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): September 30, 2019
FRANCHISE GROUP, INC.
(Exact name of registrant as specified in charter)
|
Delaware (State or other jurisdiction of incorporation) |
001-35588 (Commission File Number) |
27-3561876 (I.R.S. Employer Identification Number) |
1716 Corporate Landing Parkway, Virginia Beach, Virginia 23454
(Address of Principal Executive Offices) (Zip Code)
(757) 493-8855
(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 (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
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. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. |
In connection with the Asset Acquisition (as defined below), Franchise Group, Inc., a Delaware corporation formerly known as Liberty Tax, Inc. (the “Company”), caused Franchise Group New Holdco, LLC, a Delaware limited liability company and subsidiary of the Company (“New Holdco”), to amend Schedule 1 to the First Amended and Restated Limited Liability Company Agreement, dated July 10, 2019, of New Holdco (the “New Holdco LLC Agreement”), and entered into an Amendment No. 1 (the “RRA Amendment”) to that certain Registration Rights Agreement, dated July 10, 2019, between the Company and investors listed on Schedule 1 thereto (the “Registration Rights Agreement”), as follows:
Amendment to Schedule 1 to the New Holdco LLC Agreement
On September 30, 2019, the Company caused New Holdco to amend Schedule 1 to the New Holdco LLC Agreement to reflect the issuance of additional New Holdco Units (as defined below) to the Seller Owners (as defined below) in connection with the Asset Acquisition.
The foregoing description of the amendment to Schedule 1 of the New Holdco LLC Agreement does not purport to be complete and is subject to, and qualified in its entirety by, reference to the complete text of the amended Schedule 1 to the New Holdco LLC Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Amendment No. 1 to Registration Rights Agreement
On September 30, 2019, the Company entered into the RRA Amendment. Pursuant to the terms and conditions of the RRA Amendment, Schedule 1(B) of the Registration Rights Agreement was amended to reflect the issuance of the Equity Securities (as defined below) to the Seller Owners in connection with the Asset Acquisition. The RRA Amendment also amended the Registration Rights Agreement to provide certain registration rights applicable to shares of common stock of the Company, par value $0.01 per share (“Common Stock”) into which the New Holdco Units and the Company Voting Non-Economic Preferred Stock (as defined below) may be exchanged in accordance with the New Holdco LLC Agreement and the certificate of designation setting forth the rights, terms and preferences of the Company Voting Non-Economic Preferred Stock (as amended and together with any certificate of increase adopted or approved in respect thereof, the “Certificate of Designation”).
The foregoing description of the RRA Amendment does not purport to be complete and is subject to, and qualified in its entirety by, reference to the complete text of the RRA Amendment, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities |
On September 30, 2019, New Holdco entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Guzman RTO LLC, a Delaware limited liability company (“Guzman”), RNB RTO LLC, a Delaware limited liability company (“RNB”), and RNBJ RTO LLC, a Delaware limited liability company (“RNBJ” and, collectively with Guzman and RNB, the “Sellers”), each of which is a franchisee of Buddy’s Newco, LLC, an indirect wholly-owned subsidiary of New Holdco (“Buddy’s”), pursuant to which New Holdco acquired 21 Buddy’s Home Furnishings stores from the Sellers (the “Asset Acquisition”). The Asset Acquisition was completed on September 30, 2019. Immediately following the completion of the Asset Acquisition, New Holdco caused all of the assets acquired and the liabilities, contracts and leases assumed pursuant to the Asset Acquisition, and all of the rights and obligations of New Holdco under the Asset Purchase Agreement, to be contributed and assigned to, and accepted and assumed by, Buddy’s.
In connection with the Asset Acquisition, the Sellers became entitled to receive, in the aggregate, 1,350,000 common units of New Holdco (the “New Holdco Units”) and 270,000 shares of the Company’s voting non-economic preferred stock (the “Company Voting Non-Economic Preferred Stock” and, collectively with the New Holdco Units, the “Equity Securities”), which Equity Securities were issued at the direction of the Sellers to Vintage RTO, L.P., Samjor Family LP and the Brian DeGustino Revocable Trust (collectively, the “Seller Owners”), which are direct or indirect equity holders of the Sellers.
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Following an initial six-month lockup period, the Seller Owners may elect to cause New Holdco and the Company to redeem (a) one New Holdco Unit and (b) one-fifth of a share of the Company Voting Non-Economic Preferred Stock, respectively, in exchange for one share of Common Stock in accordance with the New Holdco LLC Agreement and the Certificate of Designation.
