Item 1.01 Entry into a Material Definitive Agreement.
Stock Purchase Agreement
On December 22, 2020, 1847 Wolo Inc. (“1847 Wolo”),
a subsidiary of 1847 Holdings LLC (the “Company”), entered into a Stock Purchase Agreement (the “Purchase Agreement”)
among 1847 Wolo, the Company, Wolo Manufacturing Corp., a New York corporation and Wolo Industrial Horn & Signal, Inc., a New
York corporation (together, “Wolo”), and the sellers named therein (together, the “Sellers”), pursuant
to which 1847 Wolo agreed to acquire all of the issued and outstanding capital stock of Wolo (the “Shares”) for an
aggregate cash purchase price of $7,300,000, subject to adjustment as described below. Headquartered in Deer Park, NY and founded
in 1965, Wolo designs and manufactures horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment),
and offers vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles.
The purchase price is subject to a post-closing working capital
adjustment provision. Under this provision, the Sellers shall deliver to 1847 Wolo at the closing of the acquisition an unaudited
balance sheet of Wolo as of that date (the Preliminary Balance Sheet”). On or before the 75th day following the
closing of the acquisition 1847 Wolo shall deliver to the Sellers an audited balance sheet as of the closing date (the “Final
Balance Sheet”). If the net working capital reflected on the Final Balance Sheet (the “Final Working Capital”)
exceeds the net working capital reflected on the Preliminary Balance Sheet (the “Preliminary Working Capital”), 1847
Wolo shall, within seven days, pay to the Sellers an amount of cash that is equal to such excess. If the Preliminary Working Capital
exceeds the Final Working Capital, the Sellers shall, within seven days, pay to 1847 Wolo an amount in cash equal to such excess.
In addition to the post-closing working capital adjustment described
above, there is a target working capital adjustment. “Net Working Capital Target” is defined in the Purchase Agreement
as $4,250,000. At the closing, if Preliminary Working Capital exceeds the Net Working Capital Target, then the purchase price will
be increased at the closing by the amount of such difference. Similarly, if the Net Working Capital Target exceeds the Preliminary
Working Capital, then the purchase price will be reduced at the closing by the amount of such difference. The purchase price will
also be reduced by the amount of outstanding indebtedness of Wolo existing as of the closing date and the deducted amount will
be used to pay off any such indebtedness.
If the closing of the acquisition occurs after December 31,
2020, 1847 Wolo will indemnify and hold harmless Sellers for any amounts in respect of taxes payable by Sellers in connection with
the acquisition that are in excess of the amounts of taxes that would have been payable by Sellers in connection with the acquisition
if the closing had occurred on or prior to December 31, 2020.
The Purchase Agreement contains customary representations, warranties
and covenants, including a covenant that the Sellers will not compete with the business of Wolo for a period of three (3) years
following closing.
The Purchase Agreement also contains mutual indemnification
for breaches of representations or warranties and failure to perform covenants or obligations contained in the Purchase Agreement.
In the case of the indemnification provided by the Sellers with respect to breaches of certain non-fundamental representations
and warranties, the Sellers will only become liable for indemnified losses if the amount exceeds an aggregate of $10,000, whereupon
the Sellers will be liable for all losses that exceed the $100,000 threshold, provided that the liability of the Sellers for breaches
of certain non-fundamental representations and warranties shall not exceed $1,825,000.
The closing of the Purchase Agreement is subject to customary
closing conditions, including, without limitation, the completion of accounting and legal due diligence investigations; the receipt
of all authorizations, consents and approvals of all governmental authorities or agencies; the receipt of any required consents
of any third parties; the release of any security interests; and 1847 Wolo obtaining the requisite acquisition financing.