Exhibit 10.1
MEMBER INTEREST PURCHASE AND ACQUISITION AGREEMENT
THIS AGREEMENT ("AGREEMENT") is dated as of August 29, 2005, among FRANCHISE
CAPITAL CORPORATION, a Nevada Corporation ("BUYER"), AZTECA WRAP FOODS, L.L.C.,
an Arizona limited liability company ("SELLER").
RECITALS
A. Each of Buyer and Seller owns a 50% membership interest in Kokopelli
Franchise Company, an Arizona limited liability company ("KOKOPELLI"), pursuant
to that certain Operating Agreement of Kokopelli Mexican Grill Franchise Company
LLC dated May 1, 2004, between Seller and Buyer (the "OPERATING AGREEMENT").
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, Seller's 50% membership interest (the "MEMBERSHIP INTEREST") in
Kokopelli, and the parties desire to enter into other agreements with respect to
Kokopelli, all on the terms and conditions set forth in this Agreement. The term
"Membership Interest" shall not include Seller's rights under Section 7.12 of
the Operating Agreement to operate its existing restaurant.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants set forth herein, the parties agree as follows:
SECTION 1
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Seller hereby sells, conveys, transfers, and assigns
to Buyer, free and clear of all liens, pledges, claims, and encumbrances of
every kind, nature, and description, the Membership Interest and the Assets, as
defined below, and Buyer hereby purchases and accepts from Seller the Membership
Interest and the Assets, subject to the terms and conditions set forth herein.
1.2 ASSET TRANSFER. In addition to the transfer of the Membership Interest
pursuant the terms of this Agreement, subject to the following sentence, Seller
hereby sells, assigns and transfers to Buyer all of Seller's right, title and
interest, including all copyrights associated therewith, in and to the Kokopelli
franchise manual, any training manuals used by Kokopelli, the
Xxxxxxxxxxxxxxxxxxxxx.xxx and Xxxxxxxxxxxxxxxxxxxxx.xxx URL, and any employee or
management manuals used by Kokopelli (the "ASSETS"). Notwithstanding the
foregoing; Seller retains the right to continue to use or have its affiliates
use the Assets (other than the URL) with respect to the operation of the one
restaurant currently operated by Seller or its affiliates under the name
"Kokopelli." These reserved rights include the right to assign or sell its
existing restaurant consistent with the terms of Section 7.12 of the Operating
Agreement, without the purchaser being required to pay any transfer fee or any
initial or periodic franchise fees or other charges with respect to such
existing restaurant.
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SECTION 2
PURCHASE PRICE
2.1 PURCHASE PRICE. The purchase price for the Membership Interest and the
Assets purchased and sold pursuant to Section 1.1, is $250,000.00 (the "PURCHASE
PRICE").
2.2 PAYMENT. The Purchase Price shall be payable as follows: $50,000.00
shall have been delivered to the Seller, by wire transfer, bank check, or as the
parties may otherwise agree, contemporaneously with the execution and delivery
of this Agreement. The remainder of the Purchase Price shall be payable in 12
equal quarterly installments of principal, plus interest, accrued at the prime
rate, as designated on the first business day of each month in the WALL STREET
JOURNAL, as the rate of interest charged by banks in the United States to their
largest and most credit-worthy commercial borrowers for unsecured loans maturing
in 90 days, but in no event in excess of the highest legal rate in Arizona. The
payments will commence on the first day of the third month after the date
hereof. The outstanding balance of the Purchase Price shall be evidenced by a
Promissory Note (the "PROMISSORY NOTE"), substantially in the form set forth as
Exhibit A.
2.3 SECURITY. Buyer's obligations under the Promissory Note shall be
secured by a security interest in the Membership Interest, pursuant to the terms
of the Membership Interest Pledge and Security Agreement attached as Exhibit B
(the "PLEDGE AGREEMENT").
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 GENERAL STATEMENT. The parties make the representations and warranties
to each other as set forth in this Section 3. All representations and warranties
in this Agreement and in any financial statement, exhibit, schedule or document
delivered by or on behalf of a party hereto or their representative to the other
party pursuant to this Agreement shall survive the consummation of the
transactions contemplated by this Agreement (and none shall merge into any
instrument or conveyance), regardless of any knowledge or belief, investigation
or lack of investigation by the parties to this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer the truth, accuracy and completeness of the following:
(a) DUE INCORPORATION, GOOD STANDING, INTERESTS, OWNERSHIP AND
QUALIFICATION. Seller is a limited liability company duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
formation with all requisite power and authority to do business and enter into
this Agreement.
(b) MEMBERSHIP INTERESTS. As of the date hereof, Seller owns 50% of the
membership interests in Kokopelli.
