| Item 1.01 | Entry
into a Material Definitive Agreement. |
2023
Credit Agreement – Strong/MDI Screen Systems Inc.
On
January 13, 2023, Strong/MDI Screen Systems Inc. (the “Borrower”), a wholly-owned subsidiary of FG Group Holdings
Inc. (the “Company”), and Canadian Imperial Bank of Commerce (the “Lender”) together entered into an amended
and restated demand credit agreement (the “2023 Credit Agreement”), which amends and restates the demand credit agreement
dated as of May 31, 2021, between the Borrower and the Lender.
The
2023 Credit Agreement consists of a revolving line of operating credit in a maximum aggregate principal amount of CDN$5.0 million, subject
to certain conditions set forth in the 2023 Credit Agreement (the “Line of Credit”), a 20-year demand installment
loan in the aggregate principal amount of CDN$3.1 million (the “Installment Loan”), and a business credit card line
with a credit limit of CDN$75,000 (together with the Installment Loans and the Line of Credit, the “Credit Facilities”).
Amounts
outstanding under the Line of Credit will bear interest at the prime rate set by the Lender plus 1.00% per annum. The Borrower has the
option to repay any amount outstanding under the Line of Credit at any time, with all outstanding interest and principal amounts payable
upon demand by the Lender.
The
Installment Loan will bear interest at the prime rate plus 0.50% and will be payable in consecutive equal monthly installments, plus
accrued interest, over a period of approximately 20 years. The Lender may also demand repayment of the Installment Loan at any time.
The Borrower is permitted to prepay all or part of an Installment Loan at any time without notice or penalty, provided that the Borrower
is not in default on the applicable loan.
The
Credit Facilities are secured by a lien on the Borrower’s Quebec, Canada facility and substantially all of the assets of the Borrower.
The
Credit Facilities contain customary covenants, including as to compliance with laws (including environmental laws), delivery of quarterly
and annual financial statements, maintenance of insurance, restrictions on the use of loan proceeds (with the proceeds from the Line
of Credit to be used for the Borrower’s day-to-day business operations and working capital, the proceeds from the Installment Loan
to be used to refinance the existing indebtedness against the Borrower’s Quebec, Canada facility) and other customary covenants.
The Borrower is also required to comply during the term of the Credit Facilities with the following financial covenants, to be measured
quarterly:
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Total
Liabilities to Effective Equity Ratio: The Borrower is required to maintain a ratio of total liabilities to “Effective Equity”
(tangible shareholders’ equity, less (a) amounts receivable from affiliates, agents or representatives and (b) intangible assets,
plus all postponed debt) not in excess of 2.50:1.0. |
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Fixed
Charge Coverage Ratio: The Borrower is required to maintain a current ratio of EBITDA to the sum of (a) debt service requirements
(which shall include amortization of the limit of the Line of Credit over 20 years), (b) cash income taxes, (c) unfunded capital,
and (d) Restricted Payments (any payment (i) of any dividends on any of its shares, (ii) on account of the purchase, redemption or
other acquisition of any of its shares or any rights to acquire any such shares, or any other distribution in respect of any of its
shares, (iii) of any principal, interest or other amount in respect of any Postponed Debt, or (iv) by way of gift or other gratuity
or in an amount exceeding an arms-length amount to any of its shareholders or affiliates or to any director or officer thereof) of
not less than 1.1:1.0. |
The
Credit Facilities contain customary events of default and remedies for credit facilities of this nature.
The
foregoing description of the Credit Facilities does not purport to be complete and is qualified in its entirety by reference to the 2023
Credit Agreement, filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Strong
Studios, Inc. - Amendment to Assignment and Attachment Agreement; Termination of Distribution Agreement
On
January 13, 2023, Strong Studios, Inc. (“Studios”), a wholly-owned subsidiary of the Company, Landmark Studio Group
LLC (“LSG”) and Screen Media Ventures, LLC (“SMV”) entered into a letter agreement (the “Amendment
and Termination Agreement”). As previously disclosed on the Company’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on March 8, 2022, Studios and LSG entered into that certain Assignment and Attachment Agreement dated March 3,
2022 (as amended, the “AA Agreement”), pursuant to which LSG assigned and transferred its rights in certain television
projects to Studios, including the original episodic television series project currently entitled “Flagrant”. In connection
with the AA Agreement, Studios and SMV entered into a distribution agreement (the “Distribution Agreement”) pursuant
to which Studios granted the worldwide distribution rights in Flagrant to SMV. The Amendment and Termination Agreement (i) terminated
the Distribution Agreement and (ii) amended the AA Agreement to (a) remove references to the Distribution Agreement, (b) remove any approval
rights of LSG over any press releases pertaining to the distribution of Flagrant, and (c) delete all reversion rights of LSG in
Flagrant. Studios now controls the worldwide distribution rights in and to Flagrant.
The
foregoing description of the Amendment and Termination Agreement does not purport to be complete and is qualified in its entirety by
reference to the Amendment and Termination Agreement, filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein
by reference.