Stock Purchase Agreement
On December 6, 2021, Eros STX Global Corporation, an Isle of
Man company limited by shares (the “Company”), entered into
a Stock Purchase Agreement (the “Purchase Agreement”) by and
among the Company, England Holdings 3, Inc., a Delaware corporation
(“Holdings”), and ST Acquisition 1221, Inc., a Delaware
corporation (“Buyer”), and an affiliate of The Najafi
Companies (“Najafi”), which provides for the sale by the
Company of all of the issued and outstanding capital stock of
Holdings to Buyer. Holdings is the parent entity of the Company’s
STX Entertainment subsidiary (“STX”).
On the terms and subject to the conditions of the Purchase
Agreement, at closing, the Buyer will pay a cash amount equal to
$173 million, minus the $2.0 million deposit previously
paid by the Buyer, subject to post-closing adjustments for
transaction expenses and debt at closing. A portion of the purchase
price will be deposited into an escrow account to serve as security
for certain income taxes.
Until January 19, 2022, the Company has a customary
go-shop right to solicit or
discuss with third parties competing proposals, subject to a
topping right by the Buyer as specified in the Purchase Agreement.
After January 19, 2022, the Company is subject to a customary
restriction that prevents it from engaging in solicitations or
discussions with third parties regarding a proposal, subject to a
fiduciary out where the board of directors of the Company
determines in good faith that a proposal received during the
go-shop period would
reasonably be expected to lead to a superior proposal.
The completion of the transactions contemplated by the Purchase
Agreement are subject to customary closing conditions, including
the Buyer’s lender’s confirmatory due diligence. The Purchase
Agreement also includes customary representations and warranties of
the Company and the Buyer that terminate at closing, and each party
has agreed to customary covenants, including, among others,
covenants relating to the conduct of business during the interim
period between execution of the Purchase Agreement and the closing
and the non-solicitation
obligations described above.
The Purchase Agreement provides for certain customary termination
rights for both the Company and the Buyer, including in the event
the conditions to their respective obligations have not been
satisfied by March 6, 2022. The Company has agreed to pay
to the Buyer a termination fee of $4.5 million and return its
$2.0 million deposit if the Company terminates the Purchase
Agreement in order to enter into a superior proposal. In addition,
the Buyer has agreed to pay to the Company a termination fee of
$4.5 million (less its $2.0 million deposit) under
certain circumstances.
Credit Facilities
As previously announced, upon execution of the Purchase Agreement,
the maturity date and the delivery date of financial statements
under the Senior Credit Agreement of STX, were extended to
January 4, 2022, and may be further extended to
February 3, 2022 if the Purchase Agreement remains in effect
on January 4, 2022. In addition, STX previously entered into
an amendment to its subordinated credit agreement to, among other
things, permit STX to promptly deliver the required financial
statements once they become available. As of December 1, 2021,
$124.0 million remained outstanding under the Senior Credit
Agreement, and $24.0 million remained outstanding under the
subordinated credit agreement. It is currently anticipated that all
such amounts will be repaid in full at the closing of the
transactions contemplated by the Purchase Agreement.
Important Note
The representations, warranties and covenants contained in the
Purchase Agreement described above were made only for purposes of
the Purchase Agreement and as of the specified dates set forth
therein, were solely for the benefit of the parties to the Purchase
Agreement, may be subject to limitations agreed upon by those
parties, including being qualified by confidential disclosures made
for the purposes of allocating contractual risk between those
parties instead of establishing particular matters as facts, and
may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors.
Investors should not rely on these representations, warranties or
covenants or any descriptions thereof as characterizations of the
actual state of facts or conditions of the parties or any of their
respective subsidiaries or affiliates. Moreover, information
concerning the subject matter of the representations, warranties
and covenants may change after the date of the Purchase Agreement,
which subsequent information may or may not be fully reflected in
the Company’s public disclosures. Accordingly, the Purchase
Agreement is described in this filing only to provide investors
with information regarding the terms of such agreement and not to
provide investors with any other factual information regarding the
parties or their respective businesses.