(c) OWNERSHIP. Seller has good and marketable title to, and rightful
possession of, the Membership Interest. No other entities have any right, title
or interest in or to the Membership Interest or the Assets, or any right to
obtain any such interest. Seller has no other right, title or interest in
Kokopelli or its assets, or any right to obtain any such interest, other than as
set forth in Section 7.12 of the Operating Agreement.
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3.3 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
to the Seller as follows:
(a) DUE INCORPORATION, GOOD STANDING, AND QUALIFICATION. Buyer is a
limited liability company duly organized, validly existing, and in good standing
under the laws of its jurisdiction of formation with all requisite power and
authority to own, operate, and lease its assets and properties and to carry on
its business as now being conducted. Buyer is not subject to any material
disability by reason of the failure to be duly qualified as a foreign
corporation for the transaction of business or to be in good standing under the
laws of any jurisdiction
(b) AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS. The execution and
delivery of this Agreement, the Promissory Note and the Pledge and Security
Agreement, the consummation of the transactions contemplated hereby and thereby,
and the fulfillment of the terms hereof and thereof by Buyer, will not violate
any provision of the articles of organization or operating agreement of Buyer,
nor will they result in the breach of any term or provision of, or result in the
termination or modification of, or constitute a default under, or permit any
party to modify or terminate, any loan agreement, note, debenture, indenture,
mortgage, deed of trust, lease, contract, agreement, or other material
obligation of any description to which Buyer is a party or by which Buyer is
bound, or any judgment, decree, order, or award of any court, government body,
or arbitration, or any applicable law, rule, or regulation.
(c) ABILITY TO BEAR RISK. Buyer has the ability to bear the economic
risk of the purchase of the Membership Interest, including the complete loss of
its investment.
(d) KNOWLEDGE AND EXPERIENCE. Buyer has sufficient knowledge and
experience in business and financial matters (or has received from a person of
its selection sufficient advice with respect to such matters) to be capable of
evaluating the merits and risks of an investment in the Membership Interest.
(e) POWER TO EXECUTE AGREEMENT. Buyer has the full power and authority
to execute, deliver, and perform its obligations under this Agreement, and this
Agreement is the legal and binding obligation of Buyer, and is enforceable
against Buyer in accordance with its terms.
(f) LITIGATION. To its knowledge, there are no actions, suits,
proceedings, pending or threatened against Kokopelli or against Buyer with
respect to Kokopelli at law or in equity, or before or by any federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality.
(g) FULLY INFORMED DECISION. As the Managing member of Kokopelli, it
has knowledge of the existing and proposed business affairs, financial
condition, plans and prospects of Kokopelli that it deems relevant in making a
fully informed decision with respect to the purchase of the Membership interest.
(h) OPPORTUNITY TO OBTAIN INFORMATION. It has had the opportunity to
ask questions and receive information with respect to, among other things, the
proposed business affairs, financial condition, plans and prospects of Kokopelli
and the terms and conditions of the purchase of the Membership Interest, as it
has requested so as to more fully understand its investment.
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(i) NO REPRESENTATIONS. Neither Seller nor any person representing or
acting on behalf of Seller, or purportedly representing or acting on behalf of
Seller, has made any representations, warranties, agreements or statements other
than those contained herein which influenced or affected its decision to
purchase the Membership Interest.
(j) ACQUISITION FOR OWN ACCOUNT. It is acquiring the Membership
Interest for its own account, without any view to the transfer, sale, assignment
or other distribution thereof.
(k) NO LIEN. The execution and delivery of this Agreement and the
Pledge Agreement by Buyer and the consummation of the transactions contemplated
hereby and thereby by Buyer will not result in the imposition of a lien upon the
Collateral, as defined in the Pledge Agreement.
(l) SECURITIES. Buyer acknowledges, understands and agrees that the
Membership Interest has not been, and will not be, registered under any federal
or state securities laws, including, but not limited to the Securities Act of
1933, as amended, and the Arizona Securities Act, as amended, and that no
federal or state governmental agency or authority has approved or passed upon
the issuance of the Membership Interest. It understands that there is not now,
and that there is not likely to be in the future, any market for the Membership
Interest and that the Membership Interest must be held by it for an indefinite
period of time, absent registration or qualification of the Membership Interest
under applicable laws or the receipt of an option of counsel satisfactory to the
Corporation that registration or qualification is not required. It acknowledges
that the certificate, if any, representing the Membership Interest to be issued
to it will bear a legend restricting the transferability thereof to the
foregoing effect.
