Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): May 13, 2010
(Exact
Name of Registrant as Specified in Its Charter)
(State or
Other Jurisdiction of Incorporation)
|
000-27707
|
20-2783217
|
|
(Commission
File Number)
|
(IRS
Employer Identification
No.)
|
|
1330
Avenue of the Americas, 34th
Floor, New York, NY
|
10019-5400
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(Registrant’s
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of
the registrant under any of the following provisions (see General Instruction A.2.
below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
x Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry
into Material Definitive Agreement
Acquisition
Agreement
As
previously disclosed, NexCen Brands, Inc. (the “Company”), together with an
investment bank retained by it, has been exploring and evaluating alternatives
to the Company’s current debt and capital structure, including a
recapitalization of the Company, a restructuring of the Company’s debt and/or a
sale of all or a portion of the Company’s business. As a result of
that process, on May 13, 2010, the Company entered into an Acquisition Agreement
(the “Acquisition Agreement”) with Global Franchise Group,
LLC, a Delaware limited liability company
(“Purchaser”). Purchaser is an affiliate of Levine Leichtman
Capital Partners IV, L.P. (“LLCP IV”), a fund managed by Levine Leichtman
Capital Partners, an independent investment firm.
Transaction;
Consideration. Pursuant to the Acquisition Agreement,
Purchaser will acquire the subsidiaries of the Company that own the Company’s
franchise business assets and also the Company’s franchise management
operations, including the Company’s management operations in Norcross, Georgia,
and its cookie and pretzel dough factory and research facility in Atlanta,
Georgia. Specifically,
the Company will: (i) sell to Purchaser all of the Company’s equity interests in
TAF Australia, LLC; (ii) cause NexCen Holding Corporation to sell to Purchaser
all of its equity interests in Athlete’s Foot Brands, LLC, The Athlete’s
Foot Marketing Support Fund, LLC, GAC Franchise Brands, LLC, GAC
Manufacturing, LLC, GAC Supply, LLC, MaggieMoo’s Franchise Brands, LLC, Marble
Slab Franchise Brands, LLC, PM Franchise Brands, LLC, PT Franchise Brands, LLC,
and ShBx IP Holdings LLC (such companies, along with TAF Australia, LLC and
their respective subsidiaries, the “Acquired Companies”); (iii) cause NB
Supply Management Corp. (“NB Supply”) to sell to Purchaser certain specified
assets, and to assign to Purchaser certain specified liabilities; and (iv) cause NexCen
Franchise Management, Inc. (“NF Management”) to sell to Purchaser certain
specified assets, and to assign to Purchaser certain specified liabilities (such
shares and assets, collectively the “NexCen Franchise Business”). The
purchase price is $112,500,000, subject to closing adjustments for cash,
indebtedness, other than borrowings under the BTMUCC Credit Facility (as defined
and discussed below), working capital and other specified items.
Closing
Conditions. The closing is subject to the satisfaction of
specified closing conditions, including: (i) approval of the sale by the
Company’s stockholders; (ii) satisfaction of the Company’s outstanding
indebtedness under the BTMUCC Credit Facility (to the extent required by the
Accord and Satisfaction Agreement (as discussed and defined below)) and release
of all liens and other obligations relating to such indebtedness; (iii) receipt of
specified third-party consents; (iv) the absence of a Material Adverse Effect
(as defined in the Acquisition Agreement) and of certain other specified events
(including insolvency, loss of 25% or more of the employees of the NexCen
Franchise Business or termination or breach of the agreements with BTMU Capital
Corporation (“BTMUCC”) signed in connection with this transaction (and discussed
below)); and (v) other customary closing conditions for a transaction of
this type.
Dissolution. The
Acquisition Agreement provides that the Board of Directors of the Company (the
“Board”) will, subject to its fiduciary duties, submit a plan of dissolution to
the Company’s stockholders for their approval, which plan will provide, subject
to the fiduciary duties of the members of the Board, for the distribution, as
promptly as the Board determines in good faith is advisable, to the Company’s
stockholders of as much money as is available for such distribution, taking into
account applicable law and the liabilities of the Company and its remaining
subsidiaries. The Company’s
current estimates of the possible results of a dissolution process are discussed
below in Item 8.01 of this Report.
