Exhibit 10
RESCISSION and FUNDING AGREEMENT
between
CREATIVE EATERIES CORPORATION
a Nevada corporation
and
FRANCHISE CAPITAL CORPORATION
a Nevada corporation
This Agreement ("Agreement") is made December 29, 2005, by and between
Franchise Capital Corporation ("FCC") and Creative Eateries Corporation ("CEC").
RECITALS
A. On October 4, 2005, FCC and CEC entered into a Purchase Agreement (the
"Purchase Agreement") whereby CEC agreed to acquire FCC's interests in
Restaurants and Concepts (as defined in the Agreement) including interests:
(1) as Managing Member and 90% owner of Kokopelli Franchise Company,
LLC ("Kokopelli");
(2) as Managing Member and 72.5% owner of Xxxxxxxx Jake's Franchise
Company, LLC ("Xxxxxxxx");
(3) as Managing Member and 100% owner of Cousin Vinnie's Franchise
Company, LLC ("Vinnie's");
(4) as Managing Member and 100% owner of Xxxxx Foo's Asian Grill
Franchise Company, LLC ("Xxxxx"). Kokopelli, Xxxxxxxx, Vinnie's and Xxxxx are
sometimes referred to collectively as the "Restaurants"); and
(5) in Restaurant Concepts for Kokopelli, Xxxxxxxx, Vinnie's and Xxxxx,
as defined in the Purchase Agreement.
B. CEC has not paid FCC the consideration set forth in the Purchase
Agreement, and certain disputes have arisen between FCC and CEC regarding
representations made or relied upon by the parties in connection with the
Purchase Agreement and performance under the Purchase Agreement. CEC has funded
certain expenses of Kokopelli and Xxxxxxxx since execution of the Purchase
Agreement.
C. Closing of the transactions contemplated in the Purchase Agreement has
not yet occurred, and FCC remains the record owner of the Restaurants and the
Concepts.
D. CEC and FCC wish to rescind the Purchase Agreement, and enter into a new
Funding Agreement whereby CEC will continue to provide funding to FCC for
operation of Kokopelli and Xxxxxxxx, and share in the profits of Kokopelli and
Xxxxxxxx for a fixed period of time.
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AGREEMENT
In consideration of the mutual promises, covenants, and representations
contained herein, the parties agree as follows:
ARTICLE I
RESCISSION
1.1 Rescission. FCC and CEC immediately rescind the Purchase Agreement, and
neither party shall have any further liability thereunder.
ARTICLE II
FUNDING; PROFITS PARTICIPATION
2.1 Funding Obligation. CEC will provide FCC with a total of $600,000 in
funding for operation of Kokopelli and Xxxxxxxx.
2.2 Timing. CEC and FCC acknowledge that CEC has provided approximately
$150,000 in funding of operations of Kokopelli and Xxxxxxxx. The exact amount of
such funding shall be mutually verified by FCC and CEC, and credited against its
full $600,000 obligation under this Agreement. The balance of approximately
$450,000 will be paid by CEC to FCC in the amount of $100,000 each month
beginning January 25, 2006 and continuing on February 25, March 25 and April 25,
2006, with a final payment of $50,000, plus or minus any difference in the
actual amount previously paid from the $150,000 initially credited under this
Agreement.
2.3 Failure to Pay. Payment of each funding payment promptly as scheduled
is crucial to the business of FCC, Kokopelli and Xxxxxxxx. If CEC fails to pay
any funding installment due on the 25th of any month by the 30th of that month,
CEC shall forfeit all rights to any profit payments due under Section 2.4 of
this Agreement, and FCC shall have no obligation to pay any profit payments to
CEC; provided however, that if CEC has paid at least $300,000 in cash funding
payments required under Section 2.2 of this Agreement, CEC shall be entitled to
receive 25% of any such profit payments.
2.4 Profit Payments. In return for CEC funding operations of Kokopelli and
Xxxxxxxx as scheduled, FCC will pay CEC an amount equal to 50% of the profits
FCC receives from its ownership in Kokopelli and Xxxxxxxx for the periods
commencing on July 1st, 2006 and ending on June 30th, 2011. FCC shall make
payments to CEC within five (5) days after profits for the quarter have been
determined by FCC and reported to the Securities and Exchange Commission on
FCC's regular reports on Form 10-Q for each calendar quarter, or on Form 10-K
for each fiscal year, as the case may be, beginning with the quarter ending
September 30, 2006, and ending with the fiscal year ending June 30, 2011.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FCC
FCC hereby represents and warrants to CEC that:
3.1 FCC Organization. FCC is a corporation duly organized, validly existing
and in good standing under the laws of Nevada, has all necessary corporate
powers to own its property and to carry on its business as now owned and
operated by it, and is duly qualified to do business and is in good standing in
each of the states where its business requires qualification.
