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This afternoon, The Nashville Chancery Court unsealed Impact Venture, Dixie Carter, etc.'s response to Billy Corgan's lawsuit. This was unsealed prior to this afternoon's hearing.
In the lawsuit, TNA stated that Corgan "owns no interest in Impact" but had loaned money to the company and "used that loan to strong-arm the company into giving him the title of President."
TNA claimed at that time Corgan filed his lawsuit, he had 20 days remaining as a lender to the company. With "time running out on his loan and with replacement financing imminent", they alleged Corgan declared a "non-monetary default" under the pledge agreement he signed with Dixie Carter. They stated he "then purported to use" her voting power to terminate the other defendants from the company in order for Corgan to install himself as the company's sole owner.
They argue that Corgan's claim to voting and control is solely through the pledge agreement, but that would terminate upon re-payment of his loan. TNA states in the lawsuit that Corgan is well aware that Impact has a new funding source ready (obviously Anthem/Fight Network) "willing and able" to pay Corgan the principal and interest due from his loan.
TNA stated that Corgan us trying to use "this illusory default and managerial control" along with the power of the court to prevent TNA from being able to repay his loan while also preventing Carter from selling her controlling interest to anyone but him. They warn that should Corgan succeed, he will next try to obtain Carter's 92.5% interest and get "true control" of the company well below the level he valued the company at as well as the company's true value
The response claimed that Corgan suffered no irreparable harm and that the situation was simply about a debt, nothing more and the defendants are happy and ready to repay him.
The filing also argues that the company is not insolvent and that there has been no "Event of Default" under the Pledge Agreement between Carter and Corgan. They argued that while Corgan has suffered no real harm, Carter will suffer "tremendous harm" if the court grants the injunction in Corgan's favor.
TNA's response also noted, "the public interest weighs strongly in favor of denying Plaintiff's request because his predatory conduct as a lender is improper and highly contrary to the public interest."
In explaining the course of events that led to Corgan investing in the company, Corgan came on board to work on the creative end. In early 2016, the company "identified a need for funding to address short-term cash flow challenges." Carter anticipated the sale of TNA to a third-party strategic buyer and approached Corgan about a "very short term loan." Corgan told Carter he was not interested in being a bank, but wanted to be an equity owner.
Carter told Corgan that she had not decided upon whether to sell yet, but that if she had, Corgan would receive a "nice amount of interest for his loan, and if she did not, he could convert the loan to equity." The loan would satisfy the company's cash needs through July 2016, according to the filing.
Corgan agreed to loan TNA a redacted amount of money with the loan broken into two separate advances. Corgan, according to TNA's filing, stated that certain conditions to the second part of the advance had not been met and did not make the advance as "originally envisioned."
TNA's course of events continued by noting that in July 2015, Carter, Corgan and Aroluxe discussed and negotiated as "broad potential transaction" that would see a group of investors brought in by Aroluxe invest in TNA with Corgan becoming a minority owner. The three parties signed an agreement at that time, noting the discussions and intent for this to happen.
TNA, noting that Corgan did not advance them the second half of the original loan, found themselves in a position where they still needed funding in July due to continuing cash flow challenges. Around 7/18/16, Corgan loaned the company money for a second time, but "with different terms and conditions originally outlines and agreed to" in prior discussions. Corgan "insisted" on a senior executive position and title in charge of the creative aspects of TNA. Corgan and Carter agreed upon the "Chief Creative Officer" title.
The deal that was to be structured would feature Aroluxe's consortium of investors as 52.5% owner, Carter as 27.5% owner, Corgan as 12.5% owner, Aroluxe owning 5% and Anthem owning 2.5%. The transaction for this had not closed by 8/11/16 but remained under discussion. Impact, at the time, believed that Aroluxe would be providing "temporary bridge funding" until the deal closed and all parties involved knew that the company was going to be needing funding for August.
The bridge loan from Aroluxe "was needed, but did not happen" leading to Corgan lending Impact another round of money. At this point, Corgan insisted to a "series of very pro-Plaintiffs conditions that he is now using in his efforts to take control of the company."
At that point, Corgan's three loans were rolled into "a secured senior convertible promissory note" and as condition of the third loan, Corgan insisted on "taking the title of President" from Carter and "purporting to assume control over day-to-day business affairs." It was noted that Carter "put on a good face for the public" in making the announcement.
As part of a revised deal, the new ownership structure, once Aroluxe's investors put in their money and Corgan converted his debt into equity ownership of the company, the breakdown would then be: Aroluxe consortium with 52.5%, Corgan with 22.5%, Carter with 17.5%, Aroluxe and Anthem with 5% each.
