STKS 8-K
ONE Group Hospitality, Inc. (STKS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
THE
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
of incorporation) | Identification No.) |
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
Stock Purchase Agreement
On March 26, 2024, The ONE Group Hospitality, Inc. (the “Company”), TOG Kaizen Acquisition, LLC, a wholly owned subsidiary of the Company (“Buyer”), Safflower Holdings LLC and Safflower Holdings Corp. entered into a stock purchase agreement (the “Stock Purchase Agreement”) pursuant to which Buyer will purchase 100% of the issued and outstanding equity interests of Safflower Holdings Corp. from Safflower Holdings LLC, for $365.0 million in cash, subject to customary adjustments for indebtedness, cash, net working capital and seller transaction expenses (the “Acquisition”). Safflower Holdings Corp. beneficially owns most of the Benihana restaurants, as well as all of the RA Sushi restaurants, in the United States. It also franchises Benihana locations in the U.S., Latin America (excluding Mexico) and the Caribbean.
Closing of the Acquisition is subject to customary closing conditions, including the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expiring or being terminated, among other things. There is no financing contingency for the Acquisition.
The Company has guaranteed the obligations of TOG Kaizen Acquisition, LLC under the Stock Purchase Agreement.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Stock Purchase Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference, and a press release regarding the Acquisition is furnished as Exhibit 99.1.
Investment Agreement
In connection with the Acquisition, the Company, HPC III Kaizen LP, an affiliate of Hill Path Capital LP (“HPC Investor”), and HPS Investment Partners, LLC (“HPS Investor” and collectively with HPC Investor, “Investors”) entered into an investment agreement (the “Investment Agreement”) whereby the Investors agreed to purchase (a) an aggregate of 160,000 shares of the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), at a price and with a liquidation preference of $1,000 per share; (b) warrants (in the form attached to the Investment Agreement, the “Penny Warrants”) to purchase a number of shares of Common Stock of the Company that in the aggregate will represent 5.33% of the fully diluted shares of Common Stock of the Company at closing at an exercise price of $0.01 per share; and (c) warrants (in the form attached to the Investment Agreement, the “Market Warrants”) to purchase, in the aggregate, 1,066,667 shares of Common Stock of the Company, at an exercise price of $10.00 per share, in each case, in a private placement exempt from registration under the Securities Act of 1933. For purposes of calculating the number of shares of Common Stock initially issuable under the Penny Warrants, fully diluted shares of Common Stock means: (a) the number of all outstanding shares of Common Stock of the Company (excluding any held by the Company in treasury), plus (b) the number of all outstanding stock options of the Company (both vested and unvested), plus (c) the number of all outstanding unvested RSUs and PSUs of the Company, plus (d) the number of shares of Common Stock issuable pursuant to the Penny Warrants. The Preferred Stock will be issued at a 5% original issue discount or issuance fee, at the option of the Investors. The terms of the Preferred Stock will be established by the filing of a certificate of designations in the form attached to the Investment Agreement (the “Certificate of Designations”) with the Delaware Secretary of State. The Preferred Stock will be non-voting and non-convertible; will have compounding dividends that begin at a rate of 13.0% per annum and increase over time at specified intervals; will be subject to optional redemption by the Company and mandatory redemption following specified events and in certain circumstances upon the exercise by the holders of a majority of the outstanding shares of Preferred Stock of an option to deliver written notice to the Company to require redemption, in each case, for specified prices; and will grant certain consent rights for the holders of a majority of the outstanding shares of Preferred Stock for specified matters.
The Investment Agreement contains various representations, warranties, covenants, closing conditions and termination provisions and will, effective at the closing of the transactions contemplated thereby, grant the HPC Investor the right to designate two representatives for appointment and nomination to the Company’s Board of Directors subject to its terms. Under the Investment Agreement, the Company also agreed to enter into a registration rights agreement in the form attached thereto with the Investors at the closing of pursuant to which the Company will agree to register for resale the
Penny Warrants, the Market Warrants and the shares of common stock issuable upon exercise of the Penny Warrants and Market Warrants (the “Registration Rights Agreement”).
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Investment Agreement and the forms of Certificate of Designations, Penny Warrant, Market Warrant and Registration Rights Agreement, which are attached hereto as Exhibit 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, and each of which is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The applicable information set forth in Item 1.01 of this Form 8-K is incorporated by reference in this Item 3.02.
Item 7.01 Regulation FD Disclosure.
Press Release
On March 26, 2024, the Company issued a press release announcing entry into the Stock Purchase Agreement, the Investment Agreement and the Debt Commitment Letter (as defined below). A copy of the press release is furnished as Exhibit 99.1 and incorporated by reference into this Item 7.01.
Investor Presentation
On March 26, 2024, the Company posted on its website, www.togrp.com, under “Investor Relations,” an investor presentation (the “Investor Presentation”). A copy of the Investor Presentation that was posted by the Company is furnished as Exhibit 99.2 hereto and is incorporated in this Item 7.01 by reference.
The information provided pursuant to this Item 7.01, including Exhibit 99.1 and Exhibit 99.2 in Item 9.01, is “furnished” and shall not be deemed to be “filed” with the SEC or incorporated by reference in any filing under the Exchange Act or the Securities Act, except as shall be expressly set forth by specific reference in any such filings.
Item 8.01. Other Events.
In connection with the Acquisition, pursuant to an irrevocable commitment letter, dated March 26, 2024 (the “Debt Commitment Letter”), provided to The ONE Group, LLC by Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., HPS Investment Partners, LLC and HG Vora Capital Management, LLC (collectively, the “Initial Lenders”), the Initial Lenders committed to provide, on the terms and subject to the conditions set forth in the Debt Commitment Letter, at the closing of the Acquisition, a $350.0 million senior secured term loan facility (the “Term Loan Facility”) and a $40.0 million senior secured revolving credit facility (the “Revolving Facility”, and together with the Term Loan Facility, the “Facilities”), up to $10.0 million of which will be available in the form of letters of credit.
The Term Loan Facility will not be subject to a financial covenant and the Revolving Facility’s financial covenant will apply only after 35% of the Revolving Facility’s capacity has been drawn.
The Term Loan Facility will bear interest at a margin over a reference rate selected at the option of the borrower. The margin for the Term Loan Facility will be 6.5% per annum for SOFR borrowings and 5.5% per annum for base rate borrowings. The Term Loan Facility will mature on the fifth anniversary of the date of the related loan agreement.
The Revolving Facility will bear interest a margin over a reference rate selected at the option of the borrower. The margin for the Revolving Facility will be set quarterly based on the Company’s Consolidated Net Leverage Ratio for the preceding four fiscal quarter period and will range from 5.5% to 6% per annum for SOFR borrowings and 4.50% to 5.00% for base rate borrowings. The Revolving Facility will mature on the date that is fifty-four months after the date of the related loan agreement.
The Facilities will be used to finance the Acquisition as well as refinance the Company’s existing credit agreement with Goldman Sachs Specialty Lending Group, L.P. and Goldman Sachs Bank USA (the “Refinancing”) and to pay fees and expenses in connection with the Acquisition, the Refinancing, the issuance and sale of the Preferred Stock and incurrence of the Facilities.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | |
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
99.1 | ||
99.2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: March 26, 2024 | THE ONE GROUP HOSPITALITY, INC. | |
By: | /s/ Tyler Loy | |
Name: | Tyler Loy | |
Title: | Chief Financial Officer | |
Exhibit 10.1
by and among
SAFFLOWER HOLDINGS LLC, as Seller
SAFFLOWER HOLDINGS CORP., as the Company
TOG KAIZEN ACQUISITION, LLC, as Buyer
and
THE ONE GROUP HOSPITALITY, INC., as Parent
Dated as of March 26, 2024
NOTE TO EXHIBIT: The schedules and exhibits to this Stock Purchase Agreement, including the Disclosure Schedules, are not filed herewith. The Company agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
Explanatory Note: The Stock Purchase Agreement (the “Agreement”) contains representations and warranties by the parties thereto made only for the purposes of the Agreement. The Agreement is filed with this report only to provide investors with information regarding its terms and conditions, and not to provide any other factual information regarding the Company or its business. A party’s representations and warranties were made solely for the benefit of the other party or parties and (i) were not intended to be treated as categorical statements of fact, but rather as a way to allocate risk if a representation and warranty proves to be inaccurate; (ii) may have been qualified in the Agreement by disclosures that were made to the other party or parties in connection with the negotiation of the Agreement (provided that any specific facts that contradict the representations and warranties in the Agreement in any material respect have been disclosed); (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the Agreement or such other date or dates as may be specified in the Agreement. Accordingly, they should not be relied upon by investors as statements of factual information.
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SCHEDULES
Schedule 1.1(c)-Permitted Liens
Schedule 6.12-Consents
iii
EXHIBITS
Exhibit A-Statement of Net Working Capital
Exhibit B-1-Form of Primary Policy
Exhibit B-2-Form of Excess Policy
Exhibit C-Form of Escrow Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of March 26, 2024, is made by and among Safflower Holdings LLC, a Delaware limited liability company (“Seller”); Safflower Holdings Corp., a Delaware corporation (the “Company”); TOG Kaizen Acquisition, LLC, a Delaware limited liability company and wholly-owned subsidiary of Parent (“Buyer”); and The ONE Group Hospitality, Inc., a Delaware corporation (“Parent”). Seller, the Company, Parent and Buyer shall be referred to herein, from time to time, collectively as the “Parties.” Capitalized terms used, but not otherwise defined herein have the meanings ascribed to such terms in Article 1.
WHEREAS, as of the date hereof, Seller owns two hundred (200) shares of the Company’s common stock, par value $0.01 per share (the “Shares”), which constitute 100% of the issued and outstanding equity interests of the Company;
WHEREAS, the board of directors (or equivalent managing body) of each of Parent and Buyer has unanimously approved the execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby, and determined it advisable and in the best interests of Parent and Buyer and each of their respective stockholders; and
WHEREAS, the Parties desire that, upon the terms and subject to the conditions hereof, Buyer will purchase from Seller, and Seller will sell, assign, transfer and deliver to Buyer, all of the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller, the Company, Parent and Buyer hereby agree as set forth below.
“2022 Audited Financial Statements” has the meaning set forth in Section 3.4(a).
“2023 Audited Financial Statements” has the meaning set forth in Section 3.4(a).
“401(k) Plans” has the meaning set forth in Section 6.9(d).
“Accounting Firm” has the meaning set forth in Section 2.3(b)(ii).
“Accounting Principles” means U.S. GAAP, applied on a basis consistent with the periods presented in the Audited Financial Statements, using the same accounting principles, practices, methodologies and procedures as were used by the Company in the preparation of the 2023 Audited Financial Statements; provided, that if the accounting principles, practices, methodologies and procedures used in the preparation of the 2023 Audited Financial Statements are inconsistent with U.S. GAAP in effect as of the Closing Date, then the accounting principles, practices,
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methodologies and procedures used in the preparation of the 2023 Audited Financial Statements shall control; provided, further, that if the accounting principles, practices, methodologies and procedures used in the preparation of the 2023 Audited Financial Statements are inconsistent with the following defined terms contained in this Agreement, then such defined terms shall control: “Cash and Cash Equivalents,” “Indebtedness,” “Net Working Capital,” “Seller Expenses,” “Transfer Taxes” and “Transaction Tax Deductions”.
“Action” has the meaning set forth in Section 3.8.
“Actual Adjustment” means (x) the Cash Purchase Price as finally determined pursuant to Section 2.3(b) minus (y) the Estimated Cash Purchase Price.
“Adjustment Escrow Account” has the meaning set forth in Section 2.3(a)(i).
“Adjustment Escrow Amount” has the meaning set forth in Section 2.3(a)(i).
“Adjustment Escrow Funds” means, at any time, the portion of the Adjustment Escrow Amount then remaining in the Adjustment Escrow Account plus all interest and income then held in the Adjustment Escrow Account.
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person, and the term “Affiliated” shall have a meaning that is correlative thereto. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto. For the avoidance of doubt, (i) employees of any Group Company are not Affiliates of any Group Company and (ii) in no event shall Seller or any Group Company be considered an Affiliate of any portfolio company or investment fund affiliated with Angelo, Gordon & Co., L.P.
“Affiliate Agreement” has the meaning set forth in Section 3.6(a)(xi).
“Agreement” has the meaning set forth in the introductory paragraph to this Agreement.
“Alternate Financing” has the meaning set forth in Section 6.15.
“Ancillary Documents” means, collectively, the Escrow Agreement and each other certificate or instrument delivered pursuant to Section 7.2 and Section 7.3 hereof.
“Antitrust Laws” means the HSR Act, the Sherman Act, the Clayton Act, the Federal Trade Commission Act and any other United States federal or state or foreign Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, restraint of trade or lessening of competition through merger or acquisition.
“ASC 842” means the Accounting Standards Update No. 2016-02 Leases.
“Assets” has the meaning set forth in Section 3.17(d).
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“Audited Financial Statements” has the meaning set forth in Section 3.4(a).
“Balance Sheet” has the meaning set forth in Section 3.4(a).
“Base Cash Consideration” means $365,000,000.
“Business Day” means a day, other than a Saturday or Sunday, on which commercial banks in New York, New York, are open for the general transaction of business.
“Buyer” has the meaning set forth in the introductory paragraph to this Agreement.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, as amended, and the rules, regulations and other guidance promulgated thereunder.
“Cash and Cash Equivalents” means all cash and cash equivalents (including bank account balances, security deposits, utility deposits, credit card receivables, restricted cash and any cash held at any Leased Real Property) of the Group Companies as of the Measuring Time, determined on a consolidated basis, in each case, including cash resulting from checks, wires, drafts and credit card receivables, deposited, initiated or charged, as applicable, prior to the Measuring Time that clear thereafter (but only to the extent that such amounts are not included in the calculation of the Net Working Capital Adjustment), less the amounts of any issued but uncleared checks, drafts, overdrafts and wires issued prior to the Measuring Time that clear thereafter (but only to the extent that such amounts are not included in the calculation of the Net Working Capital Adjustment), in each case, without giving effect to the transactions contemplated hereby.
“Cash Purchase Price” means (i) the Base Cash Consideration; plus (ii) the Net Working Capital Adjustment (which may be a negative number); plus (iii) Cash and Cash Equivalents; minus (iv) Closing Date Indebtedness; minus (v) Unpaid Seller Expenses.
“Cash Purchase Price Dispute Notice” has the meaning set forth in Section 2.3(b)(ii).
“Closing” has the meaning set forth in Section 2.1.
“Closing Date” has the meaning set forth in Section 2.1.
“Closing Date Indebtedness” means the Indebtedness as of the Measuring Time.
“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and any similar state Law.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Commitment Letters” has the meaning set forth in Section 5.11.
“Company” has the meaning set forth in the introductory paragraph to this Agreement.
“Company Material Adverse Effect” means any event, fact, condition, occurrence, effect, development, circumstance, matter or change (each, an “Effect”) that, individually or in the
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aggregate, together with all other Effects, (a) has had, or would reasonably be expected to have, a material adverse effect upon the financial condition, business, results of operations or assets or liabilities of the Group Companies, taken as a whole, or (b) would reasonably be expected to prevent, materially delay or materially impede the performance by Seller or the Company of their respective obligations under this Agreement or the consummation of the transactions contemplated herein; provided, however, that “Company Material Adverse Effect” shall not include in the case of clause (a) any Effect to the extent resulting from any of the following that occurs on or after the date of this Agreement: (i) conditions affecting the United States economy or any foreign economy generally, or any regulatory environment in the United States and elsewhere in the world; (ii) any national, international or supranational political, geopolitical or social conditions, including any civil commotion, civil disorder, or any other type of civil unrest (including riots, public demonstrations, protests, looting, and revolutions), the threat, engagement, cessation or escalation by the United States or any other country in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military, cyber or terrorist attack upon the United States or any other country, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States or any other country; (iii) changes to financial, banking, credit, currency, commodity (including food), capital or securities markets (including any disruption thereof and any increase or decrease therein), changes to the price of any market index or changes in interest rates or exchange rates; (iv) changes or prospective changes in U.S. GAAP, accounting standards or the interpretation or enforcement thereof; (v) changes or prospective changes after the date hereof in any Law or any action required to be taken under any Laws by which any Group Company (or any of their respective assets or properties) is bound; (vi) any change that is generally applicable to the industries or markets in which the Group Companies operate; (vii) any national or international calamities, crises or natural disasters (including those arising from storms, hurricanes, tornados, flooding, earthquakes, volcanic eruptions, epidemics or pandemics (including COVID-19) or other similar events or force majeure events, together with any restrictions, sanctions, other limitations or policies enacted or applied by a Governmental Entity in response to any of the foregoing (including any COVID-19 Measures)); (viii) any changes to the credit rating of any Group Company (although any facts and circumstances that may have given rise or contributed to any such changes that are not otherwise excluded from the definition of Company Material Adverse Effect may be taken into account in determining whether there has been a Company Material Adverse Effect); (ix) the negotiation, execution, announcement or existence of this Agreement or the transactions contemplated hereby, the identity of Buyer, its Affiliates or their respective financing sources or any communication by Buyer or any of its Affiliates of its plans or intentions (including in respect of officers or employees) with respect to any of the business of the Group Companies (including any impact on relationships, contractual or otherwise, with clients, vendors, partners, employees, regulators or others having relationships with any Group Company); (x) any action taken by Seller, any Group Company or their respective Affiliates contemplated, permitted or required by this Agreement or the Ancillary Documents (including the obtaining of approval or consent from any Governmental Entity or other third-party in connection with the consummation of the transactions contemplated hereby and thereby) or at Buyer’s request or with Buyer’s consent; (xi) the failure to take any action by Seller, any Group Company or their respective Affiliates if that action is prohibited by this Agreement or the Ancillary Documents and Buyer either did not consent to such action or withheld, delayed or conditioned its consent; (xii) any act or omission by Buyer or its Affiliates occurring from and after the date hereof; (xiii) any Effect
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that is cured by Seller or any Group Company; or (xiv) any failure by the Group Companies to meet any internal or published projections, forecasts, estimates or predictions of revenue, earnings, cash flow or cash position and any seasonal changes in the results of operations of the Group Companies for any period ending prior to, on or after the date of this Agreement (although any facts and circumstances that may have given rise or contributed to any such failure that are not otherwise excluded from the definition of Company Material Adverse Effect may be taken into account in determining whether there has been a Company Material Adverse Effect); provided, however, that Effects set forth in the foregoing clauses (i) through (vii) may be taken into account in determining whether there has been or is a Company Material Adverse Effect, to the extent that such Effects have a disproportionate adverse effect on the financial condition, business, results of operations, assets or liabilities of the Group Companies, taken as a whole, compared to other companies of similar size operating in the same industry as the Group Companies.
“Competing Transaction” has the meaning set forth in Section 6.5.
“Confidentiality Agreement” means that certain Confidentiality Agreement, dated as of June 15, 2023, by and between the Seller and Buyer.
“Continuing Employees” has the meaning set forth in Section 6.9(a).
“COVID-19” means the COVID-19 pandemic, including any evolutions or mutations of the COVID-19 disease, and any further epidemics or pandemics arising therefrom.
“COVID-19 Measures” means any impact of COVID-19, including any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive or guidelines promulgated by any Governmental Entity, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19.
“Credit Agreement” means that certain Credit Agreement, dated June 28, 2018, by and among Ally Bank, Seller, the Company, Benihana Inc., and the lenders identified on the signature pages thereto.
“Data Protection Requirements” means (i) all applicable laws, rules, regulations and orders of any Governmental Entity in any jurisdiction worldwide governing data privacy, data protection, or information security in the Processing of Personal Information, including (but solely to the extent applicable) the CAN-SPAM Act, the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Children’s Online Privacy Protection Act, the Fair Credit Reporting Act, the Health Insurance Portability and Accountability Act, the Gramm Leach Bliley Act, the California Consumer Privacy Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Virginia Consumer Data Protection Act, the General Data Protection Regulation (EU) 2016/679 (“GDPR”), or any national laws or regulations implementing GDPR, and any security breach notification or disclosure laws; (ii) the Payment Card Industry Data Security Standard, as applicable; (iii) any provisions of contracts or agreements, to which any Group Company is party governing data privacy, data protection, or information security; and (iv) any statement in any advertisements, promotions, publications, or other documents or materials that a Group Company
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provides or makes available to any of the Group Company’s customers in any form or medium relating to data privacy, data protection, or information security.
“D&O Claim” has the meaning set forth in Section 6.7(a).
“D&O Costs” has the meaning set forth in Section 6.7(a).
“D&O Expenses” has the meaning set forth in Section 6.7(a).
“D&O Indemnifying Party” has the meaning set forth in Section 6.7(a).
“D&O Indemnitees” has the meaning set forth in Section 6.7(a).
“Data Room” has the meaning set forth in Section 10.5.
“Debt Commitment Letter” has the meaning set forth in Section 5.11.
“Debt Financing” has the meaning set forth in Section 5.11.
“Debt Financing Sources” means the collective reference to each lender and each other Person (including each agent and each arranger) that have committed to provide or arrange or otherwise entered into agreements in connection with the Debt Financing and the other transactions contemplated hereby (including any commitment letters, engagement letters, credit agreements, loan agreements or indentures relating thereto (and any joinders or amendments thereof)), together with each former, current and future Affiliate thereof and each former, current and future officer, director, employee, member, manager, partner, attorney, agent, representative and permitted successor and assign of each of such lender, other Person or Affiliate.
“Deferred Compensation Plan” means the Nonqualified Deferred Compensation Plan of Benihana, Inc., adopted April 27, 2010.
