CONTRIBUTION AGREEMENT by and between PARADISE ON WINGS FRANCHISE GROUP, LLC, and AMERICAN RESTAURANT CONCEPTS, INC.

 

 

 

 

 

 

 

 

This Contribution Agreement (this “Agreement”), is entered into effective as of the 20th day of January, 2014 (the “Effective Date”), by and between Paradise on Wings Franchise Group, LLC, a Utah limited liability company (the “Company”), and American Restaurant Concepts, Inc., a Florida corporation (the “Purchaser”).

 

 

A.          The Company owns the “Wing Nutz” brand and operates and franchises wing-themed casual-dining restaurants.

 

B.           The Purchaser desires to invest in the Company, and accordingly, the Company will issue to Purchaser in consideration of its investment as set forth herein a “Class B” membership interest in the Company that will, upon the completion of the transactions contemplated by this Agreement, represent a fifty (50%) ownership interest in the Company (the “50% Interest”), pursuant to the terms and conditions set forth in this Agreement.

 

C.           The members of the Company immediately prior to the transactions contemplated by this Agreement are as set forth on Schedule I attached hereto (the “Members”).

 

D.           The parties desire to treat this transaction as if Purchaser invested in the Company as of January 20, 2014, and the Operating Agreement of the Company will reflect the interest of Purchaser in the Company as of January 20, 2014.

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

 

1.             Contribution in Consideration of Issuance of the 50% Interest.

 

1.1           Issuance of the 50% Interest. Subject to the terms and conditions of this Agreement, the Company agrees to immediately issue to Purchaser or into escrow at the Closing (as defined below) the 50% Interest to American Restaurant Concepts, Inc., and Purchaser agrees to contribute to the Company a total contribution of $400,000.00 in cash, with the Company acknowledging receipt of $350,000.00 prior to Closing and with the balance due being $50,000.00, and $400,000 worth of shares of Purchaser’s (“ARC”) common stock (valued at the listed opening bid price of the ARC stock on OTCMarkets.com on the morning of Closing) (the “ARC Shares”) (such cash and ARC Shares collectively the “Contribution”).

 

 

1.2           The Closing.  The closing of the Contribution to the Company, and the Company’s issuance of the 50% Interest to the Purchaser (the “Closing”) shall take place no later than January 20, 2014.  At the Closing, Purchaser shall (i) contribute to the Company the balance due of the cash portion ($50,000) of the Contribution by check, wire transfer or such other form of payment as shall be mutually agreed upon by Purchaser and the Company, (ii) deliver the ARC Shares to the Company, and (iii) execute and deliver a copy of the Amended and Restated Operating Agreement of the Company to the Company, substantially in the form attached hereto as Exhibit B (as the same may be amended from time to time, the “Operating Agreement”), and the Company shall (i) transfer the 50% Interest to the Purchaser, and (ii) deliver a copy of the Amended and Restated Operating Agreement executed by a majority of the Members to the Purchaser.

 

1.3           Restructure of Ownership in the Company.

 

(a)           In General.  Prior to the Effective Date, the Members of the Company own 100% of the Company.  Concurrent with the Contribution and issuance of the 50% Interest to Purchaser, the Members’ ownership interest in the Company shall be converted to 117.65 “Class A” Membership Units having a preferred right to distributions from the Company of the ARC Shares (as compared to the “Class B” Membership Units), and the Company shall issue Purchaser collectively 117.65 “Class B” Membership Units of the Company (which shall be identical to the Class A Membership Units in all respects except for preferential rights to distributions described above and in the Company’s Amended and Restated Operating Agreement).  The Members shall receive collectively 117.65 Class A Membership Units, and Purchaser shall receive collectively 117.65 Class B Membership Units.  The Operating Agreement reflects the ownership of the Company after giving effect to the issuance of the 50% Interest, with the Members holding in the aggregate 100% of the Class A Membership Units and Purchaser holding 100% of the Class B Membership Units.

 

(b)           Intent and Effect of Transaction.  The intent and effect of the transaction is to treat Members and Purchaser as if each were Members of the Company as of January 20, 2014 and as if Purchaser had invested in the Company on January 20, 2014.  For all tax return filing and reporting purposes, Purchaser shall be treated as a member of the Company from and after January 20, 2014.  With the exception of any gain, income, or loss associated with Company’ ownership of the ARC Shares, which shall be allocated exclusively to the Class A unitholders,  Purchaser shall be entitled to 50% of all items of income, gain, losses, deductions and expenses (the “Items”) of the Company after January 20, 2014.  The Operating Agreement shall reflect and embody the provisions of the prior two sentences.  The parties confirm and agree that the provisions of this Section 1.3 reflect the parties’ intent and the provisions of this Agreement and the Operating Agreement shall be interpreted, and all tax reports and returns shall be filed, consistent with this intent.

 

1.4           Use of Contribution Funds.  The Company agrees that it will not use the Contribution funds to pay salaries or bonuses to any of the Company’s Members, employees and/or managers’ salaries, and agrees to use the funds only according to the following purposes:  repayment of debt associated with expansion efforts, additional marketing efforts, payment of finders’ fees, and legal and accounting fees, by a vote of sixty (60%) percent of the total Class A and Class B Membership Units, after the Closing.

