EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into this
day 9th day of January, 1998 and effective as of December 31, 1997, by and among
Java Centrale, Inc. a California corporation (the "Seller",) and Xxxxxxx xx
Xxxxxx, Inc., a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller is in the business of franchising gourmet coffee and
espresso based retail outlets and operating one such outlet, all such outlets
being known as Java Centrale Coffee Cafes (the "Cafes"); and
WHEREAS, the Seller desires to transfer to the Buyer certain of the
contracts, properties and assets related to the operation of such cafes, and the
Buyer desires to acquire such contracts, properties, and assets, all upon the
terms and conditions set forth herein; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties, and covenants made by each to the other as an inducement to the
consummation of the transactions contemplated by this Agreement, all as more
fully set forth below;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1. THE ASSUMED FRANCHISE AGREEMENTS AND OTHER TRANSFERRED ASSETS.
Subject to the terms and conditions of this Agreement and in
consideration of the obligations of the Buyer as provided herein,
the Seller agrees to sell, assign, transfer, grant, bargain,
deliver, and convey to the Buyer, free and clear of all Liens,
the Seller's entire right, title, and interest in, the contracts,
properties and assets described below, and the Buyer assumes all
the obligations and duties of the Franchisor with respect to such
contracts, properties and assets and specifically, consisting of
the following:
1.1.1 The Assumed Franchise Agreements described on
Collective Exhibit A annexed hereto; and
1.1.2 United States Patent and Trademark Office Trademark
Number 1,813,192. A copy of the certificate of
registration is attached hereto as Exhibit B.
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1.1.3 The contracts attached hereto as Collective Exhibit C:
said contracts have been previously furnished to Buyer
and may be referred to herein as "Other Assumed
Contracts".
1.1.4 The notes and accounts receivable, royalties receivable
and other accounts receivable due from Java Centrale
franchisees as of December 31, 1997 summarized in the
attached Exhibit D.
1.1.5 The assets of the Java Centrale Cafe located in Reno,
Nevada and currently operated under a management
contract listed in the attached Exhibit E to this
Agreement.
1.1.6 Any and all rights of ownership of Seller in the
advertising and promotional literature, manuals, and
training materials to be used in marketing and selling
Java Centrale Cafe products and Java Centrale
franchises, as listed on the attached Exhibit F to this
Agreement, and materials to be delivered after closing.
1.1.7 A copy of the most recently registered offering
circular used in California by to engage in the sale of
franchises is attached as Exhibit G.
1.1.8 A copy of each item of correspondence with each state
agency with which Seller has communicated concerning
the actual or proposed registration of Java Centrale
Cafe franchises since September 1, 1997, such
correspondence to be delivered after the closing.
Seller does not sell and is not presently qualified to
sell Java Centrale franchises in any jurisdiction.
1.2. PURCHASE PRICE. The Purchase Price shall be $1,500,000 payable
as follows:
1.2.1 $1,000,000 related to Accounts Receivable and Product
Sales. (The Receivables) Receivables shall consist of
receivables assigned, as well as any items paid under
or in connection with any franchise agreement to be
assigned, including Royalty and Service Fee payments,
other payments under franchise agreements and payments
for items purchased from Seller or Seller's approved
suppliers. Buyer will pay fifty percent (50%) of all
Receivables and future Receivables received by the
Buyer after December 31, 1997. For example, if such
payments equal $40,000 per month then $20,000 a month
would go to the Seller resulting in approximately a
two-year pay out.
a) The payments to be owed by the Buyer to the
Seller shall consist of the income from the
Receivables actually received each month by
the Buyer from each Franchisee and others.
