UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of
Report:
July
8,
2008
Chanticleer
Holdings, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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814-00709
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20-2932652
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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The
Rotunda
4201
Congress Street, Suite 145
Charlotte,
NC
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28209
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including
area code:
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(704)
366-5122
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Not
applicable
(Former
name or former address,
if
changed since last report.)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing objection of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c)
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Item
1.01
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Entry
into a Material Definitive
Agreement
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As
previously announced, on July 8, 2008, Chanticleer Holdings, Inc. (the
“Company”) entered into an asset purchase agreement (the “Asset Purchase
Agreement”) by and among the Company, Owl Acquisition Holdings Corp., an
indirect wholly-owned subsidiary of the Company (the “Buyer”), Texas Wings
Incorporated (“TWI”) and each of the related entities listed on Annex A to the
Asset Purchase Agreement that may from time to time execute a joinder to the
Asset Purchase Agreement (the “Sellers”) to acquire substantially all of the
assets of TWI and its 45 related Hooters branded restaurants.
The
consideration for the assets to be purchased and liabilities to be assumed
will
be: (i) an amount to be paid in a combination of cash, Company common stock
and
Company convertible notes (the “Cash and Securities Consideration”) equal to (A)
the product of (x) the earnings before interest, taxes, depreciation and
amortization (the “EBIDTA”) of TWI and certain restaurants operated by TWI and
the Sellers for the trailing thirteen periods prior to the closing of the Asset
Purchase Agreement (the “Closing”) multiplied by (y) 5.5, plus (B) the lesser of
(x) the net book value (the “NBV”) of certain restaurants operated by TWI and
the Sellers, and (y) $10,000,000 plus (C) $150,000 and (ii) the assumption
by
Buyer of certain liabilities of the Sellers. The Cash and Securities
Consideration will be subject to adjustment following the Closing based upon
a
final determination of EBITDA and NBV for the most recently completed fiscal
period prior to Closing (the “Period End Date”) and will be subject to further
upward or downward adjustment based upon the amount by which the net working
capital of the Sellers exceeds or is less than $2,200,000 as of the Period
End
Date. Ten percent of the Cash and Securities Consideration will be held in
escrow until the final Cash and Securities Consideration amount is determined.
An additional $6,000,000 of the Cash and Securities Consideration will be held
in escrow for one year for indemnification purposes.
The
Cash
and Securities Consideration to be paid by Buyer to the Sellers at the Closing
pursuant to the Asset Purchase Agreement is approximately $106,000,000, made
up
of (i) $52,988,250 in cash (which amount will be reduced by any indebtedness
of
the Sellers repaid at Closing), (ii) 5,298,825 shares of Company common stock
(the number of which has been calculated at a deemed value of $7.00 per share
after giving effect to the Company’s previously disclosed 1:10 reverse stock
split) and (iii) Company convertible notes with an aggregate principal amount
of
$15,896,475. The convertible notes will bear interest at 6% per annum.
The
Asset
Purchase Agreement is subject to a number of closing conditions
including but not limited to: (i) the accuracy of the parties’ representations
and warranties through Closing, (ii) the performance of the parties’ covenants,
agreements and obligations under the Asset Purchase Agreement, (iii) the parties
obtaining all material consents, (iv) no occurrence of a material adverse change
in the Sellers’ business, (v) the Company obtaining financing to consummate the
Asset Purchase Agreement and the transactions contemplated by its previously
announced acquisition of Hooter’s, Inc. (“HI”) and its affiliates (the “HI
Acquisition”) and to fund its ordinary working capital requirements, (vi) the
shares of Company common stock being issued to the Sellers at Closing
representing at least 50.01% of the outstanding shares of Company common stock
after giving effect to the Closing and (vii) the HI Acquisition being
consummated.