“Employee Benefit Plan” means each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA, whether or not subject to ERISA) and each other pension, profit-sharing or other retirement, bonus, deferred compensation, incentive compensation, stock bonus, stock appreciation, stock purchase, stock ownership, restricted stock, restricted stock unit, stock option or other equity-based (whether real or phantom), employment, consulting, vacation, holiday, sick leave, welfare benefit, paid time off, leave of absence, tax gross up, disability, death benefit, cafeteria, hospitalization, material fringe benefit, medical, dental, vision, life or other insurance, termination, retention, change in control or severance plan, program, policy or contract) and other material benefit or compensation plans, agreements or commitments, in each case, whether or not subject to ERISA, (i) under which any current or former director, officer, employee or consultant of any Group Company has any right to benefits from any Group Company, (ii) to which any Group Company makes or is required to make contributions with respect to such directors, officers, employees or consultants, (iii) which are maintained, sponsored, contributed to, or required to be contributed to by any Group Company or any trade or business (whether or not incorporated) which would be treated at any relevant time as a single employer with any Group Company under Section 414 of the Code or Section 4001 of ERISA (an “ERISA Affiliate”), or (iv) in respect of which any Group Company or ERISA Affiliate has or may have any obligation to contribute or
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other liability; other than any benefit or compensation plan or arrangement maintained by a Governmental Entity. The term “Employee Benefit Plan” shall also include any plan, program, policy, arrangement or contract with respect to which any Group Company or any ERISA Affiliate may have liability (including potential, secondary or contingent liability) under Title IV of ERISA or otherwise to any Person and including any liability by reason of any Person’s being or having been an ERISA Affiliate.
“Environmental Laws” means all Laws in effect concerning (i) pollution or protection of the environment; (ii) the use, generation, handling, transportation, treatment, storage, disposal, discharge, release, control or cleanup of, or exposure of any person to, any pollutant, contaminant, toxic or otherwise hazardous materials, substances or wastes; or (iii) remediation or restoration of the environment.
“Environmental Permits” has the meaning set forth in Section 3.10(b).
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Escrow Agent” has the meaning set forth in Section 2.3(a)(i).
“Escrow Agreement” has the meaning set forth in Section 2.3(a)(i).
“Estimated Closing Statement” has the meaning set forth in Section 2.3(a).
“Estimated Cash Purchase Price” has the meaning set forth in Section 2.3(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Fee Letter” has the meaning set forth in Section 5.11.
“Financial Statements” has the meaning set forth in Section 3.4(a).
“Fraud” means a false statement of a material fact with respect to the making of any of the representations and warranties by a Party as set forth in this Agreement or in any other Ancillary Document (a) where the Party making such false statement (i) has actual knowledge (as opposed to constructive knowledge) of the falsity of such statement and that such falsity would constitute a breach of any of the representations and warranties made by the Party as set forth in this Agreement or in any other Ancillary Documents, (ii) makes such false statement with the intent to deceive the Party to whom such false statement is made and (iii) makes such false statement with the intent to induce reliance in the Party to whom such false statement is made, and (b) where the Party to whom such false statement is made (i) justifiably relies on such false statement and (ii) suffers actual damages as a result of such reliance.
“Fundamental Representations” means the representations and warranties contained in Section 3.1(a) (Organization and Qualification), Section 3.2 (Capitalization), Section 3.3 (Authority), Section 4.1 (Authority) and Section 4.3 (Title to Shares).
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“Governing Documents” means the legal document(s) by which any Person (other than an individual) establishes its legal existence or that govern its internal affairs. For example, the “Governing Documents” of a corporation are its certificate of incorporation and by-laws, the “Governing Documents” of a limited partnership are its limited partnership agreement and certificate of limited partnership and the “Governing Documents” of a limited liability company are its operating agreement and certificate of formation.
“Governmental Entity” means any United States or foreign (i) federal, state, local, municipal or other government; (ii) governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official or entity and any court or other tribunal); or (iii) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, including any arbitral tribunal.
“Group Companies” means, collectively, the Company and each of its Subsidiaries and each of them, individually, a “Group Company”.
“Group Company Intellectual Property” means any and all Intellectual Property Rights that are owned, purported to be owned, used, held for use or practiced by any Group Company, including all Group Company IP Registrations.
“Group Company Owned Intellectual Property” means any and all Intellectual Property Rights that are owned or purported to be owned by any Group Company.
“Group Company IP Registrations” has the meaning set forth in Section 3.12(a)(ii).
“Guaranteed Obligations” has the meaning set forth in Section 10.20(a).
“Harmful Code” means any “back door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are commonly understood in the Software industry) or any other code designed or intended to have, or capable of performing, any of the following functions: disrupting, disabling, harming or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device on which such code is stored or installed; or damaging or destroying any data or file without the user’s consent.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Income Tax” means any Tax imposed on or determined with reference to gross or net income or profits or other similar Tax (including any franchise Taxes imposed in lieu of any income Tax).
“Indebtedness” means, as of any specific time, without duplication, with respect to the Group Companies: (i) indebtedness for borrowed money (including amounts due and owing under (x) the Credit Agreement and (y) the Premium Financing Arrangements; provided, that for purposes of calculating the Cash Purchase Price with respect to this clause (y), such amount shall be calculated net of the premiums paid with respect to such agreement, but in no event, shall such amount be less than zero); (ii) obligations for the deferred purchase price of assets, property,
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services or securities (excluding any trade payables and accrued expenses arising in the ordinary course of business of the Group Companies); (iii) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security; (iv) leases treated as finance leases under the Accounting Principles; (v) all reimbursement or other obligations with respect to the letters of credit, bank guarantees, bankers’ acceptances or other similar instruments, in each case, solely to the extent drawn; (vi) all breakage costs or fees with respect to any interest rate, currency swap, cap, forward or other similar arrangements designed to provide protection against fluctuations in any price or rate that are terminated at or prior to the Closing; (vii) all obligations and liabilities secured by any Lien (other than Permitted Liens) upon any property or assets of any Group Company; (viii) the aggregate amount (but not less than zero) of the accrued but unpaid Income Taxes of the Group Companies taking into account any applicable Transaction Tax Deduction to the extent not otherwise applied in calculating such accrual; (ix) earned and unpaid corporate executive bonus in an aggregate amount; (x) amounts accrued in respect of settlement obligations for any Actions net of offsetting recoveries reasonably expected to be received in connection with the settlement of such Actions in an amount not to exceed $1,000,000; (xi) amounts required to be contributed by Benihana, Inc., under the Rabbi Trust following Closing pursuant to Section 1(e) of the Rabbi Trust; (xii) all obligations of the type described in clauses (i) through (xi) above of any third-party, in each case, for which any Group Company is responsible or liable as obligor, guarantor or surety; and (xiii) for clauses (i) through (xii) above, all accrued interest, fees, costs, prepayment and other premiums, expenses, reimbursements, indemnities, breakage costs or penalties, if any, in connection with any of the foregoing. Notwithstanding the foregoing, “Indebtedness” shall not include any (1) intercompany obligations; (2) obligations under operating leases that are not required to be treated as finance leases under U.S. GAAP; (3) build to suit lease obligations, (4) unamortized deferred financing costs; (5) undrawn amounts under letters of credit or continuous or delayed draw instruments of credit; (6) obligations under any interest rate, currency or other hedging agreements (other than the breakage costs or fees described in clause (vi)); (7) amounts included as Seller Expenses; (8) amounts otherwise taken into account in the calculation of Net Working Capital; (9) obligations under surety bonds or similar instruments; (10) any gift card liability or other deferred revenue; (11) any obligations or liabilities for or related to Taxes (other than accrued and unpaid Income Taxes); (12) obligations or liabilities pursuant to the Credit Agreement for performance (rather than payment) or other contingent or conditional obligations (e.g., indemnification) not currently due; (13) obligations arising out of or related to items 3, 7 and 8 set forth on Section 3.17(b) of the Disclosure Schedules; (14) Losses, liabilities or obligations arising out of the W-2 Matter; and (15) any current or future (including both anticipated and unanticipated) obligations, liabilities or accruals for or related to capital expenditures, whether in respect of the Group Companies’ restaurants in Conroe, TX, Temecula, CA, San Mateo, CA and Plantation, FL (such restaurants, the “Development Locations”) or otherwise.
“IT Systems” means all computer systems, servers, network equipment and other computer hardware owned, leased or licensed by any Group Company.
“Intellectual Property Rights” means all right, title, and interests in and to the following: (i) trade names, corporate names, trademarks and service marks, domain names, social media handles, logos, slogans, trade dress, and other source identifiers, and registrations or applications to register any of the foregoing, together with the goodwill symbolized by any of the foregoing (collectively, “Trademarks”); (ii) patents, utility models and other statutory rights with respect to
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the protection of inventions, and all applications, divisionals, continuations, continuations-in-part, and reissues for any of the foregoing (collectively, “Patents”); (iii) copyrights and other rights in works of authorship (whether registered or unregistered) and registrations and applications for registration of copyrights (collectively, “Copyrights”); (iv) trade secrets, including know-how, recipes, methods, processes, proprietary systems and methodologies, technical data, customer lists and any other information, in each case, to the extent any of the foregoing derives economic value from not being generally known to other Persons who can obtain economic value from its disclosure or use, excluding any Copyrights or Patents that may cover or protect any of the foregoing (collectively, “Trade Secrets”); (v) rights of attribution and integrity and other moral rights of an author; and (vi) rights in, arising out of, or associated with a person’s name, voice, signature, photograph, or likeness, including rights of personality, privacy, and publicity and similar rights, in each case whether currently existing or hereafter developed or acquired, arising under statutory law, common law, or by contract, and whether or not perfected, registered or issued, including all applications, disclosures, registrations, issuances, renewals and extensions with respect thereto.
“Latest Balance Sheet” has the meaning set forth in Section 3.4(a).
“Law” means applicable laws, rules, regulations, codes, ordinances and orders of all Governmental Entities.
“Lease Guarantees” has the meaning set forth in Section 3.17(b).
“Leasehold Improvements” means all buildings, structures and similar improvements located on any Leased Real Property which are owned by any of the Group Companies, regardless of whether title to such buildings, structures or similar improvements are subject to reversion to the landlord or other third-party upon the expiration or termination of the Real Property Lease for such Leased Real Property.
“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by any Group Company.
“Lien” means any mortgage, deed of trust, pledge, security interest, lien, charge, hypothecation, option to purchase or lease or otherwise acquire any interest, conditional sales agreement, restriction, covenant, right of way, title defect, adverse claim of ownership or use, easement, encroachment or other similar encumbrance of any kind; provided, however, that (a) no license or other rights grant with respect to any Intellectual Property Rights shall, in and of itself, be deemed a “Lien” hereunder and (b) Liens securing the obligations of the Group Companies under the Credit Agreement and related agreements shall not be deemed a “Lien” hereunder.
“Losses” means any and all losses, liabilities, costs, expenses, claims, suits, Actions, damages, deficiencies, Taxes, interest, awards, judgments, penalties or fines.
“Material Contracts” has the meaning set forth in Section 3.6(a).
“Material Supplier” has the meaning set forth in Section 3.19.
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“Measuring Time” means 12:01 a.m., New York City time, on the Closing Date.
“Net Working Capital” means (i) the aggregate value of those current assets of the Group Companies, on a consolidated basis, as of the Measuring Time that are included in the line item categories of current assets specifically identified in the Statement of Net Working Capital, less (ii) the aggregate value of (A) those current liabilities of the Group Companies, on a consolidated basis, as of the Measuring Time that are included in the line item categories of current liabilities specifically identified in the Statement of Net Working Capital and (B) all self-insurance claim liabilities, including current and non-current incurred but not reported claims, net of recoveries from third-party insurers, as determined by the Company’s actuarial service provided as of the Closing Date, in each case, determined on a consolidated basis without duplication as of the Measuring Time and calculated in accordance with the Accounting Principles (including with respect to establishing levels of reserves). Notwithstanding the foregoing, “Net Working Capital” shall exclude any amounts related to (1) any and all Income Tax assets and liabilities and any and all deferred tax assets and liabilities established for financial accounting purposes to reflect timing differences between book and tax income and loss; (2) Cash and Cash Equivalents; (3) any intercompany payables or receivables, (4) Indebtedness (including accrued interest); (5) Seller Expenses; (6) RESERVED; (7) any and all current assets and current liabilities associated with the adoption of ASC 842; (8) earned and unpaid corporate executive bonus; (9) amounts accrued for potential or actual settlements or judgments in respect of any Actions; (10) any amounts related to insurance premium finance arrangements; or (11) Losses, liabilities or obligations arising out of the W-2 Matter. In determining whether any specific account or sub-account on the balance sheet is included or excluded from Net Working Capital, treatment will be consistent with the Statement of Net Working Capital.
“Net Working Capital Adjustment” means the amount equal to (i) the Net Working Capital; minus (ii) the Target Net Working Capital.
“New Plans” has the meaning set forth in Section 6.9(b).
“Non-Party Affiliates” has the meaning set forth in Section 10.18.
“Outside Date” has the meaning set forth in Section 9.1(d).
“Parent” has the meaning set forth in the introductory paragraph to this Agreement.
“Parent and Buyer Fundamental Representations” means the representations and warranties contained in Section 5.1(a) (Organization), and Section 5.3 (Authority).
“Parent Group Companies” means, collectively, Parent and each of its Subsidiaries and each of them, individually, a “Parent Group Company”.
“Parent Preferred Stock” means the preferred stock, par value $0.0001, of Parent.
“Parties” has the meaning set forth in the introductory paragraph to this Agreement.
“Payoff Letters” means customary payoff letters from the Persons to whom any indebtedness for borrowed money with respect to the Group Companies is owed, signed by such
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Persons, setting forth, among other things, (i) the amount required to pay off in full at the Closing all indebtedness for borrowed money owed to such Person, (ii) wire transfer instructions for the payment of such amount, (iii) a release of all Liens, if any, which such Person may hold on any member of the Group Companies or any of the assets of such parties, effective upon receipt of the payoff amount set forth therein (for purposes of this clause (iii), “Liens” shall include liens and encumbrances securing the Credit Agreement) and (iv) if applicable, provisions allowing Buyer to (x) backstop or cash collateralize any letters of credit provided in connection with such indebtedness at Closing or (y) otherwise make arrangements at Closing satisfactory to Buyer with respect to any such letters of credit.
“Permits” has the meaning set forth in Section 3.11.
“Permitted Liens” means (i) mechanic’s, materialmen’s, carriers’, repairers’ and other Liens arising or incurred in the ordinary course of business of the Group Companies for amounts that are not yet delinquent or are being contested in good faith by appropriate proceedings that are reflected as a liability in the Financial Statements; (ii) Liens for Taxes (A) not delinquent as of the Closing Date or (B) that are being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established and are reflected as a liability in the Financial Statements for periods ending on or before the date of the Latest Balance Sheet and in the Group Companies’ financial statements consistent with past practice since the date of the Latest Balance Sheet Date; (iii) Liens on real property (including easements, covenants, conditions, rights of way and similar restrictions) that do not materially interfere with Group Companies’ present uses or occupancy of such real property; (iv) Liens granted to any lender at the Closing in connection with any financing by Buyer or its Affiliates of the transactions contemplated hereby; (v) zoning, building codes and other land use regulations imposed by Governmental Entities having jurisdiction over the real property regulating the use or occupancy of real property or the activities conducted thereon; (vi) Liens described in Schedule 1.1(c) attached hereto; (vii) any right, interest, Lien or title of a licensor, sublicensor, lessor or sublessor under any license, sublicense, lease, sublease or other similar agreement or in the property being leased or licensed not created or granted by any of the Group Companies; (viii) purchase money Liens and Liens securing rental payments under lease arrangements; (ix) other Liens which do not materially impair the use, value or marketability of the underlying asset; (x) with respect to the Leased Real Property, (1) the terms, conditions, and provisions of the Real Property Leases; (2) any Lien or other matter affecting title to the fee estate underlying such Leased Real Property; (3) Liens in favor of lessors, sublessors or licensors under the Real Property Leases or encumbering the interests of such lessors, sublessors or licensors (or holder of superior interests); (4) any right, title or interest of a lessor, sublessor or licensor under any of the Real Property Leases; and (5) all matters that may be shown on any title commitments and title policies, and any matter that would be reflected on a current, accurate ALTA/NSPS survey or physical inspection of any parcel of Leased Real Property; (xi) those Liens reflected in, reserved against or otherwise disclosed on the Financial Statements; (xii) all Liens created by, arising under, or existing as a result of, any Law; (xiii) all rights reserved to or vested in any Governmental Entity to control or regulate any asset or property in any manner and all Laws applicable to assets or properties; (xiv) easements, covenants, conditions, restrictions, charges, claims, rights of way, encroachments, defects or other minor imperfections of title and other similar restrictions whether or not of record; (xv) nonexclusive licenses of Intellectual Property Rights in the ordinary course of business; and (xvi) Liens that
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have been placed by any developer, landlord or other third-party on property over which a Group Company has an easement, lease or license rights.
“Personal Information” means, in addition to any definition provided by a Group Company for any similar term (e.g., “personally identifiable information,” “personal data” or “PII”) in any Group Company privacy policy or other internal or public-facing statement, all information regarding or capable of being associated with any individual or device, including: (i) information that identifies, could be used to identify or is otherwise identifiable with an individual, including name, physical address, telephone number, email address, financial account number, government-issued identifier (including Social Security number and driver’s license number), medical, health or insurance information, gender, date of birth, educational or employment information, religious or political views or affiliations, and marital or other status, photograph, face geometry, or biometric information, and any other data used or intended to be used to identify, contact or precisely locate any individual or device; (ii) any data regarding an individual’s activities online or on a mobile or other application (e.g., searches conducted, web pages or content visited or viewed); and (iii) Internet Protocol addresses or other persistent identifiers. Personal Information may relate to any individual, including a current, prospective or former customer or employee of any Person. Personal Information includes information in any form, including paper, electronic and other forms.
“Person” means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other similar entity, whether or not a legal entity.
“Pre-Closing Tax Period” means a taxable period ending on or before the Closing Date.
“Preferred Stock Commitment Letter” has the meaning set forth in Section 5.11.
“Preferred Stock Financing” has the meaning set forth in Section 5.11.
“Preferred Stock Financing Sources” means the Persons that have committed to provide or arrange the Preferred Stock Financing in connection with the transactions contemplated hereby, together with their respective Affiliates and the respective officers, directors, employees, attorneys, agents, representatives and permitted successors and assigns of each of such Person or Affiliate.
“Premium Financing Arrangements” means (a) that certain Premium Finance Agreement Promissory Note, dated as of September 1, 2023, made by Benihana, Inc. for the benefit of AFCO Credit Corporation, (b) that certain Premium Finance Agreement Promissory Note, dated as of October 9, 2023, made by Benihana, Inc. for the benefit of AFCO Credit Corporation, and (c) that certain Premium Finance Agreement, dated as of August 14, 2023, made by Benihana, Inc. for the benefit of AFCO Credit Corporation.
“Privacy Policies” has the meaning set forth in Section 3.12(b)(iii).
“Process” or “Processing” means, with respect to Personal Information, the use, collection, access, storage, recording, organization, adaption, alteration, transfer, retrieval, disclosure, dissemination or combination of such Personal Information.
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“Proposed Closing Date Calculations” has the meaning set forth in Section 2.3(b)(i).
“Protected Communications” has the meaning set forth in Section 10.17(b).
“R&W Insurance Costs” has the meaning set forth in Section 10.4.
“R&W Insurance Policy” means collectively (i) the buyer-side representations and warranties insurance policy issued by Liberty Surplus Insurance Corporation to Buyer and (ii) the excess liability insurance policy issued by Arch Reinsurance Ltd. to Buyer, attached hereto as Exhibit B-1 and Exhibit B-2, respectively.
“Rabbi Trust” means the Benihana, Inc. Executive Retirement Savings Plan Trust Agreement, dated April 27, 2010.
“Real Property Lease” means all leases, subleases, licenses, concessions and other agreements pursuant to which any Group Company holds any Leased Real Property.
“Regulatory Approvals” has the meaning set forth in Section 6.4(a).
“Related Party” has the meaning set forth in Section 3.18.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Breach” means any actual: (a) unauthorized or unlawful access to, or unauthorized alteration, destruction, disclosure, loss, Processing, or use of, Personal Information and any Group Company’s confidential information; (b) unauthorized use of, or unauthorized access to IT Systems; or (c) inability to Process Personal Information and Group Company’s confidential information, or access or use IT Systems due to Harmful Code, ransomware, or any malicious attack, exfiltration, or exploit of such Personal Information and any Group Company’s confidential information, or IT Systems.
“Seller” has the meaning set forth in the introductory paragraph to this Agreement.
“Seller Counsel” has the meaning set forth in Section 10.17.
“Seller Expenses” means, without duplication, the collective amount payable by the Group Companies for all out-of-pocket costs and expenses that are incurred in connection with the transactions contemplated by this Agreement, in each case, solely to the extent required to be paid or reimbursed by any of the Group Companies, including (i) the amount of any investment banking, accounting, attorney or other professional fees, including the fees and expenses of Seller Counsel (as defined in Section 10.17) and Piper Sandler & Co.; (ii) the amount of any “single-trigger” change of control payments or similar amounts payable by the Group Companies that are not paid by a Group Company at or prior to Closing or included as an accrual in the computation of Net Working Capital or Indebtedness and payable solely as a result of the consummation of the transactions contemplated herein (but excluding any “double trigger” payments or any amount payable as a result of any actions taken by Parent, Buyer or a Group Company on or after the Closing); (iii) the amount of all sale, “stay-around,” retention, change of control or similar bonuses
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or payments payable to current or former employees, directors or consultants of any Group Company that are not paid by a Group Company at or prior to Closing or included as an accrual in the computation of Net Working Capital or Indebtedness and payable solely as a result of the consummation of the transactions contemplated herein (but excluding any “double trigger” payments or any amount payable as a result of any actions taken by Parent, Buyer or a Group Company on or after the Closing); and (iv) the employer portion of any payroll taxes due in connection with the payments described in clauses (ii) and (iii); provided, that “Seller Expenses” shall not include (1) any amount that is included in the calculation of Indebtedness, Cash and Cash Equivalents or Net Working Capital; (2) 50% of any filing fees (if any) under the HSR Act and all non-U.S. Laws similar to the HSR Act; (3) 50% of Transfer Taxes and fees referenced in Section 6.13; (4) 50% of the policy premium with respect to the Tail Policy referenced in Section 6.7(b); (5) 50% of any fees or expenses of the Escrow Agent in connection with the Escrow Agreement; or (6) Losses, liabilities or obligations arising out of the W-2 Matter.
