Item 1.01 Entry into a Material
Definitive Agreement.
On November 8, 2019, Allegro Merger Corp.,
a Delaware corporation (“Allegro”), entered into an Agreement and Plan of Merger (“Merger Agreement”) by
and among Allegro, Allegro Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Allegro (“Merger Sub”),
TGIF Holdings, LLC, a Delaware limited liability company (“TGIF”), TGIF Midco, Inc., a Delaware corporation (“Midco”),
and Rohit Manocha, solely in his capacity as the initial representative of the equityholders of TGIF and Midco.
TGIF and Midco are holding companies for
the TGI Friday’s business, an American casual dining bar and grill concept with approximately 840 locations in more than
55 countries.
Pursuant to the Merger Agreement, (i) TGIF
will distribute all of the shares of Midco held by TGIF to its equityholders (the “Distribution”), (ii) immediately
following the Distribution, Merger Sub will merge with and into Midco, with Midco surviving ( the “Merger”), and (iii)
immediately following the Merger, Midco will merge with and into Allegro with Allegro surviving (the “Second Merger”,
and together with the Distribution, the Merger, and the other transactions contemplated by the Merger Agreement, the “Transactions”).
As a result of the Transactions, Allegro will become the holding company for the TGI Friday’s business.
Under the Merger Agreement, the equityholders
of Midco following the Distribution will receive an aggregate of $30,000,000 in consideration, in the form of cash and shares of
Allegro common stock, with the mix of cash and shares of Allegro common stock to be determined at the option of the equityholders,
subject to the requirement that at least 40% of such aggregate consideration is received in shares of Allegro common stock. The
equityholders of TGIF and Midco will also have the right to receive up to 2,000,000 shares of Allegro common stock if (i) Allegro’s
EBITDA equals or exceeds $70,000,000 as reported in Allegro’s annual report on Form 10-K for the year ended December 31,
2020, December 31, 2021, or December 31, 2022 or (ii) the reported last sale price of Allegro’s common stock equals or exceeds
$15.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations or other similar actions) for
any 20 consecutive trading days at any time after the closing of the Transactions and prior to December 31, 2022.
The equityholders of Midco receiving shares
of Allegro’s common stock upon the closing of the Transactions will be subject to a lockup period for all shares of Allegro’s
common stock received as part of the closing consideration, which terminates on the earlier of (i) December 15, 2020, (ii) Allegro’s
completion of a liquidation, merger, stock exchange, or other similar transaction that results in all holders of Allegro’s
common stock having the right to exchange their shares of Allegro common stock for cash or other property, or (iii) the reported
closing sale price of Allegro’s common stock on Nasdaq equals or exceeds $12.00 per share (as adjusted for share splits,
share dividends, reorganizations and recapitalizations) for a period of 20 consecutive trading days during a 30-trading day period
commencing at least 150 days after the closing of the Transactions.
Upon the closing of the Transactions, Cowen
and Company, LLC (“Cowen”) will be entitled to a facilitation fee in the amount of (i) $3,800,000 payable in cash,
(ii) an aggregate of 796,875 shares of common stock of Allegro to be transferred from certain of Allegro’s officers, directors,
and holders of Allegro’s common stock issued prior to Allegro’s initial public offering (“Founder Shares”),
and (iii) an aggregate of up to an additional 478,125 Founder Shares if Allegro requests assistance from Cowen to raise additional
capital to satisfy the Minimum Cash Condition (defined below), with the number of Founder Shares transferrable to be determined
by a ratio set forth in the Merger Agreement. For one year after the closing of the Transactions, all Founder Shares transferred
to Cowen will remain in escrow and continue to be subject to the transfer restrictions applicable to such shares prior to such
transfer.
The Transactions are expected to be consummated
in the first quarter of 2020, following receipt of the required approval by the stockholders of Allegro and the fulfillment of
other conditions.
The following summaries of the Merger Agreement
and the other agreements to be entered into by the parties are qualified in their entirety by reference to the text of the Merger
Agreement and agreements entered into in connection therewith. The Merger Agreement is attached as an exhibit hereto and incorporated
herein by reference.
Representations and Warranties
The Merger Agreement contains representations
and warranties of TGIF relating, among other things, to proper organization and qualification; subsidiaries; capitalization; the
authorization, performance and enforceability against TGIF of the Merger Agreement; absence of conflicts; consent, approval or
authorization of governmental authorities; financial statements; absence of undisclosed liabilities; absence of certain changes
or events; litigation; compliance with laws; material contracts; matters relating to TGIF’s franchisees and suppliers; benefit
plans; labor matters; tax matters; brokers’ fees; insurance; assets and real property; environmental matters; transactions
with affiliates; internal controls; intellectual property matters; permits; and disclosures made to selling equityholders of TGIF
who sold TGIF equity interests in October 2019.
The Merger Agreement contains representations
and warranties of each of Allegro and Merger Sub relating, among other things, to proper organization and qualification; subsidiaries;
the authorization, performance and enforceability against Allegro and Merger Sub of the Merger Agreement; absence of conflicts;
litigation; consent, approval or authorization of governmental authorities; trust account; brokers’ fees; reports filed with
the Securities and Exchange Commission (“SEC”), financial statements, Sarbanes-Oxley Act and absence of undisclosed
liabilities; transactions with affiliates; board approval; fairness opinion with respect to the Merger; business activities; tax
matters; capitalization; compliance with laws; and Nasdaq listing.
Covenants
The Merger Agreement includes customary
covenants of the parties with respect to business operations prior to consummation of the Transactions, confidentiality and exclusivity,
and efforts to satisfy conditions to the consummation of the Transactions.
The Merger Agreement also contains additional
covenants of the parties, including, among others, covenants providing for Allegro and TGIF to cooperate in the preparation of
the proxy statement required to be prepared in connection with the Transactions (the “Proxy Statement”).