The
summary of the Asset Purchase Agreement set forth in this Item 1.01 is qualified
in its entirety by reference to the text of the Asset Purchase Agreement, a
copy
of which is incorporated herein by reference and attached hereto as Exhibit
2.1.
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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment
of
Certain Officers; Compensatory Arrangements of Certain
Officers.
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In
connection with the execution of the Asset Purchase Agreement, the Company
entered into employment agreements with the following individuals who will
serve
in the following executive officers positions with the Company following the
Closing: Michael Pruitt (“Pruitt”), Chairman of the Board; Neil G. Kiefer
(“Kiefer”),
President and Chief Executive Officer; Michael Herrick (“Herrick”), Co-Chief
Operating Officer; Salvatore Mellili (“Mellili”), Co-Chief Operating Officer;
and Glenn Tobias (“Tobias”), Executive Vice Chairman (together, the “Employment
Agreements”). The Employment Agreements also contemplate that Pruitt, Kiefer and
Herrick will all be nominated to serve on the Company’s board of directors
during the term of their respective Employment Agreements.
Pruitt
is
currently, President, Chief Executive Officer and Chairman of the Board of
the
Company as well as a member of its board of directors and is expected to
continue in such capacities through the Closings. Kiefer is currently President
and Chief Executive Officer of HI and certain of its affiliates and has served
in such capacities since 1994. Mellili joined HI in 1991 and has served as
its
Chief Operating Officer since 2006. Herrick joined TW in 1993 and has served
as
its Executive Vice President since 2006. Tobias has provided financial advisory
services to the Company since August of 2007 as a consultant.
Each
Employment Agreement is conditioned upon the consummation of the HI Acquisition
and the Closing (together, the “Closings”), and the Employment Agreements will
take effect upon the later to occur of the Closings. In the event that the
Closings take place, it is expected that the Company’s board of directors will
appoint Kieffer, Tobias, Mellili and Herrick to the applicable executive officer
and director positions contemplated therein promptly following the consummation
of the Closings. The term of each Employment Agreement is three years, except
for Pruitt’s agreement, which has a term of two years, subject in all cases to
one-year automatic term renewals unless terminated by either party prior to
such
renewal. The agreements provide for annual base salaries (subject to annual
increases) and target annual bonus opportunities (determined by reference to
Company EBITDA goals) as follows:
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NAME
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ANNUAL
SALARY
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ANNUAL
BONUS OPPORTUNITY
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Pruitt
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$150,000
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Discretionary
Annual Bonus
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Kiefer
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$450,000
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58%
of Base Salary, Paid Quarterly
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Herrick
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$325,000
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58%
of Base Salary, Paid Quarterly
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Mellili
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$325,000
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58%
of Base Salary, Paid Quarterly
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Tobias
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$400,000
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55%
of Base Salary, Paid Quarterly
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The
executives are eligible to receive additional discretionary cash and/or equity
incentive bonus awards based on the attainment of significant corporate
objectives, as well as customary benefits, indemnification protections and
vacation. In addition, Pruitt will receive a one-time, $200,000 cash bonus
following the consummation of the Closings and will be eligible to receive
an
additional bonus of $1,200,000 upon the successful completion of certain future
acquisitions.
Subject
to Company’s board of directors adopting, and the Company’s stockholders
subsequently approving, the Company’s 2008 Equity Incentive Plan (the “Plan”),
the Company will grant each of these executives stock options and restricted
stock in the following amounts:
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NAME
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OPTION
GRANT
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RESTRICTED
STOCK GRANT
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Pruitt
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149,535
Shares
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37,384
Shares
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Kiefer
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195,546
Shares
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48,886
Shares
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Herrick
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195,546
Shares
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48,886
Shares
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Mellili
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195,546
Shares
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48,886
Shares
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Tobias
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195,546
Shares
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48,886
Shares
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The
allocation of options and restricted stock may be adjusted by the parties prior
to grant if necessary to preserve the value intended under the current
pre-closing allocation. The options will be granted with an exercise price
equal
to the fair market value of the Company’s common stock on the date of grant.
