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Item 1.01.
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Entry into a Material Definitive Agreement.
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Comvest Overview
On June 7, 2018, Vintage Stock
Affiliated Holdings LLC (“Holdings”) and Vintage Stock, Inc. (the “Borrower”), each subsidiaries of
Live Ventures Incorporated (the “Company”), the registrant, entered into an Amended and Restated Credit Agreement
(the “Credit Agreement”) by and among Borrower, Holdings, the lenders party thereto and Comvest Capital IV, L.P.
(“Comvest”), as agent. The Credit Agreement provides for a $24.0 million secured term loan (the “Term
Loan”). The proceeds of the Term Loan, together with a cash equity contribution of approximately $4.0 million from the
Company to the Borrower, will be used by the Borrower (i) to refinance and terminate the Borrower’s credit
facility (the “Prior Credit Facility”) with Capitala Private Credit Fund and certain of its affiliates, as
lenders, and Wilmington Trust National Association, as agent, (ii) to pay transaction costs, and (iii) for the
Borrower’s working capital and other general corporate purposes. In connection with the closing of the refinancing
transaction with Comvest, all defaults under the Prior Credit Facility were extinguished.
The Term Loan matures on May 26, 2023 and
is subject to amortization of 12.5% (decreasing to 10% upon the Borrower’s senior leverage ratio being less than 1.50 times
the Borrower’s EBITDA (as defined in the Credit Agreement)) of principal per annum payable in equal quarterly installments
plus, to the extent the Borrower generates excess cash flow (as defined in the Credit Agreement), a percent of such excess cash
flow (ranging from 50% to 100%), all in accordance with the terms of the Credit Agreement.
Interest
Borrowings under
the Credit Agreement bear interest at an interest rate equal to the London Interbank Offered Rate (“LIBOR”) plus the
applicable margin. The applicable margin ranges from 8.00% to 9.50% per annum (subject to a LIBOR floor of 1.00%) and is determined
based on the Borrower’s senior leverage ratio pricing grid. The applicable margin during the first six months following the
closing is 9.50%.
Prepayments
Under the Credit Agreement,
any and all mandatory prepayments arising from any voluntary act of the Borrower are subject to a prepayment premium, ranging from
5.00% of the principal amount prepaid plus a make-whole amount to 1.00%, depending on when the mandatory prepayment is
made. There is no prepayment premium after June 7, 2021.
Collateral and
Guarantors
The Term
Loan is secured by a pledge of substantially all of the assets of the Borrower and a pledge of the capital stock of the
Borrower. In addition, the Company is guaranteeing (the “Sponsor Guaranty”) that portion of the Term Loan that
results in the Borrower’s senior leverage ratio being greater than 2.30:1.00, and only for so long as such ratio
exceeds 2.30:1.00. The Sponsor Guaranty terminates on the date that the Borrower’s senior leverage ratio is less
than 2.30:1.00 for two consecutive fiscal quarters.
Restrictive
Covenants and Other Matters
The
Credit Agreement contains customary representations and warranties, events of default, affirmative covenants, and negative
covenants, which impose restrictions on, among other things, the ability of the Borrower to make investments, pay dividends,
sell assets, and to incur additional debt and liens. In addition, the Credit Agreement requires the Borrower to maintain (i)
at all times as the
senior leverage ratio
is greater than 1.5, a minimum amount
of EBITDA, (ii) a maximum senior leverage ratio, (iii) a minimum fixed charge coverage ratio, and (iv) at all times as the
senior
leverage ratio
is greater than 1.5, a minimum amount of year-over-year same store
sales. Subject to certain exceptions, the Credit Agreement restricts the amount of capital expenditures the Borrower may make
during any fiscal year. The Credit Agreement permits the Borrower to exercise an equity cure (subject to certain restrictions
in the Credit Agreement) by receiving cash contributions that will be included in the calculation of EBITDA on a pro forma
basis.
The
foregoing descriptions of the Credit Agreement and the Sponsor Guaranty do not purport to be complete and are qualified
in their entirety by reference to the complete text of such agreements, copies of which are attached hereto as Exhibits
10.1 and 10.2, respectively, and are incorporated herein by reference
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Amendment to Loan with Texas Capital Bank
On June 7, 2018, the Borrower and
Texas Capital Bank, National Association (“TCB”) entered into a Third Amendment to Loan Agreement
(the “Third Amendment”), which amends certain terms of the Loan Agreement dated November 3, 2016, as amended to
date (the “TCB Loan Agreement”), between TCB and the Borrower. The Third Amendment (i) reduces the interest rate
of borrowings under the TCB facility from LIBOR plus 2.75% to LIBOR plus 2.25%, effective as of April 7, 2018, (ii) reduces
the maximum amount of borrowing under the TCB facility to $12.0 million, (iii) removes as a condition precedent to
borrowing under the facility that no material adverse change has occurred, and (iv) adds as an event of default the failure
of Rodney Spriggs, the President and CEO of the Borrower, ceasing to be actively involved in the day-to-day management and
operations or is involved in the day-to-day management and operations in a materially different capacity of the Borrower. In
addition, certain other amendments were made to the Third Amendment to conform the TCB Loan Agreement to the Credit
Agreement.
The foregoing description of the Third Amendment
does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Amendment, a copy of
which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.