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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ________________
Commission File No. 1-13818
THE RATTLESNAKE HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1369616
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Stamford Landing, Suite 130
Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 975-9455
Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.001 par value Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act:
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NONE
(Title of class)
(Title of class)
[Cover Page 1 of 2 Pages]
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Check whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
The Issuer's revenues for its most recent fiscal ended June
30, 1996 were $8,755,565.
On October 9, 1996, the aggregate market value of the voting
stock of The Rattlesnake Holding Company, Inc. (consisting of Common Stock,
$.001 par value) held by non-affiliates of the Registrant was approximately
$7,381,725 based on the average closing bid and asked prices for such Common
Stock on said date as reported by NASDAQ.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
On October 9, 1996, there were 2,643,734 shares of Common
Stock, $.001 par value, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
[Cover Page 2 of 2 Pages]
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Rattlesnake Holding Company, Inc. (the "Company") was organized in
June 1993 to develop, own and operate a chain of casual dining restaurants
featuring a southwestern theme. The Company currently operates seven restaurants
under the name "Rattlesnake Southwestern Grill" and plans to open two additional
restaurants in 1997. The Rattlesnake concept is designed to appeal to the casual
dining guest by creating a relaxed restaurant experience for families and
couples in an attractive southwestern setting. Each restaurant features
contemporary southwestern decor with desert pastel colors and native American
art and artifacts. The restaurants include a 40 to 60 foot full relief, mosaic
rattlesnake bar, sculpted and tiled by artisans. The varied "all day" menu
offers wide selection and customer value and includes traditional favorites as
well as spicy recipes inspired by the cuisine of Arizona, New Mexico and Texas.
Checks average $10.25 at lunch and $13.90 at dinner per person.
The Rattlesnake Southwestern Grill acquisition and conversion strategy
was designed and developed to take advantage of the many available restaurants
in choice locations whose operations for any one of a number of reasons did not
succeed. The Rattlesnake's ability to adapt its design to existing "upfitted"
facilities enables it to completely renovate and outfit a facility for less than
an average of $500,000 for 6,000-8,000 square feet, exclusive of acquisition
costs. Moreover, the Company has completed full conversions of existing
restaurant facilities from take-over to opening in six to eight weeks. The
Company believes this formula gives the Rattlesnake a significant advantage in
rollout time and cost over industry leaders in the same segment.
The first Rattlesnake Southwestern Grill was opened in June 1992 in
historic South Norwalk, Connecticut as a prototype and distinguished entry into
the "theme" restaurant market segment. The Company opened seven additional
restaurants in Hamden, Fairfield and Danbury, Connecticut and Lynbrook, White
Plains and Yorktown Heights, New York and Flemington, New Jersey. All existing
Rattlesnake Restaurants are located in renovated facilities where restaurants
were previously operated. The Hamden, Connecticut location did not meet the
Company's performance standards. In response to this poor performance, the
Company closed this facility in January 1996.
The Company believes that the relatively low costs of acquisition and
the speed of renovation increase the Company's ability to generate revenues
rapidly. The Company also believes that casual "theme" restaurants represent a
strong segment of the restaurant market and that the southwestern concept
represents a highly appealing but unsaturated portion of that segment. However,
due to a number of factors, including the Company's limited operating history,
small restaurant base and geographic concentration, as well as the dependence of
the Company's expansion strategy on certain external factors which it cannot
control, there can be no assurance that the Company's plan of operation will
prove profitable or commercially viable.
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The Company was incorporated in the State of Delaware on June 8, 1993.
The executive offices of the Company are located at 3 Stamford Landing -- Suite
130, Stamford, Connecticut 06902, and its telephone number is (203) 975-9455.
GENERAL BUSINESS DEVELOPMENTS DURING THE LAST FISCAL YEAR
In June 1996, the Company completed a Private Placement of 54,500 shares of
Preferred Stock and Common Stock purchase warrants to purchase 218,000 shares
of common stock (the "Private Placement"). The offering price of the preferred
stock was $24.50 per share and $.50 for the four warrants sold with each share
of preferred (i.e. $.125 per warrant) The warrants have an exercise price of
$7.00 per share and expire August 31, 2001. The preferred shares are convertible
into common stock at a conversion price equal to the lesser 120% of the average
of the last reported sale price of the common stock for the 10 trading days
immediately preceding the closing or $4.50 or 85% of the average of the last
reported sale price of the common stock for the 10 trading days immediately
preceding the first anniversary of the closing subject to certain anti-dilution
adjustments. The preferred stock is redeemable at the option of the Company
commencing one year after the closing provided the average of the last reported
sale price of the common stock equals or exceeds 150% of the conversion price
for the twenty consecutive trading days ending five days prior to the notice of
redemption at the following prices:
<TABLE>
<S> <C>
Prior to June 30, 1997 $29.40(120%)
June 30, 1997 to June 30, 1999 $26.96(110%)
After June 30, 1999 $25.73(105%)
</TABLE>
In August, 1995, the Company opened a 7,200 square foot facility in
Danbury, Connecticut and in November, 1995, the Company opened a 7,800 square
foot facility in Flemington, New Jersey. The newest facility, opened in
Lynbrook, New York in June, 1996, is 7,700 square feet. The Company will
continue to use the proceeds from the Private Placement to develop new
Rattlesnake restaurants and implement the Company's expansion strategy.
BUSINESS
ORGANIZATION
In March 1992, Rattlesnake Ventures, Inc. ("RVI") was organized for the
purpose of owning and operating the South Norwalk facility. In June 1993, the
Company was established to act as a holding company for the restaurants and in
August 1993, acquired all of the outstanding shares of RVI in exchange for
685,617 shares of common stock. In November 1993, the Company acquired all of
the outstanding shares of PEN-Z Corp. ("PEN-Z") from Penny Markatos, the mother
of Peter Markatos, the Executive Vice President of the Company, for a $300,000
note, 36,084 shares of Common Stock, and other consideration. See "Certain
Relationships and Related Transactions." At the time of the acquisition, PEN-Z
was not an operating entity and its principal asset was the liquor license for
the Yorktown Heights facility.
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The Company has established new subsidiary corporations for each new restaurant
operation and such subsidiaries are owned by the holding company.
THE CONCEPT - THE RATTLESNAKE SOUTHWESTERN GRILL
The Rattlesnake Southwestern Grill concept was designed and developed
to take advantage of the many available restaurants in choice locations whose
operations for any one of a number of reasons did not succeed. The Rattlesnake's
ability to adapt its design to existing "upfitted" facilities enables it to
completely renovate and outfit a facility for less than an average of $70.00 per
square feet, exclusive of facility acquisition costs. Moreover, the Company has
completed full conversions of existing restaurant facilities from take-over to
opening in six to eight weeks. The Company believes this formula gives the
Rattlesnake a significant advantage in rollout time and cost over industry
leaders in the same segment.
The Company believes that the relatively low costs of acquisition and
the speed of renovation increase the Company's ability to generate revenues
rapidly. Further, the trend toward two wage earner families will strongly
influence dining habits for the nineties and beyond as families prepare less
meals at home during the work week. The emphasis on quality meals in comfortable
surroundings will move families to consider alternatives to the fast food
restaurants. Tablecloth restaurants, while very popular, are not able to
accommodate this market due to their relatively high prices for the repeat
customer (2 to 3 times per week). The Company believes the expanding theme
restaurant segment has become the concept of choice for families whose working
parents have moved away from in-home dining and toward frequent outside dining.
The Company also believes that casual "theme" restaurants represent a strong
segment of the restaurant market and that southwestern concepts represent a
highly appealing but unsaturated portion of that segment.
However, due to a number of factors, including the Company's limited
operating history, small restaurant base and geographic concentration, as well
as the dependence of the Company's expansion strategy on certain external
factors which it cannot control, there can be no assurance that the Company's
plan of operation will prove profitable or commercially viable.
THE RATTLESNAKE MENU
The menu of the Rattlesnake is a varied offering which provides a wide
selection and customer value. It is a diverse "all day" menu which offers
traditional favorites and spicy recipes inspired by the cuisine of Arizona, New
Mexico and Texas. Dinner customers can choose from slow-cooked Texas style BBQ
ribs and "shredded" meats to grilled salmon. Light alternatives include salad,
sandwich or pasta selections. The Rattlesnake also offers a prime 1/2 pound,
"Buckaroo Burger" where customers can choose from a variety of toppings as
add-ons. Other selections include "Rattlesnake Prairie Pizza," a southwestern
variation of the Italian classic, with choices from BBQ chicken and smoked
chorizo sausage to Santa Fe garden vegetables, all atop a paper thin crust made
from lightly fried flour tortillas. The Rattlesnake also offers three varieties
of chili; the "Soon to be Famous, Three Bean, Beef and Chorizo Chili" made with
top
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round of beef, instead of ground meat; "Buzzards Breath Chicken Chili" a white
chili filled with grilled boneless breast of chicken, white beans, garlic and
green chilies; and savory "Navajo Vegetable Chili" which offers a fat-free
healthful alternative. Fajitas are among the strongest segment of the menu and
the Rattlesnake offers a variety including the standard chicken, beef and
shrimp, and the more unusual portabello mushroom, salmon, spicy chorizo sausage
and vegetarian. The Company also added Diamond Brand Angus steaks to the menu
which capitalizes on the renewed popularity of steakhouses and quality beef.
Menu prices range from $1.95 to $23.95, with an average per person
check of $10.25 for lunch and $13.90 for dinner. The Company believes that many
of these menu items are popular in the take-out food market, and the Company has
launched an initiative called "Grub to Go," offering an alternative to the
traditional Chinese and pizza take-out options. The Company is also currently
developing an off-premises catering program offering corporate and private
Southwestern barbecues and buffets, delivered and served at client locations.
MARKETING STRATEGY
The Company believes that the upward trend in theme type restaurants
will continue as the public continues its desire for value and entertainment.
Restaurants are entertainment, and in this respect, the Rattlesnake appeals to a
broad spectrum of the market. The largest segment is the 25 to 35 year old
seeking diverse fare in an environment conducive to socializing. The menu,
energetic bar and live entertainment in a contemporary southwestern ambiance
provide the inducement for this market. Family business is encouraged as the
Rattlesnake is a "kid friendly" restaurant offering "Kid's Grub" menu, crayons,
balloons and games. The energy of the restaurant relieves parents of the fear
that their children might disturb other diners. The unique nature of the product
is also a repeat business generator. The Company attempts to offer many menu
items which can only be obtained at The Rattlesnake Southwestern Grill.
The Company believes that further opportunities exist in the areas of
"Take Out" and "Off Premises" Catering. Many families consist of multiple wage
earners, many of which regularly seek take out foods as alternatives to cooking
in or eating out. The food at the Rattlesnake is well suited for these meals.
Catering is also a potential growth component of the business. Many corporations
are currently seeking unique experiences as well as low cost alternatives for
company entertainment.
EXPANSION STRATEGY
The Company's expansion strategy is based upon four principles which
build on its commitment to provide consistently high quality food and attentive
service:
1) INVEST IN ARCHITECTURAL, DECORATIVE AND ENTERTAINMENT FEATURES TO
CREATE STIMULATING AND ENTERTAINING ENVIRONMENTS. The Company has made,
and intends to continue to make, investments in architectural,
decorative and entertainment features in its restaurants because it
believes customers seek not only
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high quality food and attentive service, but also by the sense of
superior value and satisfaction they obtain in the Rattlesnake
settings. The Company believes that its investment in creating these
environments produces an enhanced dining experience.
2) BUILD A BROAD CUSTOMER BASE. The wholesome appeal of the Rattlesnake
targets a broader customer base than many other casual dining
restaurants, which rely heavily on young, unmarried adults and couples.
The contemporary, yet warm, atmosphere and entertainment features are
designed to appeal to entire families as well as couples. Promotional
programs are addressed to children to reinforce this appeal. By
targeting the full spectrum of casual dining guests, the Company seeks
to build a broad customer base.
3) CLUSTERED EXPANSION. The Company intends to cluster Rattlesnake
restaurants principally in the suburbs of cities, where units of 6,000
to 8,000 square feet may be located. The Company believes that through
this clustering it will achieve advertising, management and operational
efficiencies and maximum market penetration.
4) SITE SELECTION. The site selection process is fundamental to the
success of an individual restaurant, and management devotes significant
time and resources to analyzing each prospective site. Local market
demographics, population density, average household income levels and
site specific characteristics such as visibility, accessibility and
traffic volume, are considered. Factors which favor a Rattlesnake
restaurant include proximity to retail, office and entertainment
centers, and other generators of a high volume of middle-market
traffic. The Company also considers existing local competition and, to
the extent such information is available, the revenue of other
comparably priced restaurants operating in the area.
The Company plans to expand the Rattlesnake restaurant from its present
suburban New York / Connecticut cluster into New York City, New Jersey,
Pennsylvania and beyond. Future expansion will be affected by availability of
expansion capital and will be executed in stages in order to insure concept
integrity, quality of operation and assurance of controls. The ideal structure
is to expand in "Chain Link" formation where each new restaurant casts a radius
of not more than 20 miles from an existing facility so that the circles overlap.
This type of expansion enhances the brand recognition of the Company, offering
new units the closeness of proximity to older units for support and market
awareness. However, there can be no assurance that the Company will be able to
successfully implement this strategy.
RESTAURANT MANAGEMENT AND EMPLOYEES
The Company seeks to attract and retain high caliber restaurant
managers by providing them with an appropriate balance of autonomy, direction
and attractive financial incentives. To
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provide those incentives, the Company has developed a management incentive
program under which new general managers will work with senior management to
prepare quarterly budgets and performance plans for their restaurants. More
experienced general managers, who have demonstrated the ability to achieve
planned objectives, may be promoted to the district manager level. The Company
believes that by providing its general managers and district managers with short
and long-term financial incentives, it will continue to attract and retain high
caliber personnel. Company policy strongly favors promoting existing
non-management employees into management positions. Management trainees must
demonstrate their ability in every area of restaurant operations before being
considered for promotion.
To assure that its employees properly implement the Company's
commitment to consistently high quality food and attentive service, the Company
has developed manuals regarding its policies and procedures for all aspects of
restaurant operation, including food handling and preparation and dining room
and beverage service operations. New employees are trained by corporate
personnel and by experienced employees who have demonstrated their familiarity
with and ability to consistently implement Company policies. The Company
believes that by requiring its employees to adhere to these policies, giving
them direct internal training by corporate personnel and using experienced
employees to train new ones, it will provide the consistently high quality of
food and service its customers desire.
In addition, Company policy is generally to assign each server tables
with seating for no more than twelve to fourteen guests to enable the server to
provide attentive service. The Company believes it provides a supportive work
environment which attracts experienced servers.
Each restaurant will be directly operated by a management team
consisting of:
General Manager: Has full operational responsibility including
profit and loss and in house promotions.
Assistant General Manager: Second in command and is directly
responsible for all controls and reporting
issues as well as repairs and maintenance.
Reports to the General Manager.
Front of the House Manager: Directs Human Resources and front-of-house
training programs as well as scheduling and
employee reviews. Reports to General Manager.
Kitchen Manager: Responsible for all food operations including
production, purchasing, inventories, food cost
controls, sanitation and personnel. Reports to
the General Manager.
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Assistant Kitchen Manager: Directly responsible for line production,
preparation schedules and daily sanitation.
Reports to the Kitchen Manager.
The entire management team is directly supervised by and responsible to
the director of operations.
Cooks, service staff and support personnel will be recruited from local
areas surrounding each individual restaurant, and although there can be no
assurance, it is anticipated that a sufficient number of qualified personnel
will be available in each area. Restaurant sites will be selected giving full
consideration to the availability of lower level hourly personnel. All personnel
will follow a two-week training protocol and receive qualifying examinations
before completion of their probationary employment. All candidates for
employment must consent to random and periodic drug screening, if requested by
the Company.
RESTAURANT SYSTEMS & CONTROLS
The Company requires each restaurant unit to adhere to a strict program
of systems and controls which were designed to prevent theft and minimize losses
resulting from poor product handling and manpower utilization. Cash and credit
card transactions are controlled by electronic register systems which compute
all sales transactions by server, product and time of day. Sales and cash are
reconciled and monitored daily. All food items, beverages and supplies are
inventoried weekly and detailed computerized reports of are compiled from this
information. These reports along with other support materials are used to
generate weekly operating statements for units to summarize data for weekly
review. The control system allows for rapid and geographically diverse growth
while maintaining the integrity of the data received.
TRADEMARK RIGHTS
The Company uses or intends to use various tradenames and marks in the
Company's business, including "Rattlesnake Southwestern Grill" and variations of
that name and mark. Another business has registered the name "The Rattlesnake
Club" as a federal trademark.
The Company has obtained a license for the use of the name "The
Rattlesnake Southwestern Grill" and variations of that name and mark from this
trademark holder. In April 1995, the Company entered into an agreement with RC
Holdings Inc. ("RC"), the owner of the Rattlesnake trademark, which grants the
Company the license to use the trademark in connection with its existing and
future facilities. The agreement limits the ability of the Company to open
restaurants under the Rattlesnake name within a 24-month period in the areas of
Las Vegas, Nevada, Phoenix, Arizona, Seattle, Washington, Dallas and Houston,
Texas, Chicago, Illinois and Southern Florida. After the expiration of the
24-month period, the Company will not be able to open in locations if, within a
50-mile radius, there is an existing or proposed location of a facility
established or to be established by RC. Irrespective of the foregoing, neither
RC nor the Company may open a restaurant within five miles of each other in an
urban area, or 15 miles of each other
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in any other area. At no time may the Company open up a Rattlesnake facility in
the states of Colorado or Michigan without the prior written consent of RC. RC
is currently the operator of fine dining establishments in Colorado and
Michigan. The Company does not consider its establishments to be in direct
competition with those operated by RC; nor does the Company anticipate that the
24-month restriction will adversely impact its future plans or expansion.
The Company paid RC $5,000 in August 1995 for these licensing rights,
and is obligated to pay RC an annual fee of $5,000 for the four existing
facilities, and an annual fee of $2,500 a year for each of the first ten
additional facilities, $1,500 per year for the next ten additional facilities,
and $1,000 per year for each additional facility in excess of 20.
There can be no assurance that any application by the Company to
register any tradenames and trademarks used by the Company will be approved
and/or that the right to the use of any such trademarks outside of their
respective current areas of usage will not be claimed by others. If trademarks
are issued, there can be no assurance as to the extent of the protection that
will be granted to the Company as a result of having such trademarks or that the
Company will be able to afford the expenses of any complex litigation which may
be necessary to enforce its trademark or license rights. The Company was
successful in its defense of the Rattlesnake trademark against an operating
restaurant in the vicinity of one of the Company's restaurants. Future failure
of the Company to successfully enforce license and trademark rights may have a
material adverse impact on the Company's business.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, type and quality of food, location and other factors. The Company has
many well established competitors with substantially greater financial resources
and a longer history of operations than the Company. In light of the Company's
recent establishment of its restaurant operations, small number of facilities
and geographical concentration, the Company has not had a significant impact on
the restaurant industry. The Company competes with locally-owned restaurants, as
well as national and regional restaurant chains, many of which are better
established in the Company's existing and future markets. Changes in customer
tastes, economic conditions, demographic trends, and the location and number of
competing restaurants, as well as the type of cuisine served by competitors,
could adversely affect the Company's business as well as the availability of
experienced management and hourly employees.
Although the Company competes generally with all other casual dining
restaurants, the Company believes there are few restaurant concepts that are
directly competitive in the Southwestern "theme" market. Most notable of these
competitors is Chili's which is currently a chain operated by Brinker
International. There are other concepts which exist in a "Southwestern" venue
such as the steakhouses Longhorn, Lonestar and Santa Fe, and the Mexican
restaurants On the Border, Chi-Chi's and EL Torito. There are also a large
number of Bar-B-Que restaurants such as Virgil's . Other casual theme restaurant
concepts such as Friday's and Bennigan's compete with the Company for the casual
diner, although their concept is distinct from the
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Rattlesnake. The Company is not aware of any other restaurant which is
comparable in concept, menu variety or decor; however, the Company believes that
the current interest in the American Southwest will stimulate the emergence of
such competitors.
The Company believes that restaurants are entertainment, and in this
respect, intends to compete by designing the Rattlesnake to appeal to a broad
spectrum of the market. The menu, energetic bar and live entertainment in a
contemporary Southwestern ambiance appeal to this market. Family business is
encouraged as the Rattlesnake is a "kid friendly" restaurant offering "Kid's
Grub" menu, crayons, balloons and games. The energy of the restaurant relieves
parents of the fear that their children might disturb other diners. The unique
nature of the product is also a repeat business generator. The Company attempts
to offer menu items which will be identified with The Rattlesnake Southwestern
Grill.
Although management believes it will gain market acceptance, there can
be no assurance that the Company will be able to successfully compete in its
market.
FRANCHISING/LICENSING
The Company has no immediate plans to franchise or license. However,
the Company believes that one or both may be appropriate outside its near-term
expansion territory in the northeast United States and, if potential
franchisees/licensees with the necessary experience, stature and financing
express interest, the Company may pursue appropriate opportunities.
GOVERNMENT REGULATION
The Company is subject to a variety of federal, state and local laws.
Each of the Company's restaurants is subject to licensing and regulation by a
number of government authorities, including alcoholic beverage control, health,
safety, sanitation, building and fire agencies in the state or municipality in
which the restaurant is located. Difficulties in obtaining or failure to obtain
required licenses or approvals could delay or prevent the development of a new
restaurant in a particular area.
A substantial portion of the Company's revenues is attributable to the
sale of alcoholic beverages. Approximately 30% of net restaurant sales were
derived from the sale of beverages, including alcohol. Alcoholic beverage
control regulations require each of the Company's restaurants to apply to a
state authority and, in certain locations, county or municipal authorities for a
license or permit to sell alcoholic beverages on the premises. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
restaurant operations, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages.
The failure of a restaurant to obtain or retain liquor or food service
licenses would severely adversely affect the restaurant's operations. To reduce
this risk, each Company restaurant
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is operated in accordance with procedures intended to assure compliance with
applicable codes and regulations.
The Company is subject in certain states to "dram shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company presently carries an average liquor liability
coverage as part of its existing $1,000,000 comprehensive general liability
insurance, as well as excess liability coverage of $2,000,000 per occurrence,
with no deductible. The Company has never been named as a defendant in a lawsuit
involving "dram shop" liability.
The Company's restaurant operations are also subject to federal and
state laws governing such matters as the minimum hourly wage, unemployment tax
rates, sales tax and similar matters, over which the Company has no control. A
majority of the Company's service, food preparation and other personnel are paid
at rates related to the federal minimum wage, and the October 1, 1996 minimum
wage increase could increase the Company's labor costs.
The development and construction of additional restaurants will be
subject to compliance with applicable zoning, land use and environmental laws
and regulations.
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ITEM 2. DESCRIPTION OF PROPERTIES
EXECUTIVE OFFICES
The Company's executive offices are located at 3 Stamford Landing --
Suite 130, Stamford, Connecticut 06902, and its telephone number is (203)
975-9455.
RESTAURANT FACILITIES
The Company's first location in South Norwalk, Connecticut occupies
2,600 square feet on the corner of Washington Avenue and South Main Street in
the historic restoration district of South Norwalk. The facility was opened in
June 1992 and has a five-year lease with two five-year options. The current rent
is $39,200 annually with minimum escalation's over the course of the three
five-year periods. The space is comprised of two dining rooms and a large
dining/bar room where the mosaic rattlesnake is located. This facility was the
prototype facility and tested the feasibility of the Rattlesnake Concept.
The second facility in Hamden, Connecticut, was closed in January 1996
due to the inability of the facility to achieve the consistent level of revenues
required by the Company.
The third facility, which opened in April 1994, is located at 355 Kear
Street in Yorktown Heights (Westchester County), New York. The facility is a
5,400 square foot freestanding building located adjacent to a major shopping
mall and the center of town. The building is rough sawn pine with a rustic look
and the dining room has 35 foot vaulted ceilings with skylights. The facility
when acquired was fully fitted as a restaurant and renovated by the Company into
the Rattlesnake motif. The lease is for a term of ten years with a five-year
renewal option and annual rent of $115,000 with scheduled abatements for the
first three years.
The fourth Rattlesnake restaurant opened on July 1, 1994 and is located
at 55 Miller Street in downtown Fairfield, Connecticut, the county seat. The
restaurant is housed in a 5,500 square foot freestanding building which
previously served as a restaurant. The rent for the facility is $84,000 per
annum for the first year and $107,324 the next fourteen months. In August 1996
the Company exercised its purchase option of $425,000 to purchase the building.
The purchase was financed through a note payable to a principal stockholder.
The fifth restaurant was opened in June 1995. The 5,200 square foot
facility is located at 1241 Mamaroneck Avenue, White Plains, New York. This
restaurant is located on a major thoroughfare between White Plains and
Mamaroneck, New York. The Company purchased the lease for the facility located
in White Plains, New York for $500,000 and entered into a 15 year lease with
initial rent of $90,000 annually plus insurance, taxes and maintenance.
The sixth restaurant was opened in Danbury, Connecticut in August 1995.
The Danbury restaurant is in the vicinity of major shopping facilities and
across from a multiplex movie
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theater. The five-year lease includes three five-year renewal options and has an
initial annual rent of $96,600 plus real estate taxes. The Company has an option
to purchase the facility for $1,365,000.
The seventh restaurant was opened in Flemington, New Jersey in November
1995. The Company purchased the lease for $100,000 and liquor license for
$150,000. The Company has a seven year lease on a net-net basis with a base rent
o $80,400 a year plus a percentage of sales over a stated sales volume.
The eighth restaurant was opened in Lynbrook, New York in June 1996.
This 7,200 square foot facility is located on a major thoroughfare of Long
Island. The Company has a ten year lease with three renewal options for five
years each at an initial base rent of $120,000 and associated real estate taxes
plus a percentage of sales over a pre-determined stated sales volume.
The following table sets forth certain information with respect to the
Company's restaurants currently operating and those under development:
<TABLE>
<CAPTION>
ACTUAL OR RESTAURANT
TENTATIVE APPROXIMATE SIZE
OPENING SEATING (APPROXIMATE LEASE
DATE LOCATION CAPACITY(2) SQUARE FEET) EXPIRATION(1)
<S> <C> <C> <C> <C>
June 1992 2 South Main Street 120 3,270 May 2012
South Norwalk, CT
April 355 Kear Street 160 5,000 April 2009
1994 Yorktown Heights,
NY
July 1994 55 Miller Street 145 5,000 July 2034
Fairfield, CT
June 1995 1241 Mamaroneck 170 5,500 April 2010
Avenue
White Plains, NY
August 106 Federal Road 225 7,200 March 2015
1995 Danbury CT
November Route 202 250 7,800 August 2010
1995 Flemington NJ
June 1996 931 Sunrise Highway 215 7,700 April 2021
Lynbrook, NY
to be 250 West 86th Street 200 5,000 January 2007
scheduled New York, NY
=======================================================================================================================
</TABLE>
(1) Including all renewal options that may be exercised in the Company's
sole discretion.
(2) Excludes outside dining area and seating.
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<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a lawsuit involving its South Norwalk
facility. The owner of an apartment above the facility has commenced an action
against the Company seeking damages for nuisance and has complained to local
authorities for excessive noise. The action is being defended by the Company's
insurance carrier and other than causing the elimination of live entertainment
at the facility, the Company does not believe the action will have a material
adverse effect on its financial position or results of operation. All of the
Company's other facilities, existing and proposed, are free-standing buildings
which do not adjoin residential apartments. The Company does not anticipate
similar problems with any of its other facilities.
The Company is a party to no other material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NOT APPLICABLE
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<PAGE> 17
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Upon the effectiveness of the Company's public offering on June 29,
1995, the Common Stock of the Company commenced trading in the over-the-counter
market and was listed on the small cap market of the NASDAQ Stock Market
("NASDAQ") under the symbol RTTL and the Boston Stock Exchange under the symbol
RTT.
The following is the range of high and low bid prices for the Company's
stock for the periods indicated below:
<TABLE>
<CAPTION>
COMMON STOCK HIGH LOW
<S> <C> <C>
Fiscal Year 1995
4th Quarter (from June 29, 1995) 5-5/8 5-1/2
Fiscal Year 1996
1st Quarter 6 5-1/2
2nd Quarter 6-1/8 5-1/2
3rd Quarter 5-1/2 2-5/8
4th Quarter 4-1/8 2-7/8
</TABLE>
The above quotations represent prices between dealers, do not include
retail mark-ups, mark-downs, or commissions, and do not necessarily represent
actual transactions.
There are approximately ___ holders of record of all the Company's
Common Stock but the Company believes there are more than 700 beneficial holders
of the Company's Common Stock.
DIVIDEND POLICY
The Company has not paid any dividends upon its Common Stock since its
inception. The Company does not expect to pay any dividends upon its Common
Stock in the foreseeable future and plans to retain earnings, if any, to finance
the development and expansion of its business. In June 1996 the Company issued
54,500 shares of preferred stock for $24.50 per share. Each share is entitled to
cumulative semi-annual dividends of $.9188 payable on May 15 and November 15 of
each year commencing November 15, 1996 and accruing from the date of issuance.
Unpaid dividends will accumulate and be payable prior to the payment of any
dividends on the Common Stock. No dividends will be payable unless the Company
has funds legally available therefor.
14
<PAGE> 18
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto.
INTRODUCTION
Rattlesnake Holding Company, Inc. is the parent corporation of seven
subsidiary companies operating at individual restaurant locations, utilizing the
unique Rattlesnake Southwestern Grill concept. The following table identifies
the seven operating locations and the date operations commenced at each of those
locations:
RESTAURANT LOCATIONS OPERATIONS COMMENCEMENT DATE
Lynbrook, New York June 1996
Flemington, New Jersey November 1995
Danbury, Connecticut August 1995
White Plains, New York June 1995
Fairfield, Connecticut July 1994
Yorktown Heights, New York April 1994
South Norwalk, Connecticut June 1992
In its three years of operation, the Company has endeavored to
establish the foundation for future growth by opening seven restaurants in
clustered segments in Connecticut, New York and New Jersey. To support its
expansion strategy, the Company has increased the size of its corporate staff
and successfully completed the Public Offering of its common stock on June 29,
1995. The Public Offering generated net proceeds of $6,535,095, after deducting
underwriters fees and expenses and other costs, extinguishment of debt,
increased marketing efforts and funding of operations.
During fiscal year 1996, the Company opened three restaurants. Danbury,
a 7,200 square foot former Howard Johnson's was completely converted into a
Rattlesnake Southwestern Grill within an eight week period for a cost of
approximately $500,000 and was opened August 30, 1995. Flemington, New Jersey
was opened on November 16, 1995 at a conversion cost of approximately $650,000.
This location encompasses 7,800 square feet and was converted to a Rattlesnake
in seven weeks. The third location opened six weeks after signing was in
Lynbrook, New York. This facility is 7,700 square feet and was acquired and
converted into a Rattlesnake for approximately $430,000. The Hamden, Connecticut
location did not meet the Company's performance standards. In response to this
poor performance, the Company closed this facility in January 1996.
The Company's strategy of aggressive growth, utilizing a low cost
restaurant concept adaptable to different leasehold configurations in a short
construction timetable, has been accomplished consistently for the existing
properties. The Company has been able to identify numerous sites for potential
development over the next fiscal year; however, there can be no assurance that
in the future the Company will be able to continue to identify suitable
locations or open new restaurants on a consistent basis within the historical
time frames or cost levels.
As is traditional with the opening of new restaurant sites, the start
up period of 90 to 120 days reflects cost ratios at higher than normal operating
15
<PAGE> 19
levels. The Company requires the presence of a training team consisting of
seasoned employees from the other restaurants during the startup period to train
inexperienced personnel. In addition, this lack of experience results in higher
food and beverage costs until the staff becomes expert in the use of Company
recipes and procedures. The Company's new restaurants can be expected to incur
above normal costs during the first three to four months of operation due to the
above mentioned factors. Achieving optimum performance as a mature restaurant
may require between twelve and twenty four months.
As projected, the Company has progressively increased its corporate
staff and marketing efforts as integral components of its expansion program.
These increases have resulted in higher general and administrative expenses for
fiscal 1996. For example, the Company has added positions in administration,
accounting and operations to react to the growth and in anticipation of the
projected expansion. In order to accommodate the growth in personnel, the
Company added additional office space. The Company has made further investments
in its computer systems to improve its point of sales and restaurant operations
information systems. The Company has also significantly increased its
promotional expenditures to support its new restaurant locations.
To establish consistency with the Company's operational reporting
periods, the accounting reporting periods were changed to a 52 week cycle ending
the last Sunday in June. The Company's board of directors ratified this change
on April 2, 1996. Effective June 30, 1994, the Company adopted a fiscal year end
of June 30. Previously, the year-end of the Company and its subsidiaries was
December 31.
FISCAL YEAR ENDED JUNE 30, 1996 AS COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1995
GENERAL DISCUSSION
Net restaurant sales increased 65.6% to $8,242,809 for the fiscal year
ended June 30, 1996 from $4,978,068 for the twelve months ended June 30, 1995.
The increase in net restaurant sales resulted from the increase in the number of
restaurants operating during the period. For the fiscal year ended June 30,
1996, the Company generated a net loss of $3,193,155 as compared to a net loss
of $2,758,371 for the fiscal year ended June 30, 1995, an increase of $434,784
or 15.8%. The increased net loss was principally attributable to several
factors, including the selling, general and administrative expenses for the
fiscal year which increased by $1,478,196. This increase in selling, general and
administrative expenses is the result of investments made by the Company in
preparation for the implementation of the Company's expansion strategy through
an increase in corporate staff, increased advertising and marketing
expenditures, as well as other expenses associated with opening new restaurants.
Also contributing to this increase was the cost associated with the closing of
the Hamden facility of $192,311.
Restaurant operating profits, defined as excess of restaurant sales
over restaurant costs and expenses, were $(159,235) for the fiscal year ended
June 30, 1996, as compared with $(131,905) for the fiscal year ended June 30,
1995. This decrease in operating profits was principally attributable the
decreased operating performance in the Fairfield and Yorktown locations as
compared to fiscal year 1995 and the higher costs associated with the opening of
new units to continue the expansion of the Company. During fiscal 1996, the
Company opened three new restaurants (Danbury, August 1995, Flemington, November
1995 and Lynbrook, June 1996)and had one restaurant reach its first anniversary
of operation (White Plains, June 1996). As is traditional with the opening of
new restaurant sites, the start up period of 90 to 120 days reflects cost ratios
at higher than normal operating levels. The lack of experience of the new
personnel, results in higher food and beverage costs until the staff becomes
expert in the use of Company recipes and procedures. Additionally, promotional
expenditures typically are higher than normal during the initial period of a
16
<PAGE> 20
restaurant opening. The Company's new restaurants can be expected to incur above
normal costs during the first three to four months of operation due to the above
mentioned factors. Additionally, management believes that the extremely
harsh winter weather also significantly impacted sales and operating profits.
RESTAURANT SALES
Gross restaurant sales increased 63.9% to $8,755,565 for the fiscal
year ended June 30, 1996 from $5,340,657 for the fiscal year ended June 30,
1995. The increase in restaurant sales resulted from the increase in the number
of restaurants operating during the fiscal 1996 period. The number of operating
restaurants increased from five to eight for the period ended June 30, 1996,
prior to the closing of the Hamden, Connecticut facility in January 1996. The
three new restaurants are located in Danbury, Connecticut; Flemington, New
Jersey; and Lynbrook, New York. The White Plains location was open for only
three weeks in fiscal year 1995, thus also contributing to the increased sales
in fiscal year 1996. Danbury, Flemington and Lynbrook were opened in August
1995, November 1995 and June 1996, respectively.
For the three restaurants operating for a full twelve months in fiscal
year 1995 and 1996, same store sales declined by $508,551. This decline is
attributed to decreased sales experienced by Yorktown and Fairfield. These
comparative sales declines are attributed to the typical higher sales levels
experienced by these new units during fiscal 1995. South Norwalk, which was not
a new unit in fiscal 1995 experienced an increase in sales. The severe weather
conditions experienced in the country's northeastern region had a dramatic
affect on sales specifically during the second and third quarters of fiscal
year 1996.
PROMOTIONAL SALES
Promotional sales increased from $362,589 for fiscal year ended June
30, 1995 to $512,756 for fiscal year ended June 30, 1996. This increase is
attributed to couponing and direct mail advertisement targeted as sales
incentives to counter extreme winter weather conditions during fiscal
year 1996. Promotional sales have decreased as a percentage of gross sales in
fiscal year 1996 to 5.9% from 6.8% in fiscal year 1995. This decrease as a
percentage of sales is the result of the beneficial effects of clustered
marketing efforts and shared costs among all of the Rattlesnake restaurants.
FOOD AND BEVERAGE COSTS
Food and beverage costs decreased as a percentage of net restaurant
sales to 31.1% in fiscal year ended June 30, 1996 as compared to 32.4% for the
twelve months ended June 30, 1995, despite the opening of three facilities in
fiscal year 1996 and the typically higher costs associated with new facilities.
The cost of food and beverage sales increased to $2,565,905 for the fiscal year
ended June 30, 1996, as compared with $1,610,680 for the fiscal year ended June
30, 1995. The decrease of the food and beverage cost rates was attributable to
the new menu, revised recipes, improved inventory utilization, increased
purchasing efficiencies and improved training methods. The Company was able to
maintain these lower cost levels despite increases in the cost of chicken,
beef, and produce in fiscal 1996. There can be no assurance that the Company
will be able to maintain these cost levels.
RESTAURANT SALARIES AND FRINGE BENEFITS
Restaurant salaries and fringe benefits, which consist of direct
salaries of restaurant managers, hourly employee wages and related fringe
benefits, increased to $3,109,435 for the fiscal year ended June 30, 1996 as
compared to $1,804,129 for the fiscal year ended June 30, 1995. This increase is
attributable to the opening of additional restaurants during fiscal 1996. As a
percentage of net sales, these costs increased to 37.7% in fiscal 1996 from
36.2%
17
<PAGE> 21
in fiscal 1995, principally due to increased restaurant management and
operating personnel in newly opened restaurants. The Company believes that the
management component of restaurant salaries should moderate in the future, as
existing restaurant supervisory personnel can manage the anticipated growth in
restaurants in fiscal 1997.
OCCUPANCY AND RELATED EXPENSES
Occupancy and other related expenses, which include linen, repairs,
maintenance, utilities, rent, insurance and other occupancy related expenses,
increased to $2,118,444 for the fiscal year ended June 30, 1996 from $1,306,469
for the fiscal year end June 30, 1995. As a percentage of net restaurant sales,
these costs decreased to 25.7% in fiscal 1996 from 26.2% in fiscal 1995. The
decrease can be attributed primarily to the enhanced controls and improved site
selection.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, decreased as a percentage of gross restaurant sales
to 7.4% for the fiscal year ended June 30, 1996 from 7.8% for the fiscal year
end June 30, 1995. These expenses increased to $608,260 in fiscal year ended
June 30, 1996 from $388,695 for the fiscal year end June 30, 1995. This increase
is primarily attributable to the opening of new restaurants, the expansion of
the corporate offices and other capital expenditures.
GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $2,810,433 in
fiscal year ended June 30, 1996 from $1,332,237 for the fiscal year end June 30,
1995. As a percentage of net sales, selling, general and administrative expenses
increased from 26.8% in 1995 to 34.1% in 1996. These expenditures include a
foundation for the implementation of its expansion strategy. These investments
included additional corporate level accounting, administrative and restaurant
management personnel. The Company also made expenditures necessary to establish
the Company as a public company including professional fees, Directors and
Officers insurance, printing costs, postage and professional service dues.
Additionally, increased advertising, marketing and the cost of promotional
programs contributed to the increases in selling, general and administrative
expenses, as did the other expenses directly relating the opening of new
restaurants.
AMORTIZATION OF DEBT ISSUANCE COSTS
Debt issuance costs are principally associated with the subordinated
notes component of the Company's $1,800,000 unit offering and were capitalized
and amortized ratably over the initial one year term of the debt. As a result
of the restructuring of this debt, the related unamortized debt issuance costs
of $72,114 were offset against the extraordinary gain recognized in this
transaction in fiscal year 1996.
LOSS ON CLOSURE OF RESTAURANT
On December 31, 1995, the Board of Directors authorized the closing of
the Rattlesnake Southwestern Grill Restaurant located in Hamden, Connecticut.
The facility was closed on January 7, 1996. A majority of the fixed assets at
the facility have been removed to be utilized at other existing or new
facilities. All remaining fixed assets and leasehold improvements have been
abandoned and all intangible assets have been written off. A loss of $192,311
relating to the closing of the Hamden location was recorded during the 1996
fiscal year.
18
<PAGE> 22
INTEREST EXPENSES
Interest expense decreased to $108,536 for the fiscal year ended June
30, 1996 from $264,279 for the fiscal year end June 30, 1995. The decrease
resulted from the repayment of notes upon completion of the IPO.
FISCAL YEAR ENDED JUNE 30, 1995 AS COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1994
RESTAURANT SALES
Gross restaurant sales increased 231% to $5,340,657 for the fiscal year
ended June 30, 1995 from $1,613,535 for the six months ended June 30, 1994. The
increase in restaurant sales resulted from the increase in the number of
restaurants operating during the fiscal 1995 period. At June 30, 1994 the
Company operated three restaurants, as compared to the five restaurants operated
at June 30, 1995.
PROMOTIONAL SALES
Promotional sales increased 154% in fiscal year 1995 to $362,539 from
$142,884 in fiscal year 1994. This increase is attributed to the overall
increase in sales for the year and in house promotions, such as "Kids Eat Free"
and "The Big Buckeroo Burger Bonanza". Promotional sales decreased as a
percentage of gross sales 6.8% for fiscal year 1995 from 8.8% for fiscal year
1994. This decrease is the result of the increased gross sales for the year
resulting from the increased number of operating restaurants.
FOOD AND BEVERAGE COSTS
Food and beverage costs remained relatively constant as a percentage of
net restaurant sales at 32.4% in fiscal year ended June 30, 1996 as compared to
32.3% for the six months end June 30, 1995, despite the opening of three
facilities in fiscal year 1995 and the typically higher costs associated with
new facilities. The cost of food and beverage sales increased to $1,610,680 for
the fiscal year ended June 30, 1995, as compared with $474,748 for the six
months ended June 30, 1994. The stability of the food and beverage costs rates
was attributable to enhanced controls, revised recipes, improved inventory
utilization, increased purchasing efficiencies and improved training methods,
despite increases in the cost of beef, fish and produce in fiscal 1995.
RESTAURANT SALARIES AND FRINGE BENEFITS
Restaurant salaries and fringe benefits, which consist of direct
salaries of restaurant managers, hourly employee wages and related fringe
benefits, increased to $1,804,129 for the fiscal year ended June 30, 1995 as
compared to $541,803 for the six months ended June 30, 1994. This increase is
attributable to the opening of additional restaurants during fiscal 1995. As a
percentage of restaurant sales, these costs decreased to 36.2% in fiscal 1995
from 36.8% in fiscal 1994. The Company believes that the management component
of restaurant salaries should moderate in the future, as existing restaurant
supervisory personnel can manage the anticipated growth in restaurant in
fiscal 1996.
OCCUPANCY AND RELATED EXPENSES
Occupancy and related expenses, which include linen, repairs,
maintenance, utilities, rent, insurance and other occupancy related expenses,
increased to $1,306,469 for the fiscal year ended June 30, 1995 from $357,717
for the six months ended June 30, 1994. As a percentage of net restaurant sales,
these costs
19
<PAGE> 23
increased to 26.2% in fiscal 1995 from 24.3% in fiscal 1994. The increase can be
attributed primarily to rents paid for additional restaurants opened during 1995
and those operating the full fiscal year. Company management estimates that its
occupancy cost ratios should moderate in future periods, as a result of
continued modification of the Rattlesnake Southwestern Grill restaurant concept
and improved site selection.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, decreased as a percentage of net restaurant sales to
7.8% for the fiscal year ended June 30, 1995 from 9.6% for the six months ended
June 30, 1994. These expenses increased to $388,695 in fiscal year ended June
30, 1995 from $140,758 for the six months ended June 30, 1994. This increase is
primarily attributable to the opening of new restaurants, the expansion of the
corporate offices and other capital expenditures. The Company anticipates that
the operating cost ratios for depreciation and amortization will continue to
moderate as the Company's expansion plan continues to be implemented in fiscal
1996.
GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense increased to $1,332,237 in
fiscal year ended June 30, 1995 from $291,979 for the six months ended June 30,
1994. As a percentage of net restaurant sales, general and administrative
expenses increased from 19.9% in 1994 to 26.8% in 1995. The increase was due
primarily to the investments made by the Company as a foundation for the
implementation of its expansion strategy. The Company added additional corporate
level restaurant management personnel to begin implementation of the expansion
plan, combined with growth in the accounting and administrative areas.
Additionally, increased advertising, marketing and the cost of promotional
programs contributed to the increases in selling, general and administrative
expenses, as did the related insurance and other expenses to support the opening
of new restaurants. Professional, legal and accounting fees also increased
significantly in the fiscal year ending June 30, 1995.
AMORTIZATION OF DEBT ISSUANCE COSTS
Amortization of debt issuance costs, principally relating to the
Company's $1,800,000 debt offering, increased to $1,027,751 for the fiscal year
ended June 30, 1995, from $499,813 for six months ended June 30, 1994. The
increase was due directly to the additional six month period over which these
costs were amortized as well as debt issued during June 30, 1995.
INTEREST EXPENSE
Interest expense increased to $264,279 for the fiscal year ended June
30, 1995 from $70,007 for the six months ended June 30, 1994. The increased
resulted from increased borrowings related to the 9% subordinated notes and
interest costs associated with additional short-term borrowing incurred as a
result of the Company's expansion program.
LIQUIDITY
The Company's cash position increased by $656,098 during the year ended
June 30, 1996, principally as a result of net cash generated from financing
activities of $5,933,595 offset by net cash used in operating activities of
$3,202,301 and net cash used in investing activities of $2,075,196.
Net cash used in operating activities consisting primarily of the
$3,193,155 net loss for the year, an increase in prepaids of $206,384, a
decrease in accounts payable of $334,691 and an increase in pre-opening costs of
$169,138,
20
<PAGE> 24
offset by depreciation and amortization of $651,597 and $190,965 relating to the
closing of the Hamden facility.
The Company utilized $2,075,196 for investing activities, principally
for capital expenditures and lease acquisition costs.
The Company generated $5,933,595 in cash from financing activities
during the year ended June 30, 1996, principally through the proceeds of the
Company's initial public offering, offset by $1,275,423 repayment of borrowings.
On June 29, 1995, the Company completed an initial public offering of
1,300,000 shares of its common stock and 195,000 additional shares pursuant to
the exercise of the over-allotment option by the Underwriter at $5.50 per share.
The net proceeds of the offering, after deducting underwriters' commissions and
fees of $986,700 and offering costs of $700,705 was $6,535,095. The proceeds of
the offering were received on July 7, 1995.
The Company utilized the proceeds from its June 1995 initial public
offering of common stock to pay approximately $750,000 of the restricted 9%
subordinated notes, $525,000 other notes outstanding principally payable to
related parties, $200,000 relating to the acquisition of the White Plains, New
York facility, $600,000 relating to the acquisition of the Danbury, Connecticut
facility, $750,000 relating to the acquisition of the Flemington, New Jersey
facility, $150,000 relating to the liquor license acquired for the Flemington
location, $400,000 in other capital expenditures for existing facilities, and
the remainder was used to fund continuing operations and the Company's
expansion plan.
In July 1995, the Company redeemed $225,000 of the notes and
restructured the remaining principle amount outstanding of $1,575,000. This
redemption was partially funded by a $50,000 note payable issued in June 1995 by
the Company, with interest at 9%, and repaid in July 1995, together with 10,000
shares of common stock. Each $25,000 principal amount of Notes was exchanged as
follows: (i) $8,334 paid in August and September 1995 (the "First Payment");
and (ii) a 9% $8,333 Series A Note (the Series A Notes) due 13 months after the
first payment, and a 9% $8,333 Series B Note (the Series B Notes) due five years
after the first payment were issued to each Noteholder with the First Payment.
Each Series B Note is convertible into common stock thirteen months after
issuance at a conversion price equal to $3.85 per share, with piggy-back
registration rights for the shares underlying the Series B Notes. Each Series B
Note is redeemable with 30 days prior written notice at any time after the
closing bid price of the common stock is 150% of the conversion price for the
ten consecutive trading days ending within 15 days of the date of notice of
redemption.
In August and September, the due dates of $312,000 Series A Notes were
extended to August 1, 1997 in consideration of an increase in the interest rate
to 15% and warrants to purchase the Company's common stock. The number of
warrants received was equal to one warrant for every dollar of the Series A not
converted. Accrued interest was paid on the notes extended through August 1,
1996. The remaining $213,000 Series A Notes were paid with accrued interest in
August, September and October 1996.
In January 1995, the Company entered into an agreement to purchase the
lease of a new facility located in Danbury, Connecticut for $35,000 which was
paid upon consummation of the lease purchase agreement. The Company incurred
additional costs associated with this location approximating $565,000 which were
paid primarily from the proceeds of the IPO.
In September 1995, the Company entered into an asset purchase agreement
under which it will acquire furniture, fixtures and other assets of a restaurant
located in Flemington, New Jersey for $365,000, consisting of $265,000 in cash
and a $100,000 five year note, bearing interest at prime plus 1%. The Company
21
<PAGE> 25
also entered into a related seven year lease agreement for this property, with
minimal annual rentals of $80,400, with contingent rental provisions based upon
a percentage of gross sales.
In April 1996, the Company entered into a 10 year lease agreement for a
restaurant located in Lynbrook, New York with an initial annual rent of
$120,000. Their were no acquisition costs associated with acquiring this lease.
On June 24, 1996, the Company entered into an agreement to continue its
participation in a discounted meal program in exchange for $230,000 in temporary
financing, of which $115,000 was received in June 1996 and the remainder was
received in July 1996.
In March 1996, the Company entered into an agreement with an investment
banking firm to sell 200,000 shares of Series A preferred stock and 800,000
common stock warrants in a private placement for total consideration of
$5,000,000. The preferred stock was valued at $24.50 per share and each warrant
at $.125 per warrant. On June 30, 1996, the Company closed on the sale of 54,500
shares of the aforementioned Series A preferred stock and 218,000 common stock
purchase warrants. The net proceeds of the offering wwre $1,129,082, net of
commissions and expenses of $233,418. The dividend rate for the preferred shares
is 7-1/2% per annum payable semi-annually in arrears on May 15 and November 15
of each year commencing November 15, 1996. The shares are convertible at any
time, one year after issuance into common stock at a conversion price equal to
the lesser of (i) 120% if the average of the last reported sale price of the
common stock for the 10 trading days immediately preceding the first closing of
the offering, or $4.50, whichever is lower; or (ii) 85% of the average of the
last reported sales price of the common stock for the 10 trading days
immediately preceding the first anniversary of the first closing subject to
certain anti-dilution adjustments. The warrants are exercisable between
September 1, 1996 and August 31, 2001 at an exercise price of $7.00 per share,
with piggy-back and demand rights on the common stock underlying the preferred
stock and the warrants.
At June 30, 1996, the Company has available a net operating loss
carryforward (NOL) for Federal and State income tax purposes of approximately
$5,952,000, which are available to offset future taxable income, if any, before
2011. In accordance with Section 382 of the Internal Revenue Code of 1986, as
amended, a change in more than 50% in the beneficial ownership of the Company
within a three-year period (an "Ownership Change"), will place an annual limit
on the Company's ability to utilize its existing NOL carryforwards to offset
taxable income in current and future periods. The Company believes that an
ownership change has occurred and will cause the annual limitations to apply.
The Company has not determined what the maximum annual amount of taxable income
is that can be reduced by the NOL carryforwards.
The Company may consider entering into joint ventures for restaurants,
whereby the Rattlesnake Southwestern Grill concept will be implemented in
locations where the joint venture would provide a portion of the financing for
the new facility.
On March 31 1996, the Company exercised its option to purchase the
building housing the Fairfield facility for $425,000. This transaction was
closed on August 31, 1996 and was financed by a principal stockholder through a
15% short term note due on January 2, 1997. In addition the investor received
50,000 warrants at an exercise price equal to the market price at the date of
the grant.
On August 7, 1996, the Company signed a purchase and sale agreement for
$388,000 for a restaurant location on 86th Street in New York city. Included in
the purchase price was the lease and certain furniture, fixtures and equipment.
22
<PAGE> 26
On October 10, 1996, a letter of intent was executed with an
investment banking firm to raise $1,500,000-$3,000,000 through a private
placement to be sold on a "best effort" basis.
The Company is formulating a cost containment plan which will be
completed and implemented within the next 30 days. The plan is intended to
reduce overhead and operating expenses.
The Company is currently negotiating with several financing
institutions to obtain equipment leasing for its existing and new facilities
and is constantly involved in ongoing discussions with investment banking
firms to obtain additional interest in the Company. The Company's management
believes that the additional financing and improved operating results will
provide sufficient liquidity to implement the Company's expansion plan, fund
current operations and meet debt service requirements.
SEASONALITY AND EXTERNAL INFLUENCES ON QUARTERLY RESULTS
The Company's sales and earnings do not reflect a seasonally of the
business. Quarterly results have been and, in the future are likely to be,
substantially affected by the timing of new restaurant openings. Because of the
impact of new restaurant openings, results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year and cannot
be used to indicate financial performance for the entire year.
EFFECTS OF INFLATION AND THE ECONOMY
The impact of general inflation in the Company's operations has not
been significant to date and the Company believes inflation will continue to
have an insignificant impact on the Company. In general restaurant economic
conditions in the New England and Mid-Atlantic regions was reported to be the
worst in the country by nation's restaurant news. This is also evidenced by the
decline in the consumer confidence index. The Company believes that on average
nationally, same store sales have declined. There were a number of external
factors affecting fiscal year 1996 results. The most significant of these was
the early and severe winter experienced. Weather had a notable impact on sales
for fiscal year 1996.
IMPACT OF ACCOUNTING STANDARDS
The Company is required to adopt in fiscal 1997 Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
requires, among other things, that long-lived assets held and used by an entity
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company's
management has not assessed the impact of the implementation of SFAS No. 121.
ITEM 7. FINANCIAL STATEMENTS
See attached Financial Statements annexed hereto.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS.
MANAGEMENT
The executive officers and directors of the Company are as follows:
NAME AGE OFFICE
23
<PAGE> 27
William J. Opper 53 Chairman of the Board, Chief Executive Officer
Stephen A. Stein 44 Vice-Chairman of the Board, Chief Administrative
Officer and Director
David C. Sederholt 44 President, Chief Operating Officer, Chief
Financial Officer, Treasurer and Director
Peter C. Markatos 49 Executive Vice President and Director
Louis R. Malikow 48 Secretary and Director
Donald M. Zuckert 61 Director
Roger Rankin 51 Director
William J. Opper, has served as Chairman of the Board and Chief
Executive Officer of the Company since its inception. He has also served as
President of each of its subsidiaries since June 1992. From 1986 through 1991,
Mr. Opper served as Senior Partner of Atlantic Professional Resources, Inc., a
management and marketing consulting firm serving the restaurant, foodservice and
hospitality industries. From 1981 to 1986, Mr. Opper was Vice President of
Marketing for NCI Foodservice, Inc., where he developed marketing programs.
Previously, Mr. Opper was the principal owner of eight full service restaurants.
Mr. Opper graduated St. Bonaventure University with a Bachelor of Arts degree in
History.
Stephen A. Stein, joined the Company as a Director in November 1994 and
as Vice Chairman and Chief Administrative Officer in December 1995. Since May
1994, he has been the President and Chief Executive Officer of Cubaney Holding
Corp., Inc., a company developing franchise and licensing opportunities. From
1983 to 1995, Mr. Stein was a principal and the President of David's Cookies,
Inc. (or its predecessors), a manufacturer/distributor with a chain of retail
specialty food stores and franchise outlets with locations worldwide. From 1990
to the present, Mr. Stein has owned and operated a food management consulting
firm, SAS Ventures, Inc. Mr. Stein is also associated with Commonwealth
Associates in the corporate finance department. Mr. Stein is also a former
practicing attorney and a graduate of Ohio State University and Vermont Law
School.
David C. Sederholt, has served as President of the Company since March
1994, and has been Chief Operating Officer of the corporation and its
subsidiaries since their inception. From 1986 through 1991, Mr. Sederholt served
as Managing Partner of Atlantic Professional Resources, Inc. with Mr. Opper.
From 1983 through 1986 he served as Corporate Director of Food & Beverage for
Huckleberry's restaurants, a multi-unit company with restaurants in New York,
Connecticut and Florida. From 1975 through 1983, Mr. Sederholt was principal
owner and Chef of Adam's Son Restaurant and Caterers on Madison Avenue in New
York City. He is a graduate of Pace University in New York City with a Bachelors
of Science in Biology and Chemistry.
Peter C. Markatos, joined the Company in September 1993 as Executive
Vice President in charge of Operations, Real Estate Management and Facility
Design. From 1976 to 1993, Mr. Markatos was the Chief Operating Officer and a
principal owner of Peters-Spence Corporation, Inc., which owned four units of
the Huckleberry's restaurant chain located in New York, Connecticut and Florida.
In 1991, after seventeen years of operation, Peters-Spence filed for protection
under Chapter 11 of the U.S. Bankruptcy code, and in 1993, after Peters-Spence
failed to reorganize, Mr. Markatos, who personally guaranteed the obligations of
Peters-Spence, filed under Chapter 7 of the U.S. Bankruptcy Code, and was
discharged in 1994. Mr. Markatos is a graduate of Syracuse University with a
Bachelor of Arts in Real Estate Management.
24
<PAGE> 28
Louis R. Malikow, has served as Secretary and Director of the Company
since September 1993. Mr. Malikow is an attorney and the proprietor of Louis R.
Malikow Associates, a tax and financial consulting firm which he founded in
1990. From 1975 to 1990, Mr. Malikow served as Vice President of The Ayco
Corporation, Inc. a tax and financial consulting firm. He is a graduate of
Syracuse University School of Management with a degree in Corporate Finance and
is also a graduate of The Albany Law School.
Donald M. Zuckert, joined the Company as a Director in November 1994.
Mr. Zuckert is Vice Chairman of Draft Direct Worldwide, Inc., a direct response
advertising agency. From 1989 to 1995 Mr. Zuckert served as Chairman and Chief
Executive Officer of Arcature Corporation, a Marketing and Investment firm in
Stamford, Connecticut. From 1960-1987, Mr. Zuckert served in various capacities
with Ted Bates Worldwide, Inc., an advertising and marketing company,
eventually becoming Chairman and Chief Executive Officer. Mr. Zuckert also
serves on the Boards of California & Washington Co. (Frozen Foods), of San
Bruno, California; and is a trustee of Bowdoin College from which he holds a BA
degree. Mr. Zuckert holds a degree in law from New York University Law School.
Roger Rankin, joined the Company as a Director in November 1994. From
1991 to present Mr. Rankin is active as a private investor. From 1986 to 1991,
Mr. Rankin served as Chairman and Chief Executive Officer of Top Source
Technologies, Inc., a publicly traded (American Stock Exchange) manufacturing
company in the automotive industry. From 1976 to 1984, Mr. Rankin was the
principal owner and operator of Rankin Distributing, a company with
wholesale/retail stores selling automotive stereo equipment
CLASSIFICATION OF THE BOARD OF DIRECTORS
The number of directors comprising the entire Board of Directors is
such number as determined in accordance with the By-Laws of the Company. The
Company's By-Laws provide that the number of directors shall be not less than
three nor more than eleven. The Company's Certificate of Incorporation provides
for a classified or "staggered" Board of Directors. The classified or
"staggered" Board of Directors is comprised of three classes of directors
elected for initial terms expiring at the 1995, 1996 and 1997 Annual Meeting of
Stockholders. Thereafter, each class is elected for a term of three years. By
reason of the classified Board of Directors, one class of the Board comes up for
re-election each year. Any further amendment to the Company's Certificate of
Incorporation affecting the classified Board may only be adopted upon the
affirmative vote of not less than 75% of the issued and outstanding shares
entitled to vote thereon. Officers serve at the discretion of the Board of
Directors of the Company. There are no family relationships among any of the
officers or directors. The underwriting agreement in connection with the Public
Offering granted the underwriter, Auerbach, Pollak & Richardson, Inc., the right
to designate an observer to the Board of Directors for a period of five years.
Messrs. Opper and Sederholt were elected as Class 1 Directors to serve
for a term of three years until the 1997 Annual Meeting of Stockholders; Messrs.
Markatos and Malikow were each elected as Class 2 Directors to serve for a term
of two years until the 1996 Annual Meeting of Stockholders; and Messrs. Zuckert,
Stein and Rankin were each elected as Class 3 Directors to serve for a term of
one year until the Company's 1995 Annual Meeting of Stockholders. During the
Company's 1995 Annual Meeting of Stockholders, Messrs. Zuckert, Stein and Rankin
were re-elected for a three year term to the Board of Directors. Thereafter,
each class of directors standing for re-election shall be elected for a term of
three years.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation and Executive
25
<PAGE> 29
Committees.
Audit Committee. The members of the Audit Committee are Roger Rankin,
and Louis R. Malikow. The Audit Committee reviews: (i) the Corporation's audit
functions; (ii) with management, the finances, financial condition and interim
financial statements of the Corporation; (iii) with the Corporation's
independent auditors, the year-end financial statements; and (iv) the
implementation of any action recommended by the independent auditors.
Executive Committee. The members of the Executive Committee are William
J. Opper, David Sederholt and Donald Zuckert. The Executive Committee has all of
the powers of the Board of Directors except it may not, among other things: (i)
amend the Certificate of Incorporation or Bylaws; (ii) enter into agreements to
borrow money in excess of $100,000; (iii) grant security interests to secure
obligations of more than $100,000; (iv) authorize private placements or public
offerings of the Company's securities; (v) authorize the acquisition of any
major assets or business or change the business of the Corporation; or (vi)
authorize the employment of any independent contractor for compensation in
excess of $50,000.
Compensation Committee. The members of the Compensation Committee are
Roger Rankin, Louis R. Malikow and Donald Zuckert. The Compensation Committee
administers the Corporation's 1994 Stock Option Plan and Non-Employee Director
Stock Option Plan and negotiates and reviews of all employment agreements of
executive officers of the Corporation.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1996, the Board of Directors of
the Company met on seven occasions and voted by unanimous written consent on one
occasions. No member of the Board of Directors attended less than 75% of the
aggregate number of (i) the total number of meetings of the Board of Directors
or (ii) the total number of meetings held by all Committees of the Board of
Directors.
CERTAIN REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and officers, and persons who own, directly or
indirectly, more than 10% of a registered class of the Corporation's equity
securities, to file with the Securities and Exchange Commission ("SEC") reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms that they file. Based solely on review of the copies
of such reports received by the Company, the Company believes that all Section
16(a) filing requirements applicable to officers, directors and 10% shareholders
were complied with during the 1996 fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid by the Company during the periods ended June 30, 1996, 1995
and 1994 for each of the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
26
<PAGE> 30
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
No. of
Securities
Other Annual Restricted Underlying
Name and Principal Fiscal Compensation Stock Options/
Position Year Salary(1) Bonus(2) (3) Award(s) Granted
<S> <C> <C> <C> <C> <C> <C>
William J. Opper 1996 $90,000 $20,000 $0 (4) 150,000 (5)
Chairman and Chief 1995 $85,000 $0 $0 (4) 0
Executive Officer 1994* $23,000 $0 $0 (4) 0
Stephan A. Stein 1996 $72,500 $10,000 $0 (4) 120,000 (6)
Vice Chairman and 1995 $0 $0 $0 (4) 0
Chief Admin- 1994 $0 $0 $0 (4) 0
istrative Officer
David C. Sederholt 1996 $90,000 $20,000 $0 (4) 150,000 (5)
Chief Operating 1995 $85,000 $0 $0 (4) 0
Officer, President 1994* $23,000 $0 $0 (4) 0
and Director
Peter C. Markatos 1996 $84,600 $20,000 $0 (4) 200,000 (5)
Executive Vice Pres- 1995 $80,000 $0 $0 (4) 0
ident and Director 1994* $23,000 $0 $0 (4) 0
</TABLE>
- -------------------------
* Six month period due to change of fiscal year.
(1) Commencing July 1, 1994, the salaries of Messrs. Opper, Sederholt and
Markatos were increased to $85,000, $85,000 and $80,000 per year,
respectively. In December 1994, these three executives entered into
employment agreements with the company which continued the salaries for
the next year. See "Employment Agreements" below.