Both the options and the restricted stock grants will vest (and the options
become exercisable) as to one-third of their respective shares on the first
anniversary of the grant date and as to one-twelfth of their respective shares
on each quarterly anniversary of the grant date thereafter, except that Pruitt’s
options and restricted stock will instead vest as to one-half of their
respective shares on each of the first two anniversaries of the grant date,
subject in all cases to the grantee’s continued employment with the Company
through each such vesting date. In addition, upon a Change of Control (as such
term is defined in the Plan), subject to the executive’s continued employment
through such event, one-half of the then-unvested shares subject to each option
and restricted stock grant shall vest.
Upon
an
executive’s termination of employment for “good reason” or without “cause” (each
as defined in the Employment Agreements), in addition to compensation and
benefits accrued prior to termination, the executive will be entitled to the
following payments and benefits, subject to the executive’s execution of a
release of claims against the Company:
(i)
For
executives other than Pruitt and Tobias, a lump-sum payment equal to the greater
of (A) the executive’s base salary that would have been payable through the
remainder of the original employment term, at the rate in effect as of the
termination date, or (B) 200% of the executive’s base salary in effect as of the
termination date, except that 200% shall be replaced by 250% if such termination
date occurs within six months prior to, or one year after, a qualifying
transaction; Tobias’ will be entitled to comparable lump-sum payments, except
that the amounts will be limited to 50% of his applicable base salary prior
to a
qualifying transaction or 100% of such base salary if the termination date
occurs within one year after such a transaction; Pruitt will not receive any
cash severance;
(ii)
For
executives other than Pruitt, Company-paid continuation medical benefits for
the
executive and his dependents for eighteen months after such termination (or,
if
earlier, the date on which the executive becomes eligible to receive comparable
benefits from another employer); and
(iii)
For
all executives, either (A) 50% of the then-unvested shares subject to such
executive’s option and restricted stock grants shall vest immediately prior to
such termination, or (B) if such termination occurs within six months prior
to
or one year following a qualifying transaction, then all unvested shares subject
to such executive’s option and restricted stock grants shall vest immediately
prior to such termination (or, with respect to a portion of the shares, the
qualifying transaction if later).
In
addition, for executives other than Pruitt, if the Company elects not to renew
an executive’s Employment Agreement, the executive will be entitled, subject to
the executive’s execution of a release of claims, to (i),a lump-sum payment
equal to 75% (for all executives other than Tobias) or 50% (for Tobias only)
of
the executive’s base salary at the rate in effect as of the termination date,
and (ii) Company-paid continuation medical benefits for the executive and his
dependents for twelve months after such non-renewal (or, if earlier, the date
on
which the executive becomes eligible to receive comparable benefits from another
employer).
If
a
change of control occurs and an executive becomes subject to “golden parachute”
taxes under Internal Revenue Code Section 280G that equal or exceed 110% of
the
threshold at which such taxes are imposed, the Company will pay or reimburse
such taxes and any taxes resulting from such payment or reimbursement in a
manner that, following such payment or reimbursement, the executive will be
in
the same economic position as if such taxes had not been imposed. In addition,
each executive has agreed to be bound by noncompetition, non-solicitation,
confidentiality and other customary covenants following termination of
employment.
The
summary of the terms of the foregoing employment agreements set forth in this
Item 5.02 is qualified in its entirety by reference to the text of such
employment agreements, copies of which are incorporated herein by reference
and
attached hereto as Exhibits 10.1 through 10.5.
Additional
Information about the Company:
Chanticleer
Holdings, Inc. is currently a closed-end investment company that invests in
value-based opportunities that are typically either privately held or considered
small or micro cap publicly traded companies. The Company is currently treated
as a business development company (a “BDC”) under the Investment Company Act of
1940, however has notified the Securities and Exchange Commission and its
shareholders of its intention to convert back to an operating company from
a
BDC, with such election expected to become effective on or around July 15,
2008.
