any delay by the Collateral Agent in exercising the same, shall not operate as a waiver of any such right, remedy or option. The rights and remedies of the Collateral Agent under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Collateral Agent has.
(g)In the event that the proceeds of any sale, collection or realization on the Collateral are insufficient to pay in full all of the Secured Obligations, the Grantors shall be liable for the deficiency, together with interest thereon, together with the costs of collection and the reasonable fees, charges and disbursements of counsel.
(h)Upon request of the Collateral Agent, each Grantor shall use commercially reasonable efforts to obtain and deliver to the Collateral Agent fully executed control agreements with respect to any deposit, securities and investment accounts of such Grantor, in form and substance reasonably acceptable to the Collateral Agent.
(i)Upon the repayment in full in cash of the Secured Obligations, this Agreement and the security interests granted hereunder will thereafter automatically terminate and be of no further force or effect, and the Collateral Agent shall execute and/or deliver, at the expense of the Grantors, each document, instrument or filing reasonably requested by any Grantor to evidence the termination of this Agreement and such security interests.
(j)For purposes of this Agreement the following terms shall have the meanings set forth below:
(i)“Governing Agreements” means, with respect to any Ownership Interests, the applicable limited liability company operating agreements or applicable partnership agreements and the applicable Grantor’s rights, powers, and remedies under such limited liability company operating agreements or partnership agreements, as applicable, in each case, as the same may be amended, modified, extended, restated or replaced from time to time.
(ii)“Lien” means any interest in property securing an obligation, whether such interest is based on common law, statute or contract, and including any security interest or lien arising from a mortgage, encumbrance, pledge, claim, charge, easement, servitude, security agreement, conditional sale or trust receipt or lease, consignment or bailment for security purposes.
(iii)“Ownership Interests” means all securities, shares, units, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company, or similar entity, whether voting or nonvoting, certificated or uncertificated, including limited liability company interests, general partner partnership interests, limited partner partnership interests, common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). Ownership Interests with respect to any entity shall include all rights, whether now existing or created, granted, or acquired in the future, whether by agreement or operation of law (including bankruptcy), to (1) the profits and losses of such entity, (2) payments, distributions and/or dividends by such entity of its income or assets from whatever source, and (3) manage or control or participate in the management or control of such entity, and any and all other rights with respect to such entity that are held or may be held, by agreement or operation of law, by the owners of such entity, including without limitation the right to exercise all voting, consensual and other powers of ownership pertaining thereto.
(iv)“Permitted Liens” means:
(1)Liens securing the Secured Obligations;
(2)Liens for taxes, assessments and governmental charges;
(3)Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens arising in the ordinary course of business and securing obligations (other than indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by
generally accepted accounting principles, as applicable at the relevant time(“GAAP”) shall have been made therefor;
(4)Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens arising in the ordinary course of business and securing obligations (other than indebtedness for borrowed money) that are not overdue by more than 30 days or are being contested in good faith and by appropriate proceedings promptly initiated and diligently conducted, and a reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor;
(5)Liens described on Schedule A, provided that any such Lien shall only secure the indebtedness that it secures on the date hereof and any Permitted Refinancing Indebtedness (as defined below) in respect thereof;
(6)Liens on equipment acquired by any Grantor in the ordinary course of its business to secure Permitted Purchase Money Indebtedness (as defined below) so long as such Lien only (A) attaches to such property, (B) secures the indebtedness that was incurred to acquire such property or any Permitted Refinancing Indebtedness in respect thereof and (C) the aggregate principal amount of all obligations secured thereby shall not exceed $250,000 at any time outstanding;
(7)deposits and pledges of cash securing (A) obligations incurred in respect of workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits, (B) the performance of bids, tenders, leases, contracts (other than for the payment of money) and statutory obligations or (C) obligations on surety or appeal bonds, but only to the extent such deposits or pledges are made or otherwise arise in the ordinary course of business and secure obligations not past due;
(8)easements, zoning restrictions and similar encumbrances on real property and minor irregularities in the title thereto that do not (A) secure obligations for the payment of money or (B) materially impair the value of such property or its use by any Grantor or any of its subsidiaries in the normal conduct of such Person’s business;
(9)Liens of landlords and mortgagees of landlords (A) arising by statute or under any lease or related contractual obligation entered into in the ordinary course of business, (B) on fixtures and movable tangible property located on the real property leased or subleased from such landlord, or (C) for amounts not yet due or that are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves or other appropriate provisions are maintained on the books of such Person in accordance with GAAP;
(10)the title and interest of a lessor or sublessor in and to personal property leased or subleased (other than through a capitalized lease), in each case extending only to such personal property; non-exclusive licenses of intellectual property rights in the ordinary course of business;
(11)judgment liens (other than for the payment of taxes, assessments or other governmental charges) securing judgments and other proceedings not constituting an Event of Default;
(12)rights of set-off or bankers’ liens upon deposits of cash in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such deposit accounts in the ordinary course of business;
(13)Liens granted in the ordinary course of business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted under the definition of Permitted Indebtedness;
(14)Liens solely on any cash earnest money deposits made by any Grantor in connection with any letter of intent or purchase agreement with respect to an acquisition; and
(15)Liens on cash collateral securing Indebtedness outstanding a letter of credit facility; provided, that the aggregate amount of such cash collateral does not exceed, at any time, 105% of the face amount of the letters of credit, surety bonds and/or other similar instruments outstanding under such letter of credit facility at such time; and
(16)Liens securing inventory financing incurred by any Grantor in the ordinary course of such Grantor’s business and consistent with such Grantor’s past practices; provided that such Liens shall be limited solely to the inventory financed by such specific financing and the direct cash proceeds thereof and shall not be granted or attached to any other assets of the Issuer and such financing shall be recourse solely to such inventory and proceeds and shall otherwise be non-recourse to the Issuer and its assets; and provided further that the aggregate amount outstanding at any time with respect to such financing shall not exceed $1,000,000.
