KWM Proposes Significantly Improved Financing Terms for Village Inn / Bakers Square Acquisition

Coral Springs, FL, June 28, 2021 (GLOBE NEWSWIRE) -- Dear BBQ Holdings Board of Directors,

Congratulations on the exceptional purchase of Village Inn & Bakers Square, we look forward to the sizeable free cash flow and growth this new asset will provide – along with BBQ Holdings, Inc. (NASDAQ:BBQ) existing businesses. We are troubled by the dilution given the $21M in cash on the balance sheet combined with a robust free cash flow outlook and stark undervaluation of the shares. We are offering the company a $5M convertible preferred financing at 5% and convertible into common stock at $20/share, with few restrictive covenants. We urge the board to act in the best interest of shareholders by accepting our "balance sheet strengthening" preferred financing that will significantly minimize previously planned dilution of common stock.

A $5M preferred at 5% with few covenants and convertible at $20/share is clearly significantly more beneficial to shareholders than selling common stock at a net price in the low teens, and especially given the company will have net cash post raise! 

TERM SHEET

CONVERTIBLE PREFERRED FINANCING OF BBQ HOLDINGS, INC.

6/28/2021

The following is a summary of the basic terms and conditions of a proposed convertible preferred financing. This term sheet is for discussion purposes only and is not binding on the Company or the Investors (as defined below), nor is the Company or any of the Investors obligated to consummate the convertible preferred financing until a definitive purchase agreement has been agreed to and executed by the Company and the Investors.

Issuer: BBQ Holdings, Inc. ("BBQ Holdings" or the "Company").

Investors: Kanen Wealth Management LLC, or any of its affiliates ("Kanen").

Issue: $5 million in convertible preferred stock issued to Kanen Wealth Management, LLC, convertible into 250,000 common shares calculated at $20.00 (the "Conversion Price"), provided that the Conversion Price and the number of shares issuable shall be adjusted upon reverse and forward stock splits and the like.

Conversion: The Convertible Preferred Stock is convertible into 250,000 shares of common stock at a conversion price of $20.00 per common share, at any time at the option of the holder, subject to certain customary adjustments as described in the prospectus supplement. The initial conversion price and the conversion price as adjusted are referred to as the "Conversion Price". The Company may elect to automatically convert some or all of the Convertible Preferred Stock into shares of common stock if the closing price of the common stock has exceeded $25 for at least 20 out of 30 consecutive trading days ending within five trading days prior to the notice of automatic conversion.

Maturity Date: Unless earlier repaid or converted, outstanding principal and unpaid accrued dividends on the preferred will be due and payable upon request of Kanen made on or after the date which is 60 months from the date of the Preferred Purchase Agreement (the "Maturity Date").

Dividends: dividends will accrue on an annual basis at the rate of 5% per annum based on a 365 day year.

Change of Control: If the Company is acquired prior to the Qualified Financing, then at the Investor's option, either (i) Investor will receive an aggregate amount equal to 1.5 times the aggregate amount of outstanding principal and accrued but unpaid dividends, or (ii) such Investor's preferred will be converted into shares of Common Stock at a conversion price implied by a USD $20 fully-diluted valuation.

Documentation: The preferred will be issued and sold pursuant to a convertible preferred purchase agreement prepared by the Investors' legal counsel and will contain customary representations and warranties of the Company and the Investors (the "Convertible Preferred Purchase Agreement"). The Convertible Preferred Purchase Agreement and the preferred may be amended, or any term thereof waived, upon the written consent of the Company and Kanen.

Protective Provisions: In addition to any other vote or approval required under the Company's Bylaws, the Company will not, without the written consent of the Majority Holders, either directly or by amendment, merger, consolidation, or otherwise: (i) Create or authorize the creation of or issue any new class or series of stock or any other security convertible into or exercisable for any equity security (by reclassification, amendment or alteration of any existing security, or otherwise), having rights, preferences or privileges senior to or on parity with the Preferred Stock; (ii) Amend, alter or repeal any provision of the Bylaws; (iii) Become obligated under any loan or guarantee of indebtedness (other than indebtedness to financial institutions) in excess of USD $15,000,000 in the aggregate.

Representations and Warranties: Standard representations and warranties by the Company.

Fees and Expenses: Company to pay all legal and administrative costs of the financing at Closing, including reasonable fees and expenses (not to exceed USD $10,000) of the Investors' counsel.

Governing Law: The preferred shall be governed by and construed in accordance with the laws of New York, without giving effect to principles of conflicts of law.

This term sheet is non-binding and is intended solely as a summary of the terms that are currently proposed by the parties. The parties acknowledge that they neither intend to enter, nor have they entered, into any agreement to negotiate a definitive agreement pursuant to this term sheet, and either party may, at any time prior to execution of such definitive agreement, propose different terms from those summarized herein or unilaterally terminate all negotiations pursuant to this term sheet without any liability whatsoever to the other party. BBQ Holdings will be liable for fees, costs and other expenses in conjunction with negotiation and preparation of a final agreement pursuant to this term sheet.

Acknowledged and agreed:

BBQ Holdings, Inc.

By: ________________________________

Name: Jeff Crivello

Title:  CEO

Date: ______________________________

Kanen Wealth Management, LLC.

By: ________________________________

Name: David Kanen

Title: President

Date: ______________________________

Kanen Wealth Management, LLC.
David Kanen
[email protected]