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SQBG > SEC Filings for SQBG > Form 8-K on 3-Apr-2013All Recent SEC Filings

Show all filings for SEQUENTIAL BRANDS GROUP, INC. | Request a Trial to NEW EDGAR Online Pro

Form 8-K for SEQUENTIAL BRANDS GROUP, INC.


3-Apr-2013

Entry into a Material Definitive Agreement, Creation of a Direct Fi


Item 1.01 Entry into a Material Definitive Agreement

On March 28, 2013, Sequential Brands Group, Inc. ("Sequential") entered into a Purchase Agreement (the "Purchase Agreement"), by and among Sequential, ETPH Acquisition, LLC, a Delaware limited liability company ("ETPH") and B®and Matter, LLC, a Delaware limited liability company ("Brand Matter"), pursuant to which Sequential acquired from ETPH all of the issued and outstanding equity interests of Brand Matter. Under the terms of the Purchase Agreement, Sequential paid ETPH an aggregate purchase price consisting of approximately $62.3 million in cash subject to adjustment as set forth in the Purchase Agreement and approximately 2.8 million shares of Sequential's common stock, par value $0.001 (the "Purchase Price"). Shares of Sequential Common Stock issued as part of the Purchase Price were issued in a private placement transaction conducted pursuant to Section 4(a)(2) or Regulation D promulgated under the Securities Act of 1933, as amended.

Prior to the consummation of the Purchase Agreement, two of Sequential's directors, Mr. Sweedler and Mr. Eby, served on the board of directors of ETPH, the direct parent of Brand Matter, (ii) Mr. Sweedler served as co-chairman of the board of directors of Brand Matter, (iii) Mr. Sweedler served as an executive officer of Brand Matter, and (iv) Mr. Sweedler beneficially owned certain membership interests of ETPH. As a consequence of Mr. Sweedler's indirect beneficial ownership in Brand Matter and Sequential and his and Mr. Eby's positions with ETPH, Brand Matter and Sequential, Sequential and ETPH each appointed special independent committees (on which neither Mr. Sweedler nor Mr. Eby served) to review, negotiate and approve the terms of the Purchase Agreement. In connection with the Purchase Agreement and the transactions contemplated thereby, Mr. Sweedler received shares of Sequential Common Stock for all his equity interests in Brand Matter.

The Purchase Agreement contains representations and warranties customary for transactions of this type, including representation and warranties from ETPH relating to Brand Matter's intellectual property. In addition, ETPH agreed to indemnify Sequential and certain of its related parties for losses resulting from its breach of any representations, warranties or covenants contained in the Purchase Agreement for a period of one year following the closing date up to a maximum amount of $1.0 million, subject to certain limited exceptions.

In connection with the Purchase Agreement and the transactions contemplated thereby, Sequential has entered into (i) a first lien term-loan agreement, dated as of March 28, 2013, among Sequential, subsidiaries of Sequential party thereto and Bank of America, N.A. ("BofA"), as a lender and as administrative agent thereunder (the "First Lien Loan Agreement"), which provides for term loans of up to $45 million (the "First Lien Term Loans") and (ii) a second lien term-loan agreement, dated as of March 28, 2013, among Sequential, certain subsidiaries of Sequential party thereto and Pathlight Capital, LLC ("Pathlight"), as a lender and as administrative agent thereunder (the "Second Lien Loan Agreement" and, together with the First Lien Loan Agreement, the "Loan Agreements"), which provides for term loans of up to $20 million (the "Second Lien Term Loans" and, together with the First Lien Term Loans, the "Term Loans"). The proceeds from the Term Loans were used to fund the acquisition of Brand Matter pursuant to the terms of the Purchase Agreement (the "Acquisition"), to repay existing debt, to pay fees and expenses in connection with the foregoing, to finance capital expenditures and for the general corporate purposes of Sequential and its subsidiaries. In connection with the Second Lien Loan Agreement, Sequential issued 5-year warrants to Pathlight to purchase up to an aggregate of 285,160 shares of Sequential Common Stock at an exercise price equal to $4.50 per share, pursuant to the warrant purchase agreement entered into as of March 28, 2013 by and between Pathlight and Sequential (the "Warrant Agreement").

The Term Loans were drawn in full on March 28, 2013. The Loan Agreements terminate, and all loans then outstanding under each Loan Agreement, must be repaid on March 28, 2018. Sequential is required to make quarterly scheduled amortization payments of the Term Loans prior to the maturity of the Loan Agreements in an amount equal to (x) in the case of the First Lien Loan Agreement, $1.5 million and (y) in the case of the Second Lien Loan Agreement, $500,000.

The First Lien Loan Agreement and the Second Lien Loan Agreement (subject to the Intercreditor Agreement (as described below)) are voluntarily prepayable from time to time in whole or in part, subject in certain cases to the payment of prepayment premiums and are mandatorily prepayable with the cash proceeds from the disposition of intellectual property or the disposition of non-intellectual property assets, subject to certain exception set forth in the Loan Agreements. Sequential is also required to make prepayments on the First Lien Term Loans annually with 30% of the consolidated excess cash, as defined in the First Lien Loan Agreement, of Sequential and its subsidiaries. The order of application of prepayments under the First Lien Loan Agreement and the Second Lien Loan Agreement are set forth in the documentation governing the respective facilities, including the Intercreditor Agreement. Voluntary and mandatory prepayments will be applied to the remaining scheduled installments of principle . . .



Item 2.03. Creation of Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

The information regarding the Acquisition Financing set forth under Item 1.01 is incorporated herein by reference.



Item 3.02. Unregistered Sales of Equity Securities

Reference is made to the disclosure provided in response to Item 1.01 of this Form 8-K, with respect to Sequential's issuance of Common Stock as partial consideration for the acquisition of Brand Matter and in connection with certain closing payments, in each case, pursuant to the terms of the Purchase Agreement, which disclosure is incorporated herein by reference.



Item 7.01. Regulation FD Disclosure

On March 29, 2013, Sequential issued a press release announcing its entry into the Purchase Agreement as discussed in Item 1.01 hereof. A copy of the press release is attached hereto as Exhibit 99.1.



Item 9.01. Financial Statements and Exhibits

(a) Exhibits.

Exhibit Number      Description
10.1**              Purchase Agreement.
10.2                First Lien Loan Agreement.
10.3                Second Lien Loan Agreement.
10.4                Intercreditor Agreement
10.5                Warrant Agreement.
10.6                Class B Common Stock Purchase Warrant.
99.1                Press release issued by Sequential on March 29, 2013 regarding
                    the Purchase Agreement.

** Pursuant to Item 6.01(b)(2) of Regulation S-K, exhibits and schedules are omitted. Sequential agrees to furnish supplementally a copy of any omitted schedule or exhibit upon request.

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