Ironclad Performance Wear Corporation, a provider of high-performance task-specific work gloves, announced that the company and its subsidiary filed voluntary petitions under Chapter 11 of the U. S. Bankruptcy Code in the U. S. Bankruptcy Court, Central District of California, San Fernando Valley Division on September 8, 2017. The company's Chapter 11 cases are expected to be jointly administered.
During the pendency of the Chapter 11 cases, Ironclad will continue in the possession of its assets and will continue to operate and manage its business in the ordinary course, including continuing the development, manufacture and sale of its high-performance task-specific work gloves, pending the sale of substantially all of its assets pursuant to a sale under Section 363 of the Bankruptcy Code. The Company intends to request Bankruptcy Court approval of a series of customary motions related to the payment of various expenses to continue operations. Court documents and additional information are available as indicated below.
To facilitate continued business operations, on September 8, 2017, Ironclad entered into a Debtor-in-Possession Credit Agreement and Agreement for the Use of Cash Collateral (the DIP Agreement) with Radians Wareham Holding, Inc., pursuant to which Radians will provide to Ironclad a secured multiple draw term loan credit facility of up to $1,000,000 for normal business operations, and up to an additional $1,000,000 for additional purchases of inventory. Among other customary matters, Ironclad's failure to comply with certain bankruptcy-related filing obligations within the timeframes set forth in the DIP Agreement constitute events of default thereunder.
On September 8, 2017, Ironclad also entered into a Stalking Horse Asset Purchase Agreement (the Purchase Agreement) with Radians pursuant to which Radians will purchase substantially all of Ironclad's assets for (1) an aggregate amount of $20,000,000, subject to a reduction to $15,000,000 if certain conditions set forth in the Purchase Agreement are not met, and (2) the assumption of certain of Ironclad's liabilities as set forth in the Purchase Agreement.
The closing of the transactions contemplated under the Purchase Agreement is conditioned on approval by the Bankruptcy Court, and consideration by Ironclad and the Bankruptcy Court, of higher or better competing bids for Ironclad's assets at an auction. Ironclad will seek the Bankruptcy Court's approval of bidding procedures for the auction requiring an initial overbid of at least $750,000 over the applicable purchase price in the Purchase Agreement, with subsequent overbids in increments of $250,000 or figures which are wholly divisible by $250,000. Bidders will be required to demonstrate that they have the financial means to consummate their transaction and to submit a cash deposit of $2,000,000.
If any party other than Radians is deemed by the Bankruptcy Court to be the winning bidder at the auction undertaken pursuant to the bidding procedures approved by the Bankruptcy Court, or if Ironclad elects to proceed with a plan of reorganization instead of proceeding with a sale of its assets, Radians will receive a break-up fee in the amount of $500,000.
The Purchase Agreement may be terminated upon the parties' mutual consent, by either Ironclad or Radians upon material breach of the other party's covenants or material inaccuracies in the other party's representations and warranties, and by Radians upon Ironclad's failure to file, by the dates specified in the Purchase Agreement, the bankruptcy motions set forth in the Purchase Agreement.
Geoff Greulich, Ironclad's Chief Executive Officer, stated that "Given the shortage of liquidity, and having extensively explored and deliberated on available alternative transactions, management and the Board of Directors determined that an orderly pre-arranged Chapter 11 filing and subsequent Section 363 asset sale with an overbid process was in the best interests of Ironclad's stockholders and creditors. Radians has extended terms that allow the Company to continue to meet the needs of its customers, employees and suppliers through a quick and efficient sale process."
Levene, Neale, Bender, Yoo & Brill L.L.P. is serving as the Company's bankruptcy counsel and Craig-Hallum Capital Group LLC is serving as its financial advisor in this process.