Document:

ex_433063.htm

Exhibit 10.1

 

 

COOPERATION AGREEMENT

 

This Cooperation Agreement (this “Agreement”) is entered into as of October 17, 2022 (the “Effective Date”) by and between Bsquare Corporation (the “Company”) and The Richard A. Karp Trust (“Karp”). The parties may be referred to separately as a “Party” or collectively as the “Parties”.

 

RECITALS

 

WHEREAS, on January 27, 2022, Karp sent a notice of shareholder nomination (the “Nomination Notice”) of three individuals (the “Nominees”) for election to the Company’s board of directors (the “Board”) at the 2022 annual meeting of shareholders (as may be adjourned or postponed, the “2022 Meeting”), and on September 29, 2022, Karp sent a notice (the “14a-19 Notice,” and together with the Nomination Notice, the “Karp Nomination Proposal”) to the Company pursuant to the requirements of Rule 14a-19 under the Securities Exchange Act of 1934, as amended, as to the Nominees.

 

WHEREAS, the Parties have agreed that, in lieu of a contested election involving the Karp Nomination Proposal, it is in the Parties’ mutual best interest to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is agreed by and between the undersigned as follows:

 

AGREEMENT

 

1.    Withdrawal of Karp Nomination Proposal, Standstill. Karp hereby withdraws the Karp Nomination Proposal for the 2022 Meeting in full, and agrees that the Nominees are not and will not be presented to the shareholders at the 2022 Meeting or reflected in any proxy statements or related materials relating to the 2022 Meeting. Karp agrees not to nominate, and to use reasonable best efforts to cause its affiliates not to nominate, any person for director of the Company until 30 days before the nomination deadline for the Company’s 2023 annual meeting of shareholders (as may be adjourned or postponed, the “2023 Meeting”), but no later than February 28, 2023.

 

2.    Board Declassification. The Company agrees that promptly following the execution of this Agreement (not to exceed two trading days), the Company will issue a press release substantially in the form of Exhibit A attached hereto, setting forth the Company’s commitment to begin a phased declassification of the Board (the “Board Declassification”). 

 

3.    Amendment to Articles of Incorporation. In order to facilitate the Board Declassification, the Company agrees to propose to its shareholders, and recommend that the shareholders approve, at the 2023 Meeting, amendments to the Company’s Articles of Incorporation (the “Articles Amendment”) to declassify the Board such that all director terms are to become one-year terms as such directors’ then-current terms expire. For the avoidance of doubt, this means that (a) at the 2023 Meeting, Class I directors will be elected to three-year terms expiring at the 2026 annual meeting of shareholders, (b) at the 2024 annual meeting of shareholders, Class II directors will be elected to one-year terms expiring at the 2025 annual meeting of shareholders, (c) at the 2025 annual meeting of shareholders, Class III directors (and the directors elected as described in clause (b)) will be elected to one-year terms expiring at the 2026 annual meeting of shareholders, and (d) at the 2026 annual meeting of shareholders, all directors will be subject to annual election. The Company further agrees to use its reasonable best efforts to cause its directors and their affiliates to support the Board Declassification by voting in favor of the Articles Amendment at the 2023 Meeting.

 

4.    Consideration of Karp Nominee. The Company agrees that promptly following the 2022 Meeting, the Company will give expedited consideration to either appointing Richard A. Karp to the Board prior to the 2023 Meeting or including Mr. Karp as a nominee for election as a Class I director at the 2023 Meeting.

 

5.    Annual Meeting Date. The Company agrees that it will hold the 2023 Meeting and its 2024 annual meeting of shareholders (the “2024 Meeting”), in June of such years, consistent with its historical meeting cadence prior to 2022, absent the Board determining in good faith that due to extraordinary circumstances it is in the best interests of shareholders to delay the 2023 Meeting or the 2024 Meeting.

