<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 20, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- -------------------
Commission file number: 000-21745
CIAO CUCINA CORPORATION
(Exact name of small business issuer as specified in its charter)
OHIO 31-1357862
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 WALNUT STREET, SUITE 300, CINCINNATI, OH 45202
(Address of principal executive offices)
(513) 241-9161
(Issuer's telephone number )
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during preceding 12 months
(or for 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
----- -----
The issuer had 3,120,386 shares of Common Stock outstanding as
of May 1, 1997.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
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CIAO CUCINA CORPORATION
INDEX
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Balance Sheets 3
April 21, 1996 and April 20, 1997
Statements of Operations 4
Sixteen weeks ended
April 21, 1996 and April 20, 1997
Statements of Cash Flows 5
Sixteen weeks ended
April 21, 1996 and April 20, 1997
Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 14
Item 2 Changes in Securities 14
Item 3 Defaults Upon Senior Securities 14
Item 4 Submission of Matters to a Vote of
Security Holders 14
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
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CIAO CUCINA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 21, 1996 April 20, 1997
-------------- --------------
ASSETS (Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 330,275 $ 2,045,417
Accounts Receivable 119,533 46,959
Inventories 109,428 80,914
Prepayments 35,823 222,146
----------- -----------
Total Current Assets 595,059 2,395,436
EQUIPMENT AND IMPROVEMENTS, NET 4,475,593 4,737,710
INTANGIBLE ASSETS, NET 569,877 76,085
SECURITY DEPOSITS AND OTHER 486,196 323,244
----------- -----------
TOTAL ASSETS $ 6,126,725 $ 7,532,475
=========== ===========
LIABILITIES, REDEEMABLE EQUITY
AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current Portion of Long-Term Debt $ 1,123,735 $ 53,122
Accounts Payable 548,046 638,157
Accrued Expenses 378,493 170,067
----------- -----------
Total Current Liabilities 2,050,274 861,346
LONG-TERM LIABILITIES
Notes Payable 1,417,564 4,856
Accrued Rentals 414,084 528,341
Deferred Lease Incentives 2,125,218 2,050,020
----------- -----------
Total Long-Term Liabilities 3,956,866 2,583,217
REDEEMABLE EQUITY
10% Series A Convertible Preferred Stock-$100 par
value, 15,000 shares authorized and issued 1,653,125 -
10% Series B Convertible Preferred Stock-$690 par
value, 1,740 shares authorized, 1,584 shares issued 1,209,996 -
----------- -----------
Total Redeemable Equity 2,863,121 -
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock-no par value, 10,000,000 shares
authorized, 794,355 shares issued for 1996,
3,120,386 shares issued for 1997 750 9,229,195
Additional Paid-In Capital (Deficit) (1,717,372) (1,647,372)
Accumulated Deficit (891,914) (3,493,911)
Treasury Stock-244,445 shares stated at cost (135,000) -
----------- -----------
Total Shareholders' Equity (Deficit) (2,743,536) 4,087,912
TOTAL LIABILITIES, REDEEMABLE EQUITY
AND SHAREHOLDERS' EQUITY (DEFICIT) $ 6,126,725 $ 7,532,475
=========== ===========
</TABLE>
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CIAO CUCINA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIXTEEN WEEKS ENDED APRIL 21, 1996 AND APRIL 20, 1997
<TABLE>
<CAPTION>
April 21, April 20,
1996 1997
---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
RESTAURANT REVENUES $ 1,976,279 $ 2,208,875
OPERATING EXPENSES
Food and Beverage Costs 608,804 665,052
Restaurant Labor Costs 649,647 739,094
Occupancy and Other Restaurant Expenses 434,198 655,149
Depreciation and Amortization 155,030 224,040
----------- -----------
1,847,679 2,283,335
RESTAURANT OPERATIONS 128,600 (74,460)
Interest Expense (Income), net 102,454 (24,133)
Other Expense 197 8,491
General and Administrative Expenses 244,382 332,662
----------- -----------
NET LOSS (218,433) (391,480)
Accretion of Dividends on Preferred Stock (50,300) -
Accretion of Discount on Preferred Stock (33,630) -
- --------------------------------------------- ----------- -----------
NET LOSS APPLICABLE TO COMMON STOCK ($302,363) ($391,480)
NET LOSS PER COMMON SHARE ($0.53) ($0.13)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 569,910 3,114,559
</TABLE>
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CIAO CUCINA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTEEN WEEKS ENDED APRIL 21, 1996 AND APRIL 20, 1997
<TABLE>
<CAPTION>
April 21, April 20,
1996 1997
---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($218,433) ($391,480)
Depreciation 110,879 152,104
Amortization 44,151 71,936
Amortization of Lease Incentives (46,411) (62,504)
Changes in Operating Assets and Liabilities
Decrease (Increase ) in -
Accounts Receivable (90,844) (4,582)
Inventories (63,354) 6,289
Prepayments (12,987) 21,694
Pre-opening Costs (309,621) 0
Increase (Decrease) in -
Accounts Payable 288,649 93,741
Accrued Expenses 2,495 (305,940)
Accrued Rentals 40,920 19,256
NET CASH USED BY OPERATING ACTIVITIES (254,556) (399,486)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment and Improvements (1,384,367) (305,629)
NET CASH USED BY INVESTING ACTIVITIES (1,384,367) (305,629)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable 9,098 0
Payments of Notes Payable (87,254) (1,035)
Payments of Syndication Costs (140,306) (122,194)
Proceeds from Bridge Financing 2,050,000 0
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,831,538 (123,229)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 192,615 (828,344)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 137,660 2,873,761
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 330,275 $ 2,045,417
</TABLE>
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CIAO CUCINA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTEEN WEEKS ENDED APRIL 21, 1996 AND APRIL 20, 1997
<TABLE>
<CAPTION>
April 21, April 20,
1996 1997
---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Deferred Landlord Incentives Received, Used for
Purchase of Leasehold Improvements and Equipment $175,786 -
Dividends Accrued on Series A and B Convertible
Preferred Stock $ 79,563 -
Accretion of Discount on Series A Convertible
Preferred Stock $ 4,367 -
Accretion of Discount on Issuance of Bridge Notes $ 6,731 -
Deferred Financing Costs on Bridge Notes $100,000
Conversion of Participating Debenture to Common
Stock - $ 50,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash Paid for Interest $ 9,881 $ 578
</TABLE>
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CIAO CUCINA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. PRESENTATION OF INTERIM INFORMATION
In the opinion of the management of Ciao Cucina Corporation, the accompanying
unaudited condensed consolidated financial statements include all normal
adjustments considered necessary to present fairly the financial position as of
April 21, 1996 and April 20, 1997 and the results of operations and cash flows
for the sixteen weeks ended April 21, 1996 and April 20, 1997. Interim results
are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-QSB, and do not contain certain information included in the
Company's audited financial statements and notes for the fiscal year ended
December 29, 1996. See the Company's Annual Report on Form 10-KSB, File No.
000-21745.
