Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15 (d) of the Securities Exchange Act of
1934
Date
of
Report (Date of earliest event reported): December 19, 2007 (December 14,
2007)
SPICY
PICKLE FRANCHISING, INC.
(Exact
name of Registrant as specified in charter)
|
|
|
|
|
|
|
Colorado
(State
or other jurisdiction
of
incorporation)
|
|
333-138228
(Commission
File Number)
|
|
38-3750924
(IRS
Employer
Identification
Number)
|
90
Madison Street, Suite 700
Denver,
Colorado 80206
(Address
of principal executive offices)
Registrant’s
telephone number, including area code: (303)
297-1902
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Registrant under any of the following
provisions (see General Instruction A.2 below).
|
|
|
|
|
o
|
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
|
|
|
|
o
|
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17
CFR240.14a-12)
|
|
|
|
|
|
o
|
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)).
|
|
|
|
|
|
o
|
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13(e)-4(c))
|
INFORMATION
TO BE INCLUDED IN REPORT
This
Form 8-K and other reports filed by the Company from time to time with the
Securities and Exchange Commission (collectively the “Filings”) contain
forward-looking statements and information that are based upon beliefs of,
and
information currently available to, the Company’s management as well as
estimates and assumptions made by the Company’s management. When used in the
Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,”
“intend,” “plan” or the negative of these terms and similar expressions as they
relate to the Company or the Company’s management identify forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events and are subject to risks, uncertainties, assumptions and other
factors relating to the Company’s industry, operations and results of operations
and any businesses that may be acquired by the Company. Should one or more
of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended or planned.
ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On
December 14, 2007, Spicy Pickle Franchising, Inc. (the “Company”) entered into a
Securities Purchase Agreement (the “Purchase Agreement”) and related transaction
documents with 14 accredited investors (the “Purchasers”), two of whom are
directors of the Company, pursuant to which the Company issued and sold to
the
Purchasers an aggregate of 705 shares of the Company’s Series
A
Variable Rate Convertible Preferred Stock, par value $0.001
per
share (the “Preferred Stock”), and warrants (the “Warrants”) to purchase an
aggregate of 5,287,500 shares of common stock of the Company, par value $0.001
per share (the “Common Stock”), for an aggregate purchase price of $5,992,500.
A
portion
of the proceeds will be used to pay the fees incurred in connection with the
transaction described herein, including legal fees, and for the preparation
and
filing of a registration statement registering for resale the shares of Common
Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants. The remaining net proceeds will be used for expansion of the Company’s
operations and working capital purposes, including, but not limited to,
consulting, payroll, sales and marketing.
The
following is a brief description of the other terms and conditions of the
Purchase Agreement and related transaction documents that are material to the
Company.
Certificate
of Designation
In
connection with the Purchase Agreement, the Company adopted a Certificate of
Designation of Preferences, Rights and Limitations of Series A Variable Rate
Convertible Preferred Stock (the “Certificate of Designation”) on December 14,
2007. The Certificate of Designation designates up to 705 shares of Preferred
Stock, and each share of Preferred Stock has a stated value equal to $8,500
(the
“Stated Value”).
The
Certificate of Designation provides that the Preferred Stock is further subject
to the following rights and preferences:
The
Company shall pay each holder of Preferred Stock cumulative dividends at a
rate
per share of 5% per annum until the second anniversary of the original issue
date, 7.5% per annum from the second anniversary of the original issue date
until the third anniversary of the original issue date, and 14% per annum
thereafter,
payable
semi-annually on January 1 and July 1, beginning on July 1, 2008, and upon
conversion or redemption of the Preferred Stock. Such dividends are payable
in
cash or, at the Company’s option, in shares of Common Stock or a combination
thereof.
Except
as
otherwise provided in the Certificate of Designation or as required by law,
the
Preferred Stock have no voting rights. Without the affirmative vote of 65%
or
more of the then-outstanding shares of Preferred Stock, the Company may not
authorize or create any class of stock ranking as to dividends, redemption
or
distribution of assets upon a liquidation of the Company senior to or otherwise
pari passu with the Preferred Stock, adversely affect any rights of the holders
of Preferred Stock, or increase the number of authorized shares of Preferred
Stock.
Each
share of Preferred Stock is convertible, at any time after the original issue
date, at the option of the holder of such share into that number of shares
of
Common Stock determined by dividing the Stated Value by the conversion price
for
the Preferred Stock. The conversion price for
the
Preferred Stock is $0.85, subject to adjustment as provided in the Certificate
of Designation.
