Item 2.01 Completion of Acquisition or Disposition of Assets.
On September 5, 2018, ARC Group, Inc. (the "Company") announced in a Current
Report on Form 8-K various transactions that we hereby incorporate by reference
(the "Company's Fat Patty's Announcement").
On September 5, 2018, the Company's Fat Patty's Announcement disclosed that on
August 30, 2018, the Company completed its acquisition of all of the assets
associated with the Fat Patty's restaurant franchise ("Fat Patty's") pursuant to
the terms of that certain Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated August 3, 2018, by and among the Company, CSA, Inc., a West
Virginia corporation, CSA Investments, LLC, a West Virginia limited liability
company, CSA of Teays Valley, Inc., a West Virginia corporation, CSA, Inc. of
Ashland, a Kentucky corporation, Fat Patty's, LLC, a West Virginia limited
liability company, and Clint Artrip, an individual (the "Fat Patty's
Acquisition").
On September 5, 2018, the Company's Fat Patty's Announcement disclosed that on
August 30, 2018, the Company completed its previously announced sale of all of
the real property acquired in the Fat Patty's Acquisition to Store Capital
Acquisitions, LLC, a Delaware limited liability company ("Store Capital"),
pursuant to the terms of that certain Purchase and Sale Agreement (the "Purchase
and Sale Agreement"; together with the Asset Purchase Agreement, the "Purchase
Agreements"), dated August 3, 2018, with Store Capital. The real property
consists of the four properties upon which the Fat Patty's restaurants acquired
in the Asset Acquisition are located (collectively, the "Properties").
On September 5, 2018, the Company's Fat Patty's Announcement disclosed that on
August 30, 2018, the Company entered into a secured convertible promissory note
(the "Note") with Seenu G. Kasturi pursuant to which the Company borrowed
$622,929.17 to help finance the Fat Patty's Acquisition. All principal and
accrued but unpaid interest is due and payable by the Company in full on the
earlier of (i) the fifth (5th) anniversary of the date of the Note, or (ii) the
date that Mr. Kasturi demands repayment in full by providing written notice
thereof to the Company. Interest accrues at the rate of six percent per annum
and is payable in full on the maturity date. Mr. Kasturi has the right, at any
time during the term of the Note and from time to time, to convert all of any
portion of the outstanding principal of the Note, together with accrued and
unpaid interest payable thereon, into shares of the Company's Class A common
stock, par value $0.01 per share ("Common Stock") at a conversion rate of $1.36
per share. The note is secured by all of the assets of the Company.
Mr. Kasturi serves as the CEO and Chairman of the Board of Directors for ARC
Group and owns approximately 6.8% of the issued and outstanding shares of Common
Stock and 100% of the issued and outstanding shares of Series A Convertible
Preferred Stock.
Also on August 30, 2018, the Company entered into a master lease agreement (the
"Master Lease") with Store Capital pursuant to which the Company leased each of
the Properties from Store Capital. The initial term of the lease expires on
August 31, 2038. The Company has the option to extend the term of the lease for
four additional successive periods of five years each. The aggregate base annual
rent is $876,875 and is subject to annual increases commencing September 1, 2019
in an amount equal to the lesser of: (i) 1.75%, or (ii) 1.25 times the change in
the Consumer Price Index. The Company is responsible for all costs and
obligations relating to the Properties. The transactions contemplated by the
Purchaser Agreements, the Note and the Master Lease are sometimes referred to
herein collectively as the "Transactions".
The Purchase Agreements, the Note and the Master Lease (the "Transaction
Agreements") have been included solely to provide readers with information
regarding their respective terms. They are not intended to be a source of
financial, business or operational information about the parties thereto or
their respective subsidiaries or affiliates, if any. The representations,
warranties and covenants contained in the Transaction Agreements were made
solely for purposes of the agreements and as of specific dates, were made solely
for the benefit of the parties thereto, and may be subject to qualifications and
limitations agreed upon by the parties, including being qualified by
confidential disclosures. The representations, warranties and covenants may have
been made for the purpose of allocating contractual risk between the parties to
the agreements instead of establishing matters as facts, and may be subject to
standards of materiality applicable to the parties to the agreements that differ
from those applicable to readers. Readers should not rely on the
representations, warranties and covenants or any description thereof as
characterizations of the actual state of facts or condition of the parties to
the Transaction Agreements or their respective subsidiaries or affiliates, if
any. Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after the date of the Transaction
Agreements, which subsequent information may or may not be fully reflected in
the Company's filings with the Securities and Exchange Commission ("SEC") or
other public disclosures.
The foregoing description of the Asset Purchase Agreement, Purchase and Sale
Agreement, Note and Master Lease does not purport to be complete and is
qualified in its entirety by reference to the Asset Purchase Agreement and
Purchase and Sale Agreement, which were filed as Exhibits 2.1 and 10.1,
respectively, to the Company's current Report on Form 8-K filed with the SEC on
August 9, 2018, and incorporated by reference herein, and to the Note and Master
Lease, copies of which were filed as Exhibits 10.2 and 10.3, respectively, on
September 5, 2018 in the Company's Fat Patty's Announcement and incorporated by
reference herein. We hereby amend that September 5, 2018 Current Report to
include the Audited Financial Statements of CSA, Inc. and Affiliates
Item 9.01 Financial Statements and Exhibits.
(a) Audited Financial Statements of CSA, Inc. and Affiliates d.b.a. Fat Patty's
filed herewith as Exhibit 99.1 are for the fiscal years ended December 31,
2018 and 2017.
(b) Audited Financial Statements of CSA, Inc. and Affiliates d.b.a. Fat Patty's
filed herewith as Exhibit 99.2 are for the fiscal years ended December 31,
2017 and 2016.
(c) Exhibits
Exhibit
Number Description
2.1 Asset Purchase Agreement, dated August 3, 2018, by and among ARC
Group, Inc., CSA, Inc., CSA Investments, LLC, CSA of Teays Valley,
Inc., CSA, Inc. of Ashland, Fat Patty's, LLC and Clint Artrip
(incorporated by reference to Exhibit 2.1 to ARC Group, Inc.'s Current
Report on Form 8-K filed with the SEC on August 9, 2018)*
10.1 Purchase and Sale Agreement, dated August 3, 2018, by and between
ARC Group, Inc. and Store Capital Acquisitions, LLC (incorporated by
reference to Exhibit 2.1 to ARC Group, Inc.'s Current Report on Form
8-K filed with the SEC on August 9, 2018)
10.2 Secured Convertible Promissory Note, dated August 30, 2018, by and
between ARC Group, Inc. and Seenu G. Kasturi (as filed with the
Commission on September 5, 2018)
10.3 Master Lease Agreement, dated August 30, 2018, by and between ARC
Group, Inc. and Store Capital Acquisitions, LLC (as filed with the
Commission on September 5, 2018)
99.1 Audited Financial Statements of CSA, Inc. and Affiliates d.b.a. Fat
Patty's for the fiscal years ended December 31, 2018 and 2017.
99.2 Audited Financial Statements of CSA, Inc. and Affiliates d.b.a. Fat
Patty's for the fiscal years ended December 31, 2017 and 2016.
© Edgar Online, source Glimpses