 

 

2.             Representations and Warranties of the Company.  In order to induce Purchaser to enter into this Agreement, the Company represents and warrants to Purchaser as follows, subject to the qualifications set forth in the Schedule of Exceptions attached hereto as Exhibit C (the “Schedule of Exceptions”).

 

2.1           Organization; Good Standing; Qualification.  The Company is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Utah, and has all requisite power and authority to own and operate its properties and assets and to carry on its business as now conducted and as presently proposed to be conducted.  The Company has all requisite power and authority to (i) execute and deliver this Agreement and, such other agreements, instruments, certificates and documents as shall be necessary or desirable to give effect to the transactions contemplated by this Agreement, (ii) issue the 50% Interest, and (iii) carry out the provisions of this Agreement.

 

2.2           Authorization.  All action on the part of the Company, its manager and member necessary for the authorization, execution and delivery of this Agreement and the Operating Agreement, as well as the performance of all obligations of the Company hereunder at the Closing and the authorization, issuance and delivery of the 50% Interest being sold hereunder have been taken or will be taken prior to the Closing, and this Agreement, when executed and delivered, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms.

 

2.3           Title to Properties and Assets; Liens, Etc. The Company owns all of the assets and properties (as referenced in, and except as otherwise specified in, the “Financial Statements”, as defined below) (the “Company Assets”).  Except as set forth in the Schedule of Exceptions, the Company has good and marketable title to the Company Assets, in each case subject to no mortgage, pledge, lien or other encumbrance.  All Company Assets are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used.  The Company does not own any real property.  The Company Assets are sufficient, and no other material tangible assets are necessary, to operate the Company’s business as presently conducted.

 

2.4           Governmental Consents. No consent, approval, qualification, order or authorization of, or filing with, any local, state or federal governmental authority was or is required on the part of the Company in connection with the Company’s valid execution, delivery or performance of this Agreement.

 

2.5           Capitalization and Voting Rights.

 

 

 

 

2.6           Subsidiaries and Related Matters.  The Company owns or controls, directly or indirectly, interests in other corporations, limited liability companies, partnership, associations, or other entities as previously disclosed to the Purchaser.  The Company is not a participant in any joint venture, partnership, strategic alliance or similar arrangement other than as otherwise disclosed.

 

2.7           Registration Rights.  The Company is presently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may subsequently be issued.

 

2.8           Compliance with Other Instruments.  The Company is not in violation or default of any provision of its articles of organization, Operating Agreement, or, in any material respect, of any provision of any mortgage, indenture, agreement, instrument, lease or contract to which it is a party or by which it is bound; or, to its knowledge, of any federal or state judgment, order, writ, decree, statute, rule, regulation or restriction applicable to the Company, its business, operations, assets or properties.  The execution, delivery and performance by the Company of this Agreement, the execution by the Members of the Operating Agreement, and the consummation of the transactions contemplated hereby and thereby, will not result in any such violation or be in conflict with or constitute, with or without the passage of time or giving of notice, either a default under any such provision or an event that results in the creation of any lien, charge, or encumbrance upon any assets of the Company or the suspension, revocation, impairment, forfeiture or non-renewal of any material permit, license, authorization or approval applicable to the Company, its business, operations, assets or properties.

 

2.11         Equity Holder Agreements.  Except as contemplated by this Agreement and the Operating Agreement, there are no agreements between the Company and any of the Company’s equity holders, or among any of the Company’s equity holders, which in any way affect any equity holder’s ability or right to freely transfer or vote such interests (except restrictions designed to provide compliance with securities laws).

 

 

2.12         Offering.  The issuance of the 50% Interest as contemplated by this Agreement is exempt from the registration requirements of the Securities Act, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.

 

2.13         Disclosure.  The Company has provided Purchaser with all the information available to it that is reasonably related or relevant to Purchaser’s decision to make the Contribution and acquire the 50% Interest and all information that the Company believes is reasonably necessary to enable Purchaser to make such decision.  Neither this Agreement nor the Operating Agreement, nor any written statement or certificate made or delivered in connection herewith contains any untrue statement of material fact or omits to state a material fact necessary to make the statements herein or therein not misleading.

 

2.14         Liabilities.  Except as specifically disclosed in the Schedule of Exceptions or the Financial Statements, the Company has no material liabilities and, to the best of its knowledge, no other material contingent liabilities, except current liabilities incurred in the ordinary course of business.

 

 

(a)           There are no material agreements, understandings or proposed transactions between the Company and any of its managers or affiliates or any affiliate thereof, except as specifically set forth in the Schedule of Exceptions.

 

(b)           Other than as set forth in this Agreement or the Schedule of Exceptions, there are no material agreements, understandings, instruments, contracts, proposed transactions, licenses, permits, authorizations, judgments, orders, writs or decrees (“Contracts”) to which the Company is a party or by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $25,000 (other than obligations of, or payments to, the Company arising from purchase or sale or services agreements entered into in the ordinary course of business), (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from the Company, (iii) provisions restricting the development, manufacture or distribution of the Company’s products or services, or otherwise materially adversely affecting the business or prospects of the Company, or (iv) indemnification by the Company with respect to infringements of proprietary rights.  For the purposes of subsection 2.15(b)(i) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amount of such subsection.  There are no Contracts to which the Company is a party or by which it is bound in which the Company or any other party thereto is in breach of or default under any of the material terms thereof.