2. COMMITMENTS
On July 1, 1996, the Company entered into a lease for a 6,755 square foot
restaurant in Ft. Lauderdale, Florida. The restaurant will be located in
Northport Marketplace Center, in close proximity to Broward County Convention
Center and the Port Everglades Cruise Port. Construction has commenced for this
location.
On May 8, 1997, the Company signed a lease for a 5,809 square foot restaurant
in Coral Gables, Florida. The restaurant will be located in the Merrick Place
Shops and Parking Building developed by the City of Coral Gables. The lease has
not yet been executed by the landlord.
The Company expects to finalize the lease with The Playhouse Square
Foundation for its Cleveland, Ohio location no later than June 15, 1997.
Although certain details of the lease have not been finalized, construction has
commenced.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company owns and operates five restaurants, serving authentic
Mediterranean cuisine, under the name "Ciao Baby Cucina". All of the Company's
five restaurants have been in operation for more than one year with its two
newest restaurants opening in February and March, 1996.
The Company has a limited operating history and the results achieved to date
by the Company's restaurants may not be indicative of future results.
The Company uses a 52/53 week year which is generally comprised of 13
four-week periods. The Company's fiscal 1996 and 1997 first quarters (sixteen
weeks) ended on April 21, 1996 and April 20, 1997, respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the sixteen weeks ended April 21, 1996
and April 20, 1997, certain items from the Company's condensed consolidated
Statement of Operations expressed as a percentage of net revenues.
<TABLE>
<CAPTION>
Sixteen Weeks Ended Sixteen Weeks Ended
STATEMENT OF OPERATIONS DATA: April 21, 1996 April 20, 1997
-------------- --------------
<S> <C> <C>
RESTAURANT REVENUES (1) 100.0% 100.0%
OPERATING EXPENSES
Food and Beverage Costs 30.8% 30.1%
Restaurant Labor Costs (2) 32.9% 33.5%
Occupancy and Other Restaurant Expenses (3) 22.0% 29.7%
Depreciation and Amortization 7.8% 10.1%
RESTAURANT OPERATIONS 6.5% (3.4)%
Interest Income (Expense), net (5.2)% 1.1%
Other Income (Expense) (0.0)% (0.3)%
General and Administrative Expenses (4) (12.4)% (15.1)%
NET LOSS (11.1)% (17.7)%
<FN>
(1) Revenues consist of restaurant food and beverage sales.
(2) Restaurant labor consists of hourly and management payroll, benefits and
taxes.
(3) Occupancy and other restaurant expenses include rent, utilities,
advertising, repairs and maintenance and operating supplies.
(4) General and administrative expenses include corporate salaries, benefits and
taxes, rent, insurance, professional services, travel and other expenses.
</TABLE>
8
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RESTAURANT REVENUES
Restaurant revenues for the first quarter of fiscal 1997 exceeded restaurant
revenues for the first quarter of fiscal 1996 by $232,596 an increase of 11.8%.
The increase for the quarter was due to two additional restaurants opened during
the first quarter of 1996 and open for the entire first quarter of 1997. Total
restaurant seats for the Company increased 83.4% with the opening of the two
newest restaurant units in Memphis, TN and Cincinnati, OH. The Company's newest
restaurants represent the prototypical restaurant units developed by the
Company, incorporating store-front style gourmet coffee shops and bakeries
adding an additional source of revenues to those units.
The Company expected to open two additional restaurant units in the first
quarter of 1997, which would have created additional sales for the quarter.
These openings did not occur on schedule due to landlord development delays, out
of the Company's control (see "Outlook" section).
Revenues of individual restaurants typically are affected by a number of
factors. When a restaurant first opens, its novelty and freshness often lead to
a period of high revenues. Generally this occurs during the first six months of
a restaurant's initial operations. In the industry, this is referred to as a
"honeymoon period." Following the "honeymoon period," restaurant revenues
typically decline to a more realistic level reflecting continued business and
mature operations. Thereafter, revenues are influenced by a number of factors,
including competition by nearby restaurants, changes in marketing expenditures
(and related changes in traffic counts) by malls in which a restaurant is
located, scheduling of nearby special events, performance schedules of nearby
theaters and renovation or construction activities in proximity to a restaurant.
The Company has a limited operating history and a small base of mature
restaurants (those which have been open more than 18 months). In the first
quarter of 1997, the Company had three mature restaurants, none of which is a
prototypical unit as planned by the Company for its expansion. Same store sales
for these mature restaurants were $1,043,265 in the first quarter of 1997
compared to $1,336,833 in the first quarter of 1996, a decrease of 22.0%.
The majority of the decrease in same store sales of the mature restaurants
was attributable to two of the three restaurants. One has experienced a rapid
growth in competition in its market area. Of eleven new restaurants opened
within a five mile radius of this unit since the beginning of 1996, four are
considered by the Company to provide head-on-head competition. Additionally,
this restaurant was closed for renovation for 17 days in early 1997. The second
restaurant has been affected adversely by decreased traffic in the mall in which
it is located. The Company is considering various alternatives with regard to
this restaurant. The Company's third mature restaurant experienced only a small
decrease (2.6%) in sales during the first quarter of 1997 as compared to the
first quarter of 1996.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the first quarter of 1997 exceeded food and
beverage costs for the first quarter of 1996 by $56,248 or 9.2%. As a percentage
of sales, food and beverage costs decreased from 30.8% to 30.1%, a percentage
decrease of .7%. The increase in the cost of sales
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was attributable to the two additional restaurants opened during the first
quarter of 1996 and open for the full first quarter of 1997. The decrease in
food and beverage costs as a percentage of revenues was attributable to
efficiencies in purchasing achieved by corporate controls, menu re- engineering
and training of purchasing personnel.
RESTAURANT LABOR
Restaurant labor for the first quarter of 1997 increased $89,447 or 13.8%
compared to the first quarter of 1996. This increase was attributable primarily
to the opening of the two additional restaurants in the first quarter of 1996.
As a percentage of revenues, restaurant labor costs for the first quarter 1997
versus 1996 increased from 32.9% to 33.5% an increase of .6%. This increase was
due to the fixed labor costs of the management staff and the decrease in same
store sales of mature restaurant units.
OCCUPANCY AND OTHER RESTAURANT EXPENSES
Occupancy and other restaurant expenses for the first quarter of 1997
exceeded occupancy and other restaurant expenses for the first quarter of 1996
by $220,951 or 50.9%. This increase was primarily due to the opening of the two
additional restaurants in 1996. As a percentage of sales, occupancy and other
restaurant expenses increased to 29.7% for the first quarter of 1997 from 22.0%
for the first quarter of 1996 or an increase of 7.7%. This increase was
primarily due to the fixed occupancy costs and the decrease in sales of the
mature restaurants.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses for the first quarter of 1997 increased
over the first quarter of 1996 by $88,280 or 36.1%. As a percentage of revenues,
general and administrative expenses increased from 12.4% in 1996 to 15.1% in
1997, an increase of 2.7%. The increase was primarily due to the addition of a
Chief Operating Officer and a change in employment contract for the Chief
Executive Officer as well as increases in travel and corporate systems needed to
manage the increased numbers of restaurant units. The Company expected to open
two additional restaurants in the first quarter of 1997, creating an increase in
sales and reducing general and administrative expenses as a percentage of sales.
