Item 1.01 Entry into a Material Definitive Agreement.
On April 13, 2017, United Online, Inc., a Delaware corporation
and an indirect wholly owned subsidiary of B. Riley Financial, Inc. (the “Company”), in the capacity as borrower (“United
Online” or “Borrower”) entered into a Credit Agreement (the “Credit Agreement”) with the Banc of
California, N.A. in the capacity as agent and lender. Each of United Online’s U.S. subsidiaries is a guarantor of all obligations
under the Credit Agreement and are parties to the Credit Agreement in such capacity (collectively, the “Secured Guarantors”).
In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of the Borrower and a subsidiary of the
Company, are guarantors of the obligations under the Credit Agreement pursuant to standalone guaranty agreements pursuant to which
the shares of outstanding capital stock of the Borrower are pledged as collateral.
The obligations under the Credit Agreement are secured by
first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Borrower and the Secured
Guarantors, including a pledge of (a) 100% of the equity interests of the Secured Guarantors and (b) 65% of the equity interests
in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India. Such
security interests are evidenced by pledge, security and other related agreements.
The proceeds of the Credit Agreement will be used (a)
for working capital and general corporate purposes and/or (b) to pay dividends or permitted tax distributions to parent, subject to the terms of the Credit Agreement.
The Credit Agreement provides for
a revolving credit facility under which Borrower may borrow (or request the issuance of letters of credit) up to USD
$20 million which amount is reduced by $1.5 million commencing on June 30, 2017 and on the last day of each calendar
quarter thereafter. The final maturity date is April 13, 2020. Borrowings under the Credit Agreement will bear interest
at a rate equal to (A) (i) the base rate (the greater of the federal funds rate plus one half of one percent (.5%), or the
prime rate) for U.S. dollar loans or (ii) at the Borrower’s option, the LIBOR Rate for Eurodollar loans, plus (B)
the applicable margin rate, which ranges from two percent (2%) to three and one-half percent (3.5%) per annum, based upon
the Borrower’s ratio of funded indebtedness to adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) for the preceding four (4) fiscal quarters. Interest payments are to be made each one, three or six
months for Eurodollar loans, and quarterly for U.S. dollar loans.
The Borrower paid a commitment fee equal to 1.00% of the
aggregate commitments upon the closing of the Credit Agreement. The Credit Agreement also provides for an unused line fee payable
quarterly, in arrears, in an amount equal to: (a) 0.50% per annum times the amount of the unused revolving commitment that is less
than or equal to the amount of the cash maintained in accounts with the agent (as depositary bank); plus (b) 1.00% per annum times
the amount of the unused revolving commitment that is greater than the amount of the cash maintained in accounts with the agent
(as depositary bank). Any amounts outstanding under the Credit Facility are due at maturity.
The Credit Agreement contains certain negative covenants,
including those limiting the Borrower’s and its subsidiaries’ ability to incur indebtedness, incur liens, sell or acquire
assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments
or pay dividends. In addition, the Credit Agreement requires the Borrower and its subsidiaries to maintain certain financial ratios.
The Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default, including
payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs,
the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding Credit Agreement.