LIVE Live Ventures Inc

Item 1.01. Entry into a Material Definitive Agreement.

Acquisition of Flooring Liquidators and related entities

On January 18, 2023, Live Ventures Incorporated, a Nevada corporation (the “Company” or “Parent”), through its wholly-owned subsidiary, Flooring Affiliated Holdings, LLC, a Delaware limited liability company (“Flooring Affiliated” or “Buyer”), acquired 100% of the issued and outstanding equity interests (the “Equity Interests”) of Flooring Liquidators, Inc., a California corporation (“Flooring Liquidators”), Elite Builder Services, Inc., a California corporation (“Elite”), 7 Day Stone, Inc., a California corporation (“7D”), Floorable, LLC, a California limited liability company (“Floorable”), K2L Leasing, LLC, a California limited liability company (“K2L”), and SJ & K Equipment, Inc., a California corporation (“SJ & K” and collectively, the “Acquired Companies” and such acquisition, the “Acquisition”).

The Acquisition was pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with an effective date of January 18, 2023 (the “Effective Date”) by and among the Company (solely for the purposes of Section 3.4 thereof), Buyer, Stephen J. Kellogg, as the Seller Representative of the equityholders of the Acquired Companies and individually in his capacity as an equityholder of the Acquired Companies (“Kellogg” or the “Seller Representative”), and the other equityholders of the Acquired Companies (collectively with Kellogg, the “Sellers”). The purchase price for the Equity Interests was $85.0 million less Estimated Indebtedness (other than Repaid Indebtedness), Estimated Selling Expenses (inclusive of $1.2 million of transaction bonuses which are deemed to be assumed liabilities for accounting purposes, such that the net purchase price for accounting purposes is $83.8 million), the RSU Value and the Retention Bonus (each as defined in the Purchase Agreement) (subject to adjustment, the “Purchase Price”). On the Effective Date, the Purchase Price was paid as follows:

The Purchase Agreement contains customary representations, warranties, covenants, and agreements of the Buyer, Sellers, and Kellogg, including indemnification rights in favor of the Buyer.

On the Effective Date, Flooring Liquidators entered into an agreement for the continued employment of Kellogg as Chief Executive Officer of Flooring Liquidators (the “Kellogg Employment Agreement”), and Elite executed an agreement for the continued employment of Benjamin Rowe (“Rowe”) as President of Elite (the “Rowe Employment Agreement” and together with the Kellogg Employment Agreement, the “Employment Agreements”). The Employment Agreements provide that each of Kellogg and Rowe, will be entitled to, among other items, annual base salaries of $600,000 and $300,000, respectively, eligibility for an annual performance-based bonus, and, under certain circumstances, severance benefits contingent upon the execution of a general release of claims in favor of Flooring Liquidators and Elite, as applicable, following their termination of employment. Each Employment Agreement contains confidentiality, non-competition, non-solicitation, and non-disparagement provisions. In addition, for his continued employment, Rowe is eligible for a retention bonus of $1.0 million, payable after five years and conditioned on Rowe’s continued employment by Elite or another Acquired Company. In the event Rowe gives notice of termination of employment before such payment date, is terminated prior to the payment date or has violated or failed to comply with any covenants or agreements set forth in the Rowe Employment Agreement or a restrictive covenant agreement with the Buyer, the retention bonus will be paid to the Stephen J. Kellogg Revocable Trust Dated April 17, 2015. Additionally, in connection with the Acquisition, Rowe was issued 29,110 RSUs pursuant to a Restricted Stock Unit Agreement, which vest after five years and are conditioned on Rowe’s continued employment by Elite or another Acquired Company. Such RSUs will be forfeited and instead the Kellogg 2022 Family Irrevocable Nevada Trust will receive an equivalent number of shares of Common Stock in the event Rowe gives notice of termination of employment before such vesting date, or is terminated prior to such vesting date.

On the Effective Date, pursuant to the Purchase Agreement, Buyer issued the Note to the Kellogg Trusts for $34.0 million. The Note is interest-free for one year and begins to accrue interest on January 18, 2024 at a rate of 8.24% per annum (10.0% following certain specified events of default) with quarterly accrued interest payable at the end of each quarter beginning March 31, 2024. The Note matures and all outstanding principal and interest thereunder become due on January 18, 2028, five years from the Effective Date. The Kellogg Trusts’ right to payment is subordinated to all of Buyer’s indebtedness and liabilities to Eclipse Business Capital LLC (“Eclipse”), and the Buyers’ obligations under the Note are guaranteed by the Company.