“Seller Released Claims” has the meaning set forth in Section 6.17.
“Seller Released Parties” has the meaning set forth in Section 6.17.
“Seller Tax Refund” has the meaning set forth in Section 6.11(b).
“Shares” has the meaning set forth in the recitals to this Agreement.
“SNDAs” means all subordination, nondisturbance, and/or attornment agreements for each Real Property Lease, to the extent in existence (including all amendments and modifications with respect thereto).
“Software” means all (i) computer programs, including all software implementations of algorithms, models and methodologies, whether in source code or object code; (ii) databases and compilations of data, including all data and collections of data, whether machine readable or otherwise; and (iii) documentation, including user manuals and other training documentation, descriptions, flow-charts, specifications, schema, and architecture related to any of the foregoing.
“Statement of Net Working Capital” means the statement of Net Working Capital determined as of January 28, 2024, and attached as Exhibit A hereto.
“Straddle Period” means a taxable period that includes (but does not end on) the Closing Date.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or a combination thereof or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more Subsidiaries of such Person or a combination thereof and for this purpose, a Person or Persons own a majority ownership interest in such a business entity (other than a corporation)
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if such Person or Persons shall be allocated a majority of such business entity’s gains or losses or shall be a, or control any, managing director or general partner of such business entity (other than a corporation). The term “Subsidiary” shall include all Subsidiaries of such Subsidiary.
“Tail Policy” has the meaning set forth in Section 6.7(b).
“Target Net Working Capital” means negative $30,821,000.
“Tax” means any federal, state, local or foreign income gross receipts, sales, use, ad valorem, transfer, franchise, profits, registration, license, lease, service, service use, withholding, payroll, employment, social security, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other tax, fee, assessment or charge of any kind whatsoever in the nature of a tax, including escheat and unclaimed property (including any amounts resulting from the failure to file any Tax Return), including any interest, penalties or additions to tax in respect of the foregoing.
“Tax Claim” has the meaning set forth in Section 6.11(d)(i).
“Tax Return” means any return, declaration, report, election, disclosure, claim for refund or information return or statement relating to Taxes filed or required to be filed with any Governmental Entity, including any schedule or attachment thereto, and including any amendment or supplement thereof.
“Transaction Financing” has the meaning set forth in Section 5.11.
“Transaction Financing Sources” has the meaning set forth in Section 6.16(a).
“Transaction Tax Deductions” means, to the extent deductible by the Group Companies as determined pursuant to Section 6.11, for Income Tax purposes, without duplication, the aggregate amount of: (i) the Seller Expenses; (ii) all success-based fees of professionals (including investment bankers and other consultants and advisors) paid by or on behalf of any Group Company in connection with this Agreement to the extent that such amounts are paid prior to Closing or otherwise are taken into account in the computation of Net Working Capital or Indebtedness; (iii) the capitalized financing costs and expenses and any prepayment premium resulting from the satisfaction at the Closing of Closing Date Indebtedness; and (iv) all sale, “stay-around,” retention, change of control or similar bonuses or payments payable to current or former employees, directors or consultants of any Group Company contingent upon the Closing, together with the employer portion of any payroll taxes imposed with respect to the foregoing, in each case either paid by a Group Company at or prior to Closing or included as an accrual in the computation of Net Working Capital, Indebtedness or Unpaid Seller Expenses.
“Transfer Agent” means Continental Stock Transfer & Trust Company.
“Transfer Taxes” means all sales (including bulk sales), use, value added, transfer, conveyance, stamp, registration, documentary, excise, real property transfer, recording, license or similar Taxes and fees imposed by any Governmental Entity arising out of or in connection with the transactions contemplated by this Agreement.
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“Treasury Regulations” means the regulations promulgated under the Code by the United States Department of the Treasury.
“Unpaid Seller Expenses” means the amount of Seller Expenses incurred and unpaid as of immediately prior to the Closing.
“U.S. GAAP” means accounting principles generally accepted in the United States of America; provided, that in the case of the 2022 Audited Financial Statements, “U.S. GAAP” shall disregard the adoption of ASC 842.
“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar state or local Law.
“Willful Breach” means, with respect to a Party, a material breach by such Party that is a consequence of an act or omission knowingly undertaken or knowingly omitted by such Party with the actual knowledge that such act or omission would cause a material breach of this Agreement.
“W-2 Indemnity Escrow Account” has the meaning set forth in Section 2.3(a)(ii).
“W-2 Indemnity Escrow Amount” has the meaning set forth in Section 2.3(a)(ii).
“W-2 Indemnity Escrow Funds” means, at any time, the portion of the W-2 Indemnity Escrow Amount then remaining in the W-2 Indemnity Escrow Account plus all interest and income then held in the W-2 Indemnity Escrow Account.
“W-2 Matter” means the facts and circumstances underlying the civil penalty notice from IRS, dated February 12, 2024, addressed to Benihana National Corp. and Benihana of Tokyo.
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having been paid to the Person in respect of which Buyer or the Company, as the case may be, made such deduction or withholding.
Except as set forth in the disclosure schedules accompanying this Agreement (the “Disclosure Schedules”), the Company and Seller represent and warrant to Buyer as of the date hereof and as of the Closing as follows:
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contemplated hereby and thereby. The execution and delivery of this Agreement and each of the Ancillary Documents to which the Company is or will be a party and the performance by the Company of its obligations hereunder and thereunder have been (and the Ancillary Documents to which the Company is or will be a party will be at or prior to the Closing) duly authorized by all necessary corporate action on the part of the Company and no other proceeding (including by its equityholders) on the part of the Company is necessary to authorize the execution, delivery or performance of this Agreement and each of the Ancillary Documents to which the Company is or will be a party or to consummate the transactions contemplated hereby or thereby. No vote of the Company’s equityholders is required to approve this Agreement (and the Ancillary Documents to which the Company is or will be a party) or for the Company to consummate the transactions contemplated hereby or thereby. This Agreement has been (and the Ancillary Documents to which the Company is or will be a party will be at or prior to the Closing) duly executed and delivered by the Company and constitutes (or will constitute when executed) a valid, legal and binding agreement of the Company (assuming that this Agreement has been, and the Ancillary Documents to which the Company is or will be a party will be, duly and validly authorized, executed and delivered by the other Persons party thereto at or prior to the Closing), enforceable against the Company in accordance with their respective terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting generally the enforcement of creditors’ rights and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding thereof may be brought (clauses (i) and (ii), collectively, the “Enforceability Exception”).
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Any contract that is required (or, if entered into after the date hereof, would have been required) to be listed pursuant to Section 3.6(a) is a “Material Contract.”
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purchase, sale, and service of liquor, including the names of the Permits and their respective dates of expiration.
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Except as set forth in the Disclosure Schedules, Seller hereby represents and warrants to Buyer (and, with respect to Section 4.6, Parent) as of the date hereof and as of the Closing as follows:
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executed and delivered by the other Persons party thereto at or prior to the Closing), enforceable against Seller in accordance with their respective terms, subject to applicable Enforceability Exception.
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any Shares. Assuming Buyer has the requisite power and authority to be the lawful owner of the Shares, upon delivery to Buyer at the Closing of certificates representing the Shares, duly endorsed by Seller for transfer to Buyer, good, valid and marketable title to the Shares will pass to Buyer, free and clear of all Liens, other than Liens arising under applicable state and federal securities Laws, and any transfer restrictions as may be set forth in the Company’s Governing Documents.
Except as set forth in the Disclosure Schedules, each of Parent and Buyer hereby represents and warrants , on a joint and several basis, to Seller as of the date hereof and as of the Closing as follows:
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to: (A) reduce the total amount of the Preferred Stock Financing; (B) impose any additional conditions precedent to the availability of the Preferred Stock Financing; (C) otherwise restrict or limit the availability of all or any portion of the Preferred Stock Financing; or (D) otherwise adversely affect the ability of Buyer to consummate the Transaction Financing on a timely basis (taking into account the anticipated timing of Closing). As of the date hereof, (1) none of the Commitment Letters, the Investment Agreement or the Fee Letters has been amended or modified, (2) to the Buyer’s knowledge, no such amendment or modification is contemplated, and (3) the respective commitments set forth in the Commitment Letters have not been withdrawn or rescinded in any respect. Buyer has fully paid, or caused to be fully paid, any and all commitment or other fees which are due and payable on or prior to the date hereof pursuant to the terms of the Commitment Letters, the Investment Agreement and any related Fee Letter. At the Closing, Buyer will have sufficient funds available to pay all obligations of Buyer under this Agreement including pursuant to Section 2.3(a) and all out-of-pocket costs and expenses of Buyer arising from the Transaction Financing. As of the date hereof, to the extent this Agreement must be in a form acceptable to any party to a Commitment Letter, such party has approved this Agreement. For the avoidance of doubt, the each of Parent and Buyer affirms and agrees that obtaining of the Transaction Financing is not a condition to the Closing and that the Buyer has sufficient cash on hand, binding commitments or other sources of immediately available funds to enable it to make payment of all obligations of Buyer under this Agreement including pursuant to Section 2.3(a) and all out-of-pocket costs and expenses of Buyer arising from the Transaction Financing.
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manner, any Person or portion thereof, or otherwise acquire or agree to acquire any assets, where the entering into of a definitive agreement relating to or the consummation of such acquisition, merger or consolidation would reasonably be expected to (a) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any Governmental Entity necessary to consummate the transactions contemplated hereby or in any Ancillary Document or the expiration or termination of any applicable waiting period; (b) materially increase the risk of any Governmental Entity entering a writ, decree, judgment, injunction or other order prohibiting the consummation of the transactions contemplated hereby or in any Ancillary Document; or (c) materially delay the consummation of the transactions contemplated hereby or in any Ancillary Document.
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Company or any of its Affiliates, on the one hand, and Buyer or any of its Affiliates, on the other hand, are adverse parties in any Action and such information is reasonably pertinent thereto; or (b) information relating to Taxes or Tax Returns other than information relating to the Group Companies. All of such information shall be treated as “Confidential Information” pursuant to the terms of the Confidentiality Agreement, the provisions of which are by this reference hereby incorporated herein. Parent agrees that it shall be bound by the Confidentiality Agreement to the same extent as Buyer.
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information related to the Group Companies and has afforded access to, and engaged in discussions with, other Persons in connection with a proposed Competing Transaction and that such information, access and discussions could reasonably enable another Person to form a basis for Competing Transaction without any breach of this Section 6.5 and (ii) Seller and the Company may respond to any unsolicited proposal regarding a Competing Transaction by indicating, without identifying Parent, Buyer or any of their respective Affiliates by name or otherwise, that each of Seller and the Company is subject to an exclusivity agreement and is unable to provide any information related to the Group Companies or entertain any proposals or offers or engage in any negotiations or discussions concerning a Competing Transaction for as long as this Agreement remains in effect.
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records and other documents pertaining to the business of the Group Companies in existence on the Closing Date and make the same available for inspection and copying by Seller during normal business hours of the Group Companies, as applicable, upon reasonable request and upon reasonable notice.
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Gordon & Co., L.P. and its Affiliates a royalty-free, non-exclusive right and license to use each Group Company’s names and the associated marks and logos for such purpose.
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other document with respect to such Transfer Taxes as may be required to comply with the provisions of applicable Laws relating to Transfer Taxes.
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Section 6.18Section 280G Parachute Payments. Seller shall use reasonable best efforts to (a) calculate the amount of any potential “parachute payment” (as defined in Section 280G(b)(2) of the Code) that is or might be payable or provided to any “disqualified individual” (as defined in Section 280G(c) of the Code) with respect to the change in ownership or effective control of the Company arising from the purchase and sale of the Shares pursuant to this Agreement; (b) to the extent necessary, obtain from each such disqualified individual a waiver of payments or benefits such that, after giving effect to all waivers, neither any Group Company nor Buyer will have made or provided, nor will be required to make or provide, any payment or benefit that would be nondeductible under Section 280G(a) of the Code or that would be subject to excise tax under Section 4999 of the Code (such waived payments with respect to any individual, the “Section 280G Waived Payments”); (c) prepare adequate disclosure for stockholder approval (the “Section 280G Disclosure”) of all Section 280G Waived Payments in accordance with the terms of Section 280G(b)(5)(B) of the Code; (d) solicit the approval of the appropriate stockholders in accordance with the terms of Section 280G(b)(5)(B) of the Code; and (e) take all other reasonable actions necessary or appropriate in support of the foregoing. Seller shall provide to Buyer in advance (i) documentation regarding the determination of the amount of Section 280G Waived Payments and (ii) drafts of all waivers, disclosure documents, stockholder consent forms and other relevant documents relating to the waiver and stockholder approval. The Company shall consider in good faith any comments made by Buyer in connection with the foregoing, including with respect to such calculations and documents prior to obtaining the waivers and soliciting the vote.
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each of Parent and Buyer further acknowledges that its only recourse in the event of any breach or inaccuracy of any representation or warranty under this Agreement and in any Ancillary Document shall be pursuant to the R&W Insurance Policy. Nothing in this Agreement shall limit the liability of any Party for Fraud or Willful Breach committed by such Party.
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To Buyer, Parent or to the Company (after the Closing):
The ONE Group Hospitality, Inc.
1624 Market Street, Suite 311
Denver, Colorado 80202
Attention:Chief Executive Officer and Chief Financial Officer
E-mail:[email protected]
with a copy (which shall not constitute notice) to:
Stoel Rives LLP
760 SW Ninth Avenue, Suite 3000
Portland, Oregon 97205
Attention:Steven H. Hull
E-mail:[email protected]
To Seller or to the Company (prior to the Closing):
Safflower Holdings LLC
c/o Angelo, Gordon & Co., L.P.
245 Park Avenue
New York, NY 10167
Attention:Syed Alam
E-mail:[email protected]
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
787 7th Ave
New York, NY 10019
Attention: David D’Urso
Telephone:212-839-6010
Facsimile No: 212-839-5599
Email: [email protected]
or to such other address as the Person to whom notice is given may have previously furnished to the other in writing in the manner set forth above.
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(including if based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by and construed in accordance with the Laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Law of any jurisdiction other than the State of Delaware.
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with respect to any Person, “ordinary course of business consistent with past practice of such Person and its Subsidiaries (taking into account any and all actions taken or omitted from being taken by such Person and its Subsidiaries in response to COVID-19 or any COVID-19 Measures)”.
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any such claim, controversy, dispute, cause of action, litigation or other proceeding shall be decided by court trial without a jury.
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No amendment or waiver of this Section 10.19 (or the definitions used herein) shall be effective to the extent such amendment is materially adverse to the Debt Financing Sources or the Preferred Stock Financing Sources, as applicable, without the prior written consent of the Debt Financing Sources or the Preferred Stock Financing Sources, as applicable. If, notwithstanding the foregoing waivers, any claim is brought against the Debt Financing Sources or the Preferred Stock Financing Sources, such claim will be governed by New York law (without giving effect to any conflicts of law principles that would result in the application of the laws of another state) and subject to the jurisdiction limitations and waiver of jury trial provisions set forth in the Debt Commitment Letter or the Preferred Stock Commitment Letter as if fully set forth herein. The Debt Financing Sources and the Preferred Stock Financing Sources are intended third party beneficiaries of this Section 10.19. This Section 10.19 shall, with respect to the matters referenced herein, supersede any provision of this Agreement to the contrary.
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Notwithstanding any other provision of this Agreement, Buyer and Seller hereby agree that Parent may assert, as a defense to any payment by Parent under this guarantee, any defense to such payment that Buyer may have under the terms of this Agreement, other than defenses arising from bankruptcy, insolvency, reorganization or other similar proceedings affecting Parent or Buyer and other defenses expressly waived hereby.
* * * * *
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IN WITNESS WHEREOF, each of the Parties has caused this Stock Purchase Agreement to be duly executed on its behalf as of the day and year first written above.
SELLER:
SAFFLOWER HOLDINGS LLC
By:/s/Thomas J. Baldwin
Name:Thomas J. Baldwin
Title:Authorized Person
COMPANY:
SAFFLOWER HOLDINGS CORP.
By:/s/Thomas J. Baldwin
Name:Thomas J. Baldwin
Title:President and Chief Executive Officer
BUYER:
TOG KAIZEN ACQUISTION, LLC
By:The ONE Group, LLC, its Manager
By: | The ONE Group Hospitality, Inc., its Manager |
By:/s/ Emanuel Hilario
Name:Emanuel Hilario
Title:President and Chief Executive Officer
PARENT:
THE ONE GROUP HOSPITALITY, INC.
By:/s/ Emanuel Hilario
Name:Emanuel Hilario
Title:President and Chief Executive Officer
[Signature Page to Stock Purchase Agreement]
SCHEDULE 1.1(c)
PERMITTED LIENS
| 1. | Liens pursuant to that certain Master Services Agreement, dated as of October 18, 2016, by and between First Data Merchant Services LLC and Benihana National Corp., as supplemented by the following: |
| a. | Bankcard Addendum to Master Services Agreement, dated as of October 18, 2016, by and among First Data Merchant Services LLC, Benihana National Corp., Wells Fargo Bank, N.A. and Citicorp Payment Services Inc. |
| b. | Amendment No. 1 to Master Services Agreement, dated as of November 18, 2019, by and among First Data Merchant Services LLC, Benihana National Corp., Wells Fargo Bank, N.A. and Citicorp Payment Services Inc. |
| c. | Clover Service Addendum, dated as of April 3, 2020, by and between Benihana National Corp. and First Data Merchant Services LLC |
| 2. | Liens pursuant to the Premium Financing Arrangements |
EXHIBIT A
Statement of Net Working Capital
EXHIBIT B-1
Form of Primary Policy
EXHIBIT B-2
Form of Excess Policy
EXHIBIT C
Form of Escrow Agreement
Exhibit 10.2
INVESTMENT AGREEMENT
by and among
THE ONE GROUP HOSPITALITY, INC.,
HPC III KAIZEN LP
and
HPS INVESTMENT PARTNERS, LLC
Dated as of March 26, 2024
NOTE TO EXHIBIT: Certain exhibits and schedules to this Investment Agreement are not filed herewith. The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request.
Explanatory Note: The Investment Agreement (the “Agreement”) contains representations and warranties by the parties thereto made only for the purposes of the Agreement. The Agreement is filed with this report only to provide investors with information regarding its terms and conditions, and not to provide any other factual information regarding the Company or its business. A party’s representations and warranties were made solely for the benefit of the other party or parties and (i) were not intended to be treated as categorical statements of fact, but rather as a way to allocate risk if a representation and warranty proves to be inaccurate; (ii) may have been qualified in the Agreement by disclosures that were made to the other party or parties in connection with the negotiation of the Agreement (provided that any specific facts that contradict the representations and warranties in the Agreement in any material respect have been disclosed); (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the Agreement or such other date or dates as may be specified in the Agreement. Accordingly, they should not be relied upon by investors as statements of factual information.
TABLE OF CONTENTS
Article I
Definitions
Article II
Purchase and Sale
Article III
Representations and Warranties of the Company
i
TABLE OF CONTENTS
(cont’d)
Article IV
Representations and Warranties of the Investors
Article V
Additional Agreements
ii
TABLE OF CONTENTS
(cont’d)
Article VI
Conditions to Closing
Article VII
Termination; Survival
Article VIII
Miscellaneous
Exhibit A:Acquisition Agreement
Exhibit B:Form of Certificate of Designation
Exhibit C-1:Form of Penny Warrant Agreement
Exhibit C-2:Form of Market Warrant Agreement
iii
TABLE OF CONTENTS
(cont’d)
Exhibit D:Hill Path Equity Commitment Letter
Exhibit E:Form of Registration Rights Agreement
Schedules
Schedule I:Disqualified Holders
Schedule II:Purchased Security Allocation
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INVESTMENT AGREEMENT, dated as of March 26, 2024 (this “Agreement”), by and between The ONE Group Hospitality, Inc., a Delaware corporation (the “Company”), HPC III Kaizen LP, a Delaware limited partnership (together with its successors and any Permitted Affiliate Transferee that becomes a party hereto pursuant to Section 8.03, the “Hill Path Investor”), and HPS Investment Partners, LLC, a Delaware limited liability company (together with its successors and any Permitted Affiliate Transferee that becomes a party hereto pursuant to Section 8.03, the “HPS Investor” and, together with the Hill Path Investor, each an “Investor” and collectively the “Investors”).
WHEREAS, the Company, TOG Kaizen Acquisition, LLC, a Delaware limited liability company and a direct or indirect subsidiary of the Company (“Buyer”), Safflower Holdings LLC, a Delaware limited liability company (“Seller”), and Safflower Holdings Corp., a Delaware corporation (the “Target”), are concurrently entering into a Stock Purchase Agreement, dated as of the date hereof (the “Acquisition Agreement”) (a copy of which is attached hereto as Exhibit A), pursuant to which, among other things and subject to its terms and conditions, Buyer will acquire 100% of the outstanding equity securities of the Target from Seller (the “Acquisition”).
WHEREAS, subject to the terms and conditions set forth herein, at the Closing (as defined below) the Company desires to issue, sell and deliver to the Investors, and the Investors desire to purchase and acquire from the Company, (a) an aggregate of 160,000 shares of the Company’s Series A Preferred Stock, par value $0.0001 per share (the “Preferred Stock”), having the designation, preferences, rights, privileges, powers, and terms and conditions, as specified in the form of the Certificate of Designations of Series A Preferred Stock attached hereto as Exhibit B (the “Certificate of Designation”), (b) warrants (the “Penny Warrants”) to purchase a number of shares of Common Stock (as defined below) that will represent 5.33% of the fully diluted shares of Common Stock as of immediately prior to the Closing and after giving effect to the issuance of the Penny Warrants, pursuant to the form of warrant agreement hereto as Exhibit C-1 (the “Penny Warrant Agreement”) and (c) warrants (the “Market Warrants” and together with the Penny Warrants, the “Warrants” and the Warrants, together with the Preferred Stock, the “Purchased Securities”) to purchase, in the aggregate, up to 1,066,667 shares of Common Stock (subject to adjustment in accordance with the terms thereof) pursuant to the form of warrant agreement attached hereto as Exhibit C-2 (the “Market Warrant Agreement” and together with the Penny Warrant Agreement, the “Warrant Agreements”).
WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to the willingness of the Company to enter into this Agreement, the Hill Path Fund (as defined below) has executed and delivered an equity commitment letter, a copy of which attached hereto as Exhibit D (the “Hill Path Equity Commitment Letter”).
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
“5% Beneficial Holding Requirement” means that the Investor Parties continue to beneficially own Warrants and/or Warrant Shares that represent, in the aggregate (on an as-exercised basis), a number of shares of Common Stock equal to at least 5% of the issued and outstanding Common Stock (on an as-exercised basis).
“Accumulated Liquidation Preference” has the meaning set forth in the Certificate of Designation.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person; provided, however, that (i) the Company and its Subsidiaries shall not be deemed to be Affiliates of any Investor Party or any of its Affiliates, and (ii) other than in the case of the definitions of “Hill Path Investor Party”, “HPS Investor Party”, “Hill Path Investor Related Party”, “HPS Investor Related Party” or “Permitted Affiliate Transferee”, Section 4.08, Section 5.04, Section 5.09(g), Section 5.09(i), Article VII or Section 8.13, in no event shall any of the Investor Parties or any of their respective Subsidiaries be considered an Affiliate of any portfolio company or investment fund affiliated with or managed by affiliates of Hill Path or HPS, nor shall any other portfolio company or investment fund affiliated with or managed by affiliates of Hill Path or HPS be considered to be an Affiliate of an Investor Party or any of their respective Affiliates. For this purpose, “control” (including, with its correlative meanings, “controlling”, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
“Anti-Corruption and Anti-Bribery Laws” means any provision of the Foreign Corrupt Practices Act of 1977, as amended, the Bribery Act 2010 of the United Kingdom or any other applicable anti-bribery or anti-corruption Law.
“Anti-Terrorism and Anti-Money Laundering Laws” means all applicable anti-money laundering Laws, including the Bank Secrecy Act of 1970, as amended by the USA PATRIOT ACT of 2001, and the rules and regulations promulgated thereunder, and all other applicable anti-money laundering Laws of the various jurisdictions in which the Group Companies conduct their business.
“as-exercised basis” means with respect to the outstanding shares of Common Stock as of any date, all outstanding shares of Common Stock calculated on a basis in which all Warrant Shares issuable upon exercise of the outstanding Warrants are assumed to be outstanding as of such date.
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“Board” means the Board of Directors of the Company.
“Business Day” means any day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized or required by applicable Law to be closed.
“Change in Control” has the meaning set forth in the Certificate of Designation.
“Code” means the United States Internal Revenue Code of 1986, as amended.
“Committee” means any or all of the Audit Committee, the Compensation Committee, the Nominating and Governance Committee, and any other committee of the Board.
“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
“Company Charter Documents” means the Company’s amended and restated certificate of incorporation and amended and restated bylaws, each as in effect as of the date of this Agreement, and shall include the Certificate of Designation upon the filing thereof with the Secretary of State of the State of Delaware.
“Company Equity Awards” means the Company Stock Options, Company RSUs, Company PSUs and any other award granted under the Company Stock Plan.
“Company Material Adverse Effect” means any event, fact, condition, occurrence, effect, development, circumstance, matter or change (each, an “Effect”) that, individually or in the aggregate, together with all other Effects, (a) has had, or would reasonably be expected to have, a material adverse effect upon the financial condition, business, results of operations or assets or liabilities of the Group Companies, taken as a whole, or (b) prevents, delays or impedes, or would reasonably be expected to prevent, delay or impede the performance by the Company of its obligations under this Agreement or the consummation of the Transactions; provided, however, that “Company Material Adverse Effect” shall not include in the case of clause (a) any Effect to the extent resulting from any of the following that occurs on or after the date of this Agreement: (i) conditions affecting the United States economy or any foreign economy generally, or any regulatory environment in the United States and elsewhere in the world; (ii) any national, international or supranational political, geopolitical or social conditions, including any civil commotion, civil disorder, or any other type of civil unrest (including riots, public demonstrations, protests, looting, and revolutions), the threat, engagement, cessation or escalation by the United States or any other country in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States or any other country, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States or any other country; (iii) changes to financial, banking, credit, currency, commodity (including food), capital or securities markets (including any disruption thereof and any increase or decrease therein), changes to the price of any market index or changes in interest rates or exchange rates; (iv) changes or prospective changes in GAAP or in accounting standards or the interpretation or enforcement thereof after the date hereof; (v) changes or prospective changes in any applicable Laws after the date hereof; (vi) any change that is generally applicable to the industries or markets in which the Group Companies
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operate; (vii) any national or international calamities, crises or natural disasters (including those arising from storms, hurricanes, tornados, flooding, earthquakes, volcanic eruptions, epidemics or pandemics (including COVID-19) or other force majeure events, together with any restrictions, sanctions, other limitations or policies enacted or applied by a Governmental Authority in response to any of the foregoing (including any measures taken in response to COVID-19)); (viii) any changes to the credit rating of any Group Company (although any facts and circumstances that may have given rise or contributed to any such changes that are not otherwise excluded from the definition of Company Material Adverse Effect may be taken into account in determining whether there has been a Company Material Adverse Effect); (ix) the negotiation, execution, announcement or existence of this Agreement or the transactions contemplated hereby, the identity of an Investor, its Affiliates or public announcement of this Agreement and the Transactions; (x) any action taken by an Investor contemplated, permitted or required by this Agreement or the Transaction Documents (including the obtaining of approval or consent from any Governmental Authority or other third-party in connection with the consummation of the transactions contemplated hereby and thereby) or at an Investor’s request or with an Investor’s consent; (xi) the failure to take any action by the Group Companies if that action is prohibited by this Agreement or the Transaction Documents and the Investor either did not consent to such action or withheld, delayed or conditioned its consent; (xii) any failure by the Group Companies to meet any internal or published projections, forecasts, estimates or predictions of revenue, earnings, cash flow or cash position and any changes in the results of operations of the Group Companies for any period ending prior to, on or after the date of this Agreement (although any facts and circumstances that may have given rise or contributed to any such failure that are not otherwise excluded from the definition of Company Material Adverse Effect may be taken into account in determining whether there has been a Company Material Adverse Effect); provided, however, that Effects set forth in the foregoing clauses (i) through (vii) may be taken into account in determining whether there has been or is a Company Material Adverse Effect, to the extent that such Effects have an incremental disproportionate adverse effect on the financial condition, business, results of operations, assets or liabilities of the Group Companies, taken as a whole, compared to other companies of similar size operating in the same industry as the Group Companies.
“Company Preferred Stock” means the preferred stock, par value $0.0001, of the Company.
“Company PSU” means a restricted stock unit of the Company subject to both time-based and performance-based vesting conditions.
“Company Related Party” means the Group Companies and any of their former, current or future Affiliates and any of the foregoing’s respective former, current or future, direct or indirect Representatives or any of their respective successors or assigns.
“Company RSU” means a restricted stock unit of the Company subject solely to time-based vesting conditions.
“Company SEC Documents” means all forms, reports, schedules, statements, exhibits, definitive proxy statements, registration statements and other documents required to be filed (or furnished) by the Company with the SEC under the Exchange Act or the Securities Act
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and publicly available prior to the date hereof, such documents have since the time of their filing been amended, modified or supplemented prior to the date hereof.
“Company Stock Plan” means The ONE Group Hospitality, Inc. 2019 Equity Incentive Plan, as may be amended from time to time.
“Company Stock Option” means an option to purchase shares of Common Stock; provided that it excludes the Warrants.
“Competition Law” shall mean the Sherman Antitrust Act, the Clayton Antitrust Act, the Federal Trade Commission Act, and all other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or strengthening of a dominant position through merger or acquisition.
“Confidentiality Agreement” means that certain agreement between Hill Path and the Company dated as of April 20, 2023, as may be amended from time to time in accordance with its terms.
“Credit Agreement” means the Credit and Guaranty Agreement, dated as of October 4, 2019, by and among the Company, The ONE Group, LLC, certain subsidiary guarantors, Goldman Sachs Specialty Lending Group, L.P., as administrative agent, and Goldman Sachs Bank USSA, as collateral agent, and the lender parties thereto, as amended by the First Amendment to Credit and Guaranty Agreement, dated as of May 8, 2020, the Second Amendment to Credit and Guaranty Agreement, dated as of August 10, 2020, the Third Amendment to Credit and Guaranty Agreement, dated as of August 6, 2021, and the Fourth Amendment to Credit and Guaranty Agreement, dated as of December 13, 2022.
“Debt Commitment Letter” means the Commitment Letter, dated as of the date hereof, among The One Group, LLC, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, HPS Investment Partners, LLC and HG Vora Capital Management, LLC.
“DGCL” means the Delaware General Corporation Law, as amended, supplemented or restated from time to time.
“Disqualified Holder” mean each Person identified on Schedule I hereto.
“Enforceability Exception” means (i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other Laws affecting generally the enforcement of creditors’ rights and (ii) equitable remedies, including specific performance, whether considered in a proceeding at law or in equity.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means, with respect to any entity, trade or business, any other entity, trade or business that is (or was at any relevant time) a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first
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entity, trade or business, or that is (or was at any relevant time) a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Existing Company Policies” means the Company’s Corporate Code of Conduct and Ethics and Insider Trading Policy, in each case as in effect as of the date of this Agreement.
“Expense Reimbursement Side Letter” means that certain agreement between Hill Path and the Company dated as of January 4, 2024.
“Fair Market Value” means, with respect to any security or other property, the fair market value of such security or other property as reasonably determined in good faith by a majority of the Board, or an authorized committee thereof.
“Fraud” means a false statement of a material fact with respect to the making of any of the representations and warranties by a party as set forth in this Agreement or in any other Transaction Document (a) where the party making such false statement (i) has actual knowledge (as opposed to constructive knowledge) of the falsity of such statement and that such falsity would constitute a breach of any of the representations and warranties made by the party as set forth in this Agreement or in any other Transaction Document, (ii) makes such false statement with the intent to deceive the party to whom such false statement is made and (iii) makes such false statement with the intent to induce reliance in the party to whom such false statement is made, and (b) where the party to whom such false statement is made justifiably relies on such false statement.
“GAAP” means generally accepted accounting principles in the United States, consistently applied.
“Governmental Authority” means any government, court, regulatory or administrative agency, commission, arbitrator (public or private), arbitral body (public or private), tribunal, judicial body, commission, department, or other governmental entity, instrumentality or including any self-regulatory organization, whether federal, state, local, municipal, territorial, provincial, domestic, foreign or multinational.
“Group Companies” means, collectively, the Company and each of its Subsidiaries and each of them, individually, is a “Group Company.”
“Hill Path” means Hill Path Capital LP.
“Hill Path Fund” means Hill Path Capital Partners III LP.
“Hill Path Investor” has the meaning set forth in the Preamble. Any reference to any action by the Hill Investor Parties in this Agreement shall require an instrument in writing signed by the Hill Path Investor so long as it is the sole Hill Path Investor Party or each of the Hill Path Investor Parties.
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“Hill Path Investor Parties” means the Hill Path Investor and each Affiliate of the Hill Path Investor to whom shares of Preferred Stock, Warrants or Warrant Shares are transferred in accordance with the terms of this Agreement.
“Hill Path Investor Related Party” means the Hill Path Investor and any other financing sources of the Hill Path Investor, the Hill Path Fund and any of the foregoing’s respective former, current or future Affiliates and any of the foregoing’s respective former, current or future, direct or indirect, Representatives, affiliates, stockholders, equityholders, lenders or any of the foregoing’s respective successors or assigns.
“HPS” means HPS Investment Partners, LLC, a Delaware limited liability company.
“HPS Investor” has the meaning set forth in the Preamble. Any reference to any action by the HPS Investor Parties in this Agreement shall require an instrument in writing signed by the HPS Investor so long as it is the sole HPS Investor Party or each of the HPS Investor Parties.
“HPS Investor Parties” means the HPS Investor and each Affiliate of the HPS Investor to whom shares of Preferred Stock, Warrants or Warrant Shares are transferred in accordance with the terms of this Agreement.
“HPS Investor Related Party” means the HPS Investor and any other financing sources of the HPS Investor, HPS and any of the foregoing’s respective former, current or future Affiliates and any of the foregoing’s respective former, current or future, direct or indirect, Representatives, affiliates, stockholders, equityholders, lenders or any of the foregoing’s respective successors or assigns.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Investor” has the meaning set forth in the Preamble.
“Investor Director” means a member of the Board who was elected to the Board as an Investor Director Designee.
“Investor Material Adverse Effect” means any effect, change, event, development or occurrence that does or would reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair (a) the consummation by an Investor of any of the Transactions on a timely basis or (b) the performance by the Investor of its material obligations under this Agreement.
“Investor Parties” means each of the Hill Path Investor Parties and the HPS Investor Parties.
“Investor Related Party” means each of the Hill Path Investor Related Parties and the HPS Investor Related Parties.
“IRS” means the United States Internal Revenue Service.
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“Knowledge” means, with respect to the Company, the actual knowledge of Emanuel Hilario, Tyler Loy and Alex Tabolsky (none of whom shall have any personal liability or obligations of inquiry regarding knowledge).
“Law” means applicable laws, common laws, statutes, rules, regulations, codes, ordinances, executive orders, judgments, injunctions, governmental guidelines or interpretations that have the force of law, permits, decrees, orders or other similar requirement enacted, adopted, promulgated or applied by any Governmental Authorities.
“Leased Real Property” means all right, title and interest of the Group Companies to any leasehold interests in any real property, together with all buildings, structures, improvements and fixtures thereon.
“Liens” means liens, encumbrances, mortgages, charges, claims, restrictions, pledges, security interests, title defects, easements, rights-of-way, covenants, encroachments, outstanding options, rights of first refusal or rights of first offer, or other adverse claims of any kind with respect to a property or asset.
“NASDAQ” means the NASDAQ Global Select Market.
“Permitted Affiliate Transferee” means (a) an investment fund or vehicle of which Hill Path, HPS or a Subsidiary thereof serves as the general partner or discretionary manager, advisor or subadvisor with the right to control such investment fund or vehicle and (b) any Subsidiary of the foregoing; provided that no investment fund or vehicle, or Subsidiary thereof, shall be a Permitted Affiliate Transferee if the applicable investment fund or vehicle has a direct or indirect investment in any Disqualified Holder.
“Person” means an individual, corporation, limited liability company, partnership, joint venture, joint stock company, association, estate, trust, firm, unincorporated organization or any other entity, organization or association, including a Governmental Authority.
“Personal Data” means information relating to or reasonably capable of being associated with an identified or identifiable person, device, or household, including, but not limited to, “personal data,” “personal information,” or other similar information defined under applicable data privacy and cybersecurity Laws.
“Registration Rights Agreement” means that certain Registration Rights Agreement to be entered into by the Company and each Investor, the form of which is set forth as Exhibit E hereto.
“Representatives” means, with respect to any Person, its officers, directors, principals, partners, managers, members, employees, consultants, agents, financial advisors, investment bankers, attorneys, accountants, other advisors and other representatives.
“Sanction” means any sanctions administered or enforced by the U.S. government, including the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and including the designation as a “specially designated national” or “blocked
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person,” the European Union, any European Union Member State, His Majesty’s Treasury, the United Nations Security Council, or other relevant sanctions authority.
“Sanctioned Country” means any country or territory that is the subject or the target of Sanctions (currently, the Crimea region of Ukraine, the non-government controlled areas of the Kherson and Zaporizhzhia regions of Ukraine, the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, Cuba, Iran, North Korea and Syria).
“Sanctioned Persons” means any Person or Persons owned or controlled by, or acting on behalf of, any Person subject or the target of Sanctions or located, organized or resident in a Sanctioned Country.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Senior Credit Agreement” has the meaning provided in the Certificate of Designation.
“Security Incident” means (i) any unauthorized processing of confidential data, information, and data compilation contained in the Systems or on the databases of the Group Companies, including Personal Data used by or necessary to the Group Companies’ business; (ii) any unauthorized access to the Group Companies’ Systems; or (iii) any incident that may require notification to any Person, Governmental Authority, or any other entity under applicable data privacy and cybersecurity Laws.
“Subsidiary” or “Subsidiaries” of any Person (other than an individual), means any Person, corporation, limited liability company, partnership, association, trust or other entity of which (x) securities or other ownership interests representing more than 50% of the voting power (or, in the case of a partnership, more than 50% of the general partnership interests) or (y) sufficient voting rights to elect at least a majority of the board of directors or other governing body are, as of such date, owned by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
“Systems” means the computer software, websites and information technology systems owned or used by the Group Companies.
“Tax” means any and all United States federal, state, local or non-United States taxes, fees, levies, duties, tariffs, imposts, and other similar charges (together with any and all interest, penalties and additions to tax) imposed by any Governmental Authority, including taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added or gains taxes; license, registration and
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documentation fees; and customs duties, tariffs and similar charges, together with any interest or penalty, in addition to tax or additional amount imposed by any Taxing Authority.
“Tax Return” means returns, reports, claims for refund, declarations of estimated Taxes and information statements, including any schedule or attachment thereto or any amendment thereof, with respect to Taxes filed or required to be filed with any Governmental Authority, including consolidated, combined and unitary tax returns.
“Taxing Authority” means any Governmental Authority having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).
“Transaction Documents” means this Agreement, the Certificate of Designation, the Hill Path Equity Commitment Letter, the Warrant Agreements, the Registration Rights Agreement and all other documents, certificates or agreements executed pursuant to an express term of this Agreement, the Certificate of Designation, the Hill Path Equity Commitment Letter, the Warrant Agreements or the Registration Rights Agreement; provided, that, for the avoidance of doubt, “Transaction Document” shall not include the Acquisition Agreement or ancillary documents thereunder or any transaction documents regarding the debt financing in connection with the Acquisition.
“Transactions” means the transactions expressly contemplated by this Agreement and the other Transaction Documents; provided, that, for the avoidance of doubt, “Transactions” shall not include the Acquisition or any debt financing in connection with the Acquisition.
“Transfer” by any Person means, directly or indirectly (including by way of a change in the ownership of any Investor Party or any of its direct or indirect owners), to sell, transfer, assign, pledge, encumber, hypothecate or otherwise dispose of or transfer (by the operation of law or otherwise), or to enter into any Contract, option or other arrangement, agreement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or other disposition or transfer (by the operation of law or otherwise), of any voting, economic or other interest in any equity securities (including the Purchased Securities) beneficially owned by such Person; provided, however, that, notwithstanding anything to the contrary in this Agreement, a Transfer shall not include (i) the exercise of one or more Warrants for Warrant Shares, (ii) the redemption or other acquisition of Warrants, Warrant Shares or Preferred Stock by the Company, (iii) the transfer (other than by an Investor Party) of any limited partnership interests or other equity interests in the Investor Party (or any direct or indirect parent entity of such Investor Party) (provided that if any of the Purchased Securities ceases to be controlled (directly or indirectly) by the Person (directly or indirectly) controlling such Person immediately prior to such transfer, such event shall be deemed to constitute a “Transfer”) or (iv) any transfer in connection with a transaction or agreement contemplated by Section 5.13.
“Warrant Shares” means the shares of Common Stock that may be issued upon exercise of the Warrants.
“Willful Breach” means a material breach of any provision in this Agreement which is the consequence of an act or failure to act undertaken by the breaching party with the actual
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knowledge that the taking of, or failure to take, such act would, or would reasonably be expected to, result in a material breach of this Agreement.
Section | ||
|---|---|---|
Recitals | ||
Recitals | ||
Section 3.07 | ||
Preamble | ||
Section 5.10(c) | ||
Section 5.04 | ||
Recitals | ||
Recitals | ||
Section 2.01 | ||
Section 2.01 | ||
Preamble | ||
Article III | ||
Section 3.04(b) | ||
Section 5.05 | ||
Section 5.02(c) | ||
Section 5.13 | ||
Section 5.15(a) | ||
Section 3.08(b) | ||
Section 4.04 | ||
Section 5.02(c) | ||
Section 6.03(a) | ||
Section 5.09(g) | ||
Recitals | ||
Section 5.09(g) | ||
Section 5.09(i) | ||
Section 5.09(i) | ||
Preamble | ||
Section 5.09(a) | ||
Recitals | ||
Recitals | ||
Section 3.09 | ||
Section 5.09(g) | ||
Section 5.15(b)(ii) | ||
Recitals | ||
Recitals | ||
Recitals | ||
Section 5.15(b)(i) | ||
Section 2.01 | ||
Recitals | ||
Section 5.09(i) | ||
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Except as set forth in (i) the Company SEC Documents filed or furnished by the Company with the SEC after January 1, 2023 and publicly available prior to the date hereof and that is reasonably apparent on the face of the applicable disclosure to be applicable to the representation and warranty set forth herein but excluding any disclosure contained under the heading “Risk Factors” in any “forward-looking statements” legend or in any other disclosures contained or referenced therein of information, factors, or risks that are predictive, cautionary, or forward-looking in nature or (ii) the confidential disclosure schedules of the Company delivered to the Investors prior to the execution of this Agreement (the “Company Disclosure Letter”) (it being understood that any information, item or matter set forth in one section or subsection of the Company Disclosure Letter shall only be deemed to apply to and qualify the section or subsection to which it corresponds in number and each other section or subsection to the extent that is reasonably apparent on the face of such disclosure that such information, item or matter is relevant to such other section or subsection), the Company hereby represents and warrants to each Investor as of the date hereof and as of the Closing (which is prior to the consummation of the Acquisition and such representations and warranties do not give effect to the consummation of the Acquisition) as follows:
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extent party to a Material Contract, is in compliance in all material respects with all Material Contracts and has performed all obligations required to be performed by it, except where such noncompliance, individually or in the aggregate, has not been and would not reasonably be expected to be material to the business of the Group Companies.
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Company nor, to the Knowledge of the Company, any Person acting on its behalf has made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering or issuance of Purchased Securities under this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act that would result in none of Regulation D or any other applicable exemption from registration under the Securities Act to be available, nor will the Company take any action or steps that would cause the offering or issuance of Purchased Securities under this Agreement to be integrated with other offerings by the Company.