Conditions to Closing
General Conditions
Consummation of the Transactions is conditioned
on approval by Allegro’s stockholders. In addition, the consummation of the Transactions is conditioned upon, among other
things:
|
●
|
all specified waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended shall have expired and no order, judgment, injunction, decree, writ, stipulation,
determination or award, in each case, entered by or with any governmental authority or statute, rule or regulation that is in
effect and prohibits or enjoins the consummation of the Transactions;
|
|
●
|
Allegro having at least $5,000,001 of net tangible assets
remaining immediately prior to, or upon the closing of, the Transactions, after taking into account the holders of Allegro’s
common stock that properly demanded that Allegro redeem their shares of common stock for their pro rata share of the trust account;
and
|
|
●
|
no material adverse effect with respect to Allegro or TGIF
shall have occurred between the date of the Merger Agreement and the closing of the Transactions
|
TGIF’s Conditions to Closing
The obligations of TGIF to consummate the
Transactions are also conditioned upon, among other things:
|
●
|
the accuracy of the representations and warranties of Allegro
and Merger Sub (subject to certain bring-down standards);
|
|
●
|
performance of the covenants of Allegro and Merger Sub
required by the Merger Agreement to be performed on or prior to the closing;
|
|
●
|
Allegro having at least $30,000,000 cash on hand as of
the closing and assuming distribution of the trust account, and after deducting (a) all amounts to be paid to holders of Allegro’s
common stock that elect to have their shares converted to cash in connection with the Transactions, (b) all amounts due in respect
of loans permitted under the Merger Agreement, (c) TGIF’s financial advisory, legal, accounting and other transaction expenses
(up to $1,500,000), (d) Allegro’s financial advisory, legal, accounting and other transaction expenses, (e) the facilitation
fee payable to an affiliate of TriArtisan pursuant to the Merger Agreement and (f) the amount of the cash consideration payable
to Midco equityholders at closing pursuant to elections made by such holders under the Merger Agreement (the “Minimum Cash
Condition”);
|
|
●
|
Allegro and the persons currently party to the registration
rights agreement in place among Allegro and certain of its shareholders executing and delivering the Registration Rights Agreement
(defined below);
|
|
●
|
resignations and appointments as specified in the Merger
Agreement;
|
|
●
|
the filing and effectiveness of amended and restated organizational
documents of Allegro; and
|
|
●
|
Allegro’s common stock continuing to be listed on
the Nasdaq Capital Market.
|
Allegro’s and Merger Sub’s Conditions to Closing
The obligations of Allegro and Merger Sub
to consummate the Transactions are also conditioned upon, among other things:
|
●
|
the accuracy of the representations and warranties of TGIF
(subject to certain bring-down standards);
|
|
●
|
performance of the covenants of TGIF required by the Merger
Agreement to be performed on or prior to the closing; and
|
|
●
|
the absence of insider loans.
|
Waivers
Either Allegro or TGIF may waive any inaccuracies
in the representations and warranties made to such party contained in the Merger Agreement or in any document delivered pursuant
to the Merger Agreement and waive compliance with any agreements or conditions for the benefit of itself or such party contained
in the Merger Agreement or in any document delivered pursuant to the Merger Agreement. Notwithstanding the foregoing, pursuant
to Allegro’s current amended and restated certificate of incorporation, Allegro cannot consummate the Transactions if it
has less than $5,000,001 of net tangible assets remaining immediately prior to or upon the closing of the Transactions after taking
into account the holders of Allegro’s common stock that properly demanded that Allegro redeem their shares of common stock
for their pro rata share of the trust account.
Termination
The Merger Agreement may be terminated at any time, but not
later than the closing, as follows:
|
●
|
by mutual written consent
of Allegro and TGIF;
|
|
●
|
by either Allegro or TGIF
if the Transactions are not consummated on or before March 31, 2020, provided that the right to terminate the Merger Agreement
will not be available to any party whose action or failure to act has been a principal cause of or primarily resulted in the failure
of the Transactions to occur on or before such date and such action or failure to act constitutes a breach of the Merger Agreement;
|
|
●
|
by either Allegro or TGIF if a governmental entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the merger, which order, decree, judgment, ruling or other action is final and non-appealable;
|
|
|
|
|
●
|
by either Allegro or TGIF if, at the Allegro stockholder meeting called to approve the Transactions, the matters presented to the stockholders fail to be approved by the required vote (subject to any adjournment or recess of the meeting).
|
|
|
|
|
●
|
by either Allegro or TGIF if Allegro has less than $5,000,001 of net tangible assets remaining immediately prior to, or upon the closing of, the Transactions, after taking into account the holders of Allegro’s common stock that properly demanded that Allegro redeem their shares of common stock for their pro rata share of the trust account;
|
|
|
|
|
●
|
by TGIF if the Minimum Cash Condition is not satisfied; or
|
|
|
|
|
●
|
by either Allegro or TGIF if the other party has breached any of its covenants or representations and warranties in any material respect which cannot be cured or, if curable, and has not been cured within thirty days of the notice of an intent to terminate, provided that the terminating party is itself not in material breach.
|
Registration Rights Agreement
The former equityholders of TGIF and Allegro’s
sponsor and other holders of Allegro’s common stock issued prior to Allegro’s initial public offering (the “Allegro
Founders”) will enter into an agreement (“Registration Rights Agreement”) with Allegro pursuant to which such
shareholders will be granted certain rights to have registered, in certain circumstances, the resale under the Securities Act of
the common stock of Allegro held by them, subject to certain conditions set forth therein. The Registration Rights Agreement will
replace a prior registration rights agreement entered into between Allegro and the Allegro Founders in connection with the initial
public offering.