Item 1.01. Entry into a Material Definitive
Agreement.
On July 30, 2021, Brand Matter,
LLC (“Seller”), a wholly-owned subsidiary of Sequential Brands Group, Inc. (“Sequential” or the “Company”)
entered into (a) a sale and purchase agreements (the “ET Purchase Agreement”) with Ellen Tracy Holdings, LLC (the “ET
Buyer”), pursuant to which Seller agreed to sell to ET Buyer certain assets comprised of the intellectual property, goodwill and
other intangible property of Seller with respect to Ellen Tracy for cash consideration of $17 million, and (b) a sale and purchase agreement
(the “CJ Purchase Agreement” and, together with the ET Purchase Agreement, the “Purchase Agreements”) with Caribbean
Joe Holdings, LLC (the “CJ Buyer” and, together with the ET Buyer, the “Buyers”), pursuant to which Seller agreed
to sell to CJ Buyer certain assets comprised of the intellectual property, goodwill and other intangible property of Seller with respect
to Caribbean Joe for cash consideration for $3 million (collectively, the “Transactions”). The Transactions closed on July
30, 2021. As a result of the Transactions, the Company made a principal prepayment of $19.6 million on its Revolver Loan in accordance
with the Amended BoA Credit Agreement and the loan documents executed in connection therewith. The Company plans on filing the proforma
financial statements for the sale of Ellen Tracy and Caribbean Joe after filing the amendments for the Form 10-Q for the period ended
September 30, 2020 and Form 10-K for the year ended December 31, 2020, and the Form 10-Q for the period ended March 31, 2021.
The Purchase Agreements included
customary representations, warranties and covenants of Seller and the Buyers. The Purchase Agreements also contained indemnification provisions
pursuant to which Seller has agreed to indemnify the Buyers against certain losses, subject to the limitations set forth therein, including
losses related to breaches of representations, warranties and covenants.
The foregoing description
of the Purchase Agreements and the transactions contemplated thereby is qualified in its entirety by the full text of the Purchase Agreements,
which are filed as exhibits to this Form 8-K.
The Purchase Agreements are
included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual
information about Sequential, Seller or the Buyers or any of their respective businesses, subsidiaries or affiliates. The representations,
warranties and covenants contained in the Purchase Agreements (a) were made by the parties thereto only for purposes of that agreement
and as of specific dates; (b) were made solely for the benefit of the parties to the Purchase Agreements; (c) may be subject to limitations
agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection
with the execution of the Purchase Agreements (such disclosures include information that has been included in public disclosures, as well
as additional non-public information); (d) may have been made for the purposes of allocating contractual risk between the parties
to the Purchase Agreements instead of establishing these matters as facts; and (e) may be subject to standards of materiality applicable
to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties
and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Sequential, Seller or the
Buyers or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and
other terms of the Purchase Agreements may be subject to subsequent waiver or modification. Moreover, information concerning the subject
matter of the representations, warranties and covenants may change after the date of the Purchase Agreements, which subsequent information
may or may not be fully reflected in Sequential’s public disclosures. The Purchase Agreements should not be read alone, but should
instead be read in conjunction with the other information regarding Sequential that is or will be contained in, or incorporated by reference
into, the Forms 10-K, Forms 10-Q and other documents that are filed with the Securities and Exchange Commission.
As previously disclosed, there
are ongoing defaults under (i) the Third Amended and Restated First Lien Credit Agreement, dated as of July 1, 2016 (the “Amended
BoA Credit Agreement”), by and among Sequential, certain of its subsidiaries, Bank of America, N.A., as administrative agent and
collateral agent, and the lenders thereto and (ii) the Third Amended and Restated Credit Agreement, dated as of July 1, 2016 (the “Amended
Wilmington Credit Agreement”, and together with the Amended BoA Credit Agreement, collectively the “Credit Agreements”),
by and among Sequential, certain of its subsidiaries, Wilmington Trust, National Association, as administrative agent and collateral agent,
and the lenders thereto. The lenders under the Credit Agreements have provided waivers of such defaults through August 10, 2021. We have
disclosed certain uncertainties and risks applicable to us in our previous Form 8-K filed on July 2, 2021 and July 8, 2021. The disclosure
in this Form 8-K should be read in conjunction with such information. It is uncertain whether the Company will be able to comply with
the covenants under the Credit Agreements going forward, and the Company is not currently forecasted to be able to comply, in the next
twelve months, with certain of the financial covenants under the Credit Agreements. The Company cannot assure you that its lenders would
be willing to negotiate further changes to its financial covenants when necessary and the Company cannot obtain further waivers of the
defaults under the Credit Agreements without the consent of the respective lenders thereunder. If the Company is unable to obtain additional
waivers of ongoing defaults, or otherwise is unable to comply with its debt arrangements, the obligations under the indebtedness may be
accelerated. If an acceleration were to occur, the Company does not have sufficient liquidity to satisfy the loan, and the Company would
potentially need to seek protection under the federal bankruptcy code.
As a result of the risk of
non-compliance with the covenants and uncertainty of further waiver extensions under the Credit Agreements, management has determined
that as of the date of this filing there continues to be a material uncertainty that casts substantial doubt with respect to the ability
of the Company to continue as a going concern.
Our Board of Directors is
continuing to evaluate strategic alternatives, including refinancing all or a portion of our debt and/or the divestiture of one or more
existing brands or a sale of the Company, which divestiture or sale may occur pursuant to a case under the federal bankruptcy code. However,
we cannot assure you that any such divestiture or sale efforts will be successful or that such efforts will yield the overall best price
for such assets, particularly if such events occurred through a restructuring or bankruptcy filing. Any sale of assets may represent a
triggering event requiring that we evaluate the carrying value of such assets for impairment purposes, which impairments may be material.