Payments owed by the Buyer to the Seller
shall be made on or before the 10th day of
the
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month following the month the cash receipts
are received by the Buyer.
b) With respect to any future Franchisees
originated by the Buyer after the closing,
the Buyer will pay the Seller 25% of any
royalties paid to the Buyer by such future
Franchisees. In the event the Seller does
not receive $1,000,000 within three (3) years
from the date of closing, the royalty
payments under this subparagraph (b) paid by
the Buyer to the Seller shall be increased
from 25% to 50% until the aforesaid
$1,000,000 is received by the Seller.
c) In the event the Buyer fails to make the
payments required under subparagraph (a)
above, the Seller shall give written notice,
by certified mail, to the Buyer of such
default. If, after receiving such notice,
the Buyer fails to cure such default within
10 days of receiving such notice, this
agreement may, at the Sellers sole
discretion, be terminated by the Seller and
all assets transferred by the Seller to the
Buyer hereunder shall be transferred back to
the Seller by the Buyer. This remedy is not
intended to limit the Seller's remedies
allowable under applicable law.
d) Upon the Seller's written request, the Buyer
shall provide the Seller with copies of all
checks received by the Buyer from each
Franchisee or other third party on a monthly
basis. In addition the Seller shall have
right to inspect the Buyers books and records
concerning such Receivable Income, such
inspections to be held after the Seller gives
the Buyer 10 days written notice of its
desire to conduct such inspection.
1.2.2 Product Sales. Buyer will ship to Seller's owned or
franchised operations bakery products at which pricing
must be reasonable in light of comparable wholesale
pricing and terms. This component of the purchase
price shall be broken into two segments: a) Purchases
by Paradise Bakery and Cafe Company owned stores and
b) Purchases by franchised Paradise Bakery and Cafes.
a) Purchases by Seller's company owned stores
will receive a 50% credit against invoices.
For example, if purchases at the mutually
agreed upon pricing totaled $40,000 for a
month, the Seller will receive a $20,000
credit against the current invoices for the
month
b) The Seller will receive payments equal to 50%
of purchase prices paid by Seller's
franchised operations to the Buyer. For
example, if purchases at the mutually agreed
upon pricing totaled $40,000
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for a month, the Seller would receive a
$20,000 payment from the Buyer.
1.2.3 $500,000 in Buyer Stock. $500,000 in Buyer common
stock will be issued at the closing of the asset
purchase. The parties agree that the purchase price
shall be Ten Cents ($0.10) per share so that at the
closing the Buyer shall deliver 5,000,000 restricted
shares of the Buyers common stock to the Seller. The
common stock received by the Seller shall be subject to
the registration rights included as Exhibit O of this
asset purchase agreement.
a) The Buyer has the option for one year from
the date of the closing to purchase the
aforesaid stock transferred to the Seller for
the sum of $500,000.
b) In the event the average closing price of the
Buyers common stock for the calendar year
1998 is less than Ten Cents ($0.10) per
share, the Buyer shall issue to the Seller an
additional number of shares of the Buyers
common stock so that the Seller shall receive
a total of $500,000 in the Buyers common
stock. These additional shares, if owed,
shall be delivered to the Seller on or before
January 30, 1999.
1.2.4 Continuing Payments until Seller receives $1,000,000.
In the event the Seller receives $500,000 from
Receivables, but does not receive $500,000 in product
sales during the same time period, the Buyer shall
continue to pay the Seller 50% of the cash receipts set
forth in paragraph 1.2.1 until the Seller receives a
total of $1,000,000.
a) In the event the Seller receives $500,000 in
product sales, but does not receive $500,000
from Receivable payments during the same time
period, the Buyer shall continue to pay the
Seller in product sales set forth in
paragraph 1.2.2 until the Seller receives a
total of $1,000,000.
b) It is expressly agreed that the Buyer's
obligations under paragraphs 1.2.1 and 1.2.2
shall terminate when the Seller receives a
total of $1,000,000 from the combined income
derived from the cash receipts from
Receivables and product sales.
1.2.5 Potential Reduction of Purchase Price. Associated with
the assets to be purchased by the buyer, the Buyer will
assume certain liabilities detailed in Exhibit H.