The restaurants did not open in the first quarter of 1997 due to landlord
development delays (see "Outlook" section).
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $69,010 for the first quarter of 1997
over the first quarter of 1996 or 44.5%. This increase is due to a full quarter
of additional depreciation of assets acquired for the two new restaurants opened
in 1996 and the balance of amortization of pre-opening costs for these two
units. Pre-opening costs are amortized over the first thirteen periods following
the opening of a restaurant unit.
As a percentage of sales, depreciation and amortization increased for the
first quarter of 1997 to 10.1% from 7.8% for the first quarter of 1996. This
increase was due to fixed depreciation as compared to the decrease in sales of
the mature restaurants and the balance of pre-opening amortization for the two
restaurants opened in 1996.
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RESTAURANT OPERATIONS
The Company's profit from restaurant operations of $128,600 in the first
quarter of 1996 decreased to a loss of $74,460 in the first quarter of 1997, or
a decrease of $203,060. The loss was attributable to the increase in occupancy
and other restaurant expenses and the decrease in sales for the Company's mature
restaurants. The Company's two newest restaurants, opened in the first quarter
of 1996, were beyond their honeymoon period in 1997 and typically the first
quarter of the year is a period of the year when sales decline after the year
end holiday season.
INTEREST EXPENSE
Interest expense decreased $126,587 for the first quarter 1997 compared to
1996 or a decrease of 123.6%. This decrease was due to the payoff of the bridge
note financing in the amount of $2,300,000 acquired in the first two quarters of
1996 (see "Liquidity and Capital Resources" discussion) and the payoff of the
Provident Bank loans. Interest income exceeded interest expense for the first
quarter of 1997. The Company has reduced its debt to approximately $10,000 in
equipment leases and a $50,000 convertible subordinated debenture that has not
converted to Common Stock.
NET LOSS
The net loss for the first quarter of 1997 increased by $173,047 over 1996 or
79.2%. This increase was primarily due to the fixed costs of occupancy,
depreciation and amortization in a period with decreased revenues for mature
restaurants, and to the increase in general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures and
operating expenses. Historically, the Company's primary sources of cash have
been from operations, bank borrowing, and the issuance of subordinated
debentures and preferred stock. As of the end of the third quarter of 1996, the
Company's financing arrangements did not provide sufficient cash flow for
continuing operating losses and for the Company's expansion plans. In late
November 1996, the Company completed an initial public offering of 1,000,000
shares of its Common Stock at an initial public offering price of $7.00 per
share. Net proceeds of the offering were approximately $6.1 million. Of this,
approximately $2,900,000 was used to repay certain indebtedness. The balance of
the net proceeds has been and will be used for the development and opening of
new restaurants and working capital. For further information concerning uses of
funds, see "Outlook."
In conjunction with the initial public offering, all outstanding shares of
the Company's Series A and Series B preferred stock and an outstanding note in
the principal amount of $150,000 were converted to Common Stock. In the first
quarter of 1997, a $50,000 convertible subordinated debenture holder elected to
convert the debenture to Common Stock of the Company.
The Company's cash flow before interest, taxes, depreciation and amortization
for the first quarter 1997 decreased from a negative cash flow of $7,163 to a
negative cash flow of $245,586. The Company historically had working capital
deficiencies, which it believes are typical in the restaurant industry. As of
April 20, 1997, the Company's current assets of $2,395,436 exceeded
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its current liabilities of $861,346, resulting in positive working capital of
$1,534,090. The positive working capital is due to Cash and Cash Equivalents of
$2,045,417 remaining from the offering. The prior deficiencies in working
capital were due primarily to the current portion of certain indebtedness (which
was repaid from the proceeds of the offering), the Company's ability to acquire
favorable terms with its vendors and its aggressive growth strategy.
Net cash used by operating activities increased $144,930 for the first
quarter of 1997 as compared to the first quarter of 1996. This was due primarily
to an increase in the net loss and a decrease in accrued expenses, primarily
restructuring costs.
Cash used in investing activities decreased from $1,384,367 for the first
quarter of 1996 to $305,629, a decrease of $1,078,738. Cash used in investing
activities in 1996 reflected expenditures for equipment and improvements for the
two new restaurants opened in 1996. Cash used in investing activities for 1997
included the renovation of the Company's oldest restaurant.
Cash flows from financing activities decreased for the first quarter of 1997
as compared to 1996 from $1,831,538 to negative $123,229, a decrease of
$1,954,767. This decrease was attributable to bridge loan financing acquired in
the first quarter of 1996, which was repaid from the proceeds of the offering.
The cash used by financing activities for the first quarter of 1997 consisted of
principal payments of $1,035 on equipment leases of approximately $10,000 and
payments made for syndication costs associated with the Compny's initial public
offering.
OUTLOOK
THE STATEMENTS CONTAINED IN THIS OUTLOOK ARE BASED ON CURRENT EXPECTATIONS.
THESE STATEMENTS ARE FORWARD LOOKING AND ACTUAL RESULTS MAY DIFFER MATERIALLY
DUE TO VARIOUS FACTORS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE
EFFECT OF UNANTICIPATED DELAYS IN THE DEVELOPMENT OF NEW RESTAURANTS AND COSTS
OF EXPANSION, ADVERSE EFFECTS IF GROWTH IS NOT MANAGED PROPERLY, EXPOSURE TO
COST FLUCTUATIONS, AVAILABILITY OF LABOR, COMPETITION FROM OTHER RESTAURANTS,
CHANGING TRENDS, GOVERNMENT REGULATION, AVAILABILITY OF LOCATIONS WITH FAVORABLE
LANDLORD INCENTIVES AND ABILITY TO SECURE REQUIRED PERMITS AND LICENSING.
The Company expects to open its Ft. Lauderdale restaurant on September 1,
1997. It is anticipated that the investment by the Company to build the Ft.
Lauderdale restaurant will be approximately $539,500. Construction has commenced
on the Ft. Lauderdale restaurant. The Company has negotiated a lease for a
Cleveland, Ohio restaurant expected to open on October 1, 1997. The Company
contribution to the development of the Cleveland location is estimated at
$400,000. Although certain details of the lease have not been finalized, based
upon agreement with the developer, construction has commenced for this
restaurant. The Company has signed a lease for a restaurant in The Merrick Place
Shops and Parking Building in Coral Gables, Florida, developed by the City of
Coral Gables and expects to open this restaurant mid October, 1997. The landlord
has not yet executed this lease. The Company expects to have under development
two other locations in 1997.
The Company has previously stated that, due to the growth of its corporate
structure to support added restaurant units, the Company would not be profitable
until additional restaurants were open. The Company expects that the addition of
three new restaurants in 1997 may produce a profitable fourth quarter, but any
profits in that quarter would not be sufficient to offset the losses in the
previous three quarters to show a profit for the year.