(2) Pursuant to the terms of their employment agreements dated December 1,
1994 Messrs. Opper, Sederholt and Markatos are to receive a cash bonus
each year during the term of their agreements equal to 4%, 3% and 3%,
respectively, of the earnings before interest and taxes of the Company,
as defined ("EBIT") up to $1,000,000, 3%, 2.25% and 2.25% of EBIT in
excess of $1,000,000 up to $2,000,000, and 2%, 1.5% and 1.5% of EBIT in
excess of $2,000,000, contingent on the Company achieving at least
$500,000 in EBIT. See "Employment Agreements."
(3) Pursuant to the terms of their employment agreements, Messrs. Opper,
Stein, Sederholt and Markatos may receive additional compensation as
determined from time to time by the Board of Directors. During fiscal
year 1996, the Board of Directors approved the above additional
compensation to its executive officers.
(4) No restricted stock awards were granted in fiscal 1996; however,
Messrs. Opper, Sederholt and
27
<PAGE> 31
Markatos owned 288,346, 144,158 and 0, respectively, restricted shares
of the Company's Common Stock as of June 30, 1996, the market value of
which was $828,995, $328,205 and 0, respectively.
(5) In December 1994, pursuant to the terms of their employment agreements,
Messrs. Opper, Sederholt and Markatos, respectively, were granted
options to purchase an aggregate of 150,000, 150,000 and 200,000 shares
of the Company's Common Stock, respectively exercisable at $4.50 per
share, vesting at one-third each year commencing December 1, 1995. See
"Employment Agreements."
(6) In December 1995, pursuant to the terms of Mr. Stein's employment
agreement, 120,000 options were granted to purchase shares of common
stock at an exercise price of $5.25 per share, vesting one-third each
year.
STOCK OPTIONS
The following table sets forth certain information concerning the grant
of stock options made as of the last fiscal year under the Company's 1994
Employees Stock Option Plan to each of the named executive officers of the
Company and non-executive employees as a group.
OPTION/SAR GRANTS
28
<PAGE> 32
<TABLE>
<CAPTION>
(INDIVIDUAL GRANTS)
NO. OF
SECURITIES PERCENTAGE
UNDERLYING OF TOTAL EXERCISE
OPTIONS OPTIONS/ OF
NAME GRANTED FISCAL BASE EXPIRATION
(1) YEAR PRICE DATE
<S> <C> <C> <C> <C>
Stephen A. Stein 120,000 67% $5.25 12/1/00
Non-
Executive 56,000 33% $3.50 - 12/1/99-
Employees $5.25 12/1/00
</TABLE>
The following table contains information with respect to the named
executive officers concerning options held as of the last fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND
FY-END OPTIONS/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AS OF OPTIONS AT
ACQUIRED JUNE 30, 1996 JUNE 30, 1996(1)
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
William J. Opper 0 -- 50,000/150,000 $0/0
Stephen A. Stein 0 -- 0/120,000 $0/0
David C. Sederholt 0 -- 50,000/150,000 $0/0
Peter C. Markatos 0 -- 66,666/120,000 $0/0
</TABLE>
29
<PAGE> 33
- -------------------------------------
1. Market value at June 30, 1996 was $2-7/8 per share.
EMPLOYMENT AGREEMENTS
The Company entered into three-year employment agreements with the
Company's Chairman of the Board and Chief Executive Officer, William J. Opper;
the Company's President and Chief Operating Officer, David C. Sederholt and the
Executive Vice President, Peter Markatos, in December 1994. The employment
agreements provide for (i) annual compensation of $85,000, $85,000 and $80,000,
respectively for the first year of the agreements, increasing by 10% in each of
the second and third years; (ii) a bonus of 4%, 3% and 3%, respectively, of the
Company's earnings before interest and taxes ("EBIT") up to $1,000,000 (as
defined in the agreement), 3%, 2.25% and 2.25%, respectively of the amount of
EBIT in excess of $1,000,000 up to $2,000,000 and 2%, 1.5% and 1.5%,
respectively, of the EBIT in excess of $2,000,000, providing the Company
achieves at least $500,000 in EBIT, with such additional bonuses as may be
awarded in the discretion of the Board of Directors; (iii) the award of
non-qualified stock options to purchase 150,000, 150,000 and 200,000 shares of
Common Stock, respectively at an exercise price of $4.50 per share (iv) certain
insurance and severance benefits and (v) automobile expenses.
In December 1995, the Company entered into a three year employment
agreement with Stephen A. Stein, the Company's Vice-Chairman and Chief
Administrative Officer. The agreement provides for a base salary of $90,000 per
year increasing 10% per annum plus a bonus to be determined by the board of
directors. The agreement also granted Mr. Stein 120,000 five year employee
stock options exercisable at $5.25 per share as well as certain insurance and
severance benefits and automobile expense payment.
The Non-Executive Directors will receive options under the Non-
Executive Director Stock Option Plan to purchase 25,000 shares of Common Stock
upon joining the Board and options to purchase 15,000 shares each year they
serve on the Board. The directors will be reimbursed for expenses incurred in
order to attend meetings of the Board of Directors and will be paid a $500
meeting fee.
STOCK OPTION PLANS
In November 1994, the Company adopted the 1994 Employees Stock Option
Plan (the "Plan"). The Plan provides for the grant of options to purchase up to
1,000,000 shares of the Company's Common Stock. Under the terms of the Plan,
options granted thereunder may be designated as options which qualify for
incentive stock option treatment ("ISOs") under Section 422A of the Code, or
options which do not so qualify ("Non-ISOs").
The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors. The Board or the Stock Option
Committee has the discretion to determine the eligible employees to whom, and
the times and the price at which, options will be granted. Whether such options
shall be ISOs or Non-ISOs; the periods during which each option will be
exercisable; and the number of shares subject to each option, shall be
determined by the Board or Committee. The Board or Committee shall have full
authority to interpret the Plan and to establish and amend rules and regulations
relating thereto.
Under the Plan, the exercise price of an option designated as an ISO
shall not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISOs options may be less than such fair market
30
<PAGE> 34
value. The aggregate fair market value of shares subject to options granted to a
participant which are designated as ISOs which become exercisable in any
calendar year shall not exceed $100,000. The "fair market value" will be the
closing NASDAQ bid price, or if the Company's Common Stock is not quoted by
NASDAQ, as reported by the National Quotation Bureau, Inc., or a market maker of
the Company's Common Stock, or if the Common Stock is not quoted by any of the
above, by the Board of Directors acting in good faith.
The Board or the Stock Option Committee, as the case may be, may, in
its sole discretion, grant bonuses or authorize loans to or guarantee loans
obtained by an optionee to enable such optionee to pay any taxes that may arise
in connection with the exercise or cancellation of an option.
Unless sooner terminated, the Plan will expire in November, 2004.
The Plan is currently administered by the Board of Directors, although
the Board may designate a Stock Option Committee to administer the Plan,
comprised of three individuals at least two of whom shall be Directors.
In November 1994, the Company adopted the Non-Executive Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for issuance of a
maximum of 500,000 shares of the Company's Common Stock upon the exercise of
stock options granted under the Director Plan. Options are granted under the
Director Plan until December 2004 to (i) non-executive directors as defined and
(ii) members of any advisory board established by the Company who are not full
time employees of the Company or any of its subsidiaries. The Director Plan
provides that each non-executive director will automatically be granted an
option to purchase 25,000 shares, upon joining the Board of Directors, and on
each December 1st thereafter, provided such person has served as a director for
the 12 months immediately prior to such December 1st. Similarly, each eligible
director of an advisory board will receive options to purchase 15,000 shares
upon joining the advisory board, and on each December 1st thereafter, an option
to purchase 7,500 shares of the Company's Common Stock, providing such person
has served as a director of the advisory board for the previous 12 month period.
The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. The
"fair market value" will be the closing NASDAQ bid price, or if the Company's
Common Stock is not quoted by NASDAQ, as reported by the National Quotation
Bureau, Inc., or a market maker of the Company's Common Stock, or if the Common
Stock is not quoted by any of the above by the Board of Directors acting in good
faith. Until otherwise provided in the Stock Option Plan the exercise price of
options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of common Stock of the Company or by a
combination of each. The term of each option commences on the date it is granted
and unless terminated sooner as provided in the Director Plan, expires five
years from the date of grant. The Director Plan is administered by a committee
of the Board of Directors composed of not fewer than three persons who are
officers of the Company (the "Committee"). The Committee has no discretion to
determine which non-executive director or advisory board member will receive
options or the number of shares subject to the option, the term of the option or
the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan are not qualified for incentive stock option treatment.
31
<PAGE> 35
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as October, 1995, with
respect to the Company's Common Stock owned by each person known to the Company
to be the beneficial owner of more than five percent (5%) of the Company's
Common Stock, each director and all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE
POSITION WITH BENEFICIAL OF
NAME COMPANY OWNERSHIP(1) CLASS
<S> <C> <C> <C>
William J. Opper Chairman of the Board and 333,361(2) 12.4%
The Rattlesnake Holding Chief Executive Officer
Company, Inc.
3 Stamford Landing, Suite 130
Stamford, CT 06902
Stephan A. Stein Vice Chairman and 40,000 (3) 1.5%
The Rattlesnake Holding Chief Administrative Officer
Company, Inc.
3 Stamford Landing, Suite 130
Stamford, CT 06902
David C. Sederholt President, Chief Operating 194,158(2) 7.2%
The Rattlesnake Holding Officer, Chief Financial
Company, Inc. Officer, Treasurer and
3 Stamford Landing, Suite 130 Director
Stamford, CT 06902
Peter C. Markatos Executive Vice President and 66,667(4) 2.5%
The Rattlesnake Holding Director
Company, Inc.
3 Stamford Landing, Suite 130
Stamford, CT 06902
Louis R. Malikow Secretary and Director 76,517(5) 2.9%
Louis R. Malikow Associates
679 Plank Road
Clifton Park, NY 12065
Donald M. Zuckert Director 148,252(5) 5.5%
3 Stamford Landing, Suite 300
Stamford, CT 06902
Roger Rankin Director 138,434(5) 5.0%
17561 S.E. Conch Bar Avenue
Tequesta, FL 33463
Guy B. Snowden Stockholder 172,422(7) 6.4%
c/o Louis R. Malikow
Associates
679 Plank Road
Clifton Park, NY 12065
All Officers and Directors as 1,001,941(2) 32.8%
a Group (7 persons) (3)(4)(5)(6)
</TABLE>
- ----------------------------------------
(1) Each person listed has sole voting and investment power over the shares
listed as beneficially owned unless otherwise indicated.
(2) Does not include 100,000 non-vested options to purchase shares of
Common Stock, but does
32
<PAGE> 36
include 50,000 vested options.
(3) Includes options to purchase 40,000 shares of Common Stock. Does not
include non-vested options to purchase 120,000 shares of Common Stock.
(4) Does not include (i) non-vested options to purchase 133,333 shares of
Common Stock; and (ii) 36,084 shares held by the mother of Mr.
Markatos. Does include 66,667 vested options to purchase shares of
Common Stock.
(5) Includes options to purchase 40,000 shares of Common Stock.
(6) Includes (i) options to purchase 40,000 shares; (ii) 73,000 shares
issuable upon exercise of a warrant.
(7) Includes (i) 27,671 shares held in five trusts established for each of
Mr. Snowden's children and (ii) 36,500 shares issuable upon exercise of
a warrant. Does not include 50,000 warrants issued to Mr. Snowden's
children July 1, 1996.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1992, William J. Opper, the Chairman of the Board and Chief
Executive Officer, loaned the Company $100,000 on a five-year note at an
interest rate of 9% per annum. This note was subsequently paid in full in July
1995. Mr. Opper's brother privately purchased an aggregate of $95,000 principal
amount of 12% convertible promissory notes and warrants to purchase 34,675
shares from Donald Zuckert. Mr. Opper disclaims any beneficial interest in this
transaction.
In January 1994, David Sederholt, the Company's President and Chief
Operating Officer, loaned the Company $22,300 on a note payable in two years at
an interest rate of 9% per annum. This note was subsequently paid in full in
August 1995. In June 1994, Mr. Sederholt's mother-in-law loaned the Company
$10,000 on a note payable on demand at an interest rate of 12% per annum. This
note was subsequently paid in full in August 1995.
In June 1994, in connection with the acquisition of the Yorktown
Heights facility, the Company purchased all of the shares of PEN-Z Corp. Inc.
from Penny Markatos, the mother of Peter Markatos, the Company's Executive
Vice-President, for a $300,000 note payable monthly through May 2009 at an
interest rate of prime plus 1% and Mrs. Markatos received 36,084 shares of
Common Stock and a trust of which Mrs. Markatos is Trustee, sold the furniture
and equipment in the Yorktown Heights location to the Company for $100,000
payable on a note due monthly through April 2009 at an interest rate of prime
plus 1%. Peter Markatos disclaimed any beneficial interest of any transaction
involving his mother.
Louis R. Malikow, Secretary and a Director of the Company, entered into
a consulting agreement in September 1993 pursuant to which Mr. Malikow provides
various consulting services to the Company for a fee of $1,667 per month. This
agreement voluntarily terminated September 1994. In addition, Mr. Malikow's
brother loaned the Company $100,000 in March 1994 payable on demand at an
interest rate of 12% per annum and $20,000 in June 1994 on the same terms. Both
of these notes have been repaid. In December 1994, Mr. Malikow's brother
purchased $20,000 principal amount of 12% convertible promissory notes,
convertible at $4.00 per share, and warrants to purchase 7,300 shares of the
Company's common stock at an exercise price of $4.50, which he subsequently
privately transferred. In addition, Mr. Malikow's brother purchased one unit of
the Company's private offering in September 30, 1994. Mr. Malikow disclaims any
beneficial interest in any transaction involving his brother.
33
<PAGE> 37
Donald M. Zuckert, a Director of the Company loaned the Company
pursuant to a demand note in April 1994, the sum of $75,000 which has been
repaid in full without interest. Mr. Zuckert in December 1994 purchased $100,000
principal amount of 12% convertible promissory notes, convertible at $8.00 per
share, and warrants to purchase 18,250 shares of the Company's common stock at
an exercise price of $4.50. Mr. Zuckert subsequently privately transferred these
notes and warrants.
Roger Rankin, a Director of the Company, purchased 7 units of the
Company's private placement of November 1994 at various times during the
offering period. Mr. Rankin in December 1994 purchased $200,000 principal amount
of 12% convertible promissory notes, convertible at $4.00 per share, and
warrants to purchase 73,000 shares of the Company's common stock at an exercise
price of $4.50. The $200,000, 12% convertible notes were repaid with interest in
December 1995.
Guy Snowden, a principal stockholder of the Company, loaned the Company
$52,500 pursuant to a demand note at 15% interest per annum. This note was
subsequently paid in full August 1995. Mr. Snowden in December 1994 purchased
$100,000 principal amount of 12% convertible promissory notes, convertible at
$4.00 per share, and warrants to purchase 36,500 shares of the Company's common
stock at an exercise price of $4.50. In August 1996, Mr. Snowden loaned the
Company $425,000 to finance the purchase of the Fairfield location. This note is
at 15% and is due January 1997. As additional consideration Mr. Snowden
received 50,000 warrants at the market price at the date of grant.
Stephen A. Stein, the Company's Vice-Chairman, has provided, and
expects to continue to provide, investment banking services to Commonwealth
Associates. The Company has engaged, and in the future may continue to engage,
Commonwealth Associates to provide advisory and/or financing activities. Mr.
Stein disclaims any beneficial interest in any transaction or activity
involving the Company and Commonwealth Associates.
Except as provided herein, the Company has not entered into any
material transactions or series of similar transactions with any director,
executive officer or any security holder owning 5% or more of the Company's
Common Stock.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statement Schedules
None
(b) Reports on Form 8-K
During the quarter ended June 30, 1996 the Company filed no reports on
Form 8-K.
(c) Exhibits
The following exhibits, designated by an asterisk (*), have been
previously filed with the Commission with the Company's registration on Form
SB-2 (File No. 33-88486) and those designated with two astericks have been
filed with the Company's 10KSB for the year ended June 30, 1995, and, pursuant
to 17 C.F.R. Section 230.411, are incorporated by reference. Those not so
designated are filed herewith.
Exhibit No. Description
2.1* Merger Agreement dated August 31, 1993 by and between
Rattlesnake Ventures, Inc. and the
34
<PAGE> 38
Registrant
3.1* Form of Restated Certificate of Incorporation of the
Registrant
3.1.1 Designation of Preferred Stock
3.2* By-Laws
4.1* Form of Common Stock Certificate
4.2* Form of Warrant to be issued to the Underwriter
4.3* Form of Warrant issued to certain individuals in December 1994
10.1* Lease agreement dated May 12, 1992 between the Registrant and
South Norwalk Redevelopment Limited Partnership for the South
Norwalk facilities
10.1.1* Agreement between Breakaway Sono Inc. and the Registrant for
the purchase of certain equipment
10.1.2* Note dated June 11, 1992 from the Registrant to Breakaway
Sono, Inc.
10.2* Lease Agreement dated April 1, 1994 between Sivad Inc. and the
Registrant for the Fairfield facilities
10.2.1* Purchase Money Leasehold Mortgage between the Registrant and
Sivad Inc.
10.3* Common Stock Purchase Agreement between the Registrant and
Penny Markatos dated November 1, 1993
10.3.1* Lease Agreement between Penny Markatos and PEN-Z Corp. dated
April 1, 1994
10.4* Lease Agreement dated March 15, 1993 between the Registrant
and Elm City Manufacturing Jewelers Inc. for the Hamden
facilities
10.4.1* Sale Agreement dated August 31, 1993 between the Registrant
and Hamden Entertainment Inc
10.4.2* Amendment of Promissory Note Agreement dated February 28, 1994
10.4.3* Amendment to Commitment Agreement dated October 31, 1994
between the Registrant and Hamden Entertainment Inc.
10.4.4* Amendment to Promissory Note dated April, 1995
10.5* Lease Agreement dated January 24, 1995 for Danbury facility
10.6* License Agreement with RC Holdings, Inc. dated April, 1995
10.7* Form of Employment agreement with William J. Opper dated
December 1994
10.8* Form of Employment agreement with David Sederholt dated
December 1994
10.9* Form of Employment Agreement with Peter Markatos dated
December 1994
10.10* 1994 Employee Stock Option Plan
35
<PAGE> 39
10.11* 1994 Nonexecutive Directors Stock Option Plan
10.12* Form of 12% Convertible Note
10.12.1* Form of Extension Agreement between the Company and the
holders of the 12% Convertible Notes
10.13* Form of Warrant issued to holders of 12% Convertible Note
10.14* Note dated May 8, 1992 from the Registrant to William J. Opper
10.15* Agreement with Berkeley Securities Corporation providing for
the cancellation of certain shares
10.16* Proposed Debt Restructure
10.16.1* Series A Note
10.16.2* Series B Note
10.17* Agreement with 1241 Mamaroneck Avenue Corp.
10.17.1* Form of Proposed Lease for 1241 Mamaroneck Avenue
10.17.2* Note Extension Agreement
10.18* Form of Consulting Agreement to be entered into with Auerbach,
Pollak & Richardson, Inc.
10.19* Letter of intent with Steve Kalafer for the Flemington
facility
10.20* Form of 12% Convertible Promissory Note
10.21** Lease Agreement dated September 12, 1995 with SBX investments,
Inc.
10.21.1** Asset Purchase Agreement dated September 12, 1995 with
Twinlittle, Inc. and Twinlittle II, Inc.
10.21.2** $100,000 principal amount of promissory note to SBX
Investments, Inc.
10.22 Employment Agreement with Stephen A. Stein
10.23 Lease Agreement with Jack Cioffi Trust ULWT dated April 15,
1996 together with Exhibits
10.24 Form of Series C Note
10.25 Note Agreement with Guy B. Snowden
10.26 Option and Escrow Agreement dated August 1996 between CFT
Restaurant, Land and Building Group, Rattlesnake of Milford,
Inc. et al., together with Asset Sale/Purchase Agreement
and related Exhibits thereto
10.27 First Amendment and Restated Lease between Land and Building
Group and Rattlesnake of Milford, Inc.
10.28 Form of Consulting Agreement among Frank Tummunello, Charter
Tummunello, Thomas Dunn and Rattlesnake of Milford, Inc.
10.29 Agreement of Sale dated August 6, 1996 between Kings Castle
Caterers Inc. and Rattlesnake of Bay Ridge, Inc. and certain
exhibits
10.30 Assignment and Assumption Agreement dated August 23, 1994
between Holy Cow Restaurant Associates, Inc. and Rattlesnake
of 86th Street, Inc.
21 Subsidiary List
36
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE RATTLESNAKE HOLDING COMPANY, INC.
By: /s/ William J. Opper
--------------------------------
William J. Opper
Chairman of the Board
and Chief Executive Officer
Dated: October 15, 1996
Pursuant to the requirements of the Securities Act of 1933, this Report
has been signed below by the following persons in the capacities and on the
dates indicated:
Signature Capacity Date
/s/ William J. Opper Chairman of the Board October 15, 1996
- ------------------ and Chief Executive Officer
William J. Opper
/s/ David C. Sederholt President, Chief Operating October 15, 1996
- ------------------ Officer, Chief Financial
David C. Sederholt Officer, Treasurer and
Director
/s/ Peter C. Markatos Director October 15, 1996
- ------------------
Peter C. Markatos
/s/ Louis P. Malikow Secretary and Director October 15, 1996
- ------------------
Louis P. Malikow
/s/ Donald M. Zuckert Director October 15, 1996
- ------------------
Donald M. Zuckert
/s/ Stephen A. Stein Director October 15, 1996
- ------------------
Stephen A. Stein
/s/ Roger Rankin Director October 15, 1996
- ------------------
Roger Rankin
37
<PAGE> 41
THE RATTLESNAKE HOLDING
COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, 1995 AND JUNE 30, 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 42
[KPMG PEAT MARWICK LLP LETTERHEAD]
Independent Auditors' Report
The Board of Directors and Stockholders
The Rattlesnake Holding Company, Inc.
We have audited the accompanying consolidated balance sheets of The Rattlesnake
Holding Company, Inc. and subsidiaries as of June 30, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1996 and 1995 and the six months ended June
30, 1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Rattlesnake
Holding Company, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
results of their operations and their cash flows for the years ended June 30,
1996 and 1995 and the six months ended June 30, 1994 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations that raise substantial doubt about its ability to continue as a
going concern. Management has developed a cost reduction program and is
attempting to raise additional capital. On October 10, 1996, a letter of intent
was executed with an investment banking firm to provide additional capital.
Management's plans in regard to these matters are also described in note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Our report on the 1994 financial statements contained an explanatory paragraph
indicating that the Company financed its operations principally through the
private placement of a $1,800,000 unit offering, consisting of 9% subordinated
notes and 105,768 shares of common stock and a $500,000 unit offering consisting
of 12% convertible subordinated notes and 182,500 common stock purchase
warrants. The subordinated notes matured in various amounts during the period
May 1995 through September 1995 and the convertible subordinated notes were to
mature in various amounts during the period June 1995 through July 1995. In the
opinion of management, the Company would not have generated sufficient operating
cash flow to repay
F-2
<PAGE> 43
the subordinated or convertible subordinated notes. The Company utilized a
portion of the proceeds received from the June 29, 1995 initial public offering
of 1,495,000 shares of common stock to partially repay the 9% subordinated notes
and restructured the terms of the remaining outstanding indebtedness.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
October 11, 1996
Stamford, Connecticut
F-3
<PAGE> 44
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assets
Current assets:
Cash $ 684,414 28,316
Cash in escrow 1,237,625 --
Accounts receivable 63,659 27,138
IPO receivable -- 7,260,800
Inventory 111,312 91,334
Pre-opening costs 107,289 18,081
Debt issuance costs -- 72,114
Prepaid expenses and other current assets 140,490 9,555
----------- ----------
Total current assets 2,344,789 7,507,338
Property and equipment, net 2,374,848 1,082,873
Intangible assets, net 1,534,227 1,499,478
Other assets 246,288 203,538
----------- ----------
$ 6,500,152 10,293,227
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of notes payable 576,852 1,530,572
Accounts payable 574,889 754,186
Accrued expenses 488,204 805,422
Other current liabilities 283,234 350,542
----------- ----------
Total current liabilities 1,923,179 3,440,722
Notes payable, net of current maturities 1,255,723 1,768,301
----------- ----------
Total liabilities 3,178,902 5,209,023
----------- ----------
Stockholders' equity:
Preferred stock, Series A, $.10 par value, 5,000,000 shares authorized,
54,500 and 0 issued and outstanding at June 30,
1996 and 1995, respectively 5,450 --
Common stock, $.001 par value - 20,000,000 shares authorized,
2,643,734 and 2,558,563 issued and outstanding, at
June 30, 1996 and 1995, respectively 2,644 2,559
Additional paid-in capital 10,704,315 9,279,649
Accumulated deficit (7,391,159) (4,198,004)
----------- ----------
3,321,250 5,084,204
$ 6,500,152 10,293,227
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 45
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended June 30, 1996 and 1995
and six months ended June 30, 1994
<TABLE>
<CAPTION>
Six months
Year ended Year ended ending
June 30, June 30, June 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Restaurant sales $ 8,755,565 5,340,657 1,613,535
Less: promotional sales 512,756 362,589 142,884
----------- ---------- ---------
Net restaurant sales 8,242,809 4,978,068 1,470,651
Costs and expenses:
Cost of food and beverage sales 2,565,905 1,610,680 474,748
Restaurant salaries and fringe benefits 3,109,435 1,804,129 541,803
Occupancy and related expenses 2,118,444 1,306,469 357,717
Depreciation and amortization expense 608,260 388,695 140,758
----------- ---------- ---------
Total restaurant costs and expenses 8,402,044 5,109,973 1,515,026
Selling, general and administrative 2,810,433 1,332,237 291,979
Amortization of debt issuance costs -- 1,027,751 499,813
Loss on closure of restaurant site 192,311 -- --
Interest expense 108,536 264,279 70,077
Miscellaneous expenses 12,350 2,199 250
----------- ---------- ---------
Total expenses 11,525,674 7,736,439 2,377,145
----------- ---------- ---------
Net loss before extraordinary
item (3,282,865) (2,758,371) (906,494)
Extraordinary item:
Gain on early extinguishment of debt 89,710 -- --
----------- ---------- ---------
Net loss $(3,193,155) (2,758,371) (906,494)
=========== ========== =========
Per share:
Loss before extraordinary item (1.26) (2.46) (0.84)
Extraordinary item .03 -- --
----------- ---------- ---------
Net loss $ (1.23) (2.46) (0.84)
=========== ========== =========
Weighted average number of common
and common equivalent shares
outstanding 2,605,808 1,122,678 1,074,513
=========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 46
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1996 and 1995
and six months ended June 30, 1994
<TABLE>
<CAPTION>
Addi- Total
tional Accum- stock-
Common Preferred Common paid-in ulated holders'
shares stock stock capital deficit equity
------ ----- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 856,274 $ -- 856 1,102,143 (533,139) 569,860
Issuance of stock in connection
with acquisition of leaseholds 12,466 -- 12 150,488 -- 150,500
Proceeds received from issuance of
common stock 2,226 -- 2 24,998 -- 25,000
Net proceeds received from issuance
of common stock in connection
with private placement 34,527 -- 35 588,617 -- 588,652
Net loss -- -- -- -- (906,494) (906,494)
--------- ------ ----- ----------- ---------- ----------
Balance, June 30, 1994 905,493 -- 905 1,866,246 (1,439,633) 427,518
Issuance of stock in connection
with refinancing of debt 10,000 -- 10 54,990 -- 55,000
Net proceeds received from Initial
Public Offering 1,495,000 -- 1,495 6,576,839 -- 6,578,334
Net proceeds received from issuance
of common stock in connection
with private placement 20,570 -- 21 253,452 -- 253,473
Conversion of debt to equity 127,500 -- 128 509,872 -- 510,000
Issuance of warrants in connection
with private placement of debt -- -- -- 18,250 -- 18,250
Net loss -- -- -- -- (2,758,371) (2,758,371)
--------- ------ ----- ----------- ---------- ----------
Balance, June 30, 1995 2,558,563 -- 2,559 9,279,649 (4,198,004) 5,084,204
Additional costs from Initial Public
Offering -- -- -- (43,239) -- (43,239)
Issuance of common stock for
services performed 2,671 -- 3 14,355 -- 14,358
Net proceeds received from issuance
of preferred stock -- 5,450 -- 1,123,632 -- 1,129,082
Conversion of debt to equity 82,500 -- 82 329,918 -- 330,000
Net loss -- -- -- -- (3,193,155) (3,193,155)
--------- ------ ----- ----------- ---------- ----------
Balance, June 30, 1996 2,643,734 $5,450 2,644 10,704,315 (7,391,159) 3,321,250
========= ====== ===== =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 47
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1996 and 1995
and six months ended June 30, 1994
<TABLE>
<CAPTION>
Six months
Year ended Year ended ending
June 30, June 30, June 30,
1996 1995 1994
----------- ---------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,193,155) (2,758,371) (906,494)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 651,597 1,420,314 638,306
Gain on early extinguistment of debt (89,710) -- --
Loss on closure of restaurant site 190,965 -- --
Issuance of stock in connection with debt restructuring 30,000 55,000 --
Stock issued for services provided 14,358 -- --
Changes in assets and liabilities, net of acquisition:
Increase in accounts receivable (36,521) (10,712) (11,637)
Increase in inventory (25,013) (17,897) (41,016)
Increase in prepaid expenses and other assets (206,384) (31,445) (7,099)
Increase in pre-opening costs (169,138) (21,697) (12,379)
(Decrease) increase in accounts payable and
accrued expenses (334,691) 1,178,214 231,580
(Decrease) increase in other current liabilities (34,609) 100,718 63,561
----------- ---------- --------
Net cash used in operating activities (3,202,301) (85,876) (45,178)
----------- ---------- --------
Cash flows from investing activities:
Capital expenditures (1,769,272) (314,242) (446,623)
Payments for acquisitions of leaseholds and lease costs (155,924) (150,448) (105,000)
Purchase of liquor license (150,000) -- --
Payments for acquisition, net of cash acquired -- -- (94,038)
----------- ---------- --------
Net cash used in investing activities (2,075,196) (464,690) (645,661)
----------- ---------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- -- 25,000
Proceeds from IPO 7,260,800 -- --
Proceeds from issuance of convertible notes -- 510,000 --
Net proceeds from private placement -- 383,263 532,686
Cost of issuance of preferred stock (108,543) -- --
Proceeds from borrowings 100,000 484,250 255,000
Principal repayment of borrowings (1,275,423) (141,567) (208,083)
IPO costs (43,239) (682,466) --
----------- ---------- --------
Net cash provided by financing activities 5,933,595 553,480 604,603
----------- ---------- --------
Net increase (decrease) in cash 656,098 2,914 (86,236)
Cash, beginning of period 28,316 25,402 111,638
----------- ---------- --------
Cash, end of period $ 684,414 28,316 25,402
=========== ========== ========
Cash paid during the period for:
Interest $ 221,825 57,686 10,086
=========== ========== ========
Income taxes $ 17,015 2,199 750
=========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 48
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
June 30, 1996, 1995 and June 30, 1994
(1) Organization and Description of Business
(a) Description of Business
The Rattlesnake Holding Company, Inc. and subsidiaries (collectively, the
Company), currently operates seven restaurants in Lynbrook, White
Plains and Yorktown Heights, New York; Fairfield, South Norwalk, and
Danbury, Connecticut and Flemington, New Jersey. In January 1996, the
Company closed its restaurant in Hamden, Connecticut (note 4). The
Company's eighth restaurant is currently under construction on 86th
Street in New York City. Company restaurants feature casual dining
utilizing a southwestern theme.
(b) Organization
In December 1994, an amendment to the Company's Certificate of
Incorporation was approved and adopted to (i) effect a 1:2.8077
reverse split of the Company's common stock (ii) change the par value
of the Company's common stock from $.01 to $.001 per share (iii)
increase the authorized capital stock of the Company to 20,000,000
shares of $.001 par value common stock and 5,000,000 shares of $0.10
par value preferred stock, and (iv) change the Company's fiscal year
end from December 31st to June 30th. In March 1995, an additional
reverse common stock split of 1:2 was approved by the Company's Board
of Directors. All references in the accompanying consolidated
financial statements and notes thereto relating to share and per share
data have been adjusted retroactively to reflect the stock splits.
On June 29, 1995, the Company completed an initial public offering (IPO) of
1,300,000 shares of its common stock and 195,000 additional shares
pursuant to the exercise of the over-allotment option by the
underwriter at $5.50 per share. The net proceeds of the offering,
after deducting underwriters' commissions and fees of $986,700 and
offering costs of $700,705, were $6,535,095. The proceeds from this
offering were to be used for working capital, marketing and
advertising, the implementation of the Company's expansion strategy
and to repay subordinated debt (note 9). The underwriter received
warrants to purchase 130,000 shares of common stock at a price of 120%
of the offering price for a term of four years commencing from the
date of the offering. Upon the closing of the offering, the Company
executed a one year consulting agreement, as amended, under which the
underwriter received $30,000 for providing financial advisory and
other consulting services.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The consolidated financial
statements have been presented on a historical cost basis for the
consolidated statements of operations. All significant inter-company
balances and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared on a
going concern basis which contemplates the realization of assets and
the satisfaction of liabilities and commitments in the normal course
of business. However, due to the matters discussed below, its
continuation as a going concern can not be reasonably assured.
(Continued)
F-8
<PAGE> 49
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company has incurred aggregate losses since inception of $7,391,159,
inclusive of a net loss in fiscal 1996 of $3,193,155. Based upon
interim financial information prepared by management, the Company has
continued to incur losses in fiscal 1997. Additionally, $525,000 of
Series A subordinate notes payable matured on August 1996 (note 9) and
a $425,000 short-term note payable associated with the acquisition of
restaurant matures in fiscal 1997.
Management of the Company is implementing a cost reduction plan to address
these issues. Such plan will include the closing of unprofitable
sites, a reduction in the Company's workforce and other cost
containment measures designed to reduce operating expenses and improve
restaurant operating performance.
On October 10, 1996, a letter of intent was executed with an investment
banking firm to provide additional capital on a "best efforts" basis
(note 16).
Management believes that the implementation of its strategic plan and
consummation of the above-mentioned financing will return the Company
to profitable operations and restore liquidity. However, no assurance
can be made regarding the achievement of the goals outlined in the
strategic plan or consummation of the aforementioned completion of
financing arrangements.
(b) Reporting Periods
On April 2, 1996, the board of directors approved a change, effective July
1, 1996, in the Company's accounting reporting period to a 52 week
cycle ending on the last Sunday in June. This change was implemented
to establish consistency between the Company's operational and
accounting reporting periods.
(c) Cash in Escrow
On June 30, 1996, the Company completed a private placement of a $1,362,500
unit offering, consisting of 54,500 shares of 7-1/2% preferred stock
and 218,000 common stock purchase warrants (note 9). The proceeds of
the offering, net of underwriters commissions and fees were
$1,212,625. On June 30, 1996, these net proceeds and a $25,000 deposit
previously paid by the Company were held in an escrow account by the
underwriter on behalf of the Company. The Company subsequently
received the proceeds in the first quarter of fiscal 1997.
(d) IPO Receivable
On June 29, 1995, the Company completed an initial public offering of
1,495,000 shares of common stock. The proceeds of the offering, net of
underwriters commissions and fees, was $7,235,800. Such amount, and an
additional $25,000 deposit previously paid by the Company, is recorded
as IPO receivable at June 30, 1995. These proceeds were received on
July 7, 1995.
(e) Accounts Receivable
Accounts receivable consist principally of bank credit card accounts
receivable.
(Continued)
F-9
<PAGE> 50
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(f) Inventories
Inventories consist primarily of restaurant food items and supplies and are
stated at the lower of cost or market value. Cost is determined using
the first-in, first-out method.
(g) Pre-Opening Costs
Certain costs relating to hiring and training of employees prior to the
opening of new restaurants are capitalized and amortized over a twelve
month period commencing upon restaurant opening. At June 30, 1996 and
June 30, 1995, such costs amounted to $107,289 and $18,081,
respectively.
(h) Debt Issuance Costs
Debt issuance costs are principally associated with the subordinated notes
component of the Company's $1,800,000 unit offering and were
capitalized and amortized ratably over the initial one year term of
the debt. Accumulated amortization at June 30, 1995 was $1,609,083 and
amortization expenses was $1,018,625 and $499,813 for the year ended
June 30, 1995 and six month period ended June 30, 1994, respectively.
As a result of the restructuring of this debt, the related unamortized
debt issuance costs of $72,114 were offset against the extraordinary
gain recognized in this transaction (note 9).
(i) Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated
primarily on the straight-line basis over the estimated useful lives
of the assets. Leasehold improvements are amortized over the shorter
of the estimated useful life or the lease term of the related asset.
The estimated useful lives are as follows:
<TABLE>
<S> <C>
Artifacts 3 years
Original smallwares 3 years
Furniture and fixtures 5 years
Restaurant and office equipment 7 years
Leasehold improvements 5-15 years
</TABLE>
(j) Intangible Assets
Intangible assets consist principally of costs to acquire leased
facilities. These leasehold costs are amortized over the life of the
related lease, generally 5 to 15 years. Accumulated amortization at
June 30, 1996 and June 30, 1995 was $401,114 and $194,939,
respectively. Amortization expense was $227,847, $150,480, $33,336 for
the year ended June 30, 1996, June 30, 1995 and the six months ended
June 30, 1994, respectively. In connection with the closing of the
Hamden location, the Company wrote off approximately $65,000 in
leasehold costs, net of accumulated amortization of $21,672 (note 4).
(k) Other Assets
The Company utilizes an outside service to provide financing and
promotional activities. The costs relating to these activities are
capitalized and are being amortized over the repayment period. The
Company also capitalized deferred costs relating to potential
Rattlesnake locations under negotiation.
(Continued)
F-10
<PAGE> 51
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(l) Financial Instruments
Management of the Company believes that the book value of its monetary
assets and liabilities, exclusive of long-term debt, approximates fair
value as a result of the short-term nature of such assets and
liabilities. Management further believes that the fair market value of
long-term debt does not differ materially from carrying value.
(m) Reclassification
Certain reclassifications of prior period balances have been made to
conform with the fiscal 1996 presentation.
(n) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amount of assets and
liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may
differ from those estimates.
(3) Restaurant Acquisition
In November 1993, the Company entered into an agreement to acquire 100% of
the outstanding common stock of Pen-Z Corp. (Pen-Z). This transaction
was completed in February 1994. Pen-Z operated a leased restaurant
facility in Yorktown Heights, New York. Terms of the acquisition
included $100,000 in cash, a $300,000 note payable and 36,084 shares
of common stock. Based upon the results of an independent appraisal,
the stock was valued at $324,200 at the time of issuance. The
acquisition has been accounted for as a purchase transaction.
Pursuant to the terms of this transaction, the Company entered into a lease
agreement with a trust of the former 100% shareholder of Pen-Z to
lease the facility for a ten year period, with a five year renewal
option and acquired certain restaurant equipment from the trust for a
$100,000 note payable.
(4) Closure of Restaurant Site
On December 31, 1995, the Board of Directors authorized the closing of the
Rattlesnake Southwestern Grill Restaurant located in Hamden,
Connecticut. The facility was closed on January 7, 1996. A majority of
the fixed assets at the facility have been removed to be utilized at
other existing or new facilities. All remaining fixed assets and
leasehold improvements have been abandoned and all intangible assets
have been written off. A loss of $192,311, relating to the closing of
the Hamden location, was recorded during the 1996 fiscal year.
(Continued)
F-11
<PAGE> 52
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Leasehold improvements $ 1,410,404 700,462
Restaurant and office equipment 918,787 458,006
Furniture and fixtures 494,876 262,105
Original smallwares 73,562 --
Artifacts 23,952 --
----------- ----------
2,921,581 1,420,573
Less accumulated depreciation
and amortization (546,733) (337,700)
----------- ----------
$ 2,374,848 1,082,873
=========== ==========
</TABLE>
Related depreciation and amortization expenses were $334,695, $200,592 and
$71,688 for the year ended June 30, 1996 and 1995, the six months
ended June 30, 1994, respectively. Accumulated depreciation and
amortization of $125,662 related to the disposal of fixed assets at
the Hamden location was written off at December 31, 1995 (note 4).
(6) Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Promotional meal programs $132,058 164,757
Deposits 96,737 38,781
Loans receivable 17,493 --
-------- -------
$246,288 203,538
======== =======
</TABLE>
(7) Capital Structure
The Company's capital structure is as follows:
<TABLE>
<CAPTION>
Shares issued
and outstanding
---------------
June 30,
Shares --------
Security Par value authorized 1996 1995
-------- --------- ---------- ---- ----
<S> <C> <C> <C> <C>
Common stock $.001 per share 20,000,000 2,643,734 2,558,563
Preferred stock, Series A $.10 per share 5,000,000 54,500 --
</TABLE>
(Continued)
F-12
<PAGE> 53
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company amended its Certificate of Incorporation in December 1994 to
increase the authorized capital stock and effect a 1:2.8077 reverse
stock split. In March 1995, an additional 1:2 reverse common stock
split was approved by the Company's Board of Directors.
The Company's preferred stock bears a dividend rate of 7-1/2% per annum
payable semi-annually in arrears on May 15 and November 15 of each
year commencing November 15, 1996. The shares are convertible at any
time, one year after issuance into common stock at a conversion price
equal the lesser of (i) 120% of the average of the last reported sale
price of the common stock for the 10 trading days immediately
preceding the first closing of the offering, or $4.50, whichever is
lower; or (ii) 85% of the average of the last reported sale price of
the common stock for the 10 trading days immediately preceding the
first anniversary of the first closing, subject to certain
anti-dilution adjustments.
The preferred stock is redeemable only at the option of the Company,
commencing one year from the date of issuance, based upon the sales
price of the Company' common stock. The preferred stock has a
liquidation preference of $24.50 per share, together with accrued and
unpaid dividends.
To date, the Board of Directors has not declared any dividends on common
stock. The Board of Directors has the authority to establish the
specific provisions of the preferred stock, i.e., liquidation rights,
dividend parameters, at the date of issuance.
(8) Notes Payable
Notes payable consists of the following:
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Subordinated notes payable due at various dates in fiscal 1995 and
1996, with interest at 9% (11% for the extension period)
(including $175,000 held by a related party) $ -- 1,800,000
Series A subordinated notes payable due August 6, 1996, with
interest at 9% (including $58,338 held by a related party) 525,000 --
Series B convertible subordinated notes payable due July 7, 2000 with
interest at 9%, convertible at $3.85 per share (including
$58,338 held by a related party) 525,000 --
Subordinated 12% convertible notes payable, net of $9,125 un-
amortized discount, paid and/or converted in December 1995 -- 490,875
Note payable to shareholder relating to the acquisition of Pen-Z Corp.,
payable in monthly payments of $2,700 at June 30, 1996 and 1995
with interest at 1% over prime (9.25% and 9.5% at June 30, 1996
and 1995, respectively) through May 2009 289,227 294,186
</TABLE>
(Continued)
F-13
<PAGE> 54
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
June 30,
--------
1996 1995
---- ----
<S> <C> <C>
Note payable relating to acquisition of leasehold, due in
monthly installments of $1,500 with interest at 5%,
paid in April 1996 $ -- 11,222
Note payable for the purchase of furniture and equipment,
due in monthly installments of $1,292 including interest
at 21.6%, paid in February 1996 -- 10,701
Note payable relating to acquisition of leasehold, due in
monthly installments of $1,436, including principal and
interest at 8.5%, paid on July 18, 1995 -- 38,660
Note payable to a related party with interest of 9%, paid
on August 17, 1995 -- 52,500
Note payable to a related party, due in monthly installments of $2,076,
including principal and interest at 9%, paid on
July 21, 1995 -- 43,522
Note payable to a related party, due in monthly installments of $1,270,
including principal and interest at 18% through
February 1998 21,799 32,081
Notes payable to a related party, due in monthly installments of
$1,050, including principal and interest at 12%, paid on
August 1, 1995 -- 7,063
Note payable to a stockholder relating to purchase of furniture and
equipment, due in monthly installments of $900 at June 30, 1996
and 1995, respectively, including principal and interest at prime
plus 1% through 2009 96,274 98,063
Note payable relating to acquisition of lease with interest of 8%,
paid on July 14, 1995 -- 120,000
Note payable relating to acquisition of lease, due in monthly
installments of $2,867, including principal and interest
at 8% through July 2010 289,206 300,000
Notes payable relating to acquisition of lease, due in monthly
installments of $1,666 of principal plus interest at 1% over prime
(9.25% at June 30, 1996 through September 1, 2000) 86,069 --
---------- ---------
1,832,575 3,298,873
Less current maturities 576,852 1,530,572
---------- ---------
$1,255,723 1,768,301
========== =========
</TABLE>
(Continued)
F-14
<PAGE> 55
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Notes payable to shareholders and other related parties (Company officers
and directors) were $523,976 and $1,002,414 at June 30, 1996 and 1995,
respectively (note 16).
In July 1994, a $50,000 note payable to a related party was exchanged,
together with accrued interest for a $52,500 note payable bearing
interest at 9%, and was satisfied in August 1995.
Maturities of these notes is as follows:
<TABLE>
<S> <C>
June 30,:
1997 $ 576,852
1998 50,793
1999 43,172
2000 570,223
2001 33,526
Thereafter 558,009
----------
$1,832,575
==========
</TABLE>
(9) Financing Arrangements
Commencing in November 1993, the Company sold through a private placement
a $1,800,000 unit offering, with each $25,000 unit consisting of 1,469
shares of common stock and a $25,000 subordinated note. The
subordinated notes mature in one year from the date of issuance,
subject to a 180 day extension period, exercisable at the option of the
Company. The subordinated notes bear interest at 9%, commencing on the
date of issue, increasing to 11% for the 180 day extension period, with
all interest payable at the maturity of the subordinated notes. The
underwriter's compensation arrangement included the receipt of 82,367
shares of common stock and a 9.33% commission. The value of the common
stock issued to the underwriter was determined by an independent
appraisal, based upon the value of the stock at the various dates in
which the units were sold, ranging between $7.40 and $12.46 per share.
Debt issuance costs were calculated based upon the relative
proportional value of the common stock and subordinated notes payable.
At June 30, 1995 and 1994, the Company had outstanding $1,800,000 and
$1,400,000, respectively, of the unit offering.
In July 1995, the Company redeemed $225,000 of the notes and restructured
the remaining principle amount outstanding of $1,575,000. This
redemption was partially funded by a $50,000 note payable issued in
June 1995 by the Company, with interest at 9%, and repaid in July 1995,
together with 10,000 shares of common stock, valued at the IPO price of
$5.50 per share. The value of the common stock was recorded as interest
expense by the Company. Each $25,000 principal amount of Notes was
exchanged as follows: (i) $8,334 paid in August and September 1995 (the
"First Payment"); and (ii) a 9% $8,333 Series A Note (the Series A
Notes) due 13 months after the first payment, and a 9% $8,333 Series B
Note (the Series B Notes) due five years after the first payment was
issued to each Noteholder with the First Payment. Each Series B Note is
convertible into common stock thirteen months after issuance at a
conversion price equal to 70% of the initial public offering price of
the common stock sold, with piggy-back registration rights for the
shares underlying the Series B Notes. Each Series B Note is redeemable
with 30 days prior written notice at any time after the closing bid
price of the common stock is 150% of the conversion price for the ten
(Continued)
F-15
<PAGE> 56
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
consecutive trading days ending within 15 days of the date of notice of
redemption. As a result of the restructuring of this debt, the related
debt issuance costs were written off in July 1995. An extraordinary
gain of $89,710, net of the write-off of $72,114 debt issuance costs
was recognized in fiscal 1996.
In fiscal 1997, the Company offered an extension agreement to the Series A
noteholders, providing for a one year extension of the maturity date,
in exchange for an increase in the interest rate from 9% to 15% and one
warrant for every dollar of indebtedness. The warrants provide for
exercise prices ranging between $2.50 - $3.00 and expire on August 6,
2001. Through October 7, 1996, noteholders aggregating $303,749 have
accepted the terms of the extension and the remaining $221,243 of
$524,992 were paid in cash.
During December 1994 and January 1995, the Company received $500,000 in
proceeds from a new unit offering, each unit consisting of a $20,000
principal amount six-month 12% convertible subordinated note and 3,650
common stock purchase warrants exercisable at $11.80 per share until
March 1997 (the "Units"). The due date of these notes was extended to
December 10, 1995 in consideration of a reduction of the conversion
price and warrant exercise price to $4.00 and $4.50, respectively, and
an increase in the number of warrants per Unit to 7,300. The value of
the warrants, $0.10 per share was determined by an independent
appraisal and has been recorded as a debt discount and additional paid
in capital. In December 1995, $300,000 of the debt and $30,000 of
accrued interest was exchanged into 82,500 shares of common stock and
the remaining $200,000 was paid.
During May and June 1995, the Company issued $510,000 of 12% subordinated
debt which was automatically converted into shares of Common Stock at
the rate of $4.00 per share upon the effective date of the initial
public offering.
In March 1996, the Company entered into an agreement with an investment
banking firm to sell 200,000 shares of Series A preferred stock and
800,000 common stock warrants in a private placement for a total
consideration of $5,000,000. The preferred stock was valued at $24.50
per share and each warrant at $.125 per warrant. The warrants are
exercisable at a price of $7.00 per share and expire on August 31,
2001. On June 30, 1996, the Company closed on the sale of 54,500 shares
of the aforementioned Series A preferred stock and 218,000 common stock
purchase warrants. The underwriter received warrants to purchase 24,760
shares of common stock at $3.78 per share which expire on June 30,
2001. The net proceeds of the offering were $1,129,082, net of
commissions and expenses of $233,418. The offering period expired on
June 30, 1996.
(Continued)
F-16
<PAGE> 57
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Accrued Expenses and Other Liabilities
(a) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30,
-------------------
1996 1995
---- ----
<S> <C> <C>
Accrued payroll $201,683 178,844
Other 192,021 227,370
Interest payable 94,500 207,787
Professional fees - 191,421
------- -------
$488,204 805,422
======= =======
</TABLE>
(b) Other Liabilities
The Company has entered into a marketing agreement whereby it receives
temporary financing in exchange for participating in a discounted price
meal program. At June 30, 1996 and June 30, 1995, the balances
outstanding under this program were $283,234 and $350,542,
respectively, which are included in other liabilities in the
accompanying consolidated balance sheets.
(11) Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No.109, "Accounting
for Income Taxes". SFAS 109 requires a change from the deferred method
of accounting for income taxes of APB Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset and
liability method, deferred tax assets and liabilities are recognized
for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carry
forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company adopted the
provisions of SFAS 109 in 1992.
There was no income tax expense for any period presented due to losses
incurred by the Company.
(Continued)
F-17
<PAGE> 58
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
June 30, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
June 30,
------------------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forward $2,381,000 1,103,000
---------- ---------
Total gross deferred tax assets 2,381,000 1,103,000
Less valuation allowance 2,350,000 1,013,000
---------- ---------
Net deferred tax assets 31,000 90,000
---------- ---------
Deferred tax liabilities:
Depreciation and amortization 31,000 90,000
---------- ----------
Net deferred tax liability 31,000 90,000
---------- ----------
$ - -
========== =========
</TABLE>
The valuation allowance for deferred tax assets as of July 1, 1995 and
July 1, 1994 was $1,013,000 and $578,000, respectively. The change in
the total valuation allowance for the year ended June 30, 1996, June
30, 1995 and the six months ended June 30, 1994 was $1,336,000,
$435,000 and $359,000, respectively. In assessing the realizability of
deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the
periods in which the net operating losses and temporary differences
become deductible. Management considers projected future taxable income
and tax planning strategies in making this assessment. In order to
fully realize the deferred tax asset, the Company will need to generate
future taxable income of approximately $5,952,000. At June 30, 1996 and
1995, the Company has net operating loss carry forwards for Federal and
State income tax purposes of approximately $5,952,000 and $2,758,000,
respectively (the NOL carry forwards), which are available to offset
future taxable income, if any, through 2011. Losses for income tax
purposes for the years ended June 30, 1996 and 1995 and the six months
ended June 30, 1994 were approximately $3,308,000, $2,983,000 and
$934,000, respectively. Based upon the limited operating history of the
Company and losses incurred to date, management believes that the value
of the deferred tax asset is impaired and has fully reserved the
deferred tax asset.
In accordance with Section 382 of the Internal Revenue Code of 1986, as
amended, as it applies to the NOL carry forwards, a change in more than
50% in the beneficial ownership of the Company within a three-year
period (an "Ownership Change") will place an annual limitation on the
Company's ability to utilize its existing NOL carry forwards to offset
United States Federal taxable income in future years. Generally, such
limitation would be equal to the value of the Company as of the date of
the Ownership Change multiplied by the Federal long-term tax exempt
interest rate, as published by the Internal Revenue Service. The
Company believes that an Ownership Change has occurred due to changes
in the beneficial ownership of the Company's Common Stock in the
current three-year testing period immediately prior to the initial
public offering and would cause the annual limitations as described
above to apply. The Company has not determined what the maximum annual
amount of taxable income is that can be reduced by the NOL carry
forwards.
(Continued)
F-18
<PAGE> 59
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Commitments and Contingent Liabilities
Commitments
The Company's operations are principally conducted in leased premises.
Remaining lease terms range from 2 to 14 years. Certain leases contain
contingent rental provisions based upon a percentage of gross sales. As
of June 30, 1996, the Company has non-cancelable operating lease
commitments as follows:
<TABLE>
<S> <C>
1997 $ 737,866
1998 715,129
1999 723,777
2000 731,656
2001 662,157
Thereafter 3,947,294
----------
$7,517,879
==========
</TABLE>
Certain shareholders and directors have personally guaranteed lease
payments for two locations.
Contingent rental payments on building leases are typically made based on
the percentage of gross sales on the individual restaurants that exceed
predetermined levels. The percentage of gross sales to be paid and
related gross sales level vary by unit. There were no contingent rental
payments in any of the periods presented.
Rent expense was $625,000, $329,000 and $109,000 for the periods ended
June 30, 1996, June 30, 1995 and June 30, 1994, respectively.
In connection with the sale of preferred stock, the Company is required to
pay a 7-1/2% dividend payment to the preferred stockholders. These
dividends are payable semi-annually in arrears on May 15 and November
15 of each year commencing November 15, 1996.
Pursuant to a restaurant lease agreement, the Company has an option to
purchase the related facility for $445,000 if executed prior to May 31,
1995 or for $425,000 thereafter. On March 31, 1996, the Company
exercised its option to purchase the facility for $425,000. This
transaction was closed on August 31, 1996 and was financed by a
shareholder (note 16).
Pursuant to a leasehold acquisition agreement, the Company paid $65,000
and issued a warrant to purchase 30,000 shares of the Company's common
stock at an exercise price of $5.00 per share, exercisable until
October 31, 1997.
Pursuant to a restaurant lease agreement, the Company has the option to
purchase a facility during the period January 1995 through January 2000
for a purchase price ranging between $1,365,000 to $1,580,000.
(Continued)
F-19
<PAGE> 60
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In August 2, 1995, the Company executed an agreement with a public
relations firm providing for annual compensation of $24,000 and an
option to purchase 20,000 shares of the Company's common stock at a
price of $5.50 per share, exercisable for a five year period.
The Company entered into a twelve month agreement with an investment
banking firm commencing September 1, 1996 under which the investment
banking firm will provide advisory services related to corporate
finance and mergers and acquisitions. The investment banking firm will
receive an initial retainer of $10,000 and monthly payments of $3,000
for the first three months, $4,000 for the next three months and $5,000
for the remaining six months and warrants to purchase 125,000 shares of
the Company's common stock exercisable within five years at a price
equal to 120% of the average closing bid price of the Company's common
stock for the five preceding days.
The Company entered into a thirteen month agreement with an independent
research firm which will produce research reports with respect to the
securities of the Company. In consideration of the firm's services, it
received 100,000 warrants to purchase the Company's common stock, which
are exercisable at amounts ranging from $4.00 - $5.50 per share which
expire on July 8, 2001.
(13) Employee Benefit Plans
(a) Stock Option Plan
In December 1994, the Company adopted the 1994 Employees Stock Option Plan
(the Employees Plan), which provides for the issuance of incentive
stock options (ISO's) and non-qualified options (Non-ISO's) to officers
and key employees. Up to 1,000,000 shares of the Company's common stock
have been reserved for issuance under the Plan. The Plan is currently
administered by the Board of Directors of the Company. The term of the
options is generally for a period of 5 years. The exercise price for
non-qualified options outstanding under the Employees Plan can be no
less that 100% of the fair market value, as defined, of the Company's
common stock at the date of the grant. For ISO's, the exercise price
can be generally no less than the fair market value of the Company's
common stock at the date of the grant, with the exception of any
employee who prior to the granting of the option, is a 10% or greater
stockholder as defined, for which the exercise price can be no less
than 110% of the fair market value of the Company's common stock at the
date of grant.
In December 1994, the Company adopted the non-Executive Director Stock
Option Plan (the Director Plan), which provides for the issuance of
non-ISO's to non-executive directors, as defined, and members of any
advisory board established by the Company who are not full-time
employees of the Company. The Company has reserved 500,000 shares for
issuance under the provisions of the Director Plan. The Director Plan
provides that each non-executive director will automatically be granted
an option to purchase 25,000 shares upon joining the Board of Directors
and 15,000 shares on each December 1st thereafter, provided such person
has served as a director for the 12 months immediately prior to such
December 1st. Similarly, each eligible director of an advisory board
will receive options to purchase 15,000 shares upon joining the
advisory board, and on each December 1st thereafter, an option to
purchase 7,500 shares of the Company's common stock, providing such
person has served as a director of the advisory for the previous 12
month period. The exercise price for options granted under the Director
Plan shall be 100% of the fair market value of the Common Stock on the
date of grant.
(Continued)
F-20
<PAGE> 61
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Activity in non-ISO's was as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares per Share
--------- ---------
<S> <C> <C>
Options outstanding June 30, 1994 - $ -
Options Granted 600,000 4.50
Exercised Options - -
------- ------------
Options outstanding June 30, 1995 600,000 4.50
Options Granted 144,000 5.25
Exercised Options - -
------- ------------
Options outstanding June 30, 1996 744,000 $4.50 - 5.25
======= ============
</TABLE>
Activity in ISO's was as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares per Share
--------- ---------
<S> <C> <C>
Options outstanding June 30, 1994 - $ -
Options Granted 72,000 4.50
Exercised Options - -
------- ------------
Options outstanding June 30, 1995 72,000 4.50
Options Granted 93,500 3.50 - 5.50
Exercised Options - -
------- ------------
Options outstanding June 30, 1996 165,500 $3.50 - 5.50
======= ============
</TABLE>
Options representing 100,000 shares issued in fiscal year 1995 are
exercisable as of the date of grant and 114,400 are exercisable
annually thereafter. The Employees and Director Plans expire in
December 2004, unless terminated earlier by the Board of Directors
under conditions specified in the respective Plans. No options have
been exercised as of June 30, 1996.
(b) Employment Agreements
The Company and its Chairman, President and Executive Vice President
(collectively, the Senior Management Group) entered into employment
agreements in December 1994 for a period commencing in December 1994
through December 1997. The agreements provide for annual compensation
for the Senior Management Group collectively of $250,000, increasing by
10% annually, plus certain other benefits. The agreements also provide
for annual aggregate incentive
(Continued)
F-21
<PAGE> 62
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
compensation for the Senior Management Group based on consolidated
pre-tax earnings of the Company, as defined, as follows:
<TABLE>
<CAPTION>
Pre-tax earnings Percentage
---------------- ----------
<S> <C>
$0 - $1,000,000 10.0%
$1,000,001 - 2,000,000 7.5%
$2,000,001 and over 5.0%
</TABLE>
The agreement also provides that upon a change in control, as defined,
that all stock options held by the employee become immediately
exercisable and that a credit equivalent to three times the employee's
annual compensation be credited against the exercise price of the
options.
The Company and its Vice-Chairman & Chief Administration Officer entered
into a part-time employment agreement in December 1995 for a period
commencing December 1995 through December 1998. The agreement provides
for annual compensation of $90,000 increasing 10% per annum, plus
certain other benefits. An additional $20,000 was paid for services
rendered in fiscal 1996 provided over and above the part-time
agreement. The employee is also entitled to receive a bonus during each
year of this agreement, determined by the Board of Directors. The Board
of Directors and/or the Compensation Committee shall set forth a
formula for determining the bonus for each year.
On June 6, 1996, the board of directors authorized additional compensation
aggregating $70,000 for the aforementioned executive officers.
(c) Other Benefits
The Company provides, on a contributory basis, medical benefits to active
employees. The Company does not provide medical benefits to retirees.
(14) Litigation
The Company is a defendant in litigation arising from the normal course of
its affairs. Management is of the opinion, pursuant to the advice of
counsel, that settlement, if any, of the aforementioned litigation will
not have a material adverse impact on the financial position or results
of operations of the Company.
(15) Earnings Per Share
The Company has presented historical earnings per share information
assuming the reverse stock split outlined in note 1(b) occurred on
March 15, 1992. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin topic 4:D, stock and stock options granted during
the 12-month period preceding the date of the Company's initial public
offering (IPO) have been included in the calculation of weighted
average common shares outstanding for periods prior to the IPO,
including years where
(Continued)
F-22
<PAGE> 63
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
the impact of such incremental shares is anti-dilutive. The computation
of weighted average common shares outstanding follows:
<TABLE>
<CAPTION>
June 30,
1994
----
<S> <C>
Weighted average common shares and equivalents outstanding,
exclusive of issuance within 12 months prior to IPO 905,493
Shares issued within 12 months prior to the IPO assumed to be
outstanding for the entire period 30,570
Incremental shares assumed to be outstanding relating to stock
options granted within 12 months prior to IPO 67,200
Incremental shares assumed to be outstanding relating to warrants
granted within 12 months of IPO 20,750
Incremental shares assumed to be outstanding relating to potentially
dilutive securities issued within 12 months of IPO 50,500
---------
Weighted average common shares and equivalent outstanding 1,074,513
=========
</TABLE>
For the year ended June 30, 1995, weighted average common shares and
equivalents outstanding are 1,122,678. The 12% percent convertible
notes do not meet the criteria of a common stock equivalent, as its
yield at the time of issuance is greater than the AA corporate bond
yield.
For the year ended June 30, 1996 a weighted average number of shares was
not calculated for options and warrants outstanding due to their
anti-dilutive effect on the Company's net loss per share calculation.
(16) Subsequent Events
Pursuant to a restaurant lease agreement, the Company exercised its option
to purchase the facility for $425,000. This transaction was financed by
a shareholder through a 15% short-term note agreement. In addition, the
investor received 50,000 warrants at an exercise price equal to the
market price at the date of the grant.
On August 6, 1996, the Company entered into an agreement to lease a
restaurant location in Bayridge, New York. The agreement required
$20,000 be paid upon execution and $26,500 be paid on or before October
1, 1996. The Company is currently negotiating the extension of this
option.
On August 6, 1996, the Company entered into an agreement for an option to
lease a restaurant location in Milford, Connecticut. The Company paid
$15,000 to maintain the option to September 1, 1996 and an additional
$15,000 was paid on September 4, 1996 to extend the option period to
October 1, 1996. The Company may extend this option to November 1, 1996
for an additional $15,000. The Company is currently negotiating the
extension of this option.
(Continued)
F-23
<PAGE> 64
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On August 7, 1996, the Company signed a purchase and sale agreement for
$388,000 for a restaurant location on 86th Street in New York City.
Included in the purchase price was the lease and certain furniture,
fixtures and equipment.
On October 10, 1996, a letter of intent was executed with an investment
banking firm to raise a maximum of $3,000,000 through a private
placement to be sold on a "best efforts" basis.
F-24
<PAGE> 65
EXHIBIT INDEX
The following exhibits, designated by an asterisk (*), have been
previously filed with the Commission with the Company's registration on Form
SB-2 (File No. 33-88486) and those designated with two astericks have been
filed with the Company's 10KSB for the year ended June 30, 1995, and, pursuant
to 17 C.F.R. Section 230.411, are incorporated by reference. Those not so
designated are filed herewith.
Exhibit No. Description
2.1* Merger Agreement dated August 31, 1993 by and between
Rattlesnake Ventures, Inc. and the Registrant
3.1* Form of Restated Certificate of Incorporation of the
Registrant
3.1.1 Designation of Preferred Stock
3.2* By-Laws
4.1* Form of Common Stock Certificate
4.2* Form of Warrant to be issued to the Underwriter
4.3* Form of Warrant issued to certain individuals in December 1994
10.1* Lease agreement dated May 12, 1992 between the Registrant and
South Norwalk Redevelopment Limited Partnership for the South
Norwalk facilities
10.1.1* Agreement between Breakaway Sono Inc. and the Registrant for
the purchase of certain equipment
10.1.2* Note dated June 11, 1992 from the Registrant to Breakaway
Sono, Inc.