 

2.16         Books and Records.  The books and records of the Company are, and have been, maintained in the usual, regular, ordinary and appropriate manner by the Company, and all of the transactions of the Company are properly reflected therein.

 

 

2.17         Financial Statements.

 

(a)        Attached hereto as Exhibit D is a copy of the unaudited balance sheet of the Company as of December 31, 2012 (such balance sheet being referred to herein as the “Most Recent Balance Sheet”), together with the related unaudited statement of income and statement of cash flows for the two years ending December 31, 2012 (the “Other Financial Information,” and, together with the Most Recent Balance Sheet, referred to as the “Financial Statements”).  As reflected in the Financial Statements, no net loss has been allocated to Members during the past two (2) years.

 

(b)       The Financial Statements and each item therein (i) were applied on a consistent basis throughout the periods covered thereby and in a way that accurately reflects the Company’s revenues and expenses during those periods, (ii) present fairly in all material respects the financial position, results of operations and changes in cash flows, as applicable, of the Company, as of such dates and for the periods then ended, (iii) are in all material respects accurate, correct and complete and are, in all material respects, in accordance with the books of account and records of the Company which themselves are accurate, correct and complete in all material respects and (iv) can be reconciled with the financial records maintained and the accounting methods applied by the Company for federal income tax purposes.

 

2.18         Changes.  Since the date of the Most Recent Balance Sheet, there has not been:

 

(a)         Any change in the assets, liabilities, financial condition, prospects or operations of the Company, other than changes in the ordinary course of business, none of which individually or in the aggregate has had or is expected to have a material adverse effect on such assets, liabilities, financial condition, prospects or operations of the Company;

 

(b)         Any material change in the contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise;

 

(c)         Any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties, business or prospects or financial condition of the Company;

 

(d)         Any waiver by the Company of a material right or of a material debt owed to it;

 

(e)         Any direct or indirect loans made by the Company;

 

(f)         Any declaration or payment of any dividend or other distribution of the assets of the Company;

 

(g)         Any debt, obligation or liability incurred, assumed or guaranteed by the Company, except those amounts of less than $5,000 and for current liabilities incurred in the ordinary course of the business of the Company;

 

 

(h)         Any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets;

 

(i)          Any change in any contract or other agreement to which the Company is a party or by which it is bound which materially and adversely affects the business, assets, liabilities, financial condition, operations or prospects of the Company;

 

(j)          Any other event or condition of any character that, either individually or cumulatively, has materially and adversely affected the business, assets, liabilities, financial condition, prospects or operations of the Company; or

 

(k)         Any arrangement or commitment by the Company to do any of the acts described in subsection (a) through (j) above.

 

2.19         Tax Returns and Payments.  The Company has timely filed all tax returns due on or before the Effective Date and has paid or will pay all taxes required to be paid with respect to such tax returns prior to the time they become delinquent.  The Company has made an adequate accrual or reserve, if any is necessary, in the Financial Statements for the payment of taxes with respect to the period beginning subsequent to the last of such periods required to be so accrued or reserved up to and including the Effective Date.  The Company is not delinquent in the payment of any tax, and no deficiencies for any tax, assessment or governmental charge have been claimed, proposed, assessed or threatened.  There are no liens on the assets of the Company for unpaid taxes, except for liens relating to taxes that are not yet due and payable.  No waiver or extension of time to assess any tax with respect to the Company has been given or requested.  The Company (i) has never been a member of an affiliated group or been included in a combined, consolidated or unitary tax return; (ii) is not a party to or bound by any tax allocation or tax sharing agreement or has any current or potential obligation to indemnify any other person with respect to taxes; (iii) is not required to make any adjustments under Section 481(a) of the Internal Revenue Code of 1986, as amended (the “Code”) by reason of a change in accounting method which affects any taxable year ending after the Effective Date, or has any application pending to effect such a change of accounting method; and (iv) is not obligated to make any payments and is not a party to an agreement that could make it obligated to make payments, which will not be deductible under Section 280G of the Code.

 

For purposes of this Section, “tax” or “taxes” refers to any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities relating to taxes, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, or excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts and any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.

 

 

2.20         Employees.  Except as set forth in the Schedule of Exceptions, the Company is not a party to or bound by any currently effective employment contract, deferred compensation arrangement, bonus plan, incentive plan, profit sharing plan, retirement agreement or other employee compensation plan or agreement.

 

2.21         Compliance with Laws; Permits. The Company is not in violation of any applicable statute, rule, regulation, judgment, writ, decree, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company.  The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its businesses as now being conducted, the lack of which could materially and adversely affect the business, properties, prospects or financial condition of the Company.

