Item 1.01 Entry into a Material Definitive Agreement.
Transaction Agreement
On January 25, 2021, Overstock.com, Inc. (the "Company" or "we"), entered into a
Transaction Agreement (the "Transaction Agreement") with Medici Ventures, Inc.,
a Delaware corporation and a wholly-owned subsidiary of the Company ("Medici
Ventures"), Pelion MV GP, L.L.C., a Delaware limited liability company
("Pelion"), and Pelion, Inc., a Utah corporation as guarantor, pursuant to which
the parties have agreed, among other things, that: (i) Medici Ventures will
convert (the "Conversion") into a Delaware limited partnership (the
"Partnership"), (ii) pursuant to the terms and subject to the conditions of a
limited partnership agreement to be entered into on the date of the Conversion
(the "Limited Partnership Agreement"), Pelion will become the sole general
partner of the Partnership, and the Company (along with any stockholders of
Medici Ventures at the time of the Conversion), will become the limited partners
of the Partnership, (iii) prior to the Conversion, the Company will convert the
outstanding intercompany debt owed to the Company by Medici Ventures into shares
of common stock of Medici Ventures; and (iv) prior to the Conversion, the
Company will convert its intercompany debt from tZERO Group, Inc., a
majority-owned subsidiary of Medici Ventures ("tZERO"), into tZERO outstanding
common stock, leaving Medici Ventures with not more than 48% of tZERO
outstanding common stock (collectively, the "Transactions"), in each case, on
the terms and subject to the conditions set forth in the Transaction Agreement
and the relevant definitive agreements to be entered into in connection
therewith.
Consummation of the Transactions is subject to regulatory approvals, including
money transmitter licenses, and other customary closing conditions. The Company
expects the Transactions to be completed within approximately three to six
months.
Limited Partnership Agreement
At the Conversion, Medici Ventures will convert into a limited partnership and
will be governed by the Limited Partnership Agreement. Pursuant to the terms of
the Limited Partnership Agreement, Pelion, as general partner of the
Partnership, will have sole authority and responsibility regarding investment
decisions, appointing board members of portfolio companies, and exercising all
shareholder rights for assets Medici Ventures currently holds. Pelion will be
able to sell investments of the Partnership at any time but must meet certain
minimum value thresholds as set forth in Schedule A to the Limited Partnership
Agreement ("Threshold NAV") for several of the investments, including tZERO, for
three years from the Conversion in order to do so. After three years, all
investments may be sold for any amount in Pelion's sole discretion but Pelion
will receive higher compensation in the event that assets are sold above the
Threshold NAV. Pelion will also be authorized to make additional investments,
modify, amend or change existing investments and otherwise control the
activities of the Partnership. The voting rights of the limited partners under
the Limited Partnership Agreement are narrow and generally limited to only those
required by applicable law.
Pursuant to the terms of the Limited Partnership Agreement, in addition to the
assets held by Medici Ventures at the date of the Conversion, the limited
partners agree to make a capital commitment of $44,550,000 to the Partnership in
exchange for a 99.00% interest in the Partnership. The capital commitments may
be called in one or more cash installments as specified by the general partner
upon 10 business days' prior written notice.
The general partner is entitled to an annual $2,500,000 fee for its services
under the Limited Partnership Agreement. In addition, following the disposition
by the Partnership of all equity interests held by the Partnership in a given
portfolio company, the Partnership must pay to Pelion a performance fee
associated with such disposition as determined pursuant to Sections 6.2(a), 13.5
and 13.42 of the Limited Partnership Agreement.
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Limited partnership interests cannot be sold, assigned, pledged, mortgaged or
otherwise disposed of or transferred without the consent of the general partner.
