UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): December 31, 2008
EDCI HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| |
|
|
|
|
DELAWARE
(State or other jurisdiction
of incorporation)
|
|
001-34015
(Commission
File Number)
|
|
26-2694280
(IRS Employer
Identification No.) |
1755 Broadway, 4th Floor
New York, New York 10019
(Address of Principal
Executive Offices)
(212) 333-8400
(Registrant’s telephone number, including area code)
Not Applicable
(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:
|
|
|
| o |
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
|
|
| o |
|
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 2.01 |
|
Completion of Acquisition or Disposition of Assets. |
As previously reported, on October 31, 2008, EDCI Holdings, Inc. (the “Company”) announced that its
subsidiaries Entertainment Distribution Company, LLC (“EDC”) and Entertainment Distribution Company
(USA), LLC (collectively, the “Sellers”) entered into an Asset Purchase Agreement (the “Agreement”)
with Sony DADC US Inc. (the “Purchaser”) for the sale of Sellers’ distribution operations located
in Fishers, Indiana, U.S. supply agreements with Universal Music Group, the equipment located in
its Fishers, Indiana distribution facility and certain manufacturing equipment located in its Kings
Mountain, North Carolina facility, as well as the transfer of U.S. customer relationships to the
Purchaser (collectively, the “Sony Sale”).
On December 31, 2008, the parties closed the Sony Sale. In accordance with the Agreement, the
Sellers received $26 million in cash at closing and will receive by the end of April 2009 an
additional approximate $1.5 million for equipment sold to the Purchaser pursuant to the Agreement.
The $26 million purchase price is subject to certain post-closing working capital adjustments, as
provided in the Agreement. The Agreement also provides for up to $2.0 million as contingent
consideration related to the transferred operations achieving additional criteria. In connection
with the transaction, EDC and Purchaser have agreed to provide certain transition services
following the closing.
A copy of the Agreement was previously filed as an exhibit to the Company’s Current Report on Form
8-K with the Securities and Exchange Commission on November 3, 2008 and is incorporated herein by
reference. The foregoing description of the transaction and the Agreement does not purport to be
complete and is qualified in its entirety by reference to the Agreement.
As previously reported, on October 31, 2008,
EDC entered into a Seventh Amendment to Credit Agreement (the
“Seventh Amendment”) with Entertainment Distribution Company (USA), LLC (the “Guarantor”),
Glenayre Electronics, Inc., the lenders party thereto (the “Lenders”) and Wachovia Bank, National
Association, as administrative agent (the “Agent”) amending certain terms of the Credit Agreement dated
as of May 31, 2005 by and among EDC, the Guarantor, Glenayre Electronics, Inc., the Lenders and the Agent. The
Seventh Amendment became effective upon the consummation of the Sony Sale. Pursuant to the Seventh
Amendment, (1) the Lenders consented to the Sony Sale, (2) the blanket lien on the remaining U.S. assets and
pledge of 65% of the stock our EDC’s subsidiaries in Hannover, Germany and Blackburn, UK was continued, (3)
the payment on the term loan was modified with $9.0 million due on December 31, 2008, $9.0 million due on closing
of the Sony Sale, $2.0 million due on December 31 2009, $2.5 million due on June 30, 2010, and $4.5 million due
on December 31, 2010 and (4) the existing revolving credit facility was repaid and eliminated and replaced with a new
European revolving credit facility of up to $2.5 million, secured by the assets of the EDC subsidiaries in Hannover,
Germany and Blackburn, UK. Upon closing of the Sony Sale, the parties to the Seventh Amendment entered into an Eighth
Amendment to Credit Agreement (the “Eighth Amendment”). The Eighth Amendment clarified certain
security provisions, modified certain of the requirements set forth in the Seventh Amendment relating to the Sony Sale and
created two events of default related to EDC failing to own two-thirds or more of the outstanding voting stock of its
Dutch holding company subsidiary or Sony taking enforcement action not terminated or rescinded within 30 days with
respect its second lien security interest securing its indemnification rights unless permitted by the
relevant documentation.