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The Company is negotiating a lease with the Rouse Company for a location at
Oviedo in Orlando, Florida. In addition, the Company is negotiating a lease for
a restaurant location at Balston Commons in Arlington, Virginia. Both these
leases are presently in the drafting stages.
The Company had originally planned to remodel its New Jersey restaurant in
the first quarter of 1997 and to adjust the restaurant concept to better serve
the New Jersey customer base and market. This renovation has not taken place and
the Company is evaluating several alternatives with regard to this location.
As noted above, the Company expects to open or have under development five
restaurants during 1997 and estimates that approximately $2.6 million will be
needed for the opening of these restaurants. The Company believes that in
addition to the remaining net proceeds from its initial public offering, cash
flow from operations and developer leasehold incentives, equipment leasing
arrangements may be necessary to fund some of the costs associated with the
opening of these five restaurants. The Company is pursuing equipment financing
alternatives as a contingency.
For the longer term, the Company's goal is to expand to thirty restaurants by
year-end 2000. The Company anticipates that additional bank and other financing
will be needed to fund costs associated with the opening of these restaurants.
If such financing is not available, or if the Company's assumptions regarding
cash flow or landlord leasehold incentives prove incorrect, the Company would be
required to curtail its expansion plans.
The Company expects growth to continue in the restaurant industry as more and
more people are consuming their meals away from home or taking prepared meals to
the home. The Company's strategy is to provide high quality food and personal
service at a reasonable price.
The Company continues to search for additional locations in its target
markets for continued growth of the Company. The Company plans to concentrate
its efforts on opening the new units for 1997 while evaluating additional
proposals for new locations in 1998.
The restaurant business is seasonal by nature and the Company's strategy of
locating its restaurants near high traffic generators is intended to attract
customers who are already in the area for purposes other than a meal. Any
seasonality associated with these high traffic generators could affect the level
of sales for a particular unit.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
N/A
ITEM 2. CHANGES IN SECURITIES
On February 10, 1997, a $50,000 convertible subordinated debenture,
outstanding since 1992, was converted to 15,538 shares of common stock.
The issuance of this stock was exempt from registration pursuant to
Section 3(a)(9) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Lease between Ciao Cucina Corporation and the City of Coral
Gables, A Municipal Corporation dated April 28, 1997.
b) Reports on form 8-K: None
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SIGNATURES
Pursuant to the requirements 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.
CIAO CUCINA CORPORATION
Date: June 3, 1997 By: /s/ Catherine C. Jetter
------------------------
Catherine C. Jetter
Executive Vice President and
Chief Financial Officer
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BASIC LEASE INFORMATION
-----------------------
DATE: April 7, 1997
LESSOR: CITY OF CORAL GABLES, A MUNICIPAL CORPORATION
LESSEE: Ciao Cucina Corporation
ARTICLE WITNESSETH:
ARTICLE 1(E): Rentable Area of Premises: 5,809 square feet
ARTICLE 2: Term Commencement:
ARTICLE 2: Rent Commencement:
ARTICLE 2: Term Expiration:
ARTICLE 5: Initial Base Rent: Per Year $72,612.50
Per Month: $12,102.08
ARTICLE 7: Security Deposit: $24,204.16
ARTICLE 36: Landlord's Address for Notice: Ciao Cucina Corp.
700 Walnut St./Ste. 300
Cincinnati, Ohio 455202
ADDENDUM 1: Landlord's Tenant Improvement Contribution
ADDENDUM 2: Percentage Rent
ADDENDUM 3: Option to Renew
EXHIBIT A: Legal Description of Building
EXHIBIT B: Location of Premises
EXHIBIT C: Landlord's Work
EXHIBIT C.1 Landlord's Work Letter of 3/31/97
EXHIBIT D: Tenant's Sign Criteria
EXHIBIT D.1: Signage Size and Location Requirements
EXHIBIT E: Tenant's Workletter
EXHIBIT F: Tenant's Space Plan
The Provisions of the Lease identified above in the margin are those provisions
where references to particular Basic Lease Information appears. Each such
reference shall incorporate the applicable Basic Lease Information. In the
event of any conflict between any Basic Lease Information and the Lease, the
latter shall control.
WITNESSES: LANDLORD: TENANT:
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MERRICK PLACE SHOPS AND PARKING
RETAIL LEASE
THIS LEASE, entered into this 28th day of April, 1997, between THE CITY OF
CORAL GABLES, a municipal corporation of the State of Florida ("Landlord") and
CIAO CUCINA CORPORATION an OHIO corporation ("Tenant").
WITNESSETH: Landlord, for and in consideration of the rent to be paid by
Tenant, and in consideration of the covenants herein to be kept and performed
by the Tenant, does hereby lease and demise unto the Tenant the following
described premises (the "Premises") situated in the City of Coral Gables,
County of Dade, State of Florida: a unit of approximately 5,809 sq. ft. located
at 10 GIRALDA, in the shopping and parking facility located at 1 Aragon Avenue,
Coral Gables, Florida, known as MERRICK PLACE SHOPS AND PARKING (the
"BUILDING"). THE APPROXIMATE LOCATION OF THE PREMISES IS OUTLINED IN RED ON
EXHIBIT B.
1. DEFINITIONS: Unless the context otherwise specifies or requires, the
following terms shall have the meanings herein specified.
(A) The term "Building" shall mean the land described on Exhibit "B"
attached hereto and the building constructed thereon known as Merrick Place
Shops and Parking, located at 1 Aragon Avenue (the "Building") and all other
improvements on or appurtenances to said parcel.
(B) The term "Premises" shall mean the portion of the Building located in
the Suite specified in the Basic Lease Information which is outlined in red on
the floor plan attached hereto as Exhibit "B".
(C) The term "Rent" shall mean the sum of the Base Rent, as defined in
Article 5 hereof, and any other additional rent as specified herein, or as may
be agreed to by the parties hereafter.
(D) The term "Rentable Area" of the "Premises" as used in this Lease means
all space within the inside surface of the glass portion of the permanent outer
Building walls, enclosing the tenant occupied portion of the floor and measured
to midpoint of the wall separating areas leased by or held for other tenants or
from areas devoted to
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corridors, elevator lobbies or any other Common Area, restrooms and other
similar facilities.
(E) The term "Common Area" shall mean the total area in the Building
consisting of restrooms, janitor, telephone and electrical closets, mechanical
areas, and public corridors providing access to tenant space, but excluding
public stairs, elevator shafts and pipe shafts, together with the enclosing
walls thereof.
