Page 10 of 17 – SEC Filing
Pursuant to Rule 13d-2 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment No. 1 to the Schedule 13D (this
“Amendment”) amends certain items of the Schedule 13D filed by the Reporting Persons with the Securities
and Exchange Commission (the “SEC”) on February 8, 2016 (the “Original Schedule 13D”),
and relates to the common stock, par value $0.10 per share (the “Common Stock”), of Differential Brands
Group Inc. (the “Issuer”). The Reporting Persons are filing this Amendment to report (i) the issuance,
to certain of the Reporting Persons, of a warrant for the purchase of Common Stock and an amended promissory note convertible into
shares of Class A-1 Preferred Stock and subsequently into shares of Common Stock; and (ii) a series of pro rata in-kind
distributions of the shares of Common Stock by certain of the Reporting Persons and affiliated funds to certain of their members,
including subsequent distributions by certain of the receiving members to their own members, in each case for no consideration.
This Amendment also constitutes an exit
filing for TCP RG, LLC, whose beneficial ownership in the shares of Common Stock has dropped below the 5.0% Schedule 13D reporting
threshold following the pro rata in-kind distributions. All capitalized terms used but not defined in this Amendment have
the meanings given to such terms in the Original Schedule 13D. Except as provided herein, this Amendment does not modify any of
the information previously reported on the Original Schedule 13D.
Item 3.
Source and Amount of Funds or Other Consideration
Item
3 of the Original Schedule 13D is hereby amended and supplemented as follows:
The SWIMS Transaction
On July 18, 2016, the Issuer completed
the acquisition of all of the outstanding share capital of Scandinavian lifestyle brand SWIMS AS (“SWIMS”),
a Norwegian private limited company (aksjeselskap). The acquisition was completed pursuant to the Purchase Agreement, dated
as of July 18, 2016 (the “SWIMS Purchase Agreement”), between the Issuer, its wholly-owned subsidiary
DFBG Swims, LLC, the shareholders of SWIMS named therein (the “SWIMS Sellers”), Øystein Alexander
Eskeland and Atle Søvik, acting jointly as the representatives of the SWIMS Sellers, and, for certain limited purposes described
in Item 6 below, TCP Denim, LLC, TCP RG, LLC and TCP RG II, LLC.
To finance the acquisition, the Issuer issued
the following to Tengram Fund II on July 18, 2016: (i) a warrant for the purchase of 500,000 shares of Common Stock at an exercise
price of $3.00 per share, subject to adjustment as described in Item 6 below (the “SWIMS Warrant”); and
(ii) a convertible promissory note with principal of $13.0 million (the “SWIMS Convertible Note”). The
SWIMS Convertible Note accrues interest at a rate of 3.75% per annum, compounding on the first day of each month starting August 1,
2016, and will convert, at Tengram Fund II’s option or on the maturity date of July 18, 2017, if not already repaid in cash
on or before that date, into up to 4,500,000 shares of Class A-1 Preferred Stock at a conversion price of $3.00 per share,
subject to adjustment as described in Item 6 below. Additionally, the Class A-1 Preferred Stock will itself be convertible
into shares of the Common Stock at an initial price of $3.00 per share, subject to adjustment as described in Item 6 below. The
terms of the SWIMS Convertible Note as issued on July 18, 2016 had initially set a maturity date of January 18, 2017. The Issuer
and Tengram Fund II amended the SWIMS Convertible Note effective January 18, 2017 to extend the maturity date by six months as
noted above.
The SWIMS Convertible Note may not be converted
(together with any other issuances considered aggregated under the applicable listing standards of The NASDAQ Stock Market LLC
(“NASDAQ”)) into shares of Class A-1 Preferred Stock which are then convertible into more than 1,610,620
shares of Common Stock. These shares of Class A-1 Preferred Stock will have as-converted voting rights only to the extent such
shares may convert into Common Stock, unless allowed under the applicable NASDAQ listing standards. Additionally, where the Issuer
issues upon exercise of the SWIMS Warrant at least 1,610,620 shares of Common Stock (subject to adjustment for stock splits and
combinations, and together with any other issuances considered aggregated under the applicable NASDAQ listing standards), any shares
of Common Stock above the 1,610,620 threshold will not carry voting rights and will not be issuable upon the exercise of purchase
rights under the SWIMS Warrant. The Issuer will take all action necessary to seek the required stockholder approval under NASDAQ
listing standards to provide for (i) full conversion into Common Stock and voting rights of all shares of Class A-1 Preferred Stock
and (ii) voting rights and issuances upon the exercise of purchase rights for the additional shares of Common Stock exercisable
under the SWIMS Warrant above the 1,610,620 threshold.
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