3.2 Restaurants Organization. Each of the Kokopelli and Xxxxxxxx is an LLC
duly organized, validly existing and in good standing under the laws of Arizona,
has all necessary corporate powers to own its property and to carry on its
business as now owned and operated by it, and is duly qualified to do business
and is in good standing in each of the states where its business requires
qualification.
3.3 Capital. Management of FCC owns control of the Restaurants and
therefore has the right to vote for the completion of this transaction. FCC
represents that there are no other issued and outstanding open subscriptions,
options, rights, warrants, debentures, instruments, convertible securities, or
other agreements or commitments obligating FCC in regards to the Restaurants.
3.4 Investigation of Financial Condition. Without in any manner reducing or
otherwise mitigating the representations contained herein, CEC and/or its
attorneys have had the opportunity to meet with accountants and attorneys to
discuss the financial condition of Kokopelli and Xxxxxxxx. FCC has made
available to CEC and/or its attorney all books and records of the Restaurants.
3.5 Authority. The Board of Directors of FCC have authorized the execution
of this Agreement and the consummation of transactions contemplated herein, and
FCC has full power and authority to execute, deliver, and perform this Agreement
and this Agreement is a legal, valid and binding obligation of FCC, and is
enforceable in accordance with its terms and conditions.
3.6 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by FCC of its obligations hereunder in the time and in the manner
contemplated will not cause, constitute or conflict with or result in (a) any
breach or violation of any of the provisions or constitute a default under any
license, indenture, mortgage, charter, instrument, articles of incorporation,
bylaws, or other agreement or instrument to which either is a party, or by which
it may be bound, nor will any consents or authorizations of any party other than
those hereto be required, (b) an event that would permit any party to any
agreement or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of FCC, or (c) any event that would result in
the creation or imposition of any lien, charge, or encumbrance on any asset of
FCC.
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3.7 Full Disclosure. None of the representations and warranties made by FCC
herein, or in any exhibit, certificate or memorandum furnished or to be
furnished by either, or on their behalf, contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
3.8 Good Title. Other than as described in Exhibit A, Kokopelli and
Xxxxxxxx have good and marketable title to all of their property free and clear
of any liens, claims and encumbrances of any nature, form or description.
3.9 Indemnification. FCC agrees to defend and hold CEC harmless against and
in respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, and reasonable attorney's fees, that it shall incur or suffer, which
arise out of, result from or relate to any breach of, or failure by FCC to
perform any of its representations, warranties, covenants and agreements in the
Purchase Agreement and this Agreement or in any exhibit or other instrument
furnished or to be furnished by FCC under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CEC
CEC hereby represents and warrants to FCC that:
4.1 Financial Ability. CEC is a corporation duly organized, validly
existing and in good standing, and has the necessary financial ability and
resources and corporate capability to complete this Agreement according to its
terms.
4.2 Authority. CEC has authorized the execution of this Agreement and the
consummation of transactions contemplated herein through its officers, board of
directors and shareholders. CEC, its officers, directors and shareholders have
full power and authority to execute, deliver, and perform this Agreement and
this Agreement is a legal, valid and binding obligation of CEC, enforceable in
accordance with its terms and conditions.
4.3 Ability to Carry Out Obligations. The execution and delivery of this
Agreement by CEC and the performance by CEC of its obligations hereunder in the
time and in the manner contemplated will not cause, constitute or conflict with
or result in (a) any breach or violation of any of the provisions or constitute
a default under any license, indenture, mortgage, charter, instrument, articles
of incorporation, bylaws, or other agreement or instrument to which CEC is a
party, or by which it may be bound, nor will any consents or authorizations of
any party other than those hereto be required except approvals required by law,
if any, (b) an event that would permit any party to any agreement or instrument
to terminate it or to accelerate the maturity of any indebtedness or other
obligation of CEC, or (c) any event that would result in the creation or
imposition of any lien, charge, or encumbrance on any asset of CEC.
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4.4 Full Disclosure. None of the representations and warranties made by CEC
herein, or in any exhibit, certificate or memorandum furnished or to be
furnished by CEC, or on its behalf, contains or will contain any untrue
statement of material fact, or omit any material fact the omission of which
would be misleading.
4.5 Indemnification. CEC will defend and hold FCC and the Restaurants
harmless against and in respect to any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries, and deficiencies,
including interest, penalties, and reasonable attorney's fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach of, or
failure by CEC to perform any of its respective representations, warranties,
covenants and agreements in the Purchase Agreement and this Agreement or in any
exhibit or other instrument furnished or to be furnished by CEC under this
Agreement.