10.2* Lease Agreement dated April 1, 1994 between Sivad Inc. and the
Registrant for the Fairfield facilities
10.2.1* Purchase Money Leasehold Mortgage between the Registrant and
Sivad Inc.
10.3* Common Stock Purchase Agreement between the Registrant and
Penny Markatos dated November 1, 1993
10.3.1* Lease Agreement between Penny Markatos and PEN-Z Corp. dated
April 1, 1994
10.4* Lease Agreement dated March 15, 1993 between the Registrant
and Elm City Manufacturing Jewelers Inc. for the Hamden
facilities
10.4.1* Sale Agreement dated August 31, 1993 between the Registrant
and Hamden Entertainment Inc
10.4.2* Amendment of Promissory Note Agreement dated February 28, 1994
10.4.3* Amendment to Commitment Agreement dated October 31, 1994
between the Registrant and Hamden Entertainment Inc.
10.4.4* Amendment to Promissory Note dated April, 1995
10.5* Lease Agreement dated January 24, 1995 for Danbury facility
10.6* License Agreement with RC Holdings, Inc. dated April, 1995
10.7* Form of Employment agreement with William J. Opper dated
December 1994
10.8* Form of Employment agreement with David Sederholt dated
December 1994
10.9* Form of Employment Agreement with Peter Markatos dated
December 1994
10.10* 1994 Employee Stock Option Plan
10.11* 1994 Nonexecutive Directors Stock Option Plan
10.12* Form of 12% Convertible Note
10.12.1* Form of Extension Agreement between the Company and the
holders of the 12% Convertible Notes
10.13* Form of Warrant issued to holders of 12% Convertible Note
10.14* Note dated May 8, 1992 from the Registrant to William J. Opper
10.15* Agreement with Berkeley Securities Corporation providing for
the cancellation of certain shares
10.16* Proposed Debt Restructure
10.16.1* Series A Note
10.16.2* Series B Note
10.17* Agreement with 1241 Mamaroneck Avenue Corp.
10.17.1* Form of Proposed Lease for 1241 Mamaroneck Avenue
10.17.2* Note Extension Agreement
10.18* Form of Consulting Agreement to be entered into with Auerbach,
Pollak & Richardson, Inc.
10.19* Letter of intent with Steve Kalafer for the Flemington
facility
10.20* Form of 12% Convertible Promissory Note
10.21** Lease Agreement dated September 12, 1995 with SBX investments,
Inc.
10.21.1** Asset Purchase Agreement dated September 12, 1995 with
Twinlittle, Inc. and Twinlittle II, Inc.
10.21.2** $100,000 principal amount of promissory note to SBX
Investments, Inc.
10.22 Employment Agreement with Stephen A. Stein
10.23 Lease Agreement with Jack Cioffi Trust ULWT dated April 15,
1996 together with Exhibits
10.24 Form of Series C Note
10.25 Note Agreement with Guy B. Snowden
10.26 Option and Escrow Agreement dated August 1996 between CFT
Restaurant, Land and Building Group, Rattlesnake of Milford,
Inc. et al., together with Asset Sale/Purchase Agreement
and related Exhibits thereto
10.27 First Amendment and Restated Lease between Land and Building
Group and Rattlesnake of Milford, Inc.
10.28 Form of Consulting Agreement among Frank Tummunello, Charter
Tummunello, Thomas Dunn and Rattlesnake of Milford, Inc.
10.29 Agreement of Sale dated August 6, 1996 between Kings Castle
Caterers Inc. and Rattlesnake of Bay Ridge, Inc. and certain
exhibits
10.30 Assignment and Assumption Agreement dated August 23, 1994
between Holy Cow Restaurant Associates, Inc. and Rattlesnake
of 86th Street, Inc.
21 Subsidiary List
<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, RIGHTS AND LIMITATIONS OF THE
SERIES A CONVERTIBLE CUMULATIVE PREFERRED STOCK
OF
THE RATTLESNAKE HOLDING COMPANY, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
The Rattlesnake Holding Company, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, and
pursuant to Section 151 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Corporation (the "Board of Directors") by the Corporation's Certificate of
Incorporation, on June 3, 1996, the Board of Directors adopted the following
resolution authorizing and creating a series of its authorized class of
5,000,000 shares of preferred stock, par value $.10 per share (the "Preferred
Stock"), consisting of 200,000 shares of Preferred Stock, designated as the
Series A Convertible Cumulative Preferred Stock:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the
Corporation's Certificate of Incorporation, a series of the Preferred Stock,
par value $.10 per share, of the Corporation be, and it hereby is, authorized
and created, and that the designation and amount thereof and the voting powers
and such other relative rights, powers and preferences of such series, and the
qualifications, limitations or restrictions thereof, are as follows:
1. DESIGNATION AND NUMBER OF SHARES. The designation of such
series of Preferred Stock authorized by this resolution shall be the Series A
Convertible Cumulative Preferred Stock (the "Series A Preferred Stock"). The
maximum number of shares of the Series A Preferred Stock shall be 200,000 and
no more.
2. RANK. The Series A Preferred Stock shall, with respect to
dividend rights and rights upon liquidation, winding up and dissolution, rank
(a) pari passu with all other classes and series of preferred stock whether
established by the Board of Directors or pursuant to the Corporation's
Certificate of Incorporation, as amended from time to time, unless holders of
the shares of Series A Preferred Stock shall consent to be junior; (b) senior
to all other equity securities, including the common stock, par value $.001 per
share (the "Common Stock"), of the Corporation (all of the securities of the
Corporation which
<PAGE> 2
rank junior to the Series A Preferred Stock are at times collectively referred
to herein as the "Junior Securities").
3. DIVIDENDS.
(a) The holders of the shares of Series A Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors, out
of funds at the time legally available for the payment of dividends, cumulative
semi-annual cash dividends in an amount equal to $.9188 per share (7.5% per
annum) and no more. Such dividends shall be payable on May 15 and November 15
of each year, commencing on November 15, 1996 (each of such dates being a
"Dividend Payment Date"). Such dividends shall be paid to the holders of record
at the close of business on the date specified by the Board of Directors at the
time such dividend is declared; provided, however, that such date shall not be
less than 10 nor more than 60 days prior to the Dividend Payment Date. Such
dividends shall be fully cumulative and shall accrue (whether or not declared),
without interest, from the first day of the period (or, with respect to the
first dividend, such dividend shall accrue from the date of issue of the shares
of Series A Preferred Stock) in which such dividend may be payable through the
Dividend Payment Date with respect to such period as herein provided. If the
Dividend Payment Date is not a business day, the Dividend Payment Date shall be
the next succeeding business day. Accumulated unpaid dividends for any past
dividend periods may be declared by the Board of Directors and paid on any date
fixed by the Board of Directors, whether or not a regular Dividend Payment
Date, to holders of record on the books of the Corporation on such record date
as may be fixed by the Board of Directors.
(b) (i) Holders of shares of the Series A Preferred Stock
shall be entitled to receive the dividends provided for in paragraph 3(a)
hereof in preference to and in priority over any dividends upon any of the
Junior Securities.
(ii) If at any time the Corporation shall have failed
to pay all dividends which have accrued on shares of Series A Preferred Stock
at the time such dividends are payable, the Corporation shall not declare, pay
or set apart for payment any dividend on any of the Junior Securities or make
any payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of, any of
the Junior Securities or any warrants, rights, calls or options exercisable for
any of the Junior Securities, or make any distribution in respect thereof,
either directly or indirectly, and whether in cash, obligations or shares of
the Corporation or other property (other than distributions or dividends in
stock to the holders of such stock), and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to purchase
or redeem any of the Junior Securities or any warrants, rights, calls or
options exercisable for any of the Junior Securities, unless prior to or
concurrently with such declaration, payment or setting apart for payment,
purchase or
2
<PAGE> 3
distribution, as the case may be, all accrued and unpaid dividends on shares of
the Series A Preferred Stock not paid on the dates provided for in paragraph
3(a) hereof shall have been or, concurrently therewith, shall be paid.
(iii) Notwithstanding the foregoing, no dividend shall
be declared or paid or any other distribution made in cash on the Common Stock
in an aggregate amount in excess of 25% of the net after tax income of the
Corporation for the prior fiscal year.
(iv) Subject to the foregoing provisions of this
paragraph 3(b), the Board of Directors may declare and the Corporation may pay
or set apart for payment dividends and other distributions on any of the Junior
Securities, and may purchase or otherwise redeem any of the Junior Securities
or any warrants, rights or options exercisable for any of the Junior
Securities, and the holders of the shares of the Series A Preferred Stock shall
not be entitled to share therein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
shares of the Series A Preferred Stock then outstanding shall be entitled,
before any distribution or payment is made upon any of the Junior Securities,
to be paid out of the assets of the Corporation available for distribution to
its stockholders, an amount in cash equal to $24.50 per share, plus an amount
in cash equal to all accrued but unpaid dividends thereon (without interest) to
the date fixed for liquidation ("Liquidation Value"). If the assets of the
Corporation are not sufficient to pay in full the Liquidation Value payable to
the holders of outstanding shares of Series A Preferred Stock or any other
series of Preferred Stock having liquidation rights ranking pari passu with the
shares of Series A Preferred Stock, then the holders of all such shares shall
share ratably in such distribution of assets in accordance with the respective
amounts which would be payable on such distribution if the amounts to which the
holders of outstanding shares of Series A Preferred Stock and of such other
series of Preferred Stock are entitled were paid in full.
(b) For the purposes of this Section 4, neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Corporation nor the consolidation or merger of the Corporation with one or
more other corporations shall be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a dissolution or winding up of
the business of the Corporation.
3
<PAGE> 4
5. OPTIONAL REDEMPTION.
(a) The corporation may redeem the Series A Preferred Stock, at any
time in whole or from time to time in part on or after July 1, 1997, but only
if the Average Closing Sale Price for a period of 20 consecutive trading days
ending within five trading days of the date of the Notice of Redemption, as
defined in Section 6(b) equals or exceeds 150% of the Conversion Price, at a
redemption price equal to $29.40 per share if redeemed before June 30, 1997 and
$26.96 per share if redeemed on or after June 30, 1997 but on or before June
30, 1999 and $25.73 per share if redeemed after June 30, 1999, plus an amount
in cash equal to all accrued and unpaid dividends thereon. For purposes of this
Section 5(a), "Average Closing Sale Price" shall mean the average of the last
reported sale prices for the Common stock on the Primary Market (as hereinafter
defined) for the Common Stock for each of the trading days within the
aforementioned 20 day period, provided however that if there has been no sale
on any trading day within the applicable period, for purpose of such average,
the price for such day shall be the mean between the closing "bid" and "asked"
prices in such Primary Market. For purposes of the foregoing, the Primary
Market as of the date of this Certificate of Designations is the Nasdaq Small
Cap Market. If hereafter, the Common Stock shall be listed on the NASD National
Market system ("NMS"), on the New York Stock Exchange, the American Stock
Exchange or equivalent exchange, then the NMS or such exchange, as the case may
be, shall be deemed the Primary Market. If the Corporation's securities shall
cease to be on an exchange or traded in any recognized securities market, then
the Average Closing Sale Price shall be determined by the Board of directors
acting in good faith.
(b) Shares of Series A Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed or converted
into Common Stock, shall (upon compliance with any applicable provisions of the
laws of the State of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of the Preferred Stock; provided, however, that
no such issued and reacquired shares of Series A Preferred Stock shall be
reissued or re-sold as Series A Preferred Stock.
(c) No sinking fund payments shall be required to be made by the
Corporation in connection with the redemption of the Series A Preferred Stock
pursuant to this Section 5.
6. PROCEDURE FOR REDEMPTION.
(a) In the event that fewer than all of the then outstanding shares
of the Series A Preferred Stock are to be redeemed, the shares of Series A
Preferred Stock to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of
4
<PAGE> 5
Directors or any other method selected by the Board of Directors which is not
inconsistent with applicable law.
(b) In the event the Corporation shall redeem shares of the Series A
Preferred Stock, notice of such redemption (the "Notice of Redemption") shall
be given by first class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed at such holder's address as the same appears on the stock
register of the Corporation. Each such notice shall state; (i) the redemption
date; (ii) the aggregate number of shares of the Series A Preferred Stock to be
redeemed from all holders of record, and, if less than all the shares held by a
holder are to be redeemed from such holder, the number of shares to be redeemed
from such holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(c) Notice having been mailed as provided in Section 6(b), from and
after the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares called
for redemption) dividends on the shares of Series A Preferred Stock so called
for redemption shall cease to accrue, and such shares shall no longer be deemed
to be outstanding and shall have the status of authorized but unissued shares
of Preferred Stock, unclassified as to series, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from
the Corporation the redemption price) shall cease. Upon surrender, in
accordance with the Notice of Redemption, of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), such shares
shall be redeemed by the Corporation at the aforesaid redemption price. In the
event that fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
7. VOTING RIGHTS.
(a) Except as otherwise required by law or set forth in this Section
7, holders of Series A Preferred Stock shall have no voting rights and their
consent shall not be required for the taking of any corporate action.
(b) The holders of Series A Preferred Stock, voting as a class,
shall have the right to approve by a majority vote of the outstanding shares of
Series A Preferred Stock (i) any amendment to the Corporation's Certificate of
Incorporation or to this Certificate of Designations which amends any of the
rights, limitations or preferences of the Series A Preferred Stock, or
authorizes or creates any class of capital stock, or series of Preferred Stock,
with rights superior to the Series A Preferred Stock on liquidation or as
5
<PAGE> 6
to dividends or which otherwise adversely affects the holders of the Series A
Preferred Stock, or (ii) any merger, consolidation or sale of all or a majority
of the assets of the Corporation.
(c) If at any time and for so long as the Corporation shall be in
arrears in the payment of any dividends with respect to the shares of Series A
Preferred Stock, the holders of Series A Preferred Stock then outstanding,
voting as a class, shall have the exclusive and special right (but not the
obligation) to nominate and elect up to two directors to the Board of
Directors. Such right shall continue until all dividend arrearages with respect
to the Series A Preferred Stock shall have been paid, at which time such right
shall terminate, subject to the revesting thereof, such directorship(s) shall
be eliminated and the director(s) elected pursuant to this Section 7(c) shall
automatically be removed, without further action by the stockholders or the
Board of Directors. For the purposes of this Section 7(c), the following
provisions shall also be applicable:
(i) The number of directors constituting the Board of Directors
shall be automatically increased, if necessary, by up to two directors in order
to provide a vacancy or vacancies in the Board of Directors to permit such
holders to exercise their right hereunder.
(ii) The right set forth in this Section 7(c) may be exercised
by a majority vote of the outstanding shares of Series A Preferred Stock either
at a special meeting of the holders of Series A Preferred Stock or by written
consent in lieu thereof.
(iii) In the event that holders of Series A Preferred Stock are
to elect the additional director(s) at a special meeting, such special meeting
shall be called by the President or the Secretary of the Corporation within
three business days of receipt of a request in writing of the holders owning at
least 10% of the outstanding shares of Series A Preferred Stock. Written notice
of such special meeting, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called (the election of up to two
directors) shall be given at least 20 days before the date of the meeting to
each holder of the Series A Preferred Stock.
(iv) So long as there are shares of Series A Preferred Stock
outstanding, the Corporation shall cause the Bylaws of the Corporation to be
consistent with and to contain provisions necessary to give effect to the right
set forth in this Section 7(c).
(d) All notices to be delivered pursuant to this Section 7 shall be
given by first class mail, postage prepaid to the Corporation at the address of
the offices of
6
<PAGE> 7
the Corporation and to the holders of the Series A Preferred Stock at the
holders' addresses as the same appear on the stock register of the Corporation.
(e) If approval of holders of Series A Preferred Stock is
required, voting or written consent procedures used to determine whether such
approval will be obtained shall comply with the applicable provisions of the
Delaware General Corporation Law and the federal securities laws.
(f) In any case in which holders of Series A Preferred Stock
shall be entitled to vote separately as a class, each holder of Series A
Preferred Stock shall be entitled to one vote for each share of Series A
Preferred Stock held.
8. CONVERSION RIGHTS; ADJUSTMENTS.
(a) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder of record thereof, at any time, and
from time to time, on or after September 1, 1996, into that number of fully
paid and nonassessable shares of Common Stock (as such shares may be
constituted on the Conversion Date, as hereinafter defined) as shall be
obtained by dividing $24.50 by the Conversion Price in effect at the time of
conversion (the "Conversion Price"). The initial Conversion Price shall be
$3.95 per share which shall be subject to adjustment as set forth below. In the
event that the Conversion Price in effect on June 29, 1997 is greater than an
amount equal to 85% of the average last reported sale price of the Common Stock
on the Primary Market for the ten consecutive trading days ending five days
prior to June 29, 1997 (the "Reset Price"), the Conversion Price will be
reduced to the Reset Price and the Company will give notice to each holder of
the Series A Preferred Stock, pursuant to Section 8(d)(v), setting forth such
new Conversion Price. All rights to convert related to the shares of Series A
Preferred Stock redeemed pursuant to Sections 5 and 6 hereof shall expire at
the close of business on the redemption date.
(b) Before any holder of Series A Preferred Stock shall be
entitled to convert the same into Common Stock, such holder shall deliver the
certificate or certificates therefor, duly endorsed, to the office of the
Corporation or the Corporation's transfer agent, if any, and shall give written
notice to the Corporation that the holder elects to convert all or part of the
shares represented by the certificate or certificates. Conversion shall be
deemed to have been made effective on the date when such delivery is made, and
such date is referred to herein as the "Conversion Date". The Corporation will,
as soon as practicable thereafter, issue and deliver to such holder of Series A
Preferred Stock, or the holder's nominee or nominees, certificates for the
number of full shares of Common Stock to which the holder shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share as hereinafter
provided. If surrendered certificates for Series A Preferred Stock are
converted only in part, the Corporation will issue and deliver to the holder
a new
7
<PAGE> 8
certificate or certificates representing the aggregate of the unconverted shares
of Series A Preferred Stock.
(c) The holders of shares of Series A Preferred Stock surrendered for
conversion between a Dividend Payment Date and the next record date for the
payment of dividends shall not be entitled to receive accrued dividends on such
surrendered shares. Dividends will be paid, however, on any Dividend Payment
Date with respect to those shares of Series A Preferred Stock surrendered for
conversion after any record date for the payment of dividends to the registered
holders thereof.
(d) The Conversion Price shall be subject to further adjustment as
follows:
(i) Adjustment Upon Issuances of Common Stock below the
Conversion Price. In case the Corporation shall issue any shares of Common Stock
other than Excluded Stock (as hereinafter defined) for a consideration per share
less than the then existing Conversion Price applicable immediately prior to
such issuance, the Conversion Price in effect immediately prior to each such
issuance shall be reduced to a price determined by dividing (A) the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such
issue, multiplied by the Conversion Price in effect immediately prior to such
issue, plus (y) the consideration, if any, received by the Corporation upon such
issue, by (B) the number of shares of Common Stock outstanding immediately after
such issue. For the purposes of this clause 8(d)(i), the following provisions
shall also be applicable:
(1) Convertible Securities Options and Rights. If the
Corporation shall issue any stock, warrant, security, obligation, option or
other right which directly or indirectly may be converted, exchanged, or
satisfied in shares of Common Stock other than Excluded Stock (as
hereinafter defined), the maximum total number of shares of Common Stock
issuable upon such conversion, exchange or other exercise of such
securities or rights shall thereupon be deemed to have been issued and to
be outstanding, and the consideration received by the Corporation therefor
shall be deemed to include the sum of the consideration received for the
issue of such securities or rights and the minimum additional consideration
payable upon such conversion, exchange or other exercise of such securities
or rights. No further adjustment shall be made for the actual issuance of
Common Stock upon such conversion, exchange or other exercise of any such
securities or rights. If the provisions of any such securities or rights
with respect to purchase price or shares purchasable shall change or
expire, any adjustment previously made hereunder therefor shall be
readjusted to such as would have obtained on the basis of the securities or
rights as modified by such change or expiration.
8
<PAGE> 9
(2) Stock Dividends and Splits. In case the Corporation shall
declare a dividend or other distribution payable in Common Stock or shall
subdivide Common Stock into a greater number of shares of Common Stock, such
issue of Common Stock shall be deemed to have been made without consideration.
(3) Consideration. In case the Corporation shall issue shares
of Common Stock for consideration wholly or partly other than cash, the amount
of the consideration other than cash received by the Corporation shall be deemed
to be the fair value of such consideration as determined by the Board of
Directors by any method that the Board of Directors deems appropriate (provided,
however, that in the event that any such shares of Common Stock are to be issued
to any person or entity in which any director or directors of the Corporation
has an interest, such determination shall be made solely by those members of the
Board of Directors who have no such interest).
(4) Record Dates. In case the Corporation shall take a record
of the holders of Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, or (ii) to subscribe
for or purchase Common Stock, then such record date shall be deemed to be the
date of issue or sale of the shares of Common Stock deemed to have been issued
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(5) Treasury Stock. The number of shares of Common Stock
outstanding at any given time shall include shares owned or held by or for the
account of the Corporation, and the disposition of any such shares so owned or
held shall not be considered an issue of Common Stock.
(6) Excluded Stock. The term "Excluded Stock" shall mean (i)
the shares of Common Stock issuable upon conversion of the Corporation's Series
B Convertible Notes, as in effect on the date hereof; (ii) the shares of Common
Stock issuable upon exercise of options and warrants, as in effect on the date
hereof, outstanding on the date of this Certificate of Designations; (iii) the
shares of Common Stock issuable upon exercise of the warrant to be issued to the
Placement Agent in connection with the placement of the Series A Preferred
Stock; (iv) the shares of Common Stock issuable upon exercise of the Series A
Common Stock Purchase Warrants; and (v) options and shares of Common Stock
issuable under the Company's Stock Option Plans approved by the shareholders.
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<PAGE> 10
(ii) Adjustments for Changes in Capital Stock. If the
Corporation (A) pays a dividend in shares of Common Stock to holders of Common
stock; (B) subdivides outstanding shares of Common Stock into a greater number
of shares; (C) combines outstanding shares of Common Stock into a smaller number
of shares; (D) pays a dividend on shares of Common Stock in shares of capital
stock other than Common Stock or makes a distribution on Common stock in shares
of capital stock other than Common Stock; or (E) issues by reclassification of
shares of Common Stock any shares of its capital stock; then the Conversion
Price in effect immediately prior to such action shall be adjusted so that the
holder of Series A Preferred Stock thereafter converted may receive the number
of shares of capital stock of the Corporation which such holder would have
owned immediately following such action if such holder had converted the Series
A Preferred Stock immediately prior to such action.
For a dividend or distribution, the adjustment shall become effective
immediately after the record date for the dividend or distribution. For a
subdivision, combination or reclassification, the adjustment shall become
effective immediately after the effective date of the subdivision, combination
or reclassification.
If, after an adjustment, a holder of Series A Preferred Stock upon
conversion thereof may receive shares of two or more classes of capital stock
of the Corporation, the Board of Directors shall determine the allocation of
the adjusted Conversion Price between or among the classes of capital stock.
After such allocation, the Conversion Price of the classes of capital stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock contained in this Section 8(d).
(iii) Voluntary Adjustment. The Corporation at any time may
decrease the Conversion Price, temporarily or otherwise, by any amount but in
no event shall such Conversion Price result in the issuance of Common Stock at
a price less than the par value of the Common Stock at the time such decrease
is made. Any such decreased Conversion Price shall be available for at least 20
days from the date on which notice of such decrease is filed by the corporation
with the transfer agent for the Common Stock, and such decrease shall be
irrevocable during such period. The Company shall notify each holder of Series
A Preferred Stock at least 15 days prior to the date on which the reduced
Conversion Price takes effect.
(iv) When Adjustment May be Deferred, Etc. No adjustment in the
Conversion Price need be made under this Section 8(d) unless cumulative
adjustments equal at least $.125. Any adjustments which are not made shall be
carried forward and taken into account in any subsequent adjustment. No
adjustment of the Conversion Price will be made for cash distributions or cash
dividends paid out of funds
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<PAGE> 11
legally available therefor. All calculations under this Section 8(d) shall be
made to the nearest cent or to the nearest 1/100th of a share, as the case
may be.
(v) Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Company shall calculate the adjustment to be made and shall
promptly mail to holders of the Series A Preferred Stock at such holder's
address as set forth in the stock register of the Corporation and to the
transfer agent of the Corporation a certificate from an officer of the
Corporation briefly stating the facts requiring the adjustment and the manner
of computing it. The certificate shall be conclusive evidence that the
adjustment is correct, absent manifest error.
(e) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon conversion of the Series A Preferred Stock.
If more than one certificate representing shares of the Series A Preferred
Stock shall be surrendered for conversion at one time by the same holder, the
number of full shares issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series A Preferred Stock so
surrendered. Instead of any fractional share of Common Stock that would
otherwise be issuable upon conversion of any shares of Series A Preferred
Stock, the Corporation will pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the Conversion Price.
(f) The Corporation shall reserve and keep available out of its
authorized but unissued shares of Common Stock or its shares of Common Stock
held in treasury, solely for the purpose of effecting the conversion of the
Series A Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A Preferred Stock. All shares of Common Stock which may be
issued upon conversion of the Series A Preferred Stock shall be validly issued,
fully paid and non-assessable.
(g) The issuance of certificates for shares of Common Stock upon
the conversion of shares of Series A Preferred Stock shall be made without
charge to the holders of shares of Series A Preferred Stock converting such
shares of Series A Preferred Stock for any issue or stamp tax in respect of the
issuance of such certificates, and such certificates shall be issued in the
respective names of the holders of shares of Series A Preferred Stock converted.
(h) Shares of Common Stock held in the treasury of the Corporation
may in the discretion of the Board of Directors be delivered upon any
conversion of shares of Series A Preferred Stock.
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<PAGE> 12
(i) All certificates for the shares of Series A
Preferred Stock and any shares of Common Stock issued upon conversion thereof
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR QUALIFICATION UNDER THE BLUE
SKY LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, BENEFICIALLY OR
ON THE RECORDS OF THE CORPORATION, UNLESS THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OR APPLICABLE BLUE SKY LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
IS DELIVERED STATING THAT SUCH REGISTRATION AND QUALIFICATION
ARE NOT REQUIRED.
The certificates evidencing such shares shall also bear any
legends required pursuant to any state, local or foreign law governing such
securities.
9. NOTICE OF CERTAIN TRANSACTIONS. In the event (A) the
Corporation takes any action which would require an adjustment in the
Conversion Price; (B) the Corporation proposes to consolidate with or merge
with or into, or transfer all or substantially all or its assets to, another
corporation; or (C) there is a proposed dissolution or liquidation of the
Corporation; then in each such case the Corporation shall send by first class
mail, postage prepaid to each holder of Series A Preferred Stock at the address
of such holders as listed in the stock register of the Corporation and to the
transfer agent or effective agent a notice stating any such proposed record or
effective date, as the case may be, by first-class mail at least 20 days before
such date. Failure to mail the notice or any defect in it shall not affect the
validity of any transaction referred to in clause (A), (B), or (C) of this
Section 9.
10. CONSOLIDATION, MERGER OR SALE OF ASSETS. In case the
Corporation shall consolidate or merge into or with another corporation, or in
case the Corporation shall sell or convey to any other person or persons all or
substantially all the assets of the Corporation, each holder of Series A
Preferred Stock then outstanding shall have the right
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<PAGE> 13
thereafter to convert each share of Series A Preferred Stock held by the holder
into the kind and amount of shares of stock, other securities, cash and
property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such consolidation,
merger, sale or conveyance, and shall have no other conversion rights. In any
event, effective provision shall be made, in the certificate or articles of
incorporation of the resulting or surviving corporation or otherwise or in any
contracts of sale and conveyance so that, so far as appropriate and as nearly
as reasonably may be, the provisions set forth herein for the protection of the
conversion rights of the shares of the Series A Preferred Stock shall
thereafter be made applicable.
11. CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event that the
Corporation shall at any time prior to the conversion of all Series A Preferred
Stock declare a dividend (other than a dividend consisting solely of shares of
common stock or a cash dividend or distribution payable out of current or
retained earnings) or otherwise distribute to its stockholders any monies,
assets, property, rights, evidences of indebtedness, securities (other than
shares of Common Stock), whether issued by the Corporation or by another person
or entity, or any other thing of value, the holders of the shares of
unconverted Series A Preferred Stock shall thereafter be entitled, in addition
to the shares of Common Stock receivable upon the conversion thereof, to
receive, upon the conversion of such Series A Preferred Stock, the same monies,
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of
such dividend or distribution had they been an owner of record of the shares of
Common Stock into which the shares of Series A Preferred Stock are then being
converted as of the record date or other date of determination for such
dividend or distribution and an appropriate provision (which provision may
include without limitation, the establishment of an escrow arrangement in favor
of the holders of the unconverted shares of Series A Preferred Stock in which
the portion of the dividend or distribution attributable to such shares of
Series A Preferred Stock is held) shall be made a part of any such dividend or
distribution. Notwithstanding any provision herein to the contrary, no
adjustment under this Section 11 shall be made with respect to any cash
dividend or distribution payable solely out of current or retained earnings of
the Company.
12. CERTAIN COVENANTS.
(a) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not directly or indirectly, create, incur,
issue, assume or guarantee or otherwise become liable, contingently or
otherwise, with respect to any indebtedness for borrowed money, without the
consent of the Board of Directors and of Auerbach, Pollak & Richardson, Inc.,
the placement agent on behalf of the Corporation in connection with the initial
offering of up to 200,000 shares of Series A Preferred Stock (the "Placement
Agent") if the terms of such indebtedness would prohibit the payment of regular
stated dividends on the Series A Preferred Stock under circumstances, except
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<PAGE> 14
where the instruments evidencing such indebtedness contain default provisions
whereby the lender has the right to demand immediate payment and/or
acceleration of payment. The Corporation shall furnish the Placement Agent with
copies of all instruments of indebtedness which contain provisions regarding
declaration or payment of dividends on the Series A Preferred Stock or other
capital stock of the Corporation irrespective of whether such instruments
contain the default provisions permitted in this Section 12(a). Such copies
shall be delivered by the Corporation not less than ten days prior to the
anticipated incurrence of any such indebtedness.
(b) No material amendments may be made to the terms of
compensation set forth in those employment agreements by and between the
Corporation and the senior executives of the Corporation in effect on the date
of this Certificate of Designation without the consent of the Placement Agent
or, if applicable, of the nominee(s) to the Board of Directors elected by the
holders of the Series A Preferred Stock pursuant to Section 7(c) hereof.
(c) The Corporation will not engage in any transaction with
any officer, director, employee or holder of at least 5% of any class of the
Corporation's outstanding securities, other than transactions on terms no less
favorable to the Corporation than those terms and conditions which would be
offered by or to an unaffiliated third party.
13. AMENDMENT. Any of the rights specified in this Certificate of
Designation may be amended, provided, that all amendments to this Certificate
of Designation shall be made in accordance with Section 7(b) of this
Certificate of Designation and the Delaware General Corporation Law in effect
from time to time. Any such amendment so effected shall be binding upon the
Corporation and any holder of Series A Preferred Stock.
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<PAGE> 15
IN WITNESS WHEREOF, The Rattlesnake Holding Company, Inc. has caused
its corporate seal to be hereunto affixed and this Certificate of Designations,
Preferences, Rights and Limitations to be duly executed by its President and
attested to by its Secretary this 30th day of June, 1996.
THE RATTLESNAKE HOLDING COMPANY, INC.
[SEAL] By: /s/ William J. Opper
---------------------------------------
William J. Opper, Chairman of the Board
ATTEST:
By: /s/ Victor J. DiGioia
-------------------------------
Victor J. DiGioia, Assistant
Secretary
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<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of December, 1995, by and between
Stephen A. Stein, residing at 60 Foxwood, Jericho, New York 11753 (hereinafter
referred to as the "Employee") and The Rattlesnake Holding Company, Inc., a
Delaware corporation with principal offices located at 3 Stamford Landing -
Suite 130, Stamford, Connecticut 06902 (hereinafter referred to as the
"Company").
W I T N E S S E T H :
WHEREAS, the Company and its subsidiaries are engaged in
the business of developing and operating a chain of casual dining
restaurants; and
WHEREAS, the Company desires to employ the Employee and
secure for the Company the experience, ability and services of the
Employee; and
WHEREAS, the Employee desires employment with the Company, pursuant to
the terms and conditions herein set forth, superseding all prior agreements
between the Company, its subsidiaries and/or predecessors and Employee;
NOW, THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs the Employee, and the Employee hereby accepts such
continued employment in his capacity as Vice-Chairman of the Board of Directors
and Chief Administrative
<PAGE> 2
Officer.
ARTICLE II
DUTIES
(A) The Employee shall, during the term of his employment with
the Company, and subject to the direction and control of the Company's Board of
Directors and Chief Executive Officer, perform such duties and functions as he
may be called upon to perform by the Company's Board of Directors and Chief
Executive Officer during the term of this Agreement.
(B) The Employee agrees to devote such business time as is
necessary to fully perform his duties and shall use his best efforts in the
performance of his duties for the Company and any subsidiary corporation of the
Company. The Company acknowledges that Employee is an executive officer of
another company and has outside business interests which will continue during
the term of this Agreement.
(C) The Employee shall perform, in conjunction with the
Company's Executive Management, to the best of his ability the following
services and duties for the Company and its subsidiary corporations (by way of
example, and not by way of limitation):
(i) Those duties attendant to the position with the
Company for which he is hired;
(ii) Implement the Company's general business plans and
strategy as formulated by the Board of Directors and the Chief Executive
Officer; and
(iii) Promotion of the relationships of the Company
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<PAGE> 3
and its subsidiaries with their respective employees, customers, suppliers and
others in the business community.
(D) Employee shall be based in the New York/Connecticut area, and
shall undertake such occasional travel, within or without the United States as
is or may be reasonably necessary in the interests of the Company.
ARTICLE III
COMPENSATION
(A) Commencing the date hereof and during the term hereof, Employee
shall be compensated at the rate of $90,000 per annum (the "Base Salary"),
increasing 10% per annum, which shall be paid to Employee as in accordance with
the Company's regular payroll periods.
(B) Employee shall be entitled to receive a bonus (the "Bonus") during
each year of this Agreement, determined by the Board of Directors. Prior to the
expiration of six months after the commencement of this Agreement, the Board of
Directors and/or the Compensation Committee shall set forth a formula for
determining the Bonus for each year under this Agreement.
(C) Employee may receive such other additional compensation as may be
determined from time to time by the Board of Directors. Nothing herein shall be
deemed or construed to require the Board to award any bonus or additional
compensation.
(D) The Company shall deduct from Employee's compensation all federal,
state and local taxes which it may now or may hereafter be required to deduct.
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<PAGE> 4
(E) The Company and Employee acknowledge that the position
contemplated hereunder is not a full time position. In the event the parties
desire Employee to be engaged full time in the business of the Company, the
compensation under this Article III shall be subject to renegotiation.
ARTICLE IV
BENEFITS
(A) During the term hereof, the Company shall (i) provide Employee
with group health care and insurance benefits as generally made available to the
Company's senior management; provided, however, that the Company will provide
term life insurance in the face amount of $500,000 (as long as Employee is
insurable without special exception or premium), at Employee's election, in lieu
of the group health care and insurance benefits in this subparagraph (A) (i);
(ii) reimburse the Employee, upon presentation of appropriate vouchers, for all
reasonable business expenses incurred by the Employee on behalf of the Company
upon presentation of suitable documentation, provided that reimbursement for any
expenses in excess of $500 per month shall be approved by the Chairman of the
Audit Committee; and (iii) pay to Employee the sum of $500 per month as and for
an automobile allowance.
(B) In the event the Company wishes to obtain Key Man life
insurance on the life of Employee, Employee agrees to cooperate with the Company
in completing any applications necessary to obtain such insurance and promptly
submit to such physical
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<PAGE> 5
examinations and furnish such information as any proposed insurance
carrier may request.
(C) For each year of the term hereof, Employee shall be entitled
to three weeks paid vacation.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination of
his employment hereunder except when acting on behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
marketing, restaurant operations and future expansion and business plans of the
Company and its subsidiaries including information relating to any customer of
the Company or employee, or any other nonpublic business information of the
Company and/or its subsidiaries learned as a consequence of Employee's
employment with the Company (collectively referred to as the "Proprietary
Information"). For the purposes of this Agreement, trade secrets and
confidential information shall mean information disclosed to the Employee or
known by him as a consequence of his employment by the Company, whether or not
pursuant to this Agreement, and not generally known in the industry. The
Employee acknowledges that trade secrets and other items of confidential
information, as they may exist from time to time, are valuable and unique assets
of the
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<PAGE> 6
Company, and that disclosure of any such information would cause substantial
injury to the Company.
ARTICLE VI
RESTRICTIVE COVENANT
(A) In the event of the voluntary termination of employment
with the Company prior to the expiration of the term hereof, or Employee's
discharge for gross misconduct as defined in Article IX, or the expiration of
the term hereof, Employee agrees that he will not, for a period of one year
following such termination (or expiration, as the case may be) directly or
indirectly enter into or become associated with or engage in any other
business (whether as a partner, officer, director, shareholder, employee,
consultant, or otherwise), which business is involved in the business of
developing, operating, franchising a chain of southwestern style casual
dining restaurants.
(B) In furtherance of the foregoing, Employee shall not during
the aforesaid period of non-competition, directly or indirectly, in connection
with any southwestern style casual dining restaurant chain, solicit any customer
or employee of the Company who was a customer or employee of the Company during
the tenure of his employment.
(C) If any court shall hold that the duration of
non-competition or any other restriction contained in this paragraph is
unenforceable, it is our intention that same shall not thereby be terminated but
shall be deemed amended to delete therefrom such
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<PAGE> 7
provision or portion adjudicated to be invalid or unenforceable or in the
alternative such judicially substituted term may be substituted therefor.
ARTICLE VII
TERM
This Agreement shall be for a term commencing on the date
first set forth above and terminating December 31, 1998, unless sooner
terminated pursuant to the terms hereof.
ARTICLE VIII
DISABILITY DURING TERM
In the event Employee becomes totally disabled so that he is
unable or prevented from performing a material portion of his usual duties
hereunder for a period of four (4) months out of any six month period, and the
Company elects to terminate this agreement in accordance with Article IX,
paragraph (B) then, and in that event, Employee shall receive his Base Salary as
provided under Article III of this Agreement for a period of six (6) months
commencing from the date of such total disability but in no event to exceed the
expiration of the original term of this agreement. The obligation of the Company
to make the aforesaid payments shall be modified and reduced and the Company
shall receive a credit for all disability insurance payments which Employee may
receive from insurance policies provided by the Company.
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<PAGE> 8
ARTICLE IX
TERMINATION
This Agreement may be terminated:
(A) By the Company, upon the death of Employee during the term hereof,
except that the Employee's legal representatives, successors, assigns and heirs
shall have those rights and interests as otherwise provided in this Agreement,
including the right to receive accrued but unpaid incentive compensation and any
special bonus compensation awarded by the Board of Directors in its discretion.
(B) Subject to the terms of Article VIII herein, by the Company, upon
written notice to the Employee, if Employee becomes totally disabled and as a
result of such total disability, has been prevented from and unable to perform a
material portion of his duties hereunder for a consecutive period of four (4)
months out of any six month period.
(C) By the Company, upon written notice from the Company to the
Employee, if the Employee has committed gross misconduct in the performance of
his duties and/or a material breach of the terms of this Agreement, and Employee
has failed to cure such breach within twenty (20) days from the date
notification setting forth such misconduct and/or breach in reasonable detail is
given to Employee by the Company.
(D) Upon thirty (30) days prior written notice by the Company or
Employee in the event Employee, due to professional commitments existing as of
the date hereof, preclude the Employee
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<PAGE> 9
from devoting the necessary professional time to the business and
affairs of the Company.
(E) In the event of the termination of this Agreement and the
discharge of Employee by the Company in breach and violation of this Agreement,
Employee shall not be obligated to mitigate damages by seeking or obtaining
alternate employment.
ARTICLE X
STOCK OPTIONS
As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee, options to purchase shares of the Company's
Common Stock, $.001 par value, upon and subject to the following conditions:
(a) Subject to the terms and conditions of the Company's 1994
Employee Stock Option Plan (the "Plan"), a copy of which Employee acknowledges
having been received, and the terms and conditions set forth in the Stock Option
Certificate which are incorporated herein by reference, the Employee is hereby
granted options to purchase 120,000 shares of the Company's Common Stock of
which options to purchase 40,000 shares shall be vested on each anniversary
hereof. The option shall contain such other terms and conditions as set forth in
the stock option agreement. The exercise price of the options shall be $____.
The foregoing options are not qualified as incentive stock options.
The Options provided for herein are not transferable by
Employee and shall be exercised only by Employee, unless otherwise
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<PAGE> 10
permitted by the Plan, or by his legal representative or executor,
as provided in the Plan. Such Option shall terminate as provided
in the Plan.
ARTICLE XI
EXTRAORDINARY TRANSACTIONS
The Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Employee, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a change in control of the Company. A "Change in Control" of
the Company shall be deemed to have occurred if there shall be consummated
(i)(x) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (ii) the stockholders of the Company approved
any plan or proposal for the liquidation or dissolution of the Company, or (iii)
any person
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<PAGE> 11
(as such term is used in Sections 13(d) and 13(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), shall become the beneficial owner
(within the meaning of Rule l3d-3 under the Exchange Act) of 20% or more of the
Company's outstanding Common Stock, or (iv) during any period of two consecutive
years, individuals who at the beginning of such period constituted the entire
Board of Directors shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
The Company agrees that, if during the term hereof, or during such
time as the Employee is otherwise employed by the Company, a Change in Control
shall occur, all options to purchase Common Stock of the Company held by
Employee, either pursuant to this Agreement or otherwise, shall immediately vest
and become exercisable on the first day following a Change in Control. Further,
the options shall be deemed amended to provide that in the event of termination
after an event enumerated in this Article X, the options shall remain
exercisable for the duration of their term; and further, at the Employee's
option, an amount equal to three times the aggregate annual compensation paid to
the Employee during the calendar year preceding the Change in Control shall be
credited against the exercise price of any options held by Employee at the time
Employee elects to exercise such options; provided, however, that if the lump
sum severance payment under this Article XI, either alone or
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<PAGE> 12
together with other payments which the Employee has the right to receive from
the Company, would constitute a "parachute payment" (as defined in Section 280G
of the Internal Revenue Code of l954, as amended (the "Code")), such credit
shall be reduced to the largest amount as will result in no portion of the
credit under this Article XI being subject to the excise tax imposed by Section
4999 of the Code.
ARTICLE XII
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the
parties and supersedes all prior agreements between the parties, whether oral or
written, without prejudice to Employee's right to all accrued compensation prior
to the effective date of this Agreement.
ARTICLE XIII
ARBITRATION
Any dispute arising out of the interpretation, application
and/or performance of this Agreement with the sole exception of any claim,
breach or violation arising under Articles V or VI hereof shall be settled
through final and binding arbitration before a single arbitrator in the State of
Connecticut in accordance with the rules of the American Arbitration
Association. The arbitrator shall be selected by the Association and shall be an
attorney at law experienced in the field of corporate law. Any
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<PAGE> 13
judgment upon any arbitration award may be entered in any court, federal or
state, having competent jurisdiction of the parties.
ARTICLE XIV
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
ARTICLE XV
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person, with written acknowledgment received, or
mailed by certified mail, return receipt requested, as follows:
IF TO THE COMPANY: The Rattlesnake Holding Company, Inc.
3 Stamford Landing, Suite 130
Stamford, CT 06902
Attention: William J. Opper
IF TO THE EMPLOYEE: Mr. Stephen A. Stein
60 Foxwood
Jericho, NY 11753
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
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<PAGE> 14
Notice shall be effective three (3) days after delivery or mailing.
ARTICLE XVI
BENEFIT
This Agreement shall inure to, and shall be binding upon, the parties
hereto, the successors and assigns of the Company, and the heirs and personal
representatives of the Employee.
ARTICLE XVII
WAIVER
The waiver by either party of any breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of construction and validity.
ARTICLE XVIII
GOVERNING LAW
This Agreement has been negotiated and executed in the State of
Connecticut, and Connecticut law shall govern its construction and validity.
ARTICLE XIX
JURISDICTION
Any or all actions or proceedings which may be brought by the Company
or Employee under this Agreement shall be brought in courts having a situs
within either the State of Connecticut, and Employee and the Company each hereby
consent to the jurisdiction of
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any local, state or federal court located within the State of
Connecticut.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except by written
agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
and affixed their hands and seals the day and year first above written.
(Corporate Seal) THE RATTLESNAKE HOLDING COMPANY, INC.
By: /s/William J. Opper
--------------------------
William J. Opper
Chairman of the Board
/s/STEPHEN A. STEIN
--------------------------
STEPHEN A. STEIN (Employee)
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EXHIBIT 10.23
LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter the "Lease"), is made as of the 15
day of April, 1996, by and between JACK CIOFFI TRUST, U.L.W.T. (hereinafter
"Landlord"), a New York Testamentary Trust, c/o Mrs. Anastasia Cioffi Pesola,
Trustee, Box 568, Windham, New York, 12496, and RATTLESNAKE OF LYNBROOK, INC.
(hereinafter "Tenant"), a New York corporation having offices at 3 Stamford
Landing, Stamford, Connecticut, 06902.
WHEREAS, Landlord desires to lease to Tenant and Tenant desires to take
and lease from Landlord the Leased Premises (hereafter defined) according to the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:
1. LEASE. Landlord has agreed to lease and does hereby demise and lease
unto Tenant, and Tenant has agreed to lease and take and does hereby lease from
Landlord, effective on the "Term Commencement Date" (hereinafter defined) the
Leased Premises, to have and to hold all of the same unto Tenant, its successors
and assigns, for the term, at the rentals, and upon the conditions hereinabove
and hereinafter set forth and Landlord represents that it is the fee owner of
the premises and improvements thereon, subject only to a first mortgage held by
the Jamaica Savings Bank and which Landlord represents is current and not in
default.
2. LEASED PREMISES. Landlord is the owner of certain land and a
restaurant building containing approximately 7,200 square feet (hereinafter "The
Building") of premises
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known as 931 Sunrise Highway, Lynbrook, New York together with all extensive
parking to the east of said building as is more particularly described in survey
"A" attached hereto (collectively, the "Leased Premises"). Tenant agrees to
maintain said area blacktop, including all pavement repairs, concrete walkings,
including snow removal and exterior lighting, and shall keep the parking lot in
good condition at its own expense and free from defects and municipal
violations. Tenant shall include the parking lot under the insurance required
under this agreement.
Landlord represents that it shall deliver the premises vacant and free
of all tenancies.
Landlord represents and warrants to Tenant that Landlord is solely
vested with fee simple title, and has full right and lawful authority to lease
the Premises to Tenant pursuant to the terms hereof. Landlord further represents
and warrants to Tenant that no joinder or approval of any other person or entity
is required with respect to Landlord's right and authority to enter into this
Lease, including any lender or mortgagee, and there is no underlying or superior
lease with respect to the Premises.
3. LICENSE AGREEMENT. Landlord grants Tenant (and the demise of the
Leased Premises to Tenant shall include) a non-exclusive license to use the 50
if. west of the premises for commercial access to the rear of the subject
premises. Tenant agrees not to alter the curb cuts currently being used for
access and not to block egress and ingress into said area.
Landlord reserves the right to promulgate reasonable rules and
regulations (upon prior written notice to Tenant) affecting said 50 feet west of
the premises and Tenant agrees to pay half (1/2) of all of the reasonable costs
incurred by Landlord for snow plowing, ground maintenance, repair of blacktop,
drainage and exterior lighting of said areas. Landlord
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shall maintain the licensed area in good order and repair; including all
pavement repairs, concrete walking including snow removal and exterior lighting,
and free from defects and municipal violations. Landlord shall not suffer or
permit the soft area to be altered, or ingress or egress blocked. Landlord's
bill shall be reasonably detailed.
4. TERM. The initial term of this Lease (hereinafter the "Initial
Term"), shall commence on May 1, 1996 (provided the conditions set forth herein
have been satisfied by Landlord) (hereinabove and hereinafter the "Term
Commencement Date") and shall terminate on April 30, 2006. The parties shall
execute a Lease Supplement in the form attached hereto as Exhibit "B" and made a
part hereof for the purpose of confirming the Term Commencement Date.
5. RENEWAL TERM. Tenant shall have the right and option to extend the
term of this Lease for Three (3) renewal terms of five (5) years each
(hereinafter the "Renewal Term") which, if all are exercised by Tenant, would
cause this Lease to expire on the 30th day of April, 2021, provided that (i)
Tenant gives Landlord not less than six (6) months prior irrevocable written
notice of its desire to extend the term hereof, and (ii) Tenant is not in
default, beyond the expiration of any applicable cure period after notice to
Tenant required hereunder, of any of the teens hereof at the time when such
notice is given.
6. DELIVERY OF POSSESSION. Landlord shall deliver possession of the
Leased Premises to Tenant on May 1, 1996, provided that Tenant has tendered to
Landlord: (i) the certificate of insurance as required by paragraph 19 herein
below; (ii) the sum of $42,039.18 which represents the general taxes for the
1996 lien period which Landlord shall promptly pay to the taxing authorities;
and (iii) first month's rent as required under paragraph 9 below. The date of
delivery of possession and Tenant's acceptance, which shall be memorialized in a
writing
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signed by both parties, shall be the Term Commencement Date hereunder.
Notwithstanding the foregoing, Tenant shall be permitted access to the Leased
Premises prior to May 1, 1996 provided Tenant complies with the foregoing
requirements. Tenant's occupancy during such period shall be upon all of the
terms and conditions set forth in the Lease, except for the obligation to pay
Minimum Rent or additional rent.
7. UTILITIES. Prior to the Term Commencement Date, Tenant shall contact
all utility companies to transfer all utilities to Tenant's account. Tenant
shall assume the obligation for all utility payments, including hook-up charges
and security deposits for services incurred from occupancy. Landlord shall
cooperate with Tenant in connection therewith.
8. RENTAL. Tenant covenants to pay as rent for the use and occupancy of
the Leased Premises the aggregate of the sums set forth below, without offset,
deduction, or demand (except as otherwise provided herein) to the Landlord at
its address as set forth above or to such other address as it may designate.
Landlord instructs tenant to make all rent payments by direct deposit into the:
Jamaica Savings Bank
303 Merrick Road
Lynbrook, NY 11563
Acct. No. : 009-00704905
Acct. Name: Anastasia Cioffi Pesola Trustee
U/L/W/T of Jack Cioffi
Unless notified otherwise.
Except as provided in paragraph "6" above and subject to paragraph 11
the first rental payment shall be due and payable on the Term Commencement Date,
as that term is defined in paragraph 6 hereinabove. In the event that the Term
Commencement Date shall occur on a day other than the first day of the month,
the first rental payment shall be adjusted to the proportionate fraction of the
whole month so that all rental payments, other than the first, shall be made and
become
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due and payable on the first day of each month thereafter.
a. MINIMUM RENT.
(i) For the initial thirty-six (36) months after the Term Commencement
Date, Tenant shall pay to Landlord the base Minimum Rent at the rate of One
Hundred Twenty Thousand Dollars ($120,000.00) per year (hereinafter the "Minimum
Rent"), to be paid in twelve (12) equal monthly installments of Ten Thousand
Dollars ($10,000.00) payable in advance on the first day of each month.
(ii) Commencing on the first day of the thirty-seventh (37th) month,
May 1, 1999, Tenant shall pay to Landlord the Base Minimum Rent of One Thousand
Thirty-Two Thousand Dollars ($132,000.00) per year (hereinafter the "Minimum
Rent") to be paid in twelve (12) equal monthly installments of Eleven Thousand
Dollars ($11,000.00) payable in advance on the first day of each month.
(iii) Commencing on the first day of the seventy-third (73rd) month,
May 1, 2002, Tenant shall pay to Landlord the Base Minimum Rent of One Hundred
Forty-Five Thousand Two Hundred Dollars ($145,200.00) per year, (hereinafter the
"Minimum Rent") to be paid in twelve (12) equal monthly installments of Twelve
Thousand One Hundred Dollars ($12,100.00) payable in advance on the first day of
each month.
(iv) Commencing on the first day of the one hundred and ninth (109th)
month, May 1, 2005, Tenant shall pay to Landlord the Base Minimum Rent of One
Hundred Fifty-Nine Thousand Seven Hundred and Twenty Dollars ($159,720.00) per
year. (hereinafter the "Minimum Rent") to be paid in twelve (12) equal monthly
installments of Thirteen Thousand Three Hundred and Ten Dollars ($13,310.00) to
be paid in advance on the first day of each month.
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b. PERCENTAGE RENT. Tenant shall pay to Landlord as additional rent
each Lease Year accruing during the term, a percentage rent equal to the amount
by which six (6%) per cent of Tenant's "Gross Sales" (hereinafter defined)
exceeds the Minimum Rent payable during such Lease Year. The first Lease Year
shall be defined for this paragraph as the period beginning on the Term
Commencement Date and ending on the twelfth (12th) month anniversary of the Term
Commencement Date. Each successive Lease Year shall mean each successive twelve
(12) month period thereafter during the term of this lease.
c. REPORTS. On or before the 30th day following each quarter-annual
period during this term, Tenant shall provide to Landlord a report in Tenant's
standard form (previously exhibited to Landlord) stating the Gross Sales from
the previous quarter annual period and aggregate Gross Sales through the last
day of the previous quarter annual period for the current Lease Year. In
addition, within sixty (60) days after the end of each Lease Year, Tenant shall
deliver a cumulative statement and pay any percentage rent due at that time.
d. DEFINITION OF GROSS SALES. The term "Gross Sales" as used herein
shall mean the dollar aggregate of the sales price of all goods sold from the
Premises without deduction for any expenses, salaries, or rent, except for (a)
exchange of merchandise between Tenant's stores (and those of Tenant's
affiliates), (b) returns to shippers and manufacturers, (c) sales not in the
ordinary course of Tenant's business (including, without limitation, bulk sales
of Tenant's stock-in-trade and/or fixtures), (d) cash or credit refunds or
credit sales not collected on transactions included in Gross Sales previously
reported by Tenant, (e) the amount of any City, County, State or Federal sales
luxury or excise tax on sales, (f) costs to Tenant of use of credit cards, (g)
sales from vending machines, telephones lottery tickets or (h) revenue from
charity or benefit events (i) sales to employees not in excess of 3% of Gross
Sales.
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Tenant shall keep full, complete and proper books, records and
accounts of its daily Gross Sales, including cash and on credit of each separate
department and concession at any tie operated in the Leased Premises at Tenant's
office maintained for such purpose, for a period of at least two (2) years.
Landlord and its agents and employees, upon reasonable notice, shall have the
right at any and all ties not more frequently than once each year, during
regular business hours, to examine and inspect all such of the books and records
of Tenant (including any sales tax reports) pertaining to the business of Tenant
conducted in, upon or from the Leased Premises which Tenant shall produce upon
prior reasonable demand by Landlord or Landlord's agents for the purpose of
investigating and verifying the accuracy of any statement of Gross Sales.
Landlord may once in any Lease Year cause an audit of the Gross Sales to be made
by an independent certified accountant of Landlord's selection, and if the
statement of Gross Sales previously made to Landlord by Tenant shall be found to
be understated by more than four (4%) percent, Tenant shall pay to Landlord the
reasonable cost of such audit, as well as the additional rental shown to be
payable by Tenant to Landlord; otherwise, the cost of such audit shall be paid
by Landlord. Landlord agrees to keep all Gross Sales information and audit
information confidential except for any controversy which shall be commenced by
suit or arbitration at which tine the parties agree this confidentiality
provision is waived.
9. ADDITIONAL RENT. Tenant shall pay as additional rent all real estate
taxes and special and general assessments which may be levied or assessed
against the Leased Premises, or installments of which become due and payable on
or after May 1, 1996, and thereafter during any part of but not after the Lease
term. Tenant shall pay to Landlord monthly one-twelfth (1/12) of the combined
annual of all such taxes and assessments which become due and payable together
with rents provided for herein. In addition, on twenty (20) days written
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notice Tenant shall pay to Landlord such additional amount that when added to
Tenant's annual tax payments will be sufficient to pay such taxes and
assessments when they next become due. The tax escrow amount shall be adjusted
annually. Landlord agrees to provide Tenant with a copy of the tax bill for each
and every adjustment period. Landlord shall pay such taxes and assessments to
the appropriate governmental authority when due. General real estate taxes and
assessments of every nature for the first and last years of the Lease term shall
be prorated on a per diem basis to reflect any partial period. Tenant shall also
pay promptly, when due, any tax which is levied or assessed against the rental,
whether the same be called a rental tax, excise tax, sales tax or otherwise, and
shall reimburse Landlord for any such taxes which Landlord is required to pay,
or in fact pays, but Tenant shall not be required to pay or reimburse Landlord
for payment of any part of Landlord's general state or federal income taxes or
any transfer, documentary or stamp tax, any tax for the income, profits or
business of Landlord or any personal property tax of the Landlord, payroll
taxes, capital levy, franchise, inheritance or estate tax of the Landlord.
Tenant shall also be responsible for any other charge or expense required to be
paid by the Tenant hereunder, including, but not limited to, percentage rents,
assessments, maintenance charges, and utilities.
10. ADMINISTRATIVE FEE FOR LATE PAYMENT. All payments for rent due and
owing from Tenant to Landlord under this Lease are due on the first (1st) of the
month. With respect to any monthly payment not received by Landlord within five
(5) days after the date due under the terms hereof or within twenty (20) days
after written notice of billing is sent by Landlord for amounts which are not
due on a monthly basis (such as annual tax escrow adjustment), Landlord may
impose, Tenant hereby agrees to pay, an administrative late payment fee
("Administrative Late Payment Charge") of three (3%) percent of the outstanding
sum due.
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All late payments shall first be applied to the payment of the Administrative
Late Payment Charge, then to the payment of past due rent. Any unpaid balance of
sums owed Landlord by Tenant after said application of payment shall be due and
payable immediately and must be paid in full prior to the fifth (5th) of the
next following month, or be subject to an additional Administrative Late Payment
Charge. There will also be a Fifty Dollar ($50.00) fee for each check returned
for any reason including, but not limited to, "not sufficient funds" or invalid
signature. Two (2) or more such returned checks within any twelve (12) month
period shall be deemed an automatic default under the Lease and shall entitle
Landlord to terminate the Lease without opportunity to cure; however, any check
returned due to a bank error (as confirmed in writing to Landlord by the bank)
shall not constitute a returned check for purposes of this paragraph.
11. TAX DEPOSIT. Prior to delivery of possession of the Leased Premises
Tenant shall deposit with Landlord the sum of Forty Two Thousand Thirty Nine
19/100 Dollars (42,039.19) which sum represents six (6) months taxes May 1, 1996
together with the second half 1996 school property taxes due on the property
June 1, 1996. Provided the Tenant makes the aforesaid payment of real estate
taxes to Landlord, and provides proof of payment and evidence of the requisite
insurance and tenders the first month's (July, 1996) rent, and further provided
that Tenant is not otherwise in default (beyond expiration of any applicable
grace period after the giving of notice required hereunder) of its obligations
under the terms of this Lease, then the Landlord shall forgive the May and June
1996 Base Minimum Rent.
Tenant shall pay one-twelfth (1/12) of the annual tax payments together
with all subsequent rental payments.
12. OPTION TO RENEW. So long as this Lease is then in full force and
effect
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and Tenant is not then in default of any of its obligations under this Lease
(which continues beyond expiration of any applicable grace period after the
giving of notice required hereunder), Tenant shall have the exclusive right to
renew this Lease for three (3) renewal terms of five (5) years each immediately
following the expiration of the initial term or the first or second renewal
terms, as the case may be, on the same terms and conditions as are set forth
herein except that the basic Minimum Rent payable by the Tenant during the
renewal terms shall be as set forth below. Tenant shall notify Landlord in
writing of its intention to renew no less than six (6) months prior to the
expiration of the original Lease Term or any renewal term as the case may be.
Should each renewal option be properly and duly exercised in the manner
prescribed by this agreement, then and in such event, the basic Minimum Rent
during the respective option periods shall be as follows:
MAY 1, 2006 - APRIL 30, 2007 - Base Minimum Rent of $159,720.00
per year to be paid in twelve (12) equal monthly installments of
$13,310.00, to be paid in advance on the first day of each
month;
MAY 1, 2007 - APRIL 30, 2008 - Base Minimum Rent of $159,720.00
per year to be paid in twelve (12) equal monthly installments of
$13,310.00, to he paid in advance on the first day of each
month;
MAY 1, 2008 - APRIL 30, 2011 - Base Minimum Rent of either (a)
$175,692.00 per year to be paid in twelve (12) equal monthly
installments of $14,641.00, to be paid in advance on the first
day of
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each month, or (b) an amount per annum (payable in equal monthly
installments) equal to 50% of the increase in the Consumer Price
Index during the preceding three (3) years added to the Base
Rent from May 1, 2005, whichever is greater, except that in lieu
of such payments, Landlord shall be entitled to a Minimum Rent
each year in an amount equal to 100% of the increase in the
Consumer Price Index during the preceding three (3) years added
to the Base Rent from May 1, 2005 in the event the Landlord has
not received any percentage rents as defined in paragraph 8(b)
herein at any time during such three (3) year period;
MAY 1, 2011 - APRIL 30, 2014 - Base Minimum Rent of either (a)
$193,261.20 per year to be paid in twelve (12) equal monthly
installments of $16,105.10, to be paid in advance on the first
day of each month, or (b) an amount per annum (payable in equal
monthly installments) equal to 50% of the increase in the
Consumer Price Index during the preceding three (3)years added
to the Base Rent from May 1, 2008, whichever is greater, except
that in lieu of such payments, Landlord shall be entitled to a
Minimum Rent each year in an amount equal to 100% of the
increase in the Consumer Price Index during the preceding three
(3) years added to the Base Rent from May 1,2005 in the event
the Landlord has not received any percentage rents as defined in
paragraph 8(b) herein at any time during such three (3) year
period;
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MAY 1, 2014 - APRIL 30, 2017 - Base Minimum Rent of either (a)
$212,587.32 per year to be paid in twelve (12) equal monthly
installments of $17,715.62, to be paid in advance on the first
day of each month, or (b) an amount per annum (payable in equal
monthly installments) equal to 50% of the increase in the
Consumer Price Index during the preceding three (3) years added
to the Base Rent from May 1, 2014, whichever is greater, except
that in lieu of such payments, Landlord shall be entitled to an
increase in rent of 100% of the increase in the Consumer Price
Index during the preceding three (3) years added to the Base
Rent from May 1, 2005 in the event the Landlord has not received
any percentage rents as defined in paragraph 8(b) herein at any
time during such three (3) year period;
MAY 1, 2017 - APRIL 30, 2020 - Base Minimum Rent of either (a)
$233,846.06 per year to be paid in twelve (12) equal monthly
installments of $19,487.17, to be paid in advance on the first
day of each month, or (b) an amount per annum (payable in equal
monthly installments) equal to 50% of the increase in the
Consumer Price Index during the preceding three (3) years added
to the Base Rent from May 1, 2017, whichever is greater, except
that in lieu of such payments, Landlord shall be entitled to a
Minimum Rent each year in an amount equal to 100% of the
increase in the Consumer Price Index during the preceding three
(3) years added to the Base Rent from May 1, 2005 in the event
the Landlord has not received any percent-
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age rents as defined in paragraph 8(b) herein at any time during
such three (3) year period; and
MAY 1, 2020 - APRIL 30, 2021 - Base Minimum Rent of either (a)
$257,230.65 per year to be paid in twelve (12) equal monthly
installments of $21,435.89, to be paid in advance on the first
day of each month, or (b) an amount per annum (payable in equal
monthly installments) equal to 50% of the increase in the
Consumer Price Index during the preceding three (3)years added
to the Base Rent from May 1, 2020, whichever 15 greater, except
that in lieu of such payments, Landlord shall be entitled to a
Minimum Rent each year in an amount equal to 100% of the
increase in the Consumer Price Index during the preceding three
(3) years added to the Base Rent from May 1, 2005 in the event
the Landlord has not received any percentage rents as defined in
paragraph 8(b) herein at any time during such three (3) year
period.
For purposes of this Agreement, the term Consumer Price Index
shall mean the "Consumer Price Index", All Urban Consumers, New York, NY,
Northeastern, N.J., 1982-84 = 100, issued by the U.S. Department of labor,
Bureau of labor Statistics.
13. USE. Tenant's use of the Leased Premises shall be limited to that
of a restaurant/tavern and ancillary uses, and Tenant agrees further not to
change said use without the prior written consent of landlord, Landlord agrees
not to unreasonably withhold its consent. Landlord represents that the premises
has a certificate of occupancy issued by the Village of Lynbrook which permits
its use as a restaurant. In conducting its business upon the Leased
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Premises, Tenant agrees to conform to all applicable lawful statutes, rules,
regulations, orders and ordinances of duly constituted governmental authority.
