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): October 19, 2004
IBF Fund Liquidating LLC
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
333-71091* 06-1708882
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(Commission File Number) (IRS Employer Identification No.)
c/o Arthur Steinberg, as ICA Trustee
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 836-8564
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(Registrant's telephone number, including area code)
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))
* IBF Fund Liquidating LLC (the "Company") is the transferee of the assets and
certain liabilities of IBF Collateralized Finance Corporation ("CFC"), IBF VI -
Secured Lending Corporation ("SLC") and IBF Premier Hotel Group, Inc. ("IBF
Hotel") pursuant to the First Amended Joint Liquidating Plan of Reorganization
(the "Plan") with Respect To InterBank Funding Corp. ("IBF"), SLC, CFC and IBF
Hotel that was confirmed by order of the United States Bankruptcy Court for the
Southern District of New York dated August 14, 2003 and approved in all respects
by order dated September 5, 2003 of the United States District Court for the
Southern District of New York. On December 10, 2003, the Plan went effective
with respect to CFC, SLC and IBF Hotel. Pursuant to oral no-action relief
provided by the Office of Chief Counsel, Division of Corporate Finance of the
Commission on August 12, 2003 (the "No-Action Relief"), the Company is
submitting this Current Report under cover of Form 8-K under SLC's former
Commission file number. Pursuant to the No-Action Relief, this Current Report is
not deemed filed pursuant to Section 13 of the Securities Exchange Act of 1934.
Item 1.01 Entry into a Material Definitive Agreement.
On February 18, 2005, IBF Fund Liquidating LLC (the "Company") entered into
an Acquisition Agreement and Plan of Merger (the "Merger Agreement") with Sunset
Brands, Inc. ("Sunset"), a wholly-owned subsidiary of Sunset ("Merger Sub") and
U.S. Mills, Inc. ("USM"). Pursuant to the Merger Agreement, Merger Sub will
merge with and into USM, with USM continuing as the surviving corporation (the
"Merger"). The Company holds approximately $7.5 million of USM debt and is the
majority stockholder of USM and, as a result of the liquidation preference to
which the Company is entitled, will receive all of the proceeds from the Merger
after the repayment of debt, the payment of the fees and expenses of USM
incurred in connection with the Merger and the payment of certain bonuses to
management of USM.
The following description of the Merger and the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is filed as Exhibit 99.1 hereto, and is incorporated
into this Current Report by reference.
At the effective time and as a result of the Merger, the outstanding shares
of capital stock of USM will be canceled and the holders thereof will receive,
in the aggregate, the following consideration (the "Merger Consideration"): (i)
$17 million in cash less any cash used to repay outstanding indebtedness for
borrowed money of USM, including approximately $7.5 million owed to the Company
and its affiliates, and (ii) a number of units of Sunset ("Units") having an
aggregate value of $3 million, consisting of shares of Series B preferred stock
of Sunset ("Series B Preferred Stock") and warrants ("Warrants") exercisable
into shares of common stock of Sunset ("Sunset Common Stock"). The Merger
Consideration is subject to adjustment, upward or downward, dollar-for-dollar,
by the amount (the "Working Capital Adjustment"), if any, by which USM's working
capital (as defined in the Merger Agreement) as of the closing of the Merger is
greater or less than a deficit of $750,000. Any upward adjustment of the Merger
Consideration may not exceed $500,000, and will be paid through the issuance of
additional Units. In addition, in the event that USM's earnings before interest,
taxes, depreciation and amortization as reported in its audited financial
statements for the fiscal year ended December 31, 2004, less the dollar amount
of certain bonuses, is less than $2.044 million, the aggregate Merger
Consideration will be reduced by the amount of such deficit multiplied by ten.