SECTION 4
INDEMNIFICATION
4.1 INDEMNIFICATION OF BUYER.
(a) Seller covenants and agrees to defend, indemnify and hold Buyer and its
officers, directors, members, employees, attorneys, agents and representatives
(collectively, the "BUYER PARTIES") harmless for, from and against any and all
damages, losses, liabilities (absolute and contingent), fines, penalties, costs
and expenses (including, without limitation, reasonable counsel fees and costs
and expenses incurred in the investigation, defense or settlement of any claim
covered by this indemnity) with respect to or arising out of any demand, claim,
inquiry, investigation, proceeding, action or cause of action that any of the
Buyer Parties may suffer or incur by reason of:
(i) the inaccuracy or breach of any of the representations or
warranties of Seller or any of Seller's members contained in this Agreement, or
any of the agreements, certificates, documents or exhibits delivered in
connection with this Agreement;
(ii) the failure to comply with, or the breach or default by Seller or
any of Seller's members of any of the covenants, warranties, or agreements made
by Seller or any of Seller's members contained in this Agreement, or any of the
agreements, certificates, documents or exhibits delivered in connection with
this Agreement; or
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(iii) any misrepresentation contained herein or in any written
statement or certificate furnished by Seller pursuant to this Agreement or in
connection with the transactions contemplated hereby.
4.2 INDEMNIFICATION OF SELLER. Buyer covenants and agrees to defend,
indemnify and hold Seller and its officers, directors, members, attorneys,
agents and representatives (the "SELLER PARTIES") harmless for, from and against
any and all damages, losses, liabilities (absolute and contingent), fines,
penalties, costs and expenses (including, without limitation, reasonable counsel
fees and costs and expenses incurred in the investigation, defense or settlement
of any claim covered by this indemnify) with respect to or arising out of any
demand, claim, inquiry, investigation, proceeding, action or cause of action
that Seller Parties may suffer or incur by reason of:
(i) any of the activities of the Company, whether before or after the
date of this Agreement, other than liabilities arising out of any act or
omission of Seller that was fraudulent, grossly negligent, in bad faith, or
contrary to Seller's fiduciary duties to the Company and its members;
(ii) the inaccuracy or breach of any of the representations or
warranties of Buyer or any of Buyer's members contained in this Agreement, or
any of the agreements, certificates, documents or exhibits delivered in
connection with this Agreement;
(iii) the failure to comply with, or the breach or default by Buyer or
any of Buyer's members of any of the covenants, warranties or agreements made by
Buyer or any of Buyer's members contained in this Agreement, or any of the
agreements, certificates, documents or exhibits delivered in connection with
this Agreement; or
(iv) any misrepresentation contained herein or in any written statement
or certificate furnished by Buyer pursuant to this Agreement or in connection
with the transactions contemplated hereby.
4.3 NOTICE AND RIGHT TO DEFEND THIRD-PARTY CLAIMS. Promptly upon receipt of
notice of any claim, demand or assessment or the commencement of any suit,
action or proceeding with respect to which indemnity may be sought pursuant to
this Agreement, the party seeking to be indemnified or held harmless (the
"INDEMNITEE") shall notify in writing, if possible, within sufficient time to
respond to such claim or answer or otherwise plead in such action (but in any
event within 30 days), the party from whom indemnification is sought (the
"INDEMNITOR"). In case any claim, demand or assessment shall be asserted, or
suit, action or proceeding commenced against the Indemnitee, the Indemnitor
shall be entitled, at the Indemnitor's expense, to participate therein, and, to
the extent that it may wish, to assume the defense, conduct or settlement
thereof, at its own expense, with counsel satisfactory to the Indemnitee, whose
consent to the selection of counsel shall not be unreasonably withheld or
delayed, provided that the Indemnitor confirms to the Indemnitee that it is a
claim to which its rights of indemnification apply. The Indemnitor shall have
the right to settle or compromise monetary claims; however, as to any other
claim, the Indemnitor shall first obtain the prior written consent from the
Indemnitee, which consent shall be exercised in the sole discretion of the
Indemnitee. After notice from the Indemnitor to the Indemnitee of Indemnitor's
intent so to assume the defense, conduct, settlement or compromise of such
action, the Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses (including, without limitation, settlement costs) subsequently
incurred by the Indemnitee in connection with the defense, conduct or settlement
of such action while the Indemnitor is diligently defending, conducting,
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settling or compromising such action. The Indemnitor shall keep the Indemnitee
apprised of the status of the suit, action or proceeding and shall make
Indemnitor's counsel available to the Indemnitee, at the Indemnitor's expense,
upon the request of the Indemnitee. The Indemnitee shall cooperate with the
Indemnitor in connection with any such claim and shall make personnel, books and
records and other information relevant to the claim available to the Indemnitor
to the extent that such personnel, books and records and other information are
in the possession and/or control of the Indemnitee. If the Indemnitor decides
not to participate, the Indemnitee shall be entitled, at the Indemnitor's
expense, to defend, conduct, settle or compromise such matter with counsel
satisfactory to the Indemnitor, whose consent to the selection of counsel shall
not be unreasonably withheld or delayed.
