Item 1.01 Entry into a Material
Definitive Agreement.
On January
12, 2018, B. Riley Financial, Inc. (the “
Company
”) entered into a Debt Conversion and Purchase and Sale Agreement
(the “
DCA
”) with bebe stores, inc. (“
bebe
”) and The Manny Mashouf Living Trust (the “
Mashouf
Trust
”), pursuant to which the Company acquired an aggregate of 3,319,528 shares of common stock, par value $0.001 per
share, of bebe (“
Common Stock
”), as described in more detail below. The Mashouf Trust is a family trust of
Manny Mashouf, the chief executive officer, chairman of the board of directors and, prior to the transactions effected pursuant
to the DCA, a 56.2% shareholder of bebe.
Pursuant to
the terms of the DCA, on January 12, 2018, the Company cancelled all of the outstanding principal amount and accrued interest,
collectively $16,917,168.40, owed by bebe to the Company pursuant to the terms of a promissory note, dated as of May 31, 2017,
in exchange for bebe’s issuing one share of Common Stock for every $6.00 (the “
Price Per Share
”) of outstanding
principal amount or accrued interest, for a total of 2,819,528 shares of Common Stock. The Company also purchased 250,000 shares
of Common Stock from each of bebe and Mashouf Trust for a cash amount per share equal to the Price Per Share. Under the DCA, subject
to the mutual agreement of the parties, the Company may purchase up to an additional 500,000 shares from the Mashouf Trust within
45 business days of the date of the DCA for a cash amount per share equal to the Price Per Share.
In connection
with the transactions contemplated by the DCA, bebe fixed the size of its board of directors at five members and two employees
of the Company, Kenneth Young, the chief executive officer of B. Riley Principal Investments, a wholly-owned subsidiary of the
Company (“
BRPI
”), and Nick Capuano, the chief investment officer of BRPI, were appointed to the bebe board
following the resignations of two former directors of bebe. Additionally, two existing members of bebe’s board of directors
have tendered irrevocable written resignations, effective on the earlier of a notice from bebe accepting the resignation
of such director or October 1, 2018.
The Company
and bebe made customary representations, warranties and covenants in the DCA for a transaction of this nature. The transaction
was contingent upon bebe executing a tax benefit preservation plan. The Company, bebe and certain shareholders of bebe, including
the Company, also entered into an investor agreement in connection with the execution of the DCA, pursuant to which such shareholders
agreed to abide by certain restrictions on the acquisition and transfer of their shares of Common Stock.
The foregoing
description of the DCA does not purport to be complete and is qualified in its entirety by reference to the DCA attached hereto
as Exhibit 10.1, which is incorporated by reference herein.
The DCA and
the above description of the DCA have been included to provide investors and securityholders with information regarding the terms
of the DCA. The DCA and the above description are not intended to provide any other factual information about the Company, bebe,
or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the DCA were made only
for purposes of the DCA and as of specific dates; were solely for the benefit of the parties to the DCA; may be subject to limitations
agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other
for the purposes of allocating contractual risk between them rather than establishing these matters as facts; and may be subject
to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are
not third-party beneficiaries under the DCA and should not rely on the representations, warranties and covenants or any description
thereof as characterizations of the actual state of facts or condition of the Company, bebe or any of their respective subsidiaries,
affiliates or businesses. Moreover, information concerning the subject matter of the representations, warranties and covenants
may change after the date of the DCA, which subsequent information may or may not be fully reflected in public disclosures by
the Company or bebe. The DCA should not be read alone, but should instead be read in conjunction with the other information about
the Company or bebe and their respective subsidiaries that the respective companies include in reports, statements and other filings
they make with the Securities and Exchange Commission.