Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As disclosed below under Item 8.01 of this Current Report on Form 8-K, Boxed,
Inc. (the "Company") continues to discuss with its lenders the satisfaction of
the milestones of the Forbearance Agreement. In connection with this process,
including anticipation of the negotiation of a stalking horse bid, the potential
filing of a petition for relief under the United States Bankruptcy Code and in
recognition of the importance to the Company of retaining certain key employees
to manage the operations and finances of the Company, the board of directors of
the Company determined that it was in the best interest of the Company to
reinforce and provide incentive for the continued attention and dedication of
certain key employees to their duties of employment.
On March 10, 2023, the Company entered into retention agreements (each a
"Retention Agreement" and, collectively, the "Retention Agreements") with
certain key employees, including each of Chieh Huang, the Company's Chief
Executive Officer, Mark Zimowski, the Company's Chief Financial Officer, and
Alison Weick, the Company's President of eCommerce. The Board of Directors
previously authorized the Company to enter into retention agreements, upon the
recommendation from the Compensation Committee, in order to retain critical
talent in an effort to maximize value during a period of significant volatility.
Each key employee, including Messrs. Huang and Zimowski and Ms. Weick, that
entered into a retention agreement received a lump-sum payment equal to 33.33%
of the individual's annual base salary, less applicable tax withholdings and
deductions (each, a "Retention Payment"), provided that such individual must
remain continuously employed with the Company through the earlier of (i) June
30, 2023 or (ii) (a) the consummation of a transaction that effectuates a
recapitalization or restructuring of a material portion of the Company's
outstanding indebtedness, (b) the acquisition, merger or other business
combination pursuant to which a majority of the business, equity or operating
assets of the Company is sold, purchased or combined with another entity or
company or (c) in the event of a liquidation or dissolution of the Company
(collectively, the "Retention Date"). If prior to the Retention Date, a key
employee, resigns their employment for any reason, other than due to their death
or disability, or they are terminated by the Company for Cause (as defined in
the Retention Agreement), the key employee will not earn any portion of the
Retention Payment and must repay the entire amount of the Retention Payment (net
of tax withholdings) to the Company no later than 30 (thirty) days following the
date on which such officer's employment is terminated. Furthermore, the key
employees have elected to waive any cash bonuses earned based on the achievement
of individual performance objectives for the fiscal year ended December 31,
2022, as per their employment agreements.
The foregoing description of the Retention Agreements does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Retention Agreements, a form of which is filed as Exhibit 10.1 hereto and
incorporated by reference herein.
Item 8.01. Other Events.
Forbearance Agreement and Liquidity
As previously disclosed, the Company is party to that certain Forbearance
Agreement, dated as of March 1, 2023, by and among Boxed, LLC, a Delaware
limited liability company (the "Borrower"), the Company and its subsidiaries
(collectively with the Borrower, the "Obligors"), the BlackRock affiliated
lenders thereunder (the "Lenders") and Alter Domus (US) LLC, as agent for the
lenders (the "Administrative Agent"). The Forbearance Agreement requires the
Borrower to satisfy certain milestones, including that: (i) the Borrower deliver
to the Administrative Agent and the Lenders a debtor-in-possession budget
prepared by the Borrower that is reasonably acceptable to the Required Lenders
(as defined in the Credit Agreement), (ii) the Borrower and each other Obligor
enter into a binding debt commitment letter and term sheet with the Lenders for
a debtor-in-possession financing facility satisfactory to the Administrative
Agent and Required Lenders and (iii) the Borrower prepay at least $5,000,000,
together with accrued interest and the early prepayment fee due under the Credit
Agreement.
The Company continues to have discussions with the Lenders and has not delivered
a debtor-in-possession budget acceptable to the Lenders, entered into a binding
debt commitment letter and term sheet or made the prepayment, as specified under
the terms of the Forbearance Agreement. The Lenders have provided limited
extensions for the satisfaction of these milestones to permit the Company and
the Lenders to continue their discussions, although the Company may not be able
to satisfy the terms of the prepayment at this time. In connection with the
foregoing, the Company has implemented cash management strategies, including
streamlining operations and headcount reductions.
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Further, on March 10, 2023, Silicon Valley Bank ("SVB") was closed by the
California Department of Financial Protection and Innovation, and the Federal
Deposit Insurance Corporation (the "FDIC") was appointed as receiver of SVB. As
of that date, the Company held the majority of its cash deposits and other
liquid instruments in SVB accounts. In connection with entering into a lending
facility with SVB in June 2014, the Company was obligated to maintain its bank
accounts with SVB and continued to do so after such loan was repaid in full in
connection with ongoing cash management initiatives and corporate credit card
programs with SVB. As of March 13, 2023, the Company has transferred a majority
of its cash out of its SVB accounts and is establishing a new commercial banking
relationship. The remaining cash balances in its SVB accounts will be used to
fund the Company's near term obligations while it establishes its new commercial
banking accounts with the goal of transferring all remaining cash balances to
its new commercial banking relationship as soon as practicable. At this time,
the successor entity to SVB has confirmed that it is operating as usual, and has
communicated to the Company that it intends to honor the letters of credit SVB
issued on behalf of the Company that are fully collateralized by funds in the
Company's SVB accounts. The Company is working to secure the funds
collateralizing the letters of credit and establishing new letters of credit for
the beneficiaries with its new commercial banking relationship.
The Company, with support from its financial advisors Solomon Partners and
Cowen, is actively soliciting proposals for the sale of all or substantially all
of its assets, as well as other material transactions that would improve its
liquidity position. The Company continues to evaluate its options, which may
include potentially filing for relief under the U.S. Bankruptcy Code and other
strategic alternatives. The Company anticipates filing a Form 12b-25, Notice of
Late Filing with respect to its Annual Report on Form 10-K for the fiscal year
ended December 31, 2022.
The foregoing description of the Forbearance Agreement does not purport to be
complete and is qualified in its entirety by the terms and conditions of the
Forbearance Agreement, which will be filed as an exhibit to the Company's Annual
Report on Form 10-K for the period ended December 31, 2022.
Forward-Looking Statements
The disclosure contained in this current report contains forward-looking
statements, including statements concerning the Company's ability to satisfy the
terms of the prepayment under the Forbearance Agreement, the Company's potential
filing for relief under the U.S. Bankruptcy Code and other strategic
alternatives, the Company's solicitation of proposals for the sale of all or
substantially all of its assets, the successor entity to SVB's intent to honor
its letters of credit and the Company's potential filing of a Form 12b-25 for
the fiscal year ended December 31, 2022. These forward-looking statements are
based on the Company's current expectations and inherently involve risks and
uncertainties. The Company's ability to satisfy the terms of the prepayment
under the Forbearance Agreement, the Company's potential filing for relief under
the U.S. Bankruptcy Code and other strategic alternatives, the Company's
solicitation of proposals for the sale of all or substantially all of its
assets, the successor entity to SVB's intent to honor its letters of credit and
the Company's potential filing of a Form 12b-25 for the fiscal year ended
December 31, 2022 could differ materially from those anticipated in such
forward-looking statements as a result of these risks and uncertainties. Factors
that could cause actual results to differ materially from the statements
included in this current report include negotiations with the Lenders of the
Forbearance Agreement or any default or event of default under the Company's
Credit Agreement. Further information on potential factors that could affect the
Company's business and financial results are included in the Company's Annual
Report on Form 10-K for the year ended on December 31, 2021 and in its Quarterly
Report on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022 and
September 30, 2022. We do not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.
securities laws.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number Description
10.1 Form of Retention Agreement
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