 

2.22         Environmental and Safety Laws.  The Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation.  No Hazardous Materials (as defined below) are used or have been used, stored, or disposed of by the Company or, to the Company’s knowledge after reasonable investigation, by any other person or entity, on any property owned, leased or used by the Company.  For the purposes of the preceding sentence, “Hazardous Materials” shall mean (i) materials which are listed or otherwise defined as “hazardous” or “toxic” under any applicable local, state, federal and/or foreign laws and regulations that govern the existence and/or remedy of contamination on property, the protection of the environment from contamination, the control of hazardous wastes, or other activities involving hazardous substances, including building materials, or (ii) any petroleum products or nuclear materials.  The Company has not been identified as a potentially responsible party in connection with response costs with respect to any Hazardous Materials.

 

2.23         Small Business Concern.  The Company, together with its “affiliates” (as that term is defined in Section 121.103 of Title 13 of the Code of Federal Regulations (“CFR”), is a “small business concern” within the meaning of the Small Business Investment Act of 1958, as amended (the “Small Business Act”), and the regulations promulgated thereunder.  The information delivered to Purchaser on SBA Forms 480, 652 and 1031 delivered in connection herewith is true and complete.  The Company is not ineligible for financing by any licensed Small Business Investment Company pursuant to Section 197.720 of the CFR.  The Company acknowledges that Purchaser is a Federal licensee under the Small Business Act.

 

2.24         Sworn Representations and Warranty.  All Class A members shall execute the “Sworn Representations and Warranty” attached as Exhibit E at closing.

 

3.            Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to the Company as follows:

 

3.1           Authorization and Enforceability.  Purchaser has full power and authority to enter into this Agreement, and this Agreement, when executed and delivered, will constitute a valid and legally binding obligation of Purchaser in accordance with its terms.

 

 

3.2           Acquisition Entirely for Own Account.  The 50% Interest will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and Purchaser has no present intention of selling or granting any participation in or otherwise distributing the same.

 

3.3           Private Offering.  Purchaser understands that the 50% Interest is not registered under the Securities Act on the ground that the issuance provided for in this Agreement is exempt from registration under the Securities Act pursuant to an exemption from registration contained in the Securities Act.

 

3.4           Investment Experience.  Purchaser represents and acknowledges that it (i) is experienced in evaluating and investing in securities, (ii) is able to fend for itself, (iii) can bear the economic risk of its investment in the Company, and (iv) has such knowledge and experience in financial or business matters such that it is capable of evaluating the merits and risks of the investment in the Company.

 

4.             Conditions Precedent to Purchaser’s Obligations at Closing.  The obligations of Purchaser to make the Contribution in exchange for the 50% Interest as described in Section 1 of this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions precedent, the waiver of which shall not be effective against Purchaser unless it consents in writing thereto:

 

4.1           Representations and Warranties.  The representations and warranties of the Company contained in Section 2 of this Agreement shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

4.2           Performance.  The Company shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

 

4.3           Operating Agreement.

 

(a)           The Operating Agreement shall have been executed by all of the members and the managers contemporaneous with the issuance of the Class B membership units.

 

5.             Conditions Precedent to the Company’s Obligations at Closing.  The obligations of the Company to Purchaser under this Agreement are subject to the fulfillment on or before the Closing of each of the following conditions precedent by Purchaser:

 

5.1           Representations and Warranties.  The representations and warranties of Purchaser contained in Section 3 shall be true on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing.

 

5.2           Performance.  Purchaser shall have performed and complied with all agreements, obligations, and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing.

 

 

6.             Miscellaneous.

 

6.1           Entire Agreement.  This Agreement, the other documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.

 

6.2           Survival of Warranties.  All of the representations, warranties and covenants contained in this Agreement shall survive the execution and delivery of this Agreement and the Closing and continue in full force and effect following the Closing.

 

6.3           Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

 

6.4           Governing Law/Arbitration/Attorneys’ Fees. This Agreement shall be governed by and construed in accordance with the laws of the State of Utah.  Any controversy or claim arising from or related to this Agreement or the breach thereof will be settled by final and binding arbitration before a panel of three arbitrators in Salt Lake City, Utah.  Such arbitration shall be administered by the American Arbitration Association under the then prevailing applicable rules.  Within 15 days after the commencement of such arbitration, each party hereto shall select one person to act as arbitrator and the two selected shall select a third arbitrator within 10 days of their appointment.  If the arbitrators selected by the parties hereto are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association.  The arbitrators shall have the authority to award any remedy or relief that a court of the State of Utah could order or grant, including, without limitation, specific performance or the issuance of any injunction.  All fees and expenses of the arbitration shall be borne by the parties equally.  However, the prevailing party shall be entitled to an award of reasonable attorneys’ fees including all costs of litigation, including but not limited to travel expenses of the parties, expert fees, copying charges, courier charges, etc.  Notwithstanding the preceding provisions of this Section 6.4, either party hereto may apply to any court having jurisdiction hereof and seek injunctive relief upon Affidavit of the requesting party attesting to the correctness of the facts pleaded  and without bond or security to maintain the status quo until the arbitration award is rendered or the controversy is otherwise resolved.  For the purposes of making such an application to a court, each party hereto (i) consents to the personal jurisdiction of the state and federal courts located in the State of Utah, (ii) waives any argument that venue in any such forum is not convenient, and (iii) agrees that such application shall only be venued in a court of the State of Utah located in Salt Lake County, Utah, and in the federal courts of the District of Utah.