(v)“Permitted Refinancing Indebtedness” means the extension of maturity, refinancing or modification of the terms of indebtedness so long as:
(1)after giving effect to such extension, refinancing or modification, the amount of such indebtedness is not greater than the amount of indebtedness outstanding immediately prior to such extension, refinancing or modification (other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfunded commitments with respect thereto);
(2)such extension, refinancing or modification does not result in a shortening of the average weighted maturity (measured as of the extension, refinancing or modification) of the indebtedness so extended, refinanced or modified;
(3)such extension, refinancing or modification is pursuant to terms that are materially not less favorable to any applicable Grantor than the terms of the indebtedness (including, without limitation, terms relating to the collateral (if any) and subordination (if any)) being extended, refinanced or modified; and
(4)the indebtedness that is extended, refinanced or modified is not recourse to any Grantor or any of its subsidiaries that is liable on account of the obligations other than those Persons which were obligated with respect to the indebtedness that was refinanced, renewed, or extended.
(vi)“Permitted Purchase Money Indebtedness” means, as of any date of determination, indebtedness incurred to finance the acquisition of any fixed or capital assets secured by a Lien permitted under clause (6) of the definition of “Permitted Liens”; provided that (1) such indebtedness is incurred within 20 days after such acquisition, (2) such indebtedness when incurred shall not exceed the purchase price of the asset financed and (3) the aggregate principal amount of all such indebtedness shall not exceed $250,000 at any time outstanding.
(vii)“Pledged Interests” means (1) all Ownership Interests owned by a Grantor identified on Schedule B, (2) the certificates or instruments representing such Ownership Interests, and (3) all of such Grantor’s rights and prerogatives under the related Governing Agreements.
3.Representations, Warranties and Covenants. Each Grantor represents and warrants that:
(a)Such Grantor has good and marketable title to the assets purported to be owned by it, including, without limitation, the Collateral, in each case free and clear of any Lien of any third party, other than Permitted Liens. Each Grantor has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder, including without limitation, to pledge and grant a security interest in such Grantor’s rights in the Collateral as contemplated hereby.
(b)This Agreement has been duly and validly executed by, and is the legal, valid and binding obligation of such Grantor and is enforceable against such Grantor in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy or insolvency or similar laws affecting enforcement of creditors’ rights generally and by general principle of equity.
(c)Such Grantor is not left with unreasonably small capital after the transactions contemplated by this Agreement and is able to pay its debts (including trade debts) as they mature.
(d)No consent, authorization, approval or other action by, and no notice to or filing (other than filings and registrations necessary to perfect the Liens on the Collateral granted by such Grantor in favor of Collateral Agent) with, any person, entity, governmental authority or regulatory body is required to be obtained by such Grantor either (i) for the pledge by such Grantor of such Grantor’s rights in the Collateral pursuant hereto, (ii) for the guaranty by such Grantor of the Secured Obligations pursuant hereto, (iii) for the execution, delivery or performance of this Agreement by such Grantor or (iv) for the exercise by the Collateral Agent of any remedies with respect to the Collateral.
(e)Neither the execution, delivery or performance of this Agreement by any Grantor will (i) violate any applicable law, (ii) violate the organizational documents of such Grantor, or (iii) breach, violate or result in a default, or give rise to a termination, cancellation or acceleration right, under any material agreement, instrument or other contractual obligation of such Grantor.
(f)Such Grantor owns or licenses or otherwise has the right to use all intellectual property rights that are necessary for the operation of such Grantor’s business, without, to the knowledge of such Grantor, infringement upon or conflict with the rights of any other Person with respect thereto.
(g)Such Grantor shall promptly (and in no case later than three (3) business days after the occurrence thereof) notify the Collateral Agent and the Holders in writing of the occurrence of any Event of Default.