It was noted that Carter's stake in the company was valued at more than twice what
As part of the third loan, Corgan required that Carter sign a "Pledge and Security Agreement" drafted by Corgan's attorney that was "overwhelmingly favorable" to Corgan. They noted that Corgan knew that if Carter did not sign, the company would face a difficult and immediate financial challenge. The filing noted, "Nonetheless, Impact needed the short-term financing" and Carter "was comfortable that the Corgan Loan could and would be repaid even if the TNA Transaction did not close." To avoid a "financial crisis", she reluctantly signed the Pledge Agreement.
The Pledge Agreement between Carter and Corgan granted Corgan a "lien and first security interest in 100%" of Carter's interest in Impact, 92.5% of the company. TNA argues that the Agreement is intended "to secure the obligations under the Corgan Note, but only the obligations of the Corgan Note."
It was noted in the Agreement that "in the absence of an Event of Default, Pleadgor [which would be Corgan] shall be entitled to exercise all voting and/or consensual powers pertaining to the Collateral [Impact] for all purposes not inconsistent with this Agreement. Upon an Event of Default, Corgan shall be entitled to exercise all voting and/or consensual powers pertaining to the Collateral for all purposes not inconsistent with this Agreement."
In the Pledge Agreement, the "Event of Default" was listed as either side breaching the agreement or if one of the sides became insolvent. The agreement would terminate when all obligations under the Note "have been fully paid."
It was noted in the TNA filing that in the event the transaction involving the Aroluxe consortium did not close by 9/27/16, Corgan could, if he desired, convert his loan into a 36% interest in Impact. The transaction did not happen by 9/1. The TNA filing states that at Corgan's request, Carter did not accept a request from Aroluxe for an extension on the exclusivity to close their deal to purchase the majority of the company. On 9/1, Corgan began his own negotiating to become the majority owner of the company.
Corgan, according to TNA's claims, offered to convert his loan into an equity position and then "pay off" TNA's debt to Aroluxe. After doing so, he would receive a 52.5% interest in the company, effectively replacing Carter as the majority owner.
TNA's filing states that Carter "spent the bulk of September trying to facilitate a modified deal" between the parties to allow for this significant funding into the company. It was noted that a company that Carter "had prior discussions regarding a potential sale, re-approached" Carter about buying the company's assets. While the name of the company is redacted, it is pretty easy to surmise they are referring to WWE given the timeline. It was noted that since Carter was unclear as to "the degree of progress" being made between Corgan and Aroluxe, she engaged in discussions with the new [likely WWE] company. Carter also reached out Aroluxe and Corgan to see if they were willing to issue an additional loan if they did not come to terms. As we know, they didn't.
This all leads to Bound for Glory weekend. TNA noted that Carter "began to have concerns about financing this production" but trusted Corgan's representation "that he would get a deal with Aroluxe" to buy them out and take over as majority owner.
TNA's filing noted that on 9/27, the new company [likely WWE, although that name is redacted] made a purchase offer "at a price very similar" to the one Corgan valued Impact at.
The same day, "after much effort and legal expense" on Carter's end to help Corgan negotiate his deal with Aroluxe, Corgan backed away from his offer to invest and stated he would provide no additional funding. It was noted that while Carter had her concerned, "she had relied on Plaintiff to secure the funding" for the Bound for Glory PPV and subsequent tapings because Corgan remained "confident that he could get a deal" done with Aroluxe.
It was noted that "Despite serving as President and knowing that funds were not available for production" if he did not complete his deal, Corgan made no effort to secure a backup source of funding for those tapings. "Plaintiff's last-minute action in pulling out and his lack of effort to arrange any other alternative left Ms. Salinas and Impact in an extremely difficult situation."
Carter "immediately scrambled to find replacement funding and engaged in more serious talks with Anthem regarding a loan." It was noted that "near midnight on the eve of the deadline to keep production on schedule", Anthem offered the financing, allowing the Bound for Glory PPV and the subsequent TV tapings that will carry the company through December to take place.
TNA's filing noted that by late September 2016, it had become "apparent" to Corgan that his plans to purchase the company was not going to succeed and that Impact now had access to other financing options and suitors, so he became more aggressive, stating that Carter was in default in a letter sent by his attorney. It was noted that Carter denies those allegations as well as the allegation that the company itself is insolvent.
On 10/12, Corgan issued a letter via his counsel "purporting to exercise" Carter's voting rights in order to remove the entire Impact Ventures Board of Managers in order to appoint himself the sole manager of the company. TNA responded that his efforts to remove them are "improper, without merit and are ineffective." It was noted that "In addition to being factually unsubstantiated and wrongful as a lender, Plaintiff did not secure the consent of Anthem before purporting to exercise" Carter's rights.
TNA noted that the next day, Corgan filed his lawsuit against them and the temporary restraining order has, as Corgan "no doubt hoped", delayed Impact and Carter from repaying his loan.