Pursuant to the Merger Agreement, an aggregate of $1.3 million in cash
and Units having a value of $1.2 million will be withheld from the Merger
Consideration and deposited into escrow at the closing of the Merger to be held
by a third-party escrow agent pursuant to the terms of an escrow agreement to be
entered into by the parties to the Merger Agreement at the closing (the "Escrow
Agreement"). Pursuant to the terms of the Merger Agreement and the Escrow
Agreement, the amount deposited into escrow will secure the payment of any
Working Capital Adjustment and the indemnification obligations of the Company
and USM following the consummation of the Merger. The amounts held in escrow
will be retained by the escrow agent until the second business day following the
first anniversary of the closing of the Merger, unless earlier released in
payment of a Working Capital Adjustment, if any, or otherwise in accordance with
the terms of the Merger Agreement. Upon determination of the final Working
Capital Adjustment, all but $300,000 of the cash in escrow will be
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released to the Company, leaving no more than $1.5 million in escrow ($1.2
million of Units and $300,000 in cash) to cover any indemnification claims made
by Sunset following the closing.
The parties to the Merger Agreement have made customary representations,
warranties and covenants in the Merger Agreement, including, among others,
covenants by the Company and USM (i) to conduct the business of USM in the
ordinary course consistent with past practice during the interim period between
the execution of the Merger Agreement and consummation of the Merger, and (ii)
not to engage in certain kinds of transactions during such period. In addition,
the Company and USM have agreed not to: (x) solicit proposals relating to
alternative business combination transactions or (y) subject to certain
exceptions, enter into discussions concerning or provide confidential
information of USM in connection with alternative business combination
transactions.
Consummation of the Merger is subject to customary conditions, including
(i) approval by the holders of USM's capital stock, (ii) to the extent required
under applicable law, approval of holders of Sunset's capital stock, (iii)
absence of any law or order prohibiting the closing, (iv) subject to certain
exceptions, the accuracy of representations and warranties, (v) the absence of
any material adverse change in USM's business and (vi) the delivery of customary
opinions and closing documentation. In addition, the closing is conditioned upon
cancellation of any indebtedness of USM for borrowed money in excess of $17
million (which may include indebtedness held by the Company), and the entry of a
final, non-appealable order of the United States Bankruptcy Court for the
Southern District of New York approving the execution and delivery of the Merger
Agreement by the Company and the transactions contemplated thereby (the "Court
Approval"). If the Court Approval is not obtained on or before April 1, 2005 and
the Merger Agreement is thereafter terminated, and thereafter, the Company
and/or USM consummates an alternative transaction with respect to USM, the
Company must pay to Sunset $500,000.
Pursuant to the terms of the Merger Agreement, Sunset was required, within
five business days of the execution of the Merger Agreement, to deliver into
escrow $500,000 in cash and 500,000 shares of Sunset Common Stock (the
"Deposit"). Sunset did not make the Deposit within such time period.
Accordingly, the Merger Agreement was amended on March 7, 2005 (the "Amendment")
pursuant to which (i) the parties entered into an escrow agreement with a
third-party escrow agent on such date (the "Deposit Escrow Agreement") pursuant
to which the Deposit was made into an escrow account to be held and disbursed
pursuant to the terms of the Deposit Escrow Agreement and the Merger Agreement,
and (ii) the parties agreed that the Escrow Agreement would be entered into at
the closing of the Merger. Pursuant to the terms of the Merger Agreement and the
Deposit Escrow Agreement, if, after April 15, 2005, the conditions to Sunset's
obligation to consummate the Merger are satisfied and Sunset does not at that
time have the financing necessary to consummate the Merger, the Deposit will be
released to USM and Sunset will be obligated to repurchase from USM the shares
of Sunset Common Stock comprising a portion of the Deposit for a purchase price
of $1.00 per share. If the Merger is consummated, the escrow agent under the
Deposit Escrow Agreement will return the shares of Sunset Common Stock
comprising a portion of the Deposit to Sunset and will deposit the cash portion
of the
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Deposit with the escrow agent under the Escrow Agreement to be held and
disbursed in accordance therewith.
The foregoing descriptions of the Amendment and the Deposit Escrow
Agreement do not purport to be complete and are qualified in their entirety by
reference to the Amendment and the Deposit Escrow Agreement, which are filed as
Exhibits 99.2 and 99.3 hereto, respectively, and which are incorporated into
this Current Report by reference.