 

 

6.5           Notices.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified; (ii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iii) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the Company and to Purchaser at the addresses set forth below or at such other address as the Company or Purchaser may designate by five (5) days advance written notice to the other parties hereto.

 

Company:

 

Paradise on Wings Franchise Group, LLC

140 West 2100 South, Ste. 218

Salt Lake City, UT  84115

Attn:  William Miller; William Owens

 

With a copy to:

 

Brunson Chandler & Jones, PLLC

175 S. Main Street, 15th Floor

Salt Lake City, UT  84111

 

Purchaser:

 

American Restaurant Concepts, Inc.

212 Guilbeau Road

Lafayette, LA 70506

Attn: Seenu Kasturi

 

With a copy to:

 

Stan Gauthier, II

Attorney at Law

1405 West Pinhook Road, Suite 105

Lafayette, Louisiana 70503

 

6.6           Delays or Omissions.  No delay or omission to exercise any right, power or remedy accruing to Purchaser upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of Purchaser, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.

 

6.7           Finder’s Fees.  The Company and Purchaser shall indemnify and hold each other harmless from any liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability) for which the Company or Purchaser or any of their respective officers, managers, employees or representatives is responsible.

 

 

6.8           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Purchaser.  Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding, each future holder of all such securities, and the Company.

 

6.9           Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

6.10         Counterparts. This Agreement may be executed by facsimile and by counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

6.11         Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provisions shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the Effective Date.

 

	THE COMPANY:
	PARADISE ON WINGS FRANCHISE GROUP, LLC
	By:	/s/ W. Miller
		Name: William Miller
		Title: Manager
	THE PURCHASER:
	AMERICAN RESTAURANT CONCEPTS, INC.
	By:	/s/ Fred D. Alexander
		Name:  FRED D. ALEXANDER
		Title: Director

 

 

 

 

 

 

		Membership Units				%
Robert Gulley			4.80				2.0400	%
WJ Miller Family LP			29.30				12.4525	%
Gail Porritt			26.30				11.1775	%
William R. Owens			29.30				12.4525	%
Tach LLP (Richard & Kate Wright)			5.00				2.1250	%
Jerry McMillan			5.30				2.2525	%
David Rees			8.82				3.7500	%
Lance Brunson			2.35				1.0000	%
Chase Chandler			2.35				1.0000	%
Callie Jones			2.35				1.0000	%
Richard Bukovinsky			1.18				0.5000	%
Michael Dancy			0.59				0.2500	%
American Restaurant Concepts, Inc.			117.65				50.0000	%
TOTAL			235.29				100.0000	%

 

 

 

 

Between:

 

PARADISE ON WINGS FRANCHISE GROUP, LLC, 140 West 2100 South, Suite 218, Salt Lake City, Utah 84115, represented herein by its authorized agents, William Miller and William Owens, hereinafter “Company”;

 

and,

 

AMERICAN RESTAURANT CONCEPTS, INC., 4400 Ambassador Caffery Parkway, Suite A, Box 347, Lafayette, Louisiana 70508, represented herein by its authorized agent, Fred D. Alexander, hereinafter “Purchaser”;

 

In consideration of Purchaser’s consideration of a possible acquisition of Company’s assets, Purchaser will be furnished with information concerning Company and Company’s operations (hereinafter the “information”).

 

As a condition of Purchaser being furnished with the information, Purchaser agrees that Purchaser will not use any of the information except to evaluate the acquisition.  Purchaser also agrees that Purchaser will not disclose any of the information to anyone other than Purchaser’s employees, officers, directors, attorneys and consultants who are involved in evaluating the acquisition.  Purchaser will cause all persons to whom Purchaser discloses any of the information to abide by the terms of this Confidentiality Agreement.  If Purchaser decides that Purchaser has no further interest in considering an acquisition, or if Company requests in writing, Purchaser will promptly return to Company all information (whether prepared by Purchaser or otherwise) and Purchaser will not retain any copies, extracts or other reproductions, in whole or in part, of any information.  Further, Purchaser will destroy all documents, memorandum, notes and other writings whatsoever based on any of the information which was prepared by Purchaser or by any person to whom Purchaser disclosed any of the information.  Such destruction shall be certified in writing to Company by an authorized officer/person supervising such destruction.

 

Violation of any of the foregoing provisions will cause irreparable injury to Company.  Thus, in addition to any other remedies that Company has, Company will be entitled, without posting bond or providing security, to injunctive or other equitable relief to enforce those provisions and to prevent or cure any breach or threatened breach thereof.

 

This Confidentiality Agreement may be amended only by an instrument in writing signed by Company and Purchaser.

 

 

This Confidentiality Agreement will be governed by the laws of the State of Florida.  Any dispute regarding this Confidentiality Agreement shall be litigated in Jacksonville, Duval County, Florida, which Purchaser agrees is a proper venue.  Company and Purchaser consent to the personal jurisdiction of Jacksonville, Duval County, Florida and waive any objections to the venue and jurisdiction of the Courts of Jacksonville, Duval County, Florida.