On the Effective Date, in order to fund a portion of the Cash Amount, Flooring Affiliated issued a subordinated promissory note (the “ICG Note”) in the amount of $5,000,000 to Isaac Capital Group LLC (“ICG” or “Isaac Capital Group”). Jon Isaac, Live Ventures’ President and Chief Executive Officer, is the President and sole member of ICG. As of December 31, 2022, Mr. Isaac is the beneficial owner of approximately 50.6% of the outstanding capital stock (on an as-converted and as-exercised basis) of Live Ventures, which percentage includes ICG’s beneficial ownership of approximately 42.6% of the outstanding capital stock (on an as-converted and as-exercised basis) of Live Ventures.

The ICG Note accrues interest on the outstanding balance, compounded monthly, from the Effective Date through the date on which the ICG Note is paid in full, at a rate equal to the lesser of (i) 12.0% per annum (14.0% following certain specified events of default) (the “Base Interest Rate”), and (ii) the Maximum Lawful Rate (as defined therein). Pursuant to a subordination agreement between Flooring Affiliated, Isaac Capital Group and Eclipse (the “Subordination Agreement”), the ICG Note is subordinated to the Note. Subject to the Subordination Agreement, the outstanding principal amount of the ICG Note and all accrued but unpaid interest thereon shall be due and payable on January 18, 2028. In connection with the issuance of the ICG Note, Flooring Affiliated paid a closing fee of $100,000 to Isaac Capital Group. The ICG Note is guaranteed by the Company. Live Ventures equity was not issued in connection with the ICG Note.

In connection with the Acquisition, in order to fund a portion of the Cash Amount, the Company issued a promissory note (the “Spriggs Note”) in favor of Spriggs Investments LLC (“Spriggs Investments”), a limited liability company whose sole member is Rodney Spriggs, the President and Chief Executive Officer of Vintage Stock, Inc., a wholly-owned subsidiary of Live Ventures, that memorializes a loan by Spriggs Investments to Live Ventures in the initial principal amount of $1,000,000 (the “Spriggs Loan”). The Spriggs Loan matures on July 31, 2024 and bears simple interest at a rate of 12.0% per annum. Interest is payable in arrears on the last day of each month, commencing January 31, 2023. The Company may prepay the Spriggs Loan in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid, together with accrued interest thereon to the date of prepayment; provided, however, that, if the Company prepays the Spriggs Loan in whole or in part on or prior to July 19, 2023, then the Company would also be obligated to pay a prepayment penalty to Spriggs Investments in an amount equal to $100,000, less the amount of any interest paid or to be paid by the Company up to the date of prepayment. The Spriggs Note contains events of default and other provisions customary for a loan of this type. The Spriggs Loan was guaranteed by Jon Isaac and by ICG.

As of December 31, 2022, Mr. Spriggs is a record and beneficial owner of less than 1.0% of the outstanding Common Stock of Live Ventures.

The foregoing summary descriptions of certain terms and provisions of the Purchase Agreement, the Employment Agreements, the Restricted Stock Unit Agreement, the Note, the ICG Note and the Spriggs Note and Spriggs Loan do not purport to be complete and are qualified in their entirety by reference to the full text of (i) the Purchase Agreement, a copy of which is attached as Exhibit 10.105 to this Current Report on Form 8-K, (ii) the Kellogg Employment Agreement, a copy of which is attached as Exhibit 10.106 to this Current Report on Form 8-K, (iii) the Rowe Employment Agreement, a copy of which is attached as Exhibit 10.107 to this Current Report on Form 8-K, (iv) the Restricted Stock Unit Agreement, a copy of which is attached as Exhibit 10.108 to this Current Report on Form 8-K, (v) the Note, a copy of which is attached as Exhibit 10.109 to this Current Report on Form 8-K, (vi) the ICG Note, a copy of which is attached as Exhibit 10.110 to this Current Report on Form 8-K, and (vii) the Spriggs Note, a copy of which is attached as Exhibit 10.111 to this Current Report on Form 8-K.