In connection with the Merger, on February 18, 2005, the Company entered
into an agreement (the "Letter Agreement") with Charles T. Verde and Cynthia
Davis, the President and Executive Vice President, respectively, of USM,
pursuant to which the Company agreed to pay to each of Mr. Verde and Ms. Davis
(i) $410,000 following the effective time of the Merger, which represents the
amount of bonus compensation that each is entitled to receive from USM in
respect of his or her employment with USM during 2003 and 2004 and in connection
with the consummation of the Merger, and (ii) an amount in cash equal to 7% of
the net proceeds the Company receives from time to time in connection with any
sale of the shares of Series B Preferred Stock it receives in connection with
the Merger, or the shares of Sunset Common Stock into which such shares of
Series B Preferred Stock are convertible.
The foregoing description of the Letter Agreement does not purport to be
complete and is qualified in its entirety by reference to the Letter Agreement,
which is filed as Exhibit 99.4 hereto, and which is incorporated into this
Current Report by reference.
The Merger is scheduled to close not later than April 15, 2005. The Merger
Agreement contains certain termination rights of the Company, USM and Sunset.
As one of the conditions to the closing of the Merger, Sunset and the
Company will enter into an Investor Rights Agreement (the "Investor Rights
Agreement"), pursuant to which Sunset will provide certain registration rights
to the holders of the Units ("Holders") issued to the Company in connection with
the Merger (or shares of Sunset Common Stock issuable upon conversion or
exercise of the shares of the Series B Preferred Stock and Warrants underlying
the Units). In addition, the Investor Rights Agreement provides for certain
restrictions on the transfer and sale of the Series B Preferred Stock and
Warrants included in the Units issued in connection with the Merger and the
shares of Sunset Common Stock issuable upon conversion or exercise thereof for a
period of three years following the consummation of the Merger; provided, that
such restrictions will not apply to sales of shares of Sunset Common Stock
underlying the Units made after the earlier of (i) one year following the
effective date of the registration statement registering such shares of Sunset
Common Stock for resale, and (ii) 15 months following the consummation of the
Merger; provided, however, that certain trading price and average daily volume
thresholds must be met prior to any such sales. Further, the Investor Rights
Agreement provides for the repurchase by Sunset of the Series B Preferred Stock
and cancellation of all or part of the Warrants in certain circumstances.
Specifically, Sunset may, directly or through a designee, repurchase from the
Holders the shares of Series B Preferred Stock issued in connection with the
Merger at any time and must repurchase any such shares of Series B
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Preferred Stock on the third anniversary of the consummation of the Merger. The
repurchase price for all Series B Preferred Stock issued pursuant to the Merger
will be $3 million plus any accrued dividends. In the event Sunset does not
repurchase the Series B Preferred Stock prior to the first anniversary of the
consummation of the Merger, Sunset will be required to pay premiums (the
"Repurchase Premiums"), either in cash or in additional shares of Series B
Preferred Stock, which Repurchase Premiums will accrue on a quarterly basis and
will be at a rate so that the annual dividend rate payable on the Series B
Preferred Stock when added to the annual Repurchase Premium equals 8%, 14% and
20% in years one, two and three, respectively. In addition, the Investor Rights
Agreement provides that a portion of the Warrants will vest over three years
following the consummation of the Merger, with the unvested portion being
canceled upon the repurchase, conversion or sale of the shares of Series B
Preferred Stock prior to the third anniversary thereof.
The foregoing description of the Investor Rights Agreement does not purport
to be complete and is qualified in its entirety by reference to the form of
Investor Rights Agreement, which is filed as Exhibit 99.5 hereto, and which is
incorporated into this Current Report by reference.
On February 22, 2005, the Company entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement") with IBF V-Alternative Investment Holdings, LLC
("AIH"), pursuant to which the Company will acquire all of the assets of AIH for
a purchase price equal to $280,502.32 in cash plus the issuance to AIH of
membership interests in the Company (which, as of the date of execution of the
Asset Purchase Agreement, equaled 1.9339% of the membership interests in the
Company), plus the contribution to AIH of the interests owned by the Company in
AIH. The assets of AIH consist primarily of 130 shares of common stock of
American Benefit Resources, Inc. and 271,085 shares of common stock and 207,792
shares of Series B preferred stock of USM. The consummation of the transactions
contemplated by the Asset Purchase Agreement have been approved as the necessary
consents and approvals of members of AIH owning a majority of the membership
interests of AIH have been received.
