Details From TNA’s Response Filing to Corgan’s Lawsuit – Claims Corgan “Strong-Armed” His Way to President

– PWInsider reports that the filed response from TNA, Impact Ventures, Dixie Carter, Dean Broadhead and Serg Salinas’ to Billy Corgan’s lawsuit against them was unsealed today. Much of the response was argued in court today, although there are additional details contained in the filing.

TNA’s legal response claims that Corgan “owns no interest” in TNA but rather had loaned the company money and then used the loan to “strong-arm the company into giving him the title of President.” They are further arguing that Corgan declared a “non-monetary default” under the terms of the pledge agreement he signed with Dixie Carter and still had twenty days remaining as a lender to the company, with “replacement financing imminent.” TNA alleges that Corgan then tried to use Dixie’s voting power to fire the other defendants (Carter, Salinas and Broadhead) so he could make himself the company’s sole owner.

The argument is basically that all of Corgan’s claims to any level of voting or control are through the pledge agreement, but that the agreement terminates upon repayment of his loan and that Corgan knows TNA has a new source of funding (referring to Anthem) “willing and able” to pay Corgan the principal and interest due. They claim the lawsuit is an attempt to use “this illusory default and managerial control” to prevent TNA from being able to repay the loan and prevent Carter from selling the company to anyone but him. This would result in Corgan getting “true control” of the company below the price at which he valued the company, as well as below the company’s true value.

TNA’s response says Corgan has not suffered irreparable harm and that they are ready to repay him. It claims the company is not insolvent and that there’s been no default under the Pledge agreement, and that Carter will suffer “tremendous harm” if the court grants Corgan his injunction. It also says that “the public interest weighs strongly in favor of denying Plaintiff’s request because his predatory conduct as a lender is improper and highly contrary to the public interest.”

The response lays out their version of the timeline that led to Corgan’s involvement in the company. Per the filing, Corgan came on board to work with the company’s creative end and then early this year TNA “identified a need for funding to address short-term cash flow challenges.” Carter was anticipating the sale of TNA to a third party and asked Corgan about a “very short term loan.” Corgan said he wasn’t interested in doing a loan but wanted to be an equity owner. Carter said that she hadn’t decided whether to sell but if she did, Corgan would get a “nice amount of interest for his loan, and if she did not, he could convert the loan to equity.” This loan would, the response claims, keep the company’s monetary needs stable through July.

Corgan agreed to loan TNA a certain amount of money, split into two separate advances. The response says Corgan claimed that some conditions of the second part of the advance hadn’t been met and thus didn’t make it. Corgan, Carter and Aroluxe Media then discussed a “broad potential transaction” in July that would see a group of investors come in through Aroluxe with Corgan becoming a minority owner when that happened. An agreement was signed with intent to execute the transaction after further discussion.

TNA then, because Corgan did not advance them the second part of the original loan, needed funding in July. They allege that Corgan then loaned them a second amount of money around July 18th “with different terms and conditions originally outlines and agreed to” from their past talks. Corgan demanded to have a senior executive position and title in which he was in charge of TNA’s creative aspects. Corgan and Carter agreed to make him the Chief Creative Officer.

The deal that was being planned would have seen Aroluxe’s investor group become a 52.5% owner, Carter become a 27.5% owner, Corgan own 12.5%, Aroluxe own 5% and Anthem own 2.5%. As of August 11th, the deal had not closed but was still under discussion. Impact believed at the time that Aroluxe would provide “temporary bridge funding” until the deal closed, with all parties aware that additional funding would be needed for August. Aroluxe’s bridge loan didn’t happen and Corgan lended TNA more money, insisting on his three loan being turned into a “secured senior convertible promissory note” with Corgan demanding the title of President from Carter and “purporting to assume control over day-to-day business affairs.”

Carter says she put on “a good face for the public” in the announcement. The new ownership structure would be under the new agreement: Aroluxe’s consortium at 52.5%, Corgan at 22.5%, Carter at 17.5% and Aroluxe and Anthem at 5% each. This is when the Pledge and Security Agreement was signed at Corgan’s insistance, which was drafted by Corgan’s attorney and was “overwhelmingly favorable” to him. Corgan knew, the filing claims, that if Carter didn’t sign there would be an immediate and serious financial challenge. “Nonetheless,” the filing says, “Impact needed the short-term financing” and Carter “was comfortable that the Corgan Loan could and would be repaid even if the TNA Transaction did not close.” She reluctantly signed the agreement to avoid a “financial crisis.”

