Item 1.01 Entry into a Material Definitive Agreement.
BRPI Acquisition Co LLC (“BRPAC”),
a Delaware corporation, United Online, Inc., a Delaware corporation (“UOL”) and YMax Corporation, a Delaware corporation
(“YMax”; and, together with BRPAC and UOL, the “Borrowers”), indirect wholly owned subsidiaries of B. Riley
Financial, Inc. (the “Company”), in the capacity of borrowers, entered into a Credit Agreement (the “Credit Agreement”)
dated December 19, 2018, with the Banc of California, N.A. in the capacity as agent and lender and with the other lenders party
thereto. Certain of the Borrowers’ U.S. subsidiaries are guarantors of all obligations under the Credit Agreement and are
parties to the Credit Agreement in such capacity (collectively, the “Secured Guarantors”; and, together with the Borrowers,
the “Credit Parties”). In addition, the Company and B. Riley Principal Investments, LLC, the parent corporation of
BRPAC 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 membership interests of the BRPAC are pledged as collateral. The Credit
Agreement replaced the prior credit facility maintained by UOL and its direct and indirect subsidiaries that was terminated with
a zero ($0) balance on December 12, 2018.
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 Credit
Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties, (b) 65% of the equity interests in United
Online Software Development (India) Private Limited, a private limited company organized under the laws of India and (c) 65% of
the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel. Such security interests
are evidenced by pledge, security and other related agreements.
The proceeds of the Credit Agreement will
be used to refinance a portion of the purchase price of the recently closed acquisition of magicJack VocalTec LTD. and to pay related
costs.
The credit facilities (the “Credit
Facilities”) under the Credit Agreement consist of: (a) a term credit facility under which the Borrowers may borrow up to
USD $80,000,000 on the closing date with a final maturity date of five years from the closing date; and (b) an optional, uncommitted
accordion term loan credit facility under which the Borrowers may borrow up to USD $10,000,000 with a final maturity date of five
years from the closing date.
Borrowings under the Credit Agreement will
bear interest at a rate equal to (A) the LIBOR Rate for Eurodollar loans, plus (B) the applicable margin rate, which ranges from
two and one-half percent (2.5%) to three percent (3.0%) per annum, based upon the Borrowers’ ratio of consolidated funded
indebtedness to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the preceding four (4) fiscal
quarters or other applicable period. Interest payments are to be made each one, three or six months.
The Borrowers paid a commitment fee and
an arrangement fee, each based on a percentage of the aggregate commitments, in each case upon the closing of the Credit Agreement.
Amounts outstanding under the Credit Facilities are due in quarterly installments commencing on March 31, 2020 with any remaining
amounts outstanding due at maturity.
The Credit Agreement contains certain negative
covenants, including those limiting the Credit Parties’, and their 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 Credit Parties 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
Facilities.