| ITEM 1.01 |
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT |
Asset Purchase Agreement
On September 29, 2023, Salem Web Network, LLC (“SWN”), a subsidiary of Salem Media Group, Inc. (the “Company” or “Salem”) entered into an Asset Purchase Agreement (“APA”) to sell its Salem Church Products business to Gloo Acquisition Corp I, LLC (“Gloo”) for $30,000,000 (the “Transaction”). Upon closing of the Transaction, SWN shall receive $22,500,000 in cash and a promissory note in the principal amount of $7,500,000 (the “Note”), which Note will be secured by a subordinated security interest in the acquired assets and guaranteed by certain personal guarantees. The APA also provides that SWN, Salem and any of their affiliates, shall not engage in, or assist others in engaging in, the Salem Church Products church resources ecommerce retail business (the “Business”) or any competing business anywhere within the United States or any other jurisdiction in which the Business currently operates for a period of five (5) years after the closing date. The APA also contains customary representations, warranties, covenants, conditions to closing, and indemnification obligations of Salem and Gloo. The Transaction is expected to close on or about November 1, 2023 (the “Closing”).
As part of the Transaction, Salem Communications Holding Corporation (“SCHC”), also a subsidiary of Salem, and Gloo will enter into a Transition Services Agreement at Closing pursuant to which SCHC will support Gloo through the migration in the areas of Ecommerce/Revenue Operations, Accounting, Human Resources, technical Resource Support, and Software, among other support functions. In addition to the above agreements, Salem and Gloo Holdings, LLC (“Gloo Holdings”) will enter into a “Series A Preferred Membership Unit Purchase Agreement” (“Membership Interest Purchase Agreement”) pursuant to which Gloo Holdings will issue 833,333 Series A Preferred Membership Units (the “Units”) to Salem. As part of the Membership Interest Purchase Agreement, Salem and certain related parties of Gloo Holdings (the “Obligors”) will enter into a Put Agreement pursuant to which, any time after January 1, 2027, Salem may require the Obligors to purchase the Units for a price of not less than $10,000,000. In exchange for the Units, effective at the Closing, Salem shall provide Gloo Holdings a credit in the amount of $10,000,000 (“Advertising Credit”) to be used by Gloo Holdings and its controlled affiliates to purchase fully pre-emptible advertising inventory consisting of spot and digital advertising and promotions on radio stations and websites and other digital media owned and operated by Salem and its subsidiaries, which Advertising Credit must be used between the Closing and December 31, 2028.
On October 4, 2023, the Company issued a press release announcing the plan to sell its Salem Church Products business and the entry into the Asset Purchase Agreement. A copy of the press release is being filed as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.
| ITEM 9.01 |
FINANCIAL STATEMENTS AND EXHIBITS |
(d) Exhibits. The following exhibits are filed with this current report on Form 8-K: