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Item 1.01
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Entry into a Material Definitive Agreement
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Acquisition of 1-2-3.tv Group
On September 22, 2021, iMedia
Brands, Inc. (the “Company”) and its wholly-owned subsidiary SCUR-Alpha 1359 GmbH (to be renamed
iMedia&123tv Holding GmbH) (the “Subsidiary”), entered into a Sale and Purchase Agreement relating to
1-2-3.tv Group (the “Purchase Agreement”) with Emotion Invest GmbH & Co. KG, BE Beteiligungen Fonds
GmbH & Co. geschlossene Investmentkommanditgesellschaft and Iris Capital Fund II (collectively, the
“Sellers”). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions thereof, the
Subsidiary intends to purchase and acquire from the Sellers (the “Acquisition”) all of the issued and outstanding
equity interests of 123tv Invest GmbH, a limited liability company organized under the laws of Germany, and 123tv Holding GmbH, a
limited liability company organized under the laws of Germany (collectively with their direct and indirect subsidiaries, the
“1-2-3.tv Group”).
The purchase price for the enterprise value of the 1-2-3.tv Group is EUR 80.0 million ($94.5 million based on the September 13, 2021 exchange
rate) (the "Enterprise Value"). The Company also agreed to pay the Sellers for the EUR 3.9 million ($4.6 million based on the September
13, 2021 exchange rate) for the 1-2-3.tv Group's cash on-hand as of July 31, 2021 and EUR 2.3 million ($2.7 million based on the September
13, 2021 exchange rate) for the 1-2-3.tv Group's excess working capital above the 1-2-3.tv Group's trailing twelve-month average as of
July 31, 2021. The Enterprise Value consideration consists of paying the Sellers EUR 62.0 million in cash at closing ($73.3 million based
on the September 13, 2021 exchange rate) and the Company entering into a vendor loan agreement in the principal amount of EUR 18.0 million
($21.2 million based on the September 13, 2021 exchange rate) (“Vendor Loan Agreement”).
The Purchase Agreement provides that the Sellers
may receive additional consideration from the Subsidiary, if earned, in the form of earn-out payments in the amount of up to EUR 14.0
million ($16.5 million based on the September 13, 2021 exchange rate) based on revenues of the 1-2-3.tv Group during 2022, and up
to an additional EUR 14.0 million per year for 2023 and 2024 based on revenues of the 1-2-3.tv Group during each of 2023 and 2024, with
the ability of the Sellers to earn amounts in excess of the EUR 14.0 million in 2023 and 2024 in the event the maximum earn-out payments
are not earned in either 2022 or 2023, respectively; provided, that in no event shall the total earn-out amount exceed EUR 42.0 million
($49.6 million based on the September 13, 2021 exchange rate). The Company has agreed to guarantee all obligations of the Subsidiary
under the Purchase Agreement and the Vendor Loan. A description of the form of Vendor Loan Agreement is included in Item 2.03 herein
(and incorporated into this Item 1.01 by reference), does not purport to be complete and is qualified in its entirety by reference to
the Purchase Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein
by reference.
The Purchase Agreement contains customary representations,
warranties and covenants by each of the parties. The Purchase Agreement also provides that the parties will indemnify each other for certain
liabilities arising under the Purchase Agreement, subject to various limitations, including, among other things, thresholds, caps and
time limitations. The Subsidiary has obtained representation and warranty insurance that provides exclusive coverage for certain breaches
of, and inaccuracies in, representations and warranties made by Sellers in the Purchase Agreement, subject to exclusions, deductibles
and other terms and conditions.
The closing of the Acquisition is subject to certain
closing conditions, including German and Austrian regulatory approvals and the completion of a financing in the amount of not less than
EUR 62.0 million. The Company expects to close the Acquisition in the fourth quarter of 2021. The Company anticipates approximately $2,000,000 in transaction expenses in connection with the Acquisition.
This description of the Purchase Agreement does
not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is attached as Exhibit 2.1
to this Current Report on Form 8-K and is incorporated herein by reference.
The Purchase Agreement is described herein to provide
investors with information regarding the terms of the Acquisition. The representations, warranties and covenants contained in the Purchase
Agreement were made solely for the purposes of the Purchase Agreement; were made only as of specified dates and do not reflect subsequent
information; were made solely for the benefit of the parties thereto; may be subject to limitations agreed upon by the contracting parties,
including being qualified by confidential disclosures that modify, qualify and create exceptions to such representations, warranties and
covenants; were made for the purposes of allocating risk between the parties thereto instead of establishing matters of fact; and may
be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors
are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or
any descriptions thereof as characterizations of the actual state of facts or condition of the parties, their affiliates or their respective
businesses. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Purchase
Agreement, which subsequent information may or may not be reflected in the Company’s public disclosures.
Credit Facility Amendment
On September 20,
2021, the Company entered into a First Amendment and Consent Agreement (the “Amendment”), which amends the Loan
and Security Agreement, dated July 30, 2021, by and among the Company, as the lead borrower, certain of its subsidiaries party thereto
as borrowers, Siena Lending Group LLC and the other financial institutions party thereto from time to time as lenders, Siena Lending Group
LLC, as agent, and VVI Fulfillment Center, Inc., EP Properties, LLC and Portal Acquisition Company, as guarantor (as amended
by the Amendment, the “Credit Agreement”). The Amendment, among other things, modifies the borrowers’ definition
of consolidated adjusted EBITDA in the Credit Agreement, minimum liquidity covenant such that the borrowers shall not permit minimum liquidity,
as defined in the Credit Agreement, as of the end of any fiscal month to be less than $15,000,000 after consummation of the Acquisition;
provided, that such amount shall be automatically reduced to $7,500,000 upon the borrowers’ delivery of evidence satisfactory to
the administrative agent in its permitted discretion that the borrowers had a senior net leverage ratio as defined in the Credit Agreement
for the most recent fiscal quarter ended of not greater than 2.50:1.00. The Amendment also requires that the Subsidiary be joined as a
guarantor under the Credit Agreement and certain other documents related thereto within five business days after consummation of the Acquisition.
The Amendment also modifies the borrowers’ maximum senior net leverage ratio such that loan parties shall maintain a senior net
leverage ratio as set forth in the following table tested as of the last date of each fiscal quarter of the loan parties measured on a
trailing twelve-month basis:
Time Period
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Senior Net Leverage Ratio
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Fiscal quarter ending October 31, 2021
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3.50:1.00
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Fiscal quarter ending January 31, 2022
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3.50:1.00
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Fiscal quarter ending April 30, 2022
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3.25:1.00
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Fiscal quarter ending July 31, 2022
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3.00:1.00
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Fiscal quarter ending October 31, 2022
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2.75:1.00
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Fiscal quarter ending January 31, 2023
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2.75:1.00
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Fiscal quarter ending April 30, 2023 and thereafter
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2.50:1.00
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This description of the Amendment does not purport
to be complete and is qualified in its entirety by reference to the Amendment, which is attached as Exhibit 10.3 to this Current
Report on Form 8-K and is incorporated herein by reference. The Loan and Security Agreement,
dated July 30, 2021, by and among the iMedia Brands, Inc., as the lead borrower, certain of its subsidiaries party thereto
as borrowers, Siena Lending Group LLC and the other financial institutions party thereto from time to time as lenders, Siena Lending Group
LLC, as agent, and VVI Fulfillment Center, Inc., EP Properties, LLC and Portal Acquisition Company, as guarantors, is incorporated
by reference as Exhibit 10.2 into this Current Report on Form 8-K.