ARTICLE V
COVENANTS
5.1 Investigative Rights. CEC and FCC have each provided the other full
access during normal business hours to all properties, books, contracts,
commitments, and records of FCC or CEC, as the case may be, and the Restaurants
for the purpose of examining same.
5.2 Conduct of Business. Until the funding under this Agreement by CEC is
completed, Neither CEC, FCC nor the Restaurants shall amend its articles of
incorporation or Bylaws, declare dividends, redeem or sell stock or other
securities, incur additional or newly-funded liabilities, acquire or dispose of
fixed assets or settle or discharge any balance sheet receivable other than in
the normal course of business.
5.3 Required Corporate Action by CEC and FCC. Each of FCC and CEC, and its
officers, directors and shareholders have approved this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO CEC'S PERFORMANCE
6.1 Conditions. CEC's obligations hereunder shall be subject to the
satisfaction, at or before execution of this Agreement, of all the conditions
set forth in this Article VI. CEC may waive any of these conditions in whole or
in part without prior notice; provided however, that no such waiver of a
condition shall constitute a waiver by CEC of any other condition of or any of
CEC's other rights or remedies, at law or in equity, if FCC shall be in default
of any of their representations, warranties, or covenants under this Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by FCC in this Agreement or in any
written statement that shall be delivered to CEC by FCC under this Agreement
shall be true and accurate.
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ARTICLE VII
CONDITIONS PRECEDENT TO FCC PERFORMANCE
7.1 Conditions. FCC obligations hereunder shall be subject to the
satisfaction, at or before execution of this Agreement, of all the conditions
set forth in this Article VII. FCC may waive any of these conditions in whole or
in part without prior notice; provided however, that no such waiver of a
condition shall constitute a waiver by FCC of any other condition of or any of
FCC other rights or remedies, at law or in equity, if CEC shall be in default of
any of their representations, warranties, or covenants under this Agreement.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by CEC in this Agreement or in any
written statement that shall be delivered to FCC by CEC under this Agreement
shall be true and accurate.
ARTICLE VIII
REMEDIES
8.1 Legal Action and Costs. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorney's fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
8.2 Termination. In addition to the other remedies, any of the parties
hereto may terminate this Agreement, without liability:
(i) upon the failure of any condition not otherwise waived by the
parties; or
(ii) upon mutual consent of the respective boards of directors of CEC
and FCC.
ARTICLE IX
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings throughout
this Agreement are for convenience and reference only, and shall in no way be
deemed to define, limit, or add to the meaning of any provision of this
Agreement.
9.2 No Oral Change. This Agreement and any provisions hereof, may not be
waived, changed, modified or discharged orally, but it can be changed by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or, discharge is sought.
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9.3 Non-Waiver. Except as other wise expressly provided herein, no waiver
of any covenant, condition, or provision of this Agreement shall be deemed to
have been made unless expressly in writing and signed by the party against whom
such waiver is charged.
9.4 Time of Essence. Time is of the essence of this Agreement and each and
every part hereof.
9.5 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings and merges any all such prior discussions and/or agreements
herein.
9.6 Choice of Law. This Agreement and its application shall be governed by
the laws of the State of Arizona.
9.7 Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
9.8 Notices. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
CEC Representative:
Xxxxx Xxxxxxxxx
0000 Xxxx XxXxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
FCC Representative:
Xxxxxx X. Xxxxxxx
0000 Xxxx Xxx Xx Xxxxxxx, Xxxxx X000
Xxxxxxxxxx, XX 00000
9.9 Binding Effect. This Agreement shall inure to and be binding upon the
heirs, executors, personal representatives successors and assigns of each of the
parties to this Agreement.
9.10 Effect of Closing. All representations, warranties, covenants, and
agreements of the parties contained in this Agreement, or in any instrument,
certificate, opinion, or other writing provided for in it, shall survive the
Closing of this Agreement.
9.11 Brokers. The parties hereto represent that no finder's fee has been
paid or is payable by any party.
9.12 Expenses. Each party will pay its own legal, accounting and any other
out-of-pocket expenses reasonably incurred in connection with this transaction,
whether or not the transaction contemplated hereby is consummated.
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9.13 Facsimile Signatures as Originals. Original signatures transmitted by
facsimile communication shall constitute originals for the purpose of validly
executing this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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Executed as of the date first above written.
CREATIVE EATERIES CORPORATION
By: /s/ Xxxxx Xxxxxxxxx
------------------------------------
Xxxxx Xxxxxxxxx, President & C.E.O.
FRANCHISE CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx, Chairman & C.E.O.
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