Item 1.01. Entry into Material Definitive Agreement
On December 27, 2017, Liberated Syndication, Inc. (the
“Company”) entered into and consummated a share
purchase agreement (the “Share Purchase Agreement”)
with Kevin Martin (“Seller”), pursuant to which the
Company acquired all the outstanding capital stock of pair
Networks, Inc., a Pennsylvania corporation (“pair
Networks”), in exchange for consideration of $16,063,778,
consisting of $13,563,788 in cash, $4,190,461 of which was used to
pay pair Network’s net debt and transaction expenses), and
$2,500,000 million in stock, consisting of 1,579,613 shares of the
Company’s common stock, par value $0.001 per share. The value
of the shares of the Company’s common stock issued as share
consideration was based on
the average closing daily price
per share of the Company’s common stock in the OTCQB®
Venture Market for each of the 30 trading days ending on the day
immediately preceding the date of the Share Purchase Agreement.
Pursuant to the Share Purchase
Agreement, $1.0 million of the share portion of the consideration,
based on the average price, was placed into an escrow account to
serve as security for the indemnification obligations of Seller for
the benefit of the Company.
The foregoing description of the Share Purchase Agreement is
qualified in its entirety by reference to the full text of the
Share Purchase Agreement, which is incorporated herein by reference
and is filed as Exhibit 2.1 to this Form 8-K.
On December 27, 2017, the Company entered into a loan agreement
(the “Loan Agreement”) among the Company, Webmayhem,
Inc., a Pennsylvania corporation and a wholly-owned subsidiary of
the Company (“Webmayhem”), and pair Networks (pair
Networks, together with Libsyn and Webmayhem, the
“Borrowers”), and First Commonwealth Bank, a
Pennsylvania bank and trust company (the
“Bank”).
The Loan Agreement provides for: (i) a revolving credit facility
pursuant to which the Borrowers may borrow up an aggregate
principal amount not to exceed $2,000,000 (the “Revolving
Credit Facility”); and (ii) a term loan in a principal amount
equal to $8,000,000 (the “Term Loan” and, together with
the Revolving Credit Facility, the “Facility”). A
portion of the Revolving Credit Facility, up to $500,000, may be
used for standby letters of credit for the account of any of the
Borrowers.
The Term Loan is repayable in quarterly installments of $400,000
commencing on March 30, 2018 and on the last day of each June,
September, December and March thereafter, through and including
September 30, 2022. Accrued interest is payable in arrears not less
frequently than quarterly. The remaining unpaid principal balance
of the Term Loan, together with accrued interest thereon, is due
and payable in full on December 27, 2022.
The Borrowers have granted the Bank a blanket security interest in
their respective assets, and the Company has pledged the stock of
Webmayhem and pair Networks to the Bank, as security for their
obligations under the Loan Agreement.
Borrowings under the Facility are at variable rates which are, at
the borrowers’ option, tied to LIBOR (London Interbank
Offered Rate) plus an applicable rate or a prime rate. Interest
rates are subject to change based on the borrowers’ combined
cash balances. The Facility contains covenants that may have the
effect of limiting the ability of the borrowers to, among other
things, merge with or acquire other entities, enter into a
transaction resulting in a change in control, create certain new
liens, incur certain additional indebtedness, engage in certain
transactions with affiliates, engage in new lines of business or
sell a substantial part of its assets. The Facility also requires
the borrowers to maintain certain consolidated fixed charge
coverage ratios and minimum liquidity balances.
The Facility also contains customary events of default, including
(but not limited to) default in the payment of principal or,
following an applicable grace period, interest, breaches of the
Company’s covenants or warranties under the Facility, payment
default or acceleration of certain indebtedness of the Company or
any subsidiary, certain events of bankruptcy, insolvency or
liquidation involving the Company or its subsidiaries, certain
judgments or uninsured losses, changes in control and certain
liabilities related to ERISA based plans.
On December 27, 2017, the Company drew $10,000,000 under the
Facility to finance a portion of the cash consideration payable to
the Seller pursuant to the Share Purchase Agreement described under
Item 1.01 above.
The foregoing description of the Loan Agreement is qualified in its
entirety by reference to the full text of the Loan Agreement, which
is incorporated herein by reference and is filed as Exhibit 10.1 to
this Form 8-K.