 

6.    Mutual Non-Disclosure Agreement. Pursuant to that certain Mutual Non-Disclosure Agreement entered into September 29, 2022, between the Company and Richard A. Karp (the “MNDA”), Mr. Karp and the Company are subject to certain nondisclosure and nonuse obligations set forth in Section 2 therein (the “Nondisclosure and Nonuse Obligations”). Notwithstanding any provisions in Section 2 of the MNDA to the contrary, the Company agrees that the Nondisclosure and Nonuse Obligations of Mr. Karp shall cease three days following the Company’s earnings announcement for the third quarter of 2022. For the avoidance of doubt, nothing in this Section 5, is intended to amend or restrict any other provision of the MNDA.

 

7.    Expense Reimbursement. Each party agrees to bear its own expenses in connection with the Karp Nomination Proposal, the negotiation, execution, and effectuation of this Agreement, and all related matters (the “Subject Matters”); provided, however, that the Company shall reimburse Karp for its reasonable and documented legal fees and expenses incurred in connection with the Subject Matters, in an amount not to exceed $25,000.

 

8.    Non-Disparagement. Subject to applicable law, each of the Parties covenants and agrees that, during the Standstill Period, or if earlier, until such time as the other Party or any of its agents, officers, key employees or directors shall have breached this Section 7, neither it nor any of its respective agents, officers, key employees or directors will make, either publicly or privately, verbally or in writing, any derogatory, disparaging, or untruthful statements about the other Party, or its directors or its executive officers to any other person or entity relating to the Subject Matters. Notwithstanding the foregoing, nothing in this provision shall be construed to require Karp or its affiliates, or the Company or any of its executive officers or directors, to testify dishonestly if compelled by operation of law to provide sworn testimony about any party hereto, to refrain from participating or cooperating in a governmental investigation, or to refrain from seeking to enforce the terms of this Agreement. If either Party violates their obligations under this Section 7, the other Party’s obligations pursuant to this Section 7 shall terminate, in addition to any other rights and remedies such other Party may have at law or in equity.

 

9.    Severability. In the event that any provision or part of any provision of this Agreement should be held to be invalid or for any reason unenforceable, such provision shall be reformed to the maximum extent permitted by law, and the remaining portions of this Agreement shall remain in full force and effect to the maximum extent permitted by law.

 

10.    Headings. Headings used in this Agreement, as designated by bold typeface, are for convenience only and shall not be used to interpret or construe the Agreement’s provisions.

 

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11.    Counterparts. This Agreement may be executed in any number of duplicate originals, photocopies, facsimiles or PDFs, each of which shall be deemed an original, and all of which (once each Party has executed and returned to the other Parties at least one such duplicate original, photocopy, facsimile or PDF) will constitute one and the same document.

 

12.    Governing Law; Venue and Jurisdiction. This Agreement shall be construed and enforced in accordance with, and governed by, the laws of the State of Washington, without regard to principles of conflict of laws. The Parties agree that any suit, action or other proceeding arising out of or related to this Agreement, or the subject matters hereof, may be brought only in the United States District Court for the District of Washington or, if there is no federal subject matter jurisdiction, in any state court of Washington sitting in King County, Washington, and each Party hereby consents and submits to the exclusive personal jurisdiction of those courts.

 

13.    Injunctive Relief. The Parties acknowledge and agree that the breach by either Party will cause irreparable and continuing damage to the other Party for which money damages are insufficient, and such other Party shall be entitled to seek injunctive relief and/or a decree for specific performance, and other relief as may be proper (including money damages if appropriate).

 

14.    Entire Agreement; Modification; Waiver. This Agreement constitutes an integrated written contract, expressing the entire agreement between the Parties with respect to the subject matter hereof and superseding in all respects any and all prior written or oral agreements between or among the Parties. With the exception of Section 2 of this Agreement, nothing in this Agreement, is intended to amend or restrict the provisions of the MNDA. Karp represents and warrants that he is not relying on any promises or representations that do not appear written herein. No modification, amendment or waiver of any of the provisions contained in this Agreement shall be binding upon any Party hereto unless made in writing and signed by such Party or by a duly authorized officer or agent of such Party.

 

15.    Knowing and Voluntary Agreement. Each Party enters into this Agreement as a matter of free will and has not been pressured or coerced in any way whatever into signing this Agreement.