The Company relied on an exemption from registration for the issuances and sales described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the United States Securities Act of 1933, as amended (the “Securities Act”), because the foregoing issuances and sales did not involve a public offering, the Seller Owners are “accredited investors” and/or had access to similar documentation and information as would be required in a registration statement under the Securities Act and the Seller Owners acquired the Equity Securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The Equity Securities were offered without any general solicitation by the Company or its representatives. No underwriters or agents were involved in the foregoing issuances and sales and the Company paid no underwriting discounts or commissions. The Equity Securities issued and sold, are subject to transfer restrictions, and the certificates evidencing each Equity Security, if any, will contain an appropriate legend stating that such Equity Security has not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. The Equity Securities were not registered under the Securities Act and such Equity Securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year |
In connection with the Asset Acquisition, the Company increased the number of shares of the Company Voting Non-Economic Preferred Stock pursuant to a certificate of increase to the Certificate of Designation (the “Certificate of Increase”). The Certificate of Increase, which was approved by the Board of Directors of the Company and filed by the Company with the Secretary of State of the State of Delaware on September 30, 2019, increased the number of shares of the Company Voting Non-Economic Preferred Stock from 1,616,667 shares to 1,886,667 shares.
The foregoing description of the Certificate of Increase does not purport to be complete and is subject to, and qualified in its entirety by, reference to the complete text of the Certificate of Increase, a copy of which is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibits are filed herewith:
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EXHIBIT INDEX
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SIGNATURES
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.
| FRANCHISE GROUP, INC. | |||
| Date: September 30, 2019 | By: | /s/ Michael S. Piper | |
| Michael S. Piper | |||
| Vice President and Chief Financial Officer | |||
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Exhibit 3.1
Certificate of INCREASE
of
The NUMBER OF SHARES OF
Voting Non-Economic
Preferred Stock
of
FRANCHISE GROUP, Inc.
Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware
Franchise Group, Inc., a Delaware corporation formerly known as Liberty Tax, Inc. (the “Corporation”), does hereby certify:
FIRST: In a Certificate of Designation filed with the Secretary of State of the State of Delaware on July 10, 2019, pursuant to Section 151 of the General Corporation Law of the State of Delaware, the Corporation was authorized to issue 1,616,667 shares of Voting Non-Economic Preferred Stock, as a series of the Corporation’s preferred stock, par value $0.01 per share;
SECOND: The Board of Directors of the Corporation, by resolution adopted September 30, 2019, duly authorized and directed that the number of shares of the Corporation’s Voting Non-Economic Preferred Stock be increased from 1,616,667 shares to 1,886,667 shares.
In witness whereof, the Corporation has caused this Certificate of Increase to be signed and attested by the undersigned this 30th day of September, 2019.
| FRANCHISE GROUP, INC. | |||
| By: | /s/ Michael S. Piper | ||
| Name: Michael S. Piper | |||
| Title: Chief Financial Officer | |||
Exhibit 10.1
SCHEDULE 1*
SCHEDULE OF MEMBERS
| Member | Units | Percentage Interest | Contribution Closing Capital Account Balance | Additional Cash Capital Contributions | Additional Non-Cash Capital Contributions | Capital Accounts | Notice Information |
| Franchise Group, Inc. | 14,199,754.00 | 60.08% | $169,201,116.00 | $1,061,271.85 | - | $170,262,387.85 |
1716 Corporate Landing Parkway Virginia Beach, VA 23454 Attention: Tiffany McMillan McWaters Email: tiffany.mcwaters@libtax.com |
| Brian DeGustino Revocable Trust | 792,529.62 | 3.35% | $9,430,363.46 | - | $79,992.00 | $9,510,355.46 |
c/o Brian DeGustino
Email: degustinob@gmail.com |
| Amy DeGustino Irrevocable Trust | 336,798.69 | 1.43% | $4,041,584.34 | - | - | $4,041,584.34 |
c/o Brian DeGustino
Email: degustinob@gmail.com |
| Samjor Family LP | 3,937,726.03 | 16.66% | $34,951,536.34 | - | $12,301,176.00 | $47,252,712.34 |
c/o Brian R. Kahn
9935 Lake Louise Drive Windermere, FL 34786 Email: bkahn@vintcap.com |
| Vintage RTO, L.P. | 2,233,218.53 | 9.45% | $22,979,790.34 | - | $3,818,832.00 | $26,798,622.34 |
c/o Vintage Capital Management, LLC
4705 S. Apopka Vineland Road Suite 206 Orlando, FL 32819 Attention: Brian R. Kahn Email: bkahn@vintcap.com |
| Martin Meyer and Fengfeng Ren | 336,798.69 | 1.43% | $4,041,584.34 | - | - | $4,041,584.34 |
1801 N. Mohawk St. #B
Email: martinmey@yahoo.com fengfengrn@gmail.com |
| David O’Neil | 898,130.31 | 3.80% | $10,777,563.75 | - | - | $10,777,563.75 |
350 N. Orleans St., Suite 2N
Chicago, IL 60654-1600 |
| Jeffrey D. Miller | 898,130.31 | 3.80% | $10,777,563.75 | - | - | $10,777,563.75 |
