Bebe stores 8-K 2017
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 22, 2017
bebe stores, inc.
(Exact Name of Registrant as Specified in Charter)
(Registrants 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):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Sale of Distribution Center
On May 22, 2017, bebe stores, inc., a California corporation (the Company), entered into a Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate with Tulloch Corporation (the Distribution Center Agreement) to sell its distribution center in Benicia California for a purchase price of approximately $21.8 million. The Company retains a right to use 72,000 square feet of the distribution center through December 31, 2017, with the ability to terminate this right with 30 days written notice. The sale is expected to close by the end of July 2017, subject to customary closing conditions.
The foregoing description of the Distribution Center Agreement does not purport to be complete and is qualified in its entirety by reference to the Distribution Center Agreement, a copy of which will be filed as an exhibit to the Companys Annual Report on Form 10-K for the fiscal year ending July 1, 2017.
Asset Purchase Agreement
On May 30, 2017, the Company and GBG USA Inc., a Delaware corporation (GBG), entered into an Asset Purchase Agreement (the Asset Purchase Agreement) pursuant to which the Company agreed to sell and transfer certain inventory and purchase orders related to the Companys website and international wholesale business (collectively, the Transferred Assets). GBG paid the Company $5.0 million as consideration for the Transferred Assets. The Asset Purchase Agreement contains customary representations, warranties and covenants of the Company and GBG and indemnity obligations of each party with respect to the foregoing.
The foregoing description of the Asset Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Asset Purchase Agreement, a copy of which is filed as Exhibit 10.2 hereto and is hereby incorporated into this report by reference.
On May 30, 2017, the Company and GBG entered into a Transition Services Agreement (the Transition Services Agreement) pursuant to which the Company agreed to provide certain transitional services in connection with the Transferred Assets through September 30, 2017, with an option for a thirty day extension. GBG agreed to pay the Company a monthly fee of approximately $3.0 million subject to certain adjustments during the term of the services.
The foregoing description of the Transition Services Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Transition Services Agreement, a copy of which is filed as Exhibit 10.3 hereto and is hereby incorporated into this report by reference.
JV License Termination and Assignments
On May 30, 2017, the Company entered into a Consensual Termination of License Agreement, by and among BB Brand Holdings LLC (the JV), bebe studio, Inc. and the Company (the License Agreement Termination), pursuant to which the parties terminated the License Agreement, dated as of June 8, 2016. Pursuant to the License Agreement Termination, the Company transferred to the JV the website domains www.bebe.com, www.2bstores.com and www.bebeoutlets.com (the URLs), along with the Companys social media accounts (the Media Accounts) and the Companys agreements with certain of its international distributors (the Distribution Agreements).
The foregoing description of the License Agreement Termination does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the License Agreement Termination, a copy of which is filed as Exhibit 10.4 hereto and is hereby incorporated into this report by reference.
In addition, to facilitate the transactions with GBG, on May 30, 2017, the Company also transferred to the JV the Companys designs relating to the bebe brand and customer information collected from visitors of the bebe retail stores and bebe-branded websites (collectively, with the assignments of the URLs, Distribution Agreements and Media Accounts, the Assignments).
On May 31, 2017, the Company entered into a Loan and Security Agreement (the Loan Agreement), with the lenders from time to time party thereto (the Lenders) and GACP Finance Co., LLC, a Delaware limited liability company (GACP), as administrative agent for the Lenders. Pursuant to the Loan Agreement, the Company borrowed $35.0 million in term loans.
The Company will use the loan proceeds (a) to fund payments to landlords of retail stores operated by the Company resulting from the closure of such stores, (b) to fund the closing costs in connection with the Loan Agreement, and (c) for general working capital purposes. The term loans under the Loan Agreement mature on May 30, 2018. Interest payments on the term loans are due on the last day of each month, beginning on June 30, 2017. Interest on the term loans accrues at an annual fixed rate of 9%. The Company may prepay all or a portion of the outstanding principal and accrued unpaid interest under the Loan Agreement at any time upon prior notice to the Lenders, without penalty or prepayment fee. The Company is required to prepay all or a portion of the outstanding principal and accrued unpaid interest under the Loan Agreement with: (1) 75% of the net sale proceeds from bebe studio realty, LLCs sale of its design center in Los Angeles or its warehouse in Benicia (whichever sale is first); (2) 100% of the net sale proceeds from bebe studio realty, LLCs sale of its remaining real property; (3) 100% of all proceeds of any dispositions (other than sales of inventory and other permitted dispositions) in excess of $250,000 per year; and (4) 100% of all proceeds of any cash for any extraordinary receipts (i.e., insurance proceeds, tax refunds, condemnation proceeds, etc.) in excess of $250,000 per year.
As security for its obligations under the Loan Agreement, the Company granted a lien on substantially all of its assets to GACP for the ratable benefit of the Lenders. In addition, all direct and indirect wholly-owned subsidiaries of the Company entered into a Guaranty (the Guaranty), in favor of GACP, pursuant to which such subsidiaries guaranteed the obligations of the Company under the Loan Agreement, and granted as security for their guaranty obligations, a lien on certain of their assets, including, among other things, equity interests, cash and real property (specifically, bebe studio realty, LLC pledged all of its interest in certain of its owned real property (a design center, a warehouse and two condominiums) for the benefit of GACP).
The Loan Agreement also contains customary affirmative and negative covenants for a credit facility of this size and type, including covenants that limit or restrict the Companys ability to, among other things, incur indebtedness, grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into transactions with affiliates, pay dividends or make distributions, or repurchase stock, in each case subject to customary exceptions. In addition, the Company shall not have less than 75% of certain cash set forth under an agreed budget.
The Loan Agreement includes customary events of default that include, among other things, non-payment, inaccuracy of representations and warranties, covenant breaches, events that result in a material adverse effect (as defined in the Loan Agreement), cross default to material indebtedness or material agreements, bankruptcy and insolvency, material judgments and a change of control (as defined in the Loan Agreement). The occurrence and continuance of an event of default could result in the acceleration of the obligations under the Loan Agreement. Under certain circumstances, a default interest rate of 11.00% per annum will apply at the election of the Lenders on all outstanding obligations during the occurrence and continuance of an event of default under the Loan Agreement.
The foregoing descriptions of the Loan Agreement and Guaranty do not purport to be complete and are qualified in its entirety by reference to the Loan Agreement and Guaranty, copies of which are filed as Exhibit 10.5 and 10.6 hereto, respectively, and each is hereby incorporated into this report by reference.
The information set forth in Item 1.01 above with respect to the License Agreement Termination and Assignments is incorporated herein by reference.
The information set forth in Item 1.01 above with respect to the Loan Agreement and the Guaranty are incorporated herein by reference.
As of May 27, 2017, the Company had effectively ended all retail operations. Going forward, the Company anticipates having no retail operations, and its sole function will be the collection of distributions from the JV.
Additionally, as of June 5, 2017, the Company has reached agreement with substantially all of its retail store landlords to terminate the existing leases for its retail stores for an aggregate payment of approximately $65.0 million. The Company has closed all of its retail stores as of May 31, 2017 and all retail store employees have been terminated as of such date.
Pursuant 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 hereunto duly authorized.