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OR ORAL, ON BEHALF OF THE COMPANY OR ANY OF ITS AFFILIATES, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE COMPANY FURNISHED OR MADE AVAILABLE TO EACH INVESTOR AND ITS REPRESENTATIVES OR AS TO THE FUTURE REVENUE, PROFITABILITY OR SUCCESS OF THE COMPANY OR ANY REPRESENTATION OR WARRANTY ARISING FROM STATUTE OR OTHERWISE IN LAW.
Each Investor, severally and not jointly, represents and warrants to the Company solely with respect to itself, as of the date hereof and as of the Closing Date:
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accuracy of such forward-looking information so furnished to such Investor (including the reasonableness of the assumptions underlying such forward-looking information), and that except for the representations and warranties made by the Company in Article III or the Transaction Documents and other than for Fraud, such Investor will have no claim against the Company with respect thereto.
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Representatives on a non-confidential basis, or (d) was independently developed by the Investor, any of its Affiliates or any of their respective Representatives without reference to, incorporation of, or other use of any Confidential Information; provided, that Confidential Information may be disclosed (i) to an Investor’s Affiliates and its and their respective Representatives, in each case, in the ordinary course of business (including in connection with monitoring, administrating or managing an Investor’s investment in the Company) (provided that such Investor’s Affiliates and the respective Representatives agree to maintain the confidentiality of such Confidential Information and such Investor will remain liable for any damages arising out of a failure by such Investor’s Affiliates and the respective Representatives to keep such Confidential Information confidential in accordance with the provisions hereof unless such Affiliate or Representative has entered into a confidentiality agreement enforceable by the Company), (ii) to existing or prospective limited partners or other equityholders in investment funds affiliated with or managed by Affiliates of Hill Path, HPS and their respective Representatives in the ordinary course of business (provided that such recipients agree to maintain the confidentiality of such Confidential Information and the Hill Path Investor (in the case of disclosure to existing or prospective Hill Path-Affiliated investment fund investors) and the HPS Investor (in the case of disclosure to existing or prospective HPS-Affiliated investment fund investors) will remain liable for any damages arising out of a failure by such recipients to keep such Confidential Information confidential in accordance with the provisions hereof unless such recipient has entered into a confidentiality agreement enforceable by the Company, and provided further that no information disclosed pursuant to this clause (ii) shall include any material non-public information of the Company), (iii) to any prospective financing sources in connection with a hedge or other derivative transaction, or the syndication and marketing of any Equity Loan, in each case, as long as such prospective purchaser or lender, as applicable, is subject to customary confidentiality restriction, (iv) as may be reasonably determined by an Investor to be necessary in connection with such Investor’s enforcement of its rights in connection with this Agreement or its investment in the Company and its Subsidiaries, (v) to another Investor, such other Investor’s Affiliates and its and their respective Representatives, in each case, in connection with monitoring, administrating or managing the Investors’ investment in the Company (provided that the recipient Investor will be solely liable, and will solely remain liable for any damages arising out of a failure by such recipient Investor, its Affiliates and their respective Representatives to keep such Confidential Information confidential in accordance with the provisions hereof unless, in the case of Affiliates or Representatives, such Affiliates or Representative has entered into a confidentiality agreement enforceable by the Company) or (vi) as may otherwise be required by applicable Law, regulation, Judgment, stock exchange rule or other applicable judicial or governmental process (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process), provided, that in the case of disclosure pursuant to this clause (vi), the applicable Investor, its Affiliates and its and their respective Representatives, as the case may be, shall, to the extent legally permitted and reasonably practicable, provide notice to the Company sufficiently in advance of any such disclosure so that the Company will have a reasonable opportunity to timely seek (at its sole cost and expense) to limit, condition or quash such disclosure. The Confidentiality Agreement shall terminate simultaneously with the Closing.
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the issuance of the number of Warrant Shares then issuable upon exercise of the then-outstanding Warrants, subject to official notice of issuance, or comply with the relevant procedures required by such other primary exchange as to which the Common Stock is then admitted for trading.
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(a) All certificates or other instruments representing the Purchased Securities and any Warrant Shares will bear a legend substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS, OR EXCEPT, WITH RESPECT TO ANY COMMON STOCK, WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
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immediately prior to such action, or (y) any modification, amendment, consent or waiver to the definition of “Company Material Adverse Effect” in the Acquisition Agreement), (B) waive the conditions set forth in Sections 7.1 or 7.2 of the Acquisition Agreement or (C) extend the Outside Date (as defined in the Acquisition Agreement), in each case without the prior written consent of the Hill Path Investor (which shall not be unreasonably withheld, conditioned or delayed).
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secure an exemption therefrom, required by any state or country prior to the offer and sale of the Preferred Stock, the Warrants and the Warrant Shares, and (b) cause such authorization, approval, permit or qualification to be effective as of the Closing (and as of any exercise of the Warrants if at least 15 Business Days’ prior written notice of the proposed exercise is given to the Company); provided, that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction or subject itself to taxation in any jurisdiction in which it is not otherwise subject to taxation on the date of this Agreement.
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provided, however, that, in each case and subject to compliance with the terms and conditions set forth in Section 5.15(h), the Company shall not be required to offer to issue or sell to the Investor Parties (or to any of them) the portion of the Proposed Securities that would require the Company to obtain stockholder approval in respect of the issuance of any Proposed Securities under the listing rules of NASDAQ or any other securities exchange or any other applicable Law (provided, further, however, that (x) if the number of Proposed Securities to be issued is reduced, then such reduction will be apportioned pro rata among the Hill Path Investor Parties and the HPS Investor Parties and (y) the Company shall still be obligated to provide written notice of such proposed issuance to the Investor Parties pursuant to Section 5.15(b)(i), which notice shall include a description of the Proposed Securities (including the number thereof) that would require stockholder approval in respect of the issuance thereof (the “Restricted Issuance Information”)).
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provided, that the Company shall not be obligated to provide such access or materials if the Company determines, in its reasonable judgment, that doing so would reasonably be expected to (A) result in the disclosure of trade secrets or competitively sensitive information to third parties who are not subject to a non-disclosure agreement with the Company, (B) violate applicable Law, an applicable order or a Contract or obligation of confidentiality owing to a third party or (C) jeopardize the protection of an attorney-client privilege, attorney work product protection or other legal privilege (provided, however, that in each such case the Company shall use reasonable efforts to provide alternative, redacted or substitute documents or information in a manner that would not result in the loss of the ability to assert attorney-client privilege, attorney work product protection or other legal privileges).
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subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following condition:
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Section 7.02 and Article VIII, all of which shall survive termination of this Agreement and the Confidentiality Agreement (which shall survive in accordance with its terms)), and there shall be no liability on the part of any Investor or the Company or their respective directors, officers and Affiliates in connection with this Agreement, except that no such termination shall relieve any party from liability for damages (as determined by a court of competent jurisdiction in accordance with Delaware law) for Willful Breach or Fraud.
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exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
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The ONE Group Hospitality, Inc.
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1624 Market Street, Suite 311
Denver, Colorado 80202
Attention: Chief Executive Officer and Chief Financial Officer
Email: [email protected]
with a copy to (which shall not constitute notice):
Stoel Rives LLP
760 SW Ninth Avenue, Suite 3000
Portland, OR 97205
Attention: Steven H. Hull; Will Goodling
Email: [email protected]; [email protected]
HPC III Kaizen LP
150 East 58th Street 32nd Floor
New York, NY 10155
Attention: James Chambers
Email: [email protected]
with a copy to (which will not constitute notice):
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention: Tracey A. Zaccone;
Matthew B. Rogers
Email: [email protected];
[email protected]
HPS Investment Partners, LLC
40 West 57th Street
New York, NY 10019
Attention: Daniel Zevnik
Email: [email protected]
with a copy to (which will not constitute notice):
Milbank LLP
55 Hudson Yards
New York, NY 10001-2163
Attention: John Britton
Email: [email protected]
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or such other address or email address as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
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[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.
THE ONE GROUP HOSPITALITY, INC.
By: /s/ Emanuel Hilario
Name: Emanuel Hilario
Title: President and Chief Executive Officer
[Signature Page to Investment Agreement]
HPC III KAIZEN LP
By: HILL PATH CAPITAL PARTNERS III GP LLC, its General Partner
By:/s/ Scott Ross
Name: Scott Ross
Title: Authorized Signatory
[Signature Page to Investment Agreement]
HPS INVESTMENT PARTNERS, LLC
By:/s/ Andersen Fisher
Name: Andersen Fisher
Title: Managing Director
[Signature Page to Investment Agreement]
Exhibit A
Acquisition Agreement
Exhibit B
Form of Certificate of Designation
Exhibit C-1
Form of Penny Warrant Agreement
Exhibit C-2
Form of Market Warrant Agreement
Exhibit D
Hill Path Equity Commitment Letter
Exhibit E
Form of Registration Rights Agreement
Schedule I
Disqualified Holder
Schedule II
Purchased Security Allocation
Investor | Preferred Stock | Penny Warrants* | Market Warrants |
Hill Path Investor | 150,000 shares | 5.00% of the fully diluted shares of Common Stock as of immediately prior to the Closing and after giving effect to the issuance of the Penny Warrants | Warrants to purchase, in the aggregate, 1,000,000 shares of Common Stock (subject to adjustment in accordance with the terms thereof) |
HPS Investor | 10,000 shares | 0.33% of the fully diluted shares of Common Stock as of immediately prior to the Closing and after giving effect to the issuance of the Penny Warrants | Warrants to purchase, in the aggregate, 66,667 shares of Common Stock (subject to adjustment in accordance with the terms thereof) |
*For this purpose, fully diluted shares of Common Stock means: (a) the number of all outstanding shares of common stock (excluding any held by the Company in treasury), plus (b) the number of all outstanding stock options (both vested and unvested), plus (c) the number of all outstanding unvested RSUs and PSUs, plus (d) the number of shares issuable under the Penny Warrants. This calculation does not include, for confirmation, shares reserved but not issued and outstanding under the Company 2019 Equity Incentive Plan. For an illustration, if this calculation were completed using the outstanding shares of Common Stock (as of February 29, 2024) and outstanding stock options (both vested and unvested) and unvested RSUs and PSUs of the Company (in each case as of December 31, 2023), in each case as specified in the Company’s Form 10-K filed on March 14, 2024, then 1,762,865 and 117,524 shares of Common Stock would be issuable under the Penny Warrants issued to the Hill Path Investor and HPS Investor, respectively. This calculation will be updated as of immediately prior to closing under the same methodology.
Exhibit 10.3
Form of
The ONE Group Hospitality, Inc.
Certificate of Designations of
Series A Preferred Stock
Exhibits
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Certificate of Designations of
Series A Preferred Stock
Pursuant to Section 151 of the General Corporation Law of the State of Delaware (the “DGCL”), on March 26, 2024, the Board of Directors of The ONE Group Hospitality, Inc., a corporation duly organized and validly existing under the DGCL (the “Company”), adopted the following resolution designating and creating, out of the authorized and unissued shares of Preferred Stock of the Company, 160,000 authorized shares of a series of Preferred Stock of the Company titled the “Series A Preferred Stock” in accordance with the provisions of Section 103 thereof:
RESOLVED that, pursuant to the authority of the Board of Directors pursuant to the Certificate of Incorporation, the Bylaws and applicable law, a series of Preferred Stock of the Company titled the “Series A Preferred Stock,” and having a par value of $0.0001 per share and an initial number of authorized shares equal to one hundred sixty thousand (160,000), is hereby designated and created out of the authorized and unissued shares of Preferred Stock of the Company, which series has the rights, designations, preferences, voting powers and other provisions set forth below:
“Accumulated Liquidation Preference” means the Initial Liquidation Preference per share of Preferred Stock plus any and all Compounded Dividends.
“Affiliate” of any Person means any Person, directly or indirectly, controlling, controlled by or under common control with such Person; provided, however, that (i) the Company and its Subsidiaries, on the one hand, and any Investor Party or any of its Affiliates, on the other hand, shall not be deemed to be Affiliates, and (ii) in no event shall any of the Investor Parties or any their respective Subsidiaries be considered an Affiliate of any portfolio company or investment fund affiliated with or managed by affiliates of Hill Path or HPS, nor shall any other portfolio company or investment fund affiliated with or managed by affiliates of Hill Path or HPS be considered to be an Affiliate of an Investor Party or any of their respective Affiliates.
“Applicable Additional Amount” has the meaning set forth in Section 7(b)(ii)(1).
“Board of Directors” means the Company’s board of directors.
“Business Day” means any day other than a Saturday, a Sunday or any day on which the Federal Reserve Bank of New York is authorized or required by law or executive order to close or be closed.
“Bylaws” means the Bylaws of the Company, adopted as of October 24, 2011, as the same may be further amended or restated.
“Capital Stock” of any Person means any and all shares of, interests in, rights to purchase, warrants or options for, participations in, or other equivalents of, in each case, however designated, the equity of such Person, but excluding any debt securities convertible into such equity.
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“Certificate” means a Physical Certificate or an Electronic Certificate.
“Certificate of Designations” means this Certificate of Designations, as amended from time to time.
“Certificate of Incorporation” means the Company’s Amended and Restated Certificate of Incorporation, as the same has been and may be further amended or restated.
“Change of Control” means any of the following events, whether in a single transaction or a series of related transactions:
(a)a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), directly or indirectly, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), shall have become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of voting stock of the Company entitled to exercise more than 50% of the total voting power of all outstanding voting stock of the Company (including any right to acquire voting stock that is not then outstanding of which such person or group is deemed the beneficial owner);
(b)the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and the Company’s Wholly Owned Subsidiaries taken as a whole to a Person, other than a Company’s Wholly Owned Subsidiary;
(c)the adoption of a plan relating to the liquidation or dissolution of the Company or any Material Subsidiary unless such Material Subsidiary’s assets are distributed only to the Company or a Wholly Owned Subsidiary of the Company in such liquidation or dissolution; or
(d)the Company or any Material Subsidiary becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or has taken any action for the purpose of effecting, in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment.
For the purposes of this definition, whether a Person is a “beneficial owner”, whether shares are “beneficially owned”, and percentage beneficial ownership, will be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act.
“Change of Control Repurchase Calculation Date” has the meaning set forth in Section 8(d)(ii).
“Change of Control Repurchase Date” means the date fixed, pursuant to Section 8(c), for the repurchase of any Preferred Stock by the Company pursuant to a Repurchase Upon Change of Control.
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“Change of Control Repurchase Date Liquidation Preference” has the meaning set forth in Section 8(d)(i).
“Change of Control Repurchase Price” means the cash price payable by the Company to repurchase any share of Preferred Stock upon its Repurchase Upon Change of Control, calculated pursuant to Section 8(d).
“Close of Business” means 5:00 p.m., New York City time.
“Common Stock” means the common stock, $0.0001 par value per share, of the Company.
“Company” has the meaning set forth in the preliminary paragraph hereto.
“Compounded Dividends” has the meaning set forth in Section 5(a).
“Consolidated Non-Wholly Owned Subsidiary” means a Subsidiary of the Company that is not a Wholly Owned Subsidiary of the Company but is consolidated with the Company and its Wholly Owned Subsidiaries for GAAP purposes.
“Default Dividend” any Dividend payable at the Default Dividend Rate.
“Default Dividend Rate” means, with respect to the Preferred Stock, as of any time of determination, the then-applicable Regular Dividend Rate plus 200 basis points (i.e. adding two percentage points to the then-applicable Regular Dividend Rate).
“DGCL” has the meaning set forth in the preliminary paragraph hereto.
“Dividend” means any Regular Dividend and any Default Dividend.
“Dividend Rights” means the Holders’ rights under Section 5.
“Dividend Junior Securities” means any securities issued by the Company, the terms of which would result in such securities ranking junior to the Preferred Stock with respect to the payment of dividends (without regard to whether or not dividends accumulate cumulatively). Dividend Junior Securities includes the Common Stock. For the avoidance of doubt, Dividend Junior Securities will not include any securities of the Company’s Subsidiaries.
“Dividend Parity Securities” means any securities issued by the Company (other than the Preferred Stock), the terms of which would result in such securities ranking equally with the Preferred Stock with respect to the payment of dividends (without regard to whether or not dividends accumulate cumulatively). For the avoidance of doubt, Dividend Parity Securities will not include any securities of the Company’s Subsidiaries.
“Dividend Payment Date” means each Regular Dividend Payment Date with respect to a Regular Dividend.
“Dividend Senior Securities” means any securities issued by the Company, the terms of which would result in such securities ranking senior to the Preferred Stock with respect to the
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payment of dividends (without regard to whether or not dividends accumulate cumulatively). For the avoidance of doubt, Dividend Senior Securities will not include any securities of the Company’s Subsidiaries.
“Electronic Certificate” means any electronic book entry maintained by the Transfer Agent that evidences any share(s) of Preferred Stock.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“First Call Date” means the date that is the third anniversary of the Initial Issue Date.
“Final Change of Control Notice” has the meaning set forth in Section 8(f).
“GAAP” means generally accepted accounting principles in the United States of America as in effect on the date of any calculation or determination required hereunder.
“Hill Path” means Hill Path Capital LP.
“Hill Path Investor” means HPC III Kaizen LP., a Delaware limited partnership together with its successors and any Affiliate that becomes a party to the Investment Agreement pursuant to the terms thereto.
“Hill Path Investor Parties” means the Hill Path Investor and each Affiliate of the Hill Path Investor to whom shares of Preferred Stock are transferred in accordance with the Investment Agreement.
“Holder” means a person in whose name any Preferred Stock is registered on the Registrar’s books.
“HPS” means HPS Investment Partners, LLC, a Delaware limited liability company.
“HPS Investor” means HPS together with its successors and any Affiliate that becomes a party to the Investment Agreement pursuant to the terms thereto.
“HPS Investor Parties” means the HPS Investor and each Affiliate of the HPS Investor to whom shares of Preferred Stock are transferred in accordance with the Investment Agreement.
“Initial Change of Control Notice” has the meaning set forth in Section 8(e).
“Initial Issue Date” means the Closing Date (as defined in the Investment Agreement).
“Initial Liquidation Preference” means one thousand dollars ($1,000.00) per share of Preferred Stock.
“Investment Agreement” means that certain Investment Agreement by and among the Company and the Investors, dated as of March 26, 2024, as it may be amended, supplemented or otherwise modified from time to time, providing for the purchase and sale of the Preferred Stock and the Warrants and certain other terms relating to the rights of the Holders and the Company.
“Investors” has the meaning set forth in the Investment Agreement.
“Investor Parties” means each of the Hill Path Investor Parties and the HPS Investor
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Parties.
“Investor Transfer Event” means the transfer of all shares of Preferred Stock held by the Hill Path Investor Parties to Persons that are not Affiliates of the Hill Path Investor Parties.
“Liquidation Event” has the meaning set forth in Section 6(a).
“Liquidation Junior Securities” means any securities issued by the Company, the terms of which would result in such securities ranking junior to the Preferred Stock with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up. Liquidation Junior Securities includes the Common Stock. For the avoidance of doubt, Liquidation Junior Securities will not include any securities of the Company’s Subsidiaries.
“Liquidation Rights” means the Holders’ rights under Section 4 and Section 6.
“Liquidation Parity Securities” means any securities issued by the Company (other than the Preferred Stock), the terms of which would result in such securities ranking equally with the Preferred Stock with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up. For the avoidance of doubt, Liquidation Parity Securities will not include any securities of the Company’s Subsidiaries.
“Liquidation Preference” means, with respect to the Preferred Stock, an amount equal to the Accumulated Liquidation Preference plus accrued and unpaid Dividends that have not yet been compounded and added to the Accumulated Liquidation Preference.
“Liquidation Senior Securities” means any securities issued by the Company, the terms of which would result in such securities ranking senior to the Preferred Stock with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up. For the avoidance of doubt, Liquidation Senior Securities will not include any securities of the Company’s Subsidiaries but will include any preferred securities of the Company that have or could have a maturity date or mandatory redemption date (whether upon acceleration or otherwise) that is earlier than the Mandatory Redemption Date.
“Majority Holders” has the meaning set forth in Section 7(a).
“Make-Whole Premium” has the meaning set forth in Section 7(b)(ii)(2).
“Mandatory Redemption” has the meaning set forth in Section 7(a).
“Mandatory Redemption Date” has the meaning set forth in Section 7(a)(i).
“Mandatory Redemption Failure Event” means the failure by Company to pay the Mandatory Redemption Price when due in accordance with Section 7 in respect of any of the outstanding shares of Preferred Stock.
“Mandatory Redemption Price” means the consideration payable by the Company to redeem any Preferred Stock upon its Mandatory Redemption, calculated pursuant to Section 7(a)(ii).
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“Material Indebtedness” means indebtedness for borrowed money of the Company or any Subsidiary in excess of $25,000,000.
“Material Subsidiary” means any Subsidiary of the Company constituting greater than 5.0% of the Consolidated EBITDA (as defined in the Senior Credit Agreement) or 5.0% of gross revenues of the Company and its consolidated Subsidiaries, or any group of Subsidiaries of the Company taken together as a group, constituting greater than 10.0% of the Consolidated EBITDA or 10.0% of gross revenues of the Company and its consolidated Subsidiaries.
“Net Leverage Ratio” means Consolidated Total Net Leverage Ratio as defined in the Senior Credit Agreement.
“Officer” means the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of the Company.
“Optional Redemption” has the meaning set forth in Section 7(b).
“Optional Redemption Date” means the date fixed, pursuant to Section 7(b)(i), for the settlement of the redemption of the Preferred Stock by the Holder pursuant to an Optional Redemption.
“Optional Redemption Date Liquidation Preference” has the meaning set forth in Section 7(b)(ii)(2).
“Optional Redemption Price” means the consideration payable by the Company to redeem any Preferred Stock upon its Optional Redemption, calculated pursuant to Section 7(b)(ii).
“Paying Agent” has the meaning set forth in Section 3(f)(i).
“Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. Any division or series of a limited liability company, limited partnership or trust will constitute a separate “person” under this Certificate of Designations.