4.Remedies Upon Default. Upon the occurrence and during the continuance any Event of Default, the Collateral Agent may, and at the direction of the Holders of a majority in aggregate principal amount of the Debentures shall, pursue any and all remedies provided at law or in equity. If an Event of Default shall occur, the Collateral Agent shall have the right, upon written notice to the Issuer (which notice may be delivered by the Holders or the Collateral Agent and shall be given not less than ten (10) days prior to any sale, assignment or other disposition), with respect to the Collateral (whether or not the same shall then be or shall thereafter come into the possession, custody or control of the Collateral Agent), to sell, assign or otherwise dispose of all or any part of the Collateral, at such place or places as the Collateral Agent deems best, and for cash or for credit or for future delivery, at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Collateral Agent or anyone else may be the purchaser, assignee or recipient of any or all of the Collateral so disposed of at any public sale or, to the extent permitted by law, at any private sale and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Grantors, any such demand, notice and right or equity being hereby expressly waived and released. The Collateral Agent may, to the fullest extent permitted by applicable law, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. The Collateral Agent’s remedies set forth above are not exclusive of any other available remedy or remedies, but each remedy shall be cumulative and shall be in addition to any other remedy given in this Agreement, at law, in equity, or by statute, whether now existing or hereafter arising. The exercise of any remedy or remedies shall not be an election of remedies. The remedies and rights of Collateral Agent may be exercised concurrently, alone, in any combination, or in any order that Collateral Agent deems appropriate. Any waiver or consent to waiver of any of the foregoing provisions shall not be construed as a bar to a waiver of any such right on any future occasion. Each Grantor hereby irrevocably constitutes and appoints Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorneys-in-fact, with full irrevocable power and authority in the place and stead of such Grantor or in Collateral Agent’s own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do the following upon the occurrence of an Event of Default: generally, to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral in such manner as is consistent with the Uniform Commercial Code and as fully and completely as though Collateral Agent was the absolute owner thereof for all purposes, and, at the expense of the Grantors, at any time, or from time to time, to do all acts and things which Collateral Agent deems necessary or desirable to protect, preserve or realize upon the Collateral and Collateral Agent’s security interest therein, in order to effect the intent of this Agreement, all as fully and effectively as any Grantor might do.
5.Appointment of Collateral Agent.
(a)Each of the Holders hereby designates and appoints the Collateral Agent as the collateral agent acting on behalf of the Holders with respect to the Collateral. The Collateral Agent hereby accepts such appointment on the terms and conditions set forth herein and acknowledges that is shall act as agent in accordance with the terms of this Agreement for and on behalf of each Holder.
(b)Each Holder hereby authorizes and directs the Collateral Agent to (i) execute this Agreement, (ii) exercise such rights and powers under this Agreement as are specifically granted or delegated to the Collateral Agent by the terms hereof, or as it may be reasonably directed in writing by any Holder, and (iii) perform the obligations of the Collateral Agent expressly set forth hereunder.
(c)Any action taken by the Collateral Agent in accordance with the provisions of this Agreement, and the exercise by the Collateral Agent of any rights or remedies set forth herein and therein shall be authorized and binding upon the Holders. Notwithstanding any provision to the contrary contained elsewhere in this Agreement, the duties of the Collateral Agent shall be ministerial and administrative in nature, and the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Collateral Agent have or be
deemed to have any trust or other fiduciary relationship with any Holder or any Grantor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement with reference to the Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
(d)The Collateral Agent may perform any of its duties under Agreement by or through receivers, agents, employees, attorneys-in-fact or with respect to any specified Person, such Person’s Affiliates, and the respective officers, directors, employees, agents, advisors and attorneys-in-fact of such Person and its Affiliates, (a “Related Person”) and shall be entitled to advice of counsel concerning all matters pertaining to such duties, and shall be entitled to act upon, and shall be fully protected in taking action in reliance upon any advice or opinion given by legal counsel. The Collateral Agent shall not be responsible for the negligence or misconduct of any receiver, agent, employee, attorney-in-fact or Related Person that it selects as long as such selection was made in good faith.
(e)None of the Collateral Agent or any of its Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to the Holders for any recital, statement, representation, warranty, covenant or agreement made by a Grantor contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement, or the validity, effectiveness, genuineness, enforceability or sufficiency of the Debentures or this Agreement Documents, or for any failure of any Grantor or any other party to this Agreement to perform its obligations hereunder or for the value or sufficiency of any Collateral. None of the Collateral Agent or any of its Related Persons shall be under any obligation to the Holders to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or to inspect the properties, books, or records of any Grantor.
(f)The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, certification, telephone message, statement, or other communication, document or conversation (including those by telephone or e-mail) believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including, without limitation, counsel to the Issuer), independent accountants and other experts and advisors selected by the Collateral Agent. The Collateral Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, or other paper or document. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first receive such advice or concurrence of the Holders of a majority in aggregate principal amount of the
Debentures, as it determines and, if it so requests, it shall first be indemnified to its satisfaction by the Holders against any and all liability, loss and expense which may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request, direction, instruction or consent of the Holders of a majority in aggregate principal amount of the Debentures and such request and any action taken or failure to act pursuant thereto shall be binding upon the Holders.