These liabilities represent franchise fees received by
the Seller from franchisees yet to open stores. In the
event Buyer reasonably and in
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good faith must refund all or a portion of these fees
to the franchisee or prospective franchisee, the above
purchase price will be reduced by the amount of such
refund, such reduction to take place upon thirty (30)
days prior written notice by Buyer to Seller. Such
reduction in the purchase price may be used to reduce
the then outstanding balance of the purchase price
attributed to section 1.2.1 or 1.2.2 above. This
provision to reduce the purchase price by refunded
franchise fees shall apply only to those franchises
listed in Exhibit H as of the closing date. The right
to reduce the purchase price shall expire one (1) year
from the closing date.
SECTION 2. CLOSING.
The Closing shall take place at the offices of the Seller, located at 0000
Xxxxx Xxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx 00000, at 2p.m. on January 9,
1998, (the "Closing Date"), or at such other time, date, and place as the
parties hereto shall mutually agree upon in writing. At the closing, the parties
will execute the following documents:
2.1 Assumed Franchise Agreements. Buyer and Seller shall execute an
Assignment and Assumption Agreement in form of the attached
Exhibit I, for each of the Assumed Franchise Agreements, wherein
Seller shall assign and transfer to the Buyer and Buyer shall
assume all obligations, duties and liabilities under the Assumed
Franchise Agreements and agrees to perform future obligations
arising under the Assumed Franchise Agreements.
2.2 Trademark assignment. Seller shall execute at closing, an
assignment of the trademark registration referred to in Section
1.1.2 in the form attached as Exhibit J, which assignment shall
be prepared by Buyer and furnished to Seller. Buyer shall
promptly record such assignment with the United States Patent and
Trademark Office, and shall pay any and all appropriate
recordation fees. If reasonably requested by Buyer, Seller will
provide such other conveyances, assurance documents, and
instruments of transfer reasonably requested by Buyer for
purposes of assigning, transferring, granting, and conveying to
Buyer such trademark registration.
2.3 Security Agreement. Buyer and Seller shall execute at closing a
Security Agreement in the form of the attached Exhibit K.
The effective date of this Agreement shall be December 31, 1997.
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SECTION 3. REPRESENTATIONS, WARRANTIES, AND
COVENANTS OF THE SELLER .
The Seller, to the best of Seller's knowledge and without having conducted
any investigation, represents and warrants to the Buyer and covenants and
agrees that:
3.1. CORPORATE MATTERS.
3.1.1. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the
State of California. The Seller has all requisite
corporate power and authority to enter into this
Agreement and all other agreements to be executed and
delivered by the Seller hereunder, to perform its
obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. To
the best of the Seller's knowledge, Seller is in
compliance with the applicable statues ordinances and
regulations concerning Seller's Java Centrale Cafe
business relevant to the assets transferred under this
Agreement.
3.2. VALIDITY OF AGREEMENT AND CONFLICT WITH OTHER INSTRUMENTS.
3.2.1 The execution, delivery and performance of this
Agreement has been duly authorized by the Board of
Directors of the Seller. This Agreement has been duly
executed and delivered by the Seller. This Agreement
and all other agreements contemplated hereby constitute
legal, valid and binding obligations of the Seller
3.2.2. The execution, delivery, and performance of this
Agreement and any other agreement contemplated hereby,
the consummation of the transactions contemplated
hereby or thereby, and the compliance with the
provisions hereof or thereof, by the Seller will not:
3.2.2.1. conflict with, constitute a breach,
violation, or termination of any provision
of, or constitute a default under, any of the
leases or the contracts or other agreements
to which the Seller is a party or by which it
is bound;
3.2.2.2. conflict with or violate the Articles of
Incorporation or Bylaws of the Seller;
3.2.2.3. violate any law, statute, ordinance,
regulation, judgment, writ, injunction, rule,
decree, order or any other restriction of any
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kind or character applicable to the Seller or
any of its respective properties or assets.
3.2.3. Attached hereto as Exhibit L are true, correct, and
complete copies of the resolutions adopted by the Board
of Directors of the Seller approving this Agreement and
the transactions contemplated hereby. Such resolutions
were adopted at meetings duly called and convened at
which quorums were present and acting throughout or
through a unanimous written consent of the Board of
Directors. Such resolutions are in full force and
effect without amendment or modification.
