Item 1.01
Entry into a Material Definitive Agreement.
On April 27, 2018, Christopher & Banks Corporation ("CBK") and its subsidiaries (collectively the “Company”) completed the closing of the sale leaseback transaction (the “Sale Leaseback Transaction”) of the Company’s corporate facility (the “Facility”) for $13,650,000. In connection with the Sale Leaseback Transaction, CBK or its subsidiary, Christopher & Banks Company entered into various agreements, as described below, and CBK issued a press release on April 30, 2018 announcing the closing; a copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Purchase and Lease Agreements
Effective April 27, 2018, CBK, as Tenant, and 2400 Xenium, LLC, a Minnesota Limited Liability Company, as Landlord, entered into a Lease Agreement (the “Lease”) and completed the sale of the Facility under the terms of the Purchase and Sale Agreement dated as of April 20, 2018. Under the Lease, CBK has leased the Facility for a term of fifteen (15) years and has an option to renew the Lease for one five (5) year term. The Lease contains various default provisions, including without limitation, those relating to payment defaults, performance defaults and events of bankruptcy or insolvency. In addition, as security for the performance of CBK's obligations, CBK has had issued to Landlord an irrevocable Letter of Credit in the amount of $1.75 million (the “Letter of Credit”), which Letter of Credit, or a replacement thereof, shall be in place throughout the term of the Lease. The Lease also contains customary indemnification provisions.
The Lease provides for an annual rent payment in year one of approximately $1.20 million with increases each year thereafter of two and one-half (2.5) percent. The Lease is an “absolute net” Lease such that the Company is responsible for all operating, ownership and maintenance costs associated with the Facility including, without limitation, all real estate taxes and assessments; repair and replacement costs; utilities and insurance.
Escrow Agreement
In connection with the Lease, the parties entered into an Escrow Agreement (the “Escrow Agreement”) whereby CBK has agreed to replace the roof and complete certain repairs during calendar 2018 (the “Escrow Repairs”). As part of the Escrow Agreement, $1,735,000 of the sale proceeds (the “Escrowed Funds”) have been deposited with Old Republic National Title Insurance Company, the escrow agent under the Escrow Agreement. The Escrowed Funds will be disbursed per the terms of the Escrow Agreement to pay for the cost of the Escrow Repairs. Any Escrowed Funds remaining after completion of all of the Escrow Repairs and submission of fully executed lien waivers related thereto shall be refunded to CBK.
Collateral Access Agreement
As required by the terms of the Company’s Credit Facility Agreement with Wells Fargo Bank, National Association, (“Wells Fargo”) in connection with the sale of the Facility, CBK, Landlord and Wells Fargo entered into a Collateral Access Agreement to reflect Wells Fargo's security interest in certain of the Company’s physical assets.
The foregoing description of the Sale Leaseback Transaction and the above-referenced agreements is qualified in its entirety by reference to the Purchase and Sale Agreement, Lease Agreement, Escrow Agreement and Collateral Access Agreement, which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 hereto, respectively, and incorporated herein by reference.