2. TERM: The term of this lease ("LEASE COMMENCEMENT DATE") shall commence
upon DELIVERY OF THE SPACE TO TENANT FOR TENANT'S CONSTRUCTION. THE
ANTICIPATED DATE OF DELIVERY IS MAY 1, 1997. HOWEVER, AS IN ALL CONSTRUCTION,
THAT DATE IS SUBJECT TO CHANGE. CIAO CUCINA CORPORATION WILL BE GIVEN NO LESS
THAN 30 DAYS NOTICE OF THE SCHEDULED COMPLETION DATE; TENANT RESERVES THE
RIGHT TO TERMINATE THE LEASE IF THE PREMISES ARE NOT DELIVERED BY SEPTEMBER 1,
1997; and, Tenant's obligation to pay rent hereunder ("Rental Commencement
Date") shall commence ONE HUNDRED EIGHTY (180) DAYS AFTER THE LEASE
COMMENCEMENT DATE; and, ending at midnight, on FIFTEEN (15) YEARS AND SIX (6)
MONTHS AFTER THE LEASE COMMENCEMENT DATE. "RENTAL COMMENCEMENT DATE" as used
herein means the date which is ONE HUNDRED EIGHTY (180) number of days after
the Lease Commencement Date. Tenant shall be entitled to possession of the
Premises upon the Lease Commencement Date and such occupancy shall be subject
to all of the terms and conditions of this Lease except that Tenant shall not
be required to pay rent until the Rental Commencement Date. There shall be no
delay in the commencement of the Term of this Lease and, subject to the
provisions contained below regarding the performance and completion of the
"Tenant Improvements" (as hereinafter defined), there shall be no delay or
abatement of the payment of "Rent(s)" (as hereinafter defined) where Tenant
fails to occupy the Premises or if Tenant fails to complete any of Tenant's
Improvements, nor shall same operate to extend the initial Term beyond the
agreed expiration date hereof. All provisions of this Lease shall be in full
force and effect upon the Lease Commencement Date, notwithstanding the fact
that prior to opening the Premises for business, Tenant shall first perform
and complete the Tenant Improvements.
3. TENANT D.B.A.: Unless otherwise consented to in writing by Landlord, Tenant
agrees to conduct its business in the premises using the name: CIAO BABY
CUCINA. All signage and advertising will use this name. TENANT RESERVES THE
RIGHT TO CHANGE ITS
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NAME IN ITS DISCRETION, SO LONG AS IT IS FOR THE SAME TYPE OF USE, UNDER THE
SAME OWNERSHIP AND THE INITIAL GUARANTEE REMAINS THE SAME.
4. USE:
(A) During the term, the premises shall be used and occupied only for the
following purposes: AN ITALIAN MEDITERRANEAN RESTAURANT WITH INDOOR AND OUTDOOR
SEATING, OFFERING DISHES FROM THE ALL AREAS OF THE MEDITERRANEAN REGION,
OPENING MORNING THROUGH EVENING HOURS AND SELLING RETAIL ITEMS MADE ON THE
PREMISES INCLUDING BAKED GOODS and for no other purposes.
(B) Tenant agrees to operate 100% of the premises during the term of this
lease and to conduct its business at all times in a high class and reputable
manner, as shall be determined by Landlord in its sole discretion.
(C) Tenant shall keep the premises open for business not less than six
days per week, including legal holidays, and particularly during those evening
hours that Landlord and tenant mutually agree in writing from time to time to
promote a dinner trade.
(D) Tenant shall promptly comply with all laws, ordinances and lawful
orders and regulations affecting the premises, and the cleanliness, safety,
occupation and use of same. No auction, fire or bankruptcy sales shall be
conducted in the premises without Landlord's written consent. Tenant shall not
use the sidewalks adjacent to the premises for business purposes without
Landlord's written consent.
(E) In the event that the Tenant uses the Premises for purposes not
expressly permitted herein, the Landlord may, in addition to all other remedies
available to it, terminate this Lease or restrain said improper use by
injunction.
(F) Tenant shall not commit any nuisance; nor permit the emission of any
objectionable noise or odor, nor burn any trash or refuse within the Premises;
nor bring on, deposit or allow to be brought on or deposited on the Premises
any hazardous nor noxious materials or substances, as the same may be defined
by federal, state or local laws, codes, ordinances, rules, or regulation; nor
make any use of the Premises or any
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part thereof or equipment therein which is improper, offensive, a nuisance or
contrary to any state, local or federal law.
(G) Tenant agrees to strictly enforce all state, local or federal laws
including American with Disabilities Act and Florida Accessibility Code in the
operation of the Premises, including, without limitation, all restrictions
concerning the serving of alcoholic beverages, if applicable, in particular the
prohibitions against serving alcohol to minors (as such term is defined by
law).
5. RENT:
(A) BASE RENT: Tenant hereby agrees to pay to Landlord, at such place as
Landlord may designate in writing, rent for the premises as follows:
Lease Year One:
Months One-Six $ 0.00
Months Six-Twelve $12,102.08 per month
excluding 6.5% sales tax
Lease Years Two-Five: $12,102.08 per month
excluding 6.5% sales tax
Lease Years Six-Ten: $13,554.33 per month
excluding 6.5% sales tax
Lease Years Eleven-Fifteen: $15,490.67 per month
excluding 6.5% sales tax
Lease Year Sixteen: $15,490.67 per month
Months One-Six: excluding 6.5% sales tax
Payment is due each month in advance on the first day of each
month, without demand.
*PERCENTAGE RENT IS SPECIFIED IN ADDENDUM 2
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(C) TAXES ON RENT: Tenant shall also pay, as additional rent, all sales or
use or excise tax imposed, levied or assessed against the rent or any other
charge or payment required hereby any governmental authority having
jurisdiction there over, even though the taxing statute ordinance may purport
to impose such sales tax against the Landlord. The payment of sales tax shall
be made by Tenant on a monthly basis, concurrently with payment of the monthly
rental. All rent shall be paid without abatement, set off, or deduction.
(D) OPERATING EXPENSE REIMBURSEMENT: Tenant will not be required to pay
operating expenses during the term of this lease.
(E) SERVICE CHARGE: If any installment of Base Rent or additional rent
provided for in this Lease, or any part thereof, is not paid by the due date,
it shall be subject to a service charge of one and one-half percent (1 1/2%) of
the unpaid rent due for each month or fraction thereof (or such lesser
percentage as may be the maximum amount permitted by law) until paid.
(F) APPLICATION OF PAYMENTS: All sums due and payable pursuant to the
terms and provisions of this Lease shall be payable only in lawful money of the
United States of America which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment, and shall be applied in
the following order of priority:
(1) Charges and expenses resulting from Tenant's failure to timely
perform its obligations hereunder.
(2) Operating Expense Reimbursement, if any.
(3) Additional rent and charges except parking space rental and charges,
if any.
(4) Base rent including adjustments thereto.
(5) Parking space rental and charges, if any.
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6. UTILITY EXPENSES: Tenant shall not perform any acts or carry on any
practices which injure the building or be a nuisance or menace to other tenants
in the building in which the premises are located and shall keep the premises,
the sidewalks adjacent to the premises, the rear area of the premises and the
service area and corridors allocated for the use of Tenant, unobstructed, clean
and free from rubbish and dirt at all times. All trash and garbage shall be
stored in the designated garbage areas and Landlord shall arrange for the
regular pickup of such trash and garbage at Tenant's expense. The Landlord will
arrange for the regular pickup of trash and garbage through an authorized
collection agency, and Tenant will pay Landlord for its share of said cost.
Tenant shall pay all charges for water, janitorial, sewage disposal,
electricity and for all other utilities used in connection with the premises
and billed direct to the Tenant, not more that ten (10) days after the same
shall become due and payable. Tenant shall pay all utility impact fees, if any,
assessed against the premises based upon Tenant's use of the premises as set
forth above.