“Physical Certificate” means any certificate (other than an Electronic Certificate) evidencing any share(s) of Preferred Stock, which certificate is substantially in the form set forth in Exhibit A, registered in the name of the Holder of such share(s) and duly executed by the Company and countersigned by the Transfer Agent.
“Preferred Stock” has the meaning set forth in Section 3(a).
“Record Date” means, with respect to any dividend or distribution on, or issuance to holders of, Preferred Stock, the date fixed (whether by law, contract or the Board of Directors or otherwise) to determine the Holders or the holders of Preferred Stock that are entitled to such dividend, distribution or issuance.
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“Redemption Notice” has the meaning set forth in Section 7(c).
“Redemption Notice Date” means the date on which the Company sends the Redemption Notice for a Mandatory Redemption or Optional Redemption pursuant to Section 7(c).
“Register” has the meaning set forth in Section 3(f)(ii).
“Registrar” has the meaning set forth in Section 3(f)(i).
“Regular Dividend Payment Date” means, with respect to any share of Preferred Stock, each March 31, June 30, September 30 and December 31 of each year, beginning on the first such date occurring after the Initial Issue Date (or beginning on such other date specified in the Certificate evidencing such share).
“Regular Dividend Period” means each period from, and including, a Regular Dividend Payment Date (or, in the case of the first Regular Dividend Period, from, and including, the Initial Issue Date) to, but excluding, the next Regular Dividend Payment Date.
“Regular Dividend Rate” means, with respect to each period set forth below, the interest rate set forth opposite such period:
Initial Issue Date until [●], 20251 | 13.0% per annum |
14.5% per annum | |
From and after [●], 20274 | 15.5% per annum (which shall increase by one additional percentage point on each anniversary of the Initial Issue Date from and after the fourth anniversary of the Initial Issue Date) |
provided, however, that to the extent and during the period with respect to which such rate has been adjusted as provided in Section 8(b), means such adjusted interest rate.
“Regular Dividend Record Date” has the following meaning: (a) March 15th, in the case of a Regular Dividend Payment Date occurring on March 31st; (b) June 15th, in the case of a Regular Dividend Payment Date occurring on June 30th; (c) September 15th, in the case of a Regular Dividend Payment Date occurring on September 30th; and (d) December 15th, in the case of a Regular Dividend Payment Date occurring on December 31st.
“Regular Dividends” has the meaning set forth in Section 5(a)(i).
“Repurchase Upon Change of Control” means the repurchase of any Preferred Stock by the Company pursuant to Section 8.
1 First anniversary of Initial Issue Date
2 First day after first anniversary of Initial Issue Date
3 End of third year after Initial Issue Date
4 Next day after end of third year after Initial Issue Date
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“Restricted Stock Legend” means a legend substantially in the form set forth in Exhibit B.
“Rule 144” means Rule 144 under the Securities Act (or any successor rule thereto), as the same may be amended from time to time.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Security” means any Preferred Stock.
“Senior Credit Agreement” means the Credit Agreement (as in effect on the Initial Issue Date) contemplated by the Commitment Letter, dated as of March 26, 2024, among The One Group, LLC, Deutsche Bank Securities Inc., Deutsche Bank AG New York Branch, HPS Investment Partners, LLC and HG Vora Capital Management, LLC, without giving effect to any amendment, waiver or consent thereto after the execution and delivery of the Investment Agreement that is materially adverse to the Holders.
“Share Agent” means the Transfer Agent or any Registrar or Paying Agent.
“Subsidiary” means, with respect to any Person, (a) any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of the Capital Stock entitled (without regard to the occurrence of any contingency, but after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees, as applicable, of such corporation, association or other business entity is owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person; and (b) any partnership or limited liability company where (x) more than fifty percent (50%) of the capital accounts, distribution rights, equity and voting interests, or of the general and limited partnership interests, as applicable, of such partnership or limited liability company are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person, whether in the form of membership, general, special or limited partnership or limited liability company interests or otherwise; and (y) such Person or any one or more of the other Subsidiaries of such Person is a controlling general partner of, or otherwise controls, such partnership or limited liability company.
“Transfer Agent” means Continental Stock Transfer & Trust Company or its successor.
“Transfer-Restricted Security” means any Security that constitutes a “restricted security” (as defined in Rule 144); provided, however, that such Security will cease to be a Transfer-Restricted Security upon the earliest to occur of the following events:
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“Treasury Rate” means, with respect to any redemption or repurchase date, the yield determined by the Company in accordance with the following two paragraphs.
The Treasury Rate shall be determined by the Company after 4:15 p.m., New York City time (or after such time as yields on U.S. government securities are posted daily by the Board of Governors of the Federal Reserve System), on the third business day preceding the redemption or repurchase date based upon the yield or yields for the most recent day that appear after such time on such day in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as “Selected Interest Rates (Daily) - H.15” (or any successor designation or publication) (“H.15”) under the caption “U.S. government securities–Treasury constant maturities–Nominal” (or any successor caption or heading). In determining the Treasury Rate, the Company shall select, as applicable: (1) the yield for the Treasury constant maturity on H.15 exactly equal to the period from the redemption or repurchase date to the First Call Date or the Change of Control Repurchase Calculation Date, as applicable (the “Remaining Life”); or (2) if there is no such Treasury constant maturity on H.15 exactly equal to the Remaining Life, the two yields – one yield corresponding to the Treasury constant maturity on H.15 immediately shorter than and one yield corresponding to the Treasury constant maturity on H.15 immediately longer than the Remaining Life – and shall interpolate to the First Call Date or the Change of Control Repurchase Calculation Date, as applicable, on a straight-line basis (using the actual number of days) using such yields and rounding the result to three decimal places; or (3) if there is no such Treasury constant maturity on H.15 shorter than or longer than the Remaining Life, the yield for the single Treasury constant maturity on H.15 closest to the Remaining Life. For purposes of this paragraph, the applicable Treasury constant maturity or maturities on H.15 shall be deemed to have a maturity date equal to the relevant number of months or years, as applicable, of such Treasury constant maturity from the redemption or repurchase date.
If on the third business day preceding the redemption or repurchase date, H.15 or any successor designation or publication is no longer published, the Company shall calculate the Treasury Rate based on the rate per annum equal to the semi-annual equivalent yield to maturity at 11:00 a.m., New York City time, on the second business day preceding such redemption or repurchase date of the United States Treasury security maturing on, or with a maturity that is closest to, the First Call Date or the Change of Control Repurchase Calculation Date, as applicable. If there is no United States Treasury security maturing on the First Call Date or the Change of
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Control Repurchase Calculation Date, as applicable, but there are two or more United States Treasury securities with a maturity date equally distant from the First Call Date or the Change of Control Repurchase Calculation Date, as applicable, one with a maturity date preceding the First Call Date or the Change of Control Repurchase Calculation Date, as applicable and one with a maturity date following the First Call Date or the Change of Control Repurchase Calculation Date, as applicable, the Company shall select the United States Treasury security with a maturity date preceding the First Call Date or the Change of Control Repurchase Calculation Date, as applicable. If there are two or more United States Treasury securities maturing on the First Call Date or the Change of Control Repurchase Calculation Date, as applicable, or two or more United States Treasury securities meeting the criteria of the preceding sentence, the Company shall select from among these two or more United States Treasury securities the United States Treasury security that is trading closest to par based upon the average of the bid and asked prices for such United States Treasury securities at 11:00 a.m., New York City time. In determining the Treasury Rate in accordance with the terms of this paragraph, the semi-annual yield to maturity of the applicable United States Treasury security shall be based upon the average of the bid and asked prices (expressed as a percentage of principal amount) at 11:00 a.m., New York City time, of such United States Treasury security, and rounded to three decimal places.
“Wholly Owned Subsidiary” of a Person means any Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which are owned by such Person or one or more Wholly Owned Subsidiaries of such Person.
(a)“or” is not exclusive;
(b)“including” means “including without limitation”;
(c)“will” expresses a command;
(d)the “average” of a set of numerical values refers to the arithmetic average of such numerical values;
(e)a merger involving, or a transfer of assets by, a limited liability company, limited partnership or trust will be deemed to include any division of or by, or an allocation of assets to a series of, such limited liability company, limited partnership or trust, or any unwinding of any such division or allocation;
(f)words in the singular include the plural and in the plural include the singular, unless the context requires otherwise;
(g)“herein,” “hereof” and other words of similar import refer to this Certificate of Designations as a whole and not to any particular Section or other subdivision of this Certificate of Designations, unless the context requires otherwise;
(h)references to currency mean the lawful currency of the United States of America, unless the context requires otherwise; and
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(i)the exhibits, schedules and other attachments to this Certificate of Designations are deemed to form part of this Certificate of Designations.
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To be timely, such written request must be delivered no later than the Close of Business on the following date: (x) with respect to the payment of any declared cash Dividend due on a Dividend Payment Date for the Preferred Stock, the related Record Date; and (y) with respect to any other payment, the date that is fifteen (15) calendar days immediately before the date such payment is due.
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Company and the Transfer Agent from any loss that any of them may suffer if such Certificate is replaced. Every replacement Certificate evidencing Preferred Stock issued pursuant to this Section 3(k) will, upon such replacement, be deemed to be evidence of outstanding Preferred Stock, entitled to all of the benefits of this Certificate of Designations equally and ratably with all other Preferred Stock then outstanding.
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liquidation, dissolution or winding up; and (c) junior to (i) Dividend Senior Securities with respect to the payment of dividends; and (ii) Liquidation Senior Securities with respect to the distribution of assets upon the Company’s liquidation, dissolution or winding up.
Dividends shall be paid at the Default Dividend Rate payable quarterly in arrears, out of funds legally available, on each Dividend Payment Date, for the period from
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and including the date upon which the event in (1), (2) or (3) occurs through, in case of (1)(A) above, the date the Company pays such unpaid amounts in full, in case of (1)(B) and (1)(C) above, the date but not including the latest of the day upon which the Company pays the Change of Control Repurchase Price or the Mandatory Redemption Price in full in accordance with Section 7 and Section 8, as applicable), in case of (2) above, the date such Default or Event of Default under the Senior Credit Agreement ceases to continue or is remediated, and in case of (3) above, the date the shares of Common Stock are listed for trading on any United States national securities exchange.
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a Regular Dividend Payment Date, then the Holder of such share on such applicable date will be entitled, notwithstanding the related Mandatory Redemption, Optional Redemption or Repurchase Upon Change of Control, as applicable, to receive, on such applicable date the amount of the Regular Dividend accrued since the preceding Regular Dividend Payment Date up through such applicable date (including, without duplication, any Regular Dividend not yet paid or compounded).
Upon payment of such amount in full on the outstanding Preferred Stock, Holders of the Preferred Stock will have no rights to the Company’s remaining assets or funds, if any. If such assets or funds are insufficient to fully pay such amount on all outstanding shares of Preferred Stock and the corresponding amounts payable in respect of all outstanding shares of Liquidation Parity Securities, if any, then, subject to the rights of any of the Company’s creditors or holders of any outstanding Liquidation Senior Securities, such assets or funds will be distributed ratably on the outstanding shares of Preferred Stock and Liquidation Parity Securities in proportion to the full respective distributions to which such shares would otherwise be entitled.
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Mandatory Redemption Price (the “Mandatory Redemption”).
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For purposes of this Section 7(b)(ii)(1), “Applicable Additional Amount” means (x) for an Optional Redemption Date occurring on or after the First Call Date and prior to the fourth anniversary of the Initial Issue Date, an amount equal to 102.25% or (y) for an Optional Redemption Date occurring on or after the fourth anniversary of the Initial Issue Date, an amount equal to 100%.
For purposes of this Section 7(b)(ii)(2), “Make-Whole Premium” means an amount equal to the excess, if any, of (a) the present value (computed using a discount rate equal to the Treasury Rate as of such Optional Redemption Date plus 50 basis points, discounted quarterly) of the Optional Redemption Price of such Preferred Stock at the Close of Business on the First Call Date (calculated in accordance with Section 7(b)(ii)(1)) over (b) the Optional Redemption Date Liquidation Preference. For purposes of calculating the Make-Whole Premium, Dividends will be deemed to accrue and compound at the Regular Dividend Rate in effect on the Redemption Notice Date for such Optional Redemption.
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(as defined in the Senior Credit Agreement) and (y) prior or concurrent repayment of any other indebtedness of the Company and its Subsidiaries if required under the terms thereof. The inability of the Company (or its successor) to make a purchase payment for any reason shall not relieve the Company (or its successor) from its obligation to effect any required purchase when, as and if permitted by applicable law. Notwithstanding the foregoing, in the event a Change of Control occurs at a time when the Company is restricted or prohibited (contractually or otherwise) from repurchasing some or all of the Preferred Stock subject to the Repurchase Upon Change of Control, the Company will use its commercially reasonable efforts to obtain the requisite consents to remove or obtain an exception or waiver to such restrictions or prohibition. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to comply with its obligations under this Section 8. The Company will not voluntarily take any action, or voluntarily engage in any transaction, that would result in a Change of Control unless the Company in good faith believes that it will have sufficient funds legally available to fully pay the maximum aggregate Change of Control Repurchase Price that would be payable in respect of such Change of Control on all shares of Preferred Stock then outstanding.
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provided, however, that the taking of any action in contravention with any of the above consent rights shall be ultra vires and void ab initio; provided further, that each of the following will not require any vote or consent pursuant to Section 9(a)(i)(1) and Section 9(a)(i)(2):
(I)any increase in the number of the authorized but unissued shares of the Company’s undesignated Preferred Stock;
(II)any increase in the number of authorized shares of Preferred Stock as necessary with respect to issuances of shares of Preferred Stock in respect of Preferred Stock that was issued on the Initial Issue Date; and
(III)the creation and issuance, or increase in the authorized or issued number, of any shares of any class or series of stock that is both Dividend Junior Securities and Liquidation Junior Securities to the extent that such securities do not bear liquidity rights adversely affecting the rights, preferences or privileges of the Preferred Stock.
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incorporation, as supplemented by this Certificate of Designation, in accordance with § 141(a) of the DGCL, exercise or perform any of the powers or duties otherwise conferred or imposed upon the board of directors by the DGCL. The taking of any action in contravention with the Company’s obligations under the Investment Agreement shall be ultra vires and void ab initio.
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[The Remainder of This Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be duly executed as of the date first written above.
The ONE Group Hospitality, Inc.
By:
Name:
Title:
EXHIBIT A
FORM OF PREFERRED STOCK CERTIFICATE
[Insert Restricted Stock Legend, if applicable]
The ONE Group Hospitality, Inc.
Series A Preferred Stock
Certificate No.[___]
The ONE Group Hospitality, Inc., a Delaware corporation (the “Company”), certifies that [___] is the registered owner of [___] shares of the Company’s Series A Preferred Stock (the “Preferred Stock”) evidenced by this certificate (this “Certificate”). The special rights, preferences and voting powers of the Preferred Stock are set forth in the Certificate of Designations of the Company establishing the Preferred Stock (the “Certificate of Designations”). Capitalized terms used in this Certificate without definition have the respective meanings ascribed to them in the Certificate of Designations.
Additional terms of this Certificate are set forth on the other side of this Certificate.
[The Remainder of This Page Intentionally Left Blank; Signature Page Follows]
IN WITNESS WHEREOF, The ONE Group Hospitality, Inc. has caused this instrument to be duly executed as of the date set forth below.
The ONE Group Hospitality, Inc.
Date: By:
Name:
Title:
Date: By:
Name:
Title:
A-2
TRANSFER AGENT’S COUNTERSIGNATURE
[legal name of Transfer Agent], as Transfer Agent, certifies that this Certificate evidences shares of Series A Preferred Stock referred to in the within-mentioned Certificate of Designations.
Date: By:
Authorized Signatory
A-3
The ONE Group Hospitality, Inc.
Series A Preferred Stock
This Certificate evidences duly authorized, issued and outstanding shares of Series A Preferred Stock. Notwithstanding anything to the contrary in this Certificate, to the extent that any provision of this Certificate conflicts with the provisions of the Certificate of Designations or the Certificate of Incorporation, the provisions of the of the Certificate of Designations or the Certificate of Incorporation, as applicable, will control.
* * *
To request a copy of the Certificate of Designations, which the Company will provide to any Holder at no charge, please send a written request to the following address:
The ONE Group Hospitality, Inc.
1624 Market Street, Suite 311
Denver, CO 80202
Attention: Secretary
A-4
ASSIGNMENT FORM
The ONE Group Hospitality, Inc.
Series A Preferred Stock
Subject to the terms of the Certificate of Designations, the undersigned Holder of the within Preferred Stock assigns to:
Name:
Address:
Social security or
tax identification
number:
the within Preferred Stock and all rights thereunder irrevocably appoints:
as agent to transfer the within Preferred Stock on the books of the Company. The agent may substitute another to act for him/her.
Date:
(Legal Name of Holder)
By:
Name:
Title:
A-5
EXHIBIT B
FORM OF RESTRICTED STOCK LEGEND
THE OFFER AND SALE OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT; OR (B) PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN AN INVESTMENT AGREEMENT. THE COMPANY WILL GIVE TO THE HOLDER OF THIS CERTIFICATE A COPY OF SUCH INVESTMENT AGREEMENT, AS IN EFFECT ON THE DATE OF THE GIVING OF SUCH COPY, WITHOUT CHARGE, PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
Exhibit 10.4
THE OFFER AND SALE OF THE SECURITIES (INCLUDING THE SHARES OF COMMON STOCK THAT MAY BE PURCHASED HEREUNDER) REPRESENTED BY THIS WARRANT (1) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (2) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS AND (3) ARE SUBJECT TO ADDITIONAL LIMITATIONS ON TRANSFER SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BETWEEN THE ONE GROUP HOSPITALITY, INC. AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME.
Original Issue Date: [●], 2024
WARRANT CERTIFICATE NO. A - [●]
The ONE Group Hospitality, Inc.
Warrant to Purchase Shares of Common Stock
The ONE Group Hospitality, Inc., a Delaware corporation (the “Company”), for value received, hereby certifies that [●] (the “Holder”), subject to the terms and conditions hereof, shall be entitled to purchase from the Company, at any time and from time on or prior to the close of business on [●], 20341 (the “Expiration Date”), [__]2 shares of Common Stock (individually, a “Warrant Share” and collectively, the “Warrant Shares”) of the Company, at a price per share equal to the Exercise Price. The number of Warrant Shares are subject to adjustment as provided herein, and all references to “shares of Common Stock” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.
1 To be the date which is ten years after the Original Issue Date.
2 Warrants of Hill Path Investor and HPS Investor (each as defined in the Investment Agreement) to be documented in separate warrant certificates exercisable for a number of warrants to represent (i) 5.0% for Hill Path Investor and (ii) 0.33% for HPS Investor, for an aggregate amount of 5.33%, in each case of the fully diluted shares of common stock on the Closing Date. For this purpose, fully diluted shares of common stock means: (a) the number of all outstanding shares of common stock (excluding any held by the Company in treasury), plus (b) the number of all outstanding stock options (both vested and unvested), plus (c) the number of all outstanding unvested RSUs and PSUs, plus (d) the number of shares issuable under the Penny Warrants (as defined in the Investment Agreement). This calculation does not include, for confirmation, shares reserved but not issued and outstanding under the Company 2019 Equity Incentive Plan. For an illustration, if this calculation were completed using the outstanding shares of Common Stock (as of February 29, 2024) and outstanding stock options (both vested and unvested) and unvested RSUs and PSUs of the Company (in each case as of December 31, 2023), in each case as specified in the Company’s Form 10-K filed on March 14, 2024, then 1,762,865 and 117,524 shares of Common Stock would be issuable under the Penny Warrants issued to the Hill Path Investor and HPS Investor, respectively. This calculation will be updated as of immediately prior to closing under the same methodology.
“Additional Warrants” means additional warrants of the Company issued pursuant to the Investment Agreement and any other warrants the Company may issue from time to time.
“Adjustment Event” has the meaning set forth in Section 6.11.
“Below Fair Market Value Issuance” has the meaning set forth in Section 6.3.
“Board” means the board of directors of the Company or committee of such board or any other governing body of any Subsidiary of the Company, in each case, duly authorized to act with the authority of such board.
“Business Combination” means a merger, consolidation, statutory share exchange, reorganization, recapitalization or similar extraordinary transaction (which may include a reclassification) involving the Company.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close or be closed.
“Cash Exercise” has the meaning set forth in Section 2.2(a).
“Cashless Exercise” has the meaning set forth in Section 2.2(b).
“Closing Date” has the meaning specified under the Investment Agreement.
“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
“Company” has the meaning set forth in the introductory paragraph of this Warrant.
“Company 2019 Equity Incentive Plan” means The One Group Hospitality, Inc. 2019 Equity Incentive Plan, as amended from time to time.
“Determination Date” has the meaning set forth in Section 6.11.
“Distribution” has the meaning set forth in Section 6.2.
“Equity Securities” means, with respect to any Person, any (a) membership interests, units or shares of capital stock, (b) equity, ownership, voting, profit or participation interests or (c) similar rights or securities in such Person or any of its subsidiaries, or any rights or securities convertible into or exchangeable for, options or other rights to acquire from such Person or any of its subsidiaries, or obligation on the part of such Person or any of its subsidiaries to issue, any of the foregoing.
“Excluded Transaction” means (a) any issuance of Equity Securities to employees, officers or directors of the Company or its subsidiaries pursuant to any stock option plan, equity incentive plan (including the Company 2019 Equity Incentive Plan) or other employee benefit arrangement approved by the Board, (b) any issuance of Warrant Shares hereunder or under any other Additional Warrants and/or (c) any issuance of Equity Securities in the following transactions: (i) any acquisition by the Company or any of its subsidiaries of any equity interests, assets, properties or business of any Person; (ii) any merger, consolidation or other business combination involving the Company or any of its subsidiaries (other than a Business Combination subject to Section 6.4); (iii) the commencement of any transaction or series of related transactions involving a change of control of the Company (other than a Business Combination subject to Section 6.4); (iv) any private placement of warrants to purchase Equity Securities of the Company to lenders or other institutional investors in any arm’s length transaction providing debt financing to the Company;
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and (v) any issuance of Equity Securities by the Company in connection with which the Holder exercised its participation or preemptive rights in accordance with the Investment Agreement.