(g)The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Event of Default, unless an officer of the Collateral Agent shall have received written notice from any Holder or the Issuer referring to this Agreement, describing such Event of Default and stating that such notice is a “notice of default.” The Collateral Agent shall take such action with respect to such Event of Default as may be requested by the Holders of a majority in aggregate principal amount of the Debentures in accordance with this Agreement.
(h)The Collateral Agent may resign at any time by notice to the Holders and the Issuer, such resignation to be effective upon the acceptance of a successor agent to its appointment as Collateral Agent. If the Collateral Agent resigns under this Agreement, the Holders of a majority in aggregate principal amount of the Debentures, with the prior written consent of the Issuer (such consent not to be (i) unreasonable withheld or delayed or (ii) required if an Event of Default has occurred and is continuing), shall appoint a successor Collateral Agent. If no successor Collateral Agent is appointed prior to the intended effective date of the resignation of the Collateral Agent (as stated in the notice of resignation), the Collateral Agent may appoint, after consulting with the Holders, with the prior written consent of the Issuer (such consent not to be (1) unreasonable withheld or delayed or (2) required if an Event of Default has occurred and is continuing), a successor Collateral Agent. If no successor Collateral Agent is appointed and consented to by the Issuer pursuant to the preceding sentence within thirty (30) days after the intended effective date of resignation (as stated in the notice of resignation), the Collateral Agent shall be entitled to petition a court of competent jurisdiction to appoint a successor. Upon the acceptance of its appointment as successor Collateral Agent hereunder, such successor Collateral Agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent, and the term “Collateral Agent” shall mean such successor Collateral Agent, and the retiring Collateral Agent’s appointment, powers and duties as the Collateral Agent shall be terminated. After the retiring Collateral Agent’s resignation hereunder, the provisions of this Agreement shall continue to inure to its benefit and the retiring Collateral Agent shall not by reason of such resignation be deemed to be released from liability as to any actions taken or omitted to be taken by it while it was the Collateral Agent under this Agreement.
(i)The Collateral Agent shall be authorized to appoint co-Collateral Agents, agents, attorneys, custodians or nominees as necessary in its sole discretion. Neither the Collateral Agent nor any of its respective officers, directors, employees or agents or other Related Persons shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The Collateral Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither the Collateral Agent nor any of its officers, directors, employees or agents shall be responsible for any act or failure to act hereunder, except for its own gross negligence or willful misconduct.
(j)The Collateral Agent is the Holders’ agent for the purpose of perfecting the Holders’ security interest in assets which, in accordance with Article 9 of the UCC, can be perfected only by possession. Should a Holder obtain possession of any such Collateral, such Holder shall notify the Collateral Agent thereof and promptly deliver such Collateral to the Collateral Agent or otherwise deal with such Collateral in accordance with the Collateral Agent’s instructions.
(k)The Collateral Agent shall have no obligation whatsoever to the Holders to assure that the Collateral exists or is owned by any Grantor or is cared for, protected, or insured or has been encumbered, or that the Collateral Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, maintained or enforced or are entitled to any particular priority, or to determine whether all or the Grantor’s property constituting collateral intended to be subject to the Lien granted pursuant to this Agreement the Collateral Documents has been properly and completely listed or delivered, as the case may be, or the genuineness, validity, marketability or sufficiency thereof or title thereto, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the rights, authorities, and powers granted or available to the Collateral Agent pursuant to this Agreement, other than pursuant to the instructions of the Holders of a majority in aggregate principal amount of the Debentures, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Collateral Agent shall have no other duty or liability whatsoever to the Holders as to any of the foregoing.
(l)No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action hereunder or take any action at the request or direction of the Holders unless it shall have received indemnity satisfactory to the Collateral Agent against potential costs and liabilities incurred by the Collateral Agent relating thereto. Notwithstanding anything to the contrary contained in this Agreement, in the event the Collateral Agent is entitled or required to commence an action to foreclose or otherwise exercise its remedies to acquire control or possession of the Collateral, the Collateral Agent shall not be required to commence any such action or exercise any remedy or take any such other action if the Collateral Agent has determined that the Collateral Agent may incur personal liability as a result of the presence at, or release on or from, the Collateral or such property, of any hazardous substances unless the Collateral Agent has received security or indemnity from the Holders in an amount and in a form all satisfactory to the Collateral Agent in its sole discretion, protecting the Collateral Agent from all such liability. The Collateral Agent shall at any time be entitled to cease taking any action described herein if it no longer reasonably deems any indemnity, security or undertaking from the Holders to be sufficient.
