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Item 1.01.
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Entry into a Material Definitive Agreement.
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On February 6,
2020, Regional Brands Inc. (the “Company”) purchased all of the outstanding membership interests not previously owned
by the Company (the “Transaction”) in its operating subsidiary, B.R. Johnson, LLC (“BRJ LLC”), from LC
591, LLC (f/k/a Lorraine Capital, LLC) (“Lorraine”) and BRJ Acquisition Partners, LLC (“BRJ Acquisition Partners”
and, collectively with Lorraine, the “Sellers”), pursuant to a Membership and Participation Interests Purchase Agreement,
dated as of February 6, 2020, by and between the Sellers, BRJ LLC and the Company (the “Purchase Agreement”).
Prior to the Transaction, the Sellers collectively owned 23.83% of BRJ LLC’s common membership interests and 4.78% of BRJ
LLC’s preferred membership interests. As a result of the Transaction, BRJ LLC is wholly owned by the Company.
As part of the Transaction,
the Company purchased from BRJ Acquisition Partners its participation interest in $358,696 of original principal amount of the
$7,500,000 term loan (the “Term Loan”) previously received by BRJ LLC from the Company pursuant to the Loan and Security
Agreement, dated November 1, 2016, by and between BRJ LLC and the Company. As a result of the purchase, the Company holds
all of the continuing lender interest in the Term Loan.
In connection with
the Transaction and pursuant to the Purchase Agreement, the Sellers also caused certain of their individual affiliates who collectively
owned approximately 57% of the outstanding common stock of Airways Door Service, Inc. to transfer their full interest in such
common stock to individuals designated by the Company.
The Company paid the
Sellers approximately $1,649,000 in cash in the Transaction, which included accrued and unpaid interest and distributions on the
purchased membership and participation interests, net of unearned management fees.
At the closing of the
Transaction, the Management Services Agreement dated as of November 1, 2016 by and between BRJ LLC and Lorraine (the “Management
Services Agreement”), and Lorraine’s management services to BRJ LLC thereunder, were terminated, and the members of
the BRJ LLC board of managers appointed by the Sellers resigned. Following the Transaction, the BRJ LLC board of managers is comprised
entirely of members appointed by the Company, and is managed by executives appointed by the board of managers. The Company is the
sole member of BRJ LLC, with the sole right to nominate and remove all of the members of the BRJ LLC board of managers and to amend
and modify the Limited Liability Company Agreement of BRJ LLC.
The parties to the
Transaction have made customary representations, warranties and covenants. The representations, warranties and covenants set forth
in the Purchase Agreement have been made only for the purposes of such agreement and were solely for the benefit of the parties
to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential
disclosures, may have been made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead
of 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. Accordingly, the Purchase Agreement is included with this filing only to provide investors
with information regarding the terms of the Transaction, and not to provide investors with any other factual information regarding
the parties or their respective businesses, and should be read in conjunction with the disclosures in the Company’s periodic
reports and other filings with the Securities and Exchange Commission.
The foregoing description
of the Purchase Agreement is a summary and is qualified in its entirety by reference to the full text of the Purchase Agreement,
which is attached to this Current Report on Form 8-K as Exhibit 2.1 and is incorporated by reference into this Item 1.01.