UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) November 13 , 2023
NICHOLAS FINANCIAL, INC.
(Exact name of registrant as specified in its Charter)
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British Columbia, Canada |
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0-26680 |
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59-2506879 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
26133 US 19 North, Suite 300 Clearwater, Florida |
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33763 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(727) 726-0763
(Registrant’s telephone number, Including area code)
Not applicable
(Former name, former address and former fiscal year, 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 Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock |
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NICK |
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NASDAQ |
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.
On November 13, 2023, Nicholas Financial, Inc. (the “Company”) and Nicholas Financial, Inc., a Florida corporation (“Nicholas”) and an indirect wholly-owned subsidiary of the Company, entered into a Master Asset Purchase Agreement (the “Purchase Agreement”) with Westlake Services, LLC dba Westlake Financial, a California limited liability company (“Westlake”), pursuant to which the Company and Nicholas have agreed to sell, and Westlake has agreed to purchase substantially all of the Company’s and Nicholas’ assets, consisting of Nicholas’ motor vehicle retail installment sale contracts and unsecured consumer loan contracts (collectively, the “Contracts”) and the accounts receivable related to such Contracts (collectively, the “Receivables”), for an aggregate purchase price of $65,617,598.23, or approximately $9.00 book value per share, subject to adjustment in accordance with the terms of the Purchase Agreement.
Westlake is an affiliate of Westlake Portfolio Management, LLC, a California limited liability company (“WPM”), and Nicholas entered into a Loan Servicing Agreement (the “Servicing Agreement”) with WPM on November 3, 2022, pursuant to which WPM commenced servicing of the Receivables under the Contracts in December 2022 and has continued such servicing to date. In connection with entering into the Purchase Agreement, the Company will cease new originations, and WPM is expected to continue to service the Receivables for Nicholas until the closing of the transaction contemplated by the Purchase Agreement.
The Purchase Agreement contains customary representations and warranties regarding the parties, and the transaction contemplated by the Purchase Agreement is subject to customary closing conditions, including approval of the Company’s shareholders. The Purchase Agreement also contains certain termination rights for each of the Company and Westlake, including if the transaction is not approved by the Company’s shareholders.
Assuming closing of the transaction contemplated by the Purchase Agreement, the Company intends to explore strategic alternatives for the use of the net proceeds of the asset sale and seek to maximize the value of deferred tax assets available to the Company.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
Exhibit # |
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Description |
2.1 |
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104 |
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Cover Page Interactive Data File (formatted the Inline XBRL document) |
* Certain terms in the Master Asset Purchase Agreement have been omitted pursuant to Instruction 6 to Item 1.01 of Form 8-K because such terms are both (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed. The registrant undertakes to furnish copies of any of the omitted schedules, exhibits and terms upon request by the Securities and Exchange Commission.
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.
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NICHOLAS FINANCIAL, INC. |
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(Registrant) |
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Date: November 17, 2023 |
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/s/ Irina Nashtatik |
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Irina Nashtatik |
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Chief Financial Officer (Principal Financial Officer) |
Exhibit 2.1
[CERTAIN INFORMATION IDENTIFIED BY [***] HAS BEEN EXCLUDED FROM THIS AGREEMENT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED]
MASTER ASSET PURCHASE AGREEMENT
THIS MASTER ASSET PURCHASE AGREEMENT, dated as of November 13, 2023 (“Effective Date”), is between Westlake Services, LLC dba Westlake Financial, a California limited liability company (“Westlake”) and Nicholas Financial, Inc., a Florida corporation (“Assignor”). Each of the parties named above may be referred to herein as a “Party” and collectively as the “Parties”.
WHEREAS, Assignor is a wholly-owned, indirect subsidiary of Nicholas Financial, Inc., a Canadian holding company incorporated under the laws of British Columbia in 1986 (“Parent”);
WHEREAS, the business activities of Parent are currently conducted exclusively through Assignor;
WHEREAS; in the regular course of business, Assignor, its affiliates and business partners, originate, finance, or purchase motor vehicle retail installment sale contracts secured by new and/or used vehicles, and unsecured consumer loan contracts, that Assignor, its affiliates or business partners sell to and arrange financing for Customers;
WHEREAS, Westlake is engaged in the business of consumer automotive financing by purchasing retail installment sales contracts from automobile dealers and finance companies, and financing and purchasing unsecured consumer loan contracts;
WHEREAS, Westlake Portfolio Management, LLC is a California limited liability company (“WPM”);
WHEREAS, Assignor and WPM entered into a Servicing Agreement dated as of November 3, 2022 (“Servicing Agreement”), for WPM to perform servicing duties with respect to the Contracts secured by Units, and WPM has been performing all such duties for Assignor since November 3, 2022, pursuant to the terms and conditions of the Servicing Agreement;
WHEREAS, WPM and Westlake understand the terms and conditions of the Contracts; and
WHEREAS, Westlake desires to purchase the Contracts and the corresponding Receivables payable under such Contracts from Assignor, and Assignor desires to sell at a discount such Contracts and Receivables related thereto to Westlake on the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual agreements hereinafter contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties agree as follows:
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On and after the Closing Date, Assignor shall not repossess any Unit or contact any Customer, other than as provided for in this Agreement, as requested by Westlake, or in response to a Customer making payment to Assignor and solely to inform the Customer to direct all future payments to Westlake.
