Material Event Form 8 K

Item 8.01. Other Events

As previously disclosed, Steel Connect, Inc. (the "Company" or "Steel Connect") is a nominal defendant in a class and derivative action filed in the Delaware Court of Chancery ("Court") styled Reith v. Lichtenstein, et al., 2018-0277-MTZ (Del. Ch.) (the "Reith Litigation"), in which plaintiff, purported stockholder Donald Reith ("Plaintiff"), brought claims against certain current and former directors of the Company and stockholders Steel Partners Holdings LP ("Steel Partners") and several of its affiliates. On October 18, 2024, the Company, Plaintiff and the defendants entered into a Stipulation and Agreement of Compromise, Settlement and Release (the "Stipulation") to resolve the Reith Litigation (the "Settlement"), subject to court approval. Among other things, the Settlement requires the defendants in the Reith Litigation to cause their directors' and officers' liability insurance carriers to pay $6,000,000 to the Company within twenty calendar dates after the effective date of the Settlement.

On December 13, 2024, the Court approved the Settlement, approved an award of $1,154,390.76 in fees and expenses to Plaintiff's counsel, and granted a mootness fee to Plaintiff's counsel of $463,040.00. Absent an appeal of the ruling approving the Settlement, the Settlement will become effective after the expiration of a thirty-day appeal period. Pursuant to the previously disclosed Stockholders' Agreement dated April 30, 2023 (as amended, the "Stockholders' Agreement") by and among the Company, Steel Partners, and other stockholders signatory thereto (together with Steel Partners, the "SP Investors"), and the Court-approved Settlement, upon resolution of the Reith Litigation, the Company will distribute the Reith Net Litigation Proceeds (as defined in the Stockholders' Agreement"), by way of a special divided or other distribution, to the holders of the Company's outstanding common stock, par value $0.01 per share (the "Common Stock"), pursuant to the allocation provisions set forth in the Stockholders' Agreement as amended by the Settlement.

Pursuant to the Stockholders' Agreement and the Court-approved Settlement, (i) the SP Investors have waived any right to receive any portion of the distribution to the extent of any shares of Common Stock held by them as of May 1, 2023 or issuable upon conversion of the Convertible Instruments (as defined in the Stockholders' Agreement) and (ii) the current directors and officers of the Company have agreed to waive any right to receive any portion of the distribution with respect to any shares of Common Stock they hold. The SP Investors will be entitled to receive a portion of the Reith Net Litigation Proceeds to the extent of any shares acquired by them after May 1, 2023. The shares of Common Stock as to which the SP Investors and the current directors and officers of the Company have waived any rights to the Reith Net Litigation Proceeds are referred to herein as the "Waived Shares".

Based on the terms of the Court-approved Settlement described above and the maximum amount of Reith Litigation Expenses (as defined in the Stockholders' Agreement) permitted under the Settlement, and assuming the Court's ruling is not appealed or otherwise overturned and that all conditions in the Stockholders' Agreement for distribution of the Reith Net Litigation Proceeds are met, the Company estimates that Company stockholders will receive approximately $1.15 per share of Common Stock held by them (other than with respect to any Waived Shares).

As previously disclosed, the Audit Committee of the Company's Board of Directors (the "Audit Committee") approved, in accordance with the terms of the Stockholders' Agreement, a short-form merger, pursuant to Section 267 of the Delaware General Corporation Law, between the Company and an indirect, wholly-owned subsidiary of Steel Partners (the "Short-Form Merger"). Steel Partners has no obligation to consummate the Short-Form Merger.

As a condition to the Audit Committee's approval of the Short-Form Merger, if Steel Partners determines to proceed with the Short-Form Merger, and if, prior to the effective time of the Short-Form Merger (the "Effective Time"), Steel Connect has not distributed to the holders of Common Stock the Reith Net Litigation Proceeds, then, at the Effective Time, Steel Partners and the rights agent named therein ("Rights Agent") will enter into a Contingent Value Rights Agreement (the "CVR Agreement"), pursuant to which, each share of Common Stock (other than Waived Shares) shall receive one contingent value right to receive a portion of the Reith Net Litigation Proceeds, if any, pursuant to the terms of the CVR Agreement (such right, a "Reith CVR").