Item 2.01
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Completion of Acquisition or Disposition of Assets
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On June 8, 2016, bebe stores,
inc., a California corporation (the
Company
), entered into: (i) an Amended and Restated Operating Agreement (the
Operating Agreement
) of BB Brand Holdings LLC, a Delaware limited liability company
(
JVCo
), with BB Brand Management LLC, a New York limited liability company (
Bluefin
), (ii) an Asset Purchase and Contribution Agreement (the
Asset Purchase Agreement
) with bebe studio,
inc. (
bebe studio
), Bluefin and JVCo and (iii) a License Agreement (the
License Agreement
) with bebe studio and JVCo (collectively, the
Joint Venture Agreements
).
Operating Agreement
Pursuant to the Operating Agreement, the Company and Bluefin entered into a joint venture to own, license, distribute and exploit trademarks
and other related intellectual property. The Company will own 50.0000000001% of the economic interest in JVCo, and Bluefin will own the remainder. The Company and Bluefin will have equal voting rights. Bluefin contributed $35,100,000 in cash to
JVCo, of which $35,000,000 was used by JVCo to pay to the Company the purchase price for the trademarks, registered copyrights and certain domain names pursuant to the Asset Purchase Agreement. The Company contributed $100,000 in cash to JVCo. The
parties expect that the initial capital contributions together with JVCos cash flow will adequately fund JVCos operations. JVCo will pay Bluefin an annual operating fee equal to 15% of all royalty revenue received by JVCo provided that
the fee will be at least $750,000 and capped at $1,500,000. Bluefin will use the operating fee to pay certain of JVCos expenses. JVCo will distribute at least 80% of excess cash (subject to a reserve) to the Company and Bluefin on a quarterly
basis.
The Board will consist of two members appointed by the Company and two members appointed by Bluefin. Bluefin will appoint the
administrative manager who is responsible for day to day management of JVCo other than certain significant matters which require board approval. JVCo may enter into any licensing arrangements which meet certain criteria, subject to the product and
territory exclusivity granted to the Company under the License Agreement and certain restrictions on the use of certain channels such as mass retail stores, mid-tier department stores and off-price retail. The Company has the right to acquire from
Bluefin its entire membership interest in JVCo in the following circumstances: (i) in anticipation of or following a change of control of the Company, (ii) upon the Company being subject to an insolvency proceeding or (iii) any time
following two years after the date of the Operating Agreement.
The foregoing description of the Operating Agreement does not purport to
be complete and is qualified in its entirety by reference to the Operating Agreement, a copy of which is filed as Exhibit 10.1 hereto and is hereby incorporated into this report by reference.
Asset Purchase Agreement
The Company and bebe studio (the
Sellers
) entered into the Asset Purchase Agreement to sell and transfer their trademarks,
registered copyrights and certain domain names (the
Transferred IP
) and trademark license agreements to JVCo. JVCo paid the Company $35,000,000 and issued the Company a 50.0000000001% interest in JVCo as consideration for the
Transferred IP. The Sellers will retain three domain names (bebe.com, bebeoutlets.com and 2bstores.com) and their social media accounts and agree to maintain registration and not transfer these domain names and social media accounts to a third
party. These domain names and social media accounts will transfer to JVCo upon a termination of the License Agreement or the occurrence of an insolvency proceeding involving the Sellers. The Asset Purchase Agreement contains customary
representations, warranties and covenants of the Sellers and JVCo and indemnity obligations of each party with respect to the foregoing. The indemnity by each party is subject to a deductible and a cap except for liability arising out of breaches of
certain fundamental representations, Sellers assets which are not transferring or as a result of fraud.
The Asset Purchase
Agreement is not intended to provide any factual information about the Sellers or JVCo. In particular, the assertions embodied in the representations and warranties contained in the Asset Purchase Agreement are subject to qualifications and
limitations agreed to by the respective parties in connection with negotiating the terms of the Asset Purchase Agreement, including information contained in a confidential disclosure schedule provided by the Sellers to JVCo in connection with the
signing of the Asset Purchase Agreement. The confidential disclosure schedule contains information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Asset Purchase Agreement. Moreover, certain
representations and warranties in the Asset Purchase Agreement were used for the purpose of allocating risk between the Sellers and JVCo rather than establishing matters as facts. Accordingly, you should not rely on the representations and
warranties in the Asset Purchase Agreement as characterizations of the actual state of facts about the Sellers or JVCo.
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 form of Asset Purchase Agreement, attached hereto as Exhibit 10.2, which is incorporated herein by reference.
License Agreement
Pursuant to the License Agreement, JVCo grants to the Sellers an exclusive license under the bebe trademarks (
Licensed
Marks
) to operate bebe-branded retail stores in the United States (including all territories and possessions) and Canada and to operate bebe-branded websites at the following URLs: www.bebe.com, www.2bstores.com, and www.bebeoutlets.com.
JVCo also grants the Sellers a non-exclusive license to use the Licensed Marks (1) to conduct the Sellers business, including the design, manufacture, advertisement and promotion of bebe-branded apparel, accessories and other products
through bebe-branded retail stores and the bebe-branded websites listed above, (2) to operate bebe-branded retail stores as well as to enter into new agreements to operate bebe-branded retail stores outside of the United States (including all
territories and possessions) and Canada subject to the rights of first refusal in the License Agreement, (3) to fulfill orders from the bebe-branded websites listed above outside of the United States and Canada, and (4) to continue to
fulfil obligations under any distribution agreements retained by the Sellers. The Licensed Marks include future derivations of the Licensed Marks and any new marks that are used or held for use in the business operated by JVCo or its licensees that
incorporate the Licensed Marks. JVCo may terminate the agreement if the Sellers do not meet certain minimum requirements for operational stores and advertising spend during the first four years or if the Sellers fail to continue to operate a website
selling products at www.bebe.com.
The foregoing description of the License Agreement does not purport to be complete and is subject to,
and qualified in its entirety by, the full text of the form of License Agreement, attached hereto as Exhibit 10.3, which is incorporated herein by reference.
Forward-Looking Statements
This Current Report on
Form 8-K contains forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve certain risks and
uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements, including, but not limited to, the impact of the announcement of the proposed joint venture on the Companys
relationships with its employees, existing customers or potential future customers; and such other risks and uncertainties pertaining to the Companys business as detailed in its filings with the SEC on Forms 10-K and 10-Q, which are available
on the SECs website at www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company assumes no obligation to update any forward-looking statement
contained in this document.