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As of the date of this Agreement, certificates of title related to the Contracts identified in Schedule B have not been delivered to Westlake or WPM.
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Termination Events. This Agreement may, by written notice given prior to the Closing, be terminated:
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(i) by mutual written consent of Westlake and Assignor;
(ii) by either Westlake or Assignor, if a material breach of any provision of this Agreement has been committed by the other Party and such breach has not been waived or cured within fifteen (15) days following notice of such breach being delivered by the non-breaching Party to the breaching Party; or
(iii) by Assignor if Assignor (a) fails to secure Shareholder Approval or (b) fails to agree to settlement terms regarding the Litigation.
A “Charged Off Receivable” shall be defined herein as a Receivable for which all or a portion of any payment due and owing thereon is more than one hundred and twenty (120) days past due on the last day of a collection period. Prior to the Effective Date, Assignor shall have the right to all collections related to Charged Off Receivables. After the Effective Date, (i) Assignor shall have the right to [***] percent ([***]%) of collections, less net liquidation proceeds, related to Charged Off Receivables and (ii) Westlake will, provided that the purchase under this Agreement closes, provide a quarterly report and payment to Assignor related to the foregoing. Westlake shall deliver such quarterly report and payment to Assignor within thirty (30) days after the end of each quarter.
Delivery of Collections and Payments. (a) From and after the Cutoff Date, Assignor shall forward to, or at the direction of, Westlake, all payments (properly endorsed where required) received in respect of the Receivable by or on behalf of Assignor as soon as practicable after receipt thereof by Assignor but in no event later than five (5) Business Days after receipt thereof, via overnight delivery or by wire transfer in accordance with the written instructions provided by Westlake to Assignor in writing. Any payments received by Assignor in respect of the Receivable shall be held by Assignor in trust for the benefit of Westlake until delivery to Westlake. From and after the Closing Date of the SFPA, Assignor shall forward to Westlake any notices or written communications that it receives with respect to the Receivables covered by the SFPA within five (5) Business Dys of receipt thereof, except notices or written communications from any governmental authority or any impound notices, which, in each case, shall be forwarded within two (2) Business Days of receipt thereof. Except as otherwise provided in this Agreement, Assignor will not take any other actions with respect to the Receivable from and after the Effective Date without the prior written consent of Westlake.
Upon a material breach of any provision contained in this Agreement, the non-breaching Party shall provide the breaching Party with written notice of such material breach. If the breaching Party does not remedy such material breach within ten (10) business days from receipt of the notice thereof, then such breaching Party shall be deemed in default under this Agreement. In the event of a Party’s default, and in addition to any other rights under applicable law or in equity, the non-breaching Party shall have all rights granted hereunder and the breaching Party shall pay the non-breaching Party the amount equal to any and all damages and reasonable costs incurred by the non-breaching Party as a result of the breaching Party’s default.
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In addition, the breaching Party shall be responsible to pay and reimburse the non-breaching Party for any and all reasonable and documented out of pocket costs, including reasonable attorneys’ fees, expended by the non-breaching Party to enforce the terms of this Agreement.
Any waiver of a default or provision under this Agreement must be in writing. No such waiver constitutes a waiver of any other default or provision concerning the same or any other provision of this Agreement. No delay or omission by Westlake or Assignor in the exercise of any of its rights or remedies under this Agreement constitutes a waiver of, or otherwise impairs such right or remedy. A consent by one Party to or approval of an act by another Party does not waive or render unnecessary the consent to or approval of any other or subsequent act.
The Parties agree that Westlake may, without any notice or demand to Assignor, deduct from the amounts to be paid to Assignor by Westlake under this Agreement any amounts owed by Assignor to Westlake or any of its affiliates under this Agreement for any reason.
Each Party represents and warrants to the other that each maintains, and will continue to maintain, appropriate information security programs and measures designed to ensure the security and confidentiality of “nonpublic personal information” (“NPI”) (as defined in the Gramm-Leach-Bliley Act (15 U.S.C. § 6801 et seq.) and any rules promulgated thereunder). Such information security programs and measures shall include appropriate procedures designed to (a) protect against anticipated threats or hazards to the security or integrity of NPI; (b) protect the security of NPI; and (c) to protect against unauthorized access to or use of NPI. The Parties further agree that, except as may be required or allowed by law, they will not knowingly disclose any NPI to any third party, and they will not use NPI other than to carry out the purposes for which it was disclosed, unless another use is expressly permitted by a written agreement executed by the other Party or required by law. Each Party shall promptly notify the other if it receives any written complaint or written notice concerning a violation of privacy rights or becomes aware of a breach of customer data security. The obligations of each Party under this section shall survive termination of this Agreement.
