Item 1.01 | Entry into a Material Definitive Agreement. |
Item 2.03 | Creation of a Direct Financial Obligation or Obligation Under an Off-balance Sale Arrangement of a Registrant. |
On December 30, 2021, Xcel, as Borrower, and its wholly-owned subsidiaries, IM Brands, LLC, JR Licensing, LLC, H Licensing, LLC, C Wonder Licensing, LLC, Xcel Design Group, LLC, Judith Ripka Fine Jewelry, LLC, H Heritage Licensing, LLC, Xcel-CT MFG, LLC and Gold Licensing, LLC, as Guarantors (each a “Guarantor” and collectively, the “Guarantors”), entered into a Loan and Security Agreement (the “Loan Agreement”) with FEAC Agent, LLC (“FEAC”), as lead arranger and as administrative agent and collateral agent for the lenders party to the Loan Agreement (in such capacity, the “Administrative Agent”), and the financial institutions party thereto as lenders (the “Lenders”). Pursuant to the Loan Agreement, the Lenders made a term loan in the aggregate amount of $29,000,000 (the “Term Loans”). The proceeds of the Term Loan used for the purpose of refinancing existing indebtedness and to pay fees, costs and expenses incurred in connection with entering into the Loan Agreement, and may be used for the purpose of consummating acquisitions by Xcel or its subsidiaries that are permitted under the Loan Agreement and working capital purposes.
The Loan Agreement also provides that Xcel may request the Lenders make incremental term loans of up to $25,000,000 (the “Incremental Term Loans”). The terms and conditions of the Incremental Term Loans will be agreed in an amendment to the Loan Agreement prior to the funding by the Incremental Term Loans.
Upon entering into the Loan Agreement, Xcel paid closing fees to the Administrative Agent (i) in the amount of $213,750 for the benefit of each Lender and (i) in the amount of $75,000 for the benefit of each Lender that was a party to the existing indebtedness refinanced by the Term Loan.
The Term Loans mature on April 14, 2025. Principal on the Term Loans shall be payable in quarterly installments of $625,000 on each of March 31, June 30, September 30 and December 31 of each year, commencing on March 31, 2022.
Xcel has the right upon thirty (30) days prior written notice to prepay all or any portion of the Term Loans or Incremental Term Loans and accrued and unpaid interest thereon; provided that any prepayment shall applied first to prepay the Term Loans in full and second to the Incremental Term Loans.
If the Term Loans are prepaid in whole or in part on or prior to the second anniversary of the Closing Date (including as a result of an event of default), Xcel shall pay a prepayment premium as follows: an amount equal to the principal amount of the Term Loan prepaid multiplied by: (i) five percent (5.00%) if such prepayment occurs on or before the first anniversary of the Closing Date; (ii) two percent (2.00%) if such prepayment occurs at any time after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date; and (iii) one percent (1.00%) if such prepayment occurs at any time after the second anniversary of the Closing Date.
Xcel’s obligations under the Loan Agreement are guaranteed by the Guarantors and secured by all of the assets of Xcel and the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement) and, subject to certain limitations contained in the Loan Agreement, equity interests of the Guarantors (as well as any subsidiary formed or acquired that becomes a credit party to the Loan Agreement).
Xcel also granted the Lenders a right of first offer to finance any acquisition for which the consideration therefore will be paid other than by cash of Xcel or the Guarantors, the issuance of equity interest of Xcel or the issuance of notes to the applicable seller.
Interest on the Term Loans will accrue at LIBOR plus 7.5% per annum. Interest on the Term Loans is payable on the last business day of each calendar month. LIBOR is defined in the Loan Agreement as the greater of (a) the rate of interest per annum for deposits in dollars for an interest period equal to three months as published by Bloomberg or a comparable or successor quoting service at approximately 11:00 a.m. (London time) two business days prior to the last business day of each calendar month and (b) 1.0% per annum.
The Loan Agreement contains customary covenants, including reporting requirements, trademark preservation and the following financial covenants of Xcel (on a consolidated basis with the Guarantors and any subsidiaries subsequently formed or acquired that become a credit party under the Loan Agreement):