“Exercise” has the meaning set forth in Section 2.2.
“Exercise Date” means the date on which each of the requirements for a Cash Exercise and a Cashless Exercise are satisfied in accordance with Section 2.2(a) and Section 2.2(b), respectively.
“Exercise Price” means $0.01 per share of Common Stock.
“Expiration Date” has the meaning set forth in the introductory paragraph of this Warrant.
“Fair Market Value” of an Equity Security means, as of any date, if such Equity Security is listed or traded on a U.S. national securities exchange or market, the closing sale price of such Equity Security on the Business Day immediately prior to such date as reported in the composite transactions for the principal U.S. national securities exchange or market on which such Equity Security is so listed or traded, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national securities exchange on which such Equity Security is so listed or traded on the Business Day immediately prior to such date, or if such Equity Security is not so listed or traded on a U.S. national securities exchange or market, the last closing bid price of such Equity Security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if that bid price is not available, the market price of such Equity Security on the Business Day immediately prior to such date as determined by the Board in good faith, which determination shall be provided to the Holder in writing; provided, that if the Holder objects in writing to the market price as determined by the Board within five Business Days of receipt of notice of such determination, such market price shall be determined by an independent financial expert appointed for such purpose, using one or more valuation methods that the independent financial expert in its best professional judgment determines to be most appropriate, assuming such securities are fully distributed and are to be sold in an arm’s-length transaction and there was no compulsion on the part of any party to such sale to buy or sell and taking into account all relevant factors.
“Holder” has the meaning set forth in the introductory paragraph of this Warrant.
“Investment Agreement” means the Investment Agreement, dated as of the Original Issue Date, between the Company and the Holder, as amended, supplemented or otherwise modified from time to time.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Public Sale” shall mean (a) an underwritten public offering pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8 or any successor or other forms promulgated for similar purposes) filed under the Securities Act, (b) a “brokers’ transaction” (as defined in Rule 144), (c) the acquisition, purchase, business combination, merger or consolidation of the Company or any direct or indirect parent of the Company into or with an entity that has, or whose direct or indirect parent has, previously consummated a public offering of Equity Securities and is a public company at the applicable time or (d) an offering pursuant to a direct listing of Equity Securities on a public stock exchange.
“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
“Shareholders” means holders of Common Stock.
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“Warrant” has the meaning set forth in the introductory sentence of Section 1.
“Warrant Share” has the meaning set forth in the introductory paragraph of this Warrant.
X = Y*(A - B) ÷ A.
“X” shall mean the net number of shares of Common Stock to be issued to the Holder pursuant to the Cashless Exercise;
“Y” shall mean the number of gross shares of Common Stock that would be issuable upon such exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a Cash Exercise rather than a Cashless Exercise;
“A” shall mean the Fair Market Value as of the Exercise Date;
“B” shall mean the Exercise Price.
The Company and the Holder agree, unless otherwise required by a change in law or by the Internal Revenue Service or other governmental authority following an audit or examination, (i) in the event of a Cashless Exercise under this Section 2.2(b), the Holder’s surrender of this Warrant in exchange for the receipt of the Warrant Shares issuable in accordance with this Warrant (or the portion thereof being cancelled) shall be treated as a recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended and (ii) not to file any tax return inconsistent with the foregoing.
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Notwithstanding the foregoing, this Section 6.3 shall not apply to underwritten offerings registered with the Commission under the Securities Act.
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(A)in any case referred to in clause (a) of this Section 6.11, the occurrence of such event,
(B)in any case referred to in clause (b) of this Section 6.11, the date any such dividend or distribution is paid or made, and
(C)in any case referred to in clause (c) of this Section 6.11, the date of expiration of such rights or warrants.
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[Signature Page Follows]
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PURCHASE FORM
To: The ONE Group Hospitality, Inc.Dated:______________
The undersigned hereby irrevocably elects to purchase ________________ shares of Common Stock of The ONE Group Hospitality, Inc., a Delaware corporation, pursuant to the purchase provisions of Section 2.2 of the attached Warrant and herewith makes payment of $____________, representing the full purchase price for such shares of Common Stock at the price per share provided for in the Warrant.
Cashless Exercise: • (If checked, the aggregate Exercise Price will be paid by withholding shares of Common Stock in accordance with Section 2.2(b) (Cashless Exercise) of the Warrant)
FORM OF RESTRICTIVE LEGEND
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO NUMEROUS CONDITIONS AND RESTRICTIONS, INCLUDING RESTRICTIONS ON TRANSFER, AS SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BY AND BETWEEN THE ONE GROUP HOSPITALITY, INC., A DELAWARE CORPORATION (THE “COMPANY”) AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME (THE “INVESTMENT AGREEMENT”). A COPY OF THE INVESTMENT AGREEMENT AS IN EFFECT FROM TIME TO TIME SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (B) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS, AND (C) ARE SUBJECT TO AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF THE INVESTMENT AGREEMENT.”
EXHIBIT C TO WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ (the “Holder”) hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of common stock, par value $0.0001 per share, of [●] covered thereby set forth below, unto:
Name of AssigneeAddressNo. of Shares of Common Stock
__________ (the “Assignee”)
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
By signing below, the Assignee acknowledges that it qualifies as an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended.
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
NOTICE
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
A copy of all notices provided to the Holder in accordance with the Warrant shall also be provided to the following (provided that delivery of such copy shall not constitute notice):
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention:Tracey A. Zaccone
Benjamin Heriaud
Exhibit 10.5
THE OFFER AND SALE OF THE SECURITIES (INCLUDING THE SHARES OF COMMON STOCK THAT MAY BE PURCHASED HEREUNDER) REPRESENTED BY THIS WARRANT (1) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (2) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS AND (3) ARE SUBJECT TO ADDITIONAL LIMITATIONS ON TRANSFER SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BETWEEN THE ONE GROUP HOSPITALITY, INC. AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME.
Original Issue Date: [●], 2024
WARRANT CERTIFICATE NO. A - [●]
The ONE Group Hospitality, Inc.
Warrant to Purchase Shares of Common Stock
The ONE Group Hospitality, Inc., a Delaware corporation (the “Company”), for value received, hereby certifies that [●] (the “Holder”), subject to the terms and conditions hereof, shall be entitled to purchase from the Company, at any time and from time on or prior to the close of business on [●], 20291 (the “Expiration Date”), [●]2 shares of Common Stock (individually, a “Warrant Share” and collectively, the “Warrant Shares”) of the Company, at a price per share equal to the Exercise Price. The number of Warrant Shares are subject to adjustment as provided herein, and all references to “shares of Common Stock” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.
“Additional Warrants” means additional warrants of the Company issued pursuant to the Investment Agreement and any other warrants the Company may issue from time to time.
“Adjustment Event” has the meaning set forth in Section 6.11.
“Below Fair Market Value Issuance” has the meaning set forth in Section 6.2.
“Board” means the board of directors of the Company or committee of such board or any other governing body of any Subsidiary of the Company, in each case, duly authorized to act with the authority of such board.
1 To be the date which is five years after the Original Issue Date.
2 Warrants of Hill Path Investor and HPS Investor (each as defined in the Investment Agreement) to be documented in separate warrant certificates exercisable for (i) 1,000,000 shares of common stock to Hill Path Investor and (ii) 66,667 shares of common stock to HPS Investor, for an aggregate amount of 1,066,667 shares of common stock.
“Business Combination” means a merger, consolidation, statutory share exchange, reorganization, recapitalization or similar extraordinary transaction (which may include a reclassification) involving the Company.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close or be closed.
“Closing Date” has the meaning specified under the Investment Agreement.
“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
“Company” has the meaning set forth in the introductory paragraph of this Warrant.
“Company 2019 Equity Incentive Plan” means The One Group Hospitality, Inc. 2019 Equity Incentive Plan.
“Determination Date” has the meaning set forth in Section 6.11.
“Distribution” has the meaning set forth in Section 6.2.
“Equity Securities” means, with respect to any Person, any (a) membership interests, units or shares of capital stock, (b) equity, ownership, voting, profit or participation interests or (c) similar rights or securities in such Person or any of its subsidiaries, or any rights or securities convertible into or exchangeable for, options or other rights to acquire from such Person or any of its subsidiaries, or obligation on the part of such Person or any of its subsidiaries to issue, any of the foregoing.
“Excluded Transaction” means (a) any issuance of Equity Securities to employees, officers or directors of the Company or its subsidiaries pursuant to any stock option plan, equity incentive plan (including the Company 2019 Equity Incentive Plan) or other employee benefit arrangement approved by the Board, (b) any issuance of Warrant Shares hereunder or under any other Additional Warrants and/or (c) any issuance of Equity Securities in the following transactions: (i) any acquisition by the Company or any of its subsidiaries of any equity interests, assets, properties or business of any Person; (ii) any merger, consolidation or other business combination involving the Company or any of its subsidiaries (other than a Business Combination subject to Section 6.4); (iii) the commencement of any transaction or series of related transactions involving a change of control of the Company (other than a Business Combination subject to Section 6.4); (iv) any private placement of warrants to purchase Equity Securities of the Company to lenders or other institutional investors in any arm’s length transaction providing debt financing to the Company; and (v) any issuance of Equity Securities by the Company in connection with which the Holder exercised its participation or preemptive rights in accordance with the Investment Agreement.
“Exercise” has the meaning set forth in Section 2.2.
“Exercise Date” means the date on which each of the requirements for a Cash Exercise are satisfied in accordance with Section 2.2.
“Exercise Price” means $10.00 per share of Common Stock.
“Expiration Date” has the meaning set forth in the introductory paragraph of this Warrant.
“Fair Market Value” of an Equity Security means, as of any date, if such Equity Security is listed or traded on a U.S. national securities exchange or market, the closing sale price of such Equity Security on the Business Day immediately prior to such date as reported in the composite transactions for the principal U.S. national securities exchange or market on which such Equity Security is so listed or
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traded, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national securities exchange on which such Equity Security is so listed or traded on the Business Day immediately prior to such date, or if such Equity Security is not so listed or traded on a U.S. national securities exchange or market, the last closing bid price of such Equity Security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if that bid price is not available, the market price of such Equity Security on the Business Day immediately prior to such date as determined by the Board in good faith, which determination shall be provided to the Holder in writing; provided, that if the Holder objects in writing to the market price as determined by the Board within five Business Days of receipt of notice of such determination, such market price shall be determined by an independent financial expert appointed for such purpose, using one or more valuation methods that the independent financial expert in its best professional judgment determines to be most appropriate, assuming such securities are fully distributed and are to be sold in an arm’s-length transaction and there was no compulsion on the part of any party to such sale to buy or sell and taking into account all relevant factors.
“Holder” has the meaning set forth in the introductory paragraph of this Warrant.
“Investment Agreement” means the Investment Agreement, dated as of the Original Issue Date, between the Company and the Holder, as amended, supplemented or otherwise modified from time to time.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Public Sale” shall mean (a) an underwritten public offering pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8 or any successor or other forms promulgated for similar purposes) filed under the Securities Act, (b) a “brokers’ transaction” (as defined in Rule 144), (c) the acquisition, purchase, business combination, merger or consolidation of the Company or any direct or indirect parent of the Company into or with an entity that has, or whose direct or indirect parent has, previously consummated a public offering of Equity Securities and is a public company at the applicable time or (d) an offering pursuant to a direct listing of Equity Securities on a public stock exchange.
“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
“Shareholders” means holders of Common Stock.
“Warrant” has the meaning set forth in the introductory sentence of Section 1.
“Warrant Share” has the meaning set forth in the introductory paragraph of this Warrant.
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EP2 = EP1* (A) ÷ (B).
(a)“EP2” shall mean the Exercise Price in effect immediately after such event;
(b)“EP1” shall mean the Exercise Price in effect immediately prior to such event;
(c)“A” shall mean the number of shares of Common Stock immediately after the close of business on the record date for such event;
(d)“B” shall mean the number of shares of Common Stock outstanding immediately prior to the close of business on the record date for such event.
An adjustment made pursuant to this Section 6.1 shall become effective immediately after the effective date, retroactive to the record date therefor in the case of a dividend or distribution in shares of Common Stock, and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
EP2 = EP1* (A) ÷ (A + B).
(a)“EP2” shall mean the Exercise Price in effect immediately after such Distribution;
(b)“EP1” shall mean the Exercise Price in effect immediately prior to such Distribution;
(c)“A” shall mean the Fair Market Value per share of the Common Stock on the last Trading Day immediately preceding the first date on which the shares of Common Stock trade regular way without the right to receive such Distribution;
(d)“B” shall mean (i) if the Distribution is in cash, the amount in cash distributed to Holders per share of Common Stock or (ii) if the Distribution is not in cash, the fair market value (as determined in good faith by the Board) of the shares of stock or other securities, property or options that are distributed to Holders per share of Common Stock.
Such adjustment shall become effective immediately after 5:00 p.m., New York City time, on the record date for such Distribution. If any cash Distribution is declared but not so paid, the number of Warrant Shares for which this Warrant is exercisable shall again be adjusted to the number of Warrant Shares for which this Warrant is exercisable that would then be in effect if such dividend or distribution had not been declared (and the Exercise Price also correspondingly readjusted). No adjustment shall be made pursuant to this Section 6.2 which shall have the effect of decreasing the number of Warrant Shares issuable upon exercise of this Warrant.
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EP2 = EP1* (A + B) ÷ (A + C).
(a)“EP2” shall mean the Exercise Price in effect immediately after such Below Fair Market Value Issuance;
(b)“EP1” shall mean the Exercise Price in effect immediately prior to such Below Fair Market Value Issuance;
(c)“A” shall mean the number of shares of Common Stock of the Company outstanding prior to the Below Fair Market Value Issuance;
(d)“B” shall mean the number of shares of Common Stock that would have been issued if such additional shares of Common Stock had been issued or deemed issued at a price per share equal to Fair Market Value (determined by dividing the aggregate consideration received by the Company in respect of such issue by Fair Market Value); and
(e)“C” shall mean the number of such additional shares of Common Stock issued in such Below Fair Market Value Issuance.
Notwithstanding the foregoing, this Section 6.3 shall not apply to underwritten offerings registered with the Commission under the Securities Act.
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(A)in any case referred to in clause (a) of this Section 6.11, the occurrence of such event,
(B)in any case referred to in clause (b) of this Section 6.11, the date any such dividend or distribution is paid or made, and
(C)in any case referred to in clause (c) of this Section 6.11, the date of expiration of such rights or warrants.
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[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have each caused this Warrant to be duly executed as of the date first written above.
The ONE Group Hospitality, Inc.
By:
Name:
Title:
[Signature Page to Warrant]
PURCHASE FORM
To: The ONE Group Hospitality, Inc.Dated:______________
The undersigned hereby irrevocably elects to purchase ________________ shares of Common Stock of The ONE Group Hospitality, Inc., a Delaware corporation, pursuant to the purchase provisions of Section 2.2 of the attached Warrant and herewith makes payment of $____________, representing the full purchase price for such shares of Common Stock at the price per share provided for in the Warrant.
FORM OF RESTRICTIVE LEGEND
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO NUMEROUS CONDITIONS AND RESTRICTIONS, INCLUDING RESTRICTIONS ON TRANSFER, AS SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BY AND BETWEEN THE ONE GROUP HOSPITALITY, INC., A DELAWARE CORPORATION (THE “COMPANY”) AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME (THE “INVESTMENT AGREEMENT”). A COPY OF THE INVESTMENT AGREEMENT AS IN EFFECT FROM TIME TO TIME SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (B) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS, AND (C) ARE SUBJECT TO AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF THE INVESTMENT AGREEMENT.”
EXHIBIT C TO WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ (the “Holder”) hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of common stock, par value $0.0001 per share, of The ONE Group Hospitality, Inc. covered thereby set forth below, unto:
Name of AssigneeAddressNo. of Shares of Common Stock
__________ (the “Assignee”)
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
By signing below, the Assignee acknowledges that it qualifies as an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended.
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
NOTICE
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
A copy of all notices provided to the Holder in accordance with the Warrant shall also be provided to the following (provided that delivery of such copy shall not constitute notice):
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention:Tracey A. Zaccone
Benjamin Heriaud
Exhibit 10.6
TABLE OF CONTENTS
Page
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of [●], 2024, by and among The ONE Group Hospitality, Inc., a Delaware corporation (including its successors and permitted assigns, the “Company”) and HPC III Kaizen LP, a Delaware limited partnership (the “Hill Path Investor”) and HPS Investment Partners, LLC, a Delaware limited liability company (the “HPS Investor” and together with the Hill Path Investor, the “Investors”). Capitalized terms used but not defined elsewhere herein are defined in Exhibit A.
As a condition to each of the parties’ obligations under the Investment Agreement, the Company and the Investors are entering into this Agreement for the purpose of granting certain registration rights to each of the Investors.
In consideration of the promises and the mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
Notwithstanding the foregoing, if the Commission prevents the Company from including any or all of the Registrable Securities on the Resale Shelf Registration Statement due to limitations on the use of Rule 415 of the Securities Act for the resale of the Registrable Securities by the Holders, the Resale Shelf Registration Statement shall register the resale of a number of shares of the Registrable Securities which is equal to the maximum number of shares as is permitted by the Commission, and, subject to the provisions of this Section 1.1, the Company shall continue to its use reasonable best efforts to register all remaining Registrable Securities as set forth in this Section 1.1. In such event, the number of shares of Registrable Securities to be registered for each Holder in the Resale Shelf Registration Statement shall be reduced pro rata among all Holders, provided, however, that, prior to reducing the number of shares of Registrable Securities to be registered for any Holder in such Resale Shelf Registration Statement, the Company shall
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first remove any shares of Registrable Securities to be registered for any Person other than a Holder that was proposed to be included in such Resale Shelf Registration Statement. The Company shall continue to use its reasonable best efforts to register all remaining Registrable Securities as promptly as practicable in accordance with the applicable rules, regulations and guidance of the Commission. Notwithstanding anything herein to the contrary, if the Commission, by written comment, limits the Company’s ability to file, or prohibits or delays the filing of, a Resale Shelf Registration Statement or a Subsequent Shelf Registration with respect to any or all the Registrable Securities, the Company’s compliance with such limitation, prohibition or delay solely to the extent of such limitation, prohibition or delay shall not be a breach or default by the Company under this Agreement and shall not be deemed a failure by the Company to use “reasonable best efforts” as set forth above or elsewhere in this Agreement.
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proposing to distribute its securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into and perform such Holder’s obligations under an underwriting agreement with the managing underwriter selected in accordance with Section 1.6(a) (such underwriting agreement to be in a customary form negotiated by the Company or such stockholders, as the case may be). Notwithstanding any other provision of this Article II, if the managing underwriter or underwriters of a proposed underwritten offering with respect to which Holders of Registrable Securities have exercised their piggyback registration rights advise the Board of Directors of the Company that in its or their opinion the number of Registrable Securities requested to be included in the offering thereby and all other securities proposed to be sold in the offering exceeds the number which can be sold in such underwritten offering in light of market conditions, the Registrable Securities and such other securities to be included in such underwritten offering shall be allocated, (a) first, in the event such offering was initiated by the Company for its own account, up to the total number of securities that the Company has requested to be included in such registration, (b) second, and only if all the securities referred to in clause (a) have been included, up to the total number of securities that the Holders have requested to be included in such offering (pro rata based upon the number of securities that each of them shall have requested to be included in such offering) and (c) third, and only if all the securities referred to in clause (b) have been included, all other securities proposed to be included in such offering that, in the opinion of the managing underwriter or underwriters can be sold without having such adverse effect. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the managing underwriter or underwriters. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.
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Offering, as applicable, subject to customary exceptions and for a term reasonably requested by the representatives of such underwriters (or placement agents, as the case may be) and in any case, such term shall not exceed 60 days following the pricing of such offering; provided, further that the Holders participating in such offering shall use commercially reasonable efforts to reduce the time period applicable to any such “lock-up” (to a period not shorter than 30 days) after consultation with any such underwriters (or placement agents, as the case may be).
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the meaning of Section 15 of the Securities Act, and each other Holder and each of such other Holder’s officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees and each Person controlling such Holder or any of the foregoing within the meaning of Section 15 of the Securities Act (collectively, the “Holder Indemnified Parties”), against all expenses, claims, losses, damages, costs (including costs of preparation and reasonable attorney’s fees and any legal or other fees or expenses actually incurred by such party in connection with any investigation or proceeding), judgments, fines, penalties, charges, amounts paid in settlement and other and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular or other document, or any amendment or supplement thereto incident to any such registration, qualification or compliance or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse each of the Holder Indemnified Parties for any reasonable legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein, provided, however, that in no event shall any indemnity under this Section 4.2 payable by a Holder exceed the amount by which the net proceeds actually received by such Holder from the sale of Registrable Securities included in such registration exceeds the amount of any other losses, expenses, settlements, damages, claims and liabilities that such Holder has been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission or violation. The indemnity agreement contained in this Section 4.2 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the prior written consent of the applicable Holder (which consent shall not be unreasonably withheld or delayed), nor shall the Holder be liable for any such loss, claim, damage, liability or action where such untrue statement or alleged untrue statement or omission or alleged omission was corrected in a final or amended prospectus, and the Company or the underwriters failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the Person asserting any such loss, claim, damage or liability in any case in which such delivery is required by the Securities Act
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The indemnity agreements contained in this Article IV shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. The indemnification set forth in this Article IV shall be in addition to any other indemnification rights or agreements that an Indemnified Party may have.
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13
If to the Company, to:
The ONE Group Hospitality, Inc.