Representations and Warranties;
Covenants; Non-Solicitation; Change of Recommendation. The
Acquisition Agreement contains customary representations, warranties and
covenants for a transaction of this type. The Company has agreed that
it will not (and will use its reasonable best efforts to cause its subsidiaries
and representatives not to) (i) directly or indirectly solicit, initiate, or
knowingly encourage any alternative sale, restructuring or similar transaction
(referred to in the Acquisition Agreement as a “Takeover Proposal”), (ii) enter
into any agreement with respect to a Takeover Proposal or (iii) participate in
negotiations or discussions, or furnish or disclose to any third party any
information, with respect to any Takeover Proposal, subject to exceptions set
forth in the Acquisition Agreement. The Company has also agreed that
the Board will not change its recommendation to the Company’s stockholders that
they approve the transactions contemplated by the Acquisition Agreement;
however, subject to the terms and conditions set forth in the Acquisition
Agreement, including the Company’s obligation to pay the termination fee
discussed below, the Board may, in response to a Takeover Proposal, change its
recommendation (or cause or permit the Company or any of its subsidiaries to
enter into an agreement with respect to a Takeover Proposal) if the Board has
determined in good faith, after consultation with independent financial advisors
and outside legal counsel, that the Takeover Proposal constitutes a “Superior
Proposal” (as defined in the Acquisition Agreement) and that failure to take
such action would be inconsistent with the fiduciary duties of the Board under
applicable law. Purchaser is entitled to customary notice and
matching rights before the Board may change its recommendation to the Company’s
stockholders.
Termination; Termination Fees;
Expense Reimbursement. The Acquisition Agreement provides for customary
termination rights of the parties to the agreement for a transaction of this
type. The Acquisition Agreement also provides that, under specified
circumstances following a termination of the agreement, the Company may be
required to pay Purchaser a termination fee of $4.5 million and/or reimburse
Purchaser for up to $500,000 of its expenses.
The
Company expects the sale of the NexCen Franchise Business to be completed in the
third quarter of 2010.
In
connection with the signing of the Acquisition Agreement, LLCP IV entered into a
letter agreement, dated May 13, 2010, in which it committed to provide the
funding required by Purchaser to complete the acquisition or, absent a closing,
to support certain obligations of the Purchaser that may be owed to the
Company. The Company is also a party to this letter
agreement. Funding is conditioned upon the absence of an insolvency
by the Company or any of its subsidiaries and the occurrence of any one of the
following: (a) satisfaction of the closing conditions in the Acquisition
Agreement; (b) a court order that Purchaser specifically perform its obligations
to close the transactions under the Acquisition Agreement; or (c) a court order,
arbitration award or settlement entitling the Company to receive monetary
damages for a pre-closing breach of the Acquisition Agreement by
Purchaser. The letter agreement will terminate upon the occurrence of
specified events, including closing under the Acquisition Agreement, termination
or expiration of the Acquisition Agreement in accordance with its terms (except
where the Company makes a claim against Purchaser for a pre-closing breach, in
which case the letter agreement will remain in effect until the claim is
resolved), termination of the Accord and Satisfaction Agreement, actions by
BTMUCC to enforce its remedies under the BTMUCC Credit Facility (such as
acceleration of the maturity of outstanding debt or foreclosures on collateral)
and an insolvency involving the Company or its subsidiaries. The
maximum amount that LLCP IV is required to fund under the letter agreement is
$112.5 million.
Accord
and Satisfaction Agreement
In
connection with the signing of the Acquisition Agreement, the Company, NexCen
Holding Corporation, a wholly owned subsidiary of the Company (“Issuer”),
certain of the Issuer’s subsidiaries (“Subsidiary Borrowers” or “Co-Issuers”)
and BTMUCC entered into an Accord and Satisfaction Agreement, dated as of May
13, 2010 (the “Accord and Satisfaction Agreement”), with respect to its existing
credit facility (the “BTMUCC Credit Facility”). The Accord and
Satisfaction Agreement provides that the Issuer and the Co-Issuers can satisfy
and permanently extinguish all outstanding obligations under the BTMUCC Credit
Facility through the payment of (i) $98,000,000, (ii) the amount by which
aggregate consideration for the sale of the Company (after giving effect to
various adjustments) exceeds $112,500,000, (iii) the amount by which the
Company’s cash (after giving effect to various adjustments) exceeds $6,000,000,
and (iv) all outstanding third-party fees and expenses of BTMUCC.
