Granite City Transaction.
On February 11, 2020, Granite City Food & Brewery Ltd. and its affiliates (“Granite City”) conducted a U.S. Bankruptcy Code Section 363 Auction (the “Auction”) and selected BBQ Acquisition,
Inc., a Minnesota corporation and wholly-owned subsidiary of BBQ Holdings, Inc. (“BBQ Holdings”), as the successful bidder for the assets associated with 23 Granite City restaurants (the “Granite City Business”) with a bid in the amount of
$3,650,000. As used in this Form 8-K, “Company”, “we” and “our” refer to BBQ Holdings and BBQ Acquisition, Inc.
On February 13, 2020, the Company announced the signing of an Asset Purchase Agreement, dated February 11, 2020, by and between the Company and Granite City (the “Granite City APA”) to purchase
certain assets of the Granite City Business from Granite City for a purchase price of $3,650,000, subject to normal closing adjustments, assumed liabilities, and approval of the Bankruptcy Court (the “Granite City Transaction”). Pursuant to the
Granite City APA, the Company may, within 60 days following the closing date of the Granite City Transaction, remove any acquired asset from the list of acquired assets in the Granite City APA, in its sole and absolute discretion, and elect to
treat such contract, permit, or other asset as an excluded asset; provided, however, that no such removal will result in any adjustment to the purchase price. Pursuant to the Granite City APA, assumed liabilities include obligations related to:
the acquired contracts, gift cards, employee pay at the store-level, property taxes, and leased real property. The Granite City Transaction represents an offer under Sections 363 and 365 of the U.S. Bankruptcy Code in connection with the Chapter
11 filing of Granite City. The Granite City APA was entered into in accordance with the bidding procedures approved by the Bankruptcy Court. The Granite City Transaction is subject to approval by the Bankruptcy Court at a hearing on February 21,
2020. The Section 363 sale process for the Granite City Business is expected to be concluded by the end of March 2020. The Company intends to fund the Granite City Transaction, if completed, with cash on hand and borrowing under its existing loan
agreement with Choice Financial Group.
Backup Bid Transaction.
As part of the Auction, Granite City selected another party as the successful bidder for the assets of four Cadillac Ranch restaurants (the “Cadillac Ranch Business”) with a bid in the amount of
$7,500,000. This successful bidder has entered into an agreement with Granite City to purchase certain assets associated with the Cadillac Ranch Business for a purchase price of $7,500,000, subject to normal closing adjustments, assumed
liabilities, and approval of the Bankruptcy Court (the “Cadillac Ranch Transaction”). The Cadillac Ranch Transaction is subject to approval by the Bankruptcy Court at a hearing on February 21, 2020. The Section 363 sale process for the Cadillac
Ranch Business is expected to be concluded by the end of March 2020.
If the Cadillac Ranch Transaction fails to close, Granite City selected the Company’s combined bid for the assets associated with the Granite City Business and the Cadillac Ranch Business in the amount of $11,050,000,
subject to normal closing adjustments and approval of the Bankruptcy Court, in accordance with the bidding procedures approved by the Bankruptcy Court (the “Backup Bid”). If the Cadillac Ranch Transaction fails to close, pursuant to the Asset
Purchase Agreement, dated February 11, 2020, by and between the Company and Granite City (the “Backup Bid APA”), the Company will purchase certain assets of the Granite City Business and the Cadillac Ranch Business for a Purchase Price of
$11,050,000, subject to normal closing adjustments, assumed liabilities, and approval of the Bankruptcy Court (the “Backup Bid Transaction”). Pursuant to the Backup Bid APA, the Company may, within 60 days following the Closing Date of the Backup
Bid Transaction, remove any acquired asset from the list of acquired assets in the Backup Bid APA, in its sole and absolute discretion, and elect to treat such contract, permit, or other asset as an excluded asset; provided, however, that no such
removal will result in any adjustment to the purchase price. Pursuant to the Backup Bid APA, assumed liabilities include obligations related to: the acquired contracts, gift cards, employee pay at the store-level, property taxes, and leased real
property. The Company intends to fund the Backup Bid Transaction, if completed, with cash on hand and borrowing under its existing loan agreement with Choice Financial Group.