Item 1.01. Entry into a Material
Definitive Agreement.
On May 9, 2022,
1847 Goedeker Inc. (the “Company”), Appliances Connection Inc. (“Appliances Connection” and, together with the
Company, the “Borrowers”) and certain subsidiaries of the Borrowers (“Guarantors”) entered
into a Credit Agreement (the “Credit Agreement”) by and among the Borrowers, the Guarantors, each of the lenders identified
therein (the “Lenders”) and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (the
“Agent”), pursuant to which the Lenders have agreed to make available to the Borrowers senior secured credit facilities in
the aggregate initial amount of $140,000,000, including (i) a $100,000,000 term loan (the “Term Loan”) and (ii) a $40,000,000
revolving credit facility (the “Revolving Loan”), which revolving credit facility includes a $2,000,000 swingline subfacility
(the “Swing Line Loan” and together with the Term Loan and the Revolving Loan, the “Loans”) and a $2,000,000 letter
of credit subfacility, in each case, on the terms and conditions contained in the Credit Agreement. The Loans may from time to time be
further evidenced by separate promissory notes issued by the Borrowers. On May 9, 2022, the Company borrowed the entire amount of the
Term Loan, but no Revolving Loans have been made as of May 9, 2022.
The
proceeds of the Term Loan were applied, among other uses, to prepay the obligations in full under the Borrowers’ existing first
lien term loan credit agreement with Manufacturers and Traders Trust Company, as agent thereunder (the “Existing Credit Agreement”).
On the Closing Date, in connection with prepayment of the obligations under the Existing Credit Agreement, the Existing Credit Agreement
was terminated.
Each
of the Loans matures in May 2027 (the “Maturity Date”). The Loans will bear interest on the unpaid principal amount thereof
as follows: (i) if it is a Loan bearing interest at a rate determined by the Base Rate (as defined in the Credit Agreement), then at the
Base Rate plus the Applicable Rate (as defined in the Credit Agreement) for such Loan; (ii) if it is a Loan bearing interest at a rate
determined by Term SOFR (as defined in the Credit Agreement), then at Term SOFR plus the Applicable Rate for such Loan; and (iii) if it
is a Swing Line Loan, then at the rate applicable to Loans bearing interest at a rate determined by the Base Rate plus the Applicable
Rate for such Loan. The Term Loan initially bears interest at Term SOFR plus Applicable Rate, with an initial interest period of one month.
The Company may elect to continue or convert the existing interest rate benchmark for the Term Loan from Term SOFR to Base Rate, and may
elect the interest rate benchmark for future Revolving Loans as either Term SOFR or Base Rate (and, with respect to any Loan made using
Term SOFR, may also select the interest period applicable to any such Loan), by notifying the Agent and Lenders from time to time in accordance
with the provisions of the Credit Agreement. Interest is payable in arrears on each Interest Payment Date (as defined in the Credit Agreement).
Notwithstanding the foregoing, following an event of default, the Loans will bear interest at a rate that is 2% per annum higher than
the interest rate then in effect for the applicable Loan.
Commencing
on September 30, 2022, through and including June 30, 2023, the Borrowers must repay the principal amount of the Term Loan in quarterly
installments of $1,250,000 each, payable on the last business day of each March, June, September and December. Commencing on September
30, 2023, through and including June 30, 2024, the Borrowers must repay the principal amount of the Term Loan in quarterly installments
of $1,875,000 each, payable on the last business day of each March, June, September and December. Commencing on September 30, 2024, through
the Maturity Date, the Borrowers must repay the principal amount of the Term Loan in quarterly installments of $2,500,000 each, payable
on the last business day of each March, June, September and December. The remaining unpaid principal amount of the Term Loan must be repaid
on the Maturity Date, unless payment is sooner required by the Credit Agreement. Mandatory prepayments of Revolving Loans are required
if the amount borrowed at any time exceeds the commitment amount. Revolving Loans may be repaid and reborrowed at any time until the Maturity
Date, subject to to the terms and conditions set forth in the Credit Agreement.
The
Company may voluntarily prepay the Loans from time to time in accordance with the provisions of the Credit Agreement, and will be required
to prepay the Loans under certain limited circumstances as set forth in the Credit Agreement, including upon receipt of cash proceeds
in connection with certain specified asset sales, receipt of loss or condemnation proceeds or other cash proceeds received other than
in the ordinary course of business or upon receipt of cash proceeds from the incurrence of indebtedness that is not permitted under the
Credit Agreement, all as more specifically set forth in the Credit Agreement.
Under
the Credit Agreement, the Borrowers are required to pay certain fees to Agent, including, without limitation, a commitment fee of up to
0.25% per annum with respect to the unused portion of the Lenders’ revolving loan commitments, determined as set forth in the Credit
Agreement, and certain fees in connection with the issuance of any letters of credit under the Credit Agreement.
The
Credit Agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on any of
the Loans when due, or to pay any fees or other amounts due under the Credit Agreement; (ii) the occurrence of certain specified defaults
under other agreements to which the Company or its subsidiaries is a party; (iii) for the breach of certain specified covenants in the
Credit Agreement: (iv) if any representation, warranty or certification in the Credit Agreement or any document delivered in connection
therewith was incorrect in any material respect as of the date made; (v) in the case of any voluntary or involuntary bankruptcy, insolvency
or dissolution; (vi) in the case of the imposition of any money judgment, writ or similar process in an aggregate amount in excess of
$4,000,000 (in certain cases, to the extent not covered by insurance); or (vii) if a Change of Control (as defined in the Credit Agreement)
occurs.
The
Credit Agreement contains customary representations, warranties and affirmative and negative financial and other covenants for loans of
this type. The closing of the Loans was subject to customary closing conditions, including delivery of the security documents described
below.
The
Loans are guaranteed by the Guarantors and are secured by a first priority security interest in substantially all of the assets of the
Borrowers and the Guarantors pursuant to a security and pledge agreement (together with other documents entered or filed in connection
therewith, the “Security Agreement”) entered into on May 9, 2022 among the Borrowers, the Guarantors and the Agent, which
includes a pledge of all of the outstanding common stock of Appliances Connection and AC Gallery Inc., each of which is held by the Company,
and of all of the outstanding equity interests of the remaining Guarantors which is held by Appliances Connection.
The foregoing descriptions
of the Credit Agreement and the Security Agreement do not purport to be complete and are subject to, and qualified in their entirety by,
the full text of the Credit Agreement, which are attached as Exhibit 10.1 and Exhibit 10.2 to this Current Report on Form 8-K and incorporated
by reference herein.
On May 9, 2022, the Company
issued a press release relating to the Credit Agreement. A copy of the press release is attached hereto as Exhibit 99.1.