Document:

exh10-3_revenueagmt.htm

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 10.3

 

REVENUE PARTICIPATION AGREEMENT WITH PRESLEY AND PATRICIA STACEY REED

AND RAYMOND AND JOAN BONANNO DATED DECEMBER 5, 2011

 

 

 

 

 

 

  

  

  

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, 

 

  

  

  

 

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 

 

  

  

  

 

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]

  

  

  

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 BonAnnoexh10-4_note.htm

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 10.4

 

SECURED PROMISSORY NOTE WITH PRESLEY AND PATRICIA STACEY REED

DATED OCTOBER 31, 2011

 

 

 

 

  

  

  

SECURED PROMISSORY NOTE

$250,000.00

Denver, Colorado

October 31, 2011

For value received, the undersigned, Spicy Pickle Franchising, Inc. (herein referred to as the "Obligor"), promises to pay to the order of Presley and Patricia Stacey Reed, or their designee (the "Obligee"), the principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/100’S DOLLARS ($250,000.00), together with interest thereon, in installments as follows (which shall be in accordance with the “Payment Schedule” attached hereto and incorporated herein by reference):

	
1.    

	
Beginning October 31, 2011, the Obligor shall pay the Obligee equal monthly payments of THREE THOUSAND AND NO/100’s DOLLARS ($3,000.00) with all following monthly payments due on the last day of each month for eighty-four (84) consecutive months.

	
2.    

	
Interest shall accrue from October 31, 2011 at Ten Percent (10%) per annum.  Interest hereunder shall be computed in accordance with the attached Payment Schedule.

	
3.    

	
A final payment of THREE THOUSAND EIGHTY-THREE AND 33/100’S DOLLARS ($3,083.33), which includes interest, together with the outstanding principal balance of this Note, shall be made on September 30, 2018.

As used herein, the term "Date of Maturity" shall mean September 30, 2018, or such earlier date on which the entire principal amount evidenced by this Note and all accrued interest thereon shall be paid or be required to be paid in full, whether by prepayment, acceleration or otherwise.

Each payment when received shall be applied first to accrued interest, and the balance, if any, of the payment, to the reduction of principal.

After the Date of Maturity, the interest rate provided for herein shall immediately, without notice, become eighteen percent (18%) ("Default Rate").

All such payments are to be made in such manner, by wire transfer or check, as the legal holder of this Note may from time to time designate in writing.

Upon fulfillment of the debt obligations of this Note, Obligee shall forthwith release any and all collateral, liens, and/or security interests with respect to this Note.

It is agreed that at the election of the holder or holders hereof, without notice, the principal sum of this Note remaining unpaid hereon, together with the accrued interest thereon, shall become at once due and payable at the place of payment aforesaid in case of default in the payment of principal or interest of this Note when due in accordance with the terms hereof and a failure to pay ten (10) days after written notice to Obligor of such default, provided there shall be no cure period for any payment default after the third written notice of payment default hereunder. Failure to exercise this option shall not constitute a waiver of the right to exercise the same in the event of any subsequent default.

If this Note, or any installment hereof or any interest hereon is not paid when due, and this Note is placed in the hands of an attorney or attorneys for collection, for realization upon the collateral, or the holder or holders of this Note are made party to any litigation because of the existence of the indebtedness evidenced by this Note, the undersigned promises to pay, in addition to any amounts due hereunder, the reasonable costs and expenses thereof, including attorney fees.

This Note may be prepaid in whole or in part at any time without penalty, provided that any prepayment of the whole amount of this Note shall include all accrued interest thereon. Any partial prepayment shall be applied first to accrued interest and second to principal in inverse order of maturity.

  

  

  

Notwithstanding anything in this Note, this Note shall not be deemed to impose on Obligor any obligation for payment of interest or other charges, except to the extent that the same may be legally enforceable under the laws of the State of Colorado.