A copy of the Seventh Amendment was previously filed as an
exhibit to the Company’s Current Report on Form 8-K with the Securities and Exchange Commission on
November 3, 2008 and is incorporated herein by reference and a copy of the Eighth Amendment is filed
as Exhibit 10.2 and is incorporated herein by reference. The foregoing description of the Seventh and Eighth
Amendments does not purport to be complete and is qualified in its entirety by reference to the full text
of such amendments.
A copy of the press release issued by the Company on January 5, 2009 announcing the completion of
the transaction is filed as Exhibit 99.1 and is incorporated herein by reference.
|
|
|
| Item 5.02. |
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers. |
On January 5, 2009, the Company also announced the appointment of Robert L. Chapman, Jr. as Chief
Executive Officer of the Company. Mr. Chapman replaced Interim Chief Executive Officer, Clarke H.
Bailey, who will continue to serve as non-Executive Chairman of the Board of Directors of the
Company, upon the terms that applied to this position prior to his serving as Interim Chief
Executive Officer. Mr. Chapman’s employment was effective following Board approval on January 2,
2009. Mr. Chapman has served as a director of the Company since November 2007. Other than as
described herein, there have been no changes to Mr. Chapman’s biography included in the proxy
statement/prospectus filed with the Securities and Exchange Commission on June 23, 2008. Further,
there are no transactions in which Mr. Chapman has an interest requiring disclosure under Item
404(a) of Regulation S-K.
In connection with his appointment as Chief Executive Officer, Mr. Chapman and the Company have
entered into a letter agreement regarding the terms of his employment. Pursuant to the letter
agreement, Mr. Chapman will receive base compensation of $37,500 per month, of which $18,750 will
be paid in cash, and $18,750 will be paid through the issuance and delivery to him of shares of
common stock of the Company issued in a valid private placement under federal securities laws.
The number of shares issued for each monthly payment will be calculated by dividing $18,750 by the
average daily closing price of the Company’s common stock on the Nasdaq Stock Market, or other
primary market (e.g., Pink Sheets) should the Company’s common stock cease to trade on the Nasdaq
Stock Market, during the calendar month immediately preceding the calendar monthly period in which
issuance and delivery is being made. Mr. Chapman will also be eligible to participate in the
Company’s bonus plans or programs as shall be established by the Board of Directors from time to
time for senior executives. If Mr. Chapman’s employment is terminated for any reason, except as
noted below, during the first six months of the term of the letter agreement, the Company shall pay
to Mr. Chapman in one cash lump sum and one issuance and delivery of shares of the Company’s common
stock, the remainder of his base salary through the six-month anniversary date of the agreement
(the “Remainder Amount”). Notwithstanding the foregoing, Mr. Chapman’s employment is conditioned
on the results of a background search to be completed on or before January 26, 2009. If the
results of the background search are not reasonably acceptable to the Board of Directors, due to
there being a material issue with his record discovered by the background search, his employment
may be terminated by the board without payment of the Remainder Amount. After July 2, 2009, Mr.
Chapman’s position shall be that of an at-will employee and his employment may be terminated at any
time upon two weeks advance notice. The letter agreement also contains provisions that comply with
Section 409A of the Internal Revenue Code, including a delay in payment in situations where
payments would otherwise not be compliant with Section 409A.
A copy of Mr. Chapman’s letter agreement is filed with this report as Exhibit 10.1 and is hereby
incorporated by reference. The foregoing description of such letter agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of the letter agreement.
|
|
|
| Item 9.01. |
|
Financial Statements and Exhibits. |
(b) Pro Forma Financial Information.
See Exhibit 99.2 for certain pro forma information assuming the completion of the Sony Sale at the
beginning of certain specified fiscal periods.
(d) Exhibits
| |
|
|
|
|
| Exhibit No. |
|
Description |
| |
10.1 |
|
|
Letter Agreement between Robert L. Chapman, Jr. and EDCI
Holdings, Inc. dated January 2, 2009. |
| |
10.2 |
|
|
Eighth
Amendment to Credit Agreement dated as of December 30, 2008 by and
among Entertainment Distribution Company, LLC as borrower, Glenayre
Electronics, Inc., the guarantors party thereto, the lenders party
thereto and Wachovia Bank, National Association, as administrative agent. |
| |
99.1 |
|
|
Company’s News Release dated January 5, 2009. |
| |
99.2 |
|
|
Pro forma financial information. |