MEMBER INTEREST PURCHASE AND ACQUISITION AGREEMENT

 

                                                                    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

Kokopellimexicangrill.com and Kokopellisonorangrill.com 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,

 

                                       5

<PAGE>

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 Agre