SECTION 5
POST-CLOSING OBLIGATIONS
5.1 COVENANTS.
(a) TRADE SECRETS AND OTHER INFORMATION. In consideration of the
execution and delivery of this Agreement by Buyer, and in consideration of the
payments by Buyer of the Purchase Price, Seller agrees that, except as necessary
or appropriate in connection with the operation of Seller's (or its affiliates')
one Kokopelli restaurant, after the date hereof Seller will not directly or
indirectly communicate or divulge to, or use for the benefit of, and person,
firm of corporation other than Buyer, or its agents or representatives, any of
the trade secrets, methods, formulas, business and/or marketing plans, processes
or any other proprietary or confidential information with respect to Buyer or
Kokopelli and their business, financial condition, business operations or
methods, or business prospects. The preceding sentence shall not apply to
information that (i) is, was, or becomes, generally known or available to the
public or the industry other than as a result of a disclosure by a party in
violation of this Agreement, or (ii) is required to be disclosed by law.
(b) OBLIGATIONS OF ALL PARTIES; FURTHER ASSURANCES. Each of the parties
shall execute such further documents, and perform such further acts, as may be
reasonably requested by the other party from time to time to transfer and convey
the Membership Interest and Assets to Buyer, on the terms herein contained, and
to otherwise comply with, implement, or evidence the terms of this Agreement and
consummate the transactions herein provided, including (without limitation) the
rights of Seller under Section 7.12 of the Operating Agreement and Section 1.2
of this Agreement.
SECTION 6
GENERAL
6.1 CONTROLLING LAW. This Agreement, and all questions relating to its
validity, interpretation, performance, and enforcement, shall be governed by and
construed in accordance with the laws of Arizona, notwithstanding any Arizona or
other conflict-of-law provisions to the contrary. In any action or proceeding to
enforce rights under this Agreement, the prevailing party shall be entitled to
recover costs and attorneys' fees.
6.2 NOTICES. Except to the extent otherwise set forth herein, all notices,
requests, demands, and other communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received when personally delivered, or 3 days after deposit in the United
States mails, first class postage prepaid, return receipt requested, or when
sent by overnight express delivery with a signature required upon receipt, or 24
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hours after being sent by facsimile with a confirmed copy, addressed as set
forth below:
If to Buyer: If to Seller:
0000 XxXxxxxx Xxxxx 000 0000 X. Xxxxxxxxx Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: President Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000 Fax:
With a copy to: With a copy to:
Xxxxx Law Firm, P.C. Xxxxxxxxxx & Xxxxxxxx L.L.P.
Attn: Xxxx X. Xxxxx Attn: Xxxxx X. Xxxxxxxx
00000 X. Xxxxx Xxxx., Xxx. 000 5080 North 40th St., Ste. 335
Phoenix, Arizona 85028 Xxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any party may alter the address to which communications or copies are to be
sent by giving notice to such other parties of change of address in conformity
with the provisions of this paragraph for the giving of notice.
6.3 BINDING NATURE OF AGREEMENT; NO ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that no party may assign, delegate, or transfer
its rights or obligations under this Agreement without the prior written consent
of the other parties hereto.
6.4 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
and the Operating Agreement, contains the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein contained. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing.
6.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
FRANCHISE CAPITAL CORPORATION, a Nevada
Corporation
By:___________________________________
Name: ________________________________
Its:___________________________________
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AZTECA WRAP FOODS, L.L.C., an Arizona limited
liability company
By:___________________________________
Name: ________________________________
Its:___________________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of August,
2005, by __________________________ as _________________________ of Franchise
Capital Corporation, a Nevada corporation, on behalf of the corporation.
------------------------------------------
Notary Public
My Commission Expires:
--------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
August, 2005, by _________________ as ______________________ of Azteca Wrap
Foods, L.L.C., an Arizona limited liability company, on behalf of the company.
-----------------------------------------
Notary Public
My Commission Expires:
--------------------
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EXHIBIT A
PROMISSORY NOTE
PROMISSORY NOTE
U.S. $200,000.00 As of August 29, 2005
FOR VALUE RECEIVED, Franchise Capital Corporation, a Nevada Corporation
("MAKER"), hereby promises to pay to Azteca Wrap Foods, LLC ("HOLDER") at
Holder's address as set forth on page 2 hereof, the principal amount of Two
Hundred Thousand Dollars ($200,000.00), together with interest on the principal
balance outstanding hereunder, from, and including, the date of this Promissory
Note (this "NOTE") until, but not including, the date of full and final payment.