Tenant acknowledges that the wood deck listed on Exhibit "A" survey does not
have municipal permits. Tenant agrees to procure the same from the governing
municipality at its own cost and expense or to remove the same if same cannot be
procured. Any modifications of or alternations to the Leased Premises (whether
structural or non-structural) necessary to comply with any applicable statute,
rule, regulation, order or ordinance (including the Americans with Disabilities
Act), shall be the responsibility of Tenant at its sole cost and expense
provided, however, that Landlord shall be responsible for all structural
alterations required by law, except for those arising out of the specific manner
of use or alteration of the Premises by Tenant.
14. SURRENDER OF POSSESSION. Tenant shall on or before the last day of
the term hereby granted or upon the sooner termination of this Lease peaceably
and quietly leave, surrender, and yield up unto Landlord the Leased Premises,
free of tenancies, broom clean, and in good order and substantially the same
condition as existed on the Term Commencement Date, reasonable wear and tear and
damage by casualty covered by insurance excepted.
15. REMOVAL OF EQUIPMENT AND TRADE FIXTURES. Tenant shall have the
right at any time during the Initial Term or the Renewal Terms, to remove from
the Leased Premises any of Tenant's equipment or trade fixtures, however, Tenant
shall not remove any of the following: built-in freezers and coolers; heating,
ventilating, and air conditioning plants and systems; electrical and plumbing
fixtures and systems; ansul systems; and like equipment and systems which
constitute an integral part of the building. All damage caused to the Leased
Premises by such removal shall be repaired promptly by Tenant; provided,
however, that no such property shall be removed if such removal would cause
permanent injury to the building
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located on the Leased Premises.
16. QUIET ENJOYMENT. Landlord covenants and agrees that Tenant, upon
paying all rentals and other charges provided for herein, and upon observing and
keeping all of the covenants, conditions, and provisions of this Lease on its
part to be observed and kept, shall lawfully and quietly hold, occupy and enjoy
the Leased Premises during the term hereof, without hinderance or molestation by
or from anyone claiming by, through or under Landlord, subject to the terms of
this Lease.
17. CONDITION OF LEASED PREMISES.
a. Landlord represents that it will assume responsibility of the
structural integrity of the building otherwise, Tenant accepts the Leased
Premises in "AS IS" condition, it being hereby expressly understood that
Landlord has made no representations or warranties with respect to such Leased
Premises and that Tenant has inspected the same and is satisfied therewith;
except as otherwise provided herein, and except that Landlord represents that at
the commencement of this Lease Term the heating and cooling systems shall be in
good operating condition. No representations regarding the duct work shall be
included in this representation. Tenant agrees to hook up all utilities prior to
taking occupancy of the Leased Premises so that the heating and cooling systems
can be started. Upon acknowledgement by the Tenant that the Systems are in good
working order, all future maintenance, repair, replacement or alterations of the
systems shall be the sole responsibility of the Tenant.
Landlord further represents that the roof shall be free of leaks and
shall repair, replace and maintain the roof during the term of this Lease except
as otherwise provided for herein. Tenant acknowledges that there is substantial
heating and cooling machinery on the roof and Tenant will take steps necessary
to avoid damage to the roof during
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maintenance and repair of said machinery. Landlord shall not be responsible for
any damage to the roof, or repairs to the roof caused by the negligence of the
Tenant, its agents, employees, and repairmen caused to the roof.
In the event Landlord is required to replace the roof during the term
of this Lease (or any option period), then upon completion of the roof Landlord
will make Tenant a joint guarantor on any roof guarantees. Thereafter any and
all subsequent repairs to the roof shall be the sole responsibility of the
Tenant provided, however, if at any time during the last year of the term
(provided Tenant does not exercise its option to renew the Lease) Tenant shall
be required to spend in excess of $10,000 to repair or replace the roof, then
Tenant shall have the right to offset the expense incurred by Tenant to repair
or replace the roof against the rent payable under the Lease, which offset shall
be applied equally against the remaining monthly installments over the balance
of the term.
Except as otherwise provided herein, during the term of this Lease,
TENANT, at its sole cost and expense, shall keep the Leased Premises and every
part thereof, including all buildings at any time situated thereon, in a clean
condition and in good repair and shall maintain the Leased Premises so that in
all respects and at all times they fully comply with all lawful health and
police regulations. To the best of Landlord's knowledge, Landlord has not
received notice of violation of any state, federal or local law affecting the
Leased Premises including any asbestos or hazardous materials in the premises or
the land, and Landlord is not aware that any of the same exists upon the Leased
Premises.
Landlord further represents that in the event any asbestos is
subsequently discovered in the building, which reasonably appears to have been
incurred or installed prior to the occupancy of the Leased Premises by the
Tenant, then Landlord agrees to
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spend a maximum of $25,000.00 in total for the cost of removal of the same. In
the event the cost of removal exceeds $25,000.00, the Landlord has the right to
terminate this Lease upon twenty (20) days notice to Tenant, provided, however,
that Tenant may elect to countermand Landlord's termination notice and elect to
continue with the tenancy without abatement or set off and if same shall be
required, bear the additional cost of removal of the asbestos. If Tenant shall
not countermand Landlord's termination notice, the Lease shall be deemed
canceled and of no further force and effect. If asbestos or hazardous materials
are found on the Leased Premises, the rent payable hereunder and the term of the
Lease shall abate during the period of removal only if said removal
substantially impairs Tenant's ability to do business or perform any
alteration work.
Any hazardous waste permitted or suffered upon the Leased Premises
subsequent to the commencement of this Lease shall be the sole responsibility of
the Tenant and any hazardous waste found to exist upon the Leased Premises prior
to the commencement of the Lease shall be the sole responsibility of Landlord.
b. Tenant agrees that it shall maintain the interior and exterior,
non-structural, of the premises in good repair and condition during the term of
this Lease and shall maintain fix, repair and if necessary replace all fencing,
walkways, exterior and interior lighting and electrical, all landscaping, snow
removal, walkways, garbage removal, painting, heating and cooling. The Tenant
agrees to maintain the sidewalks and curbing around the perimeter of the subject
premises. In the event the municipality or any governmental agency requires a
sprinkler system or any other additional requirements, Tenant agrees to install
same at its own cost and expense. Tenant's obligations do not include items
covered under Landlord's insurance.
18. ALTERATIONS AND ADDITIONS. Tenant may remodel and alter the
building
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located upon the Leased Premises according to its needs, provided that:
a. The written consent of Landlord in each instance is first obtained
for all exterior or structural changes, which consent shall not be unreasonably
withheld, or delayed. Landlord has been exhibited Rattlesnake's standard sign
and has pre-approved same, provided all necessary permits are procured from the
governing municipality.
b. Any such alterations or additions consented to shall be erected and
finished in accordance with the plans and specifications therefor, in a good and
workmanlike manner and in such manner as to comply in all respects with the
rules and regulations of any state, municipal, or other governmental authority
having jurisdiction there over;
c. Tenant shall promptly pay for all such alterations and additions,
and shall discharge any and all liens filed against the Leased Premises arising
out of such alterations or additions and shall indemnify, defend, and hold
Landlord harmless from any claims by any contractors, subcontractors,
materialmen or workers for any amounts granted by them in connection therewith;
and
d. Tenant shall indemnify, defend and hold Landlord harmless from any
and all loss, damage, liability, cost or expense incurred by reason of any
injury to any person or persons or property arising directly or indirectly out
of such alterations or additions.
e. If, because of any act or omission (or alleged act or omission) of
Tenant or anyone claiming through Tenant, any mechanic's or other lien, charge
or for the payment of money or other encumbrance shall be filed against any
portion of the Leased Premises (whether or not such charge, order or encumbrance
is valid or enforceable as such) Tenant shall, at its cost and expense, cause
same to be discharged or bonded within thirty (30) days (or such shorter time as
may be required under any mortgage provided Tenant is given
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notice of such shorter period) after notice to Tenant of the filing or
imposition thereof; and Tenant does hereby indemnify and hold Landlord harmless
from all losses, damages, expenses, liabilities, suits, penalties, claims and
obligations, including, without limitation, reasonable attorney's fees resulting
therefrom. If Tenant fails to comply with the foregoing provisions, Landlord
shall have the option to either pay the same or to discharge the same by bonding
and Tenant hereby agrees to reimburse Landlord (as additional rent) for all
reasonable costs, damages and expenses resulting therefrom or incurred in
connection therewith, together with interest thereon at the then Prime Rate of
Citibank, N.A. plus three (3%) per cent promptly upon demand.
Tenant acknowledges that after three (3) years, or when the corporate
guarantee of Rattlesnakes Holding Co., Inc., shall terminate, any alteration,
addition or construction in excess of $10,000.00, Tenant shall furnish a
performance bond from a company reasonably acceptable to Landlord or, in the
alternative, a guarantee of performance by Rattlesnakes Holding Co., in a form
and manner reasonably acceptable to Landlord.
19. INSURANCE. Tenant shall carry at its own cost and expense during
the entire term of this Lease,
a. workers' compensation insurance during the course of any work
being performed to the premises by the Tenant;
b. public liability insurance including products liability coverage
and liquor law liability coverage with a combined single limit of not less than
Three Million Dollars ($3,000,000.00) per occurrence for personal injury and
property damage, such insurance may be provided by blanket or umbrella policies,
provided same is acceptable by Landlord and Jamaica Savings Bank its successors
or assigns;
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c. fire, malicious mischief, vandalism, and extended coverage
insuring the Leased Premises, against said risks, with a guaranteed replacement
cost endorsement (whereby the insurer will be obligated to pay the full cost of
repair or replacement), the proceeds of which shall be payable to Landlord in
trust and used for restoration or otherwise in accordance with paragraph 21
below. Any such policies shall include a provision for ten (10) days' advance
written notice to Landlord in the event of any pending change or cancellation of
said insurance.
d. In addition to other insurance required of it, Tenant shall
maintain the following insurance policies:
i. Sprinkler Leakage Insurance, only if sprinkler system is
installed, if a sprinkler system is located in the Leased Premises in amounts
reasonably satisfactory to Landlord and any mortgagees.
ii. Worker's Compensation insurance subject to statutory
limits or better in respect of any work or other operations on or about the
Leased Premises.
iii. Such other insurance with respect to the Leased Premises
and in such amounts as Landlord from time to time may reasonably request
against such other insurable hazards which at the time in question are
commonly insured against in the case of property similar to the Leased
Premises, provided that such other insurance are customarily in place for other
similar restaurants in the area.
Prior to the commencement of the term hereof, Tenant shall deliver to
Landlord a certificate showing such insurance to be in effect and naming
Landlord and any mortgagor as additional insureds thereon (Jamaica Savings
F.S.B.) and Landlord shall maintain liability insurance (similar to the
insurance required to be maintained by Tenant) in form and
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content reasonably satisfactory to Tenant, covering the 50' access area.
Landlord shall deliver a certificate of such insurance, naming Tenant as an
additional insured, to Tenant.
20. WAIVER OF RECOVERY. Tenant hereby agrees to waive its right of
recovery against Landlord for loss or damage to Tenant's contents, equipment,
improvements, or other property whatsoever. It is the intent of this provision
that Tenant shall rely solely on its own property insurance policies. If any of
Tenant's property insurance policies require an endorsement to effect a waiver
of subrogation, Tenant shall cause them to be so endorsed.
Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claim, action or cause of action against each
other, their agents, officers, directors, partners and employees, for any loss
or damage that may occur to the Premises or personal property, including
building contents, within the Premises by reason of fire or the elements of
nature or other events normally covered by extended all risk property damage
insurance coverage, regardless of cause or origin including negligence of
Landlord or Tenant and their agents, officers, directors, partners and
employees. Landlord and Tenant shall immediately give written notice of the
terms of the mutual waivers contained in this paragraph to each of their
respective insurance companies which have issued policies of insurance covering
all risk property damage, and shall have the insurance policies properly
endorsed to reflect the insurance company's acknowledgment of such waiver and
the absence of any subrogation rights. Each party shall provide to the other,
annually within ten (10) days after request therefor, evidence that its all risk
property damage insurance policies have been so endorsed.
21. DAMAGE AND DESTRUCTION BY FIRE OR OTHER CASUALTY. In the event
that the Building or Leased Premises are damaged for any reason whatsoever and
Tenant is unable, in Tenant's determination, to carry on its normal business
operations for a period of sixty (60)
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days or more, Tenant shall have the right to terminate this Lease by giving
written notice of such termination to the Landlord no later than thirty (30)
days after the occurrence of such damage. Upon such termination. Tenant's
obligations hereunder and each of them, including the obligation to pay rent,
shall cease and determine as of the day the Leased Premises were so damaged. If,
in Tenant's determination, it is unable to carry on its normal business
operations for a period of less than thirty (30) days because of such damage,
rent shall abate for the period the Leased Premises are untenantable.
Notwithstanding the foregoing, should Landlord notify Tenant within thirty (30)
days of the destruction that it intends to restore the Leased Premises, and
Landlord delivers to Tenant a written estimate of its architect or engineer that
the premises can be restored within ninety (90) days, then Tenant may not
terminate this Lease, but, upon completion of Landlord's restoration within one
hundred (100) days from Landlord's notice, shall resume its occupancy of the
Leased Premises and on the 30th day following completion of Landlord's work
commence paying the Basic Minimum Rent and all items of Additional Rent as they
thereafter come due.
In the event the Leased Premises are partially damaged by fire or other
casualty and Tenant shall determine that is able to carry on its normal business
operations, Tenant shall pay rent for only such portion of the Leased Premises
which Landlord in its determination may reasonably occupy during the time
required to make repairs. All repairs necessary to restore the Leased Premises
to its original condition shall be:
a. commenced within thirty (30) days after the occurrence of
such damage and completed within one hundred (100) days; and
b. performed in a diligent and workmanlike manner with
material of at least the same quality utilized originally in the construction of
the Leased
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Premises.
In the event that the Leased Premises are not restored by Landlord
for Tenant's occupancy and full use within one hundred (100) days of any
casualty, Tenant, may, at its option, notify Landlord in writing and terminate
this Lease.
22. DEFAULT.
a. If (i) Tenant defaults in the payment of any installment of
rent, percentage rent, or additional rent due hereunder, and such default
continues for ten (10) days after written notice thereof to Tenant, or (ii)
Tenant defaults in any of the covenants, agreements, conditions, or undertakings
herein contained to be kept, observed and performed by Tenant other than the
payment of rent or any part thereof when due, and such default continues for
thirty (30) days after written notice thereof to Tenant; or (iii) proceedings in
bankruptcy or for liquidation, reorganization, or rearrangement of Tenant's
affairs are instituted by or against Tenant and if not dismissed within sixty
(60) days; or (iv) a receiver or trustee is appointed for all or substantially
all of Tenant's business or assets on the grounds of Tenant's insolvency; or (v)
a trustee is appointed for Tenant after a petition has been filed for Tenant's
reorganization under the Bankruptcy Act of the United States; or (vi) Tenant
makes an assignment for the benefit of its creditors; or (vii) Tenant abandons
the Leased Premises; or (viii) Tenant defaults under any of the terms of any
other lease or any other agreement between Landlord and Tenant; then in any of
the above events, Landlord at its election, may declare the term of this Lease
ended and, either with or without process of law, re-enter, expel, remove, and
put out Tenant and all persons occupying the Leased Premises under Tenant, using
such reasonable force as may be necessary in so doing and repossess and enjoy
the Leased Premises. Such re-entry and repossession shall not work a forfeiture
of the rents to be paid and the covenants to be per-
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formed by Tenant during the full term of this Lease.
b. Anything hereinabove contained to the contrary notwithstanding,
and to the extent consistent with cure periods, if any, it is expressly
understood that, with respect to any default (except nonpayment of rent) of such
a nature that it cannot, with due diligence, be cured within a period of thirty
(30) days, Tenant shall not be deemed in default under this Lease if Tenant
shall have commenced the curing of such default within thirty (30) days after
receiving written notice thereof from Landlord and so long as Tenant shall
thereafter proceed with all due diligence to complete the curing of such
default.
c. Upon expiration of the Lease by reason of the happening of any
of the events hereinabove described, or in the event of the termination of the
Lease or right to possession or both, as the case may be, by summary
dispossession proceedings or under any provision of law now or at any time
hereafter in force, by reason of or based upon or arising out of a default under
or breach of the Lease on the part of Tenant, or upon Landlord recovering
possession of the Leased Premises under any of the foregoing circumstances
whatsoever, whether with or without legal proceedings by reason of or based upon
or arising out of a default under or breach of the Lease on the part of Tenant,
Landlord may, at its option, at any time and from time to time, relet the Leased
Premises or any part or parts thereof for the account of Tenant or otherwise and
receive and collect the rents therefor, applying the same first to the payment
of such expenses as Landlord may have incurred in recovering possession of the
Leased Premises, including (i) reasonable legal expenses and attorney's fees,
which shall be deemed additional rents and shall be for a sum no less than ten
(10%) percent of any sum outstanding; (ii) expenses of putting the Leased
Premises into good order or condition or returning the same to the pre-lease
condition for re-rental, and (iii) expenses, commissions, and charges paid,
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assumed, or incurred by Landlord in and about the reletting of the Leased
Premises, and then to the fulfillment of the covenants of Tenant hereunder. Any
such reletting herein provided for may be for the remainder of the Lease term or
for a longer or shorter period.
d. In any case of reletting and whether or not the Leased Premises
or any part hereof be relet, Tenant shall pay to the Landlord the rent and all
other charges required to be paid by Tenant up to the tine of such termination
of the Lease, or of such recovery of possession of the Leased Premises by
Landlord, as the case may be; and thereafter Tenant covenants and agrees, if
required by Landlord, to pay to Landlord until the end of the Lease term the
equivalent of the amount of all the rent reserved herein and all other charges
required to be paid by Tenant less the net proceeds of reletting, if any, and
the same shall be due and payable by Tenant to Landlord on each of the days rent
payments are payable hereunder. In any of the circumstances hereinabove
mentioned in which Landlord shall have the right to hold Tenant liable, upon the
several rent days herein specified, to pay Landlord the equivalent of the amount
of all the rent and all other charges required to be paid by Tenant less the net
proceeds of reletting, if any, Landlord shall have the option instead of holding
Tenant so liable, forthwith to recover against Tenant, as damages for the loss
of the benefit of its bargain and not as a penalty, an aggregate sum which, at
the time of such termination of the Lease, or of such recovery of possession of
the Leased Premises by Landlord, as the case may be, represents the then present
worth of the excess, if any, of the aggregate of the rent and all other charges
payable by Tenant hereunder that would have accrued for the balance of the term
over the aggregate rental value of the Leased Premises for the balance of such
term.
23. LANDLORD'S RIGHT TO CURE. If Tenant falls to perform any of its
obligations hereunder to be performed by the lessee thereunder, which continues
after written notice to
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Tenant and the expiration of the applicable care period, if any, Landlord, at
its option, may (but shall not be required to) do the same or cause the same to
be done. In addition to any and all rights and remedies of Landlord, the cost
reasonably incurred by Landlord in connection with such performance by Landlord
shall be additional rental due from Tenant to Landlord, payable with the next
monthly payment of rent.
24. LANDLORD'S RIGHT TO INSPECT. Landlord and its agents shall have
access to the Leased Premises at all reasonable times for the purposes of
inspecting the Leased Premises, accompanied by a representative of Tenant.
25. INDEMNIFICATION.
a. GENERAL. If Landlord shall be subject to any claim, demand, or
penalty arising due to the Lease or become a party to any suit or claimed act or
omission by Tenant, its employees or agents, or by reason of any act occurring
on the Leased Premises, or by reason of an omission with respect to Tenant's
operation of its business thereon, or by reason of a default by Tenant under the
terms of this Lease, except for Landlord's negligent acts or omissions, Tenant
shall indemnify and hold Landlord harmless against all judgments, settlements,
penalties, and expenses (including but not limited to reasonable attorney's
fees, court costs, and other expenses of litigation or administrative
proceedings) incurred by or imposed upon Landlord in connection with the defense
relating to such claim or litigation or administrative proceeding, and, at the
election of Landlord, Tenant also shall defend Landlord. Notwithstanding
anything contained herein, Tenant shall only indemnify Landlord for such claims
or losses that arise from events that occurred during Tenant's occupancy.
b. ENVIRONMENTAL. Tenant shall indemnify and hold Landlord harmless
from and against any and all claims, demands, suits, losses, damages,
assessments,
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fines, penalties, costs or other expenses (including without limitation costs of
investigations, costs of remediation, attorney's fees, and court costs) arising
after the Term Commencement Date and in any way related to actual or threatened
damage to the environment, agency costs of investigation, personal injury or
death, or damage to property, due to a release or alleged release of "Hazardous
Materials" (as that term is defined in paragraph 38 herein below) on or under
the Leased Premises during the term of this Lease, or gaseous emissions from the
Leased Premises during the term of this Lease or any other condition existing on
the Leased Premises resulting from Hazardous Materials during the term of this
Lease, whether such claims prove to be true or false, and, at the election of
Landlord, Tenant also shall defend Landlord. Notwithstanding anything contained
herein, Tenant shall only indemnify Landlord for such claims or losses that
arise from events that occurred during Tenant's occupancy.
c. ENFORCEMENT. Tenant also shall pay all reasonable costs and
expenses, including reasonable attorney's fees, which may be incurred by
Landlord in enforcing any of the covenants and agreements of this lease. All
such costs, expenses, and attorney's fees shall, if paid by Landlord, together
with any interest thereon, be additional rent due on the next rent date due
after such payment or payments. In the event of any legal proceedings between
Landlord and Tenant with respect to the subject matter of this Lease, Landlord
and Tenant mutually agree to waive any right either may have to a jury trial, to
the extent permitted by law.
26. ASSIGNMENT AND SUBLETTING. Tenant may not assign this Lease or
sublet the Leased Premises or any part thereof, permit the sale or transfer of
its interest herein by legal process or otherwise, without the prior written
consent of Landlord not to be unreasonably withheld or delayed. Any provision of
this Lease to the contrary notwithstanding, Tenant may assign this Lease or
sublease the Premises, in whole or in part, without the express written
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consent of Landlord and without affording Landlord any right to terminate this
Lease, to: (i) any corporation into which or with which Tenant has merged or
consolidated; (ii) any parent, subsidiary, successor, or affiliated corporation
of Tenant; (iii) any person or entity that acquires all or substantially all of
the assets or operations of Tenant within the metropolitan area in which the
Premises are located; or (iv) any partnership greater than twenty-five (25%) per
cent of which shall be owned by Tenant or the parent corporation of Tenant.
Landlord shall have no obligation to consent to any assignment of a proposed
tenant with a financial record any less than represented by Rattlesnakes a copy
of its financial records are attached hereto as Exhibit "C". Any consent to any
assignment or subletting shall not constitute a waiver of the necessity for such
consent to any subsequent assignment of subletting. Upon any assignment, such
assignee shall by an instrument in writing assume and agree to perform the terms
hereof and Tenant shall promptly deliver a copy thereof to Landlord, and upon
any sublease, such subtenant shall acknowledge the existence of this Lease and
shall covenant not to do or permit to be done anything that would constitute a
breach thereof, and Tenant shall promptly deliver a copy of any such sublease to
Landlord. In the event Landlord consents to the assignment the equivalent of
three (3) months rent including all additional rents shall be deposited with the
Landlord in an interest bearing account as and for security for the faithful
performance of any and all obligations under the terms of this Lease.
Notwithstanding anything herein to the contrary, said assignment shall not
relieve the Tenant assignee or its guarantors of performance under the terms of
this Lease.
Any request for consent to a proposed subtenant or assignee must be
accompanied by a payment to Landlord in the amount of Five Hundred Dollars
($500.00) to compensate Landlord for its costs to review or prepare the
necessary documents and/or to review
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financial statements.
27. RULE AGAINST PERPETUITIES. If the term of this Lease shall not have
commenced within six (6) months after the date hereof, this Lease shall become
null and void and of no further force or effect. The sole remedy of Tenant in
such case is the return of any monies paid to Landlord in anticipation of the
Lease. Nothing contained in this paragraph shall be construed as extending any
time period provided herein for the satisfaction of any conditions precedent.
28. HOLDING OVER. Tenant shall not hold over beyond the expiration or
sooner termination of the term hereof. If nevertheless there by any holding over
by Tenant, such shall give rise to a tenancy at the sufferance of Landlord upon
the same conditions as are provided for herein but with a monthly rental for the
period of such holding over which is one hundred and fifty (150%) percent of the
monthly installment of rent last required to be paid by Tenant during the lease
term, and interest thereon, as liquidated damages, and not as a penalty, it
being agreed that damages to Landlord in such event would be difficult to
ascertain and that the foregoing represents a fair estimate of such damages.
Landlord's acceptance of any rent after holding over begins shall not be deemed
to renew this Lease nor shall this provision be deemed to be a waiver of
Landlord's rights of re-entry or any other right hereunder resulting from
Tenant's breach of the covenant not to hold over or any other breach hereunder.
29. WAIVER. The failure of either party to enforce any condition or
provision contained herein at any time shall not be construed as a waiver of
that condition or provision nor shall it operate as a forfeiture of any right of
future enforcement of any such condition or provision.
30. ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord
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of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any enforcement
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction. Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy provided for herein.
31. RECORDING OF LEASE. Upon the request of either party hereto, the
other party shall join in the execution of a memorandum of the Lease for the
purpose of recordation. The party requesting execution of such a memorandum
shall bear all costs for recording the same.
32. SUBORDINATION. I. This Lease and all rights of Tenant hereunder,
are and shall be subject and subordinate in all respects to all mortgages which
may now or hereafter affect the Building to each and every advance made or
hereafter to be made under such mortgages, and to all renewals, modifications,
replacements and extensions of such mortgages and spreaders and consolidations
of such mortgages.
The provisions of this Article 31 shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver any instruments that
Landlord or the holder of any mortgage, or any of their respective successors in
interest, may reasonably request to evidence such subordinations.
Notwithstanding the foregoing, the subordination of this Lease is subject to the
condition that Landlord secure a Non-Disturbance Agreement stating that the
mortgagee or ground lessor, as the case may be, shall deliver to Tenant at or
prior to the time that this Lease becomes so subordinate, a written agreement in
recordable form whereby Tenant, so long as Tenant is not in default hereunder,
may remain in possession of the Leased Premises pursuant to
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the terms hereof, and this Lease shall continue in full force and effect, and
without any diminution of the Tenant's rights should Landlord become in default
with respect to such mortgage or ground lease or should the Leased Premises
become the subject of any action for foreclose any mortgage or to dispossess
Landlord.
In the event of any act or omission of Landlord which would give
Tenant the right, immediately or after lapse of a partial or total eviction,
Tenant shall not exercise such right:
a. Until it has given written notice of such act or omission
to each mortgagee whose names and address shall previously have been furnished
to Tenant in writing.
b. Unless such act or omission shall be one which is not
capable of being remedied by Landlord or any mortgagee within a reasonable
period of time, until a reasonable period for remedying such act or omission
shall have elapsed following the time when all such mortgages shall have become
entitled under such mortgagee to remedy the same (which reasonable period shall
in no event be less than the period to which Landlord would be entitled under
this Lease or otherwise, after similar notice, to effect such remedy), provided
any such mortgagee shall with due diligence give Tenant written notice of its
intention to and shall commence and continue to remedy such act or omission, but
nothing herein contained shall obligate any mortgagee to do so unless it so
elects.
c. If a mortgagee shall succeed to the rights of Landlord
under this Lease, whether through possession or foreclosure action or delivery
of a deed, then at the request of such party so succeeding to Landlord's rights
(herein sometimes called "Successor Landlord") and upon such Successor
Landlord's written agreement to accept Tenant's attornment
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which such Successor Landlord shall agree to accept is so requested by Tenant,
Tenant shall attorn to and recognize such Successor to Landlord as Tenant's
landlord under this Lease, and shall promptly execute and deliver an instrument
that such Successor to Landlord may reasonably request to evidence such
attornment. Upon such attornment this Lease shall continue in full force and
effect as, and as if it were, a direct lease between the Successor Landlord and
Tenant upon all of the terms, covenants and conditions set forth in this Lease,
and all such attornment except that the Successor landlord shall:
(i) Not be liable for any previous act or omission of
landlord under this Lease.
(ii) Not be subject to any offset, not expressly provided
for in this Lease, which shall have theretofore or which may thereafter accrue
to Tenant against Landlord.
(iii) Not be bound by any previous modification of this
Lease, not expressly provided for in this Lease, other than a modification of
this Lease executed by Landlord and Tenant prior to the execution of any
mortgage, or by any previous prepayment of more than one months basic annual
rent, unless such modification or prepayment shall have been expressly approved
in writing by the mortgagee(s) through or by reason of which the Successor
Landlord shall have succeeded to the rights of Landlord under this Lease.
d. The term mortgagee as used herein shall include underlying
leases of the building and the holder of such lease shall be deemed a
"Mortgagee".
II. Landlord shall use its reasonable efforts to obtain from its
mortgagee a non-disturbance agreement reasonably satisfactory to Tenant. In the
event the Landlord shall be unable to procure the Non-Disturbance Agreement
within fifteen (15) days of the date of this Lease Agreement then either party
shall have the right to terminate this Lease (unless Tenant waives this
condition) and upon payment to Tenant of any monies tendered to
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Landlord for security or rent, neither party shall have any further liability to
the other.
33. COMMISSION.
a. TENANT'S REPRESENTATIONS. Tenant represents and warrants that
this Lease was brought about with the aid of Friedland Realty, Inc. and Realco
Group, Inc. Tenant agrees to indemnify landlord from and against any claims that
may be made against Landlord for any type of a real estate commission or
finder's fee as a result of Tenant's dealings with such claimant in connection
with the transaction contemplated herein, other than Friedland Realty, Inc. and
Realco Group, Inc.
b. LANDLORD'S REPRESENTATIONS. Landlord represents and warrants
that this Lease was brought about with the aid of Friedland Realty, Inc. and
Realco Group, Inc. and agrees to pay all fees due Friedland Realty, Inc. and
Realco Group, Inc. Both Landlord and Tenant agree that no broker other than
Friedland Realty, Inc., and Realco Group, Inc., brought about this Lease and
both Landlord and Tenant agree to defend and indemnify the other as a result of
this representation.
34. GENDER AND NUMBER. Words of any gender shall be held to include any
other gender and words in the singular number shall be held to include the
plural and vice versa, as the context may require.
35. HEADINGS. Headings of the sections hereof are inserted from conve-
nience only and shall not constitute a part of this Lease.
36. NOTICE. All notices required or permitted to be given hereunder
shall be in writing and sent by United States Registered or certified mail,
postage prepaid, return receipt requested, or by an express delivery service
which provides for return receipt, addressed
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to the parties as follows:
To Landlord: Jack Cioffi Trust Under Last
Will and Testament
c/o Anastasia Cioffi Pesola,
Trustee and Anne Pesola, Ind.
Box 568, Windham, New York 12496
Copy to: Phillips, Weiner & Quinn, Esqs.
101 No. Wellwood Ave. P.O. Box 405
Lindenhurst, New York 11757-0405
Attention: James F. Quinn, Esq.
To Tenant: Rattlesnake of Lynbrook Inc.
Attention: Stephen Stein
3 Stamford Landing
Stamford, Connecticut 06902
Copy to: Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Wayne Heicklen, Esq.
or to such other address as the parties may direct by notice given as
hereinabove provided. Notice shall be deemed given when received as evidenced by
the return receipt or the date such notice is first refused, if that be the
case.
37. SEVERABILITY. If any provision or provisions of this Lease or of
any of the documents or instruments delivered pursuant thereto, or any portion
of any provision hereof or thereof, shall be deemed invalid or unenforceable
pursuant to a final determination of any court of competent jurisdiction or as a
result of future legislative action, such determination or action shall be
construed so as not to affect the validity or enforceability hereof or thereof
and shall not affect the validity or effect of any other portion hereof or
thereof, unless, as a result of such determination or action, the consideration
to be received or enjoyed by any party hereto would be materially impaired or
reduced.
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38. ENVIRONMENTAL COVENANTS.
a. Tenant shall not, and shall not permit any other person to, use
any portion of the Leased Premises for any activity involving, directly or
indirectly, the use, production, storage, handling, transfer, refinement,
treatment, processing, transport, generation, removal, remediation, manufacture,
discharge, release or disposal of any Hazardous Material, except those
chemicals, lubricants and cleaning fluids customarily used in the operation and
maintenance of the restaurant located upon the Leased Premises and used and
stored in compliance with all legal requirements.
b. For purposes of this Agreement "Hazardous Materials" shall mean
petroleum and petroleum by-products; any pollutant; any contaminant; any
flammable, explosive, or radioactive material; any hazardous waste, toxic
substance, or related material; and any other substance or material defined or
designated as a hazardous or toxic substance, material, or waste by any legal
requirement applicable to the use of or any activity conducted upon the Leased
Premises or the removal of which is required, or the manufacture, use,
maintenance, storage, ownership, or handling of which is restricted, prohibited,
regulated, or penalized by any legal requirement applicable to the use of or any
activity conducted upon the Leased Premises, and shall include:
(i) those substances included within the definition of
"hazardous substances", "extremely hazardous", "hazardous materials", "hazardous
waste", "toxic substances" or "solid waste" in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 ET SEQ., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Sections 11001-11050, the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 6901 ET SEQ., and the Hazardous Materials Transporta-
35
<PAGE> 36
tion Act, 49 U.S.C. Section 1801 ET SEQ., and in the regulations adopted and
promulgated pursuant to said laws;
(ii) those substances listed in the United States Department of
Transportation Table (49 C.F.R. 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 C.F.R. Part 302 and amendments thereto);
(iii) such other substances, materials, and wastes which are
regulated under any legal requirement applicable to the use of or any activity
conducted upon the Leased Premises, or which are classified as hazardous or
toxic under any legal requirement applicable thereto;
(iv) any substance which contains polychlorinated byphenyls
(PCBs), and any asbestos or asbestos containing substance; and
(v) any waste, substance, or materials that exhibit any of the
characteristics enumerated in 40 C.R.F. Sections 261.20-261.24, inclusive, or
any "extremely hazardous" substance listed under Section 302 of the Superfund
Amendment and Reauthorization Act of 1986 ("SARA") that are present in excess of
or equal to threshold planning or reportage quantities defined under SARA.
39. ENTIRE AGREEMENT. This Lease constitutes the entire agreement
between the parties hereto and supersedes all prior and contemporaneous
agreements and undertakings of the parties pertaining to the subject matter
hereof. This Lease may not be modified except by a written instrument duly
executed by the party hereto against whom the modification is sought to be
enforced.
Within fifteen (15) days after written request from a party hereto,
the other
36
<PAGE> 37
party shall execute, acknowledge and deliver to the requesting party an estoppel
certificate certifying: (i) that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that this Lease is in full force
and effect, as modified, and stating the date and nature of each modification;
(ii) the date to which rental and other sums payable hereunder have been paid;
(iii) that no notice has been received by such other party of any default which
has not been cured, except as to default specified in the estoppel certificate;
and (iv) such other matters as may reasonably be requested by the other party,
its lender, assignee or purchaser (or proposed lender, assignee or purchaser).
Any such estoppel certificate may be relied upon by any such purchaser, lender
or assignee for estoppel purposes only, and no party executing such estoppel
certificate shall be liable for damages or other losses as a result of
inaccuracy in the information contained in such estoppel certificate.
Tenant and Landlord each warrant and represent that the party signing
this Lease on behalf of each has authority to enter into this Lease and to bind
Tenant and Landlord, respectively, to the terms, covenants and conditions
contained herein. Each party shall deliver to the other, upon request, all
documents reasonably requested by the other evidencing such authority, including
a copy of all corporate resolutions, consents or minutes reflecting the
authority of persons or parties to enter into agreements on behalf of such
party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
37
<PAGE> 38
the day and year first above written.
WITNESS: JACK CIOFFI TRUST UNDER LAST WILL
AND TESTAMENT
/s/ Jeff Grann BY: /s/ ANASTASIA CIOFFI PESOLA, Trustee
- ------------------------------ ----------------------------------------
Jeff Grann ANASTASIA CIOFFI PESOLA, Trustee
WITNESS: RATTLESNAKE OF LYNBROOK INC.
/s/ David C. ? BY: /s/ ?
- -------------------------- ---------------------------------------
NAME
TITLE Chairman/CEO
38
<PAGE> 39
[MAP]
<PAGE> 40
"EXHIBIT A"
<PAGE> 41
TOWN OF HEMPSTEAD - COUNTY OF NASSAU
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAKE FUNDS PAYABLE TO: OFFICE HOURS FISCAL YEAR 1/1/96 THRU 12/31/96
<S> <C> <C> <C>
ANGIE M. CULLIN 9 A.M. TO 4:45 P.M. EST. STATE AID - COUNTY $286,187,496.00
RECEIVER OF TAXES MON. THRU FRI. EST. STATE AID - TOWN $12,952,000.00
TOWN OF HEMPSTEAD TEL. COUNTY SALES TAX CREDIT $21,867,834.00
200 N. FRANKLIN STREET (516)538-1500
HEMPSTEAD, NEW YORK 11550
- -------------------------------------------------------------------------------------------------
PROPERTY DESCRIPTION EXEMPTION CONSOLIDATED TAXABLE
DESCRIPTION TAX CODE TAX RATE VALUE
- -------------------------------------------------------------------------------------------------
SWIS CODE SD CODE SECTION BLOCK LOT
282025 020 42 145 0109 NON-EXEMPT 458 09.920 94,600
LOT GROUP 109
LOCATION
CLASS 42114 ROLL SECTION
SIZE
- --------------------------------------------------------------------------------------------------
TAX SERVICE CODE TAXPAYER CODE ACCOUNT LAND ASSESSMENT TOTAL ASSESSMENT
- --------------------------------------------------------------------------------------------------
0O 00000 48,350 94,600
- --------------------------------------------------------------------------------------------------
OWNER'S NAME & PROPERTY ADDRESS TAXPAYER'S NAME & TAX BILLING ADDRESS
ANASTASIA CIOFFI PESOLA MARRIOTT CORP. #60050
1 MARRIOTT DR
935 SUNRISE HIGHWAY DEPT. 875.25
LYNBROOK, NY 11563 WASHINGTON, DC 20058
INDICATE NAME OR ADDRESS CHANGE ON REVERSE SIDE OF STUB
- --------------------------------------------------------------------------------------------------
LEVY DESCRIPTION EX. CODE TAXABLE VALUE TAX RATE PER $100 TAX AMOUNT
- --------------------------------------------------------------------------------------------------
COUNTY-GENERAL PURPOSES* 94,600 2.715 2,568.390
NASSAU COMMUNITY COLLEGE 94,600 .645 610.170
COUNTY POLICE HEADQUARTERS 94,600 2.417 2,286.482
COUNTY FIRE PREVENTION 94,600 .117 110.682
COUNTY SEWAGE DISP DIST 2** 94,600 2.483 2,348.918
VALLEY STREAM CSC DIST 2 94,600 .709 670.714
TOWN-GENERAL PURPOSES 94,600 .834 788.964
- --------------------------------------------------------------------------------------------------
FIRST HALF TAX .00 SECOND HALF TAX 4,692.16 TOTAL TAX 9,384.32
PENALTY THRU PENALTY THRU
PAY THIS AMOUNT IF TOTAL TAX IS
- ------------------------------------------------------------------ PAID ON OR BEFORE 2/10/96
DISCOUNT
-------------------------------------
TOTAL TOTAL $9,337.40
- --------------------------------------------------------------------------------------------------
RECEIPT FOR PAYMENT OF TAXES DISCOUNT ALLOWED (-)
FIRST HALF TOWN PENALTY INCLUDED SECOND HALF TOWN PENALTY INCLUDED (+)
SECOND PORTION COUNTY THIRD PORTION COUNTY
DATE BATCH TRANS ITEM DATE BATCH TRANS ITEM
REMITTANCE [ ] REMITTANCE [ ]
SUBJ. TO COLL SUBJ. TO COLL
FIRST 1/2 TAX PREVIOUSLY PAID
- ---------------------------------------- -----------------------------------
PAYOR (OTHER THAN OWNER) PAYOR (OTHER THAN OWNER)
1996 GENERAL TAX - SECOND HALF TOWN
THIRD PORTION COUNTY
- --------------------------------------------------------------------------------------------------
- ----------------------------------- 1996 GENERAL TAXES - TOWN OF HEMPSTEAD
SECOND HALF - GENERAL TAXES SWIS CODE S.O.CODE SECTION BLOCK LOT
DUE JULY 1, 1996 282025 020 42 145 0109
LOT GROUP 109
SECOND HALF TAX PAYABLE
WITHOUT PENALTY TO AUGUST 10, 1996 SECOND HALF TAX 4,692,.16
- ----------------------------------- CASH [ ] CERT CH [ ] CK. SUBJ. [ ] IN PERSON [ ]
OR M.O. TO COLL.
When paying by mail, detach and
return this stub with payment of the PAYOR
second half tax. If paying TOTAL TAX, (other than owner) ----------------------------------------
return both first and second half DO NOT WRITE BELOW THIS LINE
stubs with payment. When paying in
person, bring in entire bill. Do not OWNER'S ANASTASIA CIOFFI PESOLA
detach stubs. NAME
1 2004111006 96120000469216
SEE REVERSE SIDE FOR PENALTY SCHEDULE - REVIEW TAX DATA ON REVERSE SIDE
</TABLE>
<PAGE> 42
TOWN OF HEMPSTEAD - COUNTY OF NASSAU
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAKE FUNDS PAYABLE TO: OFFICE HOURS FISCAL YEAR 7/1/95 THRU 6/30/96
<S> <C> <C> <C>
ANGIE M. CULLIN 9 A.M. TO 4:45 P.M. EST. STATE AID - SCHOOL DIST. $3,000,000.00
RECEIVER OF TAXES MON. THRU FRI. TOTAL TAXES LEVIED - SCHOOL DIST. $26,939,805.43
TOWN OF HEMPSTEAD TEL. ASSESSED VALUATION - SCHOOL DIST. $57,533,605.00
200 N. FRANKLIN STREET (516)538-1500 LIBRARY RATE .000
HEMPSTEAD, NEW YORK 11550
- -------------------------------------------------------------------------------------------------
PROPERTY DESCRIPTION EXEMPTION TAXABLE
DESCRIPTION TAX RATE VALUE
- -------------------------------------------------------------------------------------------------
SWIS CODE SD CODE SECTION BLOCK LOT
282025 020 42 145 0109 NON-EXEMPT 39.851 94,600
LOT GROUP 109
LOCATION
CLASS 42114 ROLL SECTION
SIZE
- --------------------------------------------------------------------------------------------------
TAX SERVICE CODE TAXPAYER CODE ACCOUNT LAND ASSESSMENT TOTAL ASSESSMENT
- --------------------------------------------------------------------------------------------------
0O 00000 48,350 94,600
- --------------------------------------------------------------------------------------------------
OWNER'S NAME & PROPERTY ADDRESS TAXPAYER'S NAME & TAX BILLING ADDRESS
ANASTASIA CIOFFI PESOLA MARRIOTT CORP. #60050
1 MARRIOTT DR
935 SUNRISE HIGHWAY DEPT. 875.25
LYNBROOK, NY 11563 WASHINGTON, DC 20058
INDICATE NAME OR ADDRESS CHANGE ON REVERSE SIDE OF STUB
- --------------------------------------------------------------------------------------------------
LEVY DESCRIPTION TAXABLE VALUE TAX RATE PER $100 TAX AMOUNT
- --------------------------------------------------------------------------------------------------
LYNBROOK U.F.S D 94,600 39.851 37,699.046
THIS IS YOUR SCHOOL TAX BILL.
ALTHOUGH SCHOOL TAXES ARE MADE PAYABLE TO THE RECEIVER OF TAXES, ALL PROCEEDS
BENEFIT YOUR LOCAL SCHOOL DISTRICT AND YOUR LOCAL LIBRARY (IF APPLICABLE).
PAYMENTS MADE PURSUANT TO THIS BILL DO NOT FINANCE OPERATIONS OF THE TOWN OF
HEMPSTEAD.
SCHOOL TAXES ARE SET BY THE VARIOUS BOARDS OF EDUCATION WHICH ARE INDEPENDENTLY
ELECTED AND OVER WHICH THE TOWN OF HEMPSTEAD HAS NO CONTROL.
FOR INFORMATION ABOUT TAX RATES AND AMOUNTS, CONTACT YOUR LOCAL SCHOOL DISTRICT
AT THE ADDRESS PROVIDED ON THE REVERSE SIDE OF THIS BILL.
- --------------------------------------------------------------------------------------------------
FIRST HALF TAX .00 SECOND HALF TAX 18,849.52 TOTAL TAX 37,699.05
PENALTY THRU PENALTY THRU
PAY THIS AMOUNT IF TOTAL TAX IS
- ------------------------------------------------------------------ PAID ON OR BEFORE 11/10/95
DISCOUNT
-------------------------------------
TOTAL TOTAL $37,510.55
- --------------------------------------------------------------------------------------------------
RECEIPT FOR PAYMENT OF TAXES DISCOUNT ALLOWED (-)
FIRST HALF TAX PAID PENALTY INCLUDED SECOND HALF TAX PAID PENALTY INCLUDED (+)
DATE BATCH TRANS ITEM DATE BATCH TRANS ITEM
REMITTANCE [ ] REMITTANCE [ ]
SUBJ. TO COLL SUBJ. TO COLL
FIRST 1/2 TAX PREVIOUSLY PAID
- ---------------------------------------- -----------------------------------
PAYOR (OTHER THAN OWNER) PAYOR (OTHER THAN OWNER)
1995-1996 SCHOOL TAX - SECOND HALF
- --------------------------------------------------------------------------------------------------
- ----------------------------------- 1995-1996 SCHOOL TAXES - TOWN OF HEMPSTEAD
SECOND HALF - 1995-1996 SCHOOL TAX SWIS CODE S.O.CODE SECTION BLOCK LOT
DUE APRIL 1, 1996 282025 020 42 145 0109
LOT GROUP 109
SECOND HALF TAX PAYABLE
WITHOUT PENALTY TO MAY 10, 1996 SECOND HALF TAX 18,849.52
- ----------------------------------- CASH [ ] CERT CH [ ] CK. SUBJ. [ ] IN PERSON [ ]
OR M.O. TO COLL.
When paying by mail, detach and
return this stub with payment of the PAYOR
second half tax. If paying TOTAL TAX, (other than owner) ----------------------------------------
return both first and second half DO NOT WRITE BELOW THIS LINE
stubs with payment. When paying in
person, bring in entire bill. Do not OWNER'S ANASTASIA CIOFFI PESOLA
detach stubs. NAME
1 2004111006 96220001884952
SEE REVERSE SIDE FOR PENALTY SCHEDULE - REVIEW TAX DATA ON REVERSE SIDE
</TABLE>
<PAGE> 43
EXHIBIT B
Lease Agreement Supplement
--------------------------
This is a supplement to the Lease Agreement dated the 15 day of April,
1996 between JOHN J. CIOFFI TRUST and RATTLESNAKE OF LYNBROOK INC. (hereinafter
the "Lease").
Pursuant to the terms and conditions of the Lease, the parties thereto
hereby confirm that the Term Commencement Date (as defined in the Lease is the
_____ day of April, 1996.
WITNESS: JACK CIOFFI TRUST UNDER LAST WILL
AND TESTAMENT
BY:
- ------------------------------ ----------------------------------
ANASTASIA CIOFFI PESOLA, Trustee
WITNESS: RATTLESNAKE OF LYNBROOK INC.
? BY: ?
- ------------------------------ ----------------------------------
NAME:
TITLE: Chairman/CEO
39
<PAGE> 44
"EXHIBIT C"
<PAGE> 45
The Rattlesnake Holding Company, Inc.
[PHOTO]
1995 Annual Report
Rattle Snake
[logo]
A new direction for the restaurant industry
<PAGE> 46
THE RATTLESNAKE HOLDING COMPANY, INC. 1995 ANNUAL REPORT
-------------------------
TO OUR SHAREHOLDERS...Before the very first nail was hammered into the wall of
the very first Rattlesnake Southwestern Grill, we knew what a great casual theme
restaurant chain could and should be. We analyzed the critical success factors
from the most aggressive restaurant companies, and added our own studied
elements to create what we believe to be one of the most exiting, growth
concepts to emerge in years.
We applied three basic principles for the development...
...and growth of the Company. First, in creating the Rattlesnake concept, we
sought to offer something new and exciting to the dining public. We were
convinced that we could create a unique dining experience and implement an
innovative strategy for expansion of the Company at the same time. This second
principle consisted of criteria which would permit rapid growth at significantly
lower cost than comparable restaurant companies. Finally, we believed that
management's success was dependent upon establishing a close proximity for
restaurants in co-dependent "clusters," which permit for economies in manpower,
purchasing and advertising. Based upon this triad, the Rattlesnake was born.
The first three years have held great excitement for everyone at the
Rattlesnake. We are very proud of our many accomplishments. The most notable
being the Company's successful completion of the Initial Public Offering (IPO)
of its stock. The net proceeds from the offering, $7.3 million, have provided a
solid financial base for our growth. Within these three years, the Rattlesnake
Southwestern Grill has grown from one to six restaurants, with annualized sales
of approximately $9.0 million. The newest Rattlesnake opened in Danbury,
Connecticut in August 1995 to rave reviews and strong sales levels. The 7,200
square foot former Howard Johnson's restaurant, received an extensive facelift
to produce a dramatic contemporary restaurant comparable in scope and
presentation to other major national theme chains. The conversion of this
Rattlesnake was completed within eight weeks following the IPO, at a total cost
(including lease aquisition, renovations and pre-opening costs) of approximately
$480,000, or less than $67 per square foot.
The Connecticut and New York cluster paved the way for a regional grouping
in New Jersey. The first Rattlesnake location in the Garden State is under
construction in the affluent community of Flemington with completion scheduled
for mid November 1995.
<PAGE> 47
THE RATTLESNAKE HOLDING COMPANY, INC. 1995 ANNUAL REPORT
-------------------------
The Company is in substantive discussions on several locations in the
metropolitan New York City area.
We believe our focus on aggressive, controlled growth to be the key to the
Company's success. However, we are constantly reviewing and refining the concept
to enhance the performance of the existing restaurants. Our goal is to build
strong "brand recognition" in our chosen markets. As a result, we are working to
build sales in the existing operations and striving for a dominant position in
the marketplace. To strengthen the concept, we have invested considerable
capital to solidify our management foundation as a prerequisite for aggressive
expansion.
In this, our first year as a public company, the Rattlesnake team is
confident in its abilities to cultivate new business, cement customer loyalty,
strengthen unit performance, and offer an exellent, unique alternative to the
dining public. As we grow the Company, the Rattlesnake will continue to forge a
new direction for the restaurant industry.
/s/ David C. Sederholt /s/ William J. Opper
David C. Sederholt William J. Opper
President and Chief Chairman of the Board and
Operating Officer Chief Executive Officer
[PHOTO]
<PAGE> 48
------------------------
A NEW DIRECTION IN RESTAURANT CONCEPTS...Through its broad-based appeal and
unique market position, the Rattlesnake represents a new flavor and direction
for casual theme restaurants. We offer an alterantive to both the cookie-cutter
fern bars of the seventies and today's tightly focused steak, pizza and ethnic
concepts which provide limited choices for their customers.
Our menu offers broad-based American fare complemented by...
...the flavors of the great Southwest. This food style has its roots with
European pioneers who migrated across America and blended their cooking styles
with the tastes of the Native American and Mexican inhabitants. The result is a
recognizable yet unique combination of flavors and textures. Offerings include a
wide variety of appetizers and "finger foods" for the "grazing" crowd, along
with pizzas, salads, pastas, numerous chicken selections, burgers, aged Diamond
Angus steaks, Texas-style bar-b-que, and sizzlin' south-western specialties,
with sensitivity to all palates. Light, healthy and low fat selections are as
evident as hearty red meats and spicy bar-b-que
The look is clean and contemporary with a touch of southwestern comfort.
Authentic artifacts, native blankets, artwork and pottery are purchased in
Arizona and Texas to adorn the walls. Muted pastels and desert colors add
warmth to the rooms. Custom etched glass with Native American themes adorn some
of the restaurants to add casual elegance. We create an atmosphere which is more
sophisticated than most other casual theme restaurants, making guests feel
special in a comfortable environment.
While each site is unique architecturally, there is a common theme for each
interior. From the minute you enter a Rattlesnake Southwestern Grill, and you
are met by the friendly gaze of a 40 to 60 foot, full-relief, mosaic
rattlesnake, you know you're in for some fun. This ceterpiece of every
Rattlesnake Southwestern Grill appeals to families, young professionals and
more mature markets. While being a popular fun place to bring the children,
the Rattlesnake still enjoys very strong beverage/bar sales. Simply put, the
Rattlesnake is a great place for the 25 to 35 year old market to gather for a
good time alongside of the family market, a highly unusual circumstance.
We believe that the fun should begin even before our guests are seated.
Rattlesnake is the only restaurant chain we know of to employ a staff of
professional magicians to entertain guests waiting for tables. The Rattlesnake
Southwestern Grill is truly a new direction for the restaurant industry in its
design, operation and expansion strategy.
2-3
<PAGE> 49
THE RATTLESNAKE HOLDING COMPANY, INC. 1995 ANNUAL REPORT
-------------------------
[PHOTO]
A NEW DIRECTION IN EXPANSION STRATEGIES...We asked ourselves "How do we
attain the most dramatic results in speed of expansion, visual impact, cost
containment and return on invested capital?" We wondered why most major casual
theme dining concepts needed to invest millions of dollars in new locations to
attain an average sales to investment ratio of 2:1. We knew we could do better
because as entrepreneurs we had done so. The competitive...
[PHOTO]
The architectural and decorative Southwestern theme of Rattlesnake creates a
stimulating environment that offers not only high quality food and attentive
service, but also a sense of superior value and satisfaction to the guest.
<PAGE> 50
[2-PHOTOS]
One of the attributes of Rattlesnake Southwestern Grill's formula is the low
start-up cost for new restaurants. We take existing restaurant buildings and
tailor them to fit our image. The result is a dramatic contemporary restaurant
comparable in presentation to other major national theme restaurants.
...economic environment of the nineties set the tone for Rattlesnake's expansion
strategy. Waste and overspending were a thing of the past. Stategic planning
through the study of past mistakes and the experiences of others would lead to
a new direction in the nineties and beyond.
Rattlesnake's formula evolved through the study of the most positive and
innovative aspects of successful restaurant companies. We also took a balanced
look at the wasteful, questionable, even high risk practices which exist in the
industry and incorporated the lessons learned into our plan. The Rattlesnake
strategy is founded upon these priciples:
(1) ACQUIRE EXISTING RESTAURANTS. Rather than directly compete in the current
feeding frenzy for prime restaurant locations, Rattlesnake has adopted the
strategy of acquiring pre-existing locations and converting them into
Rattlesnake Southwestern Grills. Through flexible application of cosmetic rather
than structural change, Rattlesnake conversions have been rapid and low cost.
The logic is that these restaurants are good, prefitted sites and become
available for any number of reasons other than a poor location. Most often the
operator is retiring or was not prepared for the rigors and demands of the
business. Hence, they choose to move on. These locations don't usually appeal to
major companies who prefer raw ground, slab sites, mall locations and large
development properties. Our site selection process is based upon acquiring "B"
level sites in "A" level locales to create new restaurants at lower cost. The
fact is, that over 80% of the nation's restaurants are independent operations
and represent an extraordinary source of new sites for retrofit.
(2) USE EXISTING RESOURCES. There are considerable costs associated with the
industry practice of fitting out a restaurant from the ground up, or "gutting"
and rebuilding a facility. By acquiring existing restaurant properties, the
basic and most costly elements are already in place, such as kitchen, bathrooms,
tiles, heating and air conditioning, kitchen ventilation systems, sufficient
electrical power, adequate plumbing and drainage.
4-5
<PAGE> 51
THE RATTLESNAKE HOLDING COMPANY, INC. 1995 ANNUAL REPORT
-------------------------
In addition the added benefits of a site having operated as a restaurant
shortens or eliminates obstacles in the permitting process. Local planning,
zoning and building departments have already granted permits for a restaurant
use. Liquor permits are in place and the property conforms with environmental
requirements. These elements shorten the time and reduce the cost associated
with the conversion and opening within six to eight weeks as opposed to eight to
twelve months for major competitors.
(3) REMAIN FLEXIBLE. Rather than waste time or money in making a "square peg fit
into a round hole," Rattlesnake's approach to fabricate a less costly "peg" to
fit into the pre-existing and more costly "hole." While certain elements of the
Rattlesnake are essential to the concept, such as the custom mosaic rattlesnake
bar and menu, these too are adapted and adjusted to fit into the individual
environment of each new facility.
(4) THE ECONOMIC MODEL MUST WORK. In evaluating a location there is a
quantitative and qualitative examination which must be passed before acceptance.
Demographics, density of population, household income, traffic patterns, local
demand generators, etc., are evaluated. These factors are weighted against the
cost of acquisition, renovation, equipment, and pre-opening soft costs. Our goal
is to achieve a 4:1 sales to investment ratio and a completed restaurant at a
cost of under $100 per square foot.
We believe that the key to the success of any small company is in the
experience of its senior management.
William J. Opper, a 25-year veteran of the restaurant industry, has served
as Chairman of the Board and Chief Executive Officer of the Company since its
inception. Previously the principal owner of eight full service restaurants, he
has also served as President of each of Rattlesnake's subsidiaries since June
1992. As co-founder of the Company, Mr. Opper has spearheaded the concept
development with a vision of what the Rattlesnake should be.
David C. Sederholt, having owned his own restaurant in New York City for
eleven years, and serving in senior management for other companies, has
served as the President of the Company since March 1994, and has been Chief
Operating Officer of the Corporation and its subsidiaries since their
inception. Mr. Sederholt and Mr. Opper developed the Rattlesnake concept in
1991, with Mr. Sederholt being responsible for the creation and development of
the menu and operating systems as well as establishing a market identity for
the concept.
Peter C. Markatos joined the Company in 1993 as Executive Vice President in
charge of Operations, and new store development, after merging his long
successful restaurant in Yorktown Heights, NY with the Rattlesnake. His
expertise in real estate, construction and restaurant operations ensure
successful roll-out of the concept within our expansion criteria.
<PAGE> 52
[PHOTO]
[PHOTO]
Rattlesnake Southwestern Grill is a popular choice for families, couples,
singles, large parties... and just about anyone with an appetite for savory
American foods with a southwestern flavor.
[PHOTO]
Since its inception, Rattlesnake Southwestern Grills have been guided by a
vision of what casual dining could be and should be. At Rattlesnake
restaurants, there is the belief that casual dining should provide the highest
levels of comfort and quality while offering exceptional value. Rattlesnake
offers an excellent, unique alternative to the dining public.
<PAGE> 53
THE RATTLESNAKE HOLDING COMPANY, INC. 1995 ANNUAL REPORT
-------------------------
FREQUENTLY ASKED QUESTIONS...In our extensive travels throughout the U.S.,
Canada and Europe, we were asked many questions by investors and shareholders.
We'd like to answer some of those most often asked questions as they may be
on your mind as well...
Q. DO YOU PLAN TO OFFER FRANCHISES?
A. We will consider franchising after we reach approximately twenty
Company-owned restaurants. Our evaluation of franchising opportunities will take
place only after we have refined our concept and tightened our operating
formula.
Q. WHAT IS RATTLESNAKE'S MANAGEMENT GOAL FOR RESTAURANT UNIT PROFITS?
A. Restaurant cash flow, or EBIT/DA, is defined as gross restaurant sales minus
restaurant expenses (cost of food and beverages, payroll and benefits, occupancy
costs and related expenses). Our goal is to achieve an average cash flow to
revenue ratio of 15% at the unit level. Continuing our expansion strategy of low
cost acquisition and renovation will contribute to profitability by decreasing
depreciation and amorization expenses.
Q. ARE YOU MAKING PROGRESS TOWARD ATTAINING CORPORATE PROFITABILITY?
A. Yes. Of course, building the infrastructure of our Company, as we have
frequently pointed out, requires considerable investment. Our goal from the
outset has been to build Rattlesnake into a large publicly held casual dining,
theme restaurant chain. Importantly, we have not sacrificed this growth goal to
try to attain short term profitability. Also noteworthy is the restructuring
and reduction of $1.8 million in subordinated debt, which took place shortly
after the IPO.
Q. DO YOUR RESTAURANT MANAGERS GET INCENTIVES?
A. Yes. Restaurant General Managers can earn up to 6% of their units, EBIT/DA.
Profits and performance evaluations determine the full extent of the bonus.
Q. DO YOU HAVE A TRAINING FACILITY?
A. Yes. At our Hamden, Connecticut restaurant, we have, in conjunction with the
existing restaurant operation, established a training facility. We expect the
training function to become increasingly important as our rate of new
restaurant openings accelerates. We have, incidentally, renegotiated our lease
at Hamden, obtaining a considerable reduction in our rent. Furthermore, we are
using the Hamden unit as a base for off-premise catering.
<PAGE> 54
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
The following discussion of the results of operations and financial condition
should be read in conjunction with the Company's audited consolidated financial
statements and notes thereto.
Introduction
Rattlesnake Holding Company. Inc., is the parent corporation of six subsidiary
companies operating at individual restaurant locations, utilizing the unique
Rattlesnake Southwestern Grill concept. The following table identifies the six
operating locations and the date operations commenced at each of those
locations:
Operations
Commencement
Restaurant Locations Date
- -------------------- ----
Danbury, Connecticut August 1995
White Plains, New York June 1995
Fairfield, Connecticut July 1994
Yorktown Heights, New York April 1994
Hamden, Connecticut December 1993
South Norwalk, Connecticut June 1992
In its three years of operation, the Company has endeavored to establish the
foundation for future growth by opening six restaurants in clustered segments in
Connecticut, New York and New Jersey. To support its expansion strategy, the
Company has increased the size of its corporate staff and successfully completed
the Public Offering of its common stock on June 29, 1995. The Public Offering
generated net proceeds of $6,578,334, after deducting underwriters fees and
expenses and other costs, for the purpose of expansion, increased marketing
efforts and extinguishment of debt. The Company has succeeded in achieving the
initial phase of its expansion strategy by opening three additional restaurants
in fiscal 1995. The Company is proceeding with the opening of a new restaurant
in Flemington, New Jersey scheduled for November 1995. The first of the three
restaurants opened in 1995 was in Fairfield, Connecticut. The Company took over
the renovation in May 1994 and commenced operations six weeks later on July,
1994. The 5,520 square foot White Plains restaurant opened on June 10, 1995, six
weeks after the Company took possession of the property. The complete cost of
this location's renovation, leasehold improvements, equipment, furniture and
fixtures was approximately $200,000 exclusive of lease acquisition costs.
Danbury, a 7,152 square foot former Howard Johnson's, was completely converted
into a Rattlesnake Southwestern Grill within an eight week period after
receiving the Public Offering proceeds.
The Company's strategy of aggressive growth, utilizing a low cost restaurant
concept adaptable to different leasehold configurations in a short construction
timetable, has been accomplished consistently for the existing properties. The
Company has been able to identify numerous sites for potential development over
the next fiscal year; however, there can be no assurance that in the future the
Company will be able to continue to identify suitable locations or open new
restaurants on a consistent basis within the historical time frames or cost
levels.
As is traditional with the opening of new restaurant sites, the start up period
of 90 to 120 days reflects cost ratios at higher than normal operating levels.
The Company requires the presence of a training team consisting of seasoned
employees from the other restaurants during the startup period to train
inexperienced personnel. In addition, this lack of experience results in higher
food and beverage costs until the staff becomes expert in the use of Company
recipes and procedures. The Company's new restaurants can be expected to incur
above normal costs during the first three to four months of operation due to the
above mentioned factors. Achieving optimum performance as a mature restaurant
may require between twelve and twenty-four months.
As projected, the Company has progressively increased its corporate staff and
marketing efforts as integral components of its expansion program. These
increases have resulted in higher general and administrative expenses for fiscal
1995. For example, the Company has added positions in administration, accounting
and operations to react to the growth and in anticipation of the projected
expansion. In order to accommodate the growth in personnel, the Company added
additional office space. The Company has made further investments in its
computer systems to improve its point of sales and restaurant operations
information systems. The Company has also significantly increased its
promotional expenditures to support its new restaurant locations and has
expanded its marketing personnel.
The Company's restaurants have achieved market acceptance, with the continued
exception of the Hamden location which continues to perform below projected
levels despite continued efforts to achieve profitable operations. As part of
its efforts to improve the operational performance of the Hamden facility, the
Company continues to pursue its strategy to develop the facility into a center
for off-premise catering. Plans to utilize the unit as a central commissary will
parallel the development of the off-premise catering program in order to achieve
the economies afforded through cross utilization. Restaurant managers at the new
locations receive training at the Hamden facility and proposals have been
presented for the Company to provide vocational training under governmental
grants. Management will continue to evaluate the operating performance of Hamden
on an on-going basis throughout fiscal year 1996.