 

This Confidentiality Agreement may be executed and delivered by exchange of facsimile copies showing the signatures of the authorized representatives of Company and Purchaser and those signatures need not be affixed to the same copy.  The facsimile copies showing the signatures of Company and Purchaser will constitute originally signed copies of the same Confidentiality Agreement requiring no further execution.

 

This Confidentiality Agreement shall become effective on the date signed by Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

The amount of cash and a description and statement of the agreed value of the other property or services contributed and agreed to be contributed by each member;

(b)

The times at which, or events on the happening of which, any additional contributions agreed to be made by each member are to be made;

(c)

Any right of a member to receive distributions;

(d)

Any date or event upon the happening of which a member is entitled to payment in redemption of the member’s interest in the company; and

(e)

Any date or event upon the happening of which the company is to be dissolved and its affairs would up.

 

 

 

 

 

Member Name	Number and Type of Units	Ownership Percentage
Robert Gulley	4.8 Class A Units	2.04 %
WJ Miller Family LP	29.3 Class A Units	12.4525 %
Gail L. Porritt	26.3 Class A Units	11.1775 %
William R. Owens	29.3 Class A Units	12.4525 %
Tach LP	5 Class A Units	2.125 %
Jerry McMillan	5.3 Class A Units	2.2525 %
David Rees	8.82 Class A Units	3.75 %
Lance Brunson	2.35 Class A Units	1 %
Chase Chandler	2.35 Class A Units	1 %
Callie Jones	2.35 Class A Units	1 %
Richard Bukovinsky	1.18 Class A Units	0.5 %
Michael Dancy	0.59 Class A Units	0.25 %
American Restaurant Concepts, Inc.	117.65 Class B Units	50 %

 

 

 

 

3.4           Capital Accounts.

 

 

(a)

Credited with: (i) the amount of money contributed by such Member to the Company and the fair market value of any property contributed by such Member to the Company (net of liabilities secured by such property that the Company assumes or takes subject to); (ii) except as provided below, the amount of taxable income or gain allocated to such Member; and (iii) such Member’s pro rata share of any tax exempt income or gain of the Company; and

(b)

Debited with: (i) the amount of money (excluding guaranteed payments) and the agreed fair market value of any property distributed to such Member (net of liabilities secured by such property that the Member assumes or takes subject to); ii) except as provided below, the amount of taxable loss and deductions (or items thereof) allocated to such Member; and (iii) such Member’s pro rata share of any expenditures of the Company described in section 705(a)(2)(B) of the Code (or expenditures which are so treated under section 1.704-(b) of the Regulations; and

(c)

Shall be otherwise adjusted in accordance with the other capital account maintenance rules of section 1.704-1(b)(2)(iv) of the Regulations.

 

 

 

 

 

THESE SECURITIES ARE TAKEN FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS THE COMPANY HAS RECEIVED AN OPINION FROM COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER THAT ACT IS NOT REQUIRED.

 

 

 

 

First:  To each Member, an amount equal to the negative balance (if any) in such Member’s Capital Account; provided, however, that if the gain to be allocated pursuant to this Section 4.1.1 is insufficient to cause the negative balance in each Member’s Capital Account to equal zero, then the gain shall first be allocated to the Members with negative Capital Account balances, pro rata in accordance with their respective negative Capital Account balances.

 

Second:  An amount of income shall next be allocated to the Members (as necessary) so as to cause the positive balances in their respective Capital Accounts to be in the same proportion to each other as are their respective ownership percentages.

 

 

Third:  All remaining gain shall be allocated to the Members, pro rata in accordance to their respective Ownership Percentages.

 

 

First:  Loss shall be allocated to the Members until each Member’s Capital Account equals zero, provided, however, if there is not a sufficient amount of loss to be allocated to reduce the Members’ Capital Accounts to zero, loss shall first be allocated to the Members (as necessary) so to cause their Capital Accounts to be in the same proportions to one another as are their respective Ownership Percentages, and the balance of loss shall be allocated to the Members, pro rata in accordance with their respective Ownership Percentages.

 

Second:  Any remaining loss shall be allocated to the Members pro rata in accordance with their respective Ownership Percentages.

 

 

 

 

(a)

Holders of Class A Units shall have a preferred right, over holders of Class B Units, to receive distributions in kind of the Company’s American Restaurants Concepts, Inc. stock.  Such distributions of American Restaurants Concepts, Inc. stock shall be at the sole authorization and discretion of the Managers appointed by the holders of the Class A Units, which distributions of American Restaurants Concepts, Inc. stock need not be authorized or approved by the holder(s) of the Class B Units or the Manager appointed by the holder(s) of the Class B Units.

