MODIFICATION AGREEMENT TO THE
REORGANIZATION AND STOCK EXCHANGE AGREEMENT
AMONG
THE RATTLESNAKE HOLDING COMPANY, INC.,
AND
XXXXXXXXXXX BROTHERS WEST, LTD., XXXXXXXXXXX'X
CAFE FRANCHISING CORP., 34TH ST. CAFE
ASSOCIATES, INC., GARDEN STATE CAFE CORP.
AND THEIR SHAREHOLDERS
FEBRUARY 26, 1998
MODIFICATION AGREEMENT
Modification Agreement made as of February 26, 1998, by and among THE
RATTLESNAKE HOLDING COMPANY, INC., a Delaware corporation and XXXXXXXXXXX
BROTHERS WEST, LTD., XXXXXXXXXXX'X CAFE FRANCHISING CORP., 34TH ST. CAFE
ASSOCIATES, INC., AND GARDEN STATE CAFE CORP. (Terms used but not defined in
this Modification Agreement have the meanings set forth in the 1997 Agreement,
as defined below.)
WHEREAS, the parties hereto entered into a Reorganization and Stock
Exchange Agreement (the "1997 Agreement"), dated August 21, 1997 (the 1997
Agreement and this Modification Agreement being referred to herein as the
"Agreement".
WHEREAS, the parties to the 1997 Agreement desire to modify and amend the
1997 Agreement.
NOW THEREFORE, in consideration of the promises and mutual covenants
hereinafter set forth, it is agreed as follows:
1. Modification of Preamble. The Preamble to the 1997 Agreement is hereby
amended to alter the definition of "Xxxxxxxxxxx Corporations" to include only
Xxxxxxxxxxx'x Cafe Franchising Corp. and Garden State Cafe Corp.
2. Modification of Section 2. Section 2 of the 1997 Agreement is hereby
deleted and the following is inserted:
2. Merger of Xxxxxxxxxxx Corporations with Subsidiaries of RHC.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, Xxxxxxxxxxx'x Cafe Franchising Corp, and Garden State Cafe Corp.
shall be merged with Franchising Acquisition Corp. and Xxxx-GSC Acquisition
Corp., respectively, (the "RHC Subsidiaries"), each a newly formed subsidiary of
RHC with only nominal assets and liabilities (referred to hereinafter as the
"Merger"), in accordance with the laws of their respective jurisdiction of
organization and pursuant to the Plans of Merger annexed hereto as Exhibits A-1
and A-2, respectively. The Xxxxxxxxxxx Corporations shall be the surviving
corporations. If there is any inconsistency between the Agreement and the Plans
of Merger, the Plans of Merger shall control.
(b) The Merger Consideration. The merger consideration (the "Merger
Consideration") payable to the Shareholders by RHC shall be as follows:
(i) Consideration Deliverable at Closing. RHC shall issue and deliver to
the Shareholders at the Closing (subject to Section 1(e) hereof), such number of
shares of RHC Common Stock as shall equal, after the issuance thereof 37.5% of
the RHC Common Stock issued and outstanding, (including for such purpose, all
shares of Common Stock issuable under outstanding convertible RHC securities
except for the Existing Preferred described in Section 2 (b)(ii) below) as of
the date which is one day prior to the Closing. For the purposes of the
preceding sentence, the shares issuable to J.B.L. of Nevada, Inc. and Xxxxxxx
Xxxxx shall be deemed issuable at $.30 per share. If the shares are issued at a
different price, there shall be an appropriate, retroactive adjustment to the
number of shares of Common Stock issued to the Shareholders at Closing.
(ii) Consideration Deliverable at Private Placement. Reference is made to
the existing Series A Preferred Stock of RHC and the rights related thereto
(collectively the "Existing Preferred"). The holders of the Existing Preferred
have agreed to exchange the Existing Preferred for RHC preferred stock in the
Private Placement of a type simllar to the type being sold to investors in the
Private Placement (the preferred stock to be issued in exchange for the Existing
Preferred is referred to herein as the "New Preferred"). Simultaneously with the
closing of the Private Placement, RHC shall issue and deliver to the
Shareholders (subject to Section 1(e) hereof), such number of shares of RHC
Common Stock as shall equal 60.0% of the maximum number of shares of RHC Common
Stock into which the New Preferred could be converted as of that time.