<PAGE> 55
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Effective June 30, 1994, the Company adopted a fiscal year end of June 30.
Previously, the year-end of the Company and its subsidiaries was December 31.
Fiscal year ended June 30, 1995 as compared with fiscal year ended June 30, 1994
GENERAL DISCUSSION
Gross restaurant sales increased 231% to $5,340,657 for the fiscal year ended
June 30, 1995 from $1,613,535 for the six months ended June 30, 1994. The
increase in gross restaurant sales resulted from the increase in the number of
restaurants operating during the period. On the restaurant store level,
operating earnings before interest, taxes, depreciation and amortization
(EBIT/DA) increased to $510,602 for fiscal year ended June 30, 1995, from
$196,402 for the six months ended June 30, 1994. For the fiscal year ended June
30, 1995, the Company generated a net loss of $2,758,371 as compared to a net
loss of $906,494 for the six months ended June 30, 1994, an increase of
$1,851,877 or 204%. The increased net loss was principally attributable to
several factors including a $527,938 increase in the amortization of debt
issuance costs and a $194,202 increase in interest expense, related to debt
issued during fiscal 1995. Additionally, selling, general and administrative
expenses for the fiscal year increased by $1,193,857 and is principally
attributable to investments in preparation for the implementation of the
Company's expansion strategy through an increase in corporate staff, increased
advertising and marketing expenditures, as well as other expenses associated
with opening new restaurants.
Restaurant operating profits, defined as excess of restaurant sales over
restaurant costs and expenses, were $119,516 for the fiscal year ended June 30,
1995, as compared with $53,247 for the six months ended June 30, 1994. This
increase was principally attributable to the continued expansion of the Company
and maturity of certain restaurant locations, offset by lower operating results
for newly opened restaurants. Of the Company's more mature units, only the
Hamden location continues to generate operating losses. During fiscal 1995, the
Company opened two new restaurants (Fairfield, July 1994 and White Plains, June
1995) and had one restaurant reach its first anniversary of operation (Yorktown,
April 1994). As is traditional with the opening of new restaurant sites, the
start up period of 90 to 120 days reflects cost ratios at higher than normal
operating levels. The lack of experience of the new personnel, results in higher
food and beverage costs until the staff becomes expert in the use of Company
recipes and procedures. Additionally, promotional expenditures typically are
higher than normal during the initial period of a restaurant opening. The
Company's new restaurants can be expected to incur above normal costs during the
first three to four months of operation due to the above mentioned factors.
Achieving optimum performance as a mature restaurant takes a minimum of twelve
months. Additionally, management believes that individual restaurant site sales
should improve prospectively as market acceptance for new restaurants generally
range between 18 to 24 months.
RESTAURANT SALES
Gross restaurant sales increased 231% to $5,340,657 for the fiscal year ended
June 30, 1995 from $1,613,535 for the six months ended June 30, 1994. The
increase in restaurant sales resulted from the increase in the number of
restaurants operating during the fiscal 1995 period. At June 30, 1994, the
Company operated three restaurants, as compared to the five restaurants operated
at June 30, 1995.
FOOD AND BEVERAGE COSTS
Food and beverage costs remained relatively constant as a percentage of gross
restaurant sales at 32.2% in fiscal year ended June 30, 1995 as compared to
32.1% for the six months ended June 30, 1994, despite the opening of three
facilities in fiscal year 1995 and the typically higher costs associated with
new facilities. The cost of food and beverage sales increased to $1,719,457 for
the fiscal year ended June 30, 1995, as compared with $517,613 for the six
months ended June 30, 1994. The stability of the food and beverage cost rates
was attributable to enhanced controls, revised recipes, improved inventory
utilization, increased purchasing efficiencies and improved training methods,
despite increases in the cost of beef, fish and produce in fiscal 1995.
RESTAURANT SALARIES AND FRINGE BENEFITS
Restaurant salaries and fringe benefits, which consist of direct salaries of
restaurant managers, hourly employee wages and related fringe benefits,
increased to $1,804,129 for the fiscal year ended June 30, 1995 as compared to
$541,803 for the six months ended June 30, 1994. This increase is attributable
to the opening of additional restaurants during fiscal 1995. As a percentage of
restaurant sales, these costs increased to 33.8% in fiscal 1995 from 33.6% in
fiscal 1994, principally due to additional restaurant management and operating
personnel in newly opened restaurants. The Company believes that the management
component of restaurant salaries should moderate in the future, as existing
restaurant supervisory personnel can manage the anticipated growth in
restaurants in fiscal 1996.
Occupancy and Related Expenses
Occupancy and other related expenses, which include linen, repairs, maintenance,
utilities, rent, insurance and other occupancy related expenses, increased to
$1,306,469 for the fiscal year ended June 30, 1995 from $357,717 for the six
months ended June 30, 1994. As a percentage of gross restaurant sales, these
costs increased to 24.5% in fiscal 1995 from 22.2% in fiscal 1994. The increase
can be attributed primarily to rents paid for additional restaurants opened
during 1995 and those operating the full fiscal year. Company management
estimates that its occupancy cost ratios should moderate in future periods, as a
result of continued modification of the Rattlesnake Southwestern Grill
restaurant concept and improved site selection.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, decreased as a percentage of gross restaurant sales
to 7.3% for the fiscal
10 - 11
<PAGE> 56
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
LIQUIDITY
Prior to the completion on June 29, 1995 of an initial public offering of
1,495,000 shares of common stock, the Company had financed the opening of
additional restaurants and its initial operating losses principally through the
private placement of a $1,800,000 unit offering, consisting of 9% subordinated
notes and 105,768 shares of common stock. The subordinated notes matured one
year from the date of issuance, subject to a 180 day extension period
exercisable at the option of the Company. The subordinated notes bore interest
at 9%, commencing on the date of issue, increasing to 11% for the 180 day
extension period, with all interest and principal payable at the maturity of the
subordinated notes. The notes originally matured at various dates from November
1994 through September 1995. The Company subsequently exercised its option to
extend the maturity dates.
During December 1994 and January 1995, the Company received $500,000 in proceeds
from a new unit offering, each unit consisting of a $20,000 principal amount
six-month 12% convertible subordinated note and 3,650 common stock purchase
warrants exercisable at $11.80 per share until March 1997 (the "Units"). The due
date of these notes was extended for six months in consideration of a reduction
of the conversion price and warrant exercise price to $4.00 and $4.50,
respectively, and an increase in the number of warrants per Unit to 7,300.
On April 5, 1995, the Company entered into an agreement to continue its
participation in a discounted meal program in exchange for $100,000 in temporary
financing.
During May and June 1995, the Company sold to four investors an aggregate
$510,000 principal amount of 12% convertible promissory notes, which were
automatically converted into shares of common stock at the rate of $4.00 per
share on June 29, 1995.
Additional financing sources included financing provided by the sellers of
restaurant locations and temporary short-term financing, which was principally
provided by related parties.
On June 29, 1995, the Company completed an initial public offering of 1,300,000
shares of its common stock and 195,000 additional shares pursuant to the
exercise of the over-allotment option by the Underwriter at $5.50 per share. The
net proceeds of the offering, after deducting underwriters' commissions and fees
of $986,700 and offering costs of $657,466, was $6,578,334. The proceeds of the
offering were received on July 7, 1995.
In July 1995, the Company redeemed $225,000 of the notes and restructured the
remaining principal amount outstanding of $1,575,000. This redemption was
partially funded by a $50,000 note payable issued in June 1995 by the Company,
with interest at 9%, and repaid in July 1995, together with 10,000 shares of
common stock. Each $25,000 principal amount of Notes was exchanged as follows:
(i) $8,334 paid in August and September 1995 (the "First Payment") (aggregating
$516,667); and (ii) a 9% $8,333 Series A Note (the Series A Notes) due 13 months
after the first payment and a 9% $8,333 Series B Note (the Series B Notes) due
five years after the first payment were issued to each Noteholder with the First
Payment. Each Series B Note is convertible into common stock thirteen months
after issuance at a conversion price equal to $3.85 per share, with piggy-back
registration rights for the shares underlying the Series B Notes. Each Series B
Note is redeemable with 30 days prior written notice at any time after the
closing bid price of the common stock is 150% of the conversion price for the
ten consecutive trading days ending within 15 days of the date of notice of
redemption.
In July 1994, a $50,000 note payable to a related party was exchanged, together
with accrued interest for a $52,500 note payable bearing interest at 9%, and was
satisfied in August 1995.
The Company's cash position increased by $2,914 during the year ended June 30,
1995, principally as a result of cash used in operating activities of $85,876
and cash used in investing activities of $464,690, offset by cash generated from
financing activities of $555,480.
Net cash used in operating activities consisting primarily of the $2,758,371 net
loss for the year, offset by depreciation and amortization of $1,420,314 and
increases in accounts payable and accrued expenses.
The Company utilized $464,690 for investing activities, principally for capital
expenditures and lease acquisition costs.
The Company generated $555,480 in cash from financing activities during the year
ended June 30, 1995, principally consisting of additional debt financings.
In January 1995, the Company entered into an agreement to purchase the lease of
a new facility located in Danbury, Connecticut for $35,000 which was paid upon
consummation of the lease purchase agreement. The Company incurred additional
costs associated with this location approximating $500,000 which were paid
primarily from the proceeds of the IPO.
In April 1995, the Company purchased certain leasehold assets of a new facility
located in White Plains, New York for $500,000, of which $30,000 was paid on
signing of the contract, $50,000 was paid on closing and $120,000 was paid from
the proceeds of the IPO. The Company has also entered into a 15 year lease with
an initial monthly rent of $7,500 plus insurance, taxes and maintenance.
In September 1995, the Company entered into an asset purchase agreement under
which it will acquire furniture, fixtures and other assets of a restaurant
located in Flemington, New Jersey for $365,000, consisting of $265,000 in cash
and a $100,000 five year note, bearing interest at prime plus 1%. The Company
also entered into a related seven year lease agreement for this property, with
minimal annual rentals of $80,400, with contingent rental provisions based upon
a percentage of gross sales.
<PAGE> 57
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
At June 30, 1995, the Company has available a net operating loss carryforward
(NOL) for Federal and State income tax purposes of approximately $4,200,000,
which are available to offset future taxable income, if any, before 2010. In
accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a
change in more than 50% in the beneficial ownership of the Company within a
three-year period (an "Ownership Change"), will place an annual limit on the
Company's ability to utilize its existing NOL carryforwards to offset taxable
income in current and future periods. The Company believes that an ownership
change has occurred and will cause the annual limitations to apply. The Company
has not determined what the maximum annual amount of taxable income is that can
be reduced by the NOL carryforwards.
The Company initially utilized the proceeds from its June 1995 initial public
offering of common stock to pay approximately $750,000 of the restricted 9%
subordinated notes, $200,000 relating to the acquisition of the White Plains,
New York facility, $265,000 relating to the acquisition of the Flemington, New
Jersey facility and to satisfy short-term indebtedness, principally payable to
related parties.
The Company estimates that it will expend approximately $2,000,000 in the
development of six additional Rattlesnake Southwestern Grill restaurants in
fiscal 1996. Additionally, the Company anticipates significantly increased
expenditures in marketing, advertising and promotional programs. Future debt
service requirements include the potential payment of $500,000 if the 12%
promissory notes are not converted into common stock by December 1995 and
approximately $600,000 of the 9% subordinated notes in 1996. The Company may
consider entering into joint ventures for restaurants, whereby the Rattlesnake
Southwestern Grill concept will be implemented in locations where the joint
venture would provide a portion of the financing for the new facility. The
Company also has an option to purchase the building housing the Fairfield
facility for $425,000, of which $125,000 must be paid upon the exercise of the
option, and has an option to purchase the building at the Danbury facility for
$1,365,000.
The Company is currently negotiating with several financial institutions to
establish a credit line facility. The Company believes that the combination of
the proceeds of the Public Offering and improved operating results will provide
sufficient liquidity to fund current operations and debt service requirements,
as well as implementing the Company's expansion plan in fiscal 1996.
SEASONALITY AND EXTERNAL INFLUENCES ON QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. Historically, the
Company's highest sales levels are in the quarters ending June 30 and September
30. In addition, quarterly results have been and, in the future are likely to
be, substantially affected by the timing of new restaurant openings. Because of
the seasonality of the Company's business and the impact of new restaurant
openings, results for any quarter are not necessarily indicative of the results
that may be achieved for a full fiscal year and cannot be used to indicate
financial performance for the entire year.
EFFECTS OF INFLATION AND CHANGING PRICES
The impact of general inflation in the Company's operations has not been
significant to date and the Company believes inflation will continue to have an
insignificant impact on the Company.
12 - 13
<PAGE> 58
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
--------
1995 1994
---- ----
<S> <C> <C>
Assets
Current assets:
Cash $ 28,316 $ 25,402
Accounts receivable 27,138 16,426
IPO receivable 7,260,800 --
Inventory 91,334 73,437
Pre-opening costs 18,081 37,515
Debt issuance costs 72,114 802,230
Prepaid expenses and other current assets 9,555 16,891
------------ ----------
Total current assets 7,507,338 971,951
Property and equipment, net 1,082,873 969,583
Intangible assets, net 1,499,478 1,079,510
Other assets 203,538 62,932
------------ ----------
$ 10,293,227 $ 3,083,976
------------ ----------
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of notes payable 1,530,572 1,661,958
Accounts payable 754,186 253,406
Accrued expenses 805,422 127,988
Other current liabilities 350,542 147,999
------------ ----------
Total current liabilities 3,440,722 2,191,351
Notes payable, net of current maturities 1,768,301 465,107
------------ ----------
Total liabilities 5,209,023 2,656,458
------------ ----------
Stockholders' equity:
Preferred stock, $.10 par value, 5,000,000
shares authorized, none issued and outstanding -- --
Common stock, $.001 par value-
20,000,000 shares authorized, 2,558,565
and 905,493 issued and outstanding,
in 1995 and 1994, respectively 2,559 905
Additional paid-in capital 9,279,649 1,866,246
Accumulated deficit (4,198,004) (1,439,633)
------------ ----------
5,084,204 427,518
------------ ----------
Commitments and contingencies
$ 10,293,227 $ 3,083,976
------------ ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 59
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six months
Year ended ending Year ended
June 30, June 30, December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Restaurant sales $ 5,340,657 $ 1,613,535 $ 1,337,042
Costs and expenses:
Cost of food and beverage sales 1,719,457 517,613 489,051
Restaurant salaries and fringe benefits 1,804,129 541,803 383,455
Occupancy and related expenses 1,306,469 357,717 174,654
Depreciation and amortization expense 391,286 143,155 73,528
----------- ----------- -----------
Total restaurant costs and expenses 5,221,341 1,560,288 1,120,688
Selling, general and administrative 1,583,458 389,601 434,310
Amortization of debt issuance costs 1,027,751 499,813 90,655
Interest expense 264,279 70,077 41,341
Miscellaneous expenses 2,199 250 9,766
----------- ----------- -----------
Total expenses 8,099,028 2,520,029 1,696,760
----------- ----------- -----------
Net loss $(2,758,371) $ (906,494) $ (359,718)
----------- ----------- -----------
Net loss per share $ (2.46) $ (0.84) $ (0.21)
----------- ----------- -----------
Weighted average number of common and
common equivalent shares outstanding 1,122,678 1,074,513 1,704,513
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
14 - 15
<PAGE> 60
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months
Year ended ending Year ended
June 30, June 30, December 31,
1995 1994 1993
------------ ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,758,371) $(906,494) $(359,718)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,420,314 638,306 164,183
Stock issued for services provided -- -- 20,000
Issuance of stock in connection with debt
restructuring 55,000 -- --
Changes in assets and liabilities, net of
acquisition:
Increase in accounts receivable (10,712) (11,637) (1,461)
Increase in inventory (17,897) (41,016) (14,394)
(Increase) decrease in prepaids and other assets (31,445) (7,099) 5,093
Increase in pre-opening cost (21,697) (12,379) (72,971)
Increase in accounts payable and accrued expenses 1,178,214 231,580 20,549
Increase in other current liabilities 100,718 63,561 9,818
------------ ---------- ----------
Net cash used in operating activities (85,876) (45,178) (228,901)
------------ ---------- ----------
Cash flows from investing activities:
Capital expenditures (314,242) (446,623) (340,094)
Payments for acquisitions of leaseholds and
lease costs (150,448) (105,000) (100,000)
Payments for acquisition, net of cash acquired -- (94,038) --
------------ ---------- ----------
Net cash used in investing activities (464,690) (645,661) (440,094)
------------ ---------- ----------
Cash flows from financing activities:
Net proceeds from issuance of stock -- 25,000 75,000
Payments for purchases of treasury stock -- -- (30,000)
Proceeds from issuance of convertible notes 510,000 -- --
Net proceeds from private placement 383,263 532,686 709,026
Proceeds from borrowings 484,250 255,000 247,330
Principal repayment of borrowings (141,567) (208,083) (233,044)
IPO costs (682,466) -- --
------------ ---------- ----------
Net cash provided by financing activities 553,480 604,603 768,312
------------ ---------- ----------
Net increase (decrease) in cash 2,914 (86,236) 99,317
Cash, beginning of period 25,402 111,638 12,321
------------ ---------- ----------
Cash, end of period $ 28,316 $ 25,402 $ 111,638
------------ ---------- ----------
Cash paid during the period for:
Interest $ 57,686 $ 10,086 $ 32,352
------------ ---------- ----------
Income taxes $ 2,199 $ 750 $ 250
------------ ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 61
Consolidated Statements of Stockholders' Equity
Year ended June 30, 1995, six months ended June 30, 1994 and year ended December
31, 1993
<TABLE>
<CAPTION>
Addi- Total
tional Accum- stock-
Common Common paid-in Treasury ulated holders
shares stock capital stock Deficit equity
--------- -------- ----------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 721,702 $ 722 $ 69,278 $ -- $(173,421) $(103,421)
Purchase of treasury stock -- -- -- (25,000) -- (25,000)
Proceeds received from issuance of
common stock and sale of
treasury stock -- -- 40,625 9,375 -- 50,000
Issuance of treasury stock for services -- -- 16,875 3,125 -- 20,000
Issuance of stock in connection
with acquisition of leaseholds -- -- 311,700 12,500 -- 324,200
Proceeds received from issuance
of common stock 4,452 4 24,996 -- -- 25,000
Net proceeds received from issuance
of common stock in connection
with private placement 130,120 130 638,669 -- -- 638,799
Net loss -- -- -- -- (359,718) (359,718)
--------- -------- ----------- ------- ------------ -----------
Balance, December 31, 1993 856,274 856 1,102,143 -- (533,139) 569,860
Issuance of stock in connection
with acquisition of leaseholds 12,466 12 150,488 -- -- 150,500
Proceeds received from issuance
of common stock 2,226 2 24,998 -- -- 25,000
Net proceeds received from
issuance of common stock in
connection with private placement 34,527 35 588,617 -- -- 588,652
Net loss -- -- -- -- (906,494) (906,494)
--------- -------- ----------- ------- ------------ -----------
Balance, June 30, 1994 905,493 905 1,866,246 -- (1,439,633) 427,518
Issuance of stock in connection
with refinancing of debt 10,000 10 54,990 -- -- 55,000
Net proceeds received from Initial
Public Offering 1,495,000 1,495 6,576,839 -- -- 6,578,334
Net proceeds received from
issuance of common stock in
connection with private placement 20,570 21 253,452 -- -- 253,473
Conversion of debt to equity 127,500 128 509,872 -- -- 510,000
Issuance of warrants in connection
with private placement of debt -- -- 18,250 -- -- 18,250
Net loss -- -- -- -- (2,758,371) (2,758,371)
--------- -------- ----------- ------- ------------ -----------
Balance, June 30, 1995 2,558,563 $ 2,559 $ 9,279,649 $ -- $(4,198,004) $ 5,084,204
--------- -------- ----------- ------- ------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
16 - 17
<PAGE> 62
Notes to Consolidated Financial Statements
June 30, 1995, June 30, 1994 and December 31, 1993
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
(a) Description of Business
The Rattlesnake Holding Company, Inc. and subsidiaries (the Company), currently
operates six restaurants in White Plains and Yorktown Heights, New York and
Hamden, Fairfield, South Norwalk, and Danbury, Connecticut and plans to open two
additional restaurants in 1995. Company restaurants feature casual dining
utilizing a southwestern theme.
(b) Organization
On August 31, 1993, the Company entered into a merger agreement with Rattlesnake
Ventures. Inc. (Ventures), in which the shareholders of Ventures exchanged each
share of Ventures common stock for 40,525 shares of $0.01 par value common stock
of the Company. Ventures was established on March 15, 1992 for purposes of
operating a Rattlesnake restaurant in South Norwalk, Connecticut. The
transaction has been accounted for in a manner similar to a pooling of interests
and the accompanying consolidated financial statements are presented as if the
merger was effective March 15, 1992.
In December 1994, an amendment to the Company's Certificate of Incorporation was
approved and adopted to (i) effect a 1:2.8077 reverse split of the Company's
common stock (ii) change the par value of the Company's common stock from $.01
to $.001 per share (iii) increase the authorized capital stock of the Company to
20,000,000 shares of $.001 par value common stock and 5,000,000 shares of $0.10
par value preferred stock, and (iv) change the Company's fiscal year end from
December 31st to June 30th. In March 1995, an additional reverse common stock
split of 1:2 was approved by the Company's Board of Directors. All references in
the accompanying consolidated financial statements and notes thereto relating to
share and per share data have been adjusted retroactively to reflect the stock
splits.
On June 29, 1995, the Company completed an initial public offering (IPO) of
1,300,000 shares of its common stock and 195,000 additional shares pursuant to
the exercise of the over-allotment option by the underwriter at $5.50 per share,
The net proceeds of the offering, after deducting underwriters' commissions and
fees of $986,700 and offering costs of $657,466, was $6,578,334. The proceeds
from this offering will be used for working capital, marketing, and advertising,
the implementation of the Company's expansion strategy and to repay subordinated
debt (note 8). The underwriter received warrants to purchase 130,000 shares of
common stock at a price of 120% of the offering price for a term of four years
commencing from the date of the offering. Upon the closing of the offering, the
Company executed a three year consulting agreement, under which the underwriter
will receive $30,000 annually for providing financial advisory and other
consulting services.
(c) Financing Arrangements
The Company had previously financed its operations primarily through the private
placement of a $1,800,000 unit offering, consisting of 9% subordinated notes and
105,768 shares of common stock, a $500,000 unit offering consisting of 12%
convertible subordinated notes and 182,500 common stock purchase warrants and
$510,000 of 12% subordinated notes, which were required to be converted into
127,500 shares of common stock upon the consummation of the IPO. Effective June
29, 1995 the Company completed an initial public offering, the conversion of the
$510,000 subordinated notes and subsequently completed a restructuring of the
$1,800,000 subordinated notes (Note 8).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements included the accounts of the Company and
its wholly-owned subsidiaries. The consolidated financial statements have been
presented on a historical cost basis for the consolidated statements of
operations. All significant inter-company balances and transactions have been
eliminated in consolidation.
(b) IPO Receivable
On June 29, 1995, the Company completed an initial public offering of 1,495,000
shares of common stock. The proceeds of the offering, net of underwriters
commissions and fees, was $7,260,800 and is recorded as IPO receivable at June
30, 1995. These proceeds were subsequently received on July 7, 1995.
(c) Accounts Receivable
Accounts receivable consist principally of bank credit card accounts receivable.
(d) Inventories
Inventories consist primarily of restaurant food items and supplies and are
stated at the lower of cost or market value. Cost is determined using the
first-in, first-out method.
(e) Pre-Opening Costs
Certain costs relating to hiring and training costs of opening new restaurants
are capitalized and amortized over a twelve month period commencing upon
restaurant opening. At June 30, 1995 and June 30, 1994, such costs amounted to
$18,081 and $37,515, respectively.
(f) Debt Issuance Costs
Debt issuance costs are principally associated with the subordinated notes
component of the Company's $1,800,000 unit offering, are capitalized and
amortized ratably over the
<PAGE> 63
initial one year term of the debt. Accumulated amortization at June 30, 1995 and
June 30, 1994 was $1,609,083 and $590,468, respectively. Amortization expense
was $1,018,625, $499,813 and $90,655 for the year ended June 30, 1995, the six
month period ended June 30, 1994 and the year ended December 31, 1993,
respectively.
(g) Property and Equipment
Property and equipment is stated at cost. Depreciation is calculated primarily
on the straight-line basis over the estimated useful lives of the assets.
Leasehold improvements are amortized over the shorter of the estimated useful
life or the lease term of the related asset. The estimated useful lives are as
follows:
Restaurant equipment 5-7 years
Furniture and fixtures 5-7 years
Leasehold improvements 5-15 years
(h) Intangible Assets
Intangible assets consist principally of costs to acquire leased facilities.
These leasehold costs are amortized over the life of the related lease,
generally 5 to 15 years. Accumulated amortization at June 30, 1995 and June 30,
1994 was $194,939 and $44,459, respectively. Amortization expense was $150,480,
$33,336 and $7,025 for the year ended June 30, 1995, the six months ended June
30, 1994 and the year ended December 31, 1993, respectively.
(i) Other Assets
The Company utilizes an outside service to provide financing and promotional
activities. The costs relating to these activities are capitalized and are being
amortized over the repayment period.
(j) Reclassification
Certain reclassifications of prior period balances have been made to conform
with the fiscal 1995 presentation.
3. Restaurant Acquisition
In November 1993, the Company entered into an agreement to acquire 100% of the
outstanding common stock of Pen-Z Corp. (Pen-Z). This transaction was completed
in February 1994. Pen-Z operated a leased restaurant facility in Yorktown
Heights, New York. Terms of the acquisition included $100,000 in cash, a
$300,000 note payable and 36,084 shares of common stock. Based upon the results
of an independent appraisal, the stock was valued at $324,200 at the time of
issuance. The acquisition has been accounted for as a purchase transaction.
Pursuant to the terms of this transaction, the Company entered into a lease
agreement with a trust of the former 100% shareholder of Pen-Z to lease the
facility for a ten year period, with a five year renewal option and acquired
certain restaurant equipment from the trust for a $100,000 note payable.
4. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30,
--------
1995 1994
---------- ---------
<S> <C> <C>
Restaurant equipment $ 458,006 $ 369,866
Furniture and fixtures 262,105 171,817
Leasehold improvements 700,462 564,648
---------- ---------
1,420,573 1,106,331
Less accumulated depreciation
and amortization (337,700) (136,748)
---------- ---------
$1,082,873 $ 969,583
---------- ---------
</TABLE>
Related depreciation and amortization expenses were $200,592, $71,688 and
$56,234 for the year ended June 30, 1995, the six months ended June 30, 1994 and
the year ended December 31, 1993.
5. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
June 30,
1995 1994
---------- ---------
<S> <C> <C>
Deposits $ 38,781 $ --
Promotional meal programs 164,757 62,932
---------- ---------
$ 203,538 $ 62,932
---------- ---------
</TABLE>
6. Capital Structure
As more fully described in note 1(b), the Company entered into a merger
agreement on August 31, 1993 and amended its Certificate of Incorporation in
December 1994 to increase the authorized capital stock and effect a 1:2.8077
reverse stock split. In March 1995, an additional 1:2 reverse common stock split
was approved by the Company's Board of Directors.
To date, the Board of Directors has not declared any dividends on common stock.
The Board of Directors has the authority to establish the specific provisions of
the preferred stock, i.e., liquidation rights, dividend parameters, at the date
of issuance.
<PAGE> 64
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
7. Notes Payable
Notes payable consists of the following:
<TABLE>
<CAPTION>
June 30,
1995 1994
---------- ---------
<S> <C> <C>
Subordinated notes payable due at various dates in fiscal 1995 and 1996, with interest
at 9% (11% for the extension period) (including $175,000 held by a related party) $1,800,000 $1,400,000
Notes payable to a related party, due on demand with interest at 15% - 50,000
Note payable to related party, with interest of 9%, paid on August 17, 1995 52,500 -
Note payable to related party, with interest of 12%, paid on December 21, 1994 - 20,000
Note payable to related party, with interest of 12% paid on January 12, 1995 - 10,000
Subordinated 12% convertible notes payable, net of $9.125 unamortized discount,
due on December 10, 1995 490,875 -
Note payable to shareholder relating to the acquisition of Pen-Z Corp., payable in
monthly payments of $2,700 and $2,998 at June 30, 1995 and 1994 with interest
at 1% over prime (9.50% and 8.75% at June 30, 1995 and June 30, 1994
respectively) through May 2009 294,186 299,189
Note payable relating to acquisition of leasehold, due in monthly installments of
$1,500 through January 1996 with interest at 5% 11,223 29,549
Note payable for the purchase of furniture and equipment, due in monthly installments
of $1,292 including interest at 21.6% through March 1996 10,701 21,112
Note payable relating to acquisition of leasehold, due in monthly installments of $1,436,
including principal and interest at 8.5%, paid on July 18, 1995 38,660 51,155
Note payable to a related party, due in monthly installments of $2,076, including
principal and interest at 9%, paid on July 21, 1995 43,522 58,686
Note payable to a related party, due in monthly installments of $1,270, including
principal and interest at 18% through February 1998 32,081 40,681
Notes payable to a related party, due in monthly installments of $1,050, including
principal and interest at 12%, paid on August 1, 1995 7,063 16,963
Note payable to a stockholder relating to purchase of furniture and equipment, due
in monthly installments of $900 and $999 at June 30, 1995 and 1994, respectively,
including principal and interest at prime plus 1% through 2009 98,063 99,730
Note payable relating to acquisition of leasehold, non-interest bearing, paid in August 1994 - 30,000
Note payable relating to acquisition of lease with interest of 8% due on June 30, 1995
and paid on July 14, 1995 120,000 -
Note payable relating to acquisition of lease, due on monthly installments of $2,867,
including principal and interest at 8% through July 2010. $300,000 -
---------- ---------
3,298,875 2,127,065
Less current maturities 1,530,572 1,661,953
---------- ---------
$1,768,301 $ 465,107
=========== =========
</TABLE>
Notes payable to shareholders and other related parties (Company officers and
directors) were $1,002,414 and $770,249 at June 30, 1995 and 1994, respectively.
In July 1994, a $50,000 note payable to a related party was exchanged, together
with accrued interest for a $52,500 note payable bearing interest at 9%, and was
satisfied in August 1995.
As indicated in note 8, the Company restructured the terms of the $1,800,000
subordinated notes payable in July 1995. At June 30, 1995, the classification of
long-term debt reflects the restructured payment terms of the aforementioned
debt,
Maturities of these notes is as follows:
June 30:
<TABLE>
<S> <C>
1996 $1,530,572
1997 577,279
1998 29,617
1999 22,016
2000 23,975
Thereafter 1,115,414
----------
$3,298,873
----------
</TABLE>
<PAGE> 65
8. Financing Arrangements
Commencing in November 1993, the Company sold through a private placement a
$1,800,000 unit offering, with each $25,000 unit consisting of 1,469 shares of
common stock and a $25,000 subordinated note. The subordinated notes mature in
one year from the date of issuance, subject to a 180 day extension period,
exercisable at the option of the Company. The subordinated notes bear interest
at 9%, commencing on the date of issue, increasing to 11% for the 180 day
extension period, with all interest payable at the maturity of the subordinated
notes. The underwriter of the private placement's compensation arrangement
included the receipt of 82,367 shares of common stock and a 9.33% commission.
The value of the common stock issued to the underwriter was determined by an
independent appraisal, based upon the value of the stock at the various dates in
which the units were sold, ranging between $7.40 and $12.46 per share. Debt
issuance costs were calculated based upon the relative proportional value of the
common stock and subordinated notes payable. At June 30, 1995 and June 30, 1994,
the Company had outstanding $1,800,000 and $1,400,000, respectively, of the unit
offering
In July 1995, the Company redeemed $225,000 of the notes and restructured the
remaining principle amount outstanding of $1,575,000. This redemption was
partially funded by a $50,000 note payable issued in June 1995 by the Company,
with interest at 9%, and repaid in July 1995, together with 10,000 shares of
common stock, valued at the IPO price of $5.50 per share. The value of the
common stock was recorded as interest expense by the Company. Each $25,000
principal amount of Notes was exchanged as follows: (i) $8,334 paid in August
and September 1995 (the "First Payment"); and (ii) a 9% $8,333 Series A Note
(the Series A Notes) due 13 months after the first payment, and a 9% $8,333
Series B Note (the Series B Notes) due five years after the first payment were
issued to each Noteholder with the First Payment. Each Series B Note is
convertible into common stock thirteen months after issuance at a conversion
price equal to 70% of the initial public offering price of the common stock
sold, with piggy-back registration rights for the shares underlying the Series B
Notes. Each Series B Note is redeemable with 30 days prior written notice at any
time after the closing bid price of the common stock is 150% of the conversion
price for the ten consecutive trading days ending within 15 days of the date of
notice of redemption.
During December 1994 and January 1995, the Company received $500,000 in proceeds
from a new unit offering, each unit consisting of a $20,000 principal amount
six-month 12% convertible subordinated note and 3,650 common stock purchase
warrants exercisable at $11.80 per share until March 1997 (the "Units"). The due
date of these notes was extended to December 10, 1995 in consideration of a
reduction of the conversion price and warrant exercise price to $4.00 and $4.50,
respectively and an increase in the number of warrants per Unit to 7,300. The
value of the warrants, $0.10 per share was determined by an independent
appraisal and has been recorded as a debt discount and additional paid in
capital.
During May and June 1995, the Company sold $510,000 12% subordinated debt,
automatically convertible into shares of Common Stock at the rate of $4.00 per
share upon the effective date of the initial public offering.
9. Accrued Expenses and Other Liabilities
(a) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
June 30,
--------
1995 1994
---- ----
<S> <C> <C>
Other $227,370 $ 26,785
Interest payable 207,787 59,991
Professional fees 191,421 -
Accrued payroll 178,844 41,212
-------- --------
$805,422 $127,988
-------- --------
</TABLE>
(b) Other Liabilities
The Company has entered into a marketing agreement whereby it receives temporary
financing in exchange for participating in a discounted price meal program. At
June 30, 1995 and June 30, 1994, the balances outstanding under this program
were $350,542 and $147,999, which are guaranteed by certain officers and
directors of the Company, and are included in other liabilities in the
accompanying consolidated balance sheets.
10. Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.109, "Accounting for Income Taxes".
SFAS 109 requires a change from the deferred method of accounting for income
taxes of APB Opinion 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company
adopted the provisions of SFAS 109 in 1992.
There was no income tax expense for any period presented due to losses incurred
by the Company.
20 - 21
<PAGE> 66
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at June 30, 1995 and
1994 are presented below:
<TABLE>
<CAPTION>
June 30,
--------
1995 1994
---- ----
Deferred tax assets:
<S> <C> <C>
Net operating loss carry forward $1,103,000 $589,000
---------- --------
Total gross deferred tax assets 1,103,000 589,000
Less valuation allowance 1,013,000 578,000
---------- --------
Net deferred tax assets 90,000 11,000
---------- --------
Deferred tax liabilities:
Depreciation and amortization 90,000 11,000
---------- --------
Net deferred tax liability 90,000 11,000
---------- --------
$ -- $ --
---------- --------
</TABLE>
The valuation allowance for deferred tax assets as of June 30, 1995 and June 30,
1994 was $1,013,108 and $578,000, respectively. The change in the total
valuation allowance for the year ended June 30, 1995, the six months ended June
30, 1994 and the year ended December 31, 1993 was $435,000, $359,000 and
$219,000, respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which the net operating losses and temporary differences
become deductible. Management considers projected future taxable income and tax
planning strategies in making this assessment. In order to fully realize the
deferred tax asset, the Company will need to generate future taxable income of
approximately $2,758,000. At June 30, 1995 and June 30, 1994, the Company has
net operating loss carry forwards for Federal and State income tax purposes of
approximately $4,200,000 and $1,400,000, respectively (the NOL carry forwards),
which are available to offset future taxable income, if any, through 2010.
Losses for income tax purposes for the year ended June 30, 1995, six month
period ended June 30, 1994 and the year ended December 31, 1993 were
approximately $2,758,000, $906,000, and $360,000 respectively. Based upon the
limited operating history of the Company and losses incurred to date, management
believes that the value of the deferred tax asset is impaired and has fully
reserved the deferred tax asset.
In accordance with Section 382 of the Internal Revenue Code of 1986, as amended,
as it applies to the NOL carry forwards, a change in more than 50% in the
beneficial ownership of the Company within a three-year period (an "Ownership
Change") will place an annual limitation on the Company's ability to utilize its
existing NOL carry forwards to offset United States Federal taxable income in
future years. Generally, such limitation would be equal to the value of the
Company as of the date of the Ownership Change multiplied by the Federal
long-term tax exempt Interest rate, as published by the Internal Revenue
Service. The Company believes that an Ownership Change has occurred due to
changes in the beneficial ownership of the Company's Common Stock in the current
three-year testing period immediately prior to the initial public offering and
would cause the annual limitations as described above to apply. The Company has
not determined what the maximum annual amount of taxable income is that can be
reduced by the NOL carry forwards.
11. commitments and Contingent Liabilities
Commitments
The Company's operations are principally conducted in leased premises.
Remaining lease terms range from 2 to 10 years. Certain leases contain
contingent rental provisions based upon a percentage of gross sales. As of June
30, 1995, the Company has non-cancelable operating lease commitments as follows:
<TABLE>
<C> <C>
1996 $ 579,395
1997 511,571
1998 498,822
1999 438,735
2000 424,525
Thereafter 1,911,210
----------
$4,364,716
----------
</TABLE>
Certain shareholders and directors have personally guaranteed
lease payments for two locations,
Contingent rental payments on building leases are typically made based on the
percentage of gross sales on the individual restaurants that exceed
predetermined levels. The percentage of gross sales to be paid and related gross
sales level vary by unit. There were no contingent rental payments in any of the
periods presented.
Rent expense was $329,000, $109,000 and $58,000 for the periods ended June 30,
1995, June 30, 1994 and December 31, 1993, respectively.
Pursuant to a restaurant lease agreement, the Company has an option to purchase
the facility for $445,000 if executed prior to May 31, 1995 or $425,000
thereafter. Pursuant to the provisions of the purchase option, the Company
would remit a $145,000 down payment and the remainder would be financed by the
seller through a five year $300,000 note, bearing interest at a rate not to
exceed 8.5%.
Pursuant to a leasehold acquisition agreement, the Company paid $65,000 and
issued a warrant to purchase 15,000 shares of the Company's common stock at an
exercise price of $5.00 per share, exercisable until October 31, 1997.
Pursuant to a restaurant lease agreement, the Company has the option to purchase
a facility during the period January 1995 through January 2000 for a purchase
price ranging between $1,365,000 to $1,580,000.
In August 2, 1995, the Company executed an agreement with a public relations
firm providing for annual compensation of $24,000 and an option to purchase
20,000 shares of the Company's common stock at a price of $5.50 per share,
exercisable for a six year period.
<PAGE> 67
The Company entered into an agreement with a financial advisory firm for a
thirty six month period beginning in September 1995. The firm received $50,000
and warrants to purchase 50,000 shares of the Company's common stock,
exercisable within five years at a price of $7.00 per share.
12.Employee Benefit Plans
(a) Stock Option Plan
In December 1994, the Company adopted the 1994 Employees Stock Option Plan (the
Employees Plan), which provides for the issuance of incentive stock options
(ISO's) and non-qualified options (Non-ISO's) to officers and key employees. Up
to 1,000,000 shares of the Company's common stock have been reserved for
issuance under the Plan. The Plan is currently administered by the Board of
Directors of the Company. The term of the options is generally for a period of 5
years. The exercise price for non-qualified options outstanding under the
Employees Plan can be no less than 100% of the fair market value, as defined, of
the Company's common stock at the date of the grant. For ISO's, the exercise
price can be generally no less than the fair market value of the Company's
common stock at the date of the grant, with the exception of any employee who
prior to the granting of the option, is a 10% or greater stockholder as
defined, for which the exercise price can be no less than 110% of the fair
market value of the Company's common stock at tho date of grant.
In December 1994, the Company adopted the non-Executive Director Stock Option
Plan (the Director Plan), which provides for the issuance of non-ISO's to
non-executive directors, as defined, and members of any advisory board
established by the Company who are not full-time employees of the Company. The
Company has reserved 500,000 shares for issuance under the provisions of the
Director Plan. The Director Plan provides that each non-executive director will
automatically be granted an option to purchase 25,000 shares upon joining the
Board of Directors and on each September 1st thereafter, provided such person
has served as a director for the 12 months immediately prior to such September
1st. Similarly, each eligible director of an advisory board will receive options
to purchase 15,000 shares upon joining the advisory board, and on each September
1st thereafter, an option to purchase 7,500 shares of the Company's common
stock, providing such person has served as a director of the advisory for the
previous 12 month period. The exercise price for options granted under the
Director Plan shall be 100% of the fair market value of the Common Stock on the
date of grant.
Activity in non-ISO's was as follows:
<TABLE>
<CAPTION>
Number Option Price
of Shares per Share
--------- ---------
<S> <C> <C>
Options outstanding June 30, 1994 - $ --
Options Granted 672,000 4.50
Exercised Options - -
--------- ---------
Options outstanding June 30, 1995 672,000 $4.50
--------- ---------
</TABLE>
Through June 30, 1995, the Company did not grant any ISO's. Options representing
100,000 shares are exercisable as of the date of grant and 114,400 annually
thereafter. The Employees and Director Plans expire in December 2004, unless
terminated earlier by the Board of Directors under conditions specified in the
respective Plans. No Options have been exercised as of June 30, 1995.
(b) Employment Agreements
The Company and its Chairman, President and Executive Vice President
(collectively, the Senior Management Group) entered into employment agreements
in December 1994 for a period commencing in December 1994 through December 1997.
The agreements provide for annual compensation for the Senior Management Group
collectively of $250,000, increasing by 10% annually, plus certain other
benefits. The agreements also provide for annual aggregate incentive
compensation for the Senior Management Group based on consolidated pre-tax
earnings of the Company, as defined, as follows:
<TABLE>
<CAPTION>
Pre-tax earnings Percentage
- ---------------- ----------
<S> <C>
$0 - $1,000,000 10.0%
$1,000,001 - 2,000,000 7.5%
$2,000,001 and over 5.0%
</TABLE>
The agreement also provides that upon a change in control, as defined, that all
stock options held by the employee become immediately exercisable and that a
credit equivalent to three times the employee's annual compensation be credited
against the exercise price of the options.
(c) Other Benefits
The Company provides, on a contributory basis, medical benefits to active
employees. The Company does not provide medical benefits to retirees.
13. Litigation
The Company is a defendant in litigation arising from the normal course of its
affairs. Management is of the opinion, pursuant to the advice of counsel, that
settlement, if any, of the aforementioned litigation will not have a material
adverse impact on the financial position or results of operation of the Company.
14. Earnings Per Share
The Company has presented historical earnings per share information assuming the
reverse stock split outlined in note 1(b) occurred on March 15, 1992. Pursuant
to Securities and Exchange Commission Staff Accounting Bulletin topic 4:D, stock
and stock options granted during the 12-month period preceding the date of the
Company's initial public offering (IPO) have been included in the calculation of
weighted average common shares outstanding for periods prior to the IPO,
including years where the impact of such
22 - 23
<PAGE> 68
THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES
incremental shares is anti-dilutive. The computation of weighted average common
shares outstanding follows:
<TABLE>
<CAPTION>
June 30, Dec. 31,
1994 1993
--------- ---------
<S> <C> <C>
Weighted average common shares and
equivalents outstanding, exclusive of
issuance within 12 months prior to IPO 905,493 856,274
Shares issued within 12 months prior to
the IPO assumed to be outstanding
for the entire period 30,570 79,789
Incremental shares assumed to be
outstanding relating to stock options
granted within 12 months prior to IPO 67,200 67,200
Incremental shares assumed to be
outstanding relating to warrants
granted within 12 months of IPO 20,750 20,750
Incremental shares assumed to be
outstanding relating to potentially
dilutive securities issued within
12 months of IPO 50,500 50,500
--------- ---------
Weighted average common shares
and equivalent outstanding 1,074,513 1,074,513
--------- ---------
</TABLE>
For the year ended June 30, 1995, weighted average common shares and equivalents
outstanding are 1,122,678. The 12% percent convertible notes do not meet the
criteria of a common stock equivalent, as its yield at the time of issuance is
greater than the AA corporate bond yield.
15. Subsequent Events
On September 12, 1995, the Company entered into an asset purchase agreement
under which it will acquire furniture, fixtures and other assets of a restaurant
located in Flemington, New Jersey for $365,000, consisting of $265,000 in cash
and a $100,000 five year note, bearing interest at prime plus 1%. The Company
also entered into a related seven year lease agreement for this property, with
minimal annual rentals of $80,400, with contingent rental provisions based upon
a percentage of gross sales.
Independent Auditors' Report
The Board of Directors and Stockholders
The Rattlesnake Holding Company, Inc.
We have audited the accompanying consolidated balance sheets of The Rattlesnake
Holding Company, Inc. and subsidiaries as of June 30, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year ended June 30, 1995, the six months ended June 30, 1994 and
the year ended December 31, 1993. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards, require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Rattlesnake
Holding Company, Inc. and subsidiaries as of June 30, 1995 and 1994, and the
results of their operations and their cash flows for the year ended June 30,
1995, the six months ended June 30, 1994 and the year ended December 31, 1993 in
conformity with generally, accepted accounting principles.
Our report on the 1994 and 1993 financial statements contained an explanatory
paragraph indicating that the Company financed its operations principally
through the private placement of a $1,800,000 unit offering, consisting of 9%
subordinated notes and 105,768 shares of common stock and a $500,000 unit
offering consisting of 12% convertible subordinated notes and 182,500 common
stock purchase warrants. The subordinated notes matured in various amounts
during the period May 1995 through September 1995 and the convertible
subordinated notes were to mature in various amounts during the period June 1995
through July 1995. In the opinion of management, the Company would not generate
sufficient operating cash flow to repay the subordinated or convertible
subordinated notes. The Company utilized a portion of the proceeds received from
the June 29, 1995 initial public offering of 1,495,000 shares of common stock to
partially repay the 9% subordinated notes and restructured the terms of the
remaining outstanding indebtedness.
[logo]
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
September 27, 1995
Stamford, Connecticut
<PAGE> 69
Rider to Lease dated January 18, 1995 by and between: RYMSBRAN CONTINENTAL
CORP., D.I.P. as Landlord and Holy Cow Restaurant Associates, Inc. as Tenant
attached hereto and made a part thereof.
40. A. Tenant covenants and agrees to pay annual base rent to Landlord
at the following rates:
1. $120,000.00 annually for the two year period commencing
February 1, 1995, through January 31, 1997, payable in equal monthly
installments of $10,000.00;
2. $129,600.00 annually for the two year period commencing
February 1, 1997, through January 31, 1999, payable in equal monthly
installments of $10.800.00;
3. $139,968.00 annually for the two year period commencing
February 1, 1999, through January 31, 2001, payable in equal monthly
installments of $11,664.00;
4. $151,165.44 annually for the two year period commencing
February 1, 2001, through, January 31, 2003, payable in equal monthly
installments of $12,597.12;
5. $163,258.68 annually for the two year period commencing
February 1, 2003, through January 31, 2005, payable in equal monthly
installments of $13,604.89;
6. $176,319.36 annually for the two year period commencing
February 1, 2005, through January 31, 2007, payable in equal monthly
installments of $14,693.28.
B. Should Tenant not then be in default in any of its obligations
under this Lease, Tenant shall have the right to extend the term of this Lease
for an additional period of three [3] years at Tenant's sole discretion. Should
Tenant choose to exercise this right of renewal, the rent schedule shall be as
follows:
1. $185,135.28 annually for the period commencing February 1,
2007, through January 31, 2008, payable in equal monthly installments of
$15,427.94;
2. $194,392.08 annually for the period commencing February 1,
2008, through January 31, 2009, payable in equal monthly installments of
$16,199.34;
3. $204,111.72 annually for the period commencing February 1,
2009 through January 31, 2010 payable in equal monthly installments of
17,009.31.
C. Should Tenant choose to exercise this option to renew, it shall
notify Landlord no later than one hundred eighty [180] days prior to the
expiration of the initial twelve year term of this Lease. Should Tenant fail
to so notify Landlord, it shall be
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deemed as a declination by Tenant to exercise this option.
41. Provided that Tenant promptly commences alterations to make the
premises ready for occupancy in accordance with this lease, and continues
therewith diligently and in good faith then, notwithstanding anything
contained in this lease or this rider to the contrary, the obligation of tenant
to pay rent is abated and waived by the Landlord for four [4] months from the
date of this lease. Tenant may enter the premises under this lease upon
execution of the lease to commence alterations. Rental obligations hereunder,
however, shall commence on June 15, 1995. Thereafter, all rents shall become
due on the first day of each month, as per the rent schedule contained above,
in this Rider.
42. Upon the execution of this lease, Tenant shall pay to Landlord the
sum of $10,000 representing payment of partial rent due for the month of
October, 2006. At or before February 18, 1995, Tenant shall pay to Landlord an
additional $10,000, representing partial payment for rent due for the months of
October and November 2006. At or before March 18, 1995 Tenant shall pay to
Landlord an additional $9,386.56, representing the balance of rent due for the
month of November, 2006. Notwithstanding the foregoing, if Tenant surrenders
the premises to the Landlord on or before the end of the sixth month of the
term of this lease due to Tenants's inability to obtain a Liquor License or any
public assembly permit required by the City of New York in order for Tenant to
operate the leased premises for the purpose set forth in paragraph 71 herein,
resulting from location, physical configuration of the leased premises, or the
Landlord's disability and not caused by the Tenant, then in that event the
Tenant shall have the right to terminate this lease, the Landlord shall return
$19,386.56 to the tenant, and neither party shall have any further obligations
one to the other. Payment of the foregoing sum of $19,386.56 by the Landlord to
Tenant under such circumstances is personally guaranteed by Michael Aryeh.
43. In the event Tenant shall not remit full rent due to Landlord by
the tenth [10th] day of the month for wich said rent is due, a late fee of
$100.00 shall be added to the rent due, and shall be considered "additional
rent" within the definitions as set forth in the instant lease. The foregoing
is not intended and shall not be construed as an interest charge, but rather to
reimburse and defray Landlord's expenses in connection with handling
delinquencies in the payment of annual fixed rent. Notwithstanding the
foregoing, in no event shall the payments to be made pursuant to this Article
exceed the applicable usury ceiling which would be imposed were the late charge
deemed to be interest rather than a delinquency charge, and provisions hereof
are not intended to limit Landlord's remedies pursuant to this lease, but shall
be in addition to the remedies and rights otherwise provided in this lease.
44. For the Purpose of this Article:
(1.)(a) "Taxes" shall mean the real estate taxes, assessments,
levies, and special assessments imposed upon the entire commercial portion of
the building and the land on which the commercial portion of the building
stands by any governmental body or authority having jurisdiction thereover.
If at any time during the term of this Lease the methods of taxation for real
estate prevail at the commencement of the
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term hereof shall be altered so that in lieu of, or as a substitute for the
whole or any part of, the taxes, assessments, or levies, now levied, assessed
or imposed on real estate and the improvements thereof, there shall be levied,
assessed and imposed (i) a tax, assessment, or levy, wholly or partially as a
capital levy or otherwise on the rents received therefrom, or (ii) a license
fee measured by the rent payable by Tenant to Landlord, or (iii) any other such
additional or substitute tax, assessment, or levy, then all such taxes,
assessments, or levies, or the part thereof so measured or based shall be
deemed to be included within the term "Taxes" for the purpose hereof, to the
extent that any of the items set forth in (i) through (iii) above would be
payable if the demised premises were the only property of the Landlord subject
to such items.
(b) "Base Tax" shall mean Taxes for the Tax year of July 1, 1994
to June 30, 1995, wich Base Tax is $234,000.00
(C) "Tenant's Proportionate Share" shall be ten [10%] percent of
the increased amount, if any.
(d) "Tax Year" shall mean the fiscal year for which Taxes are
levied by the governmental authority having jurisdiction thereover.
(2.) If the Taxes for any Tax Year shall be more than the Base Tax,
Tenant shall pay to Landlord as additional rent for such Tax Year an amount
equal to Tenant's Proportional Share of the amount by which the Taxes for such
Tax Year are greater than the Base Tax. (The amount payable by Tenant is
hereinafter called the "Tax Payment.") The Tax Payment shall be prorated, if
necessary, to correspond with that portion of a Tax Year Occurring within the
term of this lease. The Tax Payment shall be payable by Tenant within thirty
[30] days after receipt of a demand from Landlord therefor, which demand shall
be accompanied by a copy of the tax bill together with Landlord's computation
of the Tax Payment.
(3.) With respect to any period at the expiration of the term of this
lease which shall constitute a partial Tax Year, Landlord's statement shall
apportion the amount of the additional rent due hereunder. The obligation of
tenant in respect of such additional rent applicable for the last year of this
lease or part there or shall survive the expiration of the term of this lease.
(4.) Nothing herein contained shall require or be construed to require
Tenant to pay any inheritance, estate, succession, transfer, gift, franchise,
income, profit or excess profit, capital stock, capital levy, corporate or
unincorporated business tax or other similar tax.
(5.) Landlord and Tenant acknowledge and agree that Tenant's
Proportionate Share shall be as provided in subparagraph (1) of this Article,
notwithstanding the fact that such percentage may be different from the
proportion of the demised premises to the commercial portion of the building.
45. Tenant represents that it has inspected the premises and the
improvements thereon and the equipment therein, and is thoroughly acquainted
with their condition and agrees to accept the premises "as is". It is
understood and agreed that no representations either express or implied have
been made as to the condition of the premises and/or the fixtures therein by
Landlord.
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46. Tenant agrees that during the term of this lease, it will keep and
maintain the demised premises and all appurtenances thereto and keep each and
every part thereof in good order, condition and repair.
47. Tenant shall be solely responsible for the cleaning and maintenance
of all sidewalks directly in front of the demised premises. Tenant agrees that
it shall conduct no business, and display no wares on the sidewalks adjacent to
the building, and that it shall indemnify, defend and hold Landlord harmless
against any claims, violations, etc., that may result from the obstruction of
the sidewalks in any way by the Tenant.
48. Tenant shall be responsible for and shall maintain any existing
heating, ventilating and air conditioning system ("HVAC System").
49. Tenant shall be responsible for the maintenance of all plumbing
lines, electrical lines and equipment, and gas lines, if any, which exclusively
service the demised premises and are located in the demised premises, or which
were installed by Tenant. Tenant shall also be responsible for the cleanliness
of all entrances and exits leading to or from the demised premises and for the
maintenance and cleanliness of all glass windows, doors, window sashes and
frames.
50. Tenant, at its sole cost and expense, shall maintain adequate
extermination and pest control services in and about the demised premises to
prevent any infestation by rodents, insects and other pests.
51. Tenant shall not, at any time during the term hereof, permit any
odors to emanate from the demised premises above and beyond what would
reasonably be expected from the operation of a restaurant and bar, it being
understood that the demised premises are located in a residential building and
the peace and comfort of the tenants and owners thereof are of paramount
importance to Landlord. Likewise, it is understood that Tenant has the right to
provide entertainment, including musical entertainment, to its patrons. Tenant
agrees that any such entertainment shall not be of such a loud or boisterous
nature so as to unreasonably disturb or interfere with the quiet enjoyment of
the premises by the residential or other commercial tenants of the building.
52. Tenant shall install (if necessary) and/or maintain the existing
Hood and Duct Protection System so as to meet all requirements of the Insurance
Service Office of New York or any successor organization. The manufacture,
design, installation and maintenance of such Hood and Duct Protection System.
including an automatic dry chemical fire extinguishing system, which shall
further be in compliance with the administrative codes of the City of New York
and all other applicable laws, codes, ordinances and regulations and the
applicable standards of the National Board of Fire Underwriters. Furthermore,
throughout the term of this lease, tenant shall obtain and keep in force
service contracts with persons or companies, for the maintenance of the Hood and
Duct Protection System.
53. Tenant shall not dispose of cooking oils or fats in the sanitary
sewer system.
54. Tenant shall, at its expense, install (if necessary) and/or
maintain the existing grease trap in the waste lines of the demised premises
for the purpose of preventing an accumulation of grease. Tenant covenants at
all times during the Term to keep the
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drain, waste, and sewer pipes and connections in the demised premises free from
obstruction to the reasonable satisfaction of Landlord and its agents and in
compliance with the administrative codes of the City of New York, and all other
applicable laws, codes, ordinances, and regulations. Furthermore, throughout
the term of this lease, tenant shall obtain and keep in force service contracts
with persons or companies, for the maintenance of the grease trap.
55. Tenant agrees to provide for its own garbage disposal with a
private sanitation company at its sole cost and expense. Tenant agrees to
comply with all applicable rules and ordinances relating to trash disposal, and
agrees to be solely responsible for any violations issued as a result of the
improper storage or disposal of trash.
56. Tenant shall pay all charges for its use of electricity for the
entire term of this Lease. Tenant's usage of electricity is currently measured
by a separate meter, the maintenance and repair of which shall be at the sole
cost and expense of Tenant. Landlord represents that the meter is currently in
good operating condition.
57. Tenant acknowledges that, except as provided in Article 30 of the
printed portion of the lease, Landlord shall not be required to furnish any
utilities whatsoever to the demised premises. Tenant agrees to make its own
arrangements for the furnishing of gas, electric and hot water services to the
demised premises, and, to the extent no meters by which to measure Tenant's
consumption of such utilities exist or are in disrepair. Tenant shall, at its
own cost and expense, install and/or repair said meters.
58. In the event of any dispute between Tenant and Landlord under this
Lease, Tenant shall nevertheless pay all rent as herein provided, without
offset or deduction of any kind, pending resolution of the dispute.
59. Tenant hereby indemnifies and agrees to hold Landlord harmless from
and against any and all liability, damages, expense, costs, suits, fines, claims
or judgments (including attorney's fees and disbursements) arising from injury
to persons or property or to or upon the demised premises and or any part
thereof from any matter or thing growing out of Tenant's use, occupation,
maintenance or control thereof, unless caused by the negligence of the Landlord
and/or its agents or invitees. Tenant shall, at its sole cost and expense,
defend any and all suits or actions that may be brought against Landlord or in
which Landlord may be impleaded with others upon any such above mentioned claim
or claims and shall satisfy, pay and discharge any and all judgements that may
be recovered against Landlord in any such action or actions in which Landlord
may be a party defendant. Tenant shall keep the demised premises free and clear
of any and all mechanics' liens or other similar liens or charges incidental to
work done or material supplied in or about the premises.
60. Tenant shall at its sole cost and expense, provide and keep in
force for the benefit of Landlord as an additional named insured, a general
liability policy protecting both Landlord and Tenant against any liability
occasioned by accident in the amount of $500,000.00 in respect to injuries to
any one person and in the amount of $1,000,000.00 in respect to any one
accident in the demised premises. The above policy shall be obtained by Tenant
and delivered to Landlord, and Tenant hereby agrees to pay all the premiums
therein and to submit the bill to Landlord evidencing
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<PAGE> 74
payment of said premium of the policy within ten (10) days from the date of
commencement of said policy. In the event of Tenant's failure to do so,
Landlord may procure said insurance, and the cost thereof shall be paid by
Tenant to Landlord as additional rent. This policy shall include any damages
resulting from the erection and the existence of an awning should an awning or
canopy be erected.
61. Tenant shall at all times carry its own water damage and fire
insurance covering the demised premises and the Tenant's personalty. Said
policy shall name Landlord as an additional named insured, and shall provide
coverage equal to at least 100% of the full replacement value of the property.
Tenant further agrees to furnish the Landlord with the name of the insurance
company and the policy number of said insurance. Tenant agrees that it shall
maintain and repair any and all windows and plate glass in the demised
premises.
62. Tenant shall at all times carry necessary Workmen's Compensation
Insurance and shall furnish to the Landlord the name of the company and the
numbers of the policies.
63. A. Notwithstanding anything to the contrary contained in Article 11,
Tenant may not sublet the demised premises or assign this Lease without
Landlord's prior written consent, which consent shall not be unreasonably
withheld or unreasonably delayed, provided that:
(1) Tenant shall submit to Landlord a written request for
Landlord's consent to such subletting or assignment at least fifteen (15) days
before the commencement date of such sublease or the effective date of the
assignment, which request shall contain or be accompanied by the following: (i)
the name and address of the proposed sublessee or assignee, (ii) the terms and
conditions of the proposed subletting or assignment; and (iii) a complete and
current financial statement and any other pertinent information;
(2) The proposed subtenant or assignee will conduct
substantially the same type of business as Tenant, and will not sell kosher
cuisine.
(3) The proposed subtenant or assignee shall not then be an
existing tenant or occupant of the building or a related corporation of any
other tenant or a party who dealt with Landlord for the rental of any space in
the building and shall not be a person then negotiating with Landlord for the
rental of space in the building;
(4) In the event of a subletting, the sublease shall be
expressly subject to all of the covenants, agreements, terms, provisions and
conditions of this lease, except such as are not relevant or applicable and
except as expressly set forth to the contrary in this Article, and in the event
of cancellation, termination or surrender of this Lease, whether voluntary,
involuntary or by operation of Law, prior to the expiration of the sublease,
the proposed subtenant agrees to make full and complete attornment to Landlord
for the balance of the term of the sublease, which attornment shall be
evidenced by an agreement in form and substance satisfactory to Landlord;
(5) Tenant shall not be in default beyond any applicable grace
period in the performance of any of its obligations under this Lease, either at
the time of Landlord's consent to such subletting or assignment is requested,
or at the commencement of the term of any proposed sublease, or upon the
effective date of any assignment;
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(6) In the event of an assignment, the proposed assignee shall
execute, acknowledge and deliver to Landlord, prior to the effective date of
the proposed assignment, an agreement in form and substance satisfactory to
Landlord whereby the assignee shall agree to be bound by and assume all the
covenants, agreements, terms, provisions and conditions set forth in this Lease
on the part of Tenant to be performed;
(7) Tenant shall pay to Landlord, promptly upon demand
therefor, the reasonable cost of Landlord's attorneys' fees and disbursements
in connection with reviewing the proposed sublease or assignment, not to exceed
the sum of $750.00;
(8) No subletting or assignment shall be deemed to be a consent
to any further subletting or assignment; nor shall any subletting relieve
Tenant of its obligations or liabilities hereunder; nor shall any assignment
relieve Tenant of its obligations and responsibilities incurred to Landlord
prior to any such assignment;
(9) In the event of a subletting, Tenant shall pay or cause to
be paid to Landlord promptly upon Landlord's consent to such subletting, a sum
equal to the then current one month's rent, which sum shall be held by Landlord
as a security deposit, and shall be returned to the Tenant upon the end of the
term of this lease, or which shall be applied by the Landlord to cure any
default of the terms herein by Tenant.
(10) No sublease or assignment shall apply to less than the
entire demised premises, without Landlord's written consent, except that if
Tenant conducts a cabaret/club separate and distinct from the restaurant
portion of the demised premises. Tenant shall be permitted to sub-let and/or
assign either or both such portions of the demised premises in accordance with
the terms of this lease.
(11) As a condition to Landlord's approval of any subletting or
assignment of this lease, the principal shareholders of any proposed sublesee
or assignee shall execute the limited guaranty attached hereto as Exhibit "A".
B. Any transfer of fifty percent [50%] or more in interest of
Tenant (whether stock, partnership interest or otherwise) by any party or
parties in interests whether in a single transaction or a series of related or
unrelated transactions, shall be deemed an assignment of this lease within the
meaning of this Article, except for a transfer or related series of transfers
upon or as a result of the death of a shareholder or partner of Tenant or
between shareholders or partners as the case may be, or between immediate
family members of any shareholder or partner.
C. Notwithstanding anything contained herein to the contrary,
Tenant shall have the one time right to assign this lease to a corporation
entity in which Tenant holds at least thirty percent [30%] of the outstanding
shares thereof, and under the condition that, subsequent to any such
assignment, and to the termination of this lease, Tenant shall continue to
personally supervise, the daily operations of the business operating under the
authority of this lease, and Tenant shall sign a limited personal guarantee, in
the form attached hereto as Exhibit "A", which shall guarantee payment of rent
until the premises are surrendered to the landlord. Tenant shall furnish
landlord with written notice thirty [30] days prior to any such proposed
assignment. Any notice must be furnished no less than thirty days prior to said
date.
64. Tenant shall, at its own cost and expense, obtain any and
all permits necessary for the carrying on of its business. Tenant acknowledges
and agrees that Landlord shall not be responsible for any violations issued by
any governmental
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department, board or agency with regard to the demised premises arising out of
the Tenant's use of the premises unless caused by the Landlord, and that Tenant
shall correct and remove of record all such violations promptly after they are
noted or issued.