For more information about the Company, please visit
http://www.chanticleerholdings.com.
Cautionary
Statements:
The
Asset
Purchase Agreement has been included to provide investors with information
regarding its terms. Except for its status as a contractual document that
establishes and governs the legal relations among the parties thereto with
respect to the transactions described above, the Asset Purchase Agreement is
not
intended to be a source of factual, business or operational information about
the parties.
The
Asset
Purchase Agreement contains representations and warranties made by the parties
to each other regarding certain matters. The assertions embodied in the
representations and warranties are qualified by information in confidential
disclosure schedules that the parties have exchanged in connection with signing
the Asset Purchase Agreement. The disclosure schedules contain information
that
modifies, qualifies and creates exceptions to the representations and
warranties. Moreover, certain representations and warranties may not be complete
or accurate as of a particular date because they are subject to a contractual
standard of materiality that is different from those generally applicable to
shareholders and/or were used for the purpose of allocating risk among the
parties rather than establishing certain matters as facts. Accordingly, you
should not rely on the representations and warranties as characterizations
of
the actual state of facts at the time they were made or otherwise.
Forward
Looking Statements:
This
report contains forward-looking statements that involve risks and uncertainties.
Such statements are based on current expectations, assumptions, estimates and
projections about the Company and its industry. Forward-looking statements
are
subject to known and unknown risks, uncertainties and other factors that may
cause actual results, levels of activity, performance, achievements and
prospects to be materially different from those expressed or implied by such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements for any reason even if new information
becomes available or other events occur in the future. The Company believes
that
such statements are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.
Actual
outcomes are dependent upon many factors. Words such as “plans,” “anticipates,”
“believes,” “estimates,” “expects,” “hopes,” “targets” or similar expressions
are intended to identify forward-looking statements, which speak only as of
the
date of this report. The Company undertakes no obligation to update or release
any revisions to any forward-looking statements or to report any events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events, except as required by law.
This
report shall not constitute an offer to sell or the solicitation of an offer
to
sell or the solicitation of an offer to buy any securities, nor shall there
be
any sale of securities in any jurisdiction in which such offer, solicitation
or
sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
Exhibits.
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EXHIBIT
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2.1
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Asset
Purchase Agreement dated July 8, 2008, among Owl Acquisition Holdings
Corp., Chanticleer Holdings, Inc., Texas Wings Incorporated, and
the
related entities listed on Annex A thereto that may from time to time
execute a joinder thereto.
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10.1
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and Neil
G. Kiefer.
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10.2
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and Glenn
Tobias.
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10.3
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and
Salvatore Mellili.
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10.4
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and
Michael Herrick.
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10.5
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Executive
Chairman Agreement dated July 8, 2008, between Chanticleer Holdings,
Inc.
and Michael D. Pruitt.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange of 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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CHANTICLEER
HOLDINGS, INC.
a
Delaware Corporation
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By: |
/s/
Michael
D. Pruitt |
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Michael
D. Pruitt |
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Chief
Executive Officer
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Dated:
July 14, 2008
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EXHIBIT
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2.1
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Asset
Purchase Agreement dated July 8, 2008, among Owl Acquisition Holdings
Corp., Chanticleer Holdings, Inc., Texas Wings Incorporated, and
the
related entities listed on Annex A thereto that may from time to time
execute a joinder thereto.
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10.1
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and Neil
G. Kiefer.
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10.2
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and Glenn
Tobias.
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10.3
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and
Salvatore Mellili.
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10.4
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Employment
Agreement dated July 8, 2008, between Chanticleer Holdings, Inc.
and
Michael Herrick.
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10.5
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Executive
Chairman Agreement dated July 8, 2008, between Chanticleer Holdings,
Inc.
and Michael D. Pruitt.
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