1624 Market Street, Suite 311
Denver, CO 80202
Attention:Chief Executive Officer and Chief Financial Officer
Email:[email protected]
with a copy (which shall not constitute notice) to:
Stoel Rives LLP
760 SW Ninth Avenue, Suite 3000
Portland, OR 97205
Attention:Steven H. Hull; Will Goodling
Email:[email protected]; [email protected]
If to the Hill Path Investor, to:
HPC III Kaizen LP
150 East 58th Street 32nd Floor
New York, NY 10155
Attention:James Chambers
Email:[email protected]
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with a copy (which shall not constitute notice) to:
Simpson Thacher & Bartlett LLP
425 Lexington Ave
New York, New York 10017
Attention:Tracey A. Zaccone
Matthew B. Rogers
Benjamin N. Heriaud
Email:[email protected]
If to the HPS Investor, to:
HPS Investment Partners, LLC
40 West 57th Street
New York, NY 10019
Attention: Daniel Zevnik
Email: [email protected]
with a copy (which shall not constitute notice) to:
Milbank LLP
55 Hudson Yards
New York, NY 10001-2163
Attention: John Britton
Email: [email protected]
15
(The next page is the signature page)
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written.
THE ONE GROUP HOSPITALITY, INC.
By:
Name:
Title:
HPC III Kaizen LP
By: | HILL PATH CAPITAL PARTNERS III GP LLC, its General Partner |
By:
Name:
Title:
HPS INVESTMENT PARTNERS, LLC
By:
Name:
Title:
[Signature Page to Registration Rights Agreement]
EXHIBIT A
DEFINED TERMS
1.The following capitalized terms have the meanings indicated:
A-1
INDEX OF TERMS
A-2
A-3
Exhibit 99.1
The ONE Group Hospitality, Inc. to Acquire Owner of Benihana
Creates a scaled platform and further enables The ONE Group to diversify and strengthen its industry leading portfolio of world-class, experiential restaurant concepts
Transaction adds $514 million in trailing twelve months revenue and significant incremental annualized EBITDA
Combined business will generate meaningful free cash flow enabling debt reduction and shareholder friendly capital allocation to drive long-term value for shareholders
Expected to be accretive to diluted earnings per share
Conference call and webcast to discuss the transaction to be held later today at 5:00 PM ET on Tuesday, March 26th
DENVER - March 26, 2024 – The ONE Group Hospitality, Inc. (“The ONE Group” or the “Company”) (Nasdaq: STKS), today announced it will acquire Safflower Holdings Corp., the owner of Benihana Inc. (“Benihana”), a leading operator of highly differentiated experiential brands that owns the only national teppanyaki brand in the U.S. and owns RA Sushi.
The transaction is valued at $365 million and will be financed with $160 million in preferred equity and a portion of a new $390 million term loan and credit facility. Upon closing of the transaction, which is expected by the end of the second quarter of 2024, The ONE Group will have a global footprint of 168 venues, across full-service entertainment and grill restaurants across its four distinctive experiential, and complementary brands.
Founded in 1964, Benihana has a tremendous legacy in the U.S. as it pioneered two unique, complementary restaurant brands focusing on providing high-quality food and unparalleled guest service. Its flagship brand, BENIHANA®, is a category-defining brand and American cultural icon that pioneered interactive teppanyaki dining in the U.S. Benihana’s RA SUSHI® predicates itself on delivering creative sushi and Japanese dishes in a bar-forward, upbeat, and vibrant dining atmosphere and fun-filled, high-energy environment.
Currently Benihana operates 88 company-owned restaurants and franchises or licenses an additional 17 venues in the Americas. Once closed, the acquisition is expected to add approximately $575 million in annualized system-wide revenue and approximately $70 million in annual run-rate EBITDA before synergies, which are estimated to be $20 million annually. The Company expects that it will take 24 months to realize synergies post-closing. This is expected to bring the Company’s pro forma annualized run-rate EBITDA with synergies to more than $135 million. The transaction is expected to be immediately accretive to earnings per diluted share.
“We are delighted to welcome Benihana, an American cultural icon with timeless appeal that transcends generations and offers unparalleled guest experiences, to The ONE Group family,” said Emanuel “Manny” Hilario, President and CEO of The ONE Group. “The strategic acquisition of a one-of-a-kind restaurant platform with a compelling financial profile supports our broader strategy to fortify and diversify our leading portfolio of best-in-class experiential VIBE restaurant concepts. With Benihana joining The
ONE Group’s platform, our combined annualized EBITDA enhances our ability to continue to fully fund our expansion while delivering meaningful free cash flow enabling debt reduction and shareholder friendly capital allocation to drive long-term value for shareholders.”
Additional Estimates
Capitalization | ||||
Financial | ||||
*Benihana’s TTM financial measures represent the 364 days ending December 31, 2023, and they are unaudited.
**Company expects that it will take 24 months to realize synergies post-closing.
***After reflects addition of the Company’s capitalization and financial results and estimated capitalization impacts of the transactions and Benihana's standalone TTM financial results, without giving effect to any pro forma or other adjustments.
Transaction Overview and Timing
The transaction, valued at $365 million, will be financed with a portion of a new $390 million term loan and credit facility and $160 million in preferred equity. The preferred equity will be primarily issued to Hill Path Capital and, upon closing of the transaction, Scott Ross (Founder and Managing Partner of Hill Path Capital) and James Chambers (Co-Founder and Partner of Hill Path Capital) will join the Company’s board of directors. The combined business will generate meaningful free cash flow enabling debt reduction and shareholder friendly capital allocation to drive long-term value for shareholders.
Please refer to the accompanying slides for additional detail which have been posted to the Investor Relations tab of The ONE Group’s website at http://www.togrp.com/ under “News / Events.”
Closing is expected by the end of the second quarter of 2024. The transaction has been approved by both boards of directors and is subject to customary closing conditions.
Deutsche Bank Securities Inc. served as sole financial advisor to The ONE Group and lead arranger for the term loan and credit facility. Stoel Rives LLP served as legal advisor to The ONE Group. Piper Sandler & Co served as financial advisor to Benihana. Sidley Austin LLP and Akin Gump Strauss Hauer & Feld LLP served as legal advisors to Benihana.
Transaction Conference Call and Webcast
Emanuel “Manny” Hilario, President and CEO, and Tyler Loy, CFO, will host a conference call and webcast on Tuesday at 5:00 PM Eastern Time.
The conference call can be accessed live over the phone by dialing 201-689-8573. A replay will be available after the call and can be accessed by dialing 412-317-6671; the passcode is 13745324.
The webcast can be accessed from the Investor Relations tab of The ONE Group’s website at http://www.togrp.com/ under “Presentations.”
About The ONE Group
The ONE Group Hospitality, Inc. (NASDAQ: STKS) is an international restaurant company that develops and operates upscale and polished casual, high-energy restaurants and lounges and provides hospitality management services for hotels, casinos, and other high-end venues both domestically and internationally. The ONE Group’s focus is to be the global leader in VIBE dining, and its primary restaurant brands and operations are:
| ● | STK, a modern twist on the American steakhouse concept with 28 restaurants in major metropolitan cities in the U.S., Europe, and the Middle East, featuring premium steaks, seafood, and specialty cocktails in an energetic upscale atmosphere. |
| ● | Kona Grill, a polished casual, bar-centric grill concept with 27 restaurants in the U.S., featuring American favorites, award-winning sushi, and specialty cocktails in an upscale casual atmosphere. |
| ● | ONE Hospitality, The ONE Group’s food and beverage hospitality services business, develops, manages, and operates premier restaurants and turnkey food and beverage services within high-end hotels and casinos currently operating 8 venues in the U.S. and Europe. |
Benihana Inc.
Benihana, through its subsidiaries, is the nation's leading operator of Japanese teppanyaki and sushi restaurants with more than 100 restaurants operating under the brands BENIHANA® and RA SUSHI®, including franchised Benihana restaurants in the United States, the Caribbean, Central America, and South America. Additional information about Benihana can be found at www.benihana.com.
Forward Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, including with respect to restaurant openings, run-rate adjustments, certain financial results and expected synergies. Forward-looking statements may be identified by the use of words such as “target,” “intend,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; (8) the risk that the acquisition does not close; and (9) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q.
Investors are referred to the most recent reports filed with the Securities and Exchange Commission by The ONE Group Hospitality, Inc. Investors are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Reconciliation of Non-GAAP Financial Measures
| 2023 and TTM Financials (1) | |
| The ONE Group | Benihana |
(1) Benihana’s TTM financial measures represent the 364 days ending December 31, 2023, and they are unaudited.
(2) Other addbacks include non-cash expenses, transaction expenses, one-time litigation, and other miscellaneous one-time items. For other information please refer to the Company’s 10-K filed for the year ended December 31, 2023.
Contacts:
Investors:
ICR
Michelle Michalski or Raphael Gross
(646) 277-1224
Media:
ICR
Liz DiTrapano
(203) 682-4716
| The ONE Group to Acquire Owner of Benihana |
| Forward-looking Statements 2 Forward-Looking Statements This presentation includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, including with respect to restaurant openings, run-rate adjustments, certain financial results and expected synergies. Forward-looking statements may be identified by the use of words such as “target,” “intend,” “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements, including but not limited to: (1) our ability to integrate the new restaurants into our operations without disruptions to operations; (2) our ability to capture anticipated synergies; (3) our ability to open new restaurants and food and beverage locations in current and additional markets, grow and manage growth profitably, maintain relationships with suppliers and obtain adequate supply of products and retain employees; (4) factors beyond our control that affect the number and timing of new restaurant openings, including weather conditions and factors under the control of landlords, contractors and regulatory and/or licensing authorities; (5) our ability to successfully improve performance and cost, realize the benefits of our marketing efforts and achieve improved results as we focus on developing new management and license deals; (6) changes in applicable laws or regulations; (7) the possibility that The ONE Group may be adversely affected by other economic, business, and/or competitive factors; (8) the risk that the acquisition does not close; and (9) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q. Non-GAAP Financial Measures This presentation contains non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a company’s financial performance that excludes or includes amounts from a measure calculated and presented in accordance with GAAP in the consolidated statements of operations, balance sheets or statements of cash flows of the Company. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors. The Company has both wholly owned and partially owned subsidiaries. Same store sales represent total U.S. food and beverage sales at owned and managed units opened for at least a full 18-months. This measure includes total revenue from our owned and managed locations.Total food and beverage sales at owned and managed units represents total revenue from owned operations as well as the sales reported to the Company by the owners of locations the Company manages, where it earns management and incentive fees. EBITDA is defined as net income before interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA represents net income before interest expense, provision for income taxes, depreciation and amortization, non-cash impairment loss, non-cash rent, pre-opening expenses, non-recurring gains and losses and losses from discontinued operations. The disclosure of EBITDA and Adjusted EBITDA and other non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. EBITDA and Adjusted EBITDA should be considered in addition to, and not as a substitute for, or superior to, net income, operating income, cash flows, revenue, or other measures of financial performance prepared in accordance with GAAP. For a reconciliation of total food and beverage sales at owned and managed units, EBITDA, and Adjusted EBITDA to the most directly comparable financial measures presented in accordance with GAAP and a discussion of why we consider them useful, see the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2023. |
| 3 VISION The Undisputed Global Leader in VIBE Dining ABOUT US We are an international restaurant company that develops and operates upscale and polished -casual, high -energy restaurants and turn -key food & beverage services for hospitality venues including hotels, casinos and other high -end locations. We drive revenue and profits for our stakeholders and partners, who are leading entertainment and hospitality companies, including Disney, Hyatt and Melia Hotels. MISSION To be the BEST Restaurant In Every Market That We Operate by Delivering Exceptional and Unforgettable Guest Experiences to Every Guest, Every Time. |
| Experiential Entertaining The Global Leader in VIBE Dining 4 VIBE DINING – Unforgettable, Energetic, Fun and Entertaining Created by the Flawless Execution of the Seven Fundamentals! |
| Strategic Fit 5 ▪ The ONE Group Hospitality, Inc. is acquiring Safflower Holdings Corp., the owner of Benihana Inc. (“Benihana”), a leading operator of highly differentiated experiential brands that owns the only national teppanyaki brand in the U.S. and owns RA Sushi ▪ Combines top entertainment brands in the industry and aligns with our vision of the Company being the undisputed global leader in VIBE dining ▪ Sizable and meaningful publicly traded company after transaction ▪ Creates a scaled platform and further enables The ONE Group to diversify and strengthen its industry leading portfolio of world-class, experiential restaurant concept ▪ Leverages existing franchise platform for additional asset-light development opportunities ▪ Generates significant synergies ▪ Retail & CPG presence for Benihana is significant ▪ Kona Grill and RA Sushi combined becomes a sizable and relevant grill business ▪ Provides compelling economics for shareholders both near and long-term ▪ Combined business will generate meaningful free cash flow enabling debt reduction and shareholder friendly capital allocation ▪ Expected to be accretive to diluted earnings per share |
| Footprint – 168 Venues Internationally and Growing 6 Full-Service Entertainment Restaurants (114) Grill Restaurants (46) One Hospitality F&B (8) Hospitality Services Hospitality Services Milan Radio Hospitality Services London, UK (1) 27 Domestic ~$150MM System-wide Revenue Brand 19 Domestic ~$80MM System-wide Revenue Brand 28 International ~$350MM System-wide Revenue Brand 86 Americas ~$500MM System-wide Revenue Brand |
| Benihana: An Iconic Pioneer in Entertainment Dining with Far Reaching Press 7 Lester Kasai, “The Benihana” Police Academy 2 1990’s 2000’s 2010’s 2020’s Joshua Weissman Influencer 8M subscribers 8M subscribers |
| Benihana: One-of-a-Kind, Celebratory Experience Drives Strong Brand Advocacy 8 58% 62% 70% 80% +11 MOMENTS WORTH CELEBRATING STRONG BRAND ADVOCACY TIMELESS APPEAL TRANSCENDS GENERATIONS Net Promotor Score (1) (Represents NPS “Gap” vs. Full-Service Average) GenX 12% Baby Boomers 18% GenZ 8% Millennials 62% Generation HH Income <$50K 24% $50K - $75K $75K - 16% $100K 15% $100K - $150K 25% $150K+ 19% #1 Fun Place to Go Benihana Fogo de Chão P.F. Chang’s Outback Steakhouse CREATING GREAT GUEST MEMORIES!! 78% 75% 71% 64% Fogo de Chão Outback Steakhouse P.F. Chang's Overall Guest Satisfaction Source: 2022 Beall Research Report (1) How likely are you to recommend the following restaurants to a friend or colleague (1-10)? NPS calculated by subtracting detractors (% 1-6) from promoters (% 9-10) and multiplying by 100 |
| The Undisputed Global Leader in VIBE Dining VIBE DINING Iconic & Highly Differentiated Experiential Brands High Quality, Flavorful and Craveable Menu World Class Bar Program Memorable Hospitality & Exceptional Service Fun, Vibrant & Energizing Environment 9 |
| United Kingdom Proven & Scalable Global Platform with Compelling Whitespace (1) Comprised of 69 Company-owned and 8 U.S. and 4 international franchise restaurants and includes 5 Co-Branded Arenas/ Stadiums 10 168 Total Venues Across 32 States and 12 Countries Puerto Rico UAE Qatar Mexico Spain Italy Canada Panama El Salvador Brazil Aruba STK (28) Kona Grill (27) F&B Venues (8) Benihana (86) RA Sushi (19) Benihana & STK (1) |
| Proof of Concept: (Number of Years) 19+ Years 24+ Years 55+ Years 26+ Years Real Estate Flexibility: (Targeted Square Feet) 8,000-10,000 sq. ft. 7,000-8,000 sq. ft. 8,000 sq. ft. 5,000 sq. ft. Distinct Dining Occasions: (Per Person Average Check) $130 $37 $46 $31 Menu Mix: Channel Mix: Powerful Unit Level Economics: (Average Unit Volume, $mm) $17.3 $5.2 $6.5 $4.0 Highly Complementary Brands that Diversify the Portfolio and Guest Base 11 73% 27% 76% 24% Food Mix Beverage Mix A La Carte Event Sales Takeout / Delivery 90% 6%4% 89% 11% 87% 13% 88% 12% 79% 21% 80% 20% Note: Benihana and RA Sushi results as of FY 2023 Note: Per person average check for Kona Grill is calculated by taking the average check size of $63 and dividing it by an estimate of 1.7 guests per check |
| Proven Acquisition & Integration Capabilities 12 Existing Capabilities to Support Platform Acquisitions Best-in-Class Leadership Team Robust R&D and Culinary Capabilities Investments in Employee Training & Development Leading Operating Model Infrastructure Built to Deliver Consistent, Exceptional Service Kona Grill Acquisition Created Significant Value Digital Marketing Capabilities High Impact Sales Drivers and Operational Improvements Driving Significant Performance Improvement at Kona Grill ◼ Focused menu reengineering ◼ Menu innovation around craveable food offerings ◼ Revived bar and patio program featuring live music ◼ Aggressive and sustained marketing activities ◼ Improved restaurant-level execution ◼ Access to robust social and digital marketing capabilities ◼ Suburban footprint AUV ($mm) +24% ROI +11 Pts Note: Performance for 24 acquired restaurants |
| Core Values Supporting Our Strategy Strategic: Set Goals => Execute => Measure => Reward 13 Believe in the Power of ONE (“Pof1”) ONE Team – ONE Mission - ONE Goal Honesty *** Integrity *** Fact Based *** Accountability 37 Change is the ONLY Constant Leverage Corporate G&A |
| Execution: Best at Four Wall Execution - Best in Class at Guest Experience Reservations: Brilliant at Managing the Books Delivery & Takeout: Establish, Execute and Promote Outreach: Dominate the Four Blocks Holidays: Celebrate and Convert Gift Cards: Top of Mind Awareness - Advocate Happy Hour: Build a Value and Entry-Level Layer / Convert to Dinner Digital: Expand, Innovate and Win Craveable: Flavorful and Memorable-Have to Have it Again Easy to Execute: Consistent and Operations Friendly Newsworthy: Innovative / Seasonal Instagramable: Visually or Physically Engaging STRATEGY PILLARS Vision: The Undisputed Global Leader In VIBE Dining. Mission: To be the BEST Restaurant In Every Market That We Operate by Delivering Exceptional and Unforgettable Guest Experiences to Every Guest, Every Time. Operations Marketing Culinary 14 The Core |
| Transaction Summary 15 Consideration • $365 million enterprise value, paid in cash Transaction Multiple • 5.2x FY 2023 Benihana Run Rate Adj. EBITDA of ~$70 million • 4.1x FY 2023 Benihana Run Rate Adj. EBITDA of ~$90 million with expected synergies Synergies • Expect to achieve up to $20.0 million in annual synergies (over two years) • $10.0 to $15.0 million expected in one-time integration costs Capital Structure • Funded with new debt financing arranged by Deutsche Bank for $390 million, comprised of $350 million term loan B and $40 million revolving credit facility (expected to be undrawn at close) • No financial covenants on the term loan • Low amortization • 2.2x Leverage (1) • SOFR + 650 for the senior term loan • SOFR + 600 with step downs for the revolver • Funded with new preferred equity from Hill Path Capital for $160 million (2) • PIK interest initially 13% • Nearly $100 million in estimated excess liquidity at close Conditions • Subject to customary regulatory approvals (1) Net Debt / TTM Run-rate EBITDA with Synergies = $295 million / $137 million (2) Hill Path Capital will be issued the majority of the preferred equity |
| Additional Estimates 16 Capitalization • Cash • Debt • Net Debt • Preferred Equity • Share Count $21 $74 $53 $0 31.3 $55 $350 $295 $160 33.0 $34 $276 $242 $160 1.7 Financial • Venue Count • TTM System-wide Revenue • TTM GAAP Revenue • TTM Adjusted EBITDA • TTM Run-rate EBITDA • Projected Synergies • TTM Run-rate EBITDA with Synergies 63 $436 $333 $40 $47 $0 $47 168 $1,039 $847 $105 $117 $20 $137 105 $603 $514 $65 $70 $20 $90 $ in Millions BEFORE AFTER CHANGE *Benihana’s TTM financial measures represent the 364 days ending December 31, 2023, and they are unaudited **Company expects that it will take 24 months to realize synergies post-closing. ***After reflects addition of h C mpany’s capi a iza i n and financial results and estimated capitalization impacts of the transactions and Benihana's standalone TTM financial results, without giving effect to any pro forma or other adjustments. |
| Expected Sources and Uses of Cash 17 New Term Loan (Net of OID) $338.3 Preferred Equity (Net of OID) 152.0 Total Sources $490.3 Purchase Price $365.0 Paydown of Existing Debt 76.2 Transaction Expenses 15.0 Cash to Balance Sheet 34.1 Total Uses $490.3 Sources Uses |
| Benihana Consolidated SSS Trailing Eight Quarters 18 |
| Path to Five Billion (1) 19 • 3-5 annual STK unit growth • 3-5 annual Kona Grill unit growth • 3-5 annual Benihana unit growth • 1-3 new F&B Hospitality managed deal 15%+ Consistent Adjusted EBITDA Growth Long-Term Growth Targets* • Same store sales growth of 3% - 5% • Maintain strong restaurant-level EBITDA margins • Benefit from economies of scale and operating efficiencies • Focus on capital light • Disciplined G&A management (1) System-wide revenue |
| The ONE Group Highlights 20 Fast Growing Hospitality Company Strong Management Team and Infrastructure to Support Growth Multiple Levers to Drive Revenues and Profitability Significant Pipeline for Unit Growth in 2024 and Beyond Strong Portfolio of High Volume, High Margin Brands with Industry Leading ROIC Acquisitions can Further Enhance our Brand Portfolio and Unit Pipeline Well Positioned for Significant Growth in a Transforming Hospitality Sector Share Buybacks Creating Value For Shareholders Strong Economics Drives Flexibility |
| Reconciliation of Non-GAAP Financial Measures 21 (1) Benihana’s TTM financial measures represent the 364 days ending December 31, 2023, and they are unaudited (2) Other addbacks include non-cash expenses, transaction expenses, one-time litigation and other miscellaneous one-time items. For other information please refer to the Company’s 10-K filed for the year ended December 31, 2023 The ONE Group Benihana Net Income $4.0 $5.8 Income Taxes (1.8) 2.6 Interest Expense 7.0 34.2 D&A Expense 15.7 17.1 Pre-opening Expense 8.9 2.3 Stock-based Compensation 5.0 0.0 Other Addbacks(2) $1.3 3.2 Adjusted EBITDA $40.1 $65.2 2023 and TTM Financials(1) |