65. Landlord and Tenant warrant and represent that they have dealt with
no broker in the negotiation of this lease other than Al Broser and Stu Morden.
Landlord has entered into a separate agreement for the payment of any
commissions to said Brokers. Landlord and Tenant agree to indemnify and hold
each other harmless from any and all claims for commissions based upon this
lease by any other broker, with whom Landlord and/or Tenant are alleged to have
dealt.
66. A. If any of the provisions of this Lease, or the application
thereof to any person or circumstance, shall be held invalid or unenforceable,
the remainder of this Lease, or the application of such provision or provisions
to persons or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every provision of
this Lease shall be valid and enforceable to the fullest extent permitted by
law.
B. Notwithstanding anything to the contrary contained in Article 9
of this Lease, Landlord shall not be liable for any damage or injury to Tenant
and/or the business of Tenant resulting from any damage to the demised premises
or the building to the repair thereof for any reason whatsoever unless caused
by its negligence.
C. Tenant hereby indemnifies and agrees to hold Landlord harmless
from and against any loss, cost, liability, claim, damage, fine, penalty and
expense (including reasonable attorneys' fees and disbursements) resulting from
delay by Tenant in surrendering the demised premises upon the termination of
this lease as provided in Article 21 of this Lease, including any claims made
by any succeeding tenant or prospective tenant founded upon such delay.
D. This lease is submitted to Tenant for signature with the
understanding that it shall not bind Landlord or Tenant unless and until it is
duly executed by both Tenant and Landlord and an executed copy delivered to
Tenant.
E. If any provision contained in this rider is inconsistent or in
conflict with any printed provision of this lease, the provision contained in
this rider shall supersede said printed provision and shall control.
67. A. in the event Tenant remains in possession of the demised
premises after the termination of this lease without entering into a new lease,
or if Tenant shall not vacate and surrender actual possession upon any other
termination of this lease, Landlord may re-enter and by any lawful act recover
possession of the demised premises. Tenant shall also thereupon be liable to
Landlord for any and all actual costs, expenses and damages, including without
limitation, reasonable legal costs and expenses incurred by Landlord in
regaining actual possession of the demised premises.
B. In the alternative, in the event Tenant remains in possession of
the demised premises after the termination of this lease without entering into
a new lease, or if Tenant shall not vacate and surrender actual possession upon
any other termination of
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this lease, Tenant, at the option of Landlord shall be deemed to be occupying
the demised premises as a Tenant from month to month, at a monthly rental equal
to one and one half [1 1/2] times the rent payable during the last month of the
term of this lease, subject to all of the terms of this lease insofar as the
same are applicable to a month to month tenancy.
68. Tenant hereby acknowledges that Landlord has the right to conduct
structural renovations on the building. Tenant hereby agrees to hold Landlord
harmless from any claim regarding loss or interruption of its business,
utilities, etc., which may occur as a result of these renovations or repairs
unless such repairs block a substantial area of ingress or egress to the leased
premises, in which event the rent shall abate until such time as the blockage
has been removed.
69. Tenant shall have the right to conduct any non-structural repairs,
alterations, etc. on or to the demised premises, provided that Tenant obtains
Landlord's prior written consent to any such work, which consent shall not be
unreasonably withheld. Tenant agrees to furnish Landlord with plans, drawings,
specifications, details, and other pertinent information so as to give Landlord
as detailed notice as possible as to any such contemplated work. Landlord
agrees that, given adequate description of contemplated work, and if such work
is of a character generally compatible with the level of the quality of the
building in general, consent shall not be unreasonably withheld or delayed.
In the event Landlord does not respond to Tenant's request within five [5]
business days of its receipt of such request, it shall be deemed consent.
70. Tenant shall have the right to install a sign identifying its
business on the outside of the building and to install an awning in size and
shape as permitted by the applicable ordinances, rules and regulations of the
City of New York.
71. Tenant may use the demised premises as a restaurant/bar, catering
facility and/or cabaret featuring live entertainment and dancing. Landlord
represents that it knows of no reason why the leased premises may not be used
for the foregoing purposes. The premises may not be used as a business
featuring strip tease, "lap dancing" or topless dancing.
72. During the term of this lease and any agreed upon extension,
Landlord will not lease any additional space in the entire commercial premises
controlled by it located at 250 West 86th Street and 2341-2359 Broadway to a
restaurant with a "steak house" theme.
73. Within 30 days of the day of this lease, Landlord will provide
Tenant with a fully executed non-disturbance agreement in the form attached
hereto as Exhibit " ", which shall be executed by any lender holding a mortgage
on all or any portion of the leased premises.
If Landlord is unable to provide such fully executed non-disturbance agreement
to Tenant within 30 days of the day of this lease, Tenant shall have the right
to cancel this lease, in which event Landlord shall return any monies paid by
Tenant to Landlord pursuant to paragraph 42 herein, and neither party shall
have any further obligation one to the other.
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/s/ /s/
- ---------------------------------- ----------------------
RYMSBRAN CONTINENTAL CORP., D.I.P. HOLY COW RESTAURANT
LANDLORD ASSOCIATES, INC.,
TENANT
/s/ Michael Aryeh
- ----------------------------------
Michael Aryeh, Individual Guarantor, as to the guaranty provisions contained in
par. 42
STATE OF NEW YORK)
COUNTY OF )ss.:
On this day of January, 1995, before me personally came to me known, who
being by me duly sworn, did depose and say that he resides at , NY, that
he is the of RYMSBRAN CONTINENTAL CORP., D.I.P., the corporation
described in and which executed the foregoing instrument, that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was affixed by order of the Board of Directors of said
corporation, and that HE signed HIS name thereto by like order.
NOTARY PUBLIC
STATE OF NEW YORK)
COUNTY OF )ss.:
On this day of January, 1995, before me personally came , to me known,
and known to me to be the individual described in and who executed the
foregoing instrument and acknowledged to me that he executed the same.
NOTARY PUBLIC
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SECOND AMENDMENT TO LEASE MADE JANUARY, 1972
BY AND BETWEEN S. LAWRENCE HORNSTEIN, AS
LANDLORD, AND BRESSOR CORP., AS TENANT
This Second Amendment to the Lease made January, 1972 by and between S.
Lawrence Hornstein, as Landlord, and Bressor Corp., as Tenant (the "Lessee") is
made as of August 11, 1995 by PLAINVIEW REALTY ASSOCIATES, INC., SUCCESSOR IN
INTEREST TO S. LAWRENCE HORNSTEIN, hereinafter called Landlord, and AMERICAN
THEME DINER AND RESTAURANT CORP., hereinafter called Tenant.
1. In the event of any inconsistency between the provisions of
this amendment and those contained in the Lease to which this
amendment is made a part, the provisions of this amendment
shall govern and be binding.
2. Article "2" of the Lease is amended to read as follows:
Term. The term of this Lease shall be deemed to have commenced
on January 1, 1972 and shall end 60 years after the
commencement thereof.
3. Article "3" of the Lease and First Amendment is supplemented as
follows:
A. The minimum rent for the period from January 1, 2007
until December 31, 2011 shall be $51,000.00 per annum
payable in equal installments of $4,250.00 per month.
B. The minimum rent for the period from January 1, 2012
until December 31, 2016 shall be $60,000.00 per annum
payable in equal installments of $5,000.00 per month.
C. The minimum rent for the period from January 1, 2017
until December 31, 2021 shall be $69,000.00 per annum
payable in equal installments of $5,750.00 per month.
D. The minimum rent for the period from January 1, 2022
until December 31, 2026 shall be $79,350.00 per annum
payable in equal installments of $6,612.50 per month.
E. The minimum rent for the period from January 1, 2027
until December 31, 2031 shall be $91,252.00 per annum
payable in equal installments of $7,604.38 per month.
F. The rents specified in paragraphs A, B, C, D and E
above are
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minimum annual rentals for each of the years set forth
therein. Tenant shall pay Landlord such annual rental
plus any increase as determined in accordance with
the provisions of subparagraph "G" below.
G. (1) (a) As promptly as possible for the five
year period commencing January 1, 2007
and continuing through the year commencing
January 1, 2011, Landlord shall compute any
increase in the cost of living for the period
commencing January 1, 2006 until the then
current year based upon the then applicable
Revised Consumers Price Index-Cities (the
"Index"), published by the Bureau of Labor
Statistics of the United States Department of
Labor.
(b) The "Base Index Number" for this five
(5) year period shall be the Index Number
indicated for the City of New York, entitled
"all items", for the month of January 2006.
The "current Index number" shall be the
corresponding Index number for the month of
January for the then current year.
(2) (a) As promptly as possible for the five
year period commencing January 1, 2012 and
continuing through the year commencing
January 1, 2016, Landlord shall compute any
increase in the cost of living for the period
commencing January 1, 2011 until the then
current year based upon the then applicable
Revised Consumers Price Index-Cities (the
"Index"), published by the Bureau of Labor
Statistics of the United States Department of
Labor.
(b) The "Base Index Number" for this five
(5) year period shall be the Index Number
indicated for the City of New York, entitled
"all items", for the month of January 2011.
The "current Index number" shall be the
corresponding Index number for the month of
January for the then current year.
(3) (a) As promptly as possible for the
five year period commencing January 1, 2017
and continuing through the year commencing
January 1, 2021, Landlord shall compute any
increase in the cost of living for the period
commencing January 1, 2016 until the then
current year based upon the then applicable
Revised Consumers Price Index-Cities (the
"Index"), published by the Bureau of Labor
Statistics of the United States Department of
Labor.
<PAGE> 81
(b) The "Base Index Number" for this five
(5) year period shall be the Index Number
indicated for the City of New York, entitled
"all items", for the month of January 2016.
The "current Index number" shall be the
corresponding Index number for the month of
January for the then current year.
(4) (a) As promptly as possible for the five
year period commencing January 1, 2022 and
continuing through the year commencing January
1, 2026, Landlord shall compute any increase in
the cost of living for the period commencing
January 1, 2021 until the then current year
based upon the then applicable Revised
Consumers Price Index-Cities (the "Index"),
published by the Bureau of Labor Statistics of
the United States Department of Labor.
(b) The "Base Index Number" for this five
(5) year period shall be the Index Number
indicated for the City of New York, entitled
"all items", for the month of January 2021.
The "current Index number" shall be the
corresponding Index number for the month of
January for the then current year.
(5) (a) As promptly as possible for the five
year period commencing January 1, 2027 and
continuing through the year commencing
January 1, 2031, Landlord shall compute any
increase in the cost of living for the period
commencing January 1, 2026 until the then
current year based upon the then applicable
Revised Consumers Price Index-Cities (the
"Index"), published by the Bureau of Labor
Statistics of the United States Department of
Labor.
(b) The "Base Index Number" for this five
(5) year period shall be the Index Number
indicated for the City of New York, entitled
"all items", for the month of January 2026.
The "current Index number" shall be the
corresponding Index number for the month of
January for the then current year.
(6) The current Index Number shall be divided by
the Base Index Number, and the integer 1 shall be
subtracted from such quotient. Any resulting positive
number shall be deemed to be the percentage of increase
in the cost of living. (For example, if the current
Index number for January 2007 is 125 and the base Index
<PAGE> 1
EXHIBIT 10.24
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN EXCHANGE
AGREEMENT OF EVEN DATE HEREWITH (THE "EXCHANGE AGREEMENT").
Series C 15% Subordinated Promissory Note
Due August 6, 1997
, 1996
$__________________
The Rattlesnake Holding Company, Inc., a Delaware corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to
or
registered assigns, on August 6, 1997 (the "Due Date"), the principal amount of
Dollars ($ ) and to pay interest on
the Due Date (computed on the basis of a 360-day year of twelve 30-day months)
on the unpaid portion of said principal amount from the date hereof at the rate
of 15% per annum. Both the principal hereof and interest hereon are payable at
the principal office of the Company in Stamford, Connecticut, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
1. Authorized Issue. This Note is one of a duly authorized issue of
Series C 15% Subordinated Promissory Notes due the Due Date (herein called the
"Notes") made or to be made by the Company in the aggregate amount of up to
$600,000, in original authorized principal amount, similar in terms except for
dates, principal amounts and named payees, issued by the Company pursuant to an
Exchange Agreement among the Company and certain Series C Subordinated
Promissory Note holders.
2. Transfer and Exchange. This Note is transferable on the Note
Register of the Company at the expense of the Company (except for any stamp tax
or other governmental charge with respect to any transfer) upon surrender of
this Note for transfer at the principal office of the Company, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the holder of this Note or his attorney duly authorized in
writing, and thereupon one or more new Notes, each in the denomination for the
same aggregate principal amount as the Note
<PAGE> 2
surrendered, and dated the date to which interest has been paid on the Notes,
will be issued to the designated transferee or transferees. This Note is
exchangeable for a like aggregate principal amount of Notes of different
denominations, as requested by the holder or his attorney surrendering the same.
The Company and its agents may treat the holder of this Note as the
owner for purposes of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
Any new Note or Notes to be delivered to you or upon your order,
pursuant to this Section 2, in substitution for or in lieu of any Note held by
you, will be delivered to you at your address as shown on the records of the
Company, or at such other address as you may request, without any expense to you
in connection with such delivery and insured to your satisfaction.
3. Prepayment Provisions. (a) This Note may be prepaid, at the option
of the Company, as a whole or in part, pro rata as to each Note holder, at any
time or from time to time, in each case on any date on or after the date of
issuance and prior to maturity, at a redemption price of l00% of the principal
amount of such Note, together with accrued interest through the date of
prepayment.
(b) If this Note is called for prepayment pursuant to subsection 3(a)
of this Note, the Company shall give written notice to the holder of this Note
not less than 30 nor more than 60 days prior to the date fixed for the
prepayment thereof. Such notice and all other notices to be given to any holder
of a Note shall be mailed by registered mail to the holder thereof at the
address shown on the Note Register.
Upon notice of any prepayment being given as provided in this
subsection 3(b), the Company covenants and agrees that it will prepay on the
date therein fixed for prepayment the entire principal amount of this Note so as
to be prepaid as specified in such notice as the principal amount thereof,
together with interest accrued thereon to such date fixed for prepayment, plus
the applicable premium, if any.
(c) Upon any partial prepayment of the Notes, upon presentation as
herein provided, there shall be paid to the holder the principal amount of the
portion of the Notes so to be prepaid with the unpaid interest accrued in
respect thereof, and either (i) the Note to be partially prepaid shall be
surrendered by the holder, in which event the Company shall execute and deliver
to or on the order of such holder, at the expense of the Company, a new Note for
the principal amount of the Note remaining unpaid, dated as of the date to which
interest has been paid on the Note surrendered, and registered in the name of
the holder, or (ii) if
2
<PAGE> 3
the holder and the Company shall so determine, the Note to be partially prepaid
need not be so surrendered, but may be made available to the Company, at the
place of payment specified herein, for notation thereon of the payment of the
portion of the principal so paid, in which case the Company shall make such
notation and return the Note to or on the order of such holder.
(d) All Notes which may be prepaid in full shall not be considered
outstanding for purposes of this Section 3.
4. Subordination of Indebtedness.
(a) This Note is issued subject to the provisions of this Section
4; and each person taking or holding this Note, accepts and agrees to be bound
by these provisions.
(b) This Note is a junior unsecured general obligation of the
Company and is fully subordinated to all "senior indebtedness" of the Company
now existing or hereafter incurred. Senior indebtedness is all indebtedness,
liabilities and obligations of the Company for money borrowed from banks,
savings and loan associations, the Small Business Administration and other
financial institutions, and their affiliates, and any deferrals, renewals or
extensions of any such senior indebtedness and notes or other instruments or
evidences of indebtedness issued in respect of or in exchange for any such
senior indebtedness or any funding to pay or replace any such senior
indebtedness or credit unless in the instrument creating or evidencing the same,
or pursuant to which it is outstanding, it is provided that such indebtedness or
such deferral, renewal or extension thereof is not senior in right of payment to
this Note. No payment or distribution of any kind or character on account of
principal, premium, if any, or interest on this Note shall be permitted during
the continuance of any default in the payment of principal, premium, if any, or
interest on any senior indebtedness.
5. Default. If one or more of the following events (herein
called "Events of Default") shall occur for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body), and the holder of any Note shall have given fifteen (15)
days prior written notice to the Company by certified or registered mail, return
receipt requested, and the Company shall not have cured such default within such
period:
(i) default in the due and punctual payment of the principal of,
or interest on, any Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
3
<PAGE> 4
(ii) default by the Company in any provision of the Exchange
Agreement executed in connection with the sale and purchase of the Notes; or
(iii) the Company makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts generally as they
become due; or
(iv) an order, judgment or decree is entered adjudicating the
Company or any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the
appointment of a trustee or receiver of the Company, or of any substantial part
of the assets of the Company, or commences any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a subsidiary)
relating to the Company or an subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction whether now or hereafter in effect; or
(vi) any such petition or application is filed, or any such
proceedings are commenced, against the Company, and the Company by any act
indicates its approval thereof, consent or acquiescence therein, or an order,
judgment or decree is entered appointing any such trustee or receiver, or
approving the petition in any such proceedings, and such order, judgment or
decree remains unstayed and in effect for more than 60 days; or
(vii) any order, judgment or decree is entered in any
proceedings against the Company or any subsidiary decreeing the dissolution of
the Company and such order, judgment or decree remains unstayed and in effect
for more than 60 days; or
(viii) any order, judgment or decree is entered in any
proceedings against the Company or any subsidiary decreeing a split-up of the
Company which requires the divestiture of a substantial part of the consolidated
assets of the Company and its subsidiaries, or the divestiture of the stock of a
subsidiary and such order, judgment or decree remains unstayed and in effect for
more than 60 days.
Then and in each and every such case, so long as such Event of Default shall not
have been remedied the holder of any Note, by notice in writing to the Company,
may declare the principal of this Note then outstanding and the interest accrued
thereon if not already due and payable, to be due and payable immediately, and
upon any such declaration the same shall become and shall be immediately due and
payable, anything in this Note contained to the contrary notwithstanding.
4
<PAGE> 5
6. Miscellaneous. (a) To the extent permitted by applicable law, the
Company hereby agrees to waive, and does hereby absolutely and irrevocably waive
and relinquish, the benefit and advantage of any valuation, stay, appraisement,
extension or redemption law now existing or which may hereafter exist, which,
but for this provision, might be applicable to any sale made under the judgment,
order or decree of any court, or otherwise, based on the Notes or on any claim
for principal or interest on the Notes.
(b) Each Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of the Notes, or
for the payment of the principal of, or premium, if any, or the interest on, a
Note, or for any claim based on a Note, or otherwise in respect hereof, shall be
had against any incorporator or any past, present or future stockholder, officer
or director, as such, of the Company or of any successor corporation, whether by
virtue of the constitution, statute or rule of law or by any assessment or
penalty or otherwise howsoever, all such individual liability being hereby
expressly waived and released as a condition of and as a part of the
consideration for the execution and issue of the Notes; provided, however, that
nothing herein shall prevent enforcement of the liability, if any, of any
stockholder or subscriber to capital stock upon or in respect of capital stock
not fully paid.
(c) Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of any Note and of indemnity reasonably
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of any such
Note if mutilated, the Company will make and deliver a new Note of like tenor in
lieu of any such Note so lost, stolen, destroyed or mutilated. Any new Note made
and delivered in accordance with the provisions of this subsection 6(c) shall be
dated as of the date from which unpaid interest has then accrued on the Note so
lost, stolen, destroyed or mutilated.
(d) Any notice or demand which by any provision of the Notes is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being sent
as registered mail, postage prepaid, addressed to the Company at its principal
office.
(e) No course of dealing between the Company and the holder of any Note
or any delay on the part of the holder in exercising any rights under a Note
shall operate as a waiver of any rights of any holder of the Note.
7. Binding Effect. The Company agrees that the provisions of this Note
shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
5
<PAGE> 6
8. Amendment and Waiver. Except as otherwise provided herein, this
Note may be amended, and the performance and observance of any term of this Note
may be waived, with (and only with) the written consent of the Company and such
Note purchaser as to whom performance is to be waived.
9. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
10. Communications. All notices and other communications provided for
hereunder or under the Notes shall be in writing, and, if to you, shall be
delivered or mailed by registered mail addressed to you at your address as shown
in the records of the Company in this Note hereto or to such other address as
you may designate to the Company in writing and, if to the Company, shall be
delivered or mailed by registered mail to the Company at 3 Stamford Landing -
Suite 130, Stamford, Connecticut 06902, or to such other address as the Company
may designate to you in writing.
11. Delaware Law. This Note shall be construed in accordance with and
governed by the laws of the State of Delaware without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
12. Headings. The headings of the sections of this Note are inserted
for convenience only and do not affect the meaning of such section.
IN WITNESS WHEREOF, THE RATTLESNAKE HOLDING COMPANY, INC. has caused
this Note to be signed in its corporate name by a duly authorized officer and to
be dated the date and year first above written.
THE RATTLESNAKE HOLDING COMPANY, INC.
By___________________________________
William J. Opper
Chairman of the Board of Directors
6
<PAGE> 1
EXHIBIT 10.25
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
15% Promissory Note
Due January 2, 1997
of
THE RATTLESNAKE HOLDING COMPANY, INC.
July 31, 1996
$425,000
The Rattlesnake Holding Company, Inc., a Delaware corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to GUY B. SNOWDEN, 4080 Ibis Point Circle, Boca Raton, FL 33431 or registered
assigns, on the 2nd day of January, 1997 (the "Due Date"), the principal amount
of Four Hundred Twenty Five Thousand and 00/100 Dollars ($425,000.00) together
with interest on the unpaid portion of said principal amount from the date
hereof at the rate of l5% per annum (computed on the basis of a 360-day year of
twelve 30-day months). Interest shall be payable on the 30th day of each month
commencing on August 30, 1996 and be payable in arrears. Both the principal
hereof and interest hereon are payable at the principal office of the Company in
Stamford, Connecticut, in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts.
1. Transfer and Exchange. This Note is transferable on the Note
Register of the Company at the expense of the Company (except for any stamp tax
or other governmental charge with respect to any transfer) upon surrender of
this Note for transfer at the principal office of the Company, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the holder of this Note or his attorney duly authorized in
writing, and thereupon one or more new Notes, each in the denomination of
$50,000 or an integral multiple thereof and for the same aggregate principal
amount as the Note surrendered, and dated the date to which interest has been
paid on the Notes, will be issued to the designated transferee or transferees.
This Note is exchangeable for a like aggregate principal amount of Notes of
different denominations, as requested by the holder or his attorney surrendering
the same.
The Company and its agents may treat the holder of this Note as the
owner for purposes of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue,
<PAGE> 2
and neither the Company nor any such agent shall be affected by notice to the
contrary.
Any new Note or Notes to be delivered to you or upon your order,
pursuant to this Section 4, in substitution for or in lieu of any Note held by
you, will be delivered to you at your address as shown on the records of the
Company, or at such other address within the United States of America as you may
request, without any expense to you in connection with such delivery and insured
to your satisfaction.
2. Prepayment Provisions. This Note may be prepaid, at the option of
the Company, as a whole or in part, at any time or from time to time and prior
to maturity, by payment of al outstanding principal amount of such Note,
together with accrued interest through the date of prepayment.
3. Default. If one or more of the following events (herein called
"Events of Default") shall occur for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body), and the holder of this Note shall have given fifteen (15)
days prior written notice to the Company by certified or registered mail, return
receipt requested, and the Company shall note have cured shall default within
such period:
(i) default in the due and punctual payment of the principal of,
or interest on, any Note when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by acceleration or
otherwise;
(ii) without the holder's prior written consent the Company
grants a security interest or lien to a third party with respect to the
Company's leasehold interest in its restaurant property located at 55 Miller
Street Fairfield, Connecticutt; or
(iii) the Company makes an assignment for the benefit of creditors
or admits in writing its inability to pay its debts generally as they become
due; or
(iv) an order, judgment or decree is entered adjudicating the
Company or any subsidiary bankrupt or insolvent; or
(v) the Company petitions or applies to any tribunal for the
appointment of a trustee or receiver of the Company within the meaning of the
Securities Act, or of any substantial part of the assets of the Company, or
commences any proceedings (other than proceedings for the voluntary liquidation
and dissolution of a subsidiary) relating to the Company or any
2
<PAGE> 3
subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction whether
now or hereafter in effect; or
(vi) any such petition or application is filed, or any such
proceedings are commenced, against the Company, and the Company by any act
indicates its approval thereof, consent or acquiescence therein, or an order,
judgment or decree is entered appointing any such trustee or receiver, or
approving the petition in any such proceedings, and such order, judgment or
decree remains unstayed and in effect for more than 60 days; or
(vii) any order, judgment or decree is entered in any proceedings
against the Company or any subsidiary within the meaning of the Securities Act
decreeing the dissolution of the Company and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(viii) any order, judgment or decree is entered in any proceedings
against the Company or any subsidiary decreeing a split-up of the Company which
requires the divestiture of a substantial part of the consolidated assets of the
Company and its subsidiaries, or the divestiture of the stock of a subsidiary
and such order, judgment or decree remains unstayed and in effect for more than
60 days;
Then and in each and every such case, so long as such Event of Default
shall not have been remedied, the holder of any Note, by notice in writing to
the Company, may declare the principal of this Note then outstanding and the
interest accrued thereon if not already due and payable, to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, anything in this Note contained to the contrary
notwithstanding.
4. Miscellaneous. (a) To the extent permitted by applicable
law, the Company hereby agrees to waive, and does hereby absolutely and
irrevocably waive and relinquish, the benefit and advantage of any valuation,
stay, appraisement, extension or redemption law now existing or which may
hereafter exist, which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, or otherwise, based on
the Notes or on any claim for principal or interest on the Note.
(b) This Note is issued upon the express condition, to which each
successive holder expressly assents and by receiving the same agrees, that no
recourse under or upon any obligation, covenant or agreement of the Note, or for
the payment of the principal of, or premium, if any, or the interest on, the
Note, or for any claim based on the Note, or otherwise in respect hereof, shall
be had against any incorporator or any past, present or future stockholder,
officer or director, as such, of the Company or
3
<PAGE> 4
of any successor corporation, whether by virtue of the constitution, statute or
rule of law or by any assessment or penalty or otherwise howsoever, all such
individual liability being hereby expressly waived and released as a condition
of and as a part of the consideration for the execution and issue of the Note.
(c) Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of the Note and of indemnity
reasonably satisfactory to it, and upon reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
any such Note if mutilated, the Company will make and deliver a new Note or like
tenor in lieu of the Note so lost, stolen, destroyed or mutilated. Any new Note
made and delivered in accordance with the provisions of this subsection 4(c)
shall be dated as of the date from which unpaid interest has then accrued on the
Note so lost, stolen, destroyed or mutilated.
(d) Any notice or demand which by any provision of the Note is
required or provided to be given or served to or upon the Company shall be
deemed to have been sufficiently given or served for all purposes by being sent
as registered mail, postage prepaid, addressed to the Company at its principal
office.
(e) No course of dealing between the Company and the holder of the
Note or any delay on the part of the holder in exercising any rights under the
Note shall operate as a waiver of any rights of any holder of the Note.
(f) The Company hereby waives presentment and notice of dishonor.
In the event the holder is successful in any action at law or equity to enforce
the provisions of this Note, the Holder shall be entitled to recover from the
Company all reasonable attorney's fees and costs of collection.
5. Binding Effect. The Company agrees that the provisions of this
Note shall bind and shall inure to the benefit of the parties hereto and their
successors and assigns.
6. Amendment and Waiver. This Note may be amended, and the
performance and observance of any term of this Note may be waived, with (and
only with) the written consent of the Company and such Note purchaser as to whom
performance is to be waived.
7. Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
8. Communications. All notices and other communications provided for
hereunder or under the Notes shall be in writing, and, if to you, shall be
delivered or mailed by
4
<PAGE> 5
registered mail addressed to you at your address as shown in the records of the
Company in this Note hereto or to such other address as you may designate to the
Company in writing and, if to the Company, shall be delivered or mailed by
registered mail to the Company at 3 Stamford Landing, Suite 130, Stamford,
Connecticut 06902, attention: Office of the President, or to such other address
as the Company may designate to you in writing.
9. Delaware Law. This Note shall be construed in accordance with and
governed by the laws of the State of Delaware without regard to principles of
conflicts of law, and cannot be changed, discharged or terminated orally but
only by an instrument in writing signed by the party against whom enforcement of
any change, discharge or termination is sought.
10. Counterparts. This Note may be executed simultaneously in any
number of counterparts each of which when so executed and delivered shall be an
original, but such counter parts together shall constitute but one and the same
instrument.
11. Headings. The headings of the sections of this Note are inserted
for convenience only and do not affect the meaning of such section.
IN WITNESS WHEREOF, the undersigned has caused this Note to be signed
in its corporate name by a duly authorized officer and to be dated the date and
year first above written.
THE RATTLESNAKE HOLDING COMPANY, INC.
By /William J. Opper
----------------------------------
William J. Opper
Chairman
5
<PAGE> 1
EXHIBIT 10.26
OPTION AND ESCROW AGREEMENT
AGREEMENT dated as of August , 1996, between CFT RESTAURANT
CORP. ("CFT"), LAND AND BUILDING GROUP ("LBG"), RATTLESNAKE OF
MILFORD, INC. ("RMI"), RATTLESNAKE HOLDING CORP. ("RHC"), FRANK
TUMMINELLO ("FT"), CHARLES TUMMINELLO ("CT") and THOMAS E. DUNN
("TD") and PRYOR, CASHMAN, SHERMAN & FLYNN, ("Escrow Agent").
STATEMENT OF FACTS:
-------------------
The parties to this Agreement have agreed upon the form and content of
that certain (a) Assets Sale/Purchase Agreement between RMI and CFT (the "Assets
Agreement"), (b) First Amendment and Restated Lease between LBG and RMI (the
"Lease"), (c) Consulting Agreement among FT, CT, TD, RMI and RHC, and (d) Common
Stock Purchase Warrant made by RHC that are attached to this Agreement. The
foregoing described documents contain all of the material terms of the
transaction contemplated by the parties hereto.
CFT, RMI and LBG have executed two (2) counterparts of each of the
Assets Agreement and the Lease (collectively, the "Documents") and delivered
same to Escrow Agent to be held and disbursed in accordance with terms and
conditions of this Agreement.
The parties now desire to set forth the terms and conditions pursuant
to which the Documents shall be held in escrow and disbursed by Escrow Agent,
and CFT, LBG, FT, CT and TD (collectively, the "Optionors") desire to grant RMI
and RHC (collectively, the "Optionees") the right to cause the Documents to be
released from escrow upon, and subject to, the terms and conditions herein
contained.
NOW, THEREFORE, for $10.00 and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
1. CFT, LBG and RMI have executed and delivered the Documents to Escrow
Agent, and Escrow Agent agrees to hold and disburse the same in accordance with
the terms of this Agreement.
2. Optionors hereby grant Optionees the option (the "Option") to cause
the Escrow Agent to date and release the Documents from Escrow in accordance
with paragraph 3 below. Optionees shall exercise the Option by giving written
notice to Escrow Agent and to Optionors attorney, Robert Malone, Esq., Coughlin
& Malone, 92 Cherry Street, Milford, Connecticut, 06460 ("Malone") at any time
within the Option Period (as hereinafter defined). For purposes hereof, the
"Option Period" shall mean the period between the date hereof and September 1,
1996 provided, however, that Optionor shall have the right to extend the Option
Period for an additional month to October 1, 1996 by paying the amount of
$15,000 to Optionors' at any time on or prior to September 1, 1996, and the
right to further extend the Option Period for an additional month to November 1,
1996 by paying the
<PAGE> 2
amount of $15,000 to Optionors at any time on or prior to October 1, 1996. If
Optionees shall not give written of the exercise of the Option on or before the
end of the Option Period or if Optionees shall fail to deliver any payment to
Optionors on or before the date herein required, the Option shall be deemed null
and void, and of no further force or effect, and Escrow Agent shall destroy the
Documents. All payments under this Option shall be made payable to CFT on behalf
of the Optionors. Optionors acknowledge that the amount of $15,000 has been paid
to CFT at the execution of this Agreement representing Option consideration for
the period prior to September 1, 1996.
3. If Optionees shall give written notice of the exercise of the Option
in accordance with paragraph 1 above, Escrow Agent is authorized and directed to
date the Documents as of the date the notice of Option is received by Escrow
Agent and disburse one original counterpart of each of the Documents to Malone,
on behalf of Optionors, and to RMI, on behalf of Optionees. Upon the
disbursement of the Documents as hereinabove provided, the same shall be deemed
fully effective in accordance with their respective terms.
4. Each of the parties hereto represent and warrant to the other that
they have the full right, power and authority to execute this Agreement and the
Documents, and the individuals executing this Agreement on behalf of each entity
have the full right, power and authority to do so.
5. It is agreed that the duties of the Escrow Agent are only as herein
specifically provided, and subject to the provisions of this Section, are purely
ministerial in nature, and the Escrow Agent shall incur no liability whatsoever
except for willful misconduct or gross negligence, as long as the Escrow Agent
has acted in good faith. The parties hereto each release the Escrow Agent from
any act done or omitted to be done by the Escrow Agent in good faith in the
performance of its duties hereunder. The Escrow Agent is acting as a stakeholder
only with respect to the Documents. The parties hereto each agree, jointly and
severally, to fully indemnify and hold the Escrow Agent harmless from and
against all liabilities, damages, costs and expenses (including, without
limitation, reasonable attorneys fees) incurred by the Escrow Agent with respect
to the performance of its duties hereunder. Upon making delivery of the
Documents in the manner herein provided, the Escrow Agent shall have no further
liability hereunder. In the event there is any dispute under this Agreement, the
Escrow Agent shall (i) continue to hold the Documents until the Escrow Agent has
received written notice from all parties hereto directing the disbursement of
the Documents, in which case the Escrow Agent shall then disburse the Documents
in accordance with such direction, or (ii) in the event of litigation between
the parties, deliver the Documents to the clerk of the court in which said
litigation is pending, or (iii) take such affirmative steps as
-2-
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<PAGE> 3
the Escrow Agent may, at the Escrow Agent's option, elect in order to terminate
the Escrow Agent's duties including, but not limited to, depositing the
Documents in any court which the Escrow Agent shall select in Connecticut, and
commencing an action for interpleader, the costs thereof to be borne by
whichever of Seller or Buyer is the losing party. Escrow Agent shall have the
right to represent RMI and RHC in any litigation arising out of this Agreement.
6. This Document may be executed in counterpart.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day above written.
CFT Restaurant Corp.
BY: /s/ Thomas E. Dunn, President
-----------------------------------
Rattlesnake of Milford, Inc.
By: /s/
----------------------------------
Rattlesnake Holding Corp.
By: /s/
----------------------------------
/s/ Frank Tumminello
----------------------------------
Frank Tumminello, Individual and
for Land & Building Group
/s/ Charles Tumminello
----------------------------------
Charles Tumminello, and for Land &
Building Group
/s/ Thomas E. Dunn
----------------------------------
Thomas E. Dunn, and for Land &
Building Group
Pryor, Cashman, Sherman & Flynn
By:
-------------------------------
-3-
<PAGE> 4
ASSETS SALE/PURCHASE AGREEMENT
------------------------------
The parties to this Agreement (this "Agreement"), dated as of June ,
1996, are RATTLESNAKE OF MILFORD, INC., a Connecticut corporation (hereinafter
referred to as the "Buyer"), and CFT RESTAURANT CORP., a Connecticut corporation
(hereinafter referred to as the "Seller").
RECITALS OF FACT:
-----------------
WHEREAS, the Seller is the owner/operator of a restaurant located at
1360 Boston Post Road, Milford, Connecticut (the "Premises");
WHEREAS, the Seller desires to sell, and the Buyer desires to purchase,
certain assets of the Seller as more particularly described herein, upon the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Buyer and Seller hereby agree
as follows:
1. PURCHASE AND SALE OF ACQUIRED ASSETS
Subject to the terms and conditions set forth in this Agreement, at the
Closing referred to in Section 3 hereof, the Seller shall sell, assign, transfer
and deliver to Buyer, and the Buyer shall purchase, acquire and take assignment
from the Seller of, all of the fixtures, furnishings, equipment and personal
property owned by Seller and located on, or used in connection with, the
Premises including, without limitation, the items listed on EXHIBIT A attached
hereto and made a part hereof (hereinafter collectively called the "Acquired
Assets"), free and clear of any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind ("Encumbrances"). In addition,
the Seller and the Buyer shall execute and deliver an assignment of lease with
respect to the Premises in substantially the form attached hereto as EXHIBIT B
and made a part hereof (the "Assignment of Lease") whereby the Seller shall
assign to the Buyer, and the Buyer shall assume from the Seller, all of the
Seller's right, title and interest in and under that certain lease dated July 7,
1988 (the "Lease") with respect to the Premises between Land & Building Group
("LBG"), as landlord, and the Seller, as tenant.
2. PURCHASE PRICE; PAYMENT; ADJUSTMENTS
2.1 PURCHASE PRICE. The aggregate consideration payable to the Seller
for the Acquired Assets and the Assignment of Lease (the
<PAGE> 5
"Purchase Price") shall equal Three Hundred Forty Five Thousand ($345,000.00)
Dollars, which shall be allocated as follows:
(a) $295,000.00 payable in respect of the Assignment of
Lease; and
(b) $50,000.00 payable in respect of the Acquired Assets.
2.2 PAYMENT. The Purchase Price shall be payable as follows:
(a) Within 3 days after the full execution and delivery of this
Agreement, $34,500.00 by check, subject to collection, of the Buyer to the order
of Coughlin & Malone, as Escrow Agent (hereinafter called the "ESCROW AGENT"),
to be deposited in a Trustee (IOLTA) Account and held in escrow in accordance
with Section 10 of this Agreement. Such amount is hereinafter collectively
called the "DEPOSIT";
(b) upon the Closing (as such term is defined below), by the Buyer
executing and delivering to Seller a promissory note in the principal amount of
One Hundred Thousand ($100,000.00) Dollars in the form, and upon the terms,
covenants and conditions, set forth on EXHIBIT C annexed hereto and made a part
hereof (hereinafter called the "NOTE") ; and
(c) upon the Closing, an amount (hereinafter called the "BALANCE OF THE
PURCHASE PRICE") equal to the amount by which the Purchase Price exceeds the sum
of (i) the Deposit (including, without limitation, all interest on the Deposit,
which interest shall be credited against the Purchase Price at Closing), plus
(ii) the principal amount of the Note, by certified or bank check of Buyer or by
wire transfer of immediately available federal funds.
2.3 ADJUSTMENTS. The following items shall be prorated and adjusted
as of 11:59 p.m. of the day preceding the Closing Date:
(a) the fixed rent and all other charges payable under the Lease; and
(b) all other items typically adjusted between a purchaser and a seller
in a similar transaction in the Connecticut area.
In addition, the parties shall adjust all items of unopened liquor and
alcoholic beverage inventory at Seller's cost on a dollar for dollar basis (not
to exceed $15,000.00)
3. CLOSING
3.1 TIME AND PLACE. The closing of the transfer and delivery of the
documents and instruments necessary to consummate the purchases and sales
contemplated by this Agreement (the "Closing") shall be held at the offices of
Buyer, 3 Stamford Landing, Stamford, Connecticut, at 10:00 a.m. on the date that
is forty (40) days following the date of this Agreement, or at such other time
and place as the Buyer and the Seller may agree subject to the
2
<PAGE> 6
provisions of Section 8.8 and the other terms and conditions of this Agreement.
The date on which the Closing is actually held hereunder is sometimes referred
to herein as the "Closing Date".
3.2 TRANSACTIONS AT CLOSING. At the Closing hereunder:
(a) The Buyer shall pay to the Seller the Balance of the Purchase Price
by (i) delivery of a certified bank check payable to the order of the Seller or
by wire transfer of immediately available federal funds, and (ii) by execution
and delivery to Seller of the Note. The Deposit shall be dispersed in accordance
with the provisions of Section 10 below.
(b) The Seller shall duly execute and deliver to the Buyer or its
nominee or nominees such bills of sale, certificates of title and other
instruments of assignment or transfer with respect to the Acquired Assets as the
Buyer may reasonably request and as may be necessary to vest in the Buyer good
record and marketable title to all of the Acquired Assets, including, but not
limited to, the General Assignment and Bill of Sale substantially in the form
attached hereto as EXHIBIT D and made a part hereof.
(c) The Seller shall provide a certificate of good standing for the
Seller in a form provided by the Secretary of State of Connecticut dated as of a
date not more than ten (10) days prior to the Closing Date.
(d) The Seller shall execute and deliver to the Buyer, and the Buyer
shall execute and deliver to Seller, the Assignment of Lease.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Section 4 are true, correct and complete as of the date of
this Agreement and will be true, correct and complete as of the Closing Date as
if made on the Closing Date.
4.1 ORGANIZATION OF THE SELLER; AUTHORITY. The Seller is a corporation
duly authorized, validly existing and in good standing under the laws of the
State of Connecticut. The Seller has all requisite power and authority to own
and hold the Acquired Assets, to carry on its business and to own or lease and
operate its properties, including, without limitation, the Premises, as such
business is now conducted and such properties are now owned, leased or operated.
The Seller has all requisite power, authority and capacity to execute and
deliver this Agreement and all other agreements, documents and instruments
contemplated hereby and to carry out all actions required of it pursuant to the
terms of this Agreement.
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<PAGE> 7
4.2 CORPORATE APPROVAL; BINDING EFFECT. The Seller has obtained all
necessary authorizations and approvals from its Board of Directors and
stockholders required for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against Seller in accordance with
its terms.
4.3 NONCONTRAVENTION. Neither the execution and delivery of this
Agreement by the Seller nor the consummation by the Seller of the transactions
contemplated hereby will constitute a violation of, or be in conflict with, or
constitute or create a default under, or result in the creation or imposition of
any Encumbrance upon any property of the Seller (including, without limitation,
any of the Acquired Assets) pursuant to (a) the charter documents or Bylaws of
the Seller, each as amended to date; (b) any agreement or commitment to which
the Seller is a party or by which the Seller or any of its properties
(including, without limitation, any of the Acquired Assets) is bound or to which
the Seller or any of such properties is subject; or (c) any statute or any
judgment, decree, order, regulation or rule of any court or governmental
authority.
4.4 GOVERNMENTAL CONSENT. No consent, approval or authorization of, or
registration, qualification of filing with, any governmental agency or authority
is required for the execution and delivered of this Agreement and all other
agreements, documents and instruments contemplated hereby.
4.5 TITLE TO ACQUIRED ASSETS. The Seller is the lawful owner of, has
good and valid record and marketable title to, and has the full right to sell,
convey, transfer, assign and deliver all of the Acquired Assets, without any
restrictions of any kind whatsoever. All of the Acquired Assets are entirely
free and clear of any Encumbrances other than the Permitted Encumbrances. At
Closing, the Seller will convey the Acquired Assets to the Buyer by bills of
sale and transfer effective to vest in the Buyer, and the Buyer will have, good
and valid record and marketable title to all of the Acquired Assets, free and
clear of all Encumbrances.
4.6 THE LEASE; THE PREMISES. The Lease is in full force and effect and
neither LBG nor Seller is in default of any of their respective obligations
thereunder. Except for Seller, there are no tenants or other parties in
possession of any part of the Premises, and except for LBG there are no other
parties who have a right to possession of, or title to, any part of the
Premises. Seller is not aware of any pending or threatened condemnation or
similar proceeding affecting any part of the Premises. Except as set forth on
Schedule 4.6 hereto, there are no oral or written contracts, commitments,
understandings or agreements affecting the Premises.
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<PAGE> 8
4.7 HAZARDOUS MATERIALS. To the best of Seller's knowledge, no toxic
material, pollutant, petroleum products, asbestos, hazardous waste or hazardous
substance of a kind or in a quantity prohibited or deemed unsafe under any law
or governmental rule or regulation and no hazardous or unsafe level of radon gas
(hereinafter collectively called "HAZARDOUS MATERIALS") are located upon or
within the Premises (or any portion thereof). To the best of Seller's knowledge,
the Premises have never been used for the storage, handling, manufacturing,
discharge or disposal of Hazardous Materials or for industrial purposes, and
there are not now, and there never have been, underground tanks for gasoline,
oil or any other liquid products within the Premises.
4.8 LITIGATION, ETC. No action, suit, proceeding or investigation is
pending or, to the knowledge of the Seller, threatened, relating to or affecting
the Premises or any of the Acquired Assets or relating to or affecting the
activities of the Seller carried on the Premises or with any of the Acquired
Assets, or that questions the validity of this Agreement or challenges any of
the transactions contemplated hereby, nor is there any basis for any such
action, suit, proceeding or investigation. The Seller is not aware of any
actions, suits, proceedings or claims affecting any part of the Premises, or
affecting Seller with respect to the ownership, occupancy, use or operation of
any part of the Premises pending or threatened in or before any court, agency,
commission or board. No petition in bankruptcy (voluntary or otherwise),
assignment for the benefit of creditors, or petition seeking reorganization or
arrangement or other action under Federal or State bankruptcy laws is pending or
threatened against, or contemplated by the Seller.
4.9 CONFORMITY TO LAW. To Seller's knowledge, the Seller has complied
with, and is in compliance with, (a) all laws, statutes, governmental
regulations and all judicial or administrative tribunal orders, judgments,
writs, injunctions, decrees or similar commands applicable to its business, the
Premises and all of the Acquired Assets (including, without limitation, any
labor, environmental, occupational health, zoning or other law, regulation or
ordinance), (b) all unwaived terms and provisions of all contracts, agreements
and indentures to which the Seller is a party, or by which the Seller or any of
the Acquired Assets is subject, and (c) its charter documents and Bylaws, each
as amended to date. The Seller has not committed, been charged with, or been
under investigation with respect to, or does there exist, any violation of any
provision of any federal, state or local law or administrative regulation in
respect of its business, the Premises or any of the Acquired Assets.
4.10 BOOKS AND RECORDS. All accounts, books, ledgers and official and
other records of whatsoever kind material to the Business have been fully,
properly and accurately kept and
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<PAGE> 9
completed in all respects, and there are no material inaccuracies or
discrepancies of any kind contained or reflected therein, and collectively they
fairly present the financial position of the Seller. The Seller does not have
any of its records, systems, controls, data or information recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and direct control of the Seller. The
Seller keeps its records and books of account in conformity with generally
accepted accounting principles.
4.11 RESTRICTIVE DOCUMENTS. The Seller is not subject to, or a party
to, any charter, bylaw, mortgage, lien, lease, license, permit, agreement,
contract, instrument, law, rule, ordinance, regulation, order, judgment or
decree, or any other restriction of any kind or character, which would prevent
consummation of the transactions contemplated by this Agreement or the
compliance by the Seller with the terms, conditions and provisions hereof.
4.12 CONTRACTS AND AGREEMENTS. There are no service or other contracts
or agreements affecting Seller, the Acquired Assets, the Lease or the Premises
which will be binding upon or assumed by Buyer including, without limitation,
any employment or union agreements or obligations.
4.13 BROKERS. The Seller acknowledges that no broker or finder was
employed in connection with the transactions contemplated in this Agreement,
other than as set forth in Section 8.7 below.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1 ORGANIZATION AND GOOD STANDING OF BUYER. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Connecticut. The Buyer has all requisite power, authority and capacity
to execute and deliver this Agreement and all other agreements, documents and
instruments contemplated hereby and to carry out all actions required of it
pursuant to the terms of this Agreement.
5.2 CORPORATE APPROVAL; BINDING EFFECT. The Buyer has obtained all
necessary authorizations and approvals from its Board of Directors and
stockholders required for the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Buyer and constitutes the legal, valid and
binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms.
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<PAGE> 10
5.3 ENVIRONMENTAL REVIEW OF PREMISES. The Buyer acknowledges that prior
to the execution of this Agreement it has had the opportunity to have an
environmental inspection or Phase I environmental audit conducted on the
Premises.
5.4 BROKERS. The Buyer acknowledges that no broker or finder was
employed in connection with the transactions contemplated in this Agreement,
other than as set forth in Section 8.7 below.
6. INDEMNIFICATION
6.1 INDEMNIFICATION BY SELLER. Seller shall defend, indemnify and hold
the Buyer harmless from and against any taxes, penalties, interest, claims,
suits, damages, liabilities, costs and other expenses, including, without
limitation, reasonable attorneys' fees and litigation costs, experts' fees and
house counsel expenses suffered or incurred by the Buyer as a result of the
inaccuracy of any representation and/or warranty contained in this Agreement or
the inaccuracy of any instrument, certification or affidavit executed pursuant
to this Agreement. The representations, warranties, covenants and agreements
made by Seller in this Agreement shall be true and correct as of the Closing and
shall survive closing for a period of one (1) year.
6.2 INDEMNIFICATION BY BUYER. The Buyer shall defend, indemnify and
hold Seller harmless from and against any taxes, penalties, interest, claims,
suits, damages, liabilities, costs and other expenses, including, without
limitation, reasonable attorneys' fees and litigation costs, experts' fees and
house counsel expenses suffered or incurred by Seller as a result of the
inaccuracy of any representation and/or warranty contained in this Agreement or
the inaccuracy of any instrument, certification or affidavit executed pursuant
to this Agreement. The representations, warranties, covenants and agreements
made by the Buyer in this Agreement shall be true and correct as of the Closing
and shall survive closing for a period of one (1) year.
7. CONDUCT OF BUSINESS BY SELLER PENDING CLOSING
7.1 CARRY ON IN REGULAR COURSE. The Seller agrees to conduct its
business in the ordinary course of business and shall maintain the Acquired
Assets and the Premises in good operating condition and repair, and make all
necessary renewals, additions and replacements thereon, and shall carry on its
respective business diligently and substantially in the same manner as
heretofore conducted. Without limiting the immediately preceding sentence,
pending the closing Date, the Seller will not permit the Premises or any of the
Acquired Assets to be subjected to any Encumbrance, will not permit to be sold,
transferred or otherwise disposed of
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<PAGE> 11
any of the Acquired Assets, and will not agree, whether or not in writing, to do
any of the foregoing.
7.2 EXCLUSIVE DEALING. The Seller shall not, directly or indirectly,
encourage, initiate or engage in discussions or negotiations with, or provide
any information to, any corporation, partnership, person or other entity or
group, other than the Buyer and its representatives, concerning any purchase of
Seller's business or any of the Acquired Assets.
7.3 NOTIFICATIONS BY SELLER. The Seller shall promptly advise Buyer in
writing of any facts of which the Seller becomes aware indicating the inaccuracy
of any of the representations or warranties of the Seller contained in this
Agreement, and the Seller shall promptly provide the Buyer with copies of any
written notices which Seller gives or receives relating to the Premises
including, without limitation, any notice received from or given to LBG.
7.4 MAINTENANCE OF PROPERTY. The Seller shall cause the Premises to be
kept in its present physical condition, and shall not suffer or permit any
excavation or waste upon the Premises. The Seller shall fully and timely perform
all of its obligations under the Lease and maintain the same in full force and
effect prior to Closing. The Seller shall pay all taxes and assessments imposed
against the Premises in a timely manner.
8. OTHER COVENANTS AND AGREEMENTS
8.1 CONFIDENTIAL INFORMATION. Any and all non-public information
disclosed by the Buyer to the Seller or by the Seller to the Buyer as a result
of the negotiations leading to the execution of this Agreement, or in
furtherance thereof, shall remain confidential, except to the extent that the
Buyer in its reasonable judgment, must disclose any such information to its
advisers and consultants, or to banks, venture capitalists and other
institutional lenders or investors in the process of procuring the loan or
investment of funds for the purchase contemplated herein. If the closing does
not take place for any reason, each of the Seller and the Buyer agrees not to
further divulge or disclose or use for its benefit or purposes any such
information at any time in the future unless it has otherwise become public. The
information intended to be protected shall include but not be limited to,
financial information and customer and supplier lists, and anything else having
an economic or pecuniary benefit to the Buyer or the Seller, respectively.
8.2 EMPLOYEE MATTERS. The Seller shall pay on or before the Closing
Date, all bonus, profit-sharing, severance, pension, vacation, personal and sick
day and other amounts owing and accrued
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as of such date relating to the Seller's employees and/or consultants and in no
event shall any liability for any such amounts be or be deemed to be assumed by
the Buyer. The Buyer may offer employment to some or all employees of Seller
employed on the Closing Date, as it may determine in its sole discretion, upon
such terms and conditions as it may determine in its sole discretion. It is
understood that any such offer of employment shall be for no fixed duration and
shall be terminable at the will of the Buyer and each such employee.
8.3 EXPENSES. All expenses of the preparation, execution and
consummation of this Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys', accountants' and outside advisers'
fees and disbursements, shall be borne by the party incurring such expenses. In
addition, the Seller shall pay all taxes imposed with respect to this
transaction including, but not limited to, any sales taxes imposed upon the sale
of the Acquired Assets and the Assignment of Lease.
8.4 RISK OF LOSS. The risk of any loss, damage or destruction to the
Premises and the Acquired Assets from fire or other casualty or cause shall be
borne by the Seller at all times prior to the Closing.
8.5 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants hereto contained in this Agreement or
otherwise made in writing in connection with the transactions contemplated
hereby shall survive the Closing (for a period of one (1) year) and any
investigation at any time made by or on behalf of the parties hereto. If either
party shall have breached any of its representations and warranties or any
other term of this Agreement, such party shall be liable to the non-breaching
party for the fees and expenses of counsel to the non-breaching party in any
litigation arising out of such breach.
8.6 PUBLIC STATEMENTS OR RELEASES. The parties hereto each agree that
prior to the Closing no party to this Agreement will make, issue or release any
public announcement, statement or acknowledgment of the existence of the
transactions provided for herein without first obtaining the consent of the
other parties hereto. Nothing contained in this Section 8.6 shall prevent any
party from making such public announcements as such party may consider necessary
in order to satisfy such party's legal or contractual obligations.
8.7 BROKER/REALTORS FEES. The Seller and Buyer each represent and state
that the only broker/agent due any commission is Friedland Realty, Inc. and that
any fees due shall be paid by Rattlesnake Holding Company. The Seller and the
Buyer mutually agree to indemnify, defend and hold each other harmless from and
against any and all claims, suits, liabilities, damages, costs and
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<PAGE> 13
expenses (including, without limitation, the reasonable attorneys' fees and
costs of suit) incurred by such party to be indemnified hereunder in the event
the other party breaches its representation contained in this Section. This
Section shall survive the Closing or any termination of this Agreement.
8.8 CONDITIONS TO CLOSING. Buyer's obligation to pay the Balance of the
Purchase Price and otherwise close and consummate the transactions contemplated
by this Agreement is contingent upon the following:
(a) The representations and warranties of the Seller set forth in
Section 4 and elsewhere in this Agreement shall be true, complete and correct as
of the Closing Date as if made on such date and Seller shall have delivered to
the Buyer a certificate of its President dated the Closing Date certifying to
that effect;
(b) The Seller shall have delivered to Buyer a fully executed estoppel
certificate (hereinafter called the "ESTOPPEL") from LBG in the form annexed
hereto as EXHIBIT E and made a part hereof;
(c) LBG and the Buyer shall have entered into the First Amendment and
Restated Lease in the form attached hereto as EXHIBIT F and made a part hereof;
(d) Seller shall have delivered to the Buyer (i) a non-disturbance
agreement from ___________ , the holder of the existing mortgage affecting the
Premises dated ___________ in the original principal amount of $________ (the
"Mortgage"), and (ii) the unconditional consent of such mortgagee to (x) the
Assignment of the Lease and the sale of the Acquired Assets to Buyer and the
other transactions provided for hereunder, and (y) the alterations to the
Premises necessary or desirable for Buyer to retrofit the Premises for the
operation of a Rattlesnake restaurant, to the extent such consent is required
under the provisions of the Mortgage. Seller represents that the Mortgage is the
only mortgage affecting the Premises, and that the Lease is the only lease
affecting the Premises; and
(e) Buyer shall have obtained all permits, licenses and approvals
necessary to permit Buyer to operate its business on the Premises (including,
without limitation, a liquor license) and to retrofit such Premises for the
operation of a Rattlesnake restaurant. Buyer agrees to make prompt application
for all of the foregoing.
If the foregoing contingencies have not been satisfied on or before the date
that is forty (40) days after the date of this Agreement, either Seller or Buyer
may terminate this Agreement by giving written notice to the other, in which
event the Deposit shall promptly be returned to Buyer. Notwithstanding the
foregoing,
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however, if Seller shall exercise its right to terminate this Agreement after
such fortieth (40th) day as aforesaid, Buyer shall have the right, within five
(5) days after Seller's termination notice is given, to countermand Seller's
termination notice, in which event this Agreement shall continue in full force
and effect, Buyer shall be deemed to have waived the foregoing contingencies,
and the Closing Date shall occur within five (5) days after Buyer's countermand
notice has been given.
9. GENERAL
9.1 NOTICES. All notices, demands and other communications hereunder
shall be in writing and shall be made by hand delivery, first-class mail
(registered or certified, return receipt requested, postage prepaid), or
reputable national overnight air courier (e.g. Federal Express), addressed as
follows:
(a) If to the Seller, to:
---------------------
CFT Restaurant Corp.
c/o Mr. Thomas Dunn
10 Partridge Lane
Milford Connecticut 06902
With a Copy Sent Contemporaneously to:
--------------------------------------
Robert J. Malone, Esquire
Coughlin & Malone
92 Cherry Street
P.0. Box 209
Milford, CT 06460-0209
(b) If to the Buyer. to:
--------------------
Rattlesnake of Milford, Inc.
c/o Rattlesnake Holding Corp.
3 Stamford Landing
Stamford, Connecticut 06902
With a Copy Sent Contemporaneously to:
--------------------------------------
Wayne Heicklen, Esq.
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
or to such other address as the party receiving such notice shall have properly
designated by notice to the other party hereto in accordance with this Section
9.1. Notices may be given by a party's attorney.
11
<PAGE> 15
Each such notice shall be deemed given at the time delivered by hand,
if personally delivered; five (5) business days after being deposited in the
mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
9.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings relating to
the subject matter hereof and shall not be amended except by a written
instrument hereafter signed by all of the parties hereto.
9.3 GOVERNING LAW. The validity and construction of this Agreement
shall be governed by the internal substantive laws of the State of Connecticut.
9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon inure
to the benefit of the heirs and successors of each of the parties. Neither this
Agreement nor the obligations of any party hereunder shall be assignable or
transferable by such party without the prior written consent of the other party
hereto; PROVIDED, HOWEVER, that nothing contained in this Section 9.4 shall
prevent the Buyer, without the consent of the Seller, from transferring or
assigning this Agreement or its rights or obligations hereunder to (a) another
entity controlling, under the control of or under common control with the Buyer,
and/or (b) to its lenders as security.
9.5 NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Seller and the Buyer and their respective shareholders, any rights or
remedies under or by reason of this Agreement.
9.6 AMENDMENTS. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Seller and the Buyer.
9.7 FURTHER ASSURANCES, ETC. Each party shall, from time to time,
execute, acknowledge and deliver such further instruments, and perform such
additional acts, as the other party may reasonably request in order to
effectuate the intent of this Agreement. Nothing contained in this Agreement
shall be deemed to create any rights or obligations of partnership, joint
venture or similar association between the Seller and the Buyer.
9.8 MISCELLANEOUS. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or
12
<PAGE> 16
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and be enforceable to the fullest
extent permitted by law. The captions in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Agreement or the scope or content of any of its provisions.
10. ESCROW PROVISIONS
10.1 ESCROW DEPOSIT. The Deposit shall be held by the Escrow Agent, in
trust, on the terms hereinafter set forth and subject to the respective rights
of the parties as to the payment of the Deposit as set forth elsewhere in this
Agreement.
10.2 DEPOSIT IN ACCOUNT. The Escrow Agent shall, at the direction of
the Buyer, deposit the Deposit in one or more interest-bearing accounts in a
commercial bank in Connecticut.
10.3 DELIVERY OF DEPOSIT. The Escrow Agent will deliver the Deposit to
Seller or to Buyer, as the case may be, under the following conditions:
(a) to Seller on the Closing Date in the event a Closing shall occur
pursuant to this Agreement; or
(b) to Seller upon receipt of written demand therefor (hereinafter
called "SELLER'S DEMAND FOR DEPOSIT"), stating that the Buyer has failed to pay
the Balance of the Purchase Price in accordance with the terms of this
Agreement, or that Buyer has otherwise breached or defaulted in any of its
material obligations under this Agreement, and the facts and circumstances
underlying such default; PROVIDED, HOWEVER, that the Escrow Agent shall not
honor such demand until at least five (5) days after the Escrow Agent shall have
delivered a copy of Seller's Demand for Deposit to Buyer in accordance with the
provisions of Section 10.4 below, nor thereafter if the Escrow Agent shall have
received a Notice of Objection (as such term is defined in Section 10.4 below)
from Buyer within such five (5) day period; or
(c) to Buyer upon receipt of written demand therefor (hereinafter
called "BUYER'S DEMAND FOR DEPOSIT") stating that this Agreement has been
terminated in accordance with the provisions hereof, or that any of Seller's
representations or warranties are not true and correct in any material respect,
or that Seller has otherwise breached or defaulted in any of its obligations
under this Agreement, and the facts and circumstances underlying such default;
PROVIDED, HOWEVER, that the Escrow Agent shall not honor such demand until at
least five (5) days after the Escrow Agent shall have delivered a copy of
Buyer's Demand for Deposit to Seller
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<PAGE> 17
in accordance with the provisions of Section 10.4 below, nor thereafter if the
Escrow Agent shall have received a Notice of Objection from Seller within such
five (5) period.
10.4 Notice of Objection.
--------------------
(a) Within two (2) business days following delivery to Escrow Agent of
Seller's Demand for Deposit or Buyer's Demand for Deposit, as the case may be,
the Escrow Agent shall deliver a copy thereof to the other party as provided in
this Section 10. The other party shall have the right to object to the delivery
of the Deposit by sending written notice (hereinafter called a "NOTICE OF
OBJECTION") of such objection to the Escrow Agent, which Notice of Objection
shall be deemed null and void and ineffective if such Notice of Objection is not
received by the Escrow Agent within the time periods prescribed in Section 10.3
above. Such notice shall set forth the basis for objecting to the delivery of
the Deposit. Upon receipt of a Notice of Objection, the Escrow Agent shall
promptly send a copy thereof to the party who sent the Demand for Deposit.
(b) In the event the Escrow Agent shall have received a Notice of
Objection within the time period prescribed in Section 10.4(a), the Escrow Agent
shall (i) continue to hold the Deposit until the Escrow Agent has received
written notice from both Seller and Buyer directing the disbursement of the
Deposit, in which case the Escrow Agent shall then disburse the Deposit in
accordance with such direction, or (ii) in the event of litigation between
Seller and Buyer, deliver the Deposit to the clerk of the court in which said
litigation is pending, or (iii) take such affirmative steps as the Escrow Agent
may, at the Escrow Agent's option, elect in order to terminate the Escrow
Agent's duties including, but not limited to, depositing the Deposit in any
court which the Escrow Agent shall select in Connecticut, and commencing an
action for interpleader, the costs thereof to be borne by whichever of SelLer or
Buyer is the losing party.
10.5 LIABILITY OF ESCROW AGENT. It is agreed that the duties of the
Escrow Agent are only as herein specifically provided, and subject to the
provisions of this Section, are purely ministerial in nature, and the Escrow
Agent shall incur no liability whatsoever except for willful misconduct or gross
negligence, as long as the Escrow Agent has acted in good faith. Seller and
Buyer each release the Escrow Agent from any act done or omitted to be done by
the Escrow Agent in good faith in the performance of its duties hereunder.
10.6 INDEMNIFICATION OF ESCROW AGENT. The Escrow Agent is acting as a
stakeholder only with respect to the Deposit. Seller and Buyer each agree,
jointly and severally, to fully indemnify and hold the Escrow Agent harmless
from and against all liabilities, damages, costs and expenses (including,
without limitation,
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<PAGE> 18
reasonable attorneys fees) incurred by the Escrow Agent with respect to the
performance of its duties hereunder. Upon making delivery of the Deposit in the
manner herein provided, the Escrow Agent shall have no further liability
hereunder.
10.7 EXECUTION OF AGREEMENT BY ESCROW AGENT. The Escrow Agent has
executed this Agreement in order to confirm that the Escrow Agent is holding and
will hold the Deposit in escrow, pursuant to the provisions hereof.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered by
their respective duly authorized officers, as an instrument under seal, as of
the date and year first above written.
IN THE PRESENCE OF: BUYER
RATTLESNAKE OF MILFORD, INC.
BY:
- ------------------------ --------------------------
- ------------------------
SELLER
CFT RESTAURANT CORP.