The principal balance of this Note shall bear interest at the contracted rate
per annum (calculated from the date of this Note on a 365 day basis), at the
prime rate, as designated on the first business day of each month in the WALL
STREET JOURNAL, as the rate of interest charged by banks in the United States to
their largest and most credit-worthy commercial borrowers for unsecured loans
maturing in 90 days, but in no event in excess of the highest legal rate in
Arizona.
1. Payments. The principal amount due under this Note shall be payable in
twelve (12) equal quarterly installments of principal, each in the amount of
Sixteen thousand six hundred sixty-seven dollars ($16,667.00), together with
interest accrued thereon, commencing on November 1, 2005, with the final payment
on August 1, 2008.
2. Acceleration and Other Remedies. Maker shall be in default under this
Note if Maker fails to timely make any of the payments due and payable hereunder
or if Maker fails to perform or otherwise breaches any of its obligations,
agreements, or warranties under the Purchase Agreement or the Pledge Agreement.
Upon the occurrence of any such default, before Holder may exercise any of
Holder's rights or remedies arising out of this Note, Holder shall give Maker
written notice of such default and Maker shall have fifteen (15) days from the
date Maker receives notice of the default from Holder to cure the default. If
Maker fails to cure the default within this fifteen (15) day grace period, then,
and only then, shall an "EVENT OF DEFAULT" have occurred under this Note. Upon
the occurrence of an Event of Default, the entire principal balance outstanding
hereunder, together with all accrued but unpaid interest thereon, shall, at the
election of Holder, and without further notice to Maker, become immediately due
and payable. Holder's failure to declare acceleration for any cause shall not
prevent Holder from declaring acceleration at a later time for such, or any
other, Event of Default.
3. Prepayment. Maker may prepay all or any portion of the accrued interest
and the unpaid principal balance of this Note at any time, or from time to time,
without penalty or premium. Any prepayment shall first be credited to accrued
interest, and then to principal, to the inverse order of maturity.
4. Purchase Agreement. This Note is executed and delivered in connection
with the Member Interest Purchase and Acquisition Agreement, by and among
Franchise Capital Corporation and Azteca Wrap Foods, L.L.C., as of the date
hereof the "PURCHASE AGREEMENT").
5. Application of Payments. All payments shall first be applied to accrued
interest and then to principal. Prepayment of any amounts owed under this Note
may be made at anytime, or from time to time, in whole or in part, without
penalty. All amounts payable under this Note are payable in lawful money of the
United States.
6. Waivers. Except to the extent expressly set forth herein, Maker hereby
waives diligence, demand, grace, presentment for payment, notice of nonpayment,
protest and notice of protest, notice of dishonor, notice of extension and
notice of default.
7. Costs and Expenses. In the event that Holder is required to take any
legal action in order to enforce its rights hereunder, Holder shall be entitled
to recover from Maker its reasonable out of pocket costs and expenses actually
incurred in connection therewith, including, without limitation, reasonable
attorneys' fees, whether or not suit is filed, and all costs of collection, suit
and preparation for suit (whether at trial or appellate level).
8. Security. Maker's obligations hereunder are secured by a pledge of a 50%
membership interest in Kokopelli Franchise Company, L.L.C. pursuant to the terms
of a Pledge and Security Agreement of even date herewith between Maker as
Pledgor and Holder as Secured Party (the "PLEDGE AGREEMENT").
9. Controlling Law. This Note and all questions relating to its validity,
interpretation, performance and enforcement, shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Arizona
without regard to conflicts of laws or provisions thereof to the contrary.
10. Binding Nature. The provisions of this Note shall be binding upon Maker
and the successors and assigns of Maker, and shall inure to the benefit of
Holder and any subsequent holder of all or any portion of this Note, and their
respective successors and assigns.
11. Notices. Except to the extent otherwise set forth herein, all notices,
requests, demands, and other communications required or permitted under this
Note shall be in writing and shall be deemed to have been duly given, made and
received when personally delivered, or 3 days after deposit in the United States
mails, first class postage prepaid, return receipt requested, or when sent by
overnight express delivery with a signature required upon receipt, or 24 hours
after being sent by facsimile with a confirmed copy, addressed as set forth
below:
If to Maker: If to Holder:
0000 XxXxxxxx Xxxxx 000 0000 X. Xxxxxxxxx Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: President Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000 Fax:
With a copy to: With a copy to:
Xxxxx Law Firm, P.C. Xxxxxxxxxx & Xxxxxxxx L.L.P.