240 Maplewood Rd.
Email: jdmiller10@protonmail.com |
* This Schedule of Members shall be updated from time to time to reflect any adjustment with respect to any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units, or to reflect any additional issuances of Units pursuant to this Agreement.
Exhibit 10.2
Execution Version
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
September 30, 2019
Reference is hereby made to that certain Registration Rights Agreement, dated as of July 10, 2019 (the “Registration Rights Agreement”), by and among Franchise Group, Inc. (f/k/a Liberty Tax, Inc.), a Delaware corporation (the “Company”), and the parties listed on Schedule 1 thereto (the “Investors”).
WHEREAS, the Company and the Vintage Group Members desire to amend the Registration Rights Agreement pursuant to this Amendment No. 1 (this “Amendment”) in accordance with Section 3.12 thereof; and
WHEREAS, capitalized terms used herein but not defined shall have the meaning set forth in the Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment.
(a) The definition of “Company” in the preamble to the Registration Rights Agreement is hereby amended and restated in its entirety to refer to Franchise Group, Inc. (f/k/a Liberty Tax, Inc.).
(b) The definition of “Certificate of Designation” in Section 1.1 of the Registration Rights Agreement is hereby amended and restated in its entirety as follows:
“Certificate of Designation” means that certain Certificate of Designation providing for the designations, powers, preferences, rights, qualifications, limitations and restrictions of the Voting Non-Economic Preferred Stock, which Certificate of Designation was approved by the Board of Directors and the special committee of independent directors of the Board of Directors and filed by the Company with the Secretary of State of the State of Delaware on or prior to the date hereof pursuant to the Business Combination Agreement, as such Certificate of Designation may be amended, restated or otherwise modified from time to time, together with any Certificate of Increase adopted or approved in respect of such Certificate of Designation.
(c) The definition of “Former Buddy’s Members” in Section 1.1 of the Registration Rights Agreement is hereby amended and restated in its entirety as follows:
“Former Buddy’s Members” means the former members of Buddy’s as of immediately prior to the consummation of the Merger. A list of the Former Buddy’s Members is set forth on Schedule 1(B).
(d) The definition of “Registrable Shares” in Section 1.1 of the Registration Rights Agreement is hereby amended and restated in its entirety as follows:
“Registrable Shares” means, at any time, (i) the shares of Common Stock that were purchased by Tributum, L.P., pursuant to the Vintage Subscription Agreements and that are beneficially owned by Tributum, L.P. (or another Vintage Group Member as a result of a Transfer of such shares by Tributum, L.P., to such other Vintage Group Member), (ii) the shares of Common Stock that are purchased by any Vintage Group Member pursuant to any subscription agreement, equity commitment or similar agreement between such Vintage Group Member and the Company, (iii) the shares of Common Stock issued or issuable by the Company upon a redemption of New Holdco Units and shares of Voting Non-Economic Preferred Stock by New Holdco and the Company, respectively, pursuant to the A&R New Holdco LLC Agreement and the Certificate of Designation, (iv) any shares of Common Stock that were purchased by the Investors with the proceeds from the Debt Financing or any amounts distributed thereto by New Holdco in connection with the tender offer contemplated by the Business Combination Agreement and (v) any shares of capital stock or other equity securities issued in exchange for or in substitution of a dividend or distribution on any shares of Common Stock referred to in the immediately preceding clauses (i), (ii), (iii) and (iv), but excluding any such shares of Common Stock (including shares of Common Stock issuable upon a redemption of New Holdco Units and shares of Voting Non-Economic Preferred Stock) that have, after the date hereof, been Transferred pursuant to (a) a registration statement or valid registration exemption under, and in compliance with the requirements of, the Securities Act such that such shares are freely tradeable or (b) Rule 144 under, and in compliance with the requirements of, the Securities Act.
