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Item 1.01.
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Entry into a Material
Definitive Agreement.
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On February 5, 2021, iMedia Brands,
Inc. (the “Company”) became a party to a Limited Liability Company Agreement (the “LLC Agreement”) for
TCO, LLC, a Delaware LLC newly created to operate a joint venture (the “Joint Venture” or “JV”) between
the Company and LAKR Ecomm Group LLC (“LAKR”). LAKR is a newly formed company indirectly owned by Invicta Media Investments,
LLC and Retailing Enterprises, LLC. The Joint Venture will operate TheCloseout.com, an online marketplace that was previously
owned by Invicta Media Investments and Retailing Enterprises. The initial Board of Directors of the Joint Venture includes Tim
Peterman, the Chief Executive Officer and a director of the Company, Landel Hobbs, the Chairman of the Board of the Company, and
Eyal Lalo, a director of the Company. The Company’s proxy materials for its 2020 Annual Meeting, filed on June 1, 2020,
set forth additional information regarding the Company’s relationships with Invicta Media, Retailing Enterprises and Mr.
Lalo. Such relationships are set forth at “Certain Relationships and Related Transactions” therein, which is hereby
incorporated by reference herein.
Under the LLC Agreement, the Company will act as the controlling
member. Mr. Peterman and Mr. Hobbs, as the designees of the Company, will lead the Joint Venture, with certain significant corporate
actions requiring the consent of both members. Mr. Peterman will be the Chairperson of the Joint Venture. Distributions of available
cash may be made to the members at the discretion of the Joint Venture’s board of managers. In addition, beginning on February
5, 2026 and recurring every 12 months thereafter, the Company will have the right, but not the obligation, to acquire LAKR’s
interest in the Joint Venture at a value determined based on financial benchmarks set forth in the LLC Agreement.
In connection with the entry into the Joint Venture, the Company
contributed assets in the form of inventory valued at $3,570,000 in exchange for a 51% interest in the JV, and LAKR contributed
assets in the form of inventory, intellectual property, and cash valued at $3,430,000 in exchange for a 49% interest in the JV.
The Company also entered into a Loan and Security Agreement with the Joint Venture, pursuant to which the Joint Venture may borrow
up to $1,000,000 from the Company on a revolving basis pursuant to a promissory note bearing interest at the London
Interbank Offered Rate (LIBOR) (as determined and published from time to time) plus four percent (4%), provided that the
floor of such interest rate is 4.25%. The promissory note is payable on demand by the Company,
may be voluntarily prepaid at any time, and must be repaid prior to the Joint Venture making any distributions, other than advances
for tax withholdings, to its members.
Each of the Company and LAKR has also entered into a services
agreement with the Joint Venture, pursuant to which they would provide certain corporate and administrative services to the Joint
Venture. The initial service fee payable by the Joint Venture to LAKR is $800,000 for the first year which will be renegotiated
each year thereafter. LAKR will perform services including merchandising, marketing, online operations, and customer service. The
initial annual service fee payable by the Joint Venture to the Company is 5% of the JV’s revenues plus actual shipping costs
and expenses. The Company will perform services including 3PL, financial reporting, accounting, and forecasting.
The LLC Agreement, contribution agreements and service agreements
contain additional representations, warranties, indemnification and other provisions customary for transactions of this nature.
The foregoing summary of the LLC Agreement and related documents
are qualified in its entirety by reference to Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 that are incorporated herein by reference.