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EXHIBIT 10.3
 
REVENUE PARTICIPATION AGREEMENT WITH PRESLEY AND PATRICIA STACEY REED
AND RAYMOND AND JOAN BONANNO DATED DECEMBER 5, 2011
 
 
 
 
 
 

 
 

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EXECUTION VERSION

REVENUE PARTICIPATION AGREEMENT

This Revenue Participation Agreement (the “Agreement”) is made as of December 5,
2011 (the “Effective Date”), by and between Spicy Pickle Franchising, Inc., a
Colorado corporation (the “Company”), Presley Reed and Patricia Stacey Reed
(collectively, the “Reeds”), and Raymond BonAnno and Joan BonAnno (collectively,
the “BonAnnos”, and together with the Reeds, the “Lenders”).  Each of the
Company, the Reeds, and the BonAnnos are sometimes individually referred to
herein as a “Party” and sometimes collectively as the “Parties.”

WHEREAS, the Company has entered into a Loan Agreement with the Lenders, dated
of even date herewith (the “Loan Agreement”);

WHEREAS, in connection with the Loan Agreement, the Company has issued Senior
Secured Promissory Notes to the Lenders, dated of even date herewith (the
“Notes”); and

WHEREAS, as a condition to the consummation of the transactions contemplated by
the Loan Agreement and the Notes and to induce the Lenders to consummate the
transactions set forth in the Loan Agreement and the Notes, the Company has
agreed that the Lenders will participate in the revenue generated by the Company
until such time as the Notes, including all principal and interest accrued
thereon, are repaid in full.

NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, intending to be
bound hereby, and upon the terms and subject to the conditions hereinafter set
forth, the Parties hereto agree as follows:

1.           Revenue Participation.

1.1.           Calculation of Amount.  Subject to the terms and conditions of
this Agreement, and in reliance on the concurrent execution of the Loan
Agreement and issuance of the Notes, the Company hereby agrees to pay to each of
the Lenders, in cash, on a pro rata basis based on their proportionate share of
the aggregate funded principal amount outstanding under the Notes (which shall
only include the amounts actually funded by the Lenders to the Company and shall
exclude, without limitation, any interest under the Notes, any interest paid in
kind that might otherwise be deemed principal and any unpaid Participation
Payments) (the “Aggregate Principal”), an amount equal to 1.5% of all Company
revenue generated during each monthly period (each, a “Calculation Period”) per
each $500,000 of Aggregate Principal outstanding, pro rated for any amount in
excess of $500,000 then outstanding (the “Participation Payments”), by the 10th
day of each month following a Calculation Period (each, a “Payment
Date”).  Company revenue shall be calculated consistently with the Company’s
regularly prepared financial statements, and shall reflect all revenue
calculated in accordance with generally accepted accounting principles,
consistently applied.

1.2.           Delivery of Payment.  The Participation Payments shall be made to
the Lenders by checks payable to the Lenders and delivered to Lenders by the
Payment Date, unless otherwise agreed by Company and the Lenders.  Each
Participation Payment shall be accompanied by a certificate, duly executed by
the Company’s Chief Financial Officer,
 
 
 

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certifying the amount of Company revenue generated during the corresponding
Calculation Period and setting forth the calculation for the Participation
Payment (each, a “Participation Payment Certificate”).

1.3           Revenue True-up.  In the event Company revenue, as reported in the
Company’s monthly, quarterly and annual financial statements, differs from the
amount of Company revenue certified in the Participation Payment Certificates
for the corresponding periods, then: (a) if the amount on the Participation
Payment Certificate was lower, then the Company shall make an additional
Participation Payment to the Lenders to provide them with the incremental
payments that they would have received had the Participation Payments for the
corresponding Calculation Periods accurately reflected the higher amount of
Company revenue, or (b) if the amount on the Participation Payment Certificate
was higher, then the Lenders shall pay to the Company an amount equal to the
excess of the amount Lenders received from the Company pursuant to the
Participation Payment Certificate for the corresponding Calculation Period over
the amount that Lenders would have received had the Participation Payments for
the corresponding Calculation Period accurately reflected the lower amount of
Company revenue.  Each payment in connection with a true-up of a Participation
Payment provided for herein shall be accompanied by a revised Participation
Payment Certificate certifying the adjusted revenue figure and calculating the
revised Participation Payment owing to the Lender.  Each Lender may elect to
offset any true-up payment owing to the Company against future Participation
Payments from the Company to such Lender.

2.           Termination of Participation Payments.  Upon payment in full of all
(i) amounts of principal and accrued interest outstanding under the Notes, and
(ii) Participation Payments outstanding under this Agreement, no further
Participation Payments will be payable to the Lenders, and this Agreement shall
terminate and shall be of no further force or effect.  For the avoidance of
doubt, the Company shall be obligated to make pro-rated Participation Payments
for the portion of the Calculation Period that elapsed during the month in which
this Agreement is terminated pursuant to this Section 2.

3.           Amendment.  This Agreement may only be amended by written agreement
of all the Parties.

4           Valid Agreement.  This Agreement when executed and delivered by all
of the Parties shall constitute a valid and legally binding obligation of each
of the Parties that is enforceable in accordance with its terms.

5.           Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by, Lenders’ successors and
assigns.  The rights and obligations of the Company under this Agreement may not
be assigned, without the prior written consent of the Lenders.

6.           Further Actions.  The Parties agree to execute any additional
documents and take such further action as may be reasonably necessary to carry
out the purposes of this Agreement.

7.           Governing Law; Waiver of Jury Trial.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Colorado,
excluding the body of law relating to conflict of laws.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY
 
 
 

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RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

8.           Severability.  If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect and
shall be construed in accordance with the purposes, tenor and effect of this
Agreement.

9.           Entire Agreement.  This Agreement embodies the entire agreement and
understanding of the Parties in respect of the subject matter hereof and
supersedes all prior and contemporaneous written or oral communications or
agreements between the Parties regarding such subject matter.  No amendment or
addition hereto shall be deemed effective unless agreed to in a writing signed
by all Parties.

10.           No Waiver; Cumulative Rights.  No failure on the part of the
Lenders to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the Lenders of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power.  Each and every
right, remedy and power hereby granted to the Lenders or allowed it by law or
other agreement shall be cumulative and not exclusive of any other and may be
exercised by the Lenders from time to time.

11.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute one and the same agreement.  Each of the Parties to this
Agreement will be entitled to rely upon delivery by facsimile machine of an
executed copy of this Agreement and acceptance of such facsimile copy will be
legally effective to create a valid and binding agreement between the Parties in
accordance with the terms hereof.

12.           Fees and Expenses.  Each Party shall be responsible for its own
legal, accounting and transaction costs.  Notwithstanding the foregoing, the
Company shall reimburse the Lenders for reasonable fees incurred by Lenders’
legal counsel in connection with the preparation, negotiation, execution, and
enforcement of the Loan Documents.

[Signatures on Following Page]

 
 

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IN WITNESS WHEREOF, the Parties hereto have executed this Revenue Participation
Agreement as of the day and year first set forth above.
 
 

  COMPANY           SPICY PICKLE FRANCHISING, INC.        
 
/s/     
By:  Mark Laramie
    Its:  Chief Executive Officer           LENDERS           THE REEDS        
  /s/     Presley Reed           /s/     Patricia Stacey Reed           THE
BONANNOS           /s/     Raymond BonAnno           /s/     Joan BonAnno  

 
 
 
 

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