Item 1.01 Entry into a Material Definitive Agreement.
As previously disclosed, on June 23, 2020, GNC Holdings, Inc. (the "Company")
and certain of its subsidiaries (collectively with the Company, the "Debtors")
commenced voluntary cases under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). The Debtors' Chapter 11 proceedings are jointly
administered under the caption In re GNC Holdings, Inc., et al. (the "Chapter 11
Cases"). Additional information about the Chapter 11 Cases, including access to
Bankruptcy Court documents, is available online at
http://cases.primeclerk.com/GNC, a website administered by Prime Clerk, a third
party bankruptcy claims and noticing agent. The information on this website is
not incorporated by reference into, and does not constitute part of, this
Current Report on Form 8-K.
Also as previously disclosed, on August 7, 2020, the Debtors entered into a
Stalking Horse Agreement (as amended from time to time, the "Stalking Horse
Agreement") with Harbin Pharmaceutical Group Holding Co., Ltd. ("Harbin"),
pursuant to which Harbin agreed to acquire substantially all of the Debtors'
assets at the closing of the transactions contemplated therein (the "Closing").
On October 7, 2020, the Company (on behalf of itself and the other Debtors) and
Harbin entered into the Fifth Amendment to Stalking Horse Agreement (the "Fifth
Amendment"), pursuant to which, among other things, the parties agreed (a) to
modify certain provisions related to the timing and frequency of the
distribution of the Debtors' remaining cash after the Closing and after the
Debtors have completed the wind-down process in the Bankruptcy Court; (b) that
royalty payments required to be made with respect to the Company's trademarks by
counterparties under rejected contracts, constitute purchased assets under the
Stalking Horse Agreement; (c) to remove certain additional contracts and leases
from the list of agreements to be assumed by Harbin; (d) that Harbin is
prohibited from amending the Company's executive pay policy for the first twelve
(12) months after the Closing in any manner that would adversely impact a
Transferred Employee's (as defined in the Stalking Horse Agreement) amount of
severance or the events qualifying a Transferred Employee for severance; and
(e) make additional modifications and clarifications with respect to the
liabilities being assumed by Harbin, as further set forth in the Fifth
Amendment.
The foregoing description of the Fifth Amendment does not purport to be complete
and is qualified in its entirety by reference to the Fifth Amendment, which has
been filed with the Bankruptcy Court and is attached as Exhibit 10.1 hereto and
incorporated by reference herein.
Item 1.02 Termination of a Material Definitive Agreement.
As previously disclosed, on February 13, 2019, the Company entered into the
Amended and Restated Stockholders Agreement by and among the Company and Harbin
Pharmaceutical Group Co., Ltd., a company incorporated in the People's Republic
of China ("Harbin Listco"), which sets forth, among other things, the Company's
and Harbin Listco's rights and obligations with respect to Harbin Listco's
investment in the Series A Convertible Preferred Stock of the Company (the
"Stockholders Agreement").
On October 7, 2020, the Company and Harbin Listco terminated the Stockholders
Agreement in its entirety, without any continuing rights or obligations of the
parties thereunder.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On October 7, 2020, the Debtors and Harbin consummated the Closing, thereby
completing the disposition of substantially all of the Debtors' assets in
accordance with the Stalking Horse Agreement. The Closing was consummated
through a series of transactions contemplated by the Stalking Horse Agreement,
whereby, immediately prior to the Closing, the Debtors (a) transferred
substantially all of their assets (other than their Canadian assets) to GNC
Holdings, LLC, a Delaware limited liability company formed as a wholly owned
subsidiary of the Company ("New GNC") and (b) transferred substantially all of
their Canadian assets to GNC Canada Holdings ULC, a Nova Scotia unlimited
liability company formed as a wholly owned subsidiary of New GNC. At the
Closing, Harbin, indirectly through ZT Biopharmaceutical LLC, a Delaware limited
liability company and wholly owned subsidiary of Harbin, purchased 100% of the
issued and outstanding equity interests in New GNC.
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Proceeds from the Closing are being used to, among other things, pay off (a) all
amounts owing under the $100 million Debtor-in-Possession Term Loan Credit
Agreement, by and among GNC Corporation, General Nutrition Centers, Inc., GLAS
Trust Company, LLC, as administrative agent and collateral agent, and the
lenders party thereto, (b) the $100 million of roll-up term loans under the
Amended and Restated Term Loan Agreement, dated as of February 28, 2018, among
GNC Corporation, General Nutrition Centers, Inc., JPMorgan Chase Bank, N.A., as
administrative agent, and the lenders party thereto, and (c) all amounts owing
under the $275 million Debtor-in-Possession Amended and Restated ABL Credit
Agreement, by and among GNC Corporation, General Nutrition Centers, Inc.,
JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the
lenders party thereto.
Following the Closing, the Debtors will seek an order from the Bankruptcy Court
confirming the Debtors' Joint Chapter 11 Plan of Reorganization (the "Plan"),
pursuant to which, among other things, the Debtors expect to distribute
approximately (a) $126 million in cash (subject to reduction for certain amounts
that may need to be escrowed in connection with the confirmation of the Plan)
and $184 million in second lien notes (subject to increase to take account of
any cash reduction in accordance with the terms of the Stalking Horse Agreement)
issued by New GNC to the Company's Tranche B-2 term lenders (which, together
with the $100 million term loan roll-up described above, would constitute an
approximate recovery of $410 million to the Company's Tranche B-2 term lenders)
and (b) $4.5 million in cash and $20 million in subordinated notes to be issued
by New GNC to the Debtors' unsecured creditors. The Plan also contemplates that
all outstanding shares of its common stock and preferred stock will be cancelled
under the Plan, with shareholders receiving no distributions thereunder.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
In connection with and effective as of the Closing, each of Yong Kai Wong, Hsing
Chow, Alan Wan, Michele S. Meyer and Rachel Lau are resigning from the board of
directors of the Company (the "Board") and any committees of the Board on which
they served.
In addition, each of Tricia K. Tolivar (Executive Vice President, Chief
Financial Officer), Joshua Burris (Chief US Officer), Susan M. Canning (Senior
Vice President, General Counsel and Corporate Secretary), Cameron Lawrence
(Senior Vice President, Chief Accounting Officer), Ryan Ostrom (Chief Brand
Officer), and Steve Piano (Senior Vice President, Chief Human Resources Officer)
resigned from their respective executive officer positions with the Company and
other positions they hold with the Company's subsidiaries, effective as of the
close of business on the date hereof, and assumed employment positions with New
GNC.
As previously disclosed, on September 18, 2020, Harbin notified the Company in
writing that pursuant to Section 7.10(a) of the Stalking Horse Agreement, Harbin
will not be making an offer of employment to Kenneth A. Martindale, the
Company's Chief Executive Officer, and Carl Seletz, the Company's Chief Global
Officer. Accordingly, pursuant to Section 7.10(b) of the Stalking Horse
Agreement, the Company has terminated Mr. Martindale's and Mr. Seletz's
employment with the Company, effective immediately prior to the Closing.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following materials are furnished as exhibits to this Current Report on
Form 8-K:
Exhibit
No. Description
10.1 Fifth Amendment to Stalking Horse Agreement, dated October 7, 2020.
104 Cover Page Interactive File (the cover page tags are embedded within
the Inline XBRL document).
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