3.3. NO PENDING LITIGATION AND SELLERS GOOD STANDING.
3.3.1. No trademark proceedings. Seller warrants that Exhibit
B Trademark registration is not subject to any
pending interference, infringement, or cancellation
proceeding, and is not otherwise being challenged in
any litigation or other proceeding.
3.3.2 Franchise litigation. Seller warrants that except as
set forth and described in the attached Exhibit M,
there is no pending litigation regarding any of the
Assumed Franchise Agreements or Other Assumed
Agreements.
3.3.3 Infringement of Other Rights. Seller warrants that
none of the operations of Seller in the franchising of
Java Centrale Cafes knowingly involves the infringement
of any unexpired patent, trademark, trademark
registration, trade name, copyright, copyright
registration, trade secret, or other proprietary or
intellectual property right of another person or
entity.
3.4 CONTRACTS AND COMMITMENTS.
3.4.1 The Seller has delivered to the Buyer a true, correct,
and complete copy of each such Assumed Franchise
Agreement and each is valid and in full force and
effect and embodies the complete understanding between
the parties thereto with respect to the subject matter
thereof.
3.4.2 Except as set forth on Exhibit M, the Seller has not
received any notice that any person intends to cancel,
modify or terminate any of the said Assumed Franchise
Agreements or other Assured Agreements, or to exercise
or not exercise any options thereunder.
3.5. RECEIVABLES Set forth in Exhibit D annexed hereto is a complete
and accurate schedule of the Seller's Receivables. All such
Receivables are valid and
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genuine, arise out of bona fide sales and delivery of goods,
performance of services or other transactions in the ordinary
course of business. Such Receivables are recorded on the books
of the seller in accordance with generally accepted accounting
principles consistently applied. It is expressly agreed that the
Seller will not be responsible for, and does not guarantee
collection of the Receivables.
3.6. FINDER'S FEES. The parties hereto agree that there are no
finder's fees or brokerage fees owed to any third party arising
out of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller as follows:
4.1. CORPORATE MATTERS
4.1.1. The Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of
Delaware. The Buyer has all requisite corporate power and
authority to enter into this Agreement and all other
agreements to be executed and delivered by the Buyer
hereunder, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated
hereby and thereby.
4.1.2. At the closing, the Buyer will deliver to the Seller its
most recent financial statement prepared by its Certified
Public Account in accordance with generally accepted
accounting principles. Subsequent to the closing, the Buyer
will furnish to the Seller, as long as the Seller owns the
common stock of the Buyer described in section 1.2.3 above,
the Buyer's quartely financial statements. Such statements
shall be provided in a reasonalbe time after quarter end.
4.1.3. The Buyer's common stock has been duly authorized and issued
in accordance with the applicable Federal Securities Law,
and the regulations of the Securities and Exchange
Commission, and there are no pending actions or proceedings
against the Buyer under any Federal or State Securities
laws.
4.2. VALIDITY OF AGREEMENT AND CONFLICT WITH OTHER INSTRUMENTS.
4.2.1 The execution, delivery and performance of this Agreement
has been duly authorized by the Board of Directors of the
Buyer. This Agreement has been duly executed and delivered
by the Buyer to the Seller and, this Agreement and all
other agreements contemplated hereby constitute legal, valid
and binding obligations of the Buyer.
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4.2.2 The execution, delivery, and performance of this Agreement
and any other agreement contemplated hereby, the
consummation of the transactions contemplated hereby or
thereby, and the compliance with the provisions hereof or
thereof, by the Buyer will not, to the extent of the Buyers
knowledge:
4.2.2.1. conflict with, constitute a breach, violation, or
termination of any provision of, or constitute a
default under, any of leases or contracts and
other agreements to which the Buyer is a party or
by which the Buyer is bound;
4.2.2.2. conflict with or violate the Articles of
Incorporation or Bylaws of the Buyer;
4.2.2.3. violate any law, statute, ordinance, regulation,
judgment, writ, injunction, rule, decree, order or
any other restriction of any kind or character
applicable to the Buyer or any properties or
assets owned or leased by the buyer.
