Item
1.01 Entry Into a Material Definitive Agreement.
On
August 31, 2021, FAT Brands Inc. (the “Company”), Twin Peaks Holdings, LLC (“Seller”)
and Twin Peaks Buyer, LLC (“Twin Peaks”) entered into a Unit Purchase Agreement (the “Purchase
Agreement”), on the terms and subject to the conditions of which the Company agreed to acquire all of the outstanding equity
interests of Twin Peaks from Seller (the “Transaction”). Twin Peaks and its subsidiaries franchise and operate
a chain of 83 sports lodge restaurants located in 25 states.
The
purchase price for the Transaction will be $300,000,000, payable by the Company at closing (the “Closing”)
in the form of $232,500,000 in cash (including amounts used to repay certain indebtedness and transaction expenses of Twin Peaks) and
$67,500,000 in shares of the Company’s Series B Cumulative Preferred Stock (the “Preferred Stock Consideration”),
subject to certain adjustments pursuant to the terms of the Purchase Agreement. The number of shares deliverable as the Preferred Stock
Consideration will be determined based on the volume-weighted average trading price of the Series B Cumulative Preferred Stock for a
period of ten full trading days immediately preceding the date of the Closing. Following the Closing, the parties will cooperate to finalize
certain customary adjustments to the purchase price with respect to working capital, cash, indebtedness and transaction expenses.
The
Company has agreed to register for resale the Preferred Stock Consideration to be issued to Seller at Closing and to maintain the effectiveness
of such registration for up to six years. At Closing, the Company and Seller will enter into a Put/Call Agreement (the “Put/Call
Agreement”) with respect to the Preferred Stock Consideration pursuant to which the Company will have the right to call
from Seller, and Seller will have the right to put to the Company, $42,500,000 of the Preferred Stock Consideration (the “Initial
Put/Call Shares”) on March 31, 2022 (or any time prior to such date in the event of a call), and $25,000,000 of the Preferred
Stock Consideration (the “Secondary Put/Call Shares”) on September 30, 2022 (or any time prior to such date
in the event of a call), plus any accrued but unpaid dividends thereon. Any amounts that are not paid when due under the Put/Call Agreement
will accrue interest at the rate of 10.0% per annum, payable monthly. The Put/Call Agreement will also include a lock-up provision under
which Seller will not be permitted to offer, sell or transfer any interest in the Initial Put/Call Shares until March 31, 2022 and the
Secondary Put/Call Shares until September 30, 2022, subject to certain exceptions.
The
completion of the Transaction is subject to certain customary closing conditions, including the absence of any governmental order or
injunction prohibiting any of the transactions contemplated by the Purchase Agreement. The applicable waiting period for the parties’
notification filings under the Hart-Scott-Rodino Antitrust Improvements Act has expired without any requests for additional information.
The obligations of the parties to consummate the Transaction are also subject to certain additional closing conditions, including (i)
the accuracy of the representations and warranties of the other parties in the Purchase Agreement (subject to certain materiality qualifiers) and (ii) the other parties’ compliance in all material respects
with their respective covenants and agreements contained in the Purchase Agreement.
The
Purchase Agreement contains customary representations, warranties and covenants by each party that are subject, in some cases, to specified
exceptions and qualifications contained in the Purchase Agreement. The covenants include, among others, that (i) Twin Peaks is obligated
to operate its business in the ordinary course, subject to certain conditions, between the execution of the Purchase Agreement and the
Closing, and (ii) Twin Peaks agrees not to engage in certain transactions between the execution of the Purchase Agreement and the Closing,
except with the prior written consent of the Company. Seller and the Company are required to use their commercially reasonable efforts
to satisfy their respective closing conditions.
The
Purchase Agreement may be terminated prior to the Closing upon the occurrence or non-occurrence of certain events, including by the Company
or Seller if the Closing has not occurred on or before December 29, 2021, provided that no such termination may be made by a party if
the failure to close shall be caused by the action or inaction of the terminating party. In addition, if the Purchase Agreement is terminated
by Seller or Twin Peaks due to the Company’s breach of the Purchase Agreement or failure to close the Transaction within certain
timeframes, the Company will be required to pay to Seller a termination fee equal to $6,000,000.
The
foregoing descriptions of the Purchase Agreement and Put/Call Agreement do not purport to be complete, and are qualified in their entirety
by reference to the full text of the Purchase Agreement and form of Put/Call Agreement, which are filed herewith as Exhibit 2.1 and Exhibit
E thereto, respectively, and incorporated herein by this reference. The Purchase Agreement and form of and Put/Call Agreement have been
filed to provide stockholders of the Company with information regarding their terms. They are not intended to provide any other information
about the Company, Twin Peaks or Seller or their respective subsidiaries and affiliates. The Purchase Agreement contains representations
and warranties by the Company, Twin Peaks and Seller which were made solely for the benefit of the other parties to the Purchase Agreement
and (i) may have been qualified in the Purchase Agreement by confidential disclosure schedules that were delivered to the other parties
in connection with the signing of the Purchase Agreement, which disclosure schedules may contain information that modifies, qualifies,
and creates exceptions to the representations, warranties, and covenants set forth in the Purchase Agreement, (ii) may be subject to
a contractual standard of materiality applicable to the parties that differs from what a stockholder of the Company may view as material,
and (iii) may have been made only as of the date of the Purchase Agreement or as of another date specified in the Purchase Agreement,
and information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement,
which subsequent information may or may not be fully reflected in the Company’s public disclosures, if at all. Accordingly, stockholders
of the Company should not rely upon representations and warranties of the parties or any descriptions thereof as characterizations of
the actual state of facts or condition of the Company, Seller, Twin Peaks or their respective subsidiaries and affiliates.