Subject
to certain restrictions as provided in the Certificate of Designation, the
Company may redeem some or all of the then-outstanding Preferred Stock for
cash
in an amount provided in the Certificate of Designation. The Company may redeem
the Preferred Stock at any time after the date on which a registration statement
registering for resale the shares of Common Stock into which the shares of
Preferred Stock are convertible is declared effective by the Securities and
Exchange Commission (the “Commission”).
Warrants
In
connection with the Purchase Agreement, the Company issued to each Purchaser
a
Warrant to purchase up to that number of shares of Common Stock equal to 75%
of
such Purchaser’s subscription amount divided by $0.85, with an exercise price
equal to $1.60 per share, subject to adjustment as provided therein. Each
Warrant is exercisable immediately and for a term of five years from the date
of
issuance.
Registration
Rights Agreement
In
connection with the Purchase Agreement, the Company and the Purchasers entered
into a registration rights agreement of even date with the Purchase Agreement
(the “Registration Rights Agreement”).
The
Registration Rights Agreement requires the Company to file with the Commission
one or more registration statements (each, a “Registration Statement”)
registering for resale the
shares of Common Stock issuable upon conversion of the Preferred Stock and
upon
exercise of the Warrants (collectively, the “Registrable Securities”).
The
Company also granted certain “piggy-back” registration rights to the Purchasers
that are triggered if, at certain times, there is no effective Registration
Statement covering all of the Registrable Securities and the Company files
with
the Commission a registration statement for its own account or the account
of
others.
The
securities sold pursuant to the Purchase Agreement have not yet been registered
under the Securities Act and may not be offered or sold in the United States
in
the absence of an effective registration statement or exemption from applicable
registration requirements.
Lock-Up
Agreement
In
connection with the Purchase Agreement and issuance of the Preferred Stock
and
Warrants, each of the Company’s directors and officers (each, a “Lock-Up
Signatory”) entered into a Lock-Up Agreement with the Purchasers of even date
with the Purchase Agreement (each, a “Lock-Up Agreement”). The Lock-Up
Signatories agreed not to sell or otherwise dispose of any securities of the
Company or its subsidiaries, other than Registrable Securities and previously
reported planned sales, until after 60 calendar days after the effectiveness
date of the initial Registration Statement.
ITEM
3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
The
information set forth in Item 1.01 is hereby incorporated by reference into
this Item 3.02.
As
set
forth under Item 1.01 above, on December 14, 2007 the Company issued and sold
to
the Purchasers an aggregate of 705 shares of the Company’s Preferred
Stock and Warrants to purchase an aggregate of 5,287,500 shares of the Company’s
Common Stock for an aggregate purchase price of $5,992,500.
The
Company relied upon the exemptions from registration set forth in Section 4(2)
of the Securities Act and Rule 506 of Regulation D of the Securities Act for
the
issuance of these securities with reference to the following facts and
circumstances: (1) the investors represented that they were “accredited
investors” within the meaning of Rule 501(a) under the Securities Act; (2)
transfer of the securities has been restricted by the Company in accordance
with
Rule 502(d) under the Securities Act; (3) there were no more than 35
non-accredited investors in the transaction within the meaning of Rule 506(b)
under the Securities Act, after taking into consideration all prior investors
under Section 4(2) of the Securities Act within the 12 months preceding the
transaction; and (4) none of the offers and sales were effected through any
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act.
The
foregoing description of the financing transaction contemplated by the
agreements and documents discussed herein does not purport to be complete and
is
qualified in its entirety by reference to the full text of the agreements and
other documents that are filed as exhibits hereto and incorporated by reference
herein.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d)
Exhibits.
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
4.1
|
|
Certificate
of Designation
|
| |
|
|
|
10.1
|
|
Purchase
Agreement
|
| |
|
|
|
10.2
|
|
Form
of Warrant
|
| |
|
|
|
10.3
|
|
Registration
Rights Agreement
|
| |
|
|
|
10.4
|
|
Lock-Up
Agreement of Marc Geman
|
| |
|
|
|
10.5
|
|
Form
of Lock-Up Agreement executed by other directors and
officers
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPICY
PICKLE FRANCHISING, INC.
|
|
|
|
|
By:
|
|
/s/ Arnold
Tinter
|
|
|
|
Arnold
Tinter
|
|
|
|
Chief Financial
Officer
|
|
|
|
Dated:
December 18, 2007
|