XCEL BRANDS, INC. (NASDAQ:XELB) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
Item 2.01 Completion of Acquisition or Disposition of Assets
On March 30, 2021 (the “Signing Date”), GOLD LICENSING, LLC (the “Buyer”), a Delaware limited liability company, and wholly-owned subsidiary of Xcel Brands, Inc. (“Xcel” or the “Company”), entered into an asset purchase agreement (the “Asset Purchase Agreement”) with LORI GOLDSTEIN, LTD., a New York corporation (the “Seller”), and LORI GOLDSTEIN, an individual (“Shareholder”), to which the Buyer agreed to acquire, and the Seller and Shareholder agreed to sell, certain assets of the Seller, including the “Lori Goldstein” trademark and other intellectual property rights relating thereto, subject to the assumption of certain related liabilities.
to the Asset Purchase Agreement, subject to the satisfaction of all conditions to the obligations of the Seller and the Buyer to consummate the transactions contemplated by the Asset Purchase Agreement on or before April 1, 2021 (the “Closing Date”), the Buyer will deliver $1,599,558.00 (the “Closing Cash Payment”) to the Seller. In addition, Buyer will deliver $2,044,750.00 (“Additional Cash Payment” and together with the Closing Cash Payment, the “Initial Cash Consideration”) to Seller on the earlier of (i) upon Buyer’s receipt of the first royalty payment from QVC, Inc. (“QVC”) in respect of the Transferred Assets (as defined in the Asset Purchase Agreement), and (ii) one hundred twenty (120) calendar days following the Closing (even if Buyer has not yet received such first royalty payment from QVC in respect of the Transferred Assets, and/or such first royalty payment is less than the Additional Cash Payment).
In addition to the Initial Cash Consideration, the Seller will be eligible to earn additional consideration of up to $12,500,000.00 (the “Earn-Out”), which would be payable, in cash, within 45 days after the end of each applicable calendar year during the Earn-out Period (as defined in the Asset Purchase Agreement) in an amount equal to (i) seventy-five (75%) percent multiplied by (ii) the Royalty Contribution (as defined in the Asset Purchase Agreement) for such calendar year (the “Annual Earn-Out Payment”).
In addition to the Earn-Out, commencing at the earlier of (i) the seventh calendar year following the Closing or (ii) full payment of the Earn-Out Amount, and provided that Shareholder’s employment agreement with Xcel shall be in effect as of the time the Incentive Earn-Out (as defined below) is earned (as opposed to when paid), Seller also shall be paid, annually, as additional consideration for the Transferred Assets, an incentive earn-out amount (the “Incentive Earn-Out Amount”) determined as follows: (i) an amount equal to 20.0% of any net royalties related to the Transferred Assets from QVC direct-response television in excess of $8,000,000 in each calendar year; but not to exceed $1,000,000.00 annually; plus (ii) 10% of any other net royalties related to the Transferred Assets for such period.
to the Asset Purchase Agreement, Ms. Goldstein will retain certain media rights, including the rights to (a) be involved with and use the “Lori Goldstein” phrase and all other aspects of Shareholder’s persona, and (b) retain all monetary and non-monetary compensation without exception (including but not limited to all salaries, commissions, license payments, and marketing and promotional fees), in connection with Shareholder’s participation in, contribution to, or endorsement of theater and motion pictures and entertainment shows that air on television (other than direct shopping shows or any other direct-response television), film, radio, the internet, and/or any other medium (whether now known or hereinafter developed), appearances, books, blogs, and other publications and creative works, including the right to author, co-author, and otherwise help create (either alone or in collaboration with others) autobiographical books, memoirs, other literary works, visual works, and other creative works (including literary, visual, and other creative works that reference and/or display third-party products and services but only for purposes of identification, trademark nominative use, trademark statutory fair use, and copyright fair use, and not for purposes of offering such third-party products or services for sale), as well as the unrestricted right to use the “Lori Goldstein” phrase and all other aspects of Shareholder’s persona for identification, personal description, and all other purposes that do not directly relate to offering products or services for sale by Shareholder or any other party (collectively, the “Retained Media Rights”).
The Asset Purchase Agreement contains customary representations, warranties, covenants (including restrictive covenants), indemnification and other terms for transactions of this nature. The foregoing description is qualified by reference to the Purchase Agreement attached as Exhibit 2.1.
On April 1, 2021, the Buyer completed the acquisition of certain assets and assumption of certain related liabilities of the Seller as described above and in the Asset Purchase Agreement.