In
addition to the payment of the amounts set forth above, the effectiveness of the
Accord and Satisfaction Agreement is contingent upon (i) the Issuer returning to
BTMUCC an outstanding letter of credit issued on behalf of the Issuer and the
Co-Issuers with respect to certain of their cash management obligations, (ii)
the release of any claims the Issuer and Co-Issuers may have, if any, against
BTMUCC and its affiliates (as provided in the Accord and Satisfaction
Agreement), and (iii) delivery of customary closing certificates and
resolutions, and other customary closing items.
The
Accord and Satisfaction Agreement requires that the Issuer and Co-Issuer use
commercially reasonable efforts to consummate the acquisition as provided in the
Acquisition Agreement. The Accord and Satisfaction Agreement
terminates if the closing conditions are not met by October 1,
2010.
Waiver
and Omnibus Amendment
In
connection with entering into the Accord and Satisfaction Agreement, BTMUCC, the
Issuer, the Co-Issuers, and the Company entered into a Waiver and Omnibus
Amendment, dated as of May 13, 2010 (the “Waiver and Omnibus Amendment”), which
among other things (i) permitted the Issuer and Co-Issuers to enter into the
Acquisition Agreement and the Accord and Satisfaction Agreement and to
consummate the transactions contemplated thereunder, (ii) waived certain events
of default that may occur during the period from the signing of the Acquisition
Agreement through October 1, 2010 and (iii) BTMUCC agreed to forbear from taking
any actions against the Issuer and Co-Issuers under the BTMUCC Credit Facility
during such period with respect to events of default that might occur during
such period other than certain enumerated events of default, including, without
limitation, payment and bankruptcy defaults. Additionally, the Waiver
and Omnibus Amendment extended from May 31, 2010 to the
earlier of (i) October 1, 2010 or (ii) the termination of the Accord and
Satisfaction Agreement, the trigger date on which
BTMUCC would be entitled to receive a warrant covering up to 2.8 million shares of the
Company’s common stock at an exercise price of
$0.01 per share if the Class B franchise notes are not repaid by the trigger
date.
The
foregoing descriptions of the Acquisition Agreement, the Accord and Satisfaction
Agreement and the Waiver and Omnibus Amendment and the transactions contemplated
thereby do not purport to be complete and are qualified in their entirety by the
terms and conditions of such agreements, which are filed as Exhibits 2.1, 10.1
and 10.2 to this Current Report on Form 8-K.
The
Acquisition Agreement and the Accord and Satisfaction Agreement have been
included as exhibits to this Current Report on Form 8-K to provide you with
information regarding their terms. The Acquisition Agreement and the
Accord and Satisfaction Agreement contain representations and warranties that
the parties thereto made to the other parties thereto as of specific
dates. The assertions embodied in the representations and warranties
in the Acquisition Agreement and the Accord and Satisfaction Agreement were made
solely for purposes of the contracts among the respective parties, and each may
be subject to important qualifications and limitations agreed to by the parties
in connection with negotiating the terms thereof. Moreover, some of
those representations and warranties may not be accurate or complete as of any
specified date, may be subject to a contractual standard of materiality
different from those generally applicable to stockholders or may have been used
for the purpose of allocating risk among the parties rather than establishing
matters as facts.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant
As
discussed above in Item 1.01, the Company entered into an Accord and
Satisfaction Agreement and Waiver and Omnibus Amendment related to its existing
credit facility. The descriptions in Item 1.01 are incorporated
herein by reference.
Item
8.01 Other
Events
The
Company cannot predict with certainty the timing or results of a dissolution
process, if one is implemented following completion of the sale transaction
under the Acquisition Agreement. Before making any distribution to
its stockholders, the Company will be required to address current and reasonably
anticipated liabilities, including contingent claims. The Company
has, and will continue to incur, various obligations to third parties as part of
its ordinary course operations, including salary and other operating expenses,
severance obligations to employees, and the resolution of outstanding
litigation. In addition, there will be costs associated with any
dissolution process.
While the
Company is continuing to work through plans to address these matters in as
efficient a manner as possible, based on current estimates, and taking into
account the terms of the Accord and Satisfaction Agreement described above, the
Company anticipates that it will have approximately $14-$15 million of cash upon
completion of the sale transaction, after currently anticipated closing
adjustments and net of the payment of all transaction expenses. Based
on this estimate, the Company further estimates that it would have approximately
$7-$9 million ultimately available to distribute to stockholders in a
dissolution, which would amount to approximately $0.12 to $0.16 per share, on a
pre-tax basis. These amounts are only estimates, based on current
facts and current, reasonable expectations. They are subject to
substantial uncertainty and risk, as discussed in more detail in Item 1A of the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which the
Company filed with the Securities and Exchange Commission on May 17,
2010. In addition, the timing of any distribution to stockholders is
uncertain and could take a substantial period of time to achieve.