(iii) Consideration Deliverable at Subsequent Date. RHC shall issue and
deliver to the Shareholders at the closing of the private placement described in
Section 2(d)(I)(b) below (the "Private Placement"), or April 1, 1998, whichever
is later, (subject to Section 1(e) hereof) either of the following, at the sole
election of RHC:
(A) RHC common stock purchase warrants ("Xxxxxxxxxxx Warrants") to purchase
at the same exercise price (1) such number of shares of Common Stock as shall
equal 60.0% of the Common Stock underlying all RHC warrants and options
outstanding at the Closing Date, but only when and if those warrants and options
are exercised by their holders and (2) such number of shares of Common Stock as
shall equal 60.0% the Common Stock underlying the Preferred Stock or other
securities to be issued by RHC in connection with the Private Placement (except
for the New Preferred described in Section 2(b)(ii) above), but only when and if
those securities are converted by the holders of the securities issued in the
Private Placement; or
(B) Such number of shares of RHC Common Stock, in addition to the Common
Stock (the "Other Xxxxxxxxxxx Issuances") issued to the Shareholders pursuant to
Sections 2(b)(i) and (ii) above, as shall equal, after issuance, 12.5% of the
RHC Common Stock issued and outstanding, including for such purpose, the Other
Xxxxxxxxxxx Issuances and all shares of Common stock issuable under (1) existing
outstanding convertible RHC securities (other than the Existing Preferred) and
(2) the New Preferred, as of the closing date of the Private Placement.
The Merger Consideration shall be allocated among the Shareholders in
proportion to their respective holdings of the Xxxxxxxxxxx Corporations' Capital
Stock as set forth in Section 4(b) of the Disclosure Schedule. RHC covenants and
agrees not to issue any shares of RHC Common Stock or any securities convertible
into RHC Common Stock during the period commencing one day prior to the Closing.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Robinson, Brog,
Leinwand, Greene, Xxxxxxxx & Xxxxx, P.C., 0000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
commencing at 2:00 p.m. local time on date hereof (the "Closing Date").
(d) Recission by the Shareholders. Notwithstanding the Closing, and unless
both of the following shall occur:
(i) the completion of a private placement within three business days after
Closing resulting in gross proceeds to RHC of at least $250,000; and
(ii) the completion of the Private Placement, which shall be an equity
security placement, within 60 days of the date on which a private placement
memorandum reasonably acceptable to RHC and Commonwealth Associates is
available, in the gross amount of at least $2,000,000 (which Private Placement
shall include a refinancing or payment of the September 1997 placement in the
amount of $150,000 and the post-closing placement referred to in (i) of this
subsection), the Shareholders shall have the right for fifteen (15) days to
rescind the transaction contemplated by this Agreement and have transferred to
them all of the stock of the Xxxxxxxxxxx Corporations, upon delivery of all of
the Merger Consideration (other than as held in escrow pursuant to Section
1(e)), to RHC. RHC shall, in any event, bear all of the expenses of the
transactions contemplated hereby and this Agreement shall otherwise be null and
void.
(e) Escrow of Portion of Merger Consideration. Notwithstanding the
provisions of subsection (b) above, and because Xxxxxxxxxxx Bros. West, Ltd. and
00xx Xxxxxx Cafe Associates, Inc. have been excluded from this transaction
because Macy's East, Inc. has terminated their licenses effective February 21,
1998, one half (1/2) of any Merger Consideration otherwise deliverable to the
Shareholders shall instead be placed in escrow with Hollenberg, Levin, Solomon,
Ross, Beisky & Xxxxxxx, LLP pursuant to an escrow agreement annexed hereto as
Exhibit B. It is anticipated that RHC will acquire or build one or more
restaurants following the Closing (those acquired or built within 12 months
after the Closing are referred to as the "Subject Restaurants"). If and when the
sales (net of taxes and tips) of each Subject Restaurant for the first twelve
months of its operations, when aggregated for all of the Subject Restaurants,
totals at least $4,500,000, the Merger Consideration in escrow shall be
delivered to the Shareholders. If such condition is not satisfied, the Merger
Consideration in escrow shall instead be delivered to RHC.
3. Modification to Section 3. Section 3(b) of the 1997 Agreement is
modified to add Section 3(b)(xiii) which shall read as follows:
"(xiii) Schedule 3(b)(xiii) annexed hereto sets forth as of one day prior
to the Closing Date: (a) the capitalization of RHC; (b) all current and
long-term debt of RHC; (c) all contingent obligations of RHC; (d) the amount of
authorized capital stock of RHC; (e) the number of issued and outstanding shares
of Common Stock and preferred stock of RHC; (f) the number of issued and
outstanding options and warrants; and (g) a description of the terms and
principal amount of all outstanding debt securities of RHC."
4. Modification to Section 7.
(a) Section 7(a)(xiii) of the 1997 Agreement is amended to read as follows:
"(xiii) RHC shall have received a commitment letter in usual and customary
form from Commonwealth Associates to effect and close the Private Placement of
equity securities with gross proceeds of at least $2,000,000 on behalf of RHC
within 60 days of the date on which a private placement memorandum reasonably
acceptable to RHC and Commonwealth Associates is available."
