|
Item 1.01.
|
Entry into a Material Definitive Agreement.
|
On January 23, 2020, VPR Brands, LP (the “Partnership”)
executed the Second Amendment (the “Second Amendment”) to Limited Partnership Agreement (the “Agreement”)
in order to create a new class of Partnership securities titled Class A preferred units.
Pursuant to Section 5.6 of the Agreement, Soleil
Capital Management LLC, the Partnership’s general partner (the “General Partner”) may, without the approval of
the Partnership’s limited partners, issue additional Partnership securities for any Partnership purpose at any time and from
time to time for such consideration and on such terms and conditions as the General Partner shall determine in its sole discretion,
all without the approval of any limited partners, an that each additional Partnership interest authorized to be issued by the Partnership
may be issued in one or more classes, or one of more series of any such classes, with such designations, preferences, rights, powers
and duties as shall be fixed by the General Partner in its sole discretion. Pursuant to Section 13.1 of the Agreement, the General
Partner may, without the approval of any partner, any unitholder or any other person, amend any provision of the Agreement to reflect
any amendment expressly permitted in the Agreement to be made by the General Partner acting along, therefore including the creation
of a new class of Partnership securities.
The designation, powers, preferences and rights
of the Class A preferred units and the qualifications, limitations and restrictions thereof are contained in the Second Amendment,
and are summarized as follows:
Number and Stated Value. The number
of authorized Class A preferred units is 1,000,000. Each Class A preferred unit will have a stated value of $2.00 (the “Stated
Value”).
Rights. Except as set forth in the Second
Amendment, each Class A preferred unit has all of the rights, preferences and obligations of the Partnership’s common units
as set forth in the Agreement and shall be treated as a common unit for all other purposes of the Agreement.
Dividends.
Rate.
Each Class A preferred unit is entitled to receive an annual dividend at a rate of 8% per annum on the Stated Value., which shall
accrue on a monthly basis at the rate of 0.6666% per month, non-compounding, and shall be payable in cash within 30 days of each
calendar year for which the dividend is payable.
Liquidation.
In the event of a liquidation, dissolution or winding up of the Partnership, a merger or consolidation of the Partnership wherein
the Partnership is not the surviving entity, or a sale of all or substantially all of the assets of the Partnership, each Class
A unit will be entitled to receive, prior an in preference to any distribution of any of the assets or surplus funds of the Partnership
to the holders of common units or any other Partnership securities ranking junior to the Class A preferred units, or to the General
Partner, an amount per Class A preferred unit equal to any accrued but unpaid dividends. If, upon such an event and after the payment
of preferential amounts required to be paid to holders of any Partnership securities having a ranking upon liquidation senior to
the Class A preferred units, the assets of the Partnership available for distribution to the partners of the Partnership are insufficient
to provide for both the payment of the full Class A liquidation preference and the preferential amounts (if any) required to be
paid to holders of any other Partnership securities having a ranking upon liquidation pari passu with the Class A preferred
units, such assets as are so available shall be distributed among the Class A preferred units and the holders of any other series
of Partnership securities having a ranking upon liquidation pari passu with the Class A preferred units in proportion to
the relative aggregate preferential amount each such holder is otherwise entitled to receive.
Conversion Rights.
Conversion.
Upon notice, a holder of Class A preferred units has the right, at its option, to convert all or a portion of the Class A preferred
units held into fully paid and nonassessable Partnership common units.
Conversion
Price. Each Class A preferred unit is convertible into a number of common units equal to (x) the Stated Value plus any accrued
and unpaid dividends, divided by (y) the Conversion Price (as hereinafter defined). The “Conversion Price” means 85%
multiplied by the VWAP (as defined in the Second Amendment), representing a discount rate of 15%.
Conversion
Limitation. In no event shall a holder of Class A preferred units be entitled to convert any of the Class A preferred units
in excess of that number of Class A preferred units upon conversion of which the sum of (1) the number of common units beneficially
owned by such holder and its affiliates (other than common units which may be deemed beneficially owned through the ownership of
the unconverted Class A preferred units or the unexercised or unconverted portion of any other security of the Partnership subject
to a limitation on conversion or exercise analogous to the limitations contained herein),
and (2) the number of common units
issuable upon the conversion of all Class A preferred units held by such holder would result in beneficial ownership by the holder
and its affiliates of more than 4.99% of the outstanding common units.
The foregoing description of the Second Amendment
does not purport to be complete and is qualified in its entirety by reference to the Second Amendment, a copy of which is filed
as Exhibit 3.1 to this Current Report on Form 8-K and which is incorporated herein by reference.