 

 

 

(a)

The Company would not be able to pay its debts as they become due in the usual and regular course of its business; or

 

 

 

 

 

 

 

 

 

(a)

Amend the Amended Articles of Organization, except to make ministerial amendments or to change an address;

(b)

Amend the Amended and Restated Operating Agreement, except to make ministerial amendments or to change an address;

(c)

Authorize a member or any other person to do any act on behalf of the Company that contravenes the Amended Articles of Organization or Amended and Restated Operating Agreement and thereafter to terminate the authority so granted;

(d)

Convert the Company to another entity;

(e)

Participate in a merger in which the Company is a party to the merger;

(f)

Sell, lease, exchange, or otherwise dispose of all or substantially all of the Company’s property other than in the usual and regular course of the Company’s business;

(g)

Waive liability of a member as may be allowed under this Amended and Restated Operating Agreement or the Articles of Organization;

(h)

Admit a person or entity as a Member as provided in Section 3.3 herein (which shall require the unanimous consent of the Managers);

(i)

Make a call for additional capital contributions as provided in Section 3.3.2 herein (which shall require the unanimous consent of the Managers); and,

(j)

Obligate the company by way of loan, promissory note or contract for an amount in excess of $25,000.00 in a single transaction or a series of transactions with the same entity involving not more than $50,000.00 during any one calendar year.

 

 

 

(a)

A determination by Members holding seventy percent (70%) of the outstanding Units that a Manager has materially breached the terms of the Amended Articles of Organization, this Restated and Amended Operating Agreement, or any other material agreement respecting the Manager’s duties as a Manager;

 

 

(b)

A determination by Members holding seventy percent (70%) of the outstanding Units that a Manager has been grossly negligent or has engaged in material willful or gross misconduct in the performance of his or her duties;

(c)

A determination by Members holding seventy percent (70%) of the outstanding Units that a Manager has breached the Manager’s duty of loyalty to the Company or its Members, or

 

(e)          Notwithstanding the foregoing, a Manager shall not be removed for Cause without:

 

1.

Reasonable notice to the Manager setting forth the reasons for the proposed removal for Cause;

 

 

 

(a)

He/she objects at the beginning of the meeting (or promptly upon his or her arrival) to holding it or transacting business at the meetings; or

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

At the time the member:

 

2.

120 days after the commencement of any proceeding against the member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without his or her consent or acquiescence of a trustee, receiver, or liquidator of the member or of all or any substantial part of the member’s properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any stay, the appointment is not vacated;

 

6.6.2        The Amended Articles of Organization or Amended and Restated Operating Agreement may provide for other events the occurrence of which result in a person’s ceasing to be a member of the Company.

 

6.3           Expulsion of a Member.  A member of a Company may be expelled:

 

6.3.1       As provided in this Operating Agreement;

 

6.3.2       By unanimous vote of the other members if it is unlawful to carry on the Company’s business with the member; or

 

 

 

 

 

 

 

 

 

7.4.1       The fully-exercised and acknowledged written instrument or order of sale, assignment or transfer, which sets forth the intention of the assignor that the assignee become a substituted Member in the Member’s place, has been filed with the Company.

 

7.4.2       The assignor and assignee execute and acknowledge such other instruments as the Managers may from time to time require, in order to effect such admission, including the written acceptance and adoption by the assignee of the provisions of this Agreement;

 

7.4.3       The assignee shall bear all reasonable expenses incurred in effecting the substitution; and

 

7.4.4       Managers holding an affirmative vote have consented in writing to the substitution, which consent shall be exercisable in the Managers’ sole discretion.

 

7.5           Right of First Refusal.

 

7.5.1       If any Member (a “Transferring Member”) desires to assign, transfer or otherwise dispose of such Member’s interest in the Company for value, he/she shall give written notice (“Transfer Notice”) to the Company and the other Members setting forth:

 

(a)

The number of Units or other interest in the Company (the “Transferable Interest”) which the Transferring Member desires to transfer;

(c)

That the Transferring Member had received a bona fide offer therefor, if a sale is contemplated;

(d)

The cash and other consideration (per Unit and in the aggregate) to be received by the Transferring Member in connection with such disposition;

(e)

A true copy of the offer or agreement, if any, for such sale or other disposition and a certification by the Transferring Member that, to the best of his or her knowledge and belief, the offer or agreement is genuine and in all respects what it purports to be;

(f)

An offer to sell to the Company and the other Members the Transferable Interest in accordance with this Section 7.3; and

(g)

Such other information as may be necessary or desirable in order to afford to the Company and the other Members the benefits intended to be conferred by this Section 7.3.

 

To the extent the terms of such sale or other transfer provide for the receipt by the Transferring Member of consideration other than cash or cash equivalents, the Transfer Notice shall also include a fair market appraisal of such consideration prepared by a qualified independent appraiser.

 

 

 

 

 

 

 

7.7          Permitted Transfers.  Nothing in this agreement shall be deemed to prohibit or limit the sale, assignment or transfer from a Member of all or any part of the Member’s interest in the Company to another existing Member of the Company, and no such sale, assignment, or transfer shall create a right, interest, or power in any other Member, or in the Company, or any other person, to purchase or acquire such interest in the Company, nor shall the Member who desires to sell, assign, or transfer all or any part of that Member’s interest in the Company to another Member be required to obtain the prior consent of the other Members or the Company or to offer such interest to the other Members or to the Company.

 

7.8           Estate Planning Transfers.  Estate Planning Transfer shall mean any transfer made during the life of a Member without value, or for less than full consideration, by a Member to:

 

(1)

A Trust whose beneficiary or beneficiaries include the Member, or Member’s spouse, or Member’s descendents;

 

(4)

One or more beneficiaries qualified to receive charitable gifts under the Internal Revenue Code.