Attn: Xxxx X. Xxxxx Attn: Xxxxx X. Xxxxxxxx
00000 Xxxxx Xxxxx Xxxx. Xxxxx 000 5080 North 40th Street Suite 335
Phoenix, Arizona 85028 Xxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any party may alter the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
Maker hereby acknowledges receipt of a copy of this Promissory Note.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first set
forth above.
FRANCHISE CAPITAL CORPORATION, a Nevada
Corporation
By:___________________________________
Name: ________________________________
Its:__________________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of August,
2005, by __________________________ as _________________________ of Franchise
Capital Corporation, a Nevada corporation, on behalf of the corporation.
-------------------------------------
Notary Public
My Commission Expires:
---------------------
EXHIBIT B
MEMBERSHIP INTEREST PLEDGE AND SECURITY AGREEMENT
MEMBERSHIP INTEREST PLEDGE AND SECURITY AGREEMENT
THIS MEMBERSHIP INTEREST PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT")
is made as of the ____ day of August, 2005, by and between Franchise Capital
Corporation, a Nevada Corporation ("PLEDGOR") and Azteca Wrap Foods, L.L.C., an
Arizona limited liability company ("SECURED PARTY"); and is acknowledged and
agreed to by Kokopelli Franchise Company, L.L.C., an Arizona limited liability
company ("KOKOPELLI").
RECITALS
A. Pledgor and Secured Party have executed that certain Membership Interest
Purchase and Acquisition Agreement, dated as of the date hereof (the "PURCHASE
AGREEMENT"), pursuant to which Pledgor has purchased Secured Party's 50%
membership interest in Kokopelli (the "MEMBERSHIP INTEREST") as described in
that certain Operating Agreement of Kokopelli Mexican Grill Franchise Company,
LLC dated May 1, 2004, between Pledgor and Secured Party (the "OPERATING
AGREEMENT").
B. To evidence Pledgor's obligations to Secured Party pursuant to the
Purchase Agreement, Pledgor issued to Secured Party that certain Promissory
Note, dated as of the date hereof, in the original principal amount of Two
Hundred Thousand and 00/100ths dollars ($200,000.00) (the "PROMISSORY NOTE").
C. As security for the repayment of Pledgor's payment obligations to
Secured Party under the Promissory Note and the performance of Pledgor's other
obligations under the Purchase Agreement (the "OBLIGATIONS"), Pledgor has agreed
to grant Secured Party a security interest in the Membership Interest.
AGREEMENT
1. PLEDGE. FOR GOOD AND VALUABLE CONSIDERATION, Pledgor hereby grants to
Secured Party a security interest in, and pledges to Secured Party, the 50%
membership interest in Kokopelli that Pledgor purchased from Secured Party as of
the date hereof (the "MEMBERSHIP INTEREST"), all rights under the Operating
Agreement relating to the Membership Interest, and all proceeds of the
Membership Interest (the "COLLATERAL") to secure the full and prompt payment of
Pledgor's indebtedness under the Promissory Note and all of Pledgor's other
agreements and obligations under the Purchase Agreement and this Agreement (the
"OBLIGATIONS").
2. EVENTS OF DEFAULT. Anyone or more of the following will constitute an
event of default under this Agreement (each an "EVENT OF DEFAULT"):
(a) Pledgor's Event of Default as defined under the Promissory Note;
(b) Pledgor becomes insolvent or bankrupt, or admits in writing
Pledgor's inability to pay Pledgor's debts as they mature, or makes an
assignment for the benefit of creditors, or applies for or consents to the
appointment of a trustee or receiver over Pledgor's property, or Pledgor
commences any proceeding relating to any bankruptcy, reorganization,
arrangement, insolvency, readjustment, dissolution, or insolvency or liquidation
proceeding under the law of any jurisdiction;
(c) Any proceeding described in Section 2(b) is commenced against
Pledgor and such proceeding is not dismissed within 15 days;
(d) Any order described in Section 2(b) is entered appointing a trustee
or receiver over either Pledgor's property or Pledgor or adjudicating Pledgor
bankrupt or insolvent, or approving the petition in any proceeding, and the
order remains in effect for 60 days; or
(e) Any transfer, assignment or other disposition of all or any part of
the Collateral by Pledgor.
3. REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default under
this Agreement, Secured Party is authorized, upon notice to Pledgor and
Kokopelli, to take any actions allowed by law, including, without limitation,
all rights and remedies available under the Operating Agreement and the Uniform
Commercial Code, including to retain possession, sell or otherwise dispose of
all or any portion of the Membership Interest at public or private sale. The
remedies of Secured Party hereunder are cumulative and the exercise of anyone or
more of the remedies shall not be construed as a waiver of any of the other
remedies of Secured Party so long as any part of the Obligations remains
unsatisfied. Secured Party shall have no duty of any kind to any subordinated
creditor of Pledgor. Pledgor agrees that written notice given at least twenty
(20) days prior to any public or private sale shall constitute commercially
reasonable notice. Secured Party may deduct from the proceeds of sale all costs,
expenses and charges incurred in connection therewith, including reasonable
attorneys fees. The balance of the proceeds shall be applied to the Obligations
and the remaining surplus (if any) shall be paid to the Pledgor. At any public
or private sale, the Secured Party may bid for (including a credit bid of all or
part of the unpaid balance under the Promissory Note) and purchase the
Collateral being sold and, in the event of any such public or private sale, the
purchaser shall hold the Collateral thereafter discharged of any right of
redemption. Debtor and Kokopelli agree that the purchaser of the Collateral
shall be admitted as a member of Kokopelli effective immediately upon written
demand.
4. TIME IS OF THE ESSENCE. Time is of the essence in the performance of
each and every obligation under this Agreement.
5. PLEDGOR'S REPRESENTATION. Pledgor represents that the execution and
delivery of this Agreement by Pledgor and the consummation of the transactions
contemplated hereby by Pledgor will not result in the imposition of a lien upon
the Collateral.
6. FURTHER ASSURANCES. Pledgor hereby agrees to execute and deliver to
Secured Party all financing and continuation statements and other instructions
as Secured Party may reasonably require in order to impose and continue the lien
created pursuant to this Agreement upon the Collateral. Pledgor hereby
authorizes Secured Party to execute and file all financing statements necessary
to perfect its security interest in the Collateral.
7. TERM. This Agreement and the pledge made under this Agreement will
remain in effect for so long as Pledgor is indebted to Secured Party under the
Promissory Note.
8. MODIFICATION OR WAIVER. No modification of this Agreement will be deemed
effective unless in writing and signed by the parties to this Agreement. Any
waiver granted will not be deemed effective unless in writing, signed by the
party against whom enforcement of the waiver is sought.
9. PROTECTION OF COLLATERAL. Pledgor shall not encumber, transfer, sell,
lend, secrete, or otherwise dispose of any of the Collateral or any portion
thereof without Secured Party's prior written consent. Pledgor shall at all
times keep the Collateral free from all liens, encumbrances, and other security
interests whether superior or inferior to this Agreement, unless Secured Party
consents in advance in writing to such encumbrance. Pledgor shall defend at its
own cost any attack or claim on the Collateral and the interest of Secured Party
therein against all claims, demands, and legal proceedings by all persons at any
time claiming the same or any interest therein. Secured Party at its option may
itself maintain such defense, but the cost, including reasonable attorneys'
fees, shall become an obligation of Pledgor secured by this Agreement. Pledgor
shall pay all expenses and, upon request by Secured Party, take any action
reasonably deemed advisable by Secured Party to preserve and protect the
Collateral or its security interest under this Agreement.
10. VOTING RIGHTS AND PAYMENTS AFTER DEFAULT. After an Event of Default
under this Agreement, Secured Party shall be entitled to direct Pledgor
regarding the exercise of its voting power and management rights with respect to
the Collateral, and to receive and retain, as additional Collateral hereunder,
any and all distributions made by Kokopelli with respect to the Collateral. Any
cash received and retained by Secured Party as additional Collateral hereunder
pursuant to the foregoing provisions shall from time to time be applied by
Secured Party to the payment of amounts owing pursuant to the terms of the
Obligations.
11. POWER OF ATTORNEY. Pledgor hereby appoints Secured Party as Pledgor's
attorney-in-fact for the purpose of carrying out the provisions of this
Agreement after an Event of Default and taking any action and executing any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes hereof. Without limiting the generality of the foregoing, Secured Party
shall have the right and power after an Event of Default to (a) receive, endorse
and collect all checks and other orders for the payment of money made payable to
Pledgor representing any distribution or other amount payable in respect of the
Collateral or any part thereof and to give full discharge for the same, and (b)
to execute bills of sale, endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Collateral.
12. PLEDGOR'S WARRANTIES. Pledgor warrants to Secured Party that, as of the
date hereof and so long as any part of the Obligations remains unpaid, Pledgor
is and will remain the sole and exclusive owner of the Collateral, free and
clear of any and all liens, security interests and encumbrances of every kind
and description other than the security interest granted to Secured Party
hereunder.