The agreement gave Corgan a lien and first security interest in 100% of Carter’s ownership interest in Impact, which was 92.5% of the company. TNA says that the Agreement was intended “to secure the obligations under the Corgan Note, but only the obligations of the Corgan Note.” The agreement said that in the absence of a default, Corgan “shall be entitled to exercise all voting and/or consensual powers pertaining to the Collateral [Impact] for all purposes not inconsistent with this Agreement. Upon an Event of Default, Corgan shall be entitled to exercise all voting and/or consensual powers pertaining to the Collateral for all purposes not inconsistent with this Agreement.” The “Event of Default” was defined as either side breaching the agreement of one of the sides becoming insolvent. The agreement terminates when all obligations under the Note “have been fully paid.”

The response says that if the deal involving Aroluxe’s investor group didn’t close by September 27th, Corgan could convert his loan into a 36% interest in the company. When the deal didn’t happen by September 1st, Carter didn’t accept a request for an extension by Aroluxe on the exclusivity to close their deal and Corgan began his own talks to become the company’s majority owner, offering to convert his loan into an equity position and then satisfy TNA’s debt to Aroluxe. That would give him a 52.5% interest in the company and make him the majority owner.

The response alleges that Carter spent m,ost of September trying to facilitate a new deal and that a company that Carter “had prior discussions regarding a potential sale, re-approached” her about buying the assets. This would appear to be WWE, although the name is redacted. Carter, unclear about the degree of progress being made between Corgan and Aroluxe, talked with the new company and reached out Aroluxe and Corgan to see if they were willing to issue an additional loan if they did not come to terms. They did not.

Carter then allegedly began to have cocerns about financing Bound for Glory, but trusted Corgan’s representation “that he would get a deal with Aroluxe” to take over as majority owner. On September 27th, the new company (again, likely WWE) made an offer at a “similar price” to what Corgan valued Impact at. Corgan then backed away from his offer on the same day and said he wouldn’t provide additional funding. Carter says she had relied on Corgan’s promises that he could secure funding for the PPV and TV tapings, but that Corgan made no effort to secure a backup source of funding despite knowing that funds would not be available if he didn’t complete his deal. The filing states, “Plaintiff’s last-minute action in pulling out and his lack of effort to arrange any other alternative left Ms. Salinas and Impact in an extremely difficult situation.”

Carter says she sought replacement funding and engaged in serious talks with Anthem about a loan and that Anthem offered the financing at the last moment to allow the tapings and PPV to happen.

TNA alleges that it became apparent to Corgan by late September that he was not going to succeed in buying the company now that TNA had access to other financing options and suitors, so sent a letter through his attorney claiming that Carter was in default. Carter denies the allegations as well as the allegation that the company itself is insolvent. Carter then sent the letter on October 12th to exercise Carter’s voting rights and make him the sole owner in the company. The lawsuit and restraining order was filed the next day which has delayed TNA from paying back the loan.

TNA disputes that Corgan has claimed he’s been “frozen out” of management and says he has only made two trips to TNA Headquarters in Nashville since becoming President. TNA says that during those trips Corgan “spent the overwhelming majority of the time with the company’s creative team at the production studios,” which are in in a different location from the headquarters, “and/or attempting to negotiate a purchase of the company.” The company claims the Board of Managers has been and remains willing to meet with Corgan but that he’s made “little or no attempt to meet with them about anything including the company’s future. He was invited to be part of an in-person executive meeting for the company but would only make himself available via telephone. He also allegedly declined an invitation to be at a locker room talent meeting on October 3rd, insted “conduct[ing] business on his own” and telling Carter, “You are damaged goods. I don’t intend to involve you.”

TNA denies that Corgan has been unable to access the company books, saying he has access to a digital data room containing the info. They say when they contacted Corgan’s attorney to request a payoff amount that Anthem would cover, Corgan’s counsel said, “The former Managers no longer have the authority to conduct those [i.e. borrowing] discussions on behalf of TNA, and are enjoined from doing so without our client’s consent.” When Carter emailed Corgan on October 17th asking that he agree to Anthem providing the loan and paying him back, Corgan’s lawyer contacted them the next day with a payoff amount and “expressing a willingness to consent to the new loan and to accept repayment” on November 1st subject to “certain easily satisfied conditions.” Those conditions included the defendants certify that there was no agreement that, if consummated, would constitute a “Corporate Transaction,” as Corgan claims he would be owed a bonus if that happens. TNA provided the requested certification and asked Corgan’s lawyers to confirm everything would be stamped canceled and returned once he was in receipt of payment. On October 20th, Corgan’s lawyer contacted TNA and told them they owed more money and that his note would be “deemed paid only on receipt of that amount.”

TNA says there is no agreement to sell Impact or its assets and that there will be none before November 1st. They say, “If Plaintiff will stop interfering, Impact can obtain further financing/investment to address its cash flow cycle and operational needs. They have asked that the court deny Corgan’s request for an injunction.