On August 31, 2026, Kustom Entertainment, Inc. (the "Company" or the "Buyer") entered into a Unit Purchase Agreement with (i) TFL, LLC, a Kansas limited liability company ("TFL"), (ii) The Rouen Trust Dated October 5, 2010, Daniel P. Rouen Irrevocable Trust dated December 16, 2024, The Shefali S. Rouen Irrevocable trust dated November 17, 2023, Jeffrey Fromm Irrevocable Trust Dated December 26, 2012, William M. Fromm (collectively, the "Sellers"), and (iii) Daniel P. Rouen (the "Sellers’ Representative"), (the "Agreement"). Pursuant to the Agreement, on the closing date (the "Closing") the Company will acquire all of the equity interests of TFL for aggregate consideration consisting of (i) $89.6 million in cash, subject to certain adjustments, and (ii) $22.4 million in shares of the Company’s restricted common stock (the "Common Stock"), minus the Holdback Shares as described below, with the number of shares determined based on the volume weighted average trading price of the Company’s Common Stock over the ten consecutive trading days ending immediately prior to the Closing (the "Stock Consideration").

 

The Agreement provides for a purchase price adjustment based primarily on TFL’s closing net debt and transaction expenses. The Company has also agreed to repay, at Closing, $35.0 million of TFL’s outstanding indebtedness, which repayment will not result in any adjustment to the purchase price. In connection therewith, $500,000 of the purchase price will be deposited into a purchase price adjustment escrow and $1.0 million will be deposited into an indemnification escrow to secure certain obligations of the Sellers.

 

In addition, the Company will hold back a portion of the purchase price, which holdback amount shall consist of shares of restricted common stock having an aggregate value of $11.2 million (the "Holdback Shares"). The Holdback Shares will be issued upon achievement of a specified Target EBITDA (as defined in the Agreement) for the period beginning on the closing date and through calendar year 2027.

 

Pursuant to the Agreement, at Closing the parties will enter into ancillary agreements, including an escrow agreement, a registration rights agreement pursuant to which the Company will grant registration rights with respect to the Stock Consideration, lock-up agreements, and employment agreements with certain key TFL executives. The Agreement further provides that, effective as of the Closing, one individual designated by the Sellers will be appointed to the Company’s board of directors, subject to applicable legal and regulatory requirements.

 

The Closing of the transaction is subject to customary closing conditions, including, among other things, required third-party consents, stockholder approvals, the Company obtaining sufficient funds, corporate actions necessary to authorize the issuance of the stock consideration, and the satisfaction of other customary closing conditions.

 

The Agreement contains customary representations, warranties, covenants and indemnification provisions for a transaction of this nature. The Sellers agreed to certain non-competition and non-solicitation restrictions for a period of five years following the Closing.