Item 1.01 Entry into a Material Definitive Agreement.
As previously reported, on December 3, 2020, Francesca's Holdings Corporation
(the "Company") and each of its subsidiaries (together with the Company, the
"Debtors") commenced voluntary cases (the "Chapter 11 Cases") for relief under
chapter 11 of title 11 of the United States Code, §§ 101-1532, et seq. (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). The Chapter 11 Cases are being jointly
administered under the caption In re: Francesca's Holdings Corporation, et al.,
Case No. 20-13076 (BLS). The Debtors also filed a motion seeking authorization
to pursue a bidding and sale process under section 363 of the Bankruptcy Code,
which was approved by the Bankruptcy Court in an order entered on January 4,
2021.
On January 7, 2021, the Debtors entered into a "stalking horse" Asset Purchase
Agreement (the "Asset Purchase Agreement") with Francesca's Acquisition, LLC, a
Delaware limited liability company ("Francesca's Acquisition"), Tiger Capital
Group, LLC, a Delaware limited liability company ("Tiger" and, together with
Francesca's Acquisition, "Buyer"), and TerraMar Capital, LLC, a Delaware limited
liability company. Upon the terms and subject to the conditions set forth in the
Asset Purchase Agreement, Francesca's Acquisition will acquire the Acquired
Assets (as defined in the Asset Purchase Agreement) for a cash purchase price of
$17,360,000, subject to certain adjustments, and assume certain contracts,
leases and other Assumed Liabilities (as defined in the Asset Purchase
Agreement). Each party's obligation to consummate the transactions contemplated
by the Asset Purchase Agreement (the "Transactions") is subject to customary
closing conditions, and subject to the Bankruptcy Court-supervised auction
described below. In addition, the Company (on behalf of itself and the other
Debtors) will enter into an Agency Agreement with Tiger, pursuant to which Tiger
will act as the Company's agent for the purpose of conducting store closing
sales at certain of the Company's locations. If the Transactions are
consummated, the stores to be closed will be determined by the Buyer subject to
the outcome of negotiations with landlords in the Chapter 11 Cases, among other
factors, and subject to the terms of the Asset Purchase Agreement.
The proposed sale will be conducted through a Bankruptcy Court-supervised
process pursuant to Bankruptcy Court-approved bidding procedures, and is subject
to the receipt of higher or better offers from competing bidders at an auction,
approval of the sale by the Bankruptcy Court, and the satisfaction of certain
conditions. As the stalking horse bidder, Buyer's offer to purchase the Acquired
Assets and assume the Assumed Liabilities (as illustrated by the terms and
conditions of the Asset Purchase Agreement) would be the standard against which
any other qualifying bids would be evaluated.
The Asset Purchase Agreement contains certain customary representations and
warranties made by each party, which are qualified by the confidential
disclosures provided to Buyer in connection with the Asset Purchase Agreement.
The Company and Buyer have agreed to various customary covenants, including,
among others, covenants regarding the conduct of the Company's business prior to
the consummation of the Transactions (the "Closing"). A portion of the purchase
price will be placed in escrow at Closing to serve as a source of funds for,
among other things, a working capital purchase price adjustment, the
satisfaction of certain cure costs associated with contracts and leases assigned
to Buyer and taxes allocated to the Company. Within three business days
following the execution of the Asset Purchase Agreement, Buyer will deposit
$850,000 (the "Performance Deposit") with a third party escrow agent, which
amount will be credited against the purchase price payable by Buyer at the
Closing. If the Asset Purchase Agreement is terminated, the Performance Deposit
will be returned to Buyer except in certain circumstances relating to certain
breaches by Buyer of the Asset Purchase Agreement or the failure of Buyer to
consummate the Transactions when otherwise required.
The Asset Purchase Agreement provides Buyer with certain bid protections that
remain subject to the approval of the Bankruptcy Court. In particular, if the
Asset Purchase Agreement is terminated for certain reasons, including if the
Company enters into a definitive agreement with respect to, or consummates, an
Alternative Transaction (as defined in the Asset Purchase Agreement), or if the
Bankruptcy Court enters an order approving an Alternative Transaction, the
Company may be required to reimburse Buyer for its reasonable expenses up to
$350,000 and pay Buyer a termination fee of $693,000.
The foregoing description of the Asset Purchase Agreement is qualified in its
entirety by reference to the Asset Purchase Agreement, which is filed as Exhibit
2.1 hereto and incorporated by reference herein. The Asset Purchase Agreement
has been incorporated herein by reference to provide information regarding the
terms of the Asset Purchase Agreement and is not intended to modify or
supplement any factual disclosures about the Company in any public reports filed
with the Securities and Exchange Commission by the Company. In particular, the
assertions embodied in the representations, warranties and covenants contained
in the Asset Purchase Agreement were made only for purposes of the Asset
Purchase Agreement as of the specific dates therein, were solely for the benefit
of the parties to the Asset Purchase Agreement, and may be subject to
limitations agreed upon by the contracting parties, including being qualified by
information in confidential disclosure schedules provided by the Company to
Buyer in connection with the signing of the Asset Purchase Agreement. These
disclosure schedules contain information that modifies, qualifies and creates
exceptions to the representations and warranties set forth in the Asset Purchase
Agreement. Moreover, the representations and warranties in the Asset Purchase
Agreement were used for the purpose of allocating risk between the Company and
Buyer, rather than establishing matters of fact. Accordingly, the
representations and warranties in the Asset Purchase Agreement may not
constitute the actual state of facts with respect to the Company and Buyer. The
representations and warranties set forth in the Asset Purchase Agreement may
also be subject to a contractual standard of materiality different from that
generally applicable to investors under federal securities laws. Moreover,
information concerning the subject matter of the representations and warranties
may change after the date of the Asset Purchase Agreement, which subsequent
information may or may not be fully reflected in the Company's public
disclosures.
Item 7.01 Regulation FD Disclosure.
On January 8, 2021, the Company issued a press release announcing the Asset
Purchase Agreement disclosed under Item 1.01 of this Current Report on
Form 8-K. A copy of the press release is furnished as Exhibit 99.1 to this
report. This information shall not be deemed "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, as amended, and is not incorporated by
reference into any filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
2.1 Asset Purchase Agreement, dated January 7, 2021, by and among
Francesca's Holdings Corporation, a Delaware corporation, Francesca's
Services Corporation, a Texas corporation, Francesca's Collections,
Inc., a Texas corporation, Francesca's LLC, a Delaware limited
liability company, Francesca's Acquisition, LLC, a Delaware limited
liability company, Tiger Capital Group, LLC, a Delaware limited
liability company, and TerraMar Capital, LLC a Delaware limited
liability company
99.1 Press Release issued by Francesca's Holdings Corporation on January
8, 2021
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