(m)The Collateral Agent (i) shall not be liable for any action taken or omitted to be taken by it in connection with this Agreement or instrument referred to herein or therein, except
to the extent that any of the foregoing are found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from its own gross negligence or willful misconduct, (ii) shall not be liable for interest on any money received by it except as the Collateral Agent may agree in writing with the Issuer (and money held in trust by the Collateral Agent need not be segregated from other funds except to the extent required by law) and (iii) may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it in good faith and in accordance with the advice or opinion of such counsel. The grant of permissive rights or powers to the Collateral Agent shall not be construed to impose duties to act.
(n)Neither the Collateral Agent nor the Holders shall be liable for delays or failures in performance resulting from acts beyond its control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters. Neither the Collateral Agent nor the Holders shall be liable for any indirect, special, punitive, incidental or consequential damages (included but not limited to lost profits) whatsoever, even if it has been informed of the likelihood thereof and regardless of the form of action.
(o)The Collateral Agent does not assume any responsibility for any failure or delay in performance or any breach by any Grantor under this Agreement. The Collateral Agent shall not be responsible to the Holders or any other Person for (i) any recitals, statements, information, representations or warranties contained in the Debentures, this Agreement or in any certificate, report, statement, or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement; (ii) the execution, validity, genuineness, effectiveness or enforceability of this Agreement against any other party thereto; (iii) the genuineness, enforceability, collectability, value, sufficiency, location or existence of any Collateral, or the validity, effectiveness, enforceability, sufficiency, extent, perfection or priority of any Lien therein; (iv) the validity, enforceability or collectability of any Secured Obligations; (v) the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Grantor or Holder; or (vi) any failure of any Grantor to perform its obligations under this Agreement. The Collateral Agent shall have no obligation to the Holders or any other Person to ascertain or inquire into the existence of any Event of Default, the observance or performance by any obligor of any terms of the Debentures and the Collateral Documents, or the satisfaction of any conditions precedent contained in the Debentures and any Collateral Documents. The Collateral Agent shall not be required to initiate or conduct any litigation or collection or other proceeding under the Debentures and the Collateral Documents unless expressly set forth hereunder or thereunder. The Collateral Agent shall have the right at any time to seek instructions from the Holders with respect to the administration of the Collateral Documents.
(p)Each of the Grantors and the Holders agree and acknowledge that the Collateral Agent shall not assume, be responsible for or otherwise be obligated for any liabilities, claims, causes of action, suits, losses, allegations, requests, demands, penalties, fines, settlements,
damages (including foreseeable and unforeseeable), judgments, expenses and costs (including but not limited to, any remediation, corrective action, response, removal or remedial action, or investigation, operations and maintenance or monitoring costs, for personal injury or property damages, real or personal) of any kind whatsoever, pursuant to any environmental law as a result of this Agreement or any actions taken pursuant hereto. Further, the Grantors and the Holders hereby agree and acknowledge that in the exercise of its rights under this Agreement, the Collateral Agent may hold or obtain indicia of ownership primarily to protect the security interest of the Collateral Agent in the Collateral and that any such actions taken by the Collateral Agent shall not be construed as or otherwise constitute any participation in the management of such Collateral.
(q)Notwithstanding anything to the contrary in the Debentures and this Agreement, in no event shall the Collateral Agent or the Holders be responsible for, or have any duty or obligation with respect to, the recording, filing, registering, perfection, protection or maintenance of the security interests or Liens intended to be created by this Agreement (including without limitation the filing or continuation of any UCC financing or continuation statements or similar documents or instruments), nor shall the Collateral Agent or the Holders be responsible for, and neither the Collateral Agent nor the Holders makes any representation regarding, the validity, effectiveness or priority of this Agreement or the security interests or Liens intended to be created hereby.
(r)Before the Collateral Agent acts or refrains from acting in each case at the request or direction of the Grantors, it may require an opinion of counsel as to such matter as the Collateral Agent may reasonable determined related thereto. The Collateral Agent shall not be liable for any action it takes or omits to take in good faith in reliance on such opinion of counsel.
(s)Any Person into which the Collateral Agent or any successor to it as Collateral Agent shall be merged or converted, or any Person with which it or any successor to it shall be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Collateral Agent or any such successor to it shall be a party, or any Person to which the Collateral Agent or any successor to it shall sell or otherwise transfer all or substantially all of the corporate trust business of the Collateral Agent, shall be the successor Collateral Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto.
6.Disclaimer of the Collateral Agent and the Holders.
(a)Neither the Collateral Agent nor the Holders shall be (i) accountable for the Issuer’s use of the proceeds from the Debentures or any money paid to the Issuer or upon the Issuer’s direction under any provision of the Debentures and (ii) responsible for any statement or recital herein or in the Debentures or any other document entered into in connection with the Debentures. Neither the Collateral Agent nor the Holders shall be responsible to make any calculation, evaluate, verify or independently determine the accuracy of any report, certificate or other information with respect to any matter under the Debentures. Neither the Collateral Agent nor the Holders shall have any duty to monitor or investigate any Grantor’s compliance with or the breach of, or cause to be performed or observed, any representation, warranty or covenant
made in the Debentures or in this Agreement, and may each assume performance absent written notice or actual knowledge to the contrary.