In the event the interest provisions hereof or any exactions provided for herein (or in any other instrument(s) securing this Note) shall result, at any time during the life of the loan, in an effective rate of interest, which, for any week, transcends the limits of the usury or any other law applicable to the loan evidenced hereby, all sum in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied upon principal immediately upon receipt of such moneys by the holder hereof, with the same force and effect as though the payer had specifically designated such extra sum to be so applied to principal and the holder hereof and agreed to accept such extra payment(s) as a premium-free prepayment. In no such event shall any agreed to or actual exaction as consideration for this loan transcend the limits imposed or provided by the law applicable to this transaction or the makers hereof for the use or detention of money.

No delay on the part of the holder of this Note in the exercise of any power or right under this Note or under any other instrument executed pursuant hereto shall operate as a waiver thereof, nor shall a single or partial exercise of any other power or right. Enforcement by the holder of this Note of any security for the payment thereof shall not constitute any election by it or remedies so as to preclude the exercise of any other remedy available to it.

Presentment, notice of dishonor and protest are hereby waived by all makers, sureties, guarantors and endorsers hereof. This Note shall be the joint and several obligations of all makers, sureties, guarantors and endorsers, and shall be binding upon them their successors and assigns.

Any notice required or permitted by this Note shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or 72 hours hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.

This Note has been delivered, and is to be performed in the State of Colorado, and the laws of such state shall govern the validity, construction, enforcement and interpretation of this Note. All principal and interest due under this Note are payable in cash in lawful money of the United States. This Note may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one agreement.

The purpose of this Note is for Obligor to use the underlying amount as purchase money for the full build-out (including without limitation all leasehold improvements, equipment and goods) of its new Spicy Pickle® restaurant to be located at 8000 E. Belleview, Unit D-40, Englewood, CO 80111 (the “Restaurant”).  As security for this Note, Obligor hereby grants Obligee a security interest in any and all equipment and leasehold improvements, including materials, furniture, furnishings, machinery, goods, fixtures, and equipment, and all heating, plumbing, lighting, water heating, cooking, laundry, refrigerating, incinerating, communications, ventilating and air conditioning equipment, all disposals, dishwashers, fire extinguishing apparatus and equipment, water tanks, engines, machines, computers, computer software, elevators, motors, cabinets, shades, blinds, partitions, window screens, awnings, drapes, rugs and other floor coverings, furniture, furnishings, and all fixtures, accessions and appurtenances thereto, and all renewals or replacements of or substitutions for any of the foregoing, owned by the Company now at the premises located at the Restaurant or hereafter attached or affixed to or used in and about the Restaurant (the “Collateral“). In the event of any default in the payment of this Note, the Obligee or its agent shall have and may exercise any and all remedies of a secured party under the Colorado Uniform Commercial Code, and any other remedies available at law or equity, with respect to the Collateral.

 

Notwithstanding, if the total cost of entry for the Restaurant is less than $250,000 (the “Reduced Entry Cost”), which cost shall include, without limitation, the total build-out cost and general opening costs for 

 

 

Promissory Note - 2

 

  

  

  

 

the Restaurant, Obligor hereby agrees to make a one-time principal payment equal to the difference of $250,000 minus the Reduced Entry Cost (the “Early Principal Payment”).  The obligor shall make the Early Principal Payment to the Obligee, reducing the principal balance hereunder accordingly, within five days of receiving (or of its affiliate receiving) the tenant improvement allowance from the landlord per the Restaurant’s commercial real estate lease.

	 	MADE BY:	 
	 	Spicy Pickle Franchising, Inc.	 
	 	OBLIGOR	 
	 	 	 	 
	
 

	
By: 

	/s/ Clint Woodruff	 
	 	Its:	Chief Financial Officer	 
	 Notice Address:	 	90 Madison Street, Suite 700	 
	 	 	Denver, CO  80206	 
	 	 	 	 
	 	 	 	 
	 Notice Address for Obligee:	 	 	 
	 	 	 	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

Promissory Note -3

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