 

16.    Signatures and Effective Date. The “Effective Date” of this Agreement shall be the date of the last party to sign the Agreement. No Party shall incur a duty or enjoy a benefit from the Agreement prior to the Effective Date.

 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

Bsquare Corporation

 

Dated: October 17, 2022                  

 

By: /s/ Ralph C. Derrickson

Name: Ralph C. Derrickson

Title: President and CEO

 

 

The Richard A. Karp Trust

 

Dated: October 17, 2022

 

By: /s/ Richard A. Karp

Name: Richard A. Karp

Title: Trustee

 

2Exhibit 10.1

 

DIGITAL BRANDS GROUP, INC. 

 

PROMISSORY NOTE

 

[X], 2022

 

FOR VALUE RECEIVED,
Digital Brands Group, Inc., a Delaware corporation (the “Debtor”), promises to pay to the order of                    (“Holder”),
in lawful money of the United States at such address as set forth below or such other address as the Holder may designate in writing,
the principal amount of ____________ Dollars ($___________) together with accrued but unpaid interest, on or before February 15, 2023
(the “Maturity Date”) pursuant to the terms of this Promissory Note (the “Note”). This Note is issued
as part of a series of notes having an aggregate amount of up to $5,500,000 (collectively, the “Notes”) issued by the
Debtor to certain persons, including the Holder, further to that Second Amended and Restated Membership Interest Purchase Agreement, dated
__________, 2022, by and among Moise Emquies, George Levy, Matthieu Leblan and Carol Ann Emquies as Sellers,
Sunnyside, LLC (“Sunnyside”), the Debtor, and George Levy, as Sellers’ Representative (the “MIPA”),
pursuant to which, Debtor is purchasing all of the membership interest of Sunnyside from the Sellers (including, the Holder).

 

1.                  
Principal and Interest Payments. The Debtor promises to pay interest on the unpaid principal balance to the Maturity Date,
at a simple rate of interest equal to 8% per annum. All outstanding principal shall be due and payable on the Maturity Date; interest
shall be payable monthly on or before the fifth business day of each month with the initial payment of interest due on or before the fifth
business day of the first full calendar month following the date of issuance of this Note; provided however that in the event Debtor fails
to timely make such required interest payment for two consecutive months, the rate of interest shall be equal to 10% per annum and should
Debtor thereafter fail to timely make any required interest payment the rate of interest shall be equal to 12% per annum until the unpaid
principal balance of this Note is paid in full. Interest shall be calculated on the basis of a 365-day year for the actual number of days
elapsed. All payments due to the Holder hereunder shall be made by wire transfer in immediately available funds, to an account designated
by Holder in writing, without any reduction or deduction whatsoever, including any reduction or deduction for any set off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or tax.

 

2.                Prepayment.
Principal or interest may be paid by Debtor at any time prior to the Maturity Date, without penalty or premium (a “Prepayment”).
Any Prepayment shall be applied first against accrued interest and fees, and, thereafter, against the outstanding principal balance hereunder.

 

2.1 Notwithstanding anything to the
contrary in this Note, the Debtor must prepay all of the outstanding principal, interest, and fees under this Note, in the event of the
following (whichever is first to occur):

 

(a)            
(i) an acquisition of the Debtor or Sunnyside by another person or entity (or group of person
or entities) by any means (including, without limitation, a merger, tender offer, share exchange, business combination, consolidation
or other corporate reorganization); (ii) a sale, lease, exclusive license or other disposition of all, or substantially all, of the assets
of the Debtor and its subsidiaries (on a consolidated basis) or Sunnyside; or (iii) a transaction or series of related transactions (whether
by merger, consolidation, stock acquisition or otherwise) in which a majority of the total outstanding voting power of Sunnyside is transferred;

 

(b)               
any sale or spinout of Sunnyside by or from the Debtor;

 

     

     

    

 

(c)               
 the issuance or sale of shares of capital stock or any equity interest or debt instrument by the Debtor or any of its subsidiaries
(including Sunnyside) where the primary purpose of such sale or issuance is the acquisition of the assets or capital stock of a third
party entity; or

 

(d)               
the issuance any cash dividends with respect to any equity interest or shares of capital stock of the Debtor or other payment,
exchange redemption or repurchase by the Debtor in respect of any shares of capital stock of the Debtor, other (i) than payments in the
form of additional shares of common stock; (ii) or as may be consented to in writing by the Majority in Interest of Holders.