(b)No provision of this Agreement or any Collateral Document shall be deemed to impose any duty or obligation on the Collateral Agent to perform any act or acts, receive or obtain any interest in property or exercise any interest in property, or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which, as a result thereof, the Collateral Agent shall become subject to taxation, being required to qualify to do business if not then so qualified or other consequence that, in the sole determination of the Collateral Agent is adverse to the Collateral Agent or in which the Collateral Agent shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, to receive or obtain any such interest in property or to exercise any such right, power, duty or obligation.
(c)The Collateral Agent shall not, nor shall any receiver appointed by or any agent of the Collateral Agent, by reason of taking possession of any Collateral or any part thereof or any other reason or on any basis whatsoever, be liable to account for anything except actual receipts or be liable for any loss or damage arising from a realization of the Collateral or any part thereof or from any act, default or omission in relation to the Collateral or any part thereof or from any exercise or non-exercise by it of any power, authority or discretion conferred upon it in relation to the Collateral or any part thereof unless such loss or damage shall be caused by its own willful misconduct or gross negligence as determined by a final non-appealable judgment issued by a court of competent jurisdiction. The Collateral Agent shall not have any responsibility or liability arising from the fact that the Collateral may be held in safe custody by a custodian. The Collateral Agent assumes no responsibility for the validity, sufficiency or enforceability (which the Collateral Agent has not investigated) of the Collateral purported to be created by this Agreement. In addition, the Collateral Agent has no duty to monitor the performance by the Grantors of their obligations to the Collateral Agent nor is it obliged (unless indemnified or secured (including by way of prefunding to its satisfaction) to take any other action which may involve the Collateral Agent in any personal liability or expense).
7.Proceeds of Collateral.
(a)The Collateral Agent shall be the secured party under the Collateral Documents and shall hold the Collateral, for the benefit of the Holders. The Holders will receive pro rata treatment in connection with all payments, distributions, collections or recoveries relating to the Collateral. Each payment or distribution by or from or received in connection with the exercise of remedies after an Event of Default in respect of the Collateral shall be shared and applied to the Obligations in accordance with this Section 7. The provisions contained herein concerning the Collateral and any and all money or other property received by the Collateral Agent upon the sale, lease, exchange, casualty loss or any other disposition of any Collateral (the “Proceeds”) shall be controlling, notwithstanding the terms of any agreement between the Holders and any Grantor under any other document or instrument between such parties, whether or not any bankruptcy or other insolvency proceeding shall at any time have been commenced with respect to any Grantor.
(b)The Proceeds of any sale, enforcement or other disposition of any of the Collateral or other distribution in respect of the Collateral, in each case following an Event of Default, to the extent received by the Collateral Agent, shall be applied by the Collateral Agent in the following order:
(i)first, to the payment of all reasonable costs, fees and expenses incurred by the Collateral Agent in connection with the realization upon the Collateral or incurred in connection with, or otherwise due to the Collateral Agent under, this Agreement;
(ii)second, to the payment of the Secured Obligations, which payment shall be paid to the Holders on a pro rata basis based on their respective shares of the Secured Obligations then outstanding, until all the Secured Obligations have been satisfied in full; and
(iii)third, to the payment to the applicable Grantor or as a court of competent jurisdiction may direct, or otherwise as required by law, if any surplus is then remaining from such proceeds.
(c)If at any time payment, in whole or in part, of any Proceeds distributed hereunder is rescinded or must otherwise be restored or returned by the Collateral Agent as a preference, fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar law, then each Holder receiving any portion of such Proceeds agrees, upon demand, to return the portion of such Proceeds it has received to the Person responsible for restoring or returning such Proceeds.
(d)Any Holder possessing Collateral agrees to act as bailee for the Collateral Agent in accordance with the terms and provisions hereof.
(e)Notwithstanding anything contained herein to the contrary, if the Collateral Agent, acting upon the instructions of the Holders, shall ever acquire any Collateral through foreclosure or by a conveyance in lieu of foreclosure or by retaining any of the Collateral in satisfaction of all or part of the Obligations or if any Proceeds or other property received by the Collateral Agent to be distributed and shared pursuant to the terms of this Agreement are in a form other than immediately available funds, the Collateral Agent shall not be required to remit any share thereof under the terms hereof and the Holders shall only be entitled to their undivided interests therein as determined hereby. The Secured Parties shall receive the applicable portions of any immediately available funds consisting of Proceeds from such Collateral or proceeds of such non-cash Proceeds or other property so acquired only if and when paid in connection with the subsequent disposition thereof. While any Collateral or other property to be shared pursuant to the terms of this Agreement is held by the Collateral Agent pursuant to this Agreement, the Collateral Agent shall hold such Collateral or other property for the benefit of the Holders in accordance with their respective undivided interest therein and all matters relating to the management, operation, further disposition or any other aspect of such Collateral or other property shall be resolved by the agreement of the Holders.