BY: /s/ Charles Tumminello
- ------------------------ --------------------------
Section 10 agreed to:
COUGHLIN & MALONE, AS ESCROW AGENT
By:
---------------------
15
<PAGE> 19
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered by
their respective duly authorized officers, as an instrument under seal, as of
the date and year first above written.
IN THE PRESENCE OF: BUYER
RATTLESNAKE OF MILFORD, INC.
BY:
- ------------------------ ------------------------------
- ------------------------
SELLER
CFT RESTAURANT CORP.
BY: /s/ Thomas E. Dunn, President
- ------------------------ -------------------------------
Section 10 agreed to:
COUGHLIN & MALONE, AS ESCROW AGENT
By:
---------------------
<PAGE> 20
EXHIBIT B
ASSIGNMENT OF LEASE
-------------------
THIS ASSIGNMENT OF LEASE ("Assignment") dated this __ day of June,
1996, made by CFT RESTAURANT CORP., a Connecticut Corporation having an address
c/o Mr. Thomas Dunn, 10 Partridge Lane, Milford, Connecticut 06902 (hereinafter
"Assignor") in favor of RATTLESNAKE OF MILFORD, INC., a Connecticut Corporation
having an address at 3 Stamford Landing, Stamford, Connecticut 06902
(hereinafter "Assignee").
FOR AND IN CONSIDERATION of Ten ($10.00) Dollars and other good and
valuable consideration paid by Assignee to Assignor, the receipt and sufficiency
of which is acknowledged, Assignor hereby assigns, sets over and transfers unto
Assignee all of its right, title and interest in and to that certain lease dated
July 7, 1988 (the "Lease") made between Land and Building Group, as Landlord,
and Assignor, as Tenant, subject to the covenants, conditions and limitations
therein contained.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
forever from and after the date hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
the day and year first above written.
CFT RESTAURANT CORP.
By:
--------------------------
Name:
Title:
<PAGE> 21
EXHIBIT C
PROMISSORY NOTE
$100,000.00 Stamford, Connecticut
_______________, 1996
FOR VALUE RECEIVED, the undersigned, RATTLESNAKE OF MILFORD, INC., a
Connecticut corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
CFT RESTAURANT CORP., a Connecticut corporation (the "Lender"), the principal
sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) on __________, 2001 (the
"Maturity Date"), or such lesser amount as remains outstanding under this
Promissory Note on the Maturity Date.
The Borrower may prepay all or any part of the principal of this
Promissory Note at any time prior to the Maturity Date without penalty or
premium. The Borrower shall pay interest on any and all amounts outstanding
under this Promissory Note at the rate of one percent above the prime lending
rate as announced by Citibank, N.A., New York from time to time. All accrued and
unpaid interest on this Promissory Note shall be payable semi-annually on the
last business day of [insert dates that are 6 and 12 months respectively after
date of Note] in each year, commencing [insert date that is 6 months after
date of Note], and on the Maturity Date. Both principal and interest are
payable in lawful money of the United States of America in same day funds at
the address of the Lender set forth in that certain Assets Sale/Purchase
Agreement dated as of _________, 1996 between Borrower and Lender.
Borrower also shall pay all costs associated with the enforcement and
collection of amounts due hereunder, including fees and expenses of Lender's
counsel.
Presentment, protest, notice of nonpayment and protest and all other
similar notices are hereby waived by the Borrower.
This Promissory Note shall be interpreted and the rights and
liabilities of the parties hereto determined in accordance with the laws of the
State of Connecticut applicable to agreements made and to be performed entirely
within such state. Whenever possible each provision of this Promissory Note
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Promissory Note shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Promissory Note. The
provisions of this
16
<PAGE> 22
Promissory Note shall be binding upon Borrower and its successors and assigns,
and shall inure to the benefit of Lender and its successors and assigns.
RATTLESNAKE OF MILFORD, INC.
By:__________________________
Name:
Title:
Rattlesnake Holding Corp. shall guaranty the full repayment of the above
Promissory Note.
17
<PAGE> 23
EXHIBIT D
GENERAL ASSIGNMENT AND BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that CFT RESTAURANT CORP., a
Connecticut Corporation having an address c/o Mr. Thomas Dunn, 10 Partridge
Lane, Milford, Connecticut 06902 (hereinafter "Assignor") in consideration of
the sum of One Dollar ($1.00) and other good and valuable consideration paid,
the receipt of which is hereby acknowledged, does hereby convey and assign to
RATTLESNAKE OF MILFORD, INC., a Connecticut Corporation having an address at 3
Stamford Landing, Stamford, Connecticut 06902 (hereinafter "Assignee"), its
successors and assigns, all of Seller's right, title and interest in and to all
fixtures, furniture, furnishings, fittings, equipment, machinery, apparatus,
appliances and other articles of personal property located at, or otherwise used
in connection with the operation of, the premises commonly known as 1360 Boston
Post Road, Milford, Connecticut, including, without limitation, the items
described in EXHIBIT A annexed hereto.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns
forever.
IN WITNESS WHEREOF, the Assignor has caused these presents to be
executed this ____ day of June, 1996.
CFT RESTAURANT CORP.
ASSIGNOR
By:________________________
Name:
Title:
RATTLESNAKE OF MILFORD, INC.
ASSIGNEE
By:_________________________
Name:
Title:
<PAGE> 24
EXHIBIT E
LAND AND BUILDING GROUP
C/O THOMAS DUNN
10 PARTRIDGE LANE
MILFORD, CONNECTICUT 06460
June , 1996
RATTLESNAKE OF MILFORD, INC.
3 STAMFORD LANDING
STAMFORD, CONNECTICUT 06902
Re: 1360 Boston Post Road, Milford, Connecticut (the
"Premises")
------------------------------------------------
Dear Sir/Madam:
The undersigned ("LANDLORD"), being the landlord under that certain
lease dated July 7, 1988 (the "LEASE") between LAND AND BUILDING GROUP, as
landlord, and CFT RESTAURANT CORP. ("CFT"), as tenant, which Lease covers the
Premises, hereby certifies to RATTLESNAKE OF MILFORD, INC. as
successor-in-interest to CFT ("Rattlesnake"), with the understanding that
Rattlesnake is relying on the representations contained herein as a material
inducement for their accepting an assignment of the Lease:
1. The Lease constitutes the entire agreement between Landlord and CFT
and is unmodified and in full force and effect.
2. There are no defaults on the part of CFT or Landlord under the
Lease.
3. All net rent and additional rent and any other charges due to
Landlord under the Lease have been paid through the date hereof.
4. No actions, whether voluntary or otherwise, are pending against
Landlord under the bankruptcy laws of the United States or any State thereof.
Signed,
LANDLORD:
LAND AND BUILDING GROUP
By:____________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.27
FIRST AMENDMENT AND
-------------------
RESTATED LEASE
--------------
THIS INDENTURE, made by and between LAND AND BUILDING GROUP, a
Connecticut General Partnership having an address c/o Mr. Thomas Dunn, 10
Partridge Lane, Milford, Connecticut 06460 (hereinafter called "Landlord"), and
RATTLESNAKE OF MILFORD, INC., a Connecticut Corporation having an address at 3
Stamford Landing, Stamford, Connecticut 06902 (hereinafter called "Tenant").
W I T N E S S E T H T H A T:
WHEREAS, the Landlord is the owner of certain land with the building
thereon containing approximately 9,200 square feet of net rentable area located
at 1360 Boston Post Road, Milford, Connecticut, including all parking areas
appurtenant to the building (sometimes referred to hereafter as the "Premises"
or the "Demised Premises").
WHEREAS, pursuant to an Agreement to Lease (the "Original Lease") dated
July 7, 1988, Landlord leased the Premises to CFT Restaurant corp ("CFT").
WHEREAS, pursuant to an Assets Sale/Purchase Agreement, between CFT and
Tenant (the "ASPA"), CFT agreed, inter alia, to assign all of its rights, titles
and interest in, to and under the Original Lease to Tenant and, pursuant to an
Assignment of Lease of even date herewith, CFT assigned all of its rights,
titles and interest in, to and under the Lease to Tenant.
NOW, THEREFORE, in consideration of the respective provisions and
agreements hereinafter contained, and for Ten Dollars ($10.00) and other good
and valuable consideration, the mutual receipt and legal sufficiency of which is
hereby acknowledged, Landlord and Tenant hereby agree to amend and restate the
Original Lease in its entirety upon, and subject to, the terms, covenants and
conditions herein contained.
1. DEMISE/TERM. Landlord hereby leases to Tenant, and Tenant hires from
Landlord, the Premises for the term herein stated upon and subject to, the
terms, covenants and conditions set forth herein. The term of the Lease shall
commence on the date hereof and shall expire on the last day of the month during
<PAGE> 2
which the date that is ten (10) years following the Full Rent Commencement Date
(as such term is hereinafter defined) shall occur. When the full Rent
Commencement Date has been determined, the parties shall enter into a
supplementary agreement confirming same and the expiration date hereof.
2. RENT
----
(a) Commencing on the Full Rent Commencement Date and continuing for
the balance of the term, Tenant shall pay to the Landlord as Base Rent on the
1st day of each and every month, in advance, without setoff or deduction of any
kind, the sum of TEN THOUSAND AND NO/100 ($10,000.00) DOLLARS per month. Said
payments shall be subject to additional rent and adjustments as hereinafter
provided in this Lease. If the Full Rent Commencement Date shall occur on a date
that is other than the 1st day of a month, then the Base Rent shall be
proportionately adjusted. For purposes of this Lease, the "Full Rent
Commencement Date" shall mean the date that is forty five (45) days after all
the following have occurred: (i) Landlord shall have delivered, and Tenant shall
have accepted, possession of the Premises in the condition required under the
Lease, (ii) Tenant shall have obtained all permits and other approvals
(including, without limitation, approvals from any mortgagee that may be
required) for the commencement of construction of its work to prepare the
Premises for its occupancy, (iii) Landlord shall have delivered to Tenant a
non-disturbance agreement from the holder of any mortgage affecting the Premises
substantially in the form annexed hereto as Exhibit A, and (iv) all
contingencies set forth in Section 8.8 of the ASPA shall have been satisfied and
the closing under the ASPA shall have occurred.
(b) Tenant shall pay Landlord each lease year as additional rental, any
ad valorem real property taxes, sewer use taxes, assessments and governmental
charges of any sort whatsoever imposed on the Demised Premises during the term
of this Lease (collectively "Real Estate Taxes") provided, however, that Real
Estate Taxes shall not include any transfer or documentary stamp
2
<PAGE> 3
tax, any tax upon the income or profits of Landlord, or any capital levy,
franchise, inheritance or estate taxes. Landlord represents that the Premises
are separately assessed for Real Estate Taxes. Tenant shall pay Landlord,
together with the Base Rent, an amount equal to $______ representing 1/12th of
the estimated Real Estate Taxes for each lease year, which obligation shall
commence on the date Tenant accepts possession of the Premises, and Landlord
shall pay, prior to the due date, all Real Estate Taxes imposed against the
Premises during the term and deliver proof thereof, and copies of all tax bills
to Tenant. (A copy of the applicable tax bills or bills provided to the Tenant
shall be sufficient evidence of the amount of the Real Estate so imposed). If
Tenant's estimated tax payments shall exceed the actual amount thereof, Landlord
shall promptly refund the difference, and if the actual amount of Real Estate
Taxes shall exceed the estimated payments, Tenant shall, within twenty (20) days
after Landlord's demand, pay any such shortfall. Landlord shall have the right
to make such demand, and to adjust the amount of the estimated Real Estate Tax
payment Tenant is required to pay, in the event Landlord is notified of an
increase in the amount of Real Estate Taxes. Tenant shall have the right to
contest the Real Estate Taxes, and Landlord shall cooperate with Tenant in
connection therewith.
(c) Tenant shall pay directly (i) to the taxing authorities any
personal property taxes imposed against the Premises during the term, and (ii)
for any maintenance costs, sewage use or service fee or tax or a sewer
assessment, utilities, including electricity, water, gas, and heating oil,
landscaping services and maintenance, snow removal, rubbish removal and hot
water.
(d) In the event any monies due from the Tenant are not paid within ten
(10) days after the due date, interest at the rate of fifteen (15%) percent per
annum upon the unpaid balance of such monies due until date of payment, together
with costs and reasonable attorney's fees for collection, if any, shall be paid.
3
<PAGE> 4
(e) All payments to the Landlord shall be made by checks or drafts on
good funds payable to the order of Landlord, or Landlord's designated payee, and
shall be mailed and delivered to such payee, at Land & Building Group, c/o
Thomas Dunn, 10 Partridge Lane, Milford, Connecticut 06460, or such other
address as the Landlord hereunder may direct by written notice delivered to
Tenant, pursuant to the notice provision of this lease.
2. USE.
---
The Tenant covenants and agrees that the Demised Premises and all parts
thereof shall be used only for the following: a restaurant for the retail sale
of liquor and food and uses appurtenant thereto. The Landlord shall not be
liable in any event whatsoever for any nuisance or claimed nuisance arising out
of or connected with the Tenant's occupancy of the Demised Premises, or for any
damage to any property (including property of the Tenant) or for any injury,
including death as the result thereof, to any person or persons arising out of
or connected with the Demised Premises or the occupancy thereof by the Tenant or
that may happen on or about the Demised Premises, or the property, or for any
injury or damages to the Demised Premises or to any property of the Tenant or of
any person or persons contained thereon, whether occurring by reason of any
existing or future condition, defect, matter or thing on or about the Demised
Premises or the property, except if due to the acts, omissions or negligence of
Landlord, its agents or representatives. Landlord represents that, to its
knowledge, the use of the Premises as a restaurant for the sale of food and
liquor is permitted by all laws, rules and regulations affecting the Premises,
that there is sufficient parking to comply with zoning law, and that the
Premises is in compliance with, and there are no violations of, any building
code or similar rule, regulation or order affecting the Premises.
3. INSURANCE
---------
(a) Tenant shall purchase and keep in full force and effect, during the
entire lease term hereof, at his sole cost and
4
<PAGE> 5
expense, public liability and property damage insurance in which the Landlord
and the Tenant shall be named as insured in companies reasonably acceptable to
the Landlord to protect both the Landlord and the Tenant against any liabilities
from damages or injuries to persons or property incident to the use of or
resulting from any accident in or about said Demised Premises from any cause
whatsoever in the amount of at least Three Million Dollars ($3,000,000.00) from
injury or death to any one person and Five Million Dollars ($5,000,000.00) for
injury arising out of any one incident, accident or occurrence and replacement
cost with respect to damage to the improvements upon the real property. Such
policy or policies shall be in such form and with such insurance companies as
shall be reasonable satisfactory to the Landlord with provisions for at least
ten (10) days notice to Landlord for cancellation. Certificates of all insurance
policies required by any of the terms of this lease shall be promptly furnished
to the Landlord and the Tenant shall submit to Landlord annually, on the
anniversary date of this lease, copies of all paid premiums for any such
insurance policies. The Tenant is to obtain a written obligation on the part of
the insurance carriers to notify the Landlord in writing prior to any
cancellation of insurance, and the Tenant agrees that if the Tenant does not
keep such insurance in full force and effect the Landlord may take out the
necessary insurance and pay the premium and the repayment thereof to the
Landlord shall be deemed to be part of the rental and payable as such on the
next day upon which the rent becomes due. Tenant agrees that he shall keep all
his furniture, fixtures, and equipment in the Demised Premises, whether owned by
Landlord or by Tenant, insured to the extent of full insurance value thereof,
against loss or damage by fire with the usual extended coverage endorsements. It
is understood and agreed that the Tenant assumes all risk of damage to his own
property and that of his agents, arising from any cause whatsoever, including,
without limitation, loss by theft or otherwise. In that event that during the
term hereof and as the
5
<PAGE> 6
result of any act or neglect of Tenant, his invitee, agents, employees, or
representatives, of the nature of the business conducted in or at the building
shall be increased over the rate then existing as of the date hereof, the
Tenant, on demand, shall pay to the Landlord as additional rent a sum equal to
any increase in the cost of such insurance caused by such increase in said
insurance rate. Nothing herein contained shall diminish any other rights
granted to Landlord under any other provision of this lease if such act or
neglect hereinbefore stated constitutes a breach of any term of this lease.
Except for claims arising out of acts caused by the negligence of the Landlord,
agents or its representatives, Tenant agrees to indemnify, and save harmless
the Landlord and its officers, directors, agents and employees from and against
all liability (statutory or otherwise), claims, suits, demands, judgements,
costs, interest and expenses, including counsel fees and disbursements incurred
in the defense thereof to which the Landlord or any such officer, director,
agent or employee may be subject or suffer whether by reason of, or by reason
of any claim for, injury to or death of, any person or persons or damage to
property (including any loss of use thereof) or otherwise arising from or
connection with the use of the Demised Premises, or from any work or thing
whatsoever done in any part of the Demised Premises, or from any work or thing
whatsoever done in any part of the Demised Premises during the term of this
lease or during the period of time, if any, prior to the commencement of such
term that the Tenant may have been given access to such part for the purpose
of doing work otherwise, or arising from any condition of the Demised Premises
due to or resulting from any default by the Tenant, in the keeping, observance
or performance of any covenant, agreement, term, provision or condition contain
ed in this Lease or from any act or negligence of the Tenant or any of his
officers, directors, agents, contractors, servants, employees, licensees or
invitees, whether the Landlord may be legally liable therefor or not. Tenant
shall have the right to maintain all insurance
6
<PAGE> 7
required of it under blanket or umbrella policies. Tenant shall name Landlord
and its mortgagee as additional insureds under its insurance policies.
(b) Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claim, action or cause of action against each
other, their agents, officers, directors, partners and employees, for any loss
or damage that may occur to the Premises or personal property, including
building contents, within the Premises by reason of fire or the elements of
nature or other events normally covered by extended all risk property damage
insurance coverage, regardless of cause or origin including negligence of
Landlord or Tenant and their agents, officers, directors, partners and
employees. Landlord and Tenant shall immediately give written notice of the
terms of the mutual waivers contained in this paragraph to each of their
respective insurance companies which have issued policies of insurance covering
all risk property damage, and shall have the insurance policies properly
endorsed to reflect the insurance company's acknowledgment of such waiver and
the absence of any subrogation rights. Each party shall provide to the other,
annually within ten (10) days after request therefor, evidence that its all risk
property damage insurance policies have been so endorsed.
(c) Tenant shall during the term maintain in full force and effect all
risks, property damage insurance and a standard extended coverage endorsement
issued by an insurance carrier licensed to business in Connecticut reasonably
acceptable to Landlord covering the improvements on the Premises to the extent
of its full replacement value exclusive of foundation and excavation costs.
Tenant shall name Landlord and its mortgagee as additional insureds on such
policy, shall deliver an insurance certificate to Landlord, and such policy
shall provide that it cannot be cancelled without ten (10) days prior notice to
Landlord.
4. LANDLORD'S RIGHT OF ENTRY
-------------------------
7
<PAGE> 8
Landlord, its agents and representatives, at all reasonable times upon
prior reasonable notice may enter said Premises by a master key, or otherwise,
for the purpose of (1) inspection thereof, (2) after default by Tenant making
such repairs or replacements to said Premises as the Landlord may deem
reasonably necessary and appropriate for the maintenance of its equity interest
therein, although nothing herein contained shall be deemed to require the
Landlord to make any such repairs or replacements except as otherwise incumbent
upon him to do under provisions of this lease, (3) exhibiting the said Premises
to prospective tenants during the last six (6) months of the term, or exhibiting
then to prospective purchasers or other persons at any time throughout said
term, and (4) during the last six (6) month period, provided Tenant shall have
vacated the said Premises, to decorate, remodel, alter and otherwise prepare the
said Premises for occupancy, and any such entry by or on behalf of Landlord
shall not be or constitute an eviction or deprivation of any right of Tenant,
and shall not alter the obligations of Tenant hereunder or create any right in
Tenant adverse to the interest of Landlord. Landlord shall perform any work to
the Premises at such times and in such a manner as shall cause the least
practicable interference with Tenant's business.
5. ALTERATIONS
-----------
Tenant shall not make any improvements, additions or alterations to,
nor do any work to the Demised Premises that are structural in nature without
obtaining Landlord's consent (which will not be unreasonably withheld or
delayed) and, to the extent required under any mortgage, Landlord's mortgagee's
prior written consent. Any improvements, additions or alterations shall be made
at Tenants' sole cost and expense. Any improvements, additions and alterations
shall be made pursuant to the following terms and conditions:
(a) Plans and specification of such alteration shall be submitted to
the Landlord at least twenty-one (21) days prior to the intended commencement of
such alteration, and the Tenant
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shall not proceed with alteration within a period of twenty-one (21) days after
delivery of such plans and specifications unless it has, within said period,
obtained a written approval from Landlord to the extent the same is required. To
proceed with such alteration, the Landlord must grant such written approval or,
if such twenty one (21) day period shall expire without objection by Landlord,
Landlord shall be deemed to have approved such work.
(b) Prior to commencement of such alterations, Tenant shall furnish to
Landlord certificates evidencing the issuance of workmen's compensation
insurance and general contractors' liability insurance, the latter in amounts
equal to that required to be maintained by Tenant as elsewhere described in this
lease throughout the rest of the term as to liability insurance, insuring both
Landlord and Tenant as to any injuries which may occur in the course of said
work, either to workmen to the general public, both as to personal injury and
property damage, and such insurance shall, when delivered in the form of
certificates to the Landlord, bear evidence of payment of premiums therefor.
(c) Tenant shall provide a Certificate of Occupancy to the
Landlord upon completion of any such work to the premises.
6. MECHANIC'S LIEN
---------------
The Tenant shall not suffer or permit any mechanics' or artisans' or
other liens to be filed or placed or exist against the fee of the Demised
Premises nor against the Tenant's leasehold interest in said Demised Premises by
reason of work, labor, services or materials supplied or claimed to have been
supplied to the Tenant or anyone holding the Demised Premises or any part there
of or under the Tenant, and nothing in this lease contained shall be deemed or
construed in any way as constituting the consent or request of the Landlord,
expressed or implied by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor or the
furnishings of any materials for any specific improvements,
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alterations or repair of or to the Demised Premises or any part thereof, nor as
giving the Tenant any right, power or authority to contract for or permit the
rendering of any services or the furnishing of any materials that would give
rise to the filing of any mechanics' or other liens against the fee of the
Demised Premises. If any such mechanics' or other lien shall at any time be
filed against the Demised Premises in connection with work performed at the
request of the Tenant, the Tenant shall cause the same to be discharged of
record within thirty (30) days after the date of filing the same at Tenant's
expense, or, in addition to any other right or remedy of the Landlord, the
Landlord may, but shall not be obligated, upon prior notice to Tenant, to
discharge the same either by paying the amount claimed to be due or by procuring
the discharge of such lien by deposit in court or bonding and in any such event
the Landlord shall be entitled, if the Landlord so elects, to compel the
prosecution of an action for the foreclosure of such mechanic's lien by the
lienor and to pay the amount of the judgment, if any, in favor of the lienor
with interest, costs and allowance, all at Tenant's expense.
7. OPTION TO EXTEND
----------------
(a) The term of this lease may be extended at the option of the Tenant
for two (2) successive periods of five (5) years each by providing written
notice to the Landlord sixty (60) days prior to the expiration of the then
existing term.
(b) Each extended term shall be upon the same terms, covenants, and
conditions, with the Base Rent to increase to Twelve Thousand ($12,000.00)
Dollars per month. Payment of all additional rent and other charges required to
be made by the Tenant as provided in this lease for the initial term shall
continue to be made during each of such extended terms. The Tenant shall not be
permitted to extend this lease beyond the two extended terms. Any termination of
this lease during the initial term or during any extended term shall terminate
all rights of extension hereunder.
8. BROKERAGE FEES
--------------
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Landlord and Tenant each represent and warrant to the other that the
only brokers/agents due any commission is Friedland Realty, Inc. and Century 21
Milford, that any commission due Friedland Realty, Inc. or Century 21 Milford
shall be paid by Tenant.
9. REPAIRS AND MAINTENANCE OF THE PROPERTY
---------------------------------------
Tenant shall take good care of the non-structural elements of the
Demised Premises and the fixtures, plumbing, heating, air conditioning and
electric systems, and appurtenances located within the Demised Premises or its
ceiling, and at its sole cost and expense maintain and repair the same as and
when needed to preserve them in working order and condition. All damage or
injury to the Demised Premises and to its fixtures, appurtenances and equipment
caused by the Tenant, or resulting from fire, explosion, short circuits, flow or
leakage of water, steam or by frost or by bursting or leaking of pipes or
plumbing works, to the extent the foregoing are caused by the Tenant in moving
in or out of the building or installing or removing any of the Tenant's property
or fixtures, of from any other cause of any other kind or nature whatsoever due
to the carelessness, omission, neglect, improper conduct of or other cause of
Tenant, his servants, employees, agents or licensees shall be repaired and
restored promptly by Tenant at his sole cost and expense to the satisfaction of
Landlord. If the Tenant fails to make such repairs and restorations and such
failure continues beyond the expiration of the applicable cure period and the
giving of notice required hereunder, same may be made by Landlord at Tenant's
expense. The Tenant further agrees to keep said Demised Premises in a clean and
sanitary condition and free from trash, and other objectionable matter. Tenant
shall be responsible for and shall retain janitorial services for the proper
maintenance of the Premises. Tenant shall not permit, allow or cause any
noxious, disturbing, or offensive odors, fumes, gases or any smoke, dust, steam,
or vapors, or any loud or disturbing noise to originate in or be emitted from
said Demised Premises. Tenant shall keep the
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Premises free and clear of rodents, bugs and vermin. Tenant agrees that he will
store all trash, rubbish, and garbage within a sealed container upon the Demised
Premises, or in a common area in such manner as to assure that neither odors or
unsightly conditions will result in the manner in which same is stored and
agrees that he will enter into a contract with a independent third party to
cause all trash, rubbish and garbage to be removed from the Demised Premises on
a reasonably regular basis throughout the term of the lease. Tenant further
agrees to permit no waste upon the Demised Premises and upon termination of this
lease surrender possession of the same in as good condition as at the
commencement of the lease, reasonable wear and tear, casualty and condemnation
excepted. It is expressly understood that the Landlord is only responsible for
maintenance, repairs and replacements to the roof (excepting any gutters or
leaders), the utility lines to the point of entry to the building, the
foundation, bearing walls and other structural elements of the Premises (herein
collectively referred to as "structural" or "structural parts") unless the
conditions necessitating the repairs to such structural parts shall have been
caused by the Tenant, its agents or servants. Landlord shall perform such
obligations it is required to perform under this Section 9. If Landlord shall
fail to perform such obligations, Tenant may, after ten (10) days' written
notice to Landlord, perform such obligations on Landlord's behalf at Tenant's
reasonable expense. If Landlord shall not reimburse Tenant for its expenditures
within ten (10) days after Tenant's written demand therefor, Tenant shall have
the right to offset the rent payable hereunder to the extent of its
expenditures.
10. COMPLIANCE WITH LAWS AND REGULATIONS
------------------------------------
The Tenant shall during the term of this lease, use and occupy said
Premises for the purpose stated in Section 2, above, and Tenant shall not use of
permit the same to be used for any other purpose or purposes without the prior
written consent of Landlord. Tenant, at all times, shall fully and promptly
comply
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with all laws, ordinances, orders and regulations of any lawful authority having
jurisdiction of said Premises, including, but not limited to, such as shall
relate to the cleanliness, safety, occupation and use of said Premises and the
nature, character and manner of operation of the business conducted in or at
such Premises and with the rules and regulations of the New Haven Board of Fire
Underwriters and the fire insurance company insuring the Premises. Tenant shall,
at his sole expense, comply with all present and future laws, orders and
regulations of the federal, state, county and municipal authorities, and with
any direction of any public officer or officers, pursuant to law, which shall
impose any violation, order or duty with respect to Demised Premises or the use
or occupation and any alterations or improvements made on the Premises by the
Tenant thereof except that Landlord shall comply with all laws or requirements
which require structural (as defined in Section 9) repairs, replacements or
alterations to the Premises. Tenant shall not do or permit to be done any act or
thing upon said Demised Premises which will invalidate or be in conflict with
fire insurance policies covering the building of which Demised Premises form a
part, and fixtures and property therein, and shall not do or permit to be done,
any act or thing upon said Demised Premises which shall or might subject
Landlord to any liability or responsibility for injury to any person or persons
or to property by reason of any business or operation being carried on upon said
Demised Premises or for any other reason. Except as agreed herein, Tenant at his
sole expense shall comply with all rules, orders, regulations or requirements of
the Board of Fire Underwriters, or any other similar body, and shall not do, or
permit anything to be done, in or upon said Demised Premises, or bring or keep
anything therein, except as now or hereafter permitted by the Fire Department,
Board of Fire Underwriters, Fire Insurance Rating Organization, or other
authority having jurisdiction.
11. LANDLORD'S LIABILITY
--------------------
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Unless caused by Landlord's acts, omissions or negligence, or that of
its agents, Landlord or its agents shall not be liable for any damage to any
property of the Tenant, in the Demised Premises. Landlord or its agents shall
not be liable for any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, electricity, water, rain, snow or leaks
from any part of said building or from the pipes, appliances or plumbing works
or from the roof, street or sub-surface of from any other place or by dampness
or by any other cause of whatsoever nature, nor shall Landlord be liable for any
such damage caused by other tenants or persons in said building, of which the
Demised Premises are part, or caused by operations in construction of any
private, public or quasi-public work; nor shall Landlord be liable for any
latent defect or any existing or future condition in the Demised Premises; nor
shall the Landlord be liable by reason if inconvenience, annoyance or injury to
business arising alterations or improvements in or to any portion of the
Building. The foregoing shall not apply, however, to any breach of Landlord's
representations herein contained. Tenant shall reimburse and compensate Landlord
as additional rent within twenty (20) days after rendition of a statement for
all expenditures made by or damages or fines sustained or incurred by Landlord
due to Non-performance or non-compliance with or breach or failure to observe
any term, covenant or condition of this lease upon Tenant's part to be kept,
observed, performed or complied with. Tenant shall give immediate notice to
Landlord in case of fire or accident in the Demised Premises or defect therein.
12. INDEMNIFICATION
---------------
If Tenant shall be in default which continues after written notice to
Tenant and the expiration of the applicable cure period provided for hereunder
in the observance of any term or covenant on Tenant's pert to be observed or
performed under or by virtue of any of the terms or provisions in any article of
this lease, Landlord may after written notice to the Tenant perform the same
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for the account of Tenant, including the prosecution or defense of any action or
proceeding, all at Tenant's reasonable expense. In the event that the Tenant is
in arrears in payment of any sums due under this lease, the Tenant waives the
Tenant's right, if any to designate the items against which any payments made by
the Tenant are to be credited, and the Landlord may apply any payments made by
the Tenant to any items the Landlord sees fit, irrespective of and not
withstanding any designation or request by the Tenant as to the items against
which any such payment shall be credited. The Landlord reserves the right,
without liability to the Tenant and without constituting any claim or
constructive eviction, to suspend furnishing or rendering to the Tenant any
property, material, labor, utility or other service, wherever the Landlord is
obligated to furnish or render the same at the expense of the Tenant, in the
event that the Tenant is in arrears in paying the Landlord therefor at the
expiration of twenty (20) days after the rendering of any such bill or statement
and any grace period provided for hereunder.
13. ACCEPTANCE OF PREMISES
----------------------
Landlord or Landlord's agents have made no representations or promises
with respect to the said building or Demised Premises except as herein expressly
set forth or to induce the Tenant to rent the said Demised Premises are in good
condition at the time that the tenant takes possession of the Demised Premises.
The Tenant herewith agrees that he has examined the Demised Premises and is
fully satisfied with the physical condition thereof and will make all
alterations and repairs necessary for the use of the Demised Premises except as
herein specifically set forth, Except as provided above, the taking possession
of the Demised Premises by Tenant should be conclusive evidence as against
Tenant that he accepts same "as is" and that said Demised Premises were in good
and satisfactory condition at the time such possession was so taken. Landlord
represents, however, that, as of the date Tenant accepts possession of the
Premises (i) to its knowledge, there will be no "Hazardous Materials" (defined
below)
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upon the Premises, (ii) the roof will be free from leaks and the HVAC system (4
units) is in working order, (iii) the Premises will be in compliance with law
(including the Americans with Disabilities Act and all fire codes), and (iv)
there will be adequate utilities available for Tenant's use. Subject to the
foregoing and the other representations of Landlord herein contained, Tenant has
inspected the Demised Premises and the equipment and will accept the same in "as
is" condition.
14. CONDITION ON TERMINATION
------------------------
Prior to the expiration of the term of this lease, Tenant shall quit
and surrender to Landlord the Demised Premises, in good order and condition,
ordinary wear and casualty, condemnation and Landlord's obligations excepted and
except as provided herein, Tenant shall remove all of his personal moveable, but
(at Tenant's option) not built-in property. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination of term
of this lease. Except as specifically provided herein, if Tenant fails to remove
all of his personable moveable, but not built-in fixtures, appliances and
effects from the Demised Premises, either upon the termination of his possession
of the Demised Premises or upon the termination of this lease, the Landlord, at
its option, may remove the same in any manner that the Landlord may choose and
may elect to store or otherwise dispose of the said effects without liability to
the Tenant for the loss thereof, at Tenant's expense; or, the Landlord, at its
option, without notice, may sell such effects, or any of the same, at private
sale and without legal process, for such prices as Landlord may obtain, and
apply the proceeds of such sale against any amounts due under this lease from
the Tenant to the landlord and against the expense incident to the removal and
sale of such effects, retaining the surplus, if any, as compensation for his
incidental damages.
15. HOLDING OVER
------------
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In the event that the Tenant shall remain in possession of the Demised
Premises after the expiration of either the original term of this lease or of
any extended term without having executed a new written lease with the Landlord,
such holding over shall not constitute a renewal or extension of this lease. The
Landlord may, at its option, elect to treat the Tenant as one who has not
removed at the end of its term, and thereupon be entitled to all the remedies
against the Tenant provided by law in that situation, of the Landlord may elect,
at its option, to construe such holding over a tenancy from month to month,
subject to all the terms and conditions of this lease, except as to duration
thereof, and the monthly payment for rent of the Demised Premises shall be one
and a half (1-1/2) times the rate as that in effect during the last month of the
preceding term.
16. PEACEFUL POSSESSION
-------------------
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, tenant may
peaceably and quietly enjoy the Demised Premises hereby demised subject,
nevertheless, to the terms and conditions of this lease.
17. LANDLORD'S COVENANT
-------------------
The Landlord covenants and warrants that it has full right and
authority to execute and perform this lease and to grant the estate demised
herein and covenants that the Tenant on performing its obligations hereunder
shall peaceably and quietly hold and enjoy the Premises through the term.
18. EMINENT DOMAIN
--------------
The parties hereto agree that should the Demised Premises, or any
substantial part hereof, or any substantial part of the common elements of the
entire Premises be taken or condemned by competent authority for public or
quasi-public use, then and in that event this lease shall cease and come to an
end as of the time of such actual taking, and the rent shall be paid up to such
time of actual taking and then and thenceforth all obligations of
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the parties hereunder, the one to the other, shall cease. It is expressly agreed
that the Tenant shall not be entitled to any part of any award by way of
condemnation, appeal therefrom or settlement which may be obtained by the
Landlord as a result of such taking, or in the event of partial taking, nor
shall the Tenant have any right to appear as a party in any condemnation
proceeding or appeal therefrom nor from any partial taking.
In the event that a part of the Demised Premises, being less than a
substantial part, shall be taken or condemned by competent authority for public
or quasi-public use, there shall be an abatement of rent to be agreed upon
between the parties and this lease shall be deemed to cease and terminate to
such portion to be taken (notwithstanding the lack of such agreement upon
abatement of rent), and it is expressly agreed that the tenant shall not be
entitled to any part of the award by way of condemnation, appeal therefrom or
settlement which may be obtained by the Landlord as the result of such taking,
nor shall the Tenant have any right to appear as a party in any condemnation
proceeding or appeal therefrom. In the event the parties are not able to agree
upon the amount of abatement in such event, then the parties shall submit the
question of such abatement to arbitration pursuant to the Rules of the American
Arbitration Association. Nothing heretofore contained shall prohibit the Tenant
from seeking such relief from said taking authority as is provided tenants by
reason of the statutes empowering such condemnation; provided, however, that
such award to Tenant, whether by way of administrative relief or otherwise,
shall be not recoverable if, as the result thereof, the amount which the
Landlord will otherwise be entitled to recover shall be diminished thereby.
19. ASSIGNMENT AND SUBLETTING
-------------------------
Except as otherwise expressly permitted hereunder, Tenant shall not
assign or in any manner transfer this lease or any estate, interest or benefit
therein, or sublet said Premises or any part or parts thereof or permit the use
of the same or any
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part thereof by anyone other than Tenant, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. To the
extent Landlord's consent is required, consent by Landlord to any assignment or
transfer of interest under this lease, or subletting of said Premises or any
part thereof shall not constitute consent to any other assignment, transfer of
interest, or subletting, nor shall such consent relieve tenant of any
obligations hereunder.
(a) Upon obtaining a proposed assignee or subtenant, upon terms
satisfactory to Tenant, Tenant shall, if Landlord's consent is required with
respect to such transaction, submit to Landlord in writing at least thirty (30)
days prior to the effective date of the proposed sublease or assignment; (1) the
name of the proposed assignee or subtenant; (2) the terms and conditions of the
proposed assignment or subletting; and (3) the nature and character of the
business of the proposed assignee or subtenant and any other information
reasonably requested by Landlord.
(b) If the Demised Premise or any part thereof be sublet or occupied by
any person or persons other than Tenant, Landlord may, after default by Tenant,
collect rent from the subsequent or occupant and apply the net amount collected
to the rent herein reserved; but no assignment, subletting, occupancy or
collection of rent shall be deemed a waiver of the covenants in this article,
nor shall it be deemed acceptance of the assignee, subtenant or occupant as a
tenant, or a release of Tenant from the full performance by Tenant of all the
terms, condition and covenants of this lease.
(c) Each permitted assignee or transferee shall assume and be deemed to
have assumed this lease and shall be remain liable jointly and severally with
Tenant for the payment of rent and additional rent and for the due performance
of all the terms, covenants, conditions and agreements herein contained on
Tenant's part to be performed for the term of this lease. No assignment shall be
binding on Landlord unless such assignee or Tenant shall deliver to Landlord a
duplicate original of the instrument of
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assignment, in form reasonably satisfactory to Landlord, containing a covenant
of assumption by the assignee of all of the obligations aforesaid and shall
obtain from Landlord the aforesaid written consent prior thereto.
(d) No attempted assignment or subletting, where approved by Landlord
or not, shall relieve Tenant or any of his obligations under this lease nor any
other act of non-act of Landlord.
(e) Any provision of this Lease to the contrary notwithstanding, Tenant
may assign this Lease or sublease the Premises, in whole or in part, without the
express written consent of Landlord to: (i) any corporation into which or with
which Tenant has merged or consolidated; (ii) any parent, subsidiary, successor,
or affiliated corporation of Tenant; (iii) any person or entity that acquires
all or substantially all of the assets or operations of Tenant within the
metropolitan area in which the Premises are located; (iv) any partnership
greater than twenty-five percent (25%) of which shall be owned by Tenant or the
parent corporation of Tenant; (v) any franchisee of Tenant; or (vi) to any
individual, entity or other party so long as the primary use of the Premises
continues to be a restaurant and tavern for the retail sale of liquor and food
and uses appurtenant thereto as permitted hereunder. No assignment shall operate
to release Tenant of its liabilities and obligations arising hereunder after the
date of such assignment. The assignee shall agree in writing to assume and
perform all of the terms and conditions of this Lease on Tenant's part to be
performed from and after the effective date of such assignment.
(f) In the event that, at any time after the second (2nd) anniversary
of the date of this Agreement, this lease shall be assigned or all or
substantially all of the entire Premises shall be sublet to any party other than
one described in Section 19(e)(i) through and including (iv) above, then Tenant
or such assignee or subtenant (as the case may be) shall be required to post
with Landlord a security deposit in the amount of triple
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(i.e., three times) the then (i.e., as of the effective date of the assignment
or subletting) monthly Base Rent payable under this lease. The foregoing
security deposit shall be deposited by Landlord in a separate bank account and
returned to Tenant at the expiration of the term, unless Tenant shall have
committed an "event of default" hereunder which remains uncured, in which event
Landlord shall be permitted to apply the security deposit as and to the extent
permitted by applicable law.
20. BANKRUPTCY
----------
If, at any time during the term hereby demised, a petition shall be
filed in bankruptcy by or against the Tenant, if the Tenant shall make an
assignment for the benefit of creditors or a receiver shall be appointed over
the assets of the Tenant, whether by voluntary or involuntary act, of if an
attachment, lien or execution shall be levied upon the assets of the Tenant
located in the Demised Premises and such attachment shall not be released within
thirty (30) days after levy, then upon the happening of any of the aforesaid
events with respect to Tenant or any successor tenant under this lease or
subtenant of the Premises, and upon the option of the Landlord, this lease shall
expire and terminate with the same force and effect as if the time of the
happening of any such event were the date herein fixed for the expiration of the
term of this lease. It is further stipulated and agreed that in the event of the
termination of the term of this lease by the happening of any of such events,
Landlord shall forthwith, upon such termination, and any other provisions of
this lease to the contrary notwithstanding, become entitled to recover as and
for liquidated damages caused by such breach of the provisions of this lease, an
amount equal to the difference between the then cash value of the rent reserved
hereunder for the unexpired portion of the term hereby demised, and the rental
value of the Demised Premises for such unexpired portion of the term hereby
demised, unless the statute which governs or shall govern the proceeding in
which such damages are to be proved, limits or shall limit the amount
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of such claim capable of being so proved, in which case Landlord shall be
entitled to prove as and for liquidated damages an amount equal to that allowed
by or under any such statute. The provisions of this paragraph shall be without
prejudice to Landlord's right to prove in full, damages for rent accrued prior
to the termination of this lease, but not paid. The provisions of this lease
shall be without prejudice to any rights given to Landlord by a pertinent
statute to prove for any amount allowed thereby.
In making any such computation, the then cash rental value of the
Demised Premises shall be deemed prima facie to be the rental realized upon any
reletting. If such reletting cannot be accomplished by Landlord within a
reasonable time after such termination of this Lease, then cash rental value of
the future rents hereunder reserved to the Landlord for the unexpired portion of
the term hereby Demised shall be deemed to be such sum which, if invested as six
(6%) percent simple interest, will produce the rental value over the period of
time in question.
21. TENANT'S DEFAULT
----------------
The happening of any one or more of the following listed events
(hereinafter referred to as "event of default") shall constitute a breach of
this Lease agreement on the part of Tenant:
(a) The failure of Tenant to pay Base Rent or any additional rent on
the due date hereunder and the continued failure to pay the same for ten (10)
days after written notice to Tenant.
(b) The failure of the Tenant to fully and promptly perform any act
required of it in the performance of this Lease or to otherwise comply with the
terms or provisions thereof within thirty (30) days after notice thereof to
Tenant by Landlord; provided said thirty (30) day period shall be extended if
within said thirty (30) day period Tenant has commenced to cure said default and
is diligently pursuing same. No part of this clause shall be applicable to
nonpayment of Base Rent, but it shall be
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applicable to payments of additional rent and other payments of
money required hereunder.
(c) Any default by Tenant or Rattlesnake Holding Corp. under that
certain Consulting Agreement among Frank Tumminello, Charles Tumminello, Thomas
Dunn, Tenant and Rattlesnake Holding Corp. which continues for 20 days after
written notice to the defaulting party.
(d) Upon the happening of any event of default, Landlord, if it shall
elect, may (1) collect each installment of rental hereunder as and when the same
matures, or (2) Landlord, or any other person by its order, may re-enter the
said Premises, without process of law, and without being liable to any
prosecution therefor, and may either elect to terminate this Lease, or if the
Landlord desires, not terminate the Lease, but terminate the right to possession
and occupancy and relet the said Premises too any person, firm or corporation,
as the agent of the Tenant or otherwise, for whatever rent it shall obtain,
applying the avails for such letting first to the payment of such expenses as
the Landlord may incur in the re-entering and reletting of same, and then to
the payment of the rent due hereunder and the fulfillment of the Tenant's
covenants, and paying over to the Tenant the balance, if any; and in case of its
deficiency, the Tenant shall remain liable therefor. Tenant hereby waives the
service of a notice to quit pursuant to Connecticut General Statutes. Tenant
agrees to pay a reasonable attorney's fee and all costs if it becomes necessary
for Landlord to employ an attorney to collect any of the rent or enforce any of
the provisions of this Lease, and of any other cost of collection or enforcement
of any provision of this Lease, or any cost of retaking or reletting said
Premises, including but not limited to, the payment of a commission for
brokerage, and Tenant expressly waives all exemptions secured to the Tenant
under the laws of the State of Connecticut or of any State of the United States
as against the collection of any debt herein or hereby incurred or secured. If
Tenant is late paying any installment of rent or additional rent, the provisions
of Section 2(d) above shall apply.
22. CHANGES AND WAIVER
------------------
This Lease or any covenant, agreement or conditions contained herein
cannot be terminated, altered, waived or
23
<PAGE> 24
modified in any way on behalf of the Landlord except by an instrument in
writing. Receipt of rent shall not be deemed or construed to be a waiver of any
other rent or charges due or of the rights of the Landlord under a breach of any
covenant or conditions herein contained, nor shall any waiver be claimed as to
any provision of this Lease unless the same be in writing. Acceptance of the
keys shall not be tantamount to or evidence of a surrender. The failure of
Landlord to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Lease, or any of the Rules and
Regulations set forth or hereafter adopted by Landlord, shall not prevent a
subsequent act which would have originally constructed a violation, from having
all the force and effect of an original violation.
23. OBLIGATION TO PAY RENT
----------------------
This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on the part of the
Tenant to be performed shall in no way be affected, impaired or excused and
Landlord shall have no responsibility or liability because Landlord does not
fulfill any of its obligations under this Lease or to supply, or is delayed in
supplying any service expressly or impliedly to be supplied or is unable to make
or is delayed in making repairs, additions alterations or decoration or does not
supply or is delaying in supplying any equipment or fixtures if Landlord does so
because of strike or labor troubles or any outside cause whatsoever including,
but limited to, accidents, repairs, government preemption or by reason of any
law, rule, recommendation, request, order or regulation of any department or
subdivision thereof of any government authority, agency or subdivision, or by
reason of the conditions of supply and demand which have been or are affected by
any emergency, shortage or crisis, or in the event of any business interruption
due to measures taken by the federal, state, county or municipal authorities,
including but not being limited to, highway or street repair, changes or
24
<PAGE> 25
restrictions in the flow of traffic or in parking provisions, and condemnation
or razing of adjacent buildings or because of the breakdown of any equipment or
any other cause beyond the Landlord's control. No diminution or abatement of
rent, or other compensation, shall be claimed or allowed for inconvenience or
discomfort arising from the making of repairs or improvements to the building or
to this appliance nor for any space taken to comply with any, law ordinance, or
order of a government authority.
24. CONTINGENCY
-----------
This Lease is contingent upon the occurrence of the closing under that
the ASPA.
25. NOTICE
------
Any and all notices, demands, approvals, consents or other
communications, legal or otherwise required by or incidental to any provision of
this lease shall be in writing and, shall be delivered to the respective parties
by registered or certified mail, return receipt requested, postage prepaid, or
by overnight courier, at the following addresses or at such further address as
shall be notified in writing:
(a) To the Landlord:
Land & Building Corp.
c/o Mr. Thomas Dunn
10 Partridge Lane
Milford, Connecticut 06460
(b) To the Tenant:
Rattlesnake of Milford, Inc.
c/o Rattlesnake Holding Corp.
3 Stamford Landing
Stamford, Connecticut 06902
With a Copy Sent Contemporaneously to:
--------------------------------------
Wayne Heicklen, Esquire
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
26. APPROVAL BY LANDLORD
--------------------
If, at any time, the terms of this Lease require the approval by a
party for any act by the other, such approval shall be in writing.
25
<PAGE> 26
27. STATUS OF PARTIES
-----------------
The execution of this Lease, or the performance of any act pursuant to
the provisions thereof, shall not be deemed or construed to have the effect of
creating between the Landlord and Tenant the relationship of principal or agent
or of partnership or of joint venture and the relationship between them shall be
that only of Landlord and Tenant.
28. SUBORDINATION
-------------
It is further agreed that this Lease shall not be a superior lien
against said entire Premises in respect to any mortgages that are now and that
hereinafter may be placed against said Premises and the recording of such
mortgage or mortgages shall have preference and precedence regardless of the
date of record. Tenant further agrees to execute, at no cost or expense to
Tenant, any document reasonably requested by Landlord to evidence or further
effectuate this provision of this Lease, and failing such execution, Tenant
shall be liable to Landlord for all damages, including reasonable attorney's
fees, incurred by Landlord as a result of such refusal. The term "mortgage"
shall include each and every form and type of security instrument. It is further
understood by Landlord and Tenant that reference to the execution of an
additional instrument or evidence of subordination is not necessary for this
subordination to be effective.
29. PREJUDGMENT REMEDY
------------------
The Tenant, for itself and for all persons claiming through or under
it, hereby acknowledges that this Lease constitutes a commercial transaction as
such term is used and defined in the Connecticut General Statutes, or its
successor provisions if amended, and hereby expressly waives any and all rights
which are or may be conferred upon the Tenant by said Act to any notice or
hearing prior to a prejudgment remedy under the Connecticut General Statutes, or
their successor provisions if amended, inclusive of said statutes. Said waiver
is intended as a waiver in accordance with the Connecticut General Statutes.
Tenant
26
<PAGE> 27
further waives any and all rights which are or may be conferred by any present
or future law to redeem the said Premises, or to any new trial in any action or
ejectment under any provision of law, after re-entry thereupon, or upon any part
thereof, by the Landlord, or after any warrant or dispossess or judgment in
ejectment. If the Landlord shall acquire possession of the said Premises by
summary proceedings, or in any other lawful manner without judicial proceedings,
it shall be deemed a re-entry within the meaning of that word as used in this
Lease. In the event that the Landlord commences any summary proceedings or
action of nonpayment of rent or other charges provided for in this Lease, the
Tenant shall not interpose any counterclaim of any nature or description in any
proceeding or action, except for those which are mandatory. The Tenant and the
Landlord both waive a trial by jury of any or all issues arising in any action
or proceeding between the parties hereto or their successors, under or connected
with this Lease, or any of its provisions.
30. INTERPRETATION
--------------
Words of any gender used in this Lease shall be construed to include
any other gender, words in the singular number shall be construed to include the
plural, when the context or sense of this lease requires.
31. BINDING EFFECT
--------------
This lease, together with any and all addenda or amendments hereto,
shall inure to the benefit of the respective parties hereto, their successors,
heirs, personal representatives or assigns (provided that any assignment by the
Tenant shall be effective only if made in strict accordance with the terms of
this lease).
32. CHANGES TO MADE IN WRITING
--------------------------
No changes or other modification of this Lease shall be binding upon a
party to this Lease unless in writing and signed by a duly authorized officer or
agent of the party to be charged therewith.
33. INVALIDITY OF PARTICULAR PROVISIONS
-----------------------------------
27
<PAGE> 28
If any term or provision of this Lease or the application thereof to
any person or circumstances shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
person or circumstances other than those as to which it held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
34. BENEFIT AND GOVERNING LAW
-------------------------
This Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns, and all the provisions hereof shall be governed by and construed in
accordance with the laws of the State of Connecticut.
35. RECORDATION
-----------
Tenant agrees not to record or cause to be recorded this Lease,
however, upon Tenant's request, Landlord shall execute a Notice of Lease and
record same on the Land Records of the City of Milford.
36. LANDLORD'S DEFAULT
------------------
Should Landlord fail to perform any of its obligations under this
Lease, in addition to all other remedies available to Tenant under this Lease or
at law or in equity, in the event Landlord does not fully perform such
obligation within thirty (30) days after Tenant first gives Landlord written
notice such failure or, if the performance of such obligation cannot be
reasonably completed within such 30-day period, in the event Landlord fails to
commence within such 30-day period and thereafter diligently pursue to
completion the performance of such obligation, then Tenant may (but shall not be
obligated to) perform the obligation of Landlord and the reasonable cost thereof
shall be payable from Landlord to Tenant upon demand. If Landlord fails to
reimburse Tenant on demand for the reasonable cost of performing Landlord's
obligation, or if Landlord fails to timely pay to Tenant any other amount due to
Tenant under this Lease within thirty (30)
28
<PAGE> 29
days after Tenant gives Landlord written notice of such past due amount, then
Tenant may in either of such events deduct any such amounts owing from Landlord,
plus interest thereon at 2% above the Prime Rate of Citibank, N.A. from time to
time in effect, Minimum Rent or other charges due or to become due Landlord
under this Lease. If Tenant has not received or received credit for all such
amounts and interest thereon at the expiration of the term of this Lease, Tenant
may, at its option, extend the term of this Lease on the same terms and
conditions then in effect until all such amounts and interest thereon are fully
paid by application of all Base Rent and other charges accruing during such
extended term.
37. HAZARDOUS MATERIALS
-------------------
For purposes of this Lease, "Hazardous Materials" shall mean any
chemical, substance, material or combination thereof which is or may be
hazardous to human health or safety or to the environment due to its
radioactivity, ignitability, infectiousness or other harmful or potentially
harmful properties or effects, including petroleum and petroleum products,
asbestos, radon, polychlorinated biphenyls ("PCBs") and all of those chemicals,
substances, materials or combinations thereof that are listed, defined or
regulated in any manner by any environmental law. Landlord hereby represents and
warrants to Tenant that: (a) to Landlord's knowledge, the Premises has not been
used for the disposal of refuse or waste, or for the generation, processing,
manufacture, storage, handling, treatment, release, discharge or disposal of any
Hazardous Materials; (b) the Premises is in compliance with all environmental
laws; and (c) no (i) asbestos-containing materials, (ii) machinery, equipment or
fixtures containing PCBs, (iii) storage tanks for gasoline or any other
substance or (iv) urea formaldehyde foam insulation has been installed, used,
stored, handled or placed on the Premises by Landlord or, to Landlord's
knowledge after due inquiry, by any other party.
38. FORCE MAJEURE
-------------
29
<PAGE> 30
Landlord and Tenant shall be excused for the period of any delay in
performance of any obligations hereunder when prevented from doing so by the
wrongful or negligent acts or omissions of the other party or by causes beyond
either party's control, which shall include all labor disputes, civil
disturbance, war, war-like operations, invasions, rebellion, hostilities,
military or usurped power, sabotage, governmental regulations or controls, fires
or other casualty, inability to obtain any material or service or acts of God.
Notwithstanding the foregoing, nothing contained in this paragraph shall excuse
either party from paying in a timely fashion any payments due under the terms of
this Lease.
39. ESTOPPELS
---------
Within fifteen (15) days after written request from a party hereto, the
other party shall execute, acknowledge and deliver to the requesting party an
estoppel certificate certifying: (i) that this Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Lease is in
full force and effect, as modified, and stating the date and nature of each
modification); (ii) the date to which rental and other sums payable hereunder
have been paid; (iii) that no notice has been received by such other party of
any default which has not been cured, except as to defaults specified in the
estoppel certificate; and (iv) such other matters as may reasonably be requested
by the other party, its lender, assignee or purchaser (or proposed lender,
assignee or purchaser). Any such estoppel certificate may be relied upon by any
such purchaser, lender or assignee for estoppel purposes only, and no party
executing such estoppel certificate shall be liable for damages or other losses
as a result of inaccuracy in the information contained in such estoppel
certificate.
40. NON-DISTURBANCE
---------------
Notwithstanding anything to the contrary herein contained, the
subordination of this lease to any mortgage or underlying lease or other
security agreement now or hereafter affecting the
30
<PAGE> 31
Premises is subject to the condition that Landlord obtain for Tenant's benefit a
non-disturbance agreement for Tenant's benefit from each holder of a mortgage,
grounded lessor or interest holder substantially in the form annexed hereto as
Exhibit A.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first written above.
IN THE PRESENCE OF: LANDLORD
LAND & BUILDING GROUP
BY:
- ------------------------ ----------------------------
ITS PARTNER
- ------------------------
TENANT
RATTLESNAKE OF MILFORD, INC.
- ------------------------ BY:
----------------------------
ITS PRESIDENT
- ------------------------
31
<PAGE> 32
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first written above.
IN THE PRESENCE OF: LANDLORD
LAND & BUILDING GROUP
BY:
- ------------------------ ----------------------------
ITS PARTNER
BY: /s/ Charles Tumminello
- ------------------------ ----------------------------
Charles Tumminello
TENANT
RATTLESNAKE OF MILFORD, INC.
BY: /s/ ?
- ------------------------ ----------------------------
ITS PRESIDENT
- ------------------------
<PAGE> 33
STATE OF )
) ss: City of Milford, March , 1996
COUNTY OF )
Personally appeared , who acknowledged himself to be
the President of Rattlesnake of Milford, Inc., and that he, as such President,
being authorized so to do, executed the foregoing for the purposes therein
contained.
__________________________
Notary Public
My Commission Expires:
Notarial Seal:
STATE OF CONNECTICUT )
) ss: City of Milford, March , 1996
COUNTY OF NEW HAVEN )
Personally appeared , who acknowledged himself to be
the General Partner of Land & Building Group, and that he, as such General
Partner, being authorized so to do, executed the foregoing for the purposes
therein contained.
__________________________
Notary Public
My Commission Expires:
Notarial Seal:
<PAGE> 34
EXHIBIT A
---------
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into as of the __ day of ________________,
19__, between _______________________________, a ________________________ , with
a place of business at __________________________________________, ________
("Mortgagee"), and _________________________________, a
__________________________________, with a place of business at
______________________, ________________________, _________________________
("Tenant").
RECITALS
A. Mortgagee has made a loan to _______________________________
("Landlord") in the original principal amount of $__________________ (the
"Loan").
B. Mortgagee is the holder of a mortgage or deed of trust securing the
Loan (the "Mortgage") covering that certain parcel of land owned by Landlord and
described on Exhibit A attached hereto and made a part hereof, together with the
improvements erected thereon, commonly known as"________________ "(the
"Premises").
C. By a certain Lease entered into between Landlord and Tenant, dated
as of __________________________, 19__ (the "Lease"), landlord leased to Tenant
the Premises.
D. A copy of the Lease has been delivered to Mortgagee, the receipt of
which is hereby acknowledged.
E. The parties hereto desire to effect the subordination of the Lease
to the Mortgage and to provide for the non-disturbance of Tenant by the holder
of the Mortgage or any purchaser under a foreclosure or deed in lieu thereof.
AGREEMENT
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. Mortgagee hereby consents to and approves the Lease and all of the
terms and conditions thereof.
2. Tenant covenants and agrees with Mortgagee that the Lease is hereby
made and shall continue hereafter to be subject and subordinate to the lien of
the Mortgage, and to all modifications and extensions thereof, with the same
force and effect as if the Mortgage had been executed and delivered prior to the
execution and delivery of the Lease and without
<PAGE> 35
regard to the order of priority of recording the Mortgage, subject, however, to
the provisions of this Agreement.
3. Tenant certifies that the Lease is presently in full force and
effect and unmodified and Tenant as of this date has no knowledge of any
default, charge, lien or claim of offset under the Lease.
4. Mortgagee agrees that, so long as Tenant is not in default under the
Lease:
(a) Tenant shall not be named or joined as a party or otherwise in any
suit, action or proceeding for foreclosure by the Mortgagee or to enforce any
rights under the Mortgage or the Loan.
(b) The possession by Tenant of the Premises and Tenant's rights under
the Lease shall not be disturbed, affected or impaired by (i) any suit, action
or proceeding under the Mortgage or the Loan or for foreclosure under the
Mortgage, or any other enforcement of any rights under the Mortgage or any other
documents pertaining to the Loan, (ii) any judicial or non-judicial foreclosure,
sale or execution of the Premises or the Shopping Center, or any deed given in
lieu of foreclosure, or (iii) any default under the Mortgage or the Loan.
(c) All condemnation awards and insurance proceeds paid or payable with
respect to the Premises or any other part of the Shopping Center and received by
Mortgagee shall be applied and paid in the manner set forth in the Lease.
(d) Neither the Mortgage nor any other security instrument executed in
connection with the Loan shall cover or be construed as subjecting in any manner
to the lien thereof any trade fixtures, signs or other personal property at any
time furnished or installed by or for Tenant in or on the Premises.
5. If Mortgagee or any future holder of the Mortgage or any other
transferee under the Mortgage shall become the owner of the Shopping Center or
any part thereof by reason of foreclosure of the Mortgage, or if the Shopping
Center or any part thereof shall be sold as a result of any action or proceeding
to foreclose the Mortgage, or by transfer of ownership by deed given in lieu of
foreclosure, the Lease shall continue in full force and effect, without
necessity for executing any new lease, as a direct lease between Tenant and the
then owner of the Premises as "Landlord" under the Lease, upon all of the same
terms, covenants and provisions contained in the Lease, and in such event:
(a) Tenant shall be bound to such new owner under all of the terms,
covenants and provisions of the Lease for the remainder of the term thereof
(including also any extension periods, if Tenant elects or has elected to
exercise its option to extend the term) and Tenant hereby agrees to attorn to
such new owner and to recognize such new owner as "Landlord" under the Lease;
and
(b) Such new owner shall be bound to Tenant under and hereby assumes
all of the terms, covenants and provisions of the Lease for the remainder of the
term thereof
<PAGE> 36
(including also any extension periods, if Tenant elects or has elected to
exercise its option to extend the term), and Tenant shall, from and after the
date such new owner succeeds to the interest of "Landlord" under the Lease, have
the same remedies against such new owner for the breach of any covenant
contained in the Lease; provided, however, that such new owner shall not (i) be
bound by any rent or additional rent which Tenant might have paid for more than
one month in advance to any prior landlord (including Landlord), or (ii) be
personally liable for any breach of the Lease by or other act or omission of any
prior landlord (including Landlord) or (iii) be bound by any amendment or
modification of the Lease made without Mortgagee's consent which would reduce
fixed annual rent or any other monetary obligation of Tenant under the Lease.
6. Any notices or communications given under this Agreement shall be in
writing and shall be deemed given on the earlier of actual receipt or three (3)
days after deposit in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid, at the respective addresses set forth above,
or at such other address as the party entitled to notice may designate by
written notice as provided herein.
7. This Agreement shall bind and inure to the benefit the parties
hereto and their respective successors and assigns.
8. This Agreement contains the entire agreement between the parties and
cannot be changed, modified, waived or cancelled except by an agreement in
writing executed by the parties against whom enforcement of such modification,
change, waiver or cancellation is sought.
<PAGE> 37
9. This Agreement and the covenants contained herein shall run with and
shall bind the Premises.
EXECUTED as of the date first written above.
MORTGAGEE:
----------------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
TENANT:
----------------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
<PAGE> 38
STATE OF Section
-----------------
COUNTY OF Section
------------------
The foregoing instrument was acknowledged before me this ___ day of
_______, 19___, by _____________________________,______________________________
_____ of________________________________________________________,a ___________
____________________________, on behalf of such______________________________.
___________________________________________
Notary Public in and for the State of______
My Commission Expires:_____________________
<PAGE> 39
STATE OF Section
-----------------
COUNTY OF Section
------------------
The foregoing instrument was acknowledged before me this ___ day of
_______, 19___, by _____________________________,______________________________
_____ of________________________________________________________,a ___________
____________________________, on behalf of such______________________________.
___________________________________________
Notary Public in and for the State of______
My Commission Expires:_____________________
<PAGE> 1
AGREEMENT made , 1996 between FRANK TUMMINELLO,
CHARLES TUMMINELLO and THOMAS E. DUNN, hereinafter known as "FT, CT & TD" and
RATTLESNAKE OF MILFORD, INC., hereinafter known as "R of M" and RATTLESNAKE
HOLDING CORP., hereinafter known as "RHC".
WHEREAS above individuals, FT, CT & TD, have been directors and
officers of CFT Restaurant Inc., hereinafter known as "CFT", which is a
Connecticut Corporation and which has conducted a retail restaurant business at
1360 Boston Post Road, Milford, Connecticut, and
WHEREAS R of M desires to retain FT, CT & TD's experience and abilities
in the business of the retail food preparation and sale, and has offered to
engage them to render consultative and advisory services to it, and
WHEREAS CFT has assigned (or is assigning as of the date of this
Agreement) to R of M all of its interests in and to that certain lease (the
"Lease") dated July 7, 1988 between Land and Building Group, as Landlord, and
CFT, as Tenant, for the premises located at 1360 Boston Post Road, Milford,
Connecticut (the "Premises"), which lease is being amended by that certain
First Amended and Restated Lease (such lease, as amended, the "Lease").
