Item
3.03 Material Modification to Rights of Security Holders.
Issuance
of Series 1 Preferred Stock
As
previously announced, Chanticleer Holdings, Inc., a Delaware corporation (“Chanticleer”) is conducting a rights offering
through the distribution of non-transferable subscription rights to purchase up to an aggregate of 1,000,000 units at a subscription
price of $13.50 per unit, each unit consisting of one share of 9% Redeemable Series 1 Preferred Stock (“Series 1 Preferred”)
and one Series 1 Warrant to purchase 10 shares of common stock, as set forth in a final prospectus contained in the Company’s
registration statement on Form S-1 declared effective by the U.S. Securities and Exchange Commission on December 15, 2016.
Although
the expiration time of the rights offering has been extended to 5:00 P.M. Eastern Time, January 13, 2017, Chanticleer sold
and issued the first tranche of its rights offering on December 29, 2016.
The
general effects of the issuance of the Series 1 Preferred Stock on the holders of shares of Chanticleer’s common stock are
as follows:
Dividends.
Holders of the Series 1 Preferred will be entitled to receive cumulative dividends out of legally available funds at the rate
of 9% of the purchase price per year for a term of seven years, payable quarterly on the last day of March, June, September and
December in each year in cash or registered common stock. Shares of common stock issued as dividends will be issued at a 10% discount
to the five-day volume weighted average price per share of common stock prior to the date of issuance. Dividends will be paid
prior to any dividend to the holders of common stock.
Liquidation
Preference
. The Series 1 Preferred will have a liquidation preference of $13.50 per share, equal to its purchase price. In
the event of any liquidation, dissolution or winding up of the company, any amounts remaining available for distribution to stockholders
after payment of all liabilities of the company will be distributed first to the holders of Series 1 Preferred and then to the
holders of common stock.
Rank
.
The Series 1 Preferred will rank with respect to distribution rights upon liquidation, winding-up or dissolution of the company
and dividend rights, junior to all of the company’s existing and future indebtedness but senior to common stock and any
other class of capital stock the company issues in the future.
No
Conversion.
The Series 1 Preferred will not be convertible into or exchangeable for shares of our common stock or any other
security, except through the exercise of Series 1 Warrants
.
Voting
Rights.
Except as otherwise required by law, the Series 1 Preferred will be non-voting. Holders of the Series 1 Preferred
will vote as a class on any amendment altering or changing the powers, preferences or special rights of the Series 1 Preferred
so as to affect them adversely.
Redemption
.
Chanticleer will redeem the outstanding Series 1 Preferred at the expiration of the seven year term out of legally available funds.
The redemption price for any shares of Series 1 Preferred will be an amount equal to the $13.50 purchase price per share plus
any accrued but unpaid dividends to the date fixed for redemption.
The
foregoing description of the terms of the Series 1 Preferred is qualified in its entirety by reference to the full text of the
Certificate of Designation for the Series 1 Preferred filed herewith as Exhibit 3.1, the terms of which are incorporated herein
by reference.