 

2.2 In the event of the issuance or
sale of shares of capital stock or any equity interest or debt by the Debtor or any of its subsidiaries (including Sunnyside) to investors
in a financing transaction where the primary purpose of such sale or issuance is unrelated to the acquisition of the assets or capital
stock of a third party entity, 20% of the net proceeds from such financing transaction shall be used as a Prepayment.

 

3.                  
Default.

 

(a)               The occurrence of any one or more of the following events will constitute a default by Debtor hereunder (each, an “Event
of Default”): (i) Debtor fails to pay on the Maturity Date the full amount of interest then accrued on this Note and the full
amount of any principal on this Note, or otherwise breaches any other covenant or agreement herein; (ii) Debtor makes an assignment for
the benefit of creditors, or any proceeding is instituted by or against Debtor alleging (or Debtor admits in writing) that Debtor is insolvent,
unable to pay its debts as they mature, or not generally paying its debts as such debts become due, or any proceeding is instituted by
or against Debtor under the Federal Bankruptcy Code or any successor statute or Debtor otherwise files for bankruptcy, or any proceeding
is instituted seeking the appointment of a liquidator, receiver or trustee for all or any portion of Debtor’s property or assets,
or if any proceeding affecting the rights of creditors generally is instituted by or against Debtor, or Debtor files any petition
or answer seeking for itself any reorganization, arrangement, composition, readjustment, dissolution or similar relief under any present
or future statute, law or regulation; provided, that in the case of the institution of any of the
foregoing proceedings that are involuntary, such proceeding is not dismissed within 30 days.

 

(b)               Upon
the occurrence and during the continuation of an Event of Default, Holder, without demand or notice of any kind, may declare this Note
immediately due and payable by providing written notice to Debtor (except with respect to any Event of Default set forth in Section
3(a)(ii), in which case this Note shall automatically become immediately due and payable without the necessity of any notice or other
demand), whereupon all outstanding principal and accrued interest shall become immediately due and payable. .

 

(c)               
In addition to the foregoing, upon the occurrence of an Event of Default, Holder shall have the right to exercise all other remedies
available to it in law or in equity, including but limited to its rights under the MIPA. No right or remedy conferred upon or reserved
to Holder hereunder or now or hereafter existing at law or in equity is intended to be exclusive of any other right or remedy, and each
and every such right or remedy shall be cumulative and concurrent, and in addition to every other such right or remedy, and may be pursued
singly, concurrently, successively or otherwise, at the sole discretion of Holder, and shall not be exhausted by any one exercise thereof
but may be exercised as often as occasion therefor shall occur.

 

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4.                   Attorneys’
Fees. In the event any suit or action is brought by Debtor or Holder under this Note to enforce or interpret any of its terms,
or in any appeal therefrom, or to otherwise it is agreed that the prevailing party shall be entitled to recover its costs and
expenses, including but not limited to reasonable attorneys’ fees and costs from the non-prevailing party in addition to any
other relief to which such prevailing party may be entitled. Notwithstanding and in furtherance to the foregoing, Debtor agrees to
pay or reimburse Holder for all costs and expenses incurred by Holder and any of its affiliates (including reasonable
attorney’s fees, disbursements and other charges, and expenses associated with any action or litigation) in connection with,
arising out of, or in any way related to Holder seeking to collect payment under this Note should said Note not be repaid in full on
or before the Maturity Date, as well as protecting, enforcing or preserving Holder’s rights or remedies under Section 15.

 

5.                 
Savings Clause. In no event shall the amount or rate of interest due and payable under this Note exceed the maximum amount
or rate of interest allowed by applicable law, and, in the event any such excess payment is made by Debtor or received by Holder, such
excess sum shall be credited as a payment of principal (or if no principal shall remain outstanding, shall be refunded to Debtor). It
is the express intent of the parties that Debtor not pay and Holder not receive, directly or indirectly or in any manner, interest in
excess of that which may be lawfully paid under applicable law.