(f)Each Holder agrees that:
(i)it will provide the applicable percentage to the Collateral Agent to the extent necessary to enable the Collateral Agent to make distributions in accordance with this Agreement;
(ii)it will, not later than 30 days after it has become aware of the occurrence of any Event of Default under its Debentures which it believes will not be cured or waived, give the Collateral Agent notice, and if such notice is oral, confirmed in writing, of such Event of Default and stating that the same constitutes a Notice of Event of Default (a “Notice of Event of Default”) (provided that the failure to give such notice shall not constitute a waiver of such Event of Default); and
(iii)it will give the Collateral Agent immediate written notice of (1) any acceleration of any of the Obligations and (2) any demand made under, or any other enforcement action taken in respect of, any guarantee (provided, that the failure to give such notice shall not constitute a waiver or rescission of such acceleration, suspension, demand or enforcement action).
8.Compensation and Reimbursement of the Collateral Agent. The Grantors, jointly and severally, agree:
(a)to pay to the Collateral Agent such compensation as the Issuer and the Collateral Agent shall from time to time agree in writing for all services rendered by it hereunder which shall include, but not be limited to, an acceptance fee in an amount equal to $6,500 which shall be earned, due and payable to the Collateral Agent, for its own account, on the date hereof;
(b)except as otherwise expressly provided herein, to reimburse the Collateral Agent upon its request for all reasonable expenses and disbursements incurred or made by the Collateral Agent in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel and of all Persons not regularly in its employ), except to the extent that any such expense, disbursement or advance may be attributable to the Collateral Agent’s gross negligence or willful misconduct; and
(c)to indemnify the Collateral Agent and its officers, agents, directors and employees for, and to hold them harmless against, any and all loss, damage, claims, liability or expense, including reasonable fees and expenses of counsel, arising out of or in connection with this Agreement, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Issuer, the Holders or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, or in connection with enforcing the provisions of this Agreement, except to the extent that such loss, damage, claim, liability or expense is due to such indemnified party’s gross negligence or willful misconduct.
9.Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail, sent by facsimile or electronic mail, as follows:
(a)if to any Grantor:
Remark Holdings, Inc.
800 S. Commerce Street
Las Vegas, Nevada 89106
Attention: Shing Tao
(b)if to the Collateral Agent:
Argent Institutional Trust Company
1100 Abernathy Rd, Suite 480
Atlanta, Georgia 30328
Attention: Jane Strobel
(c)if to a Holder, at the address of such Holder specified in the Debenture held by such Holder.
10.Bankruptcy Remote. Neither Remark SPV Holdco LLC (“Holdco SPV”) nor Remark Holdings SPV, Inc. (the “Remark SPV”) shall at any time fail to be organized as a bankruptcy-remote entity having an operating agreement or bylaws, as applicable, in form and substance reasonably acceptable to the Holder (with such operating agreement and bylaws in effect on the date of this Agreement being deemed to be reasonably acceptable to the Holder), which an operating agreement or bylaws, as applicable, shall contain usual and customary provisions for (a) appointment of an independent director whose affirmative vote shall be required to commence an insolvency proceeding (the “Independent Director”) and (b) separateness representations and covenants. Holdco SPV shall not at any time fail to own 100% of the equity of Remark SPV. Remark SPV shall not at any time fail to own 100% of the equity of Sharecare, Inc. (the “ShareCare Shares”). Holdco SPV and Remark SPV, as applicable, shall have the following limitations on business activity: (i) Remark SPV’s sole business shall be the ownership and maintenance of the ShareCare Shares and being a Guarantor hereunder; (ii) Remark SPV shall grant no Liens except under this Agreement and shall have no creditors except the Holders and professional service providers (including, without limitation, attorneys, tax advisors and auditors); (iii) Holdco SPV’s sole business shall be owning 100% of the capital stock of Remark SPV and being a Guarantor hereunder; and (iv) other than Permitted Liens and the creditors with respect thereto, Remark SPV shall grant no Liens except under this Agreement and shall have no creditors except the Holders. Remark SPV shall be a wholly owned direct Subsidiary of Holdco SPV and Holdco SPV shall be a wholly owned direct Subsidiary of the Issuer. In addition, the Grantors shall cause each of Holdco SPV and Remark SPV to comply with all of their respective obligations, including obligations to maintain its special purpose vehicle separateness and bankruptcy remote structure, and the Loan Parties shall not amend any such provisions without the prior written consent of the Holders.