TNA also took issue with the idea that Corgan has claimed that despite being President of the company, that he has been "frozen out" of management. TNA claimed that Corgan's lack of involvement in management has been his own choice. It was noted that since taking on the position, he has only made two trips to the company headquarters in Nashville (8/29-30 and 9/26-27). TNA noted that during the trips Corgan "spent the overwhelming majority of the time with the company's creative team at the production studios" that are located in a different location from the company HQ "and/or attempting to negotiate a purchase of the company." During those visits, he only visited the company's primary business office once and "only for a brief amount of time", doing so during a time period that no one from TNA senior management was aware that he was coming or had they asked to meet with him.
TNA noted that their Board of Managers has been and remains willing to meet with Corgan. He, however, has made "little or no attempt to meet with the board to discuss strategy, the company's future or otherwise. It was noted that he was invited to take part in an in-person executive meeting for the company but only offered to make himself available via telephone. It was also noted that he was invited but declined to attend a locker room talent meeting on 10/3. This was the Dixie meeting with the troops meeting that PWInsider.com had previously reported on.
TNA's filing stated that Corgan "has instead conducted business on his own" and when asked by Carter why he was not involving others in planning or meetings, responded, "You are damaged goods. I don't intend to involve you."
TNA also denied that Corgan has been withheld from accessing the company books, records, etc. and that he had been given access to a digital data room containing that information.
TNA noted that its note to Corgan is unclear as to whether it can be paid back prior to the 11/1/16 date. It was noted that Anthem has proposed loaning Impact the money it needs to pay Corgan off. When Impact contacted Corgan's attorney to request a "payoff amount and communicate an offer to pay all principal and interest due", they were told the following by Corgan's counsel:
"The former Managers no longer have the authority to conduct those [i.e. borrowing] discussions on behalf of TNA, and are enjoined from doing so without our client's consent."
So, according to TNA, Corgan will not respond to requests to get a total amount TNA has to pay him, because according to Corgan, they are no longer in an official position to have that communication, to accept the money from Anthem or to pay Corgan off.
TNA states that Corgan's conduct "in attempting to block the efforts to repay his loan demonstrates that his true intend is to usurp" Carter's ownership and control of Impact.
It was also noted that Carter emailed Corgan on 10/17/16, requesting that he consent to Anthem providing the loan and paying him back. The next day, Corgan's counsel contacted Impact's counsel providing a payoff amount and "expressing a willingness to consent to the new loan and to accept repayment" on 11/1 subject to "certain easily satisfied conditions." One of those conditions was that the defendants all certify that there was no agreement that, if consummated, would constitute a "Corporate Transaction" - because Corgan claims he would be owed a bonus if that happens. TNA's attorneys provided the certification requested and asked Corgan's attorneys to confirm that everything would be stamped canceled and returned once he was in receipt of payment of his principal and interest from the loan.
"The hope that Plaintiff had seen the light and would act reasonably was short-lived." It was noted that on 10/20, TNA was contacted by Corgan's attorney and informed of an additional amount of money that they were now required to pay and that his note would be "deemed paid only on receipt of that amount." TNA noted that Corgan's game is obvious and that he "plans to constantly move the goal line in an effort" to prevent TNA from repaying his loan so he can continue his efforts to take over the company, all the while trying to limit Carter's ability to sell the company or secure additional financing and investments from others. Corgan is doing this, they allege, "in hopes that short term cash flow challenges will strangle the company and make it vulnerable to takeover."
TNA stated there is no agreement to sell Impact or its assets; there has been no "Corporate Transaction" since 8/11/16 and there will be none prior to 11/1/16. They note, "If Plaintiff will stop interfering, Impact can obtain further financing/investment to address its cash flow cycle and operational needs." They stated Corgan's refusal to accept payment on his loan is the "primary impediment" to Impact obtaining additional fund and continuing its operations.
In defending that the company was not insolvent, the company showcased contracted revenues for International Revenue through 2002, and listed projected advertising sales and sponsorship revenue for 2017 from Impact airing on Pop as well as PPV broadcasts. They noted that the cash flow issues came from Impact leaving Destination America and going to Pop TV and that the cash issued were "expected and required to transition the brand from a license model to a barter sales contract tied to advertising sales." In other words, Destination paid TNA for the content while Pop is paying TNA based on a piece of the advertising sales derived from TNA commercial time. TNA explained "the change was necessary in order to secure the company's valuable digital rights, full sponsorship/advertising rights and non-exclusivity rights, all of which are critical to the long-term growth of the brand." They also noted that "When making the transition, it is typical for advertising sales to take time to increase to a level at which the barter sales contract generates revenue similar to a license structure." It was stated that the company also expects additional short term funds including a payments from an international licensee the week of 10/24/16. It was noted that Impact has successfully borrowed money in the past as needed to fund operations and can continue to do so.
TNA asked the court to deny Corgan's claims and to deny his request for a temporary injunction.
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