7. SECURITY DEPOSIT/ADVANCED RENT DEPOSIT/PERSONAL GUARANTEE: Landlord,
after satisfactory review of Tenant's financial statement, hereby acknowledges
receipt from Tenant of the sum of $12,102.08 which sum shall be held by
Landlord without liability for interest as a deposit for the first month's
rent. Landlord, after satisfactory review of Tenant's financial statement, AND
UPON LANDLORD'S DELIVERY OF PREMISES TO TENANT, hereby acknowledges receipt
from Tenant of the sum of $24,204.16 which sum shall be held by Landlord
without liability for interest as security for the faithful performance by
Tenant of all of the terms and conditions of this Lease. In the event Tenant
defaults under any of the terms and conditions of this Lease Landlord may, at
Landlord's option, apply the above security, or so much thereof as may be
necessary, to compensate Landlord for any loss or damages sustained by Landlord
due to such default on the part of Tenant, and Tenant shall forthwith upon
demand restore said security to the original sum deposited. Within thirty (30)
days after the expiration of this Lease, said security shall be returned in
full to Tenant, provided this Lease is in good standing and no outstanding
defaults exist hereunder. A Personal Guarantee may be required from Tenant upon
Landlord's review of Tenant's financial statement.
8. TERRACE AREA: Although not a part of the Premises, the Tenant shall have the
right to the use of a portion of the open air terrace located in the front
center portion of the first floor of the Building and appearing on the cross
hatched section of Exhibit
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"B" attached hereto and by this reference made a part hereof ("Terrace Area");
provided, however, that such use shall be limited to the placement of tables
and chairs for outdoor seating of the Tenant's patrons. Tenant shall be fully
responsible for the maintenance and repair of the Terrace Area. Tenant
acknowledges that there exists in the City of Coral Gables an ordinance or
ordinances regarding the placing of tables and chairs outdoors and that as with
all governmental ordinances, it shall be required to comply with same.
9. RESTAURANT FOOD AND BEVERAGE LICENSING: Tenant shall be solely responsible
for obtaining and maintaining all required licenses and permits for the
operation and maintenance of a restaurant facility, including, without
limitation, any and all licenses and permits required for the serving of
alcoholic beverages. Tenant shall further be responsible for complying with all
requirements and qualifications of all federal, state and local health and
rehabilitation service departments.
10. DELIVERY OF PREMISES BY LANDLORD: It is contemplated that the premises will
be ready for occupancy by Tenant on or about the date first above written.
However, in the event that Landlord is unable to deliver possession of the
premises to Tenant on or before said date, then Landlord agrees to deliver
possession of the premises to Tenant as soon as practicable thereafter, and the
rental under this lease will be abated proportionately and Tenant will be
relieved of the liability for paying same during such time Tenant does not have
possession. In no event shall Tenant have any claim for damages (except for the
abatement of rent as herein specified) on account of the failure of Landlord to
deliver possession of the premises to Tenant on or before said date.
11. ACCEPTANCE OF PREMISES.
(A) Tenant shall not permit or suffer any noise, disturbance or nuisance
whatsoever on the Premises detrimental to same or annoying to the neighbors,
and the Tenant acknowledges that, except as set forth in Paragraph 26 hereof,
the Premises have been received in good order, tenantable condition and repair,
of which the execution of this Lease, and taking Possession hereunder shall be
conclusive evidence; and that, except as set forth in Paragraph 26 hereof, no
representations as to the condition of the premises have been made by the
Landlord, or the Landlord's agent, and that no obligation as to the repairing,
adding to, or improving the premises has been assumed by the Landlord, and that
no oral arrangements have been entered into in consideration of making this
Lease and that this Lease contains a full statement of the obligation of both
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parties hereto. Any noise or disturbance caused by Tenant's preparing the
Premises for Tenant's use and occupancy will not be a default under the
provisions of this paragraph.
(B) The Premises shall, at all times, be kept in good order, condition,
and repair by Tenant and shall also be kept in a clean, sanitary and safe
condition in accordance with all directions, rules and regulations of the
health officer, fire marshall, building inspector or other proper officers of
the governmental agencies having jurisdiction, all at the sole cost and expense
of Tenant, during the term herein demised. Tenant shall permit no water damage
or injury to the premises, and Tenant shall at its own cost and expense replace
any glass windows, doors and door hardware in the premises which may be damaged
or broken.
(C) At the expiration of this lease, Tenant shall surrender the premises
in good condition, reasonable wear and tear, loss by fire or other unavoidable
casualty excepted.
12. SUBMISSION OF TENANT'S DRAWINGS: Tenant agrees that it shall submit to
Landlord two sets of Tenant construction drawings, two sets of Tenant fixture
drawings, interior layout, finish material samples, electronic data base if
available, and any other items Landlord may from time to time request, all of
which must be approved by Landlord in writing prior to the commencement of any
construction by Tenant in the Premises. Tenant shall not make changes to the
storefront without Landlord's consent.
13. SIGNAGE: Tenant shall not erect or install any exterior or interior window
or door signs or window or door lettering or placards without the previous
written consent of Landlord. Tenant agrees not to use loudspeakers, phonographs
or radio broadcasts in a manner to be heard outside the premises. Tenant agrees
that it will at its own expense, install exterior signs in places on the
premises to be designated by Landlord, which signs will advertise Tenant's name
or type of business, the form and design of which will be subject to Landlord's
approval. Tenant understands and agrees that Tenant is responsible for
compliance with all local or state sign ordinances. See Exhibit "D" for Sign
Criteria.
14. MAINTENANCE OF PREMISES BY TENANT: Other than the repairs which shall be
the obligation of Landlord as required pursuant to Article 5 hereof, Tenant
shall, at its own cost and expense, take good care of and make necessary
repairs, structural and otherwise, to the interior of the premises, and the
fixtures and equipment therein, including the exterior and interior windows,
doors, locks and entrances,
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storefronts, signs, showcases, floor coverings, interior walls, columns and
partitions, lighting fixtures, heating ventilating and air conditioning
equipment, and plumbing and sewage facilities. All parts of the premises shall
be painted or otherwise decorated by Tenant periodically as may be determined
by Landlord. Tenant agrees to keep and maintain in good condition the
electrical equipment in the premises and keep in force a standard maintenance
agreement with a company acceptable to Landlord on all air conditioning
equipment and provide a copy of said maintenance agreement to Landlord. Tenant
also shall pay for and maintain a termite and pest extermination service for
the premises. Tenant shall have the obligation to keep the exterior fronts,
sidewalks and rear of the premises in a neat and orderly condition, and free
from debris and rubbish at all times.
Notwithstanding the foregoing, Landlord agrees to make any and all repairs
required to the roof, the exterior walls, the foundation and structural portions
of the Premises. Landlord shall have thirty (30) days after receipt of written
notice from Tenant to perform such repairs of the items described in the
foregoing sentence, or such additional time as may be reasonably required for
the nature of the repair.