4.2.3. Attached hereto as Exhibit M are true, correct, and complete
copies of the resolutions adopted by Board of Directors of
the Buyer approving this Agreement and the transactions
contemplated hereby. Such resolutions were adopted at
meetings duly called and convened at which quorums were
present and acting throughout. Such resolutions are in full
force and effect without amendment or modification.
SECTION 5. ACCESS TO INFORMATION BY THE BUYER.
5.1 PRIOR TO CLOSING. The Buyer shall have the right prior to Closing to
conduct a due diligence investigation of the Seller's books and
records including a review of all Franchise Agreements, financial
statements, tax returns and any other documents relative to this
agreement.
5.2 CONFIDENTIALITY. All information disclosed by any party to this
Agreement to another party, except as required by either party for
regulatory requirements under federal or state securities law or by
securities administrators, such as the Securities and Exchange
Commission, to the fullest extent reasonable possible, shall be kept
confidential by such receiving party and shall not be used by such
receiving party other than as herein contemplated or required by court
order, except to the extent that such information was known by such
receiving party when received or it is or hereafter becomes legally
obtainable from other sources or to the extent such duty as
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to confidentiality is waived by the other party. In the event of
termination of this Agreement, each party hereto shall use all
reasonable efforts to return, upon request, to the other parties, all
documents (and reproduction thereof) received from such other parties.
SECTION 6 CHANGE OF NAME
6.1 Change of Name. The Seller agrees that from and after the closing
date it will take such action as may be required to change its
corporate name to one bearing no resemblance to its current corporate
name of Java Centrale, Inc., the right to use such name being
transferred to the Buyer under this Agreement. During the period
between closing and a final change of the Seller's Corporate name,
Seller will not use the Java Centrale name in competition with the
Buyer.
SECTION 7. TERMINATION.
7.1. TERMINATION. The obligation to close the transactions contemplated by
this Agreement may be terminated by:
7.1.1 Mutual agreement of the Buyer and the Seller (as evidenced
by action of their respective Boards of Directors)
7.1.2 The Buyer, if a material default shall be made by the Seller
in the observance or in the due and timely performance of
any agreement or covenant of the Seller; or if there shall
have been a material breach by the Seller of any of the
warranties and representations herein contained; or if the
conditions of this Agreement to be complied with or
performed by the Seller or on or before the Closing Date
shall not have been complied with or performed at the time
required for such compliance or performance and such
noncompliance or nonperformance shall not have been waived
by the Buyer.
7.1.3. The Seller, if a material default shall be made by the Buyer
in the observance or in the due and timely performance of
any agreement or covenant of the Buyer herein contained; or
if there shall have been a material breach by the Buyer of
any of the warranties and representations of the Buyer
herein contained; or if the conditions of this Agreement to
be complied with or performed at the time required for such
compliance or performance and such noncompliance and
nonperformance shall have not have been waived by the
Seller.
7.2. LIABILITY UPON TERMINATION. Upon termination of this Agreement
pursuant to this Section 7, no party shall have any liability or
continuing obligation to the other.
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7.3 NOTICE OF TERMINATION. The parties hereto may exercise their
respective rights of termination under this Section 7 only by
delivering written notice to that effect to the other party or
parties, and such notice is received on or before the Closing Date.
SECTION 8 DISPUTES
8.1 MEDIATION: If a dispute arises out of or relates in any way to this
agreement, or the breach thereof, and if the dispute cannot be settled
through negotiations, the Buyer and the Seller agree prior to
initiating any litigation first to try in good faith to settle the
dispute by mediation administered by the American Arbitration
Association under its commercial rules before resorting to litigation.
Such mediation shall occur in Sacramento, California unless another
location is agreed upon in writing between the parties.
8.2 EXCEPTION It is expressly agreed that Section 8.1 above does not
apply to the requirements under Section 1, Paragraph 1.2.1 (a) and (b)
concerning the timely payments of all cash receipts owed to the Seller
by the Buyer.