Forward-Looking
Statements
This
Current Report on Form 8-K contains “forward-looking statements,” as such term
is used in the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include those regarding the transaction between the
Company and Purchaser, the expected timing and completion of the transaction,
estimates of retained proceeds from the transaction, and the process and
anticipated results of a future dissolution of the Company. When used
herein, the words “anticipate,” “believe,” “estimate,” “intend,” “may,” “will,”
“expect” and similar expressions as they relate to the Company are intended to
identify such forward-looking statements. Forward-looking statements
are based on current expectations and assumptions, which are subject to risks
and uncertainties. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or
contribute to such differences include: (1) we may not complete the transaction
on the negotiated terms, within the expected timeframe or at all; (2) we may not
obtain the approval of the transaction or a plan of dissolution by our
stockholders; (3) we may not obtain governmental approvals of the transaction or
satisfy other conditions required to close the transaction; (4) transaction fees
and costs and expenses incurred in connection with a dissolution and wind-down
of the Company may be greater than what we estimate; (5) economic conditions may
vary and may negatively affect the performance of our business; (6) the effects
of disruption from the transaction may make it more difficult to maintain
relationships with our employees, franchisees, lender, business partners,
vendors and other service providers; (7) the amount and timing of any
distribution to our stockholders after completion of the transaction may vary
due to various factors within and outside the Company’s control; and (8) other
risks and factors, as discussed in the Company’s filings with the Securities and
Exchange Commission, including the Risk Factors set forth in Item 1A of the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which was
filed today with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Additional
Information
This
Current Report on Form 8-K addresses both the proposed transaction between the
Company and Purchaser, as well as a possible plan of
dissolution. This Current Report on Form 8-K is not a solicitation of
a proxy from any stockholder of the Company. The Company intends to
file with the Securities and Exchange Commission (“SEC”) a proxy statement and
other relevant documents to be mailed to stockholders in connection with the
pending transaction and any plan of dissolution that is proposed to
stockholders. Stockholders are encouraged to read the proxy statement
and any other relevant documents when they become available, because they will
contain important information about the Company, the pending transaction and any
plan of dissolution that is proposed to stockholders. Stockholders
will be able to obtain these materials (when they are available) and other
documents filed with the SEC free of charge at the SEC’s website,
www.sec.gov. In addition, these materials (when they are available)
may be obtained free of charge by directing a request to the Company’s proxy
solicitor, Innisfree M&A Incorporated, toll free at (877)
456-3488.
Participants
in the Transaction
The
Company and its directors and executive officers may be deemed to be
participants in the solicitation of proxies in respect of the pending
transaction and any plan of dissolution that is proposed to
stockholders. Information about the Company’s directors and executive
officers can be found in the Company’s most recently filed definitive proxy
statement and Annual Report on Form 10-K/A filed for the year ended December 31,
2009, which were filed with the SEC on November 3, 2009 and April 29, 2010,
respectively. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement and
other relevant materials to be filed with the SEC.
Item
9.01 Financial
Statements and Exhibits
(d)
Exhibits
2.1 Acquisition
Agreement, dated as of May 13, 2010, by and between NexCen Brands, Inc. and
Global Franchise Group, LLC.
10.1 Accord and Satisfaction
Agreement, dated as of May 13, 2010, by and among NexCen Brands, Inc.,
NexCen Holding Corporation, the Subsidiary Borrowers parties thereto, the
Managers parties thereto, BTMU Capital Corporation, as Agent for the
Noteholders, and the Noteholders (as defined in the
agreement).
10.2 Waiver and Omnibus
Amendment, dated as of May 13, 2010, by and among BTMU Capital
Corporation as Agent and as Noteholder, NexCen Holding Corporation as Issuer,
NexCen Brands, Inc., and the Subsidiary Borrowers parties thereto.
SIGNATURES
According
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on May 17, 2010.
| |
NEXCEN
BRANDS, INC. |
|
| |
|
|
|
|
|
|
/s/ Sue
J. Nam |
|
| |
By: |
Sue
J. Nam |
|
| |
Its: |
General
Counsel |
|
| |
|
|
|