Without the prior written consent of the Landlord, which shall not be
unreasonably withheld, the Tenant shall make no alterations, additions or
improvements of a structural nature in or to the Premises. Except only furniture
and trade fixtures which shall be readily removable without injury to the
Premises, all additions, fixtures, carpets, and improvements shall be and remain
a part of the Premises at the expiration of this Lease.
It is further agreed that this Lease is made by the Landlord and accepted by the
Tenant with the distinct understanding and agreement that the Landlord shall
have the right and privilege to make and build additions to the Building of
which the Premises are a part, and make such alterations and repairs to said
Building as it may deem wise and advisable without any liability to the Tenant
therefor. The Landlord agrees to exercise efforts to avoid disturbing the Tenant
or the Premises during any such alterations or repairs and that such addition or
alteration shall not adversely affect the Tenant's frontage or access.
INTENTIONALLY LEFT BLANK
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15. MECHANICS LIENS: Tenant shall keep the Premises and all parts thereof at
all times free of mechanic's liens and any other lien for labor, services,
supplies, equipment or material purchased or procured, directly or indirectly,
by or for Tenant. Tenant further agrees that Tenant will promptly pay and
satisfy all liens of contractors, subcontractors, mechanics, laborers,
materialmen, and other items of like character, and will indemnify Landlord
against all expenses, costs and charges, including bond premiums for release of
liens and attorneys fees and costs reasonably incurred in and about the defense
of any suit in discharging the Premises, the Building, or any part thereof from
any liens, judgments, or encumbrances caused or suffered by Tenant. In the
event any such lien shall be made or filed, Tenant shall bond against or
discharge the same within ten (10) days after the same has been made or filed.
It is understood and agreed between the parties hereto that the expenses, costs
and charges above referred to shall be considered as rent due and shall be
included in any lien for rent.
The Tenant herein shall not have any authority to create any liens for labor or
material on the Landlord's interest in the Premises and all persons contracting
with the Tenant for the construction or removal of any facilities or other
improvements on or about the Leased Premises, and all materialmen, contractors,
mechanics, and laborers are hereby charged with notice that they must look only
to the Tenant and to the Tenant's interests in the Premises to secure the
payment of any bill for work done or material furnished at the request or
instruction of Tenant.
16. QUIET ENJOYMENT: Upon payment by Tenant of the Rents herein provided, and
upon the observance and performance of all terms and provisions, on Tenant's
part to be observed and performed, Tenant shall, subject to all of the terms and
provisions of this Lease, peaceably and quietly hold and enjoy the Premises for
the Term hereby demised.
17. DAMAGE TO PREMISES: The Tenant takes all risk of any damage to the Tenant's
property that may occur by reason of water or the bursting or leaking of any
pipes or waste water about the Premises, or from any act of negligence of any
co-tenant or occupants of the building, or any other person, or fire, or
hurricane, or other act of God, or from any cause whatsoever.
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18. LANDLORD'S WORK:
(A) Landlord agrees that it will supply at its own expense, its standard
store, as more particularly described in Exhibit "C", attached (the Landlord's
Work.)
(B) Landlord shall have no obligations to make improvements to the
premises. All improvements to the Premises will be performed by the Tenant at
Tenant's sole cost and expense. Tenant shall then have the obligation to
complete Tenant's work as expeditiously as possible. Landlord must approve any
contract entered into by Tenant for work in the premises prior to commencement
thereof. All such contracts must contain a waiver of lien by Tenant's
contractor against the Building. Tenant accepts premises in as is condition.
19. SERVICES: Landlord shall maintain the public and common areas of the
Building, including lobbies, stairs, elevators, corridors and restrooms, the
mechanical, plumbing and electrical equipment serving the Building, but not the
individual tenant's systems, and the structure itself in reasonably good order
and condition except for damage occasioned by the act of Tenant, which damage
shall be repaired by Landlord at Tenant's expense. Landlord shall furnish the
Premises with those fixtures and service as outlined in Exhibit C.
20. MAINTENANCE BY LANDLORD. Landlord shall keep the foundation, the outer
walls and roof of the building in which the premises are located in good
repair, except that Landlord shall not be called on to make any repairs caused
by the negligence of Tenant, its agents, employees, licensees and invitees.
Landlord shall not be called upon to make any other improvements or repairs of
any kind on the premises.
21. HOLD HARMLESS AND INDEMNIFICATION: The Tenant shall indemnify and save
harmless the Landlord from and against any and all claims, suits, actions,
damages and/or causes of action arising during the term of this Lease for any
personal injury, loss of life and/or damage to property sustained in or about
the Premises arising out of the Tenant's occupancy thereof or caused by Tenant's
negligence, and from and against any orders, judgments, and/or decrees which may
be entered thereon, and from and against all costs, counsel fees, including any
appellate proceedings, expenses and liabilities incurred in and about the
defense of any such claim and the investigation thereof, and shall obtain
insurance to satisfy the requirements of this section and City
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shall be named as "additional insured" in any such policy. All insurance
obtained by Tenant to satisfy the requirements of this section shall be primary
over any City self-insurance or insurance program.
22. LANDLORD'S LIEN: As security for Tenant's payment of rent, damages and all
other payments required to be made by this Lease, Tenant hereby grants to
Landlord a lien upon all property of Tenant now or subsequently located upon the
Premises. LANDLORD AGREES TO SUBORDINATE ITS LANDLORD LEASE RIGHTS TO THIRD
PARTY FINANCING OR LEASING OF EQUIPMENT FOR THE RESTAURANT. If Tenant abandons
or vacates any substantial portion of the Premises, or is in default in the
payment of any rentals, damages or other payments required to be made by this
Lease, Landlord may take any action it deems necessary, and may be available to
it in the State of Florida. The proceeds of the sale of the personal property
shall be applied by Landlord toward the cost of the sale and then toward the
payment of all sums then due by Tenant to Landlord under the terms of this
Lease. All alterations, additions, improvements and fixtures, other than trade
fixtures, which may be made or installed by either of the parties hereto upon
the premises and which in any manner are attached to the floors, walls or
ceilings, shall become the property of Landlord at the termination of this lease
and shall remain upon and be surrendered with the premises as a part thereof.
Any linoleum or other floor covering of similar character which may be
adhesively affixed to the floor of the premises shall become the property of
Landlord. No alterations or additions to the premises may be made without the
prior written consent of Landlord.
23. INSURANCE: From and after the date hereof, and thereafter at all times
during the term of this Agreement, Tenant shall provide and maintain insurance
as follows:
(A) "All risk" insurance, including flood and earthquake coverage, on all
buildings, contents, and structures above ground or subject to being damaged or
destroyed by an insurable peril, including without limitation, all Furnishings
and Equipment and all Tenant's Property, on a full replacement cost basis; said
policy or policies to be endorsed to reflect the hold harmless &
indemnification provision contained in Article 21.
(B) Comprehensive boiler and machinery insurance, with limits of not less
than $500,000; said policy or policies to be endorsed to reflect the hold
harmless provision contained in Article 21.
