XCEL BRANDS, INC. : Creation of a direct financial obligation or obligation under an off-balance sheet arrangement of a holder, financial statements and exhibits (Form 8-K)

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under a

Off-balance sheet sale arrangement of a registrant.

At December 30, 2021, Xcel, as the borrower, and its wholly owned subsidiaries, Brands IM, 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 License, LLC, as guarantors (each a “guarantor” and collectively, the “guarantors”), have entered into a loan and guarantee agreement (the “Loan Agreement”) with Agent FEAC, LLC (“FEAC”), as principal arranger and as administrative agent and guarantee agent for the lenders parties to the loan agreement (in this capacity, the “Administrative Agent”), and financial institutions who are parties to it as lenders (the “Lenders”). Under 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 debt and to pay the fees, costs and expenses incurred in connection with entering into the loan agreement, and may be used for the purpose of making acquisitions by Xcel or its subsidiaries which are authorized under the loan agreement and for working capital purposes.

The loan agreement also provides that Xcel may request lenders to provide additional term loans of up to $ 25,000,000 (the “Additional Term Loans”). The terms and conditions of the additional term loans will be agreed in an amendment to the loan agreement prior to funding by the additional term loans.

When entering into the loan agreement, Xcel paid closing costs to the administrative agent (i) in the amount of $ 213,750 for the benefit of each Lender and (i) up to $ 75,000 for the benefit of each Lender who was party to the existing debt refinanced by the Term Loan.

Term loans mature on April 14, 2025. The principal of the term loans will be payable in quarterly installments of $ 625,000 on each of March, 31st, June 30th,
September 30 and the 31st of December of each year, from March 31, 2022.

Xcel has the right, upon thirty (30) days written notice, to prepay all or part of any term loans or additional term loans and accrued and unpaid interest thereon; provided that any prepayment applies first to prepayment of term loans in full and then to incremental term loans.

If term loans are prepaid in whole or in part on or before the second anniversary of the closing date (including as a result of an event of default), Xcel will pay a prepayment premium as follows: a amount equal to the amount of the principal amount of the prepaid term loan multiplied by: (i) five percent (5.00%) if this prepayment occurs on or before the first anniversary of the closing date; (ii) two percent (2.00%) if such early payment occurs at any time after the first anniversary of the Closing Date and no later than 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 guaranteed by all assets of Xcel and the Guarantors (as well as any affiliates formed or acquired which becomes a creditor party to the Loan Agreement) and, subject to certain limitations contained in the Loan Agreement, the participation of the Guarantors (as well as any subsidiary formed or acquired which becomes a creditor party to the Loan Agreement).

Xcel has also granted the Lenders a right of first offer to finance any acquisition the consideration for which will therefore be paid other than in cash from Xcel or the Guarantors, the issuance of an equity interest of Xcel or the issuance of notes to the relevant seller. .

Interest on term loans will accrue at LIBOR plus 7.5% per annum. Interest on 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 annual interest rate for dollar deposits for an interest period equal to three months as published by Bloomberg or a comparable listing service or successor to approximately 11:00 (London hour) two working days before the last working day of each calendar month and (b) 1.0% per annum.

The loan agreement contains customary restrictive covenants, including reporting obligations, brand preservation and the following financial covenants of Xcel (on a consolidated basis with the guarantors and any subsidiaries formed or subsequently acquired that become a part of credit under the loan agreement):

?liquid assets of (i) during the first fiscal month of each fiscal quarter
$2,500,000 if cash payments from revenue licenses during the immediately
succeeding 30 days are expected to be at least $4,000,000 and (ii) at least
$3,000,000 at all other times;
?a fixed charge coverage ratio for (i) the fiscal quarter ending September 20,
2022 of not less than 1.00 to 1.00 and (ii) the twelve fiscal month period
ending at the end of each fiscal quarter commencing with the fiscal quarter
ending December 31, 2022 of not less than 1.00 to 1.00;
?a loan to value ratio not to exceed 50%;
?minimum revenues of not less than the amounts set forth below at the end of the
appliable fiscal period set forth below:




Fiscal Period                                            Minimum Revenue
April 1, 2021 thru December 31, 2021                     $16,445,000

For the twelve month period ending March 31, 2022

                                                     $23,500,000

For the twelve month period ending June 30, 2022

                                                     $24,491,000
For the trailing twelve month periods ending
September 30, 2022 and each Fiscal Quarter end
thereafter                                               $25,000,000

the sum of (i) eligible stocks plus (ii) eligible cash insofar as it is not used to meet the minimum amount of accounts (as defined below) plus (iii) eligible accounts in the to the extent that they are not used to meet the minimum amount Account amount (as defined below) of at least $ 1,250,000 at any time (“Minimum inventory amount”); and the sum of (i) eligible accounts plus (ii) eligible cash to the extent that it is not used to meet the minimum amount of stock of at least $ 1,500,000 at any time (“Minimum Account Amount”); and? EBITDA of at least $ 2,000,000 for the 6 month fiscal period ending June 30, 2022.

Item 9.01 Financial statements and supporting documents

Exhibitions

10.1 Loan and guarantee contract dated December 30, 2021

104 Interactive cover page data file (integrated into the online XBRL document)

Source link