The foregoing descriptions of the Transaction Agreement, the Limited Partnership
Agreement and the Transactions do not purport to be complete and are subject to,
and qualified in their entirety by, the full text of the Transaction Agreement
(and the exhibits and schedules thereto, including the Limited Partnership
Agreement), which is filed as Exhibit 10.1 hereto and incorporated by reference
herein. The Transaction Agreement has been included to provide investors with
information regarding its terms and is not intended to provide any other factual
information about the Company, Medici Ventures or Pelion. The representations,
warranties and covenants contained in the Transaction Agreement were made only
for purposes of such Transaction Agreement as of the specific dates therein,
were solely for the benefit of the parties to the Transaction Agreement, may be
subject to limitations agreed upon by the contracting parties, including being
qualified by confidential disclosures made for the purposes of allocating
contractual risk between the parties to the Transaction Agreement instead of
establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those
applicable to investors. For the foregoing reasons, the representations,
warranties and covenants should not be relied upon as statements of factual
information.
Cautionary Note Regarding Forward-Looking Statements
This Form 8-K contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements are therefore entitled to
the protection of the safe harbor provisions of these laws. These
forward-looking statements involve risks and uncertainties and relate to future
events or our future financial or operating performance, such as statements
about the potential timing or consummation of the Transactions and expectations
with respect to the performance of Pelion and the Partnership. Important risk
factors that could cause actual results to differ materially from those
indicated in any forward-looking statement include, but are not limited to:
(i) the ability to obtain regulatory approvals, or the possibility that they may
delay the Transactions or that such regulatory approval may result in the
imposition of conditions that could cause the parties to abandon the
Transactions, (ii) the risk that a condition to effecting the Transactions may
not be satisfied; (iii) the possibility that other anticipated benefits of the
Transactions will not be realized; (iv) potential litigation relating to the
Transactions that could be instituted against the Company, Medici Ventures,
Pelion or one of its affiliates; (v) legislative, regulatory and economic
developments; (vi) catastrophic events, including, but not limited to, acts of
terrorism or outbreak of war or hostilities, pandemics (including COVID-19) or
other public health events, as well as management's response to any of the
aforementioned factors; and (vii) such other factors affecting the Company are
detailed from time to time in the Company's filings with the SEC. In some cases,
you can identify the use of forward looking statements by terminology such as
"may," "would," "could," "should," "will," "expect," "anticipate," "predict,"
"project," "potential," "continue," "contemplate," "seek," "assume," "believe,"
"intend," "plan," "forecast," "goal," "estimate," or other similar expressions
which identify these forward-looking statements. The forward-looking statements
include all statements other than statements of historical fact, including,
without limitation, all statements regarding our strategies and plans for our
retail business and the business Medici Ventures, and the costs, benefits and
risks of such initiatives; our plans and expectations regarding the costs,
benefits, and risks of attempting to develop technology applications including
applications using or relating to blockchain technology and our plans to
commercialize any of these potential applications; our plans for further changes
to our business; and our other statements about the anticipated benefits and
risks of our business and plans. Additional information regarding factors that
could materially affect results and the accuracy of the
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forward-looking statements contained herein may be found in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed
with the SEC on March 13, 2020, in our Form 10-Q for the quarter ended March 31,
2020, which was filed with the SEC on May 7, 2020, in our Form 10-Q for the
quarter ended June 30, 2020, which was filed with the SEC on August 6, 2020, in
our Form 10-Q for the quarter ended September 30, 2020, which was filed with the
SEC on November 5, 2020, and in our subsequent filings with the SEC. We caution
you that the list of important factors included in our SEC filings may not
contain all of the material factors that are important to you. In addition, in
light of these risks and uncertainties, the matters referred to in the
forward-looking statements contained in this communication may not in fact
occur. The Company disclaims any intention or obligation to update or revise any
forward-looking statements as a result of new information, future events or
otherwise, except as otherwise required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Exhibit
10.1 Transaction Agreement, dated as of January 25, 2021, by and among
Overstock.com, Inc., Medici Ventures, Inc., Pelion MV GP, L.L.C. and
Pelion, Inc., as guarantor.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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