Exhibit 10
RESCISSION and FUNDING AGREEMENT
between
CREATIVE EATERIES CORPORATION
a Nevada corporation
and
FRANCHISE CAPITAL CORPORATION
a Nevada corporation
This Agreement
("Agreement") is made December 29, 2005, by and between
Franchise Capital Corporation ("FCC") and
Creative Eateries Corporation ("CEC").
RECITALS
A. On October 4, 2005,
FCC and CEC entered into a Purchase Agreement (the
"Purchase Agreement") whereby CEC agreed to
acquire FCC's interests in
Restaurants and Concepts (as defined in the
Agreement) including interests:
(1) as Managing Member and 90% owner of Kokopelli Franchise
Company,
LLC ("Kokopelli");
(2) as Managing Member and 72.5% owner of Comstock Jake's
Franchise
Company, LLC ("Comstock");
(3) as Managing Member and 100% owner of Cousin Vinnie's
Franchise
Company, LLC ("Vinnie's");
(4) as Managing Member and 100% owner of Kirby Foo's Asian
Grill
Franchise Company, LLC ("Kirby").
Kokopelli, Comstock, Vinnie's and Kirby are
sometimes referred to collectively as the
"Restaurants"); and
(5) in Restaurant Concepts for Kokopelli, Comstock, Vinnie's and
Kirby,
as defined in the Purchase Agreement.
B. CEC has not
paid FCC the consideration set forth in the Purchase
Agreement, and certain disputes have arisen
between FCC and CEC regarding
representations made or relied upon by the
parties in connection with the
Purchase Agreement and performance under
the Purchase Agreement. CEC has funded
certain expenses of Kokopelli and Comstock
since execution of the Purchase
Agreement.
C. Closing of
the transactions contemplated in the Purchase Agreement has
not yet occurred, and FCC remains the
record owner of the Restaurants and the
Concepts.
D. CEC and FCC
wish to rescind the Purchase Agreement, and enter into a new
Funding Agreement whereby CEC will continue
to provide funding to FCC for
operation of Kokopelli and Comstock, and
share in the profits of Kokopelli and
Comstock for a fixed period of time.
Page 1 of 9
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AGREEMENT
In consideration
of the mutual promises, covenants, and representations
contained herein, the parties agree as
follows:
ARTICLE I
RESCISSION
1.1 Rescission.
FCC and CEC immediately rescind the Purchase Agreement, and
neither party shall have any further
liability thereunder.
ARTICLE II
FUNDING; PROFITS PARTICIPATION
2.1 Funding
Obligation. CEC will provide FCC with a total of $600,000 in
funding for operation of Kokopelli and
Comstock.
2.2 Timing. CEC
and FCC acknowledge that CEC has provided approximately
$150,000 in funding of operations of
Kokopelli and Comstock. The exact amount of
such funding shall be mutually verified by
FCC and CEC, and credited against its
full $600,000 obligation under this
Agreement. The balance of approximately
$450,000 will be paid by CEC to FCC in the
amount of $100,000 each month
beginning January 25, 2006 and continuing
on February 25, March 25 and April 25,
2006, with a final payment of $50,000, plus
or minus any difference in the
actual amount previously paid from the
$150,000 initially credited under this
Agreement.
2.3 Failure to
Pay. Payment of each funding payment promptly as scheduled
is crucial to the business of FCC,
Kokopelli and Comstock. If CEC fails to pay
any funding installment due on the 25th of
any month by the 30th of that month,
CEC shall forfeit all rights to any profit
payments due under Section 2.4 of
this Agreement, and FCC shall have no
obligation to pay any profit payments to
CEC; provided however, that if CEC has paid
at least $300,000 in cash funding
payments required under Section 2.2 of this
Agreement, CEC shall be entitled to
receive 25% of any such profit
payments.
2.4 Profit
Payments. In return for CEC funding operations of Kokopelli and
Comstock as scheduled, FCC will pay CEC an
amount equal to 50% of the profits
FCC receives from its ownership in
Kokopelli and Comstock for the periods
commencing on July 1st, 2006 and ending on
June 30th, 2011. FCC shall make
payments to CEC within five (5) days after
profits for the quarter have been
determined by FCC and reported to the
Securities and Exchange Commission on
FCC's regular reports on Form 10-Q for each
calendar quarter, or on Form 10-K
for each fiscal year, as the case may be,
beginning with the quarter ending
September 30, 2006, and ending with the
fiscal year ending June 30, 2011.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FCC
FCC hereby represents and warrants
to CEC that:
3.1 FCC
Organization. FCC is a corporation duly organized, validly
existing
and in good standing under the laws of
Nevada, has all necessary corporate
powers to own its property and to carry on
its business as now owned and
operated by it, and is duly qualified to do
business and is in good standing in
each of the states where its business
requires qualification.
3.2 Restaurants
Organization. Each of the Kokopelli and Comstock is an LLC
duly organized, validly existing and in
good standing under the laws of Arizona,
has all necessary corporate powers to own
its property and to carry on its
business as now owned and operated by it,
and is duly qualified to do business
and is in good standing in each of the
states where its business requires
qualification.
3.3 Capital.
Management of FCC owns control of the Restaurants and
therefore has the right to vote for the
completion of this transaction. FCC
represents that there are no other issued
and outstanding open subscriptions,
options, rights, warrants, debentures,
instruments, convertible securities, or
other agreements or commitments obligating
FCC in regards to the Restaurants.
3.4
Investigation of Financial Condition. Without in any manner
reducing or
otherwise mitigating the representations
contained herein, CEC and/or its
attorneys have had the opportunity to meet
with accountants and attorneys to
discuss the financial condition of
Kokopelli and Comstock. FCC has made
available to CEC and/or its attorney all
books and records of the Restaurants.
3.5 Authority.
The Board of Directors of FCC have authorized the execution
of this Agreement and the consummation of
transactions contemplated herein, and
FCC has full power and authority to
execute, deliver, and perform this Agreement
and this Agreement is a legal, valid and
binding obligation of FCC, and is
enforceable in accordance with its terms
and conditions.
3.6 Ability to
Carry Out Obligations. The execution and delivery of this
Agreement by FCC of its obligations
hereunder in the time and in the manner
contemplated will not cause, constitute or
conflict with or result in (a) any
breach or violation of any of the
provisions or constitute a default under any
license, indenture, mortgage, charter,
instrument, articles of incorporation,
bylaws, or other agreement or instrument to
which either is a party, or by which
it may be bound, nor will any consents or
authorizations of any party other than
those hereto be required, (b) an event that
would permit any party to any
agreement or instrument to terminate it or
to accelerate the maturity of any
indebtedness or other obligation of FCC, or
(c) any