(b) Section 7(b)(vii) of the 1997 Agreement is amended to read as follows:
"(vii) There shall be in fill' force and effect agreements entered into by
RHC with respect to (a) $150,000 of RHC Debt held by J.L.B. of Nevada, Inc. and
Xxxxxxx Xxxxx, the conversion of which into Common Stock shall be automatically
effected by the Closing; and (b) a contract of sale for the Fairfield restaurant
having a purchase price of at least $350,000 and a cash payment at closing of at
least $120,000 with the balance in the form of a second promissory note (said
cash at closing to be paid to the holder of the debt on the Fairfield restaurant
and said promissory note to be pledged to the holder of such debt), with the
balance to be paid to the holder of the debt from the proceeds of the Private
Placement."
(c) Section 7(b)(viii) of the 1997 Agreement is amended to read as follows:
"(viii) RHC shall have received a commitment letter in usual and customary
form from Commonwealth Associates to effect and close the Private Placement of
equity securities with gross proceeds of at least $2,000,000 on behalf of RHC
within 60 days of the date on which a private placement memorandum reasonably
acceptable to RHC and Commonwealth Associates is available."
(d) Section 7(b)(x) of the 1997 Agreement is amended to read as follows:
"(x) RHC shall have entered into an agreement with the holders of the
Existing Preferred to exchange the same for the New Preferred, as contemplated
by Section 2(a)(ii) hereof."
(e) Section 7(b)(xii) of the 1997 Agreement is hereby deleted.
5. Exhibits D and E. With respect to Exhibits E and F of the 1997
Agreement, Article IV of each Exhibit, entitled "Options", any reference to same
contained in Exhibits E and F, is hereby deleted.
6. Interim Financial Statements. The balance sheets of the Xxxxxxxxxxx
Corporations as of September 30, 1997 (the "Balance Sheet Date") and their
income statements for the period from January 1, 1997 to the Balance Sheet Date
(collectively the "Interim Financial Statements") have heretofore been delivered
by the Shareholders to RHC. The Shareholders represent that the Interim
Financial Statements present fairly the financial condition of the Xxxxxxxxxxx
Corporations as of such dates and the results of the operations of the
Xxxxxxxxxxx Corporations for such periods, and shall be consistent with the
books and records of the Xxxxxxxxxxx Corporations (which books and records are
correct and complete in all material respects).
7. Representation Letters. At Closing, the Shareholders shall execute
representation letters concerning the Merger Consideration in customary form
necessary to permit counsel to RHC to opine on the conformity of the issuance
thereof with applicable securities laws and to confirm the statements made about
them and the Xxxxxxxxxxx Corporations in a private offering memorandum addressed
to the holder of RHC Preferred Stock (including the termination of the Macy's
operations on or about February 21, 1998).
8. Committee of the Board. The Shareholders, as directors of RHC, agree to
vote for the creation of a committee of the Board of Directors to administer the
interest of RHC in, and to take action on behalf of RHC concerning, the
Agreement, of which they shall not be members.
9. Further Modification to Section 3. Notwithstanding the provisions of
Section 3(b)(vi) hereof, RHC has advised the other parties that it has not filed
certain exhibits with the Securities and Exchange Commission. In addition, RHC
has advised the other parties that the RHC Common Stock is not presently traded
on either the NASDAQ Small Cap Market or the Boston Stock Exchange, and may no
longer be registered under Section 12(b) or 12(g) of the Securities Exchange Act
of 1934.
10. Modification to Section 4(h). The introduction to Section 4(h) of the
1997 Agreement is modified as follows: "Since September 30, 1997".
11. Modification to Section 4(i). With respect to Section 4(i) of the 1997
Agreement, the term "Financial Statements" includes the Interim Financial
Statements.
12. Full Force and Effect. Except as modified hereunder, the 1997 Agreement
shall continue in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned have executed this Modification
Agreement as of the day and year first above written.
THE RATTLESNAKE HOLDING COMPANY INC.
By:/s/Xxxxx Xxxxxxx
----------------------------
Name:Xxxxx Xxxxxxx
Title: President
/s/Xxxxxx Xxxxxxxxxxx
----------------------------
XXXXXX XXXXXXXXXXX, Individually
/s/Xxxxxx Xxxxxxxxxxx
-----------------------------
XXXXXX XXXXXXXXXXX, Individually
XXXXXXXXXXX BROTHERS WEST, LTD.
By:/s/Xxxxxx Xxxxxxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
XXXXXXXXXXX'X CAFE FRANCHISING CORP.
By:/s/Xxxxxx Xxxxxxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
34TH ST. CAFE ASSOCIATES, INC.
By:/s/Xxxxxx Xxxxxxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
GARDEN STATE CAFE CORP.
By:/s/Xxxxxx Xxxxxxxxxxx
----------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