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(C) Comprehensive general liability insurance with broad form endorsement,
including automobile liability, liquor legal (dram shop) liability, completed
operation and products liability, contractual liability, severability of
interests with cross liability provision, and personal injury liability with
limits of $1,000,000 combined single limit per occurrence for bodily injury and
property damage. Said policy or policies shall be endorsed to name Landlord and
Tenant as additional insureds and shall reflect the hold harmless provision
contained in Article 21 Tenant.
(D) Worker's compensation for all employees of Operator as required by
Florida Statues 440, and employer's liability insurance with limits of not less
the $100,000; said policy or policies shall, to the extent possible, be
endorsed to name Landlord and Tenant as additional insureds and shall reflect
the hold harmless Provision contained in Article 12.
(E) Automobile Lability Insurance covering all owned, non-owned and hired
vehicles used in connection with the premises in an amount not less than
$100,000/$300,000 for bodily injury and property damage; said policy or
policies shall, to the extent possible, be endorsed to name Landlord and Tenant
as additional insureds and shall reflect the hold harmless provision contained
in Article 12.
(F) Other (or increased amounts of) insurance which Landlord shall from
time to time deem advisable or appropriate, it being reasonable for Landlord to
require commercially available insurance of the types and in the amounts
generally carried on business which are similar to the business subject to this
lease in size, style or character, such new or additional insurance to be
effective as of the later of 90 days after notice thereof or the next annual
renewal of any policy being increased (as applicable).
(G) All policies shall contain waiver of subrogation against Landlord and
Tenant where applicable, shall expressly provide that such policy or policies
are primary over any other collectible insurance that Landlord may have.
(H) All of the above insurance is to be placed with Best rated A-8 or
better insurance companies.
(I) Certified copies of all policies and related endorsements shall be
delivered to Landlord at or before the execution of this Agreement, except
that:
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(1) In the case of insurance relating to Site preparation, or
construction, repair, rehabilitation, furnishing or equipping the
business, certified copies shall be delivered not later than 10 days
prior to commencement of said activities;
(2) In the case of insurance required to be maintained during the term
hereof relating to liquor legal liability or completed operations,
certified copies shall be delivered not later than the earlier of 10
days prior to the Opening Date, or that date when the public actually
commence use of the business, whichever is earlier; and
(3) In all instances, certified copies shall be delivered not later than
30 days prior to the expiration date of any policy or policies of
insurance required to be maintained during the term hereof.
(J) All policies shall provide for 30 days notice to Landlord prior to
cancellation or material change.
(K) Tenant acknowledges that the insurance coverage requirement set forth
in this Article, in terms of both forms of insurance and amounts of coverage,
represent the minimum protection required by Landlord. Tenant agrees to make
-------
and to rely upon the reasonable determination of Landlord regarding what
additional forms of insurance or higher levels of coverage, if any, may be
desirable in order to furnish Landlord and Tenant proper and adequate
protection during the term hereof.
(L) Tenant shall have the option to increase the limits of coverage on
said policies or carry additional insurance.
(M) The amount of any deductible or self-insured retention shall be
subject to the reasonable approval of Landlord.
(N) Landlord reserves the right (but shall not be obligated) to provide
any or all of the minimum insurance coverages not provided by Tenant. In such
an event, the cost of the insurance shall be a reimbursable expense receivable
by Landlord from Tenant on demand.
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24. ASSIGNMENT AND SUBLETTING: Tenant agrees not to assign the Tenant's
interest in this Lease, nor sublet the whole or any part of the Premises
without first having obtained the written consent to such assignment or
subleasing from the Landlord, and the Tenant further covenants that the
premises will not be used for any unlawful purpose or for any purpose that will
invalidate any policies of insurance now or hereafter written on the Property,
or will increase the rate of premium thereof unless Tenant agrees to pay any
increase in insurance premiums.
25. HOLDING OVER: If the Tenant shall occupy the Premises with or with out the
consent of the Landlord after the expiration of this Lease, and the rent is
accepted from the Tenant during such period, such occupancy and payment shall be
construed as an extension of this Lease on a month-to-month basis only from the
date of such expiration unless other terms of such extension are endorsed hereon
in writing and signed by the parties hereto.
26. ENTRY BY LANDLORD: Tenant agrees to permit the Landlord, or the Landlord's
agent, at any reasonable time, and at all times in the event of an emergency,
to enter and inspect the Premises, and make repairs, if in the Landlord's sole
judgment, the Landlord should elect to do so.
27. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES: If any one or more of the
following events (herein sometimes called "events of default" shall happen:
(A) If default shall be made in the payment of any rent or other charges
herein reserved upon the same become due and payable and such default continues
for a period of ten (10) days after written notice thereof from Landlord to
Tenant; or
(B) If default shall be made by Tenant in the performance of, or
compliance with, any of the covenants, agreements, or terms or conditions
contained in this Lease or default made by Tenant in compliance or
non-compliance with any and all municipal or county ordinances, resolutions or
codes and all state and federal statues, rules and regulations now in force or
which may hereafter be in force, and such default shall continue for a period
of ten (10) days after written notice thereof from Landlord to Tenant;
provided, however, that if Tenant is unable to cure such default within such
ten (10) day period and such default results solely from the failure to obtain
a building
15
<PAGE> 17
actions of Tenant, then, an in that event, Tenant shall have such additional
reasonable time as is necessary; or
(C) If the premises shall be seized under any levy, execution, attachment
or other process of court and the same shall not be promptly vacated or stayed
on appeal or otherwise, or if the Tenant's interest in the Premises is sold by
judicial sale and the sale is not promptly vacated or stayed on appeal or
otherwise; or
(D) If Tenant:
(1) Fails to take possession and open for business within thirty (30)
days after the Rent Commencement Date, or
(2) Should vacate, abandon, or desert the Premises, or
(3) Cease the continual operation of Tenant's business therein for
fifteen (15) continuous days and thirty (30) days (in the aggregate)
in any one year during the Lease Term.
(E) If the Tenant shall suffer to be filed against the Tenant an
involuntary petition in bankruptcy (and such petition is not dismissed within
(40) days there after or shall be adjudged a voluntary or involuntary bankrupt
or make an assignment for the benefit of creditors, or should there be
appointed a receiver to take charge of the Premises either in the State or
Federal courts.
(F) If the Tenant shall vacate or abandon the Premises prior to the end of
the term hereof, then: in any such events, (an "Event of Default) the Landlord
may, at the Landlord's option, terminate and end this Lease and reenter upon
the premises, where upon the term hereby granted, and at the Landlord's option,
all of the Tenant's right, title and interest in this Lease shall end and the
Tenant shall become a tenant at sufferance; or else the Landlord may, at the
Landlord's option, elect to declare the entire rent for the balance of the
term, or any part thereof, due and payable forthwith, and may proceed to
Collect the same by distress or otherwise, and thereupon the term hereof shall
terminate, at the option of the Landlord, or else the Landlord may take
Possession of the Premises and rent the same for the account of the Tenant. The
exercise of any options herein contained shall not be deemed to be exclusive
and the Landlord shall at all times in the
16
<PAGE> 18
event of