Each Party acknowledges and agrees that the other Party has developed and acquired certain confidential, proprietary information and trade secrets regarding its business, including, but not limited to, the contents of this Agreement and any other agreements between Assignor and Westlake, its products, fee structures, customer and dealer data, marketing plans and strategies, business plans and strategies, pricing and purchasing policies and practices, computer software, programs, source code, algorithms, record layouts, routines, report formats, data, compilers, assemblers, design concepts, inventions, discoveries, copyrights, concepts and ideas, patents, patent applications, know-how, processes and methods, and other proprietary business information and intellectual property (collectively, “Confidential Information”), all of which are valuable assets.
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Each Party (“Receiving Party”) further acknowledges and agrees that it has been or will be granted access to Confidential Information, and that the economic value of Confidential Information would be destroyed by its unauthorized disclosure, thereby causing significant harm to the disclosing party (“Disclosing Party”), and that this section is necessary to protect the value of Confidential Information. Therefore, Receiving Party agrees to keep all Confidential Information confidential and will not directly or indirectly disclose or reveal to any third party or utilize for its own benefit, other than pursuant to this Agreement, any Confidential Information and any information derived therefrom. Receiving Party further agrees to notify Disclosing Party in the event that it discovers any unauthorized disclosure of Confidential Information and agrees to take all reasonable steps to preserve the confidentiality of Confidential Information. Receiving Party shall assume responsibility that its employees will similarly preserve Confidential Information and agrees to limit access to Confidential Information to only those employees that have a bona fide need to know Confidential Information. Receiving Party agrees that upon termination of this Agreement, Receiving Party will discontinue all use of Confidential Information and, at no cost to Disclosing Party, promptly return or destroy all Confidential Information disclosed during the term of this Agreement and any information derived therefrom. The confidentiality obligations of each Party under this section shall survive termination of this Agreement. Receiving Party also agrees that its obligations under this section shall also apply to any Confidential Information or trade secrets of any third party which Disclosing Party has agreed to keep confidential and not disclose, and which Receiving Party has actual or constructive notice of such agreement.
The Parties agree that Confidential Information shall not include any information that (i) is or becomes available to the public other than as a result of a disclosure by the Receiving Party in breach of this Agreement, (ii) is or becomes available to the Receiving Party or any of its employees from a source other than the Disclosing Party provided that such source is not known to the Receiving Party to be subject to a contractual or fiduciary obligation of confidentiality owed to the Disclosing Party with respect to such information, (iii) was within the possession of the Receiving Party or any of its employees prior to being furnished to the Receiving Party by or on behalf of the Disclosing Party pursuant hereto, (iv) is or was independently developed or conceived by or on behalf of the Receiving Party or any of its employees without the use of the Confidential Information and/or (v) is identified by the Disclosing Party as not or no longer being proprietary or confidential.
Notwithstanding the foregoing, the Receiving Party and its employees may, without notifying the Disclosing Party or otherwise complying with the provisions of this section , disclose Confidential Information to any bank, securities, tax or other regulatory, governmental or supervisory authority in the course of any routine examination by such authority or in response to any request from such authority, provided that such examination or request does not specifically target the Disclosing Party or the transactions contemplated by this Agreement.
Westlake acknowledges and agrees that Parent is subject to public disclosure and filing requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As such, Parent must disclose the proposed sale of the Conveyed Interests for purposes of complying with the disclosure rules and regulations of the Exchange Act and the Nasdaq stock exchange. Any such disclosures by Parent for purposes of complying with the disclosure rules and regulations of the Exchange Act and the Nasdaq stock exchange are specifically permitted and shall not constitute a breach of this Agreement; provided such disclosures are reasonably redacted to the satisfaction of Westlake where approval by Westlake shall not be unreasonably withheld, delayed, or conditioned.
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The Parties recognize that money damages would not be an adequate remedy to Disclosing Party for breach of this section and agree that in the event of a breach of this section, Disclosing Party is entitled to seek additional judicial relief, including, but not limited to, restraining orders, injunctions and an accounting.
Assignor agrees to provide (or, if applicable, agrees to direct its collateral custodian to provide) Westlake with such necessary information and documents that Westlake may reasonably request from time to time so long as such requests are in connection with the transactions contemplated by this Agreement, including but not limited to, evidence of compliance by Assignor with all of Assignor’s obligations hereunder, and evidence relating to all warranties and representations of Assignor hereunder.