 

6.               
Waiver. Demand, presentment, notice, notice of demand, notice for payment, protest and notice of dishonor are hereby waived
by Debtor. Holder shall not be deemed to waive any of its rights under this Note unless such waiver is in writing and signed by Holder.
No delay or omission by Holder in exercising any of its rights under this Note shall operate as a waiver of such rights, and a waiver
in writing on one occasion shall not be construed as a consent to or a waiver of any right or remedy on any future occasion. Debtor shall
in no event contest or deny the validity or enforceability of this Note in writing, and any such contest or denial shall be deemed a material
breach hereof.

 

7.               
Assignment. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of
law or otherwise, in whole or in part, by the Debtor without the prior written consent of the Majority in Interest of Holders. “Majority
in Interest of Holders” shall mean Holders holding more than 50% of the aggregate outstanding principal amount of the Notes.
Subject to the foregoing restriction, the rights and obligations of the Debtor and the Holder shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.

 

8.               
Amendment. This Note may be amended or modified only with the written consent of Debtor and Majority in Interest of Holders.

 

9.              
MUTUAL WAIVER OF JURY TRIAL. EACH OF THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS NOTE IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE, EACH OF THE UNDERSIGNED HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS NOTE, OR THE TRANSACTIONS CONTEMPLATED BY THIS NOTE. EACH OF THE UNDERSIGNED CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH OF THE UNDERSIGNED UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C)
EACH OF THE UNDERSIGNED MAKES THIS WAIVER VOLUNTARILY AND (D) EACH OF THE UNDERSIGNED HAS BEEN INDUCED TO EXECUTE THIS NOTE BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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10.               Governing
Law; Waiver; Service. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without reference
to the conflicts of law principles thereof. To the extent that any party has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment
in aid of execution, execution or otherwise) with respect to itself or its property, each of the undersigned hereby irrevocably waives
such immunity in respect of its obligations under this Note. Without limiting any of the foregoing, each of the undersigned agrees that
service of any process, summons or notice of document in any action suit or proceeding with respect to the subject matter hereof may
be served on it anywhere in the world.

 

11.               Severability.
If any provision of this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note
will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

 

12.             
Miscellaneous. Words importing the singular number hereunder shall include the plural number and vice versa, and any pronoun
used herein shall be deemed to cover all genders. The headings as to contents of particular Sections are inserted only for convenience
and are in no way to be construed as part of this Note.

 

13.             
Notices. All notices, consents and other communications hereunder shall be sufficiently given for any purpose hereunder
only if in writing and delivered personally, by electronic mail receipt confirmed in writing, by certified mail return receipt requested,
or sent pre-paid by nationally-recognized overnight delivery service for next business day delivery, to the appropriate address as set
forth on the signature pages hereto. Each such notice, consent or other communication shall be effective when received by the addressee
thereof in the case of personal service, three (3) days after the date of mailing, or, if sent by overnight delivery service as described
herein, the next business day after deposit with such service.

 

14.             
Counterparts; Delivery. This Note may be executed in counterparts (including by electronic signature and PDF), each of which
shall be deemed an original and all of which, when taken together, shall be deemed to be one instrument.

 

15.              
Pari Passu with All Notes. The parties agree that the Notes (including this Note) shall rank equally without preference
or priority of any kind with each of the other Notes issued by Debtor pursuant to the MIPA. Debtor agrees, and the Holder acknowledges,
that all payments of principal and interest with respect to the Notes shall be applied ratably and proportionately on each of the Notes
on the basis of the original principal amount of outstanding indebtedness represented by such Note.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties
have executed this Note as of the date first written above.

 

	 	Company:
	 	 
	 	 DIGITAL BRANDS GROUP, INC.
	 	 
	 	By:	 
	 	 
	 	Name:	 
	 	 
	 	Title:	 
	 	 
	 	Address:	 
	 	 	 

 

	 	Holder:
	 	 
	 	By:	 
	 	 
	 	Name:	 
	 	 
	 	Title:	 
	 	 
	 	Address:	 
	 	 	 

 

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