11.Governing Law; Etc. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to the exclusive jurisdiction and venue of the state courts located in the County of New York and/or federal courts located in the Southern District of New York in connection with any dispute arising under this Agreement, and each waives any objection based on forum non conveniens. This provision is intended to be a “mandatory” forum selection clause and governed by and interpreted
consistent with New York law. To the extent determined by such court, the Issuer shall reimburse the Holders and the Collateral Agent for any reasonable legal fees and disbursements incurred by the Holders or the Collateral Agent, as applicable, in enforcement of or protection of any of their respective rights under this Agreement.
12.Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement or any document, amendment, approval, consent, information, notice (including, for the avoidance of doubt, any notice delivered in accordance with Section 9), certificate, request, statement, disclosure or authorization related to this Agreement or the transactions contemplated hereby or thereby (each, an “Ancillary Document”) that is executed by an Electronic Signature (as defined below) transmitted by fax, emailed .pdf or any other electronic means that reproduces an image of an actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement or such Ancillary Document, as applicable. For purposes of this Agreement, “Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
13.Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
14.Effectiveness; Survival. This Agreement shall become effective when executed and delivered by the parties hereto. All covenants, agreements, representations and warranties made by any party in this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement.
15.Parties in Interest. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. No other Person shall have or be entitled to assert rights or benefits hereunder.
16.Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.
[Signature Pages Follow]
| | | | | | | | |
| | |
| REMARK HOLDINGS, INC. |
| By: | /s/ Kai-Shing Tao | |
| Kai-Shing Tao | |
| Chief Executive Officer | |
| | |
| BIKINI.COM, LLC |
| REMARK AI, LLC |
| | |
| By: | Remark Holdings, Inc., its Sole Member |
| | |
| By: | /s/ Kai-Shing Tao | |
| Kai-Shing Tao | |
| Chief Executive Officer | |
| | |
| REMARK HOLDINGS SPV, INC. |
| REMARK SPV HOLDCO LLC |
| | |
| By: | /s/ Kai-Shing Tao | |
| Kai-Shing Tao | |
| President | |
S-1
[Signature Page to Guaranty and Security Agreement]
| | | | | | | | |
| | |
| MUDRICK DISTRESSED OPPORTUNITY |
| DRAWDOWN FUND II, L.P. |
| REMARK HOLDINGS, INC. |
| DRAWDOWN FUND II SC, L.P. |
| REMARK HOLDINGS, INC. |
| 2020 DISLOCATION FUND, L.P. |
| REMARK HOLDINGS, INC. |
| MASTER FUND, L.P. |
| REMARK HOLDINGS, INC. |
| FUND, L.P. |
| BOSTON PATRIOT NEWBURY ST LLC |
| MERCER QIF FUND PLC |
| | |
| By: | Mudrick Capital Management, L.P., its |
| Investment Manager |
| | |
| By: | /s/ Glenn Springer | |
| Glenn Springer | |
| Chief Financial Officer | |
S-2
[Signature Page to Guaranty and Security Agreement]
| | | | | | | | |
| | |
| ARGENT INSTITUTIONAL TRUST |
| COMPANY |
| | |
| By: | /s/ Jane Strobel | |
| Jane Strobel | |
| Vice President | |
Schedule A
Liens
| | | | | | | | |
Grantor | Secured Party | Collateral |
| Remark Holdings, Inc. | Bank of the West | Leased/financed computers, routers and related equipment, proceeds |
| BMO Harris Bank, N.A. | Leased/financed computers, routers and all related equipment, proceeds |
Schedule B
Pledged Interests
| | | | | | | | | | | |
Grantor | Entity | Number of Shares | Percentage |
| Remark Holdings, Inc. | Remark Holdings SPV, Inc. | 100 | 100% |
| Remark Holdings SPV, Inc. | Remark SPV Holdco LLC | -- | 100% |
| Remark Holdings, Inc. | Remark AI, LLC | -- | 100% |
| Remark Holdings, Inc. | Bikini.Com LLC | -- | 100% |
| Remark Holdings, Inc. | RAAD Productions, LLC | -- | 100% |
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| Name: |
dei_EntityIncorporationStateCountryCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarStateCountryItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe exact name of the entity filing the report as specified in its charter, which is required by forms filed with the SEC. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityRegistrantName |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe Tax Identification Number (TIN), also known as an Employer Identification Number (EIN), is a unique 9-digit value assigned by the IRS. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityTaxIdentificationNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:employerIdItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionLocal phone number for entity.
| Name: |
dei_LocalPhoneNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 13e
-Subsection 4c
| Name: |
dei_PreCommencementIssuerTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14d
-Subsection 2b
| Name: |
dei_PreCommencementTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTitle of a 12(b) registered security. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b
| Name: |
dei_Security12bTitle |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:securityTitleItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the Exchange on which a security is registered. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
| Name: |
dei_SecurityExchangeName |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarExchangeCodeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14a
-Subsection 12
| Name: |
dei_SolicitingMaterial |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTrading symbol of an instrument as listed on an exchange.
| Name: |
dei_TradingSymbol |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:tradingSymbolItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
| Name: |
dei_WrittenCommunications |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
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