WHEREAS FT, CT & TD desires to accept such engagement, upon the terms
and conditions hereinafter set forth,
NOW, therefore, in consideration of the premises and the mutual
covenants herein contained, it is agreed as follows:
1. TERM AND DUTIES. R of M hereby employs FT, CT & TD for a period of
six (6) months beginning on the date of the First Amendment and Restated Lease,
for no more than two (2) hours a week total for all FT, CT & TD for consultation
and communication by way of telephone, fax or personal contact at FT, CT & TD's
option, as a general advisor and consultant to management on all matters
pertaining to the business of R of M, and to render such additional services as
are pertinent thereto, the services to be of a similar nature as those FT, CT &
TD perform for CFT prior to the sale of its business and assets to R of M. FT,
CT & TD shall report and be responsible only to the Board of Directors of RHC
and shall devote their best efforts and such time as shall be necessary to
perform his duties and to advance the interest of R of M, subject to reasonable
vacations compatible with their position and with due regard to the preservation
of their health. RHC recognized that FT, CT & TD's association with CFT during
the many years past has created goodwill of unique value to R of M in the
operation of the restaurant business. Accordingly, it is expressly understood
that the inability of FT, CT & TD to render services to R of M by reason of
absences, or temporary of permanent illness, disability, death or incapacity, or
for any other reasonable cause, shall not constitute a failure by them to
perform their obligations hereunder and shall not be deemed a
<PAGE> 2
breach or default by them hereunder.
Notwithstanding anything to the contrary herein contained, it is
understood and agreed that FT, CT and TD are to function in an advisory capacity
only, and FT, CT and TD shall have no authorization, power or authority to act
on behalf or bind R of M in any manner whatsoever.
2. COMPENSATION. As full and complete compensation for any and all
services which FT, CT & TD may render to R of M in the business of the R of M, R
of M and/or RHC, as provided below shall pay to FT, CT & TD the following:
(a) RHC shall issue its Common Stock Purchase Warrant in the form
annexed hereto as Schedule 1, in the aggregate amount of 100,000 shares
as follows:
40,000 to Frank Tumminello
40,000 to Thomas E. Dunn
20,000 to Charles Tumminello, or their respective heirs or successors
(b) R of M shall pay, guaranteed by RHC, to FT, CT & TD or their heirs,
and/or estate in the pro rata distributions of 40% to FT, 40% to TD and
20% to CT the following monies:
(1) Seven and Three Quarters Per Cent (7 3/4%) of the Gross Sales in
excess of One Million Nine Hundred Thousand ($1,900,000.00) Dollars
(the "Breakpoint") in any Lease Year (defined below) occurring
during the term of the Lease (including any extension periods)
payable as provided below, and
(2) A one time payment of the sum of $50,000.00 due the said FT, CT
& TD the first time R of M attains Gross Sales of Two Million Five
Hundred Thousand ($2,500,000.00) Dollars in a Lease year, and
(3) A one time payment of the sum of $25,000.00 due the said FT, CT
& TD the first time R of M attains Gross Sales of Four Million
($4,000,000.00) Dollars in a Lease Year.
The said payments referred to in 1, 2 and 3 shall be paid or the estate
of FT, CT & TD throughout and during the lease and any extensions thereof
between CFT and R of M.
The payment set forth in (b)(i) above shall be paid on the first day
of the calendar month following the month in which the Breakpoint for such Lease
Year is attained.
<PAGE> 3
The term "Gross Sales" as used herein shall be construed to include the
entire amount of the actual sales price, whether for cash or otherwise, of all
sales of merchandise or services and other receipts whatsoever of all business
conducted in or from the Premises, known as 1360 Boston Post Road, Milford,
Connecticut by R of M, all concessionaires or otherwise, including, without
limitations: mail, catalogue, closed circuit television, computer, other
electronic or telephone orders received or filled at the Premises; all deposits
not refunded to purchasers; orders taken, although said orders may be filled
elsewhere; and the entire amount of the actual sales price and all other
receipts for sales and services by R of M, any concessionaire or otherwise in or
from the Premises. A "sale" shall be deemed to have been consummated for the
purposes of this Agreement, and the entire amount of the sales price shall be
included in Gross Sales, at such time as (i) the transaction is initially
reflected in the book or records of R of M or concessionaire (if a
concessionaire makes the sale), or (ii) R of M concessionaire receives all or
any portion of the sales price, or (iii) the applicable goods or services are
delivered to the customer, whichever first occurs, irrespective of whether
payment is made in installments, the sale is for cash or for credit, or all or
any portion of the sales price has actually been paid at the time of inclusion
in Gross Sales or at any other time. No deduction shall be allowed for direct or
indirect discounts, rebates, credits or other reductions to employees or others,
unless such discounts, rebates, credits or other reductions are generally
offered to the public on a uniform basis. For purposes hereof, the "First Lease"
means the period commencing on the Rent Commencement Date under the Lease and
ending on the last day of the calendar month immediately preceding the one year
anniversary of the Rent Commencement Date, and the next and each successive
Lease Year shall consist of each yearly period thereafter.
Notwithstanding the foregoing, however the following items should be
excluded from Gross Sales: (a) the amount of any sales tax, use tax, gross
receipts tax, successor tax or similar tax by whatever name called, imposed by a
federal, state, municipal or governmental authority directly on sales and
collected from customers; (b) proceeds of claims for damage to or loss of
merchandise; (c) the exchange of merchandise between the stores of Tenant where
such exchange is made solely for the convenient operation of the business of
Tenant and not for the purpose of depriving Landlord of the benefit of a sale
which otherwise would be made from the Premises; (d) proceeds from the sale of
trade fixtures, machinery and equipment; (e) the amount of any cash or credit
refund made upon any sale from the Premises previously included in Gross Sales;
(f) any redeemed gift certificates; (g) discounted sales to employees not in
exceed 5% of Gross Sales in any Lease Year; (h) license fees and rents paid by
sub-tenants and concessionaires.
3. ARBITRATION. Any controversy or claim arising out of or relating to
this agreement shall be settled by arbitration in accordance with the rules of
the American Arbitration Association, and judgment upon the award rendered in
such arbitration may be entered in any court having jurisdiction thereof.
Reasonable attorneys fees shall be awarded to the prevailing party by the
arbitrator.
4. WAIVER, MODIFICATION, OR CANCELLATION. Any waiver,
<PAGE> 4
alteration, or modification of any of the provisions of this agreement or
cancellation or replacement of this agreement shall not be valid unless in
writing and signed by the parties.
5. CONSTRUCTION. This agreement shall be governed by the Laws of
Connecticut.
6. ASSIGNMENT. This agreement shall inure to the benefit of and bind
the parties hereto and their respective legal representatives, successors, and
assigns.
7. RHC and R of M hereby agree that should they fail to make any
payment due FT, CT and TD as set forth herein then in that event RHC and R of M
shall pay FT, CT and TD a late payment fee equal to 5% of the payment due said
FT, CT and TD, in addition to the amount so due, and any reasonable attorneys
fees and collection expenses which are incurred by FT, CT and TD in order to
enforce their rights pursuant to this agreement.
8. RECORD AND BOOKS OF ACCOUNT. R of M shall prepare and keep full,
complete and proper books and source documents of the Gross Sales, whether for
cash, credit or otherwise, and of the operations of each subtenant,
concessionaire, licensee and/or assignee, and shall require and cause all such
parties to prepare and keep books, source documents, records and accounts
sufficient to substantiate those kept by R of M. The books and source documents
to be kept by R of M shall include, without limitation, true copies of all state
and local sales and use tax returns and reports, records of inventories and
receipts of merchandise, daily receipts from all sales and other pertinent
original sales records and record of any other transactions conducted in or from
the Premises by R of M and any other persons conducting business from the
Premises. R of M shall record at the time of each sale or other transaction all
receipts from such sale or other transaction, whether for cash, credit or
otherwise, in a cash register or cash registers having a cumulative total which
shall be sealed.
<PAGE> 5
All of the foregoing books, source documents and records shall at all reasonable
times be open to the inspection of, and may be copied or extracted from, in
whole or in part, by FT, CT and TD or their authorized representative or agent
for a period of at least three (3) years after the expiration of each Lease
Year.
R of M shall furnish to FT, CT and TD within fifteen (15) days after
the expiration of each month of each Lease Year, a complete statement, certified
by R of N, of the amount of Gross Sales, as defined herein made from the
Premises during such period. R of M shall furnish to FT, CT and TD, within sixty
(60) days after the expiration of each Lease Year, a complete statement,
certified by the chief financial officer or chief executive officer or outside
accountant employed by R of M, showing in all reasonable detail the amount of
such Gross Sales made by R of M from the Premises during the preceding Lease
Year or Partial Lease Year. R of M shall require all of its subtenants,
concessionaires, licensees and/or assignees, if any, to furnish a similar
statement. If R of M or assignees, subtenants or concessionaires fails to
furnish to FT, CT and TD any monthly or annual statement of Gross Sales within
the time required by agreement then R of M shall be in breach hereunder and
entitle FT, CT & TD to all remedies provided in this agreement or by law to FT,
CT and TD. In addition, if R of M or any subtenant, concessionaire, licensee
and/or assignee, if any, fails to furnish any two (2) consecutive monthly or
annual statements of Gross Sales within the time required by this agreement then
FT, CT and TD shall have the right with ten (10) days' prior written notice to
conduct an audit and any and all charges occasioned by reason thereof shall be
the sole obligation of R of M and payable on demand.
9. AUDIT.
------
a) RIGHT TO EXAMINE BOOKS. R of M shall make available to FT, CT and TD
within ten (10) days following their request for the same at R of M's principal
business office in the United States for examination, extracting and/or copying
all books, source documents, accounts, records and sales tax reports of R of M
and any subtenants, concessionaires, licensees and/or assignees filed with
applicable government agencies in order to verify the amount of Gross Sales in
and from the Premises.
b) AUDIT. At their option, FT, CT and TD may at any time upon ten (10)
days' prior written notice to R of M, cause a complete audit to be made by a
certified public accountant selected by FT, CT and TD (hereinafter "auditor") of
the records R of M and/or any subtenants, concessionaires, licensees and/or
assignees relating to the Premises for the period covered by any statement
issued or required to be issued by R of M or a
<PAGE> 6
concessionaire as above set forth herein. R of M shall make available to auditor
at R of M's principal business office in the United States, within ten (10) days
following FT, CT and TD's notice requiring such audit, all of the books, source
documents, accounts, records and sales tax reports and sales tax reports of R of
M and/or any of its subtenants, concessionaires, licensees and/or assignees
which auditor deems necessary or desirable for the purpose of making such audit.
If such audit discloses that Gross Sales as previously reported for the period
audited were understated, R of M shall immediately pay to FT, CT and TD the
additional Percentage Rent due for the period audited. Further, if such
understatement was in excess of three percent (3%) of actual Gross Sales as
disclosed by such audit, R of M shall immediately pay to FT, CT and TD the cost
of such audit.
10. The waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed a waiver of any subsequent breach
thereof.
11. Every provision of this Agreement is intended to be severable, and
if any term or provision of this Agreement shall be invalid, illegal or
unenforceable for any reason whatsoever, the validity, legality and
unenforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
12. Notwithstanding anything to the contrary contained in this
Agreement, this Agreement shall only become effective upon the occurrence of the
Closing under the ASPA. In the event the Closing under the ASPA shall not occur
for any reason whatsoever, this Agreement shall be deemed null and void and of
no force or effect, and neither party shall have any obligation to the other
hereunder.
In witness whereof the parties hereto have executed this agreement the
day and year first above written.
RATTLESNAKE HOLDING CORP.
- ------------------------------- BY
Frank Tumminello ---------------------------------
/s/ Charles Tumminello Rattlesnake of Milford, Inc.
- ------------------------------
Charles Tumminello
BY
- -------------------------- ---------------------------------
Thomas E. Dunn
<PAGE> 7
SCHEDULE 1
----------
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1922, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED I THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE TRANSFERABILITY OF THIS WARRANT
IS RESTRICTED AS PROVIDED IN SECTION 2
Warrant No.14 July , 1996
THE RATTLESNAKE HOLDING COMPANY, INC.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledge by THE RATTLESNAKE HOLDING COMPANY, INC., a Delaware corporation
(the "Company"), Is hereby granted the right to purchase, at any time from the
date hereof until 5:00 P.M., New York City time, on July , 2001 up to 100,000
paid and non-assessable shares of the Company's Common Stock, $.001 par value
per share ("Common Stock").
This warrant is exercisable at a par share price of 133% of prior 5 day
average "bid" price prior to closing under the assets sale/---agreement (the
"Exercise Price") payable in cash or by certified or official bank check in New
York Clearing House funds, subject to adjustment as provided in Section 1
hereof. Upon surrender of this Warrant with the annexed Subscription Form duly
executed, together with payment of the Exercise Price for the shares of Common
Stock purchased at the Company's principal executive offices ) presently located
at 3 Stanford Landing - Suite 130, Stanford, Connecticut 08902) the registered
holder of the Warrant )"holder") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased.
1. Exercise of Warrant.
--------------------
1.1 The purchase rights represented by this Warrant are exercisable at
the option of the holder hereof, in whole or in part (but not as to fractional
shares of the Common Stock) during any period in which this Warrant may be
exercised as set forth above. In the case of the purchase of less than all the
shares of Common Stock purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender thereof and shall execute and deliver a new
Warrant of like tenor for the balance of the shares of Common Stock purchasable
hereunder.
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in
<PAGE> 8
the name of, or in such names as may be directed by, the holder hereof;
provided, however, that the company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuances and delivery
of such certificates in a name other than that of the holder and the company
shall not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
company that such tax has been paid.
1.3 In case at any time or from time to time the Company shall
subdivide as a whole, split its Common Stock or issue a dividend payable in
shares or otherwise, the number of shares of Common Stock than outstanding into
a greater or lesser number of shares, the Warrant Price then in effect shall be
increased or reduced proportionately, and the number of shares issuable upon
exercise of this Warrant shall accordingly be increased or reduced
proportionately.
1.4 In case of any reclassification or change of outstanding shares of
Common Stock issuable upon exercise of this Warrant (other than change in par
value, or from par value to no par value, or from no par value to par value, or
as a result or a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger in
which the Company is continuing corporation and which does not result in any
reclassification or change of outstanding shares of Common Stock, other than a
change in number of the shares issuable upon exercise of the Warrant) or in case
of any sale or conveyance to another corporation of the property of the company
as an entirety or substantially as an entirety, the holder of this Warrant shall
have the right thereafter to exercise this Warrant into the kind and amount of
shares of Stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of share of Common Stock of the Company for which the Warrant
might have been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. The above provisions of this Section
1.4 shall similarly apply to successive reclassification and changes of shares
of Common Stock and to successive consolidations, mergers, sales or conveyances.
1.5 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall than be issuable upon the exercise of this Warrant. The
Company covenants that all shares of Common Stock which shall be so issuable
shall be duly and validly issued an fully-paid and non-assessable.
2. Restrictions on Transfer.
-------------------------
The holder acknowledges that he has been advised by the Company that
this Warrant and the shares of Common Stock (the "Warrant Shares") issuable upon
exercise thereof (collectively the "Securities") have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), that the Warrant
is being issued, and the shares issuable upon exercises of the Warrant will be
issued, on the basis of the statutory exemption provided by section 4(2) of the
Securities Act relating to transactions by an issuer not involving any public
offering, and that the
<PAGE> 9
Company's reliance upon this statutory exemption is based in part upon the
representations made by the holder contained herein. The holder acknowledges
that he has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Securities Act and the rules and
regulations thereunder on the transfer of securities. In particular, the holder
agrees that no sales, assignment or transfer of the Securities shall be valid or
effective, and the Company shall not be reguired to give any effect to any such
sales, assignment or transfer, unless (i) the sale, assignment or transfer of
the Securities is registered under the Securities Act, and the Company has no
olbigations or intention to so register the Securities except as may otherwise
be provided herein, or (ii) the Securiites are sold, asigned or transferred in
accordance with all the requirements and limitations of Rule 144 under the
Securities Act or such sale, assignment, or transfer is otherwise exempt from
registration under the Securities Act. The holder represnets and warrants that
he has acquired this Warrant and will acquire the Securities for his own account
for investment and not with a view to the sale or distribution thereof or the
granting of any paticipation therein, and that he has no present intention of
distributing or selling to others any of such interest or granting any
participation therein. The holder acknowledges that the securities shall bear
the following legend:
"These securites have not been registered uner the Securiites
Act of 1933. Such securities may not be sold or offered for
sale, transferred,hypothecated or otherwise assigned in the
absence of an effective registration statement with respect
thereto under such Act or an opinion of counsel to the Company
that an exemption from registration for such sale, offer,
transfer, hypothecation or other assignment is availabe under
such Act."
3. Registration Rights.
--------------------
3.1 (A) The Company shall advise the holder of this Warrant or of the
Warrant Shares or any than holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "holders") by written notice at least
four weeks prior to the filing of any registration statement under the
Securities Act of 1933 (the "Act") covering securities of the Company, except on
Forms S-4 or S-8, and upon the request of any such holder within ten days after
the date of such invoice, include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares. The Company shall supply prospectuses and other documents as the holder
may reasonably request in order to facilitate the public sale or other
disposition of the Warrant Shares, qualify the Warrant Shares for sale in such
states as any such holder reasonably designates and do any and all other acts
and things which may be necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Warrant Shares, and
furnish indemnification in the manner as set forth in Subsection 3.2 of this
Section 3. Such holders shall furnish information and indemnification as set
forth in Subsection 3.2 of this Section 3. For the purpose of the foregoing,
inclusion of the Warrant Shares in a Registration Statement pursuant to this
sup-paragraph 3.1 under a condition that the offer and/or sale of such Warrant
Shares not commence until a date not to exceed 90 days from the effective date
of such registration statement shall be deemed to be in compliance with the
sub-paragraph 3.1.
<PAGE> 10
(B) (I) If the Company shall have not filed a registration
statement subject to Section 3.1 (A) prior to August 1, 1998, the holders of the
Warrants and/or Warrant Shares representing a "Majority", as defined below,
shall have the right exercisable by written notice to the Company, to have the
Company prepare and file with the Commission, on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Underwriter
and such holders, in order to comply with the provisions of the Act, so as to
permit a public offering and sale of their respective Warrant Shares for nine(9)
consecutive months by such holders and any other holders of the Warrants and/or
Warrant Shares who notify the Company within ten(10) days after receiving notice
from the Company of such request.
(ii) The Company covenants and agrees to give
written notice of any registration request under this Section 3.1(b) by any
holder or holders to all other registered holders of the Warrants and the
Warrant Shares within ten (10) days from the date of the receipt of any such
registration request.
(iii) For purposes of this Warrant, the
term "Majority" in reference to the holders of Warrants or Warrant Shares,
shall mean in excess of fifty percent (50%) of the then outstanding Warrants or
Warrant Shares that (I) are not held by the Company, an affiliate, officer or
agent thereof or any of their respective affiliates, member of their family,
persons acting as nominees or in conjunction therewith or (ii) have not been
resold to the public pursuant to a registration statement filed with the
Commission under the Act.
3.2 The following provisions of this Section 3 shall also be applicable
to the exercise of the registration rights granted under this Section 3.1:
(A) The foregoing registration rights shall be contingent on
the holders furnishing the Company with such appropriate information (relating
to the intentions of such holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith supply
such number of prospectuses meeting the requirements of the Act as shall be
requested by such owner to permit such holder to make a public offering of all
Warrant Shares from time to time offered or sold to such holder, provided that
such holder shall from time to time furnish the Company with such appropriate
information (relating to the intentions of such holder) as the Company shall
request in writing. The Company shall also use its best efforts to qualify the
Warrant Shares for sale in such states as such holder shall reasonably
designate.
(B) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Subsection 3.1 of this Section
3 notwithstanding that Warrant Shares subject to this Warrant may be included in
any such registration. Any holder whose Warrant Shares are included in any such
registration statement pursuant to this section 3 shall, however, bear the fees
of his own counsel and any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant Shares sold by him pursuant
thereto.
<PAGE> 11
(C) The Company shall indemnify the hold harmless each such
holder and such underwriter, within the meaning of the Act, who may purchase
from or sell for any such holder any Warrant Shares from and against any all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 3 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that the Company
shall not be obliged so to indemnify any such holder or underwriter or
controlling person unless such holder or underwriter shall at the same time
agree to indemnify the Company, its directors, each officer signing the related
registration statement and each person, if any, who controls the Company within
the meaning of such act, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished by reason of this Section 3 or caused by any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading insofar as such losses, claims,
damages or liabilities are caused by any untrue statement furnished in writing
to the Company by any such holder or underwriter expressly for use therein.
4. Miscellaneous
-------------
4.1 All the covanants and agreements made by the Company in
this warrant shall bind its successors and assigns.
4.2 No recourse shall be had for any claim based hereon or
otherwise in any manor in respect hereof, against any incorporator, stockholder,
officer or director, past, present or future, of the Company or of any
predecessor corporation, whether by virtue of any constitutional provision or
statute or rule of law, or by the enforcement of any agreement or penalty or in
any other manner, all such liability being expressly waived and released by the
acceptance hereof and as part of the consideration of the issue hereof.
4.3 No course of dealing between the Company and the holder
hereof shall operate as a waive of any right of any holder hereof, and no delay
on the pat of the holder in exercising any right hereunder shall so operate.
4.4 The Warrant may be amended only by a written instrument
executed by the Company and the holder hereof. Any amendment shall be endorsed
upon this Warrant, and all future holders shall be bound thereby.
4.5 All communications provided for herein shall be sent,
except as may be otherwise specifically provided, by registered or certified
mail, if to the holder of this Warrant, to
<PAGE> 12
the address shown on the books of the Company, and if to the Company, to 3
Stanford Landing, Suite 130, Stanford, Connecticut 06902, attention: Office of
the President, or such other address as the Company may advise the holder of
this Warrant in writing. Notices shall be deemed given when mailed.
4.6 The provisions of this Warrant shall in all respects be
constructed according to, and the rights and liabilities of the parties hereto
shall in all respects be governed by, the laws of the State of Delaware. This
Warrant shall be deemed a contract made under the laws of the State of Delaware
and the validity of this Warrant all rights and liabilities hereunder shall be
determined under the laws of said state.
4.7 The headings of the Sections of this Warrant are inserted
for convenience only and shall not be deemed to constitute a part of this
Warrant.
IN WITNESS WHEREOF, THE RATTLESNAKE HOLDING COMPANY,
INC., has caused this Warrant to be executed in its corporate name by its
officer, and its seal to be affixed hereto.
Dated: October , 1996
Stanford, Connecticut
THE RATTLESNAKE HOLDING COMPANY, INC.
By:
---------------------------------
William J. Opper
Chairman of the Board
<PAGE> 13
SUBSCRIPTION FORM
TO: THE RATTLESNAKE HOLDING COMPANY, INC.
3 Stanford Landing
Suite 130
Stanford, CT 06902
The undersigned holder hereby irrevocably elects to exercise the right
to purchase Shares of common stock covered by this Warrant according to the
conditions hereof and herewith makes full payment of the Exercise price of such
shares.
Kindly deliver to the undersigned a certificate representing the
Shares.
INSTRUCTIONS FOR DELIVERY
Name:
----------------------------------------------------------------
(please typewrite or print in block letters)
Address:
-------------------------------------------------------------
Dated:
----------------------------
Signature:
-----------------------
<PAGE> 14
SUBSCRIPTION FORM
TO: THE RATTLESNAKE HOLDING COMPANY, INC.
3 Stanford Landing
Suite 130
Stanford, CT 06902
The undersigned holder hereby irrevocably elects to exercise the right
to purchase Shares of common stock covered by this Warrant according to the
conditions hereof and herewith makes full payment of the Exercise price of such
shares.
Kindly deliver to the undersigned a certificate representing the
Shares.
INSTRUCTIONS FOR DELIVERY
Name:
----------------------------------------------------------------
(please typewrite or print in block letters)
Address:
-------------------------------------------------------------
Dated:
----------------------------
Signature:
-----------------------
<PAGE> 1
EXHIBIT 10.29
AGREEMENT OF SALE
-----------------
AGREEMENT OF SALE, made August 6, 1996, between KINGS CASTLE CATERERS, INC., c/o
DiConza, Larocca & DiCunto, LLP, 478 Bay Ridge Parkway, Brooklyn, New York,
("Seller"), and RATTLESNAKE OF BAY RIDGE, INC., 1 Stamford Landing, Stamford,
Connecticut, ("Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, Purchaser desires to acquire, and Seller desires to sell, certain
assets of the Seller hereinafter specified, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements hereafter set
forth, and other valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL. Seller agrees to sell, transfer and deliver to Purchaser,
and Purchaser agrees to purchase, upon the terms and conditions hereinafter set
forth, the following assets of Seller (collectively, the "Assets"):
(a) the equipment, furniture, fixtures and improvements located at Short
Ribs Restaurant & Bar, 9101 Third Avenue, Brooklyn, New York 11209, more
particularly itemized in Exhibit B, annexed, and;
(b) a sub-lease of the prime lease dated the 1st day of December, 1995,
with rider dated February 1, 1996, between 9103 Third Avenue Realty
Corp. , as Landlord, and Kings Castle Caterers, Inc., as Tenant, copies
of which are annexed hereto as Exhibit A (the "Lease" and "Sub-Lease").
The sale hereunder shall not include, and Seller shall retain, the name "Short
Ribs" and "Short Ribs Restaurant & Bar", all cash, securities, cash equivalents
and accounts receivable and all other assets, property and rights of Seller and
the business, including without limitation the property described in Exhibit C
hereto (the "Excluded Assets").
<PAGE> 2
2. PURCHASE PRICE. The purchase price to be paid by Purchaser is $465,000.00,
payable as follows:
(a) $46,500.00 upon execution of this agreement, by check subject to
collection. The nonpayment of said check shall give Seller the right to
declare this agreement null and void, in addition to pursuing all other
remedies against Purchaser on said check or as otherwise permitted by law.
Said check is payable to the order of the Escrow Agent hereinafter
identified, and the proceeds of said check shall be held in escrow as
hereinafter provided.
(b) $173,500.00 at the closing.
(c) $245,000.00 at the closing by the execution and delivery of a Promissory
Note by Purchaser to Seller in said amount. Said Promissory Note shall be
self-liquidating over a period of eighty (80) months and shall bear interest
at the rate of prime plus one (1%) percent as established by the Chase
Manhattan Bank and reported in the Wall Street Journal, adjusted monthly.
The Promissory Note shall be secured by a Security Agreement and UCC
Financing Statements creating a security interest in the assets of the
business to be established by Purchaser to operate a restaurant and bar
("Business") at the premises (the "Security Agreement).
The Promissory Note shall be guaranteed by the Rattlesnake Holding Company
Inc., 1 Stamford Landing, Stamford, Connecticut. The guaranty shall be
delivered at Closing.
The purchase price is comprised of the following components:
Furniture, Fixtures & Equipment: $
Sub-Lease: $
The parties agree to use the foregoing allocation, which was the result of arm's
length negotiations, for purposes of all Federal, State and local tax returns.
Purchaser agrees to pay at the Closing the applicable New York State Sales Taxes
on the furniture, fixtures and equipment transferred, and to indemnify and hold
harmless the Seller from any and all claims for taxes due as a result thereof.
This provision shall survive the Closing.
2
<PAGE> 3
3. ACCEPTABLE FUNDS. All money payable under this agreement, unless otherwise
specified, shall be paid either: (a) in cash, but not more than $1,000 shall be
paid in cash; (b) by good certified check of Purchaser, or official check of any
bank, savings bank, trust company, or savings and loan association which is a
member of the New York Clearing House, payable to the direct order of Seller; or
(c) as otherwise agreed to in writing by the parties or their attorneys.
4. THE CLOSING. The "closing" means the settlement of the obligations of Seller
and Purchaser to each other under this agreement, including the payment of the
purchase price to Seller as provided in Article 1 hereof and the delivery of the
closing documents provided for in Article 5 hereof. The closing shall be held at
the offices of DiConza, Larocca & DiCunto, LLP, 478 Bay Ridge Parkway, Brooklyn,
NY 11209, at 10 A.M. on or about five (5) days after receipt of Landlord's
written consent to Sub-lease Agreement. (the "closing date").
5. CLOSING DOCUMENTS. At the closing Seller shall execute and deliver to
Purchaser:
(a) a Bill of Sale for all furniture, fixtures and equipment;
(b) Sub-Lease substantially in the form of Exhibit A hereto;
(c) Landlord's consent to Sub-Lease Agreement in the form annexed
hereto;
(d) such other instruments as may be necessary or proper to transfer to
Purchaser all other ownership interests in the Assets to be transferred
under this agreement;
(e) evidence that any existing violations have been satisfied and
removed of record;
(f) Memo of Lease fully executed, in recordable form, in the form
attached.
At the closing Purchaser shall execute and deliver to Seller:
(a) the Promissory Note, Security Agreement and UCC Financing Statements
and Guaranty provided for in Article 2 hereof.
3
<PAGE> 4
6. THE SECURITY AGREEMENT. The Security Agreement shall create a security
interest in the property described in Exhibit B. Purchaser agrees to perfect
the security interest of the Security Agreement by executing and delivering to
Seller appropriate Financing Statements and extensions and renewals thereof, in
accordance with the provisions of the Uniform Commercial Code, and all other
instruments or documents as may be reasonably requested by Seller. All filing
fees in connection therewith shall be paid by Purchaser.
7. CLOSING ADJUSTMENTS. The following items shall be apportioned as of midnight
of the day preceding the closing date:
(a) rent, including any additional rent, under the Lease;
(b) taxes;
(c) water and sewer charges.
Any errors or omissions in computing apportionments shall be corrected after the
closing.
8. WAIVER OF BULK TRANSFER REQUIREMENTS. The parties waive compliance with the
bulk transfer provisions of the Uniform Commercial Code which may be applicable
to this transaction. Seller agrees to hold harmless Purchaser against all claims
made by the creditors of Seller.
At the closing, Seller shall deposit with the Escrow Agent hereinafter
identified the Promissory Note to be held in escrow, for a period of ninety (90)
days, as security for the payment of any and all liabilities due the State and
City of New York for taxes. During the time that the Promissory Note is so held
in escrow, payments due on the Promissory Note shall be made by Purchaser to the
Escrow Agent. The Promissory Note so made shall be released from escrow and
delivered to Seller after ninety (90) days or at such time as a receipt or
receipts evidencing payment of said sales tax liabilities of Seller, or
appropriate releases, are delivered to Purchaser, whichever shall first occur,
with payments to be so released within ninety (90) days thereafter. Seller's
obligations as to said taxes shall remain, and Purchaser shall have a right of
set-off against the Note for payments made by it as a result of the non-payment
of same by Seller, as a result of any misrepresentations or failure to perform.
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<PAGE> 5
9. USE OF PURCHASE PRICE TO PAY ENCUMBRANCES. If there is any lien or
encumbrance against the Assets, or anything else affecting this sale, which
Seller is obligated to pay and discharge at the Closing, Seller shall use any
portion of the balance of the purchase price to discharge it, or Seller may
allow to Purchaser the amount thereof as a credit at the Closing. Purchaser
agrees to provide separate certified checks as reasonably requested to assist in
clearing up these matters.
10. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
Purchaser as follows:
(a) Seller has full power and authority to conduct its business as now
carried on, and to carry out and perform its undertakings and obligations as
provided herein.
(b) No action, approval, consent or authorization of any governmental
authority is necessary for Seller to consummate the transactions
contemplated hereby.
(c) Seller is the owner of and has good and marketable title to the Assets,
free of all liens, claims and encumbrances, except as may be set forth
herein.
(d) There are no violations of any law or governmental rule or regulation
pending against Seller or the Assets.
(e) There are no judgments, liens, suits, actions or proceedings pending, or
to its knowledge threatened, against Seller or the Assets.
(f) Except as set forth in sub-paragraph 11(d) herein, Seller has not
entered into, and the Assets are not subject to, any: (i) written contract
or agreement for the employment of any employee of the business; (ii)
contract with any labor union or guild; (iii) pension, profit-sharing,
retirement, bonus, insurance, or similar plan with respect to any employee
of the business; or (iv) similar contract or agreement affecting or relating
to the Assets.
(g) The Lease is the only agreement between Landlord and Seller with respect
to the premises demised thereunder, and is in full force and effect and
without any default by Seller, or Landlord, thereunder.
(h) Seller has no knowledge of any environmental or hazardous conditions at
the premises, including the presence of asbestos;
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<PAGE> 6
(i) Seller has no knowledge of any other parties having rights or interest
in or to the premises.
11. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser has full power and authority to carry out and perform its
undertakings and obligations as provided herein.
(b) No action, approval, consent or authorization of any governmental
authority is necessary for Purchaser to consummate the transactions
contemplated hereby.
(c) There are no judgments, liens, suits, actions or proceedings pending or,
to the best of Purchaser's knowledge, threatened against Purchaser or its
property.
(d) Purchaser agrees to assume the obligations of Seller pursuant to the
security alarm equipment lease agreement annexed as EXHIBIT D. Purchaser
further agrees to defend, indemnify, and hold Seller harmless, from and
against any and all claims resulting from the future use of the alarm
system. This provision shall survive the Closing.
12. NO OTHER REPRESENTATIONS. Purchaser acknowledges that neither Seller nor any
representative or agent of Seller has made any representation or warranty
(expressed or implied) regarding the Assets or the business, or any matter or
thing affecting or relating to this agreement, except as specifically set forth
in this agreement. Seller shall not be liable or bound in any manner by any oral
or written statement, representation, warranty, agreement or information
pertaining to the Assets or the business or this agreement furnished by any
broker, agent or other person, unless specifically set forth in this agreement.
Purchaser has inspected the Assets, Purchaser agrees to take the Assets "as is"
and in their present condition, subject to reasonable use, wear, tear and
deterioration between now and the closing date.
13. CONDITIONS TO CLOSING. The obligations of the parties to close hereunder are
subject to the following conditions, any of which may be waived by the benefited
party:
(a) All of the terms, covenants and conditions to be complied with or
performed by the other party under this agreement on or before the closing
shall have been complied with or performed in all material respects.
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<PAGE> 7
(b) All representations or warranties of the other party herein are true in
all material respects as of the closing date.
(c) On the closing date, there shall be no liens or encumbrances against the
Assets, except as may be provided for herein.
Seller promptly shall notify the lessor under the Lease (the "Lessor") of the
proposed Sub-Lease to Purchaser, and shall request the consent of the Lessor
thereto. Seller and Purchaser shall furnish to the Lessor such information as
may reasonably be required in connection with the procuring of such consent, and
shall otherwise cooperate with the Lessor and with each other in an effort to
expeditiously procure such consent. Neither Seller nor Purchaser shall be
obligated to make any payment to obtain such consent. If the Lessor shall fail
or refuse to grant such consent in writing in the form of a Landlord's Consent
Agreement, within ten (10) days after the date of this agreement (the "Outside
Date"), or shall require as a condition of the granting of such consent that
additional consideration be paid to the Lessor which neither Seller nor
Purchaser is willing to pay, then either Seller or Purchaser may terminate this
agreement, by written notice to the other delivered within ten (10) days after
the Outside Date.
If this agreement is terminated as provided above in this Article 13, Seller
shall direct Escrow Agent to return, without interest, the down payment and
Escrow Agent shall so return same, whereupon all rights of Purchaser hereunder
and to the business shall terminate, and neither Seller nor Purchaser shall have
any further claim against the other hereunder.
If Purchaser shall be entitled to decline to close the transactions contemplated
by this agreement, but Purchaser nevertheless shall elect to close, Purchaser
shall be deemed to have waived all claims of any nature arising from the failure
of Seller to comply with the conditions or other provisions of this agreement of
which Purchaser shall have actual knowledge at the closing.
14. ESCROW CONDITIONS. Concurrently with the execution of this agreement,
Purchaser has delivered to DiConza, Larocca & DiCunto, LLP, having an address at
478 Bay Ridge Parkway, Brooklyn, NY 11209 ("Escrow Agent"), Purchaser's check
in the amount of $46,500.00, being the amount to be paid by Purchaser upon the
execution of this agreement (the "down payment"). At the closing, Seller is to
deliver to said Escrow Agent the Promissory Note to be held in escrow, as
provided in Article 8 above.
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<PAGE> 8
Escrow Agent shall hold the down payment and the Promissory Note in accordance
with this agreement, or a joint instruction signed by Seller and Purchaser, or
separate instructions of like tenor signed by Seller and Purchaser, or a final
judgment of a court of competent jurisdiction. Escrow Agent hereby is authorized
and directed to deliver the down payment to Seller if, as and when title closes.
15. LIQUIDATED DAMAGES. If Purchaser defaults under this agreement, Seller as
its sole remedy shall be entitled to declare this agreement null and void and to
receive from Escrow Agent and to retain the down payment and any other sums paid
by Purchaser hereunder as liquidated damages, whereupon this agreement shall
terminate and neither Seller nor Purchaser shall have any further claim against
the other. The parties acknowledge that the actual damages sustained by Seller
in the event of such default are difficult, if not impossible, to ascertain.
16. BROKERAGE. The parties hereto represent and warrant to each other that they
have not dealt with any broker or finder in connection with this agreement or
the transactions contemplated hereby, other than Friedland Realty, Inc., whose
commission shall be paid by Seller and no other broker or any other person is
entitled to receive any brokerage commission, finder's fee or similar
compensation in connection with this agreement or the transactions contemplated
hereby. Each of the parties shall indemnify and hold the other harmless from and
against all liability, claim, loss, damage or expense, including reasonable
attorneys' fees, pertaining to any other broker, finder or other person with
whom such party has dealt. No action or inaction of Seller or Purchaser,
including the giving of notices, shall affect, change or discharge the
obligations of the Purchaser's Guarantor hereunder.
17. ASSIGNMENT. Purchaser shall not assign this agreement without the prior
written consent of Seller in each instance. Any attempted assignment without
Seller's consent shall be null and void.
18. NOTICES. All notices, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been properly given if delivered by hand or by registered or certified mail,
return receipt requested, with postage prepaid, to Seller or Purchaser, as the
case may be, at their addresses first above written, or at such other addresses
as they may designate by notice given hereunder. All notices shall be copied to
the respective party's attorneys as follows: To the Purchaser, copy to: ATTN:
ANDREW S. LEVINE, ESQ., PRYOR, CASHMAN, SHERMAN & FLYNN, 410 PARK AVENUE, NEW
YORK, NEW YORK 10022-4441; To the Seller, copy to: ATTN: RICHARD A. KAPLIN,
ESQ., DIcONZA, LAROCCA & DIcUNTO, 478 BAY RIDGE PARKWAY, BROOKLYN, NEW YORK
11209- 2720.
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<PAGE> 9
19. ENTIRE AGREEMENT. This agreement contains all of the terms agreed upon
between Seller and Purchaser with respect to the subject matter hereof. This
agreement has been entered into after full investigation. All prior oral or
written statements, representations, promises, understandings and agreements of
Seller and Purchaser are merged into and superseded by this agreement, which
alone fully and completely expresses their agreement.
20. CHANGES MUST BE IN WRITING. No delay or omission by either Seller or
Purchaser in exercising any right shall operate as a waiver of such right or any
other right. This agreement may not be altered, amended, changed, modified,
waived or terminated in any respect or particular unless the same shall be in
writing signed by the party to be bound. No waiver by any party of any breach
hereunder shall be deemed a waiver of any other or subsequent breach.
21. CAPTIONS AND EXHIBITS. The captions in this agreement are for convenience
only and are not to be considered in construing this agreement. The Exhibits
annexed to this agreement are an integral part of this agreement, and where
there is any reference to this agreement it shall be deemed to include said
Exhibits.
22. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York. If any provisions of this
agreement shall be unenforceable or invalid, such unenforceability or invalidity
shall not affect the remaining provisions of this agreement.
23. BINDING EFFECT. This agreement shall not be considered an offer or an
acceptance of an offer by Seller, and shall not be binding upon Seller until
executed and delivered by both Seller and Purchaser. Upon such execution and
delivery, this agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns.
24. OPTION PERIOD. Notwithstanding the prior provisions of this Agreement, upon
execution hereof, Purchaser shall deliver a bank, certified or attorney escrow
check in the amount of $20,000.00, which shall be deposited by and held in
escrow by DiConza, Larocca & DiCunto, LLP, attorney for Seller. The $20,000.00
deposit shall be held in a non-interest bearing account until October 1, 1996.
(the "Expiration Date"). At or prior to the Expiration Date, Purchaser shall be
required to deposit an additional down payment of $26,500.00, representing the
balance of the full deposit due under the Agreement of Sale, in which event, the
terms and conditions of this Agreement shall be fully effective. In the event
Purchaser shall fail to deposit the additional sum of $26,500.00 within the
required period or otherwise notifies Seller
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<PAGE> 10
in writing of its intention not to proceed with the Agreement of Sale, then, in
either event, the initial $20,000.00 deposit shall be forfeited by the
Purchaser. In such event, DiConza, Larocca & DiCunto, LLP shall be authorized to
release the initial deposit of $20,000.00 to Seller and the Agreement shall
terminate and be of no further force and effect, with neither party having any
further claims as against the other.
IN WITNESS WHEREOF, the parties have executed this agreement the date first
above written.
KINGS CASTLE CATERERS, INC.
Witness:
BY: /s/ Jerry Pellegrino, President
- ---------------------------- -------------------------------------
Jerry Pellegrino, President
RATTLESNAKE OF BAY RIDGE INC.
Witness:
By: /s/ William Opper
- ---------------------------- -------------------------------------
William Opper, C.E.O.
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<PAGE> 11
EXHIBIT A
The Lease and Sub-Lease
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<PAGE> 12
RIDER TO LEASE
--------------
The provisions of this rider are hereby incorporated into and made a
part of the lease to which this rider is annexed. If there is any conflict
between the provisions of this rider and the remainder of this lease, the
provisions of this rider shall govern.
2. RENT
Tenant covenants to pay to Landlord as a net minimum rent (the "fixed
rent") during the term of this lease as follows:
Year Annual Rent Monthly Rent
Year 1 $81,600.00 $6,800.00
Year 2 84,048.00 7,004.00
Year 3 86,569.44 7,214.00
Year 4 90,032.22 7,502.00
Year 5 94,533.83 7,877.00
Year 6 99,260.52 8,270.00
Year 7 99,260.52 8,270.00
Year 8 99,260.52 8,270.00
Year 9 99,260.52 8,270.00
Year 10 99,260.52* 8,270.00
* TO BE PRORATED
The fixed rent shall be payable in advance in equal monthly
installments on the first day of each calendar month. If the term of this lease
does not commence on the first day of a month, the fixed rent for the month in
which the term of this lease commences shall be appropriately apportioned. The
first installment of fixed rent shall be paid simultaneously with the execution
of this lease.
Tenant also covenants to pay, from time to time as provided in this
lease, as additional rent, all other amounts and obligations which Tenant
assumes or agrees to pay under this lease. In the event of any failure on the
part of Tenant to pay any additional rent, Landlord shall have all the rights,
powers and remedies provided for in this lease, at law, in equity or otherwise,
in the case of nonpayment of fixed rent. Tenant's obligations to pay fixed rent
and additional rent shall survive the expiration of the lease term or earlier
termination of this lease, arising out of Tenant's default.
All fixed rent and additional rent (collectively hereinafter referred
to as "rent") shall be paid in such coin or currency (or, subject to collection,
by good check payable in such coin or currency) of the United States of America
as at the time shall be legal tender for the payment of public and private
debts, at the office of Landlord as set forth above, or at such place and to
such person as Landlord from time to time may designate.
<PAGE> 13
All rent shall be paid to Landlord without notice, demand,
counterclaim, setoff, deduction or defense, and nothing shall suspend, defer,
diminish, abate or reduce any rent, except as otherwise specifically provided in
this lease.
3. Work To Be Performed
-----------------------
Tenant at Tenant's sole cost and expense shall perform the work and
make the installations in the demised premises set forth in Paragraph "18"
hereto. Tenant shall obtain all necessary governmental approvals in connection
therewith.
Tenant has examined and inspected the demised premises. Tenant agrees
to accept possession of the demised premises "AS IS" except as otherwise
expressly provided herein. Landlord shall not be responsible for making any
improvements, alterations or repairs therein or for spending any other money to
prepare the demised premises for Tenant's occupancy, except as expressly
provided herein. All other improvements and alterations to the demised premises
prior to or at any time after the commencement of the term of this lease shall
be made at Tenant's sole cost and expense, in accordance with the provisions of
this lease.
4. Alterations and Additions
----------------------------
Tenant shall be entitled to make all non-structural alterations or
additions to the demised premises without the prior written consent of Landlord
in each instance, so long as all alterations are consistent with the design and
furnishings of other Rattlesnake restaurants. Owner shall be responsible for all
structural repairs to the demised premises, including the roof. In the event
Owner fails to make required structural repairs which impact on Tenant's use of
the demised premises, Tenant may undertake such repairs on thirty (30) days'
prior written notice and may set-off the cost of such repairs as against rent
due.
5. Liens
--------
Tenant shall indemnify and hold Landlord harmless from and against any
and all bills for labor performed or equipment, fixtures and materials furnished
to or for Tenant, and from and against any and all liens or claims therefor or
against the demised premises or the building of which it forms a part, and from
and against any and all liability, claim, loss, damage or expense, including
reasonable attorneys' fees, in connection with any work performed by or for
Tenant. The demised premises and the building shall at all times be free of
liens for labor and materials supplied or claimed to have been supplied to or on
behalf of Tenant, and no financing statements or other security instruments
shall be filed against the demised premises or the building or the contents
thereof, except for new fixture financing. Landlord agrees to execute releases
and/or acknowledgements to confirm this.
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<PAGE> 14
If, in connection with any work being performed by or for Tenant or any
subtenant, or in connection with any materials being furnished to Tenant or any
subtenant, any mechanic's lien or other lien or charge shall be filed or made
against the demised premises or any part thereof, or if any such lien or charge
shall be filed or made against Landlord as owner, then Tenant, at Tenant's
expense, within thirty (30) days after such lien or charge shall have been filed
or made, shall cause the same to be canceled and discharged of record by payment
thereof or filing a bond or otherwise.
Nothing in this lease shall constitute any consent or request by
Landlord, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the demised
premises or any part thereof, nor as giving Tenant any right, power or authority
to contract for or permit the performance of any labor or services or the
furnishing of any materials or other property in any fashion that would permit
the filing or making of any lien or claim against Landlord, the demised premises
or the building.
6. Waste Removal
----------------
Tenant, at Tenant's expense, shall contract for the removal, on a daily
basis, of all Tenant's garbage waste. Tenant, at Tenant's expense, shall cause
the demised premises to be exterminated from time to time to the satisfaction of
Landlord.
7. Licenses And Permits
-----------------------
Tenant agrees to secure and maintain, at its own expense, all licenses
and permits from Federal, State and local authorities as may be necessary for
the conduct of Tenant's business, and shall comply with all applicable laws,
rules and regulations. Landlord does not represent that any license or permit
which may be required will be granted or, if granted, will continue in effect or
be renewed. Tenant's obligations under this lease shall in no way be affected by
Tenant's inability to secure or maintain any license or permit.
8. Utility Services
-------------------
Tenant shall pay all charges for all public or private utility services
provided to the demised premises which accrue on or after the commencement date
of this lease, shall comply with all contracts relating to such services, and
shall do all other things required for the maintenance and continuance of all
such services.
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<PAGE> 15
Utilities shall include, but not limited to, all gas, electric, water, sewer and
telephone services.
Tenant, at its sole cost and expense, shall make all arrangements with
the public utility company serving the demised premises for obtaining and paying
for electricity and other utility services at the demised premises, including
without limitation arrangements pertaining to the installation and use of
meters, pans, risers, wiring, panel boards, feeders and other conductors and
equipment, if necessary. Landlord shall not be liable or responsible for charges
for electricity at the demised premises, or any loss, damage or expense which
Tenant may sustain or incur if either the quantity or character of electric
service is changed or is no longer available or suitable for Tenant's
requirements.
Tenant covenants and agrees that its use of electric current shall
never exceed the capacity of the existing conductors, feeders, risers, wiring
installations or other equipment servicing the building.
9. Compliance With Paramount Lease
----------------------------------
This lease is subject and subordinate to the terms, covenants and
conditions of that certain Lease Agreement dated December 1, 1995, with Rider
dated February 1, 1996, by and between 9103 Third Ave. Realty Corp., as Landlord
and Kings Castle Caterers, Inc., as Tenant (the "Paramount Lease"), as modified
by the Landlord Consent Agreement. 9103 Third Ave. Realty Corp. shall be
referred to herein as either Prime Landlord or Owner. Tenant, at Tenant's sole
cost and expense, shall observe, perform and comply with all of the terms,
covenants and conditions of the Paramount Lease to be observed, performed or
complied with by the lessee thereunder, other than the provisions for the
payment of rent. All rent payments under this lease must be made directly to the
Landlord hereunder and NOT to the Owner. In the event of any default in the
observance, performance or compliance with any such term, covenant or condition
of the Paramount Lease, other than the payment of rent, other than the payment
of rent, as claimed by Owner, Landlord, in addition to its other rights and
remedies hereunder, shall be entitled to cure such default under the Paramount
Lease, and all sums advanced or incurred by Landlord in connection therewith
shall be paid by Tenant to Landlord on demand as additional rent hereunder.
10. Limited Liability
---------------------
Tenant agrees that, notwithstanding any other provision of this lease,
Landlord shall not be under any personal liability under this lease and, if
Landlord defaults hereunder, Tenant shall look solely to the interest of
Landlord or its successor in the demised premises for the satisfaction of any
judgment or other judicial process requiring the payment of money by Landlord
based
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<PAGE> 16
upon any default hereunder, and no other assets of Landlord or any such
successor shall be subject to levy, execution or other enforcement procedure for
the satisfaction of any such judgment or process.
11. Indemnification By Tenant
-----------------------------
Tenant shall indemnify and hold Landlord (and any fee owner, mortgagee
or lessor under any superior lease) harmless from and against any and all
liability, claim, loss, damage or expense, including reasonable attorneys ,
fees, by reason of any injury to or death of any person or persons, or injury or
damage to property, or otherwise, arising from or in connection with the
occupancy or use of the demised premises or any work, installation or thing
whatsoever done in, at or about the demised premises, or from any act, omission
or negligence of Tenant or any contractors, agents, employees, customers,
subtenants, licensees, guests or invitees of Tenant.
12. Insurance
-------------
Tenant, at all times during the term of this lease and at Tenant's
expense, shall provide and keep in force with insurers reasonably approved by
Landlord comprehensive public liability and property damage insurance protecting
Landlord against any and all liability occasioned by negligence, occurrence,
accident, disaster and other risks included under "extended coverage" policies,
occurring in or about the demised premises or any part thereof, in amounts
approved from time to time by Landlord, which amounts at the date hereof shall
be, in the case of public liability, $1,000,000 per person and $3,000,000 per
accident, and $500,000 in the case of property damage, and insurance against
such other hazards and in such amounts as is customarily carried by tenants in
similar restaurants, as Landlord reasonably may request.
All insurance maintained by Tenant pursuant to this Article 12 shall
name Landlord, Tenant and Owner as additional insureds, shall provide that any
loss shall be payable to Landlord notwithstanding any act or failure to act or
negligence of Landlord, Tenant or any other person, shall provide that no
cancellation, reduction in amount or material change in coverage thereof will be
effective until at least ten days after receipt by Landlord of written notice
thereof, and shall be satisfactory to Landlord, acting reasonably, in all other
respects. Notwithstanding the above, all casualty loss payments below $50,000.00
may be paid directly to Tenant so long as they are used to repair or restore the
demised premises. In the event of a casualty loss, Landlord may not terminate
this lease unless consented to by Tenant or unless there shall be less than two
(2) years remaining on this lease. All repairs required as a result of
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<PAGE> 17
casualty loss shall be expeditiously commenced and completed by Tenant.
Upon the execution of this lease and thereafter not less than fifteen
days prior to the expiration date of any policy delivered pursuant to this
Article 12, Tenant shall deliver to Landlord the originals of all policies or
renewal policies or Certificates of Insurance, as the case may be, required by
this lease, bearing notations evidencing the payment of the premiums therefor.
If at any time Tenant shall neglect or fail to provide or maintain
insurance or to deliver insurance policies or certificates in accordance with
this Article 12, Landlord may, upon notice to Tenant, effect such insurance as
agent for Tenant, by taking out policies in a company satisfactory to Landlord,
and the amount of the premiums paid for such insurance shall be paid by Tenant
to Landlord on demand.
13. Assignment and Subletting
-----------------------------
Tenant expressly covenants that Tenant shall not voluntarily or
involuntarily assign, encumber, mortgage or otherwise transfer this lease, or
sublet the demised premises or any part thereof, or suffer or permit the demised
premises or any part thereof to be used or occupied by others, by operation of
law or otherwise, without the prior written consent of Landlord in each
instance. Absent such consent, any act or instrument purporting to do any of the
foregoing shall be null and void. Landlord's consent to any proposed assignment
or subletting may not be unreasonably withheld, or delayed. Failure to respond
within thirty (30) days shall be deemed a consent.
If Tenant desires to assign this lease or sublet all or any portion of
the demised premises, Tenant shall submit to Landlord in writing: the name and
address of the proposed assignee or subtenant; a counterpart of the proposed
agreement of assignment or sublease and all other instruments or agreements
pertaining thereto; such information as to the nature and character of the
business of the proposed assignee or subtenant, and the proposed use of the
space, as Landlord reasonably may request; banking, financial or other credit
information relating to the proposed assignee or subtenant, to the extent
available to Tenant, sufficient to enable Landlord to determine the financial
responsibility and character of the proposed assignee or subtenant. Tenant shall
pay all of Landlord's costs and expenses, including reasonable attorneys' fees,
incurred in connection with the review, preparation and execution of any
documents pertaining to any proposed assignment or sublease.
In the event of an assignment or subletting, Tenant shall continue to
remain fully obligated under the terms of this lease.
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<PAGE> 18
14. Brokerage
-------------
Landlord and Tenant represent and warrant that they have not dealt with
any broker in connection with this lease or the negotiation or execution thereof
other than Friedland Realty, Inc., who is being paid by Landlord. Each party
agrees to indemnify and hold the other harmless from and against any claims,
damage, liability or expense, including attorneys' fees, pertaining to any other
broker with whom they have dealt.
15. Notices
-----------
All notices required or permitted to be given hereunder shall be sent
by registered or certified mail, return receipt requested, addressed to Landlord
or Tenant at the address hereinabove stated, or to Tenant at the demised
premises, or to such other address as either party hereafter may designate by
notice hereunder.
In addition, written notice shall be sent to DiConza, Larocca & DiCunto
LLP, 478 Bay Ridge Parkway, Brooklyn, New York 11209, as attorneys for Landlord
and to Pryor, Cashman, Sherman & Flynn, 410 Park Avenue, New York, New York
10022-4441, as attorneys for Tenant.
16. Miscellaneous
-----------------
The submission of this lease to Tenant shall not be construed as an
offer or option, and Tenant shall not have any rights hereunder unless and until
Landlord shall execute a copy of this lease and deliver the same to Tenant.
17. Option To Extend
--------------------
Provided that the Tenant is not in default beyond any notice and grace
period under any of the terms herein, Tenant shall have the option to renew this
lease for the period, commencing on the 1st day of the first month immediately
following the expiration of this lease and ending on the 30th day of January in
the Year 2011. In order to exercise this option to extend the term of the lease,
Tenant must give Landlord written notice by Certified Mail, Return Receipt
Requested, on or before December 1st, 2005. All of the terms and conditions of
this lease will remain in full force and effect during the extension period;
except that the rent payable during the extension period shall be $104,196.00
per year, in equal monthly installments of $8,683.00 each.
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<PAGE> 19
18. Improvements
----------------
The Tenant acknowledges that the demised premises requires substantial
improvements which by their very nature will become attached to and will improve
the structure of the premises for the benefit of the Landlord and the Owner of
the property. The following improvements will be made by the Tenant at its own
cost and expense during the term of this lease: (a) new oil burner, (b) new
fifteen (15) ton air conditioning unit, and (c) new upgraded 400 - 800 AMP
electrical service.
The Tenant has examined the subject premises and is aware of these
required improvements. The Tenant shall be responsible for the cost of these
improvements.
19. Real Estate Taxes
---------------------
Tenant shall pay, during the term of this lease, the additional rent
provided for in this Article. As used herein, the following terms shall have the
meanings set forth below.
"Real Estate Taxes" shall mean all real estate taxes, assessments, water
charges and sewer rents, and other taxes and charges of every nature and
kind whatsoever, whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character, which at any time may be
assessed, levied, charged, confirmed or imposed on or in respect of or be a
lien upon the building. "Real Estate Taxes" shall exclude income, franchise,
inheritance or similar taxes; provided, however, that if the method of
taxation or assessment shall be changed so that the whole or any part of the
Real Estate Taxes theretofore payable with respect to the building instead
shall be levied, charged, assessed or imposed in whole or in part on the
income or rents received by Landlord from the building or shall otherwise be
imposed against Landlord in the form of a franchise tax or otherwise, then
the same shall be deemed Real Estate Taxes for purposes of this Article.
"Escalation Year" shall mean each twelve month period or portion thereof,
ending on June 30th, occurring within the term of this lease.
"Base Year" shall mean the twelve month period ending on June 30th, 1996.
The "building" shall mean the land and the building of which the demised
premises forms a part, known as 9101 Third Avenue, in the City of New York,
Borough of Brooklyn.
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"Tenant's Share" shall mean 50% percent.
Tenant shall pay to Landlord, as additional rent, an amount equal to
Tenant's Share of the amount of the Real Estate Taxes payable during the term
hereof. Such additional rent may be billed by Landlord at or about the dates on
which installments of Real Estate Taxes are due and payable by Landlord, or
within twelve (12) months thereafter, and such additional rent shall be payable
by Tenant to Landlord within ten days after being billed therefor.
The Real Estate Taxes actually payable by Landlord shall be used in
computing the additional rent hereunder. If Landlord receives a refund of any
Real Estate Taxes paid during any year on which additional rent shall have been
based, as a result of a reduction of Real Estate Taxes by final determination of
legal proceedings, settlement or otherwise, the additional rent shall be
recomputed based on the net refund, after deducting Landlord's expenses, and
Tenant shall receive a credit for or refund of any overpayment of additional
rent.
Landlord shall not be obligated to contest the levy or assessment of
any Real Estate Taxes, and it shall be at Landlord's sole discretion whether any
such contest shall be undertaken by Landlord. Tenant shall also have the right
to take and prosecute all such proceedings and if so taken, may proceed at its
own expense and may prosecute the proceeding, including settlement and
discontinuance.
In no event shall the annual fixed rent under this lease be reduced by
virtue of this Article.
The additional rent provided herein shall be apportioned as of the
expiration of the lease term or earlier termination of this lease. The
obligations of Tenant to pay additional rent as provided for herein shall
survive the expiration of the lease term or earlier termination of this lease.
The additional rent provided for herein shall be collectible by
Landlord in the same manner as the regular installments of fixed rent due under
this lease. No delay or failure by Landlord in preparing or delivering any
statement or demand for any additional rent shall constitute a waiver of, or
impair Landlord's rights to collect, such additional rent.
20. Security Deposit
--------------------
Tenant has deposited with Landlord the sum of $6,800.00 as security for
the full and faithful performance and observance by Tenant of the terms,
covenants and conditions of this lease. If Tenant defaults in the performance or
observance of any term,
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<PAGE> 21
covenant or condition of this lease, including without limitation the obligation
of Tenant to pay any rent or other sum required hereunder, Landlord may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent or any other sum as to which Tenant is in
default or for any sum which Landlord may expend or may be required to expend by
reason of Tenant's default, including without limitation any damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. If Tenant shall fully and faithfully observe and perform all of the
terms, covenants and conditions of this lease, the security, without interest,
shall be returned to Tenant after the end of the first six (6) months of this
lease.
21. Non-disturbance Agreement
-----------------------------
Landlord shall use its best efforts to obtain a Non-disturbance
Agreement protecting the respective interests of the Landlord and the Tenant in
the subject premises in the form of agreement annexed hereto and made a part
hereof. In the event that the holder of any current mortgage against the subject
premises is unwilling to execute a Non-disturbance Agreement in either the form
annexed hereto or in some other form acceptable to both Landlord and Tenant,
then, in such event, the parties shall have the following rights and
obligations.
In the event a foreclosure action is instituted and both the Landlord
and Tenant are named as parties thereto, then in such event, the Landlord shall
have the option of purchasing the mortgage, in which case the action against the
Landlord and Tenant shall be discontinued. At such time, Landlord shall either
discharge the mortgage of record or enter into a Non-disturbance Agreement with
the Tenant in the form annexed hereto.
Landlord shall be obligated to advise Tenant within thirty (30) days of
the commencement of the foreclosure action whether or not it intends to purchase
the mortgage. In the event Landlord elects not to so purchase or fails to advise
Tenant that it intends to purchase the mortgage, then, in such event, Tenant
shall have the option of purchasing the defaulted mortgage from the holder
thereof. In such event, Tenant shall have the right to offset as against future
rent due, the amount paid to purchase the
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defaulted mortgage. Thereafter, Tenant shall assign the mortgage to the Landlord
without additional consideration.
KINGS CASTLE CATERERS, INC.
BY:
---------------------------------------
LANDLORD
RATTLESNAKE OF BAY RIDGE, INC.
BY:
---------------------------------------
TENANT
11
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EXHIBIT B
The Equipment, Furniture, Fixtures and Improvements
Located at Short Ribs Restaurant & Bar
11
<PAGE> 24
EXHIBIT C
Excluded Assets
---------------
1. Grandfather Clock
2. Frozen Drink Machines (2)
3 Bar stock
4. Restaurant inventory
5. Stained glass
12
<PAGE> 25
EXHIBIT D
Security Alarm Equipment Lease Agreement
<PAGE> 1
EXHIBIT 10.30
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
AGREEMENT made this 23 day of August, 1996, by and between HOLY COW
RESTAURANTS ASSOCIATES, INC., having an address at 2345 Broadway, New York, New
York 10024 ("ASSIGNOR") and RATTLESNAKE OF 86th STREET, INC., having an address
at 3 Stamford Landing, Stamford, Connecticut 06902 ("ASSIGNEE").
STATEMENT OF FACTS
------------------
Pursuant to that certain Lease dated January 18, 1995 (the "LEASE")
Rymsbran Continental Corp. DIP ("LANDLORD") leased to Assignor, and
Assignor hired from Landlord, that certain premises known as 2341-2359
Broadway, a/k/a 250 West 86th Street, New York, New York more
particularly described in the Lease (the "PREMISES"). Assignor now
desires to assign to Assignee, and Assignee has agreed to assume, all
of Assignor's rights, titles and interests in, to and under the Lease
upon, and subject to, the terms, covenants and conditions herein
contained.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the mutual receipt and legal sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Assignor hereby assigns unto Assignee, all of Assignor's right, title
and interest in, to and under the Lease, to have and to hold the same unto
Assignee, its successors and assigns, subject to the terms, covenants and
conditions set forth in the Lease. Assignee hereby assumes all of the terms,
covenants, conditions and obligations on the part of Assignor to be performed
under the Lease arising or accruing from and after the date hereof, and Assignee
covenants to fully perform and abide by the same including, without limitation,
those which govern the permitted use of the Premises, and those which govern
Assignee's right to further assign its interest in the Lease or sublet the
Premises.
2. Assignor shall indemnity, defend and save Assignee harmless from and
against any and all claims, suits, actions, damages, charges, liabilities, costs
and expenses (including, without limitation, reasonable attorney's fees and
disbursements) that Assignee may sustain by reason of Assignor's failure to
observe or perform any of the terms, covenants or conditions of the Lease
arising or accruing prior to the date hereof.
3. Assignee shall indemnify, defend and save Assignor harmless from and
against any and all claims, suits, actions, damages, charges, liabilities, costs
and expenses (including, without limitation, reasonably attorney's fees and
disbursements) that Assignor may sustain by reason of Assignee's failure to
observe or perform any of the terms, covenants or conditions of the Lease
arising or accruing from and after the date hereof.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
ASSIGNOR:
HOLY COW RESTAURANT ASSOCIATES, INC.
By: /s/ ? , Pres.
------------------------------------
ASSIGNEE:
RATTLESNAKE OF 86TH STREET, INC.
By: /s/ ? , CEO/Chairman.
------------------------------------
<PAGE> 1
EXHIBIT 21
SUBSIDIARES
1. Pen-Z Corp.
2. Rattlesnake Ventures, Inc.
3. Rattlesnake-Fairfield, Inc.
4. Rattlesnake (Hamden), Inc.
5. Rattlesnake-Danbury, Inc.
6. Rattlesnake-Lynbrook, Inc.
7. Rattlesnake-White Plains, Inc.
8. Rattlesnake-Flemington, Inc.
9. Rattlesnake of 86th Street, Inc.