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The indemnification obligations of Assignor detailed herein shall survive for a period of twelve (12) months from the Closing Date (excluding indemnification obligations relating to the Litigation which shall survive indefinitely and indemnification obligations for third party claims which relate to the fraud, gross negligence, or willful misconduct of Assignor, which shall survive for a period twenty-four (24) months from the Closing Date.
This Agreement, including the exhibits and schedules hereto, constitute the sole and entire agreement of the Parties, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. Any amendment or modification of this Agreement must be made in writing and must be executed by the Assignor and Westlake.
All notices hereunder shall be in writing and shall be effective upon personal delivery, facsimile or deposit in the U.S. mail and addressed to address set forth on the last page hereof or such other address of which the Party may designate. Each Party shall properly provide the other with notice of any change in address.
This Agreement shall be governed by the laws of the State of Delaware, without regard to conflict of laws provisions. Any actions or proceedings arising out of this Agreement, including, but not limited to, actions pertaining to the formation, validity, interpretation, or alleged breach of this Agreement shall be brought against the non-filing party in the state and county of the non-filing party.
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Each Party consents to the jurisdiction of such courts in any such action or proceeding and waives any objection to venue laid therein. Each Party hereby waives personal service of process. The prevailing Party in any action or proceeding shall be entitled to recover all costs and reasonable attorneys’ fees from the other Party.
THE PARTIES, TO THE MAXIMUM EXTENT PERMISSIBLE BY APPLICABLE LAW, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION BASED UPON, ARISING UNDER OR IN ANY WAY RELATED TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE. THE PARTIES AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. THIS SECTION SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
Assignor acknowledged and understands that Westlake is obligated to comply with the provisions of the USA PATRIOT ACT of 2001 (the “Patriot Act”), which includes but is not limited to the requirements of filing Suspicious Activity Reports and establishing a Customer Identification Program. Assignor agrees to reasonably cooperate with Westlake in this regard and shall make available and provide information reasonably requested by Westlake so as to comply with the Patriot Act. Additionally, Assignor agrees to use its commercially reasonable efforts to detect and prevent money laundering and financing of terrorism schemes and to report suspicious activity related to or arising from this Agreement to Westlake and the appropriate agencies, which activities may include detected or attempted fraud and identity theft.
If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
Each Party represents that it has had the opportunity to discuss this Agreement with legal counsel and it has either discussed this Agreement with legal counsel or have opted not to discuss this Agreement with legal counsel. Each Party also agrees that it shall not deny the validity of this Agreement on the ground that it did not have the advice of legal counsel. Each Party further agrees that any legal rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not apply to the interpretation of this Agreement or any addendum, amendment, or exhibits thereto.
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This Agreement inures to the benefit of and is binding upon the heirs, legatees, personal representatives, successors and assigns of the Parties. Neither Party may assign its rights or duties without the prior written consent of the other Party, where such consent shall not be unreasonably withheld, delayed, or conditioned. The Parties agree that neither Party is a partner, joint venturer, legal representative, or agent of the other Party or any of its subsidiaries or affiliates. Each Party further agrees that this Agreement is binding on all locations and fictitious business organizations under which such Party may operate. Section titles are for convenience only and are not part of the terms hereof. This Agreement shall create and constitute the continuing obligations of the Parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by Assignor pursuant to Section 3 and Westlake pursuant to Section 4; (ii) the duty to maintain, appropriate information security programs and measures designed to ensure the security and confidentiality of NPI of Section 11 and the duty of confidentiality of Section 12, and (iii) the indemnification and payment provisions of Section 14 shall be continuing and shall survive any termination of this Agreement. Each Party warrants and represents that its signatory hereto is legally competent in all respects and is authorized to enter into this Agreement on behalf of the Party for which he or she purports to sign. This Agreement may be executed simultaneously in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. The Parties hereby acknowledge and agree that facsimile or electronically-scanned signatures of this Agreement shall have the same force and effect as the original signature.
Signature page follows
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed by their respective officers with the intent it be effective as of the Effective Date.
WESTLAKE SERVICES, LLC. NICHOLAS FINANCIAL, INC., a Florida corporation
dba WESTLAKE FINANCIAL
By: /s/ Todd Laruffa Name: Todd C. Laruffa Title: Vice President Address: 4751 Wilshire Boulevard, Suite 100 Los Angeles, California 90010 Tel: (323) 900-3293 Fax: (323) 330-8662 Date: 11/13/2023 |
By: /s/ Michael Rost Name: Michael Rost Title: CEO Address:
Tel: Fax: Date: 11/13/2023 |
NICHOLAS FINANCIAL, INC.,a Canadian holding company
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By: /s/ Michael Rost Name: Michael Rost Title: CEO Address:
Tel: Fax: Date: 11/13/2023 |
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