(e) A new Section 3.13 is hereby added to the Registration Rights Agreement as follows:
3.13 Third Party Beneficiaries. Each Vintage Group Member that is not an Investor is an express third party beneficiary of this Agreement (including with respect to all rights of the Vintage Group Members under this Agreement).
(f) Schedule 1(A) and Schedule 1(B) of the Registration Rights Agreement are hereby amended and restated in their entirety as follows:
A. Vintage Group
| Name and Address |
Shares of Common Stock |
||
|
Tributum, L.P.
|
2,083,333.33
|
||
|
Vintage Tributum, L.P.
c/o Vintage Capital Management 4705 S. Apopka Vineland Road Suite 206 Orlando, FL 32819 Attention: Brian R. Kahn Email: bkahn@vintcap.com |
2,075,151.00 |
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B. Former Buddy’s Members
| Name and Address | New Holdco Units | Shares of Voting Non-Economic Preferred Stock | Shares of Common Stock into which New Holdco Units and Shares of Voting Non-Economic Preferred Stock are Convertible |
|
Brian DeGustino Revocable Trust c/o Brian DeGustino
32 Wedgewood Drive Hawthorn Woods, IL 60047
|
792,529.62 | 158,505.92 | 792,529.62 |
|
Amy DeGustino Irrevocable Trust c/o Brian DeGustino
32 Wedgewood Drive Hawthorn Woods, IL 60047
|
336,798.69 | 67,359.74 | 336,798.69 |
|
Samjor Family LP
9935 Lake Louise Drive Windermere, FL 34786
|
3,937,726.03 | 787,545.21 | 3,937,726.03 |
|
Vintage RTO, L.P. c/o Vintage Capital Management 4705 S. Apopka Vineland Road Suite 206
Orlando, FL 32819
|
2,233,218.53 | 446,643.71 | 2,233,218.53 |
|
Martin Meyer and Fengfeng Ren
1801 N. Mohawk St. #B Chicago, IL 60614 Email: martinmey@yahoo.com fengfengrn@gmail.com |
336,798.69 | 67,359.74 | 336,798.69 |
|
David O’Neil 350 N. Orleans St., Suite 2N Chicago, IL 60654-1600 |
898,130.31 | 179,626.06 | 898,130.31 |
|
Jeffrey D. Miller 240 Maplewood Rd.
Riverside, IL 60546
|
898,130.31 | 179,626.06 | 898,130.31 |
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2. Miscellaneous; No Other Waivers or Amendments. As amended by this Amendment, the provisions of Article I (Definitions) and Sections 3.1 (Notices), 3.2 (Waiver), 3.3 (Counterparts), 3.4 (Applicable Law), 3.5 (Waiver of Jury Trial), 3.6 (Severability), 3.8 (Delivery by Electronic Transmission), 3.11 (Descriptive Headings; Interpretation) and 3.12 (Amendments) of the Registration Rights Agreement shall apply to this Amendment mutatis mutandis. Except as specifically amended hereby, the Registration Rights Agreement shall continue in full force and effect as written. References to the Registration Rights Agreement in other documents and agreements (including, for the avoidance of doubt, the Registration Rights Agreement) will be deemed to be references to the Registration Rights Agreement, as amended by this Amendment, regardless of whether such documents and agreements refer to any amendments to the Registration Rights Agreement.
3. Entire Agreement. This Amendment, together with the Registration Rights Agreement and all other documents and agreements referenced herein or therein, represents the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto or thereto, or between any of them, with respect to the subject matter hereof and thereof.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, all as of the date first above written.
FRANCHISE GROUP, INC.
By: /s/ Michael S. Piper_________________________
Name: Michael S. Piper
Title: Chief Financial Officer
VINTAGE GROUP:
TRIBUTUM, L.P.
By: /s/ Brian Kahn_________________________
Name: Brian Kahn
Title: Authorized Signatory
SAMJOR FAMILY LP
By: /s/ Brian Kahn_________________________
Name: Brian Kahn
Title: Authorized Signatory
VINTAGE RTO, L.P.
By: /s/ Brian Kahn_________________________
Name: Brian Kahn
Title: Authorized Signatory
[Signature page to Amendment No. 1 to Registration Rights Agreement]
VINTAGE CAPITAL MANAGEMENT, LLC
By: /s/ Brian Kahn_________________________
Name: Brian Kahn
Title: Authorized Signatory
VINTAGE TRIBUTUM, LP
By: /s/ Brian Kahn_________________________
Name: Brian Kahn
Title: Authorized Signatory
[Signature page to Amendment No. 1 to Registration Rights Agreement]