SECTION 9 IMPLEMENTATION OF AGREEMENT AFTER CLOSING
9.1 NOTICE TO FRANCHISEES Immediately following the closing, the Buyer,
in cooperation with the Seller, will contact each of the franchisees
listed on Exhibit A in order to fully explain the substance of this
Agreement and the procedures the Buyer will implement to ensure an
orderly transition and the continued success of the Java Centrale
Franchise Program.
9.2 CONTINUING COOPERATION BETWEEN BUYER AND SELLER Buyer and Seller
agree, at no additional cost to the Seller, it is in the mutual
interests of the Buyer and the Seller to cooperate with one another in
the implementation of this Agreement, including the development of
good working relationships between the Buyer and the Franchisees. To
this end, the parties will, in good faith, cooperate with each other
to promote such relationship, for a period of six (6) months from the
date of closing.
9.3 MUTUAL INDEMNIFICATION The Buyer agrees to indemnify and hold
harmless the Seller relative to any claim asserted by any third party
against the Seller arising out of events which occurred solely after
the closing herein. Similarly, the Seller agrees to indemnify and
hold harmless the Buyer relative to any claim asserted by any third
party against the Buyer arising out of events which occurred solely
before the closing herein. In the event any third party asserts a
claim against the Buyer and the Seller arising out of events which
occurred before and after the closing herein, the Buyer and the Seller
will separately defend themselves against such claims and each will
pay its own legal fees and court costs, if any.
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SECTION 10 MISCELLANEOUS.
10.1. Notices. All Notices given hereunder shall be made by certified
mail as follows:
10.1.1. To the Seller at:
0000 Xxxxx Xxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
10.1.2. The Buyer at:
0000 Xxxxxx Xxxx.
Xxxxx 000
Xxxxxx, XX 00000
10.2 EXPENSES Except as otherwise set forth herein, and whether or
not the transactions contemplated by this Agreement shall be
consummated, each party agrees to pay, without right of
reimbursement from any other party, the costs incurred by such
party incident to the preparation and execution of this Agreement
and performance of its obligations hereunder, including without
limitation the fees and disbursements of legal counsel,
accountants, and consultants employed by such party in connection
with the transaction contemplated by this Agreement
10.3. BULK TRANSFER LAWS. The Seller agrees with the Buyer that the
bulk sales provisions of the Uniform Commercial Code as in effect
in California and the provisions of any similar statute of any
other state or jurisdiction regulating bulk sales or transfers do
not apply to this Agreement.
10.4. ASSIGNMENT. This Agreement may not be assigned by either of the
parties hereto without the written consent of the other.
10.5 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties and may not be changed or modified except in
writing by all of the parties hereto.
10.6. GOVERNING LAW. This Agreement was negotiated and executed in
Sacramento, California and shall be governed and construed in
accordance with the laws of the State of California, without
regard to its choice of law principles.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
JAVA CENTRALE, INC.
BY:
-------------------------------
Xxxx X. Xxxxxx
President and CEO
XXXXXXX XX XXXXXX, INC.
BY:
-------------------------------
Xxxx X. Xxxxxxx
President
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EXHIBIT 10.15
LIST OF EXHIBITS
Collective Exhibit A Assumed Franchise Agreements.
Exhibit B United States Patent and Trademark Office
Trademark Number and Certification
Collective Exhibit C Other Assumed Contracts.
Exhibit D Description of Royalties, Accounts and Notes
Receivable transferred to Buyer.
Exhibit E The Assets of Reno, Nevada Cafe.
Collective Exhibit F List of Training and Promotional Materials
Exhibit G Copy of Offering Circular
Exhibit H Description of Assumed Liabilities
potentially owed to franchisees.
Exhibit I Form of Assignment and Assumption Agreement.
Exhibit J Form of Trademark Assignment.
Exhibit K Form of Security Agreement
Exhibit L Corporate Resolution of Seller approving
Transaction.
Exhibit M Description of potential problems with
franchisees.
Exhibit N Corporate resolution of Buyer approving
Transaction.
Exhibit O Seller's Piggy Back Right
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