Item
1.01 Entry into a Material Definitive Agreement
On
May 4, 2017 (“Closing Date”), pursuant to a Securities Purchase Agreement (“Purchase Agreement”), Chanticleer
Holdings, Inc., a Delaware corporation (“Chanticleer” or the “Company”) sold and issued 8% non-convertible
secured debentures in the principal amount of $6,000,000 (“Debentures”) and warrants to purchase 12,000,000 shares
of common stock (“Warrant Shares”) to accredited investors. The Debentures bear interest at a rate of 8% per annum,
payable in cash quarterly in arrears. The Debentures mature on December 31, 2018. The Debentures contain customary negative covenants.
The Warrants will expire on the tenth anniversary of the Closing Date and have an exercise price equal to $0.35, subject to adjustment
therein. The Warrants are not exercisable until six months after the Closing Date. The Warrant Shares have registration rights,
and, if not registered, the holders will have the right to cashless exercise.
Upon
the occurrence of an event of default, in addition to holders having acceleration repayment rights, the holders shall have the
right, on a pro-rata basis, to purchase the Company’s subsidiary, Little Big Burger, for $6,500,000. The purchasers were
granted a right of first refusal as to future financing transactions of the Company for the term of the Debentures. Further, the
Company has agreed to appoint one person selected by purchasers holding a majority of interest of the Debentures to its board
of directors.
Pursuant
to the Security Agreement dated May 4, 2017, the Debentures are secured by a second priority lien on all of the
Company’s assets. Pursuant to the Subsidiary Guarantee dated May 4, 2017, all of the Company’s subsidiaries have
guaranteed the Company’s performance of its obligations under the transaction documents.
In
conjunction with the financing described above, the Company entered into a Satisfaction, Settlement and Release Agreement with
Florida Mezzanine Fund LLLP, a Florida limited liability partnership (“Florida Mezz”), pursuant to which Florida Mezz
agreed to release the Company from all claims and outstanding obligations pursuant to that certain Assumption Agreement dated
June 30, 2014, as amended October 15, 2014 and October 22, 2016, and that certain Agreement dated May 23, 2016, as amended January
30, 2017, in exchange for payment of $5,000,000.
Five
million of the net proceeds from the offering have been remitted to Florida Mezz, $500,000 will be reserved to fund the opening
of new stores, and the balance of $206,746 will be used for working capital and general corporate purposes. T.R. Winston &
Company, LLC, the Company’s placement agent, received a fee of $260,153 for its services related to this transaction.
The
above descriptions of the material terms of the Purchase Agreement, the Debentures, the Warrants, the Security Agreement, the
Subsidiary Guarantee and the Satisfaction, Settlement and Release Agreement are qualified in their entirety by reference to the
text of such documents, which are filed as Exhibits 10.1, 4.1, 4.2, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K, respectively,
and are incorporated by reference herein.