The foregoing description of the Asset Purchase Agreement does not purport
to be complete and is qualified in its entirety by reference to the Asset
Purchase Agreement, which is filed as Exhibit 99.6 hereto, and which is
incorporated into this Current Report by reference.
Item 8.01 Other Events.
In December 2003, the Company issued a note in the original principal
amount of $5 million (with an interest rate of 3.5% per annum) (the "Escrow
Note") payable to certain investors ("Escrow Investors") who had invested in IBF
Collateralized Finance Corp. and IBF VI-Secured Lending Corp. (together, the
"Funds") after December 17, 2001 and whose monies were deposited at the time
into an escrow account created pursuant to discussions with the Securities and
Exchange Commission. On October 19, 2004, the court-appointed trustee under the
Investment Company Act of 1940 of the Funds, who also serves as the manager and
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liquidating agent of the Company, arranged for the Escrow Note to be paid in
full on or about such date, and to make a distribution to investors in the Funds
holding general unsecured claims ("General Investors"). The distribution made on
or about October 19, 2005 of approximately $9.2 million consisted of
approximately $5.2 million, which was used to repay the Escrow Note in full, and
$4 million, which was distributed to General Investors and Escrow Investors on
account of their deficiency claim.
On or about February 22, 2005, the Company distributed $7 million to
General Investors and Escrow Investors on account of their deficiency claim.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
The following Exhibits are filed as part of this Current Report
99.1 Acquisition Agreement and Plan of Merger, dated as of
February 18, 2005, among IBF Fund Liquidating LLC, U.S.
Mills, Inc., USM Acquisition Sub, Inc. and Sunset Brands,
Inc.
99.2 Amendment No. 1 to Acquisition Agreement and Plan of Merger,
dated as of March 7, 2005, among IBF Fund Liquidating LLC,
U.S. Mills, Inc., USM Acquisition Sub, Inc. and Sunset
Brands, Inc.
99.3 Escrow Agreement, dated as of March 7, 2005, among Sunset
Brands, Inc., U.S. Mills, Inc., IBF Fund Liquidating LLC and
Continental Stock Transfer & Trust Company, as escrow agent
99.4 Letter Agreement, dated as of February 18, 2005, among IBF
Fund Liquidating LLC, Charles T. Verde and Cynthia Davis
99.5 Form of Investor Rights Agreement to be entered into by
Sunset Brands, Inc. and IBF Fund Liquidating LLC
99.6 Asset Purchase Agreement, dated as of February 22, 2005,
among IBF Fund Liquidating LLC and IBF V-Alternative
Investment Holdings, LLC
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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.
IBF FUND LIQUIDATING LLC
Date: March 16, 2005 By: /S/ Arthur J. Steinberg
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Name: Arthur J. Steinberg
Title: ICA Trustee and Manager
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EXHIBIT INDEX
Exhibit No. Description
99.1 Acquisition Agreement and Plan of Merger, dated as of
February 18, 2005, among IBF Fund Liquidating LLC, U.S.
Mills, Inc., USM Acquisition Sub, Inc. and Sunset Brands,
Inc.
99.2 Amendment No. 1 to Acquisition Agreement and Plan of Merger,
dated as of March 7, 2005, among IBF Fund Liquidating LLC,
U.S. Mills, Inc., USM Acquisition Sub, Inc. and Sunset
Brands, Inc.
99.3 Escrow Agreement, dated as of March 7, 2005, among Sunset
Brands, Inc., U.S. Mills, Inc., IBF Fund Liquidating LLC and
Continental Stock Transfer & Trust Company, as escrow agent
99.4 Letter Agreement, dated as of February 18, 2005, among IBF
Fund Liquidating LLC, Charles T. Verde and Cynthia Davis
99.5 Form of Investor Rights Agreement to be entered into by
Sunset Brands, Inc. and IBF Fund Liquidating LLC
99.6 Asset Purchase Agreement, dated as of February 22, 2005,
among IBF Fund Liquidating LLC and IBF V-Alternative
Investment Holdings, LLC