 

 

The Agreement will bind the transferee of any estate planning transfer to the exact terms and conditions of the Agreement.  Estate planning transfers are authorized by the Company, without Company consent, but subject to notice.

 

 

8.1           Events of Dissolution.  The Company shall, without further action of the Members, be dissolved upon the first to occur of the following:

 

8.1.1       When the period fixed for the duration of the Company expires;

 

8.1.2       At such times as the Company fails to have at least one member;

 

8.1.3       By written agreement signed by all members;

 

8.1.4       Upon the occurrence of a dissolution event specified in the Amended Articles of Organization, or the Amended and Restated Operating Agreement;

 

8.1.5       When the Company is not the successor company in the merger or consolidation of two or more companies;

 

8.1.6       Upon administrative dissolution, subject to the right of reinstatement; or

 

8.1.7       Upon entry of a decree of judicial dissolution.

 

Unless approved by Members holding, in the aggregate, at least 67% of the outstanding Units, no Member shall have the right, and all Members hereby agree not, to dissolve, terminate, partition, or liquidate, or to petition a court for the dissolution, termination, partition, or liquidation of, the Company except as provided in this Agreement.

 

8.1.8        Effects of Dissolution.   The Company shall be dissolved upon the occurrence of any of the following events:

 

8.1.9       When the period fixed for the duration of the Company, expires;

 

8.1.10     At such times as the Company fails to have at least one member;

 

8.1.11     By written agreement signed by all members;

 

8.1.12     Upon the occurrence of a dissolution event specified in the Amended Articles of Organization or Amended Operating Agreement;

 

8.1.13     When the Company is not the successor company in the merger or consolidation of two or more companies;

 

 

 

 

(d)

In any situation not covered by Subsection (1)(a), (b), or (c), a person appointed by a court of competent jurisdiction upon application of any interested person.

 

 

 

 

(a)

Be published once a week for three successive weeks in a newspaper of general circulation in the county where the dissolved company’s designated office or, if it has no designated office in this state, its registered office, is or was last located;

 

 

 

 

 

 

 

 

 

 

 

 

 

Chase Chandler
Member
Callie Jones
Member
Richard Bukovinsky
Member
Michael Dancy
Member
American Restaurant Concepts, Inc.
Member
By: Fred D. Alexander
Its: Director

 

 

 

Member Name	Business Address	Residence Address	Mailing Address
Robert Gulley		1632 Brookfield Court Twin Falls, ID 93301	1632 Brookfield Court Twin Falls, ID 93301
WJ Miller Family LP	140 W. 2100 S. Suite 218 SLC, UT 84115	5147 Fortrose Drive Herriman, UT 84096	5147 Fortrose Drive Herriman, UT 84096
Gail L. Porritt	140 W. 2100 S. Suite 218 SLC, UT 84115	1214 Parkstone Draper, UT 84020	1214 Parkstone Draper, UT 84020
William R. Owens	140 W. 2100 S. Suite 218 SLC, UT 84115	6477 Ralph H Circle Herriman, Ut 84096	6477 Ralph H Circle Herriman, Ut 84096
Tach LP
Jerry McMillan		20200 Sherman Way, #325 Winnetka, CA  91306	20200 Sherman Way, #325 Winnetka, CA  91306
David Rees	175 S. Main St, 15th Floor, SLC, UT  84111
Lance Brunson	175 S. Main St, 15th Floor, SLC, UT  84111	186 N 750 W, Layton, UT  84041	186 N 750 W, Layton, UT  84041
Chase Chandler	175 S. Main St, 15th Floor, SLC, UT  84111	696 Eaglepointe Dr., North Salt Lake, UT  84054	696 Eaglepointe Dr., North Salt Lake, UT  84054
Callie Jones	175 S. Main St, 15th Floor, SLC, UT  84111	1609 Millbrook, SLC, UT  84106	1609 Millbrook, SLC, UT  84106
Richard Bukovinsky
Michael Dancy	175 S. Main St, 15th Floor, SLC, UT  84111
American Restaurants Concepts, Inc.	212 Guilbeau Road Lafayette, Louisiana 70506

 

 

 

Section 2.14 Liabilities:

 

Asset Purchase Agreement (including Secured Promissory Note) with Ding A Wingz, LLC for purchase of Taylorsville store (assumed by Wing Nutz Taylorsviller, LLC)

 

Section 2.15(a) Agreements:

 

None

 

Section 2.20 Employment Contracts:

 

Employment contract with William Miller – $35,000/year

 

Employment contract with William Owens – $35,000/year

 

 

 

Previously provided.

 

 

 

Sworn Representations and Warranty

 

 

 

 

 

 

________________

 

 

 

 

Appearers are all of the current Members  and Managers  of Paradise on Wings Franchise Group, LLC, hereinafter the “Company”.

 

 

 

 

“... opportunity to inspect and to review the physical assets owned by the Company, if any, the properties leased by the Company, if any, and the books and records of the Company including  but  not  limited  to  the following records:”

 

Page 2 of 3 pages of Sworn Representations and Warranty

 

 

 

 

 

 

	APPEARERS:

 

 

 

 

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