13. PRESERVATION OF KOKOPELLI. So long as any part of Pledgor's
indebtedness under the Promissory Note or any other of the Obligations remains
unpaid, Pledgor shall not, without the prior written consent of Secured Party,
agree to any amendment of the Operating Agreement or cause or permit Kokopelli
to do any of the following:
(a) merge or consolidate with any other legal entity;
(b) dissolve or terminate its existence;
(c) sell, transfer, grant an exclusive license of, or otherwise dispose
of all or any part of Kokopelli's registered and unregistered trademarks,
service marks, trade names, copyrights, recipes, designs, menus and franchise
manuals, other than franchise licenses for restaurants and development areas in
the usual course of business;
(d) make any distributions or transfers of cash or property to
Kokopelli's members or their affiliates, directly or indirectly, with respect to
any outstanding membership interests in Kokopelli or any outstanding
indebtedness owing by Kokopelli to its members or their affiliates;
(e) issue any capital or profits interests in Kokopelli, or any similar
right to share in Kokopelli's cash flow, in any manner that dilutes,
subordinates, or diminishes the distribution rights or economic value of the
Collateral; or
(f) make any loans of Kokopelli's cash to any third party or permit any
third party to use any of Kokopelli's assets, other than franchisees in the
normal course of business pursuant to the terms of their franchise agreements.
14. FINANCIAL STATEMENTS. Pledgor shall deliver to Secured Party unaudited
quarterly balance sheets and income statements (for the quarter and
year-to-date) for Pledgor and Kokopelli within fifteen (15) days after the end
of each fiscal quarter, in the form such statements are prepared in the ordinary
course of business. In addition, within sixty (60) days after the end of each
fiscal year, Pledgor shall deliver to Secured Party an audited balance sheet,
income statement, and statement of cash flow (with all auditor's notes) for
Pledgor and Xxxxxxxxx.
00. ATTORNEYS' FEES. In the event of any action or proceeding to compel
compliance with, or for breach of, any of the terms and conditions of this
Agreement, the prevailing party will be entitled to recover from the
non-prevailing party the reasonable costs of such action or proceedings,
including without limitation reasonable attorneys' fees, costs and
disbursements.
16. NOTICES. Except to the extent otherwise set forth herein, all notices,
requests, demands, and other communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received when personally delivered, or 3 days after deposit in the United
States mails, first class postage prepaid, return receipt requested, or when
sent by overnight express delivery with a signature required upon receipt, or 24
hours after being sent by facsimile with a confirmed copy, addressed as set
forth below:
If to Pledgor or Kokopelli: If to Secured Party:
0000 XxXxxxxx Xxxxx 000 0000 X. Xxxxxxxxx Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: President Attention: Xxxxxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
With a copy to: With a copy to:
Xxxxx Law Firm, P.C. Xxxxxxxxxx & Xxxxxxxx L.L.P.
Attn: Xxxx X. Xxxxx Attn: Xxxxx X. Xxxxxxxx
00000 Xxxxx Xxxxx Xxxx. Xxxxx 000 5080 North 40th Street Suite 335
Phoenix, Arizona 85028 Xxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any party may alter the address to which communications or copies are to be
sent by giving notice to such other parties of change of address in conformity
with the provisions of this paragraph for the giving of notice.
The parties have signed this Membership Interest Pledge and Security
Agreement as of the date first noted above.
PLEDGOR:
FRANCHISE CAPITAL CORPORATION, a Nevada
Corporation
By:___________________________________
Name: ________________________________
Its:___________________________________
SECURED PARTY:
AZTECA WRAP FOODS, L.L.C., an Arizona
limited liability company
By:___________________________________
Name: ________________________________
Its:___________________________________
ACKNOWLEDGMENT OF, CONSENT AND AGREEMENT
TO THE TERMS OF THIS AGREEMENT:
KOKOPELLI FRANCHISE COMPANY, L.L.C., an
Arizona limited liability company
By Franchise Capital Corporation, its
Manager
By:___________________________________
Name: ________________________________
Its:___________________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of August,
2005, by __________________________ as _________________________ of Franchise
Capital Corporation, a Nevada corporation, on behalf of the corporation.
------------------------------------------
Notary Public
My Commission Expires:
--------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____ day of
August, 2005, by _________________ as ______________________ of Azteca Wrap
Foods, L.L.C., an Arizona limited liability company, on behalf of the company.
------------------------------------------
Notary Public
My Commission Expires:
---------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ___ day of August,
2005, by _________________________ as ___________________ of Franchise Capital
Corporation, a Nevada corporation acting in its capacity as manager of Kokopelli
Franchise Company, L.L.C., an Arizona limited liability company, on behalf of
the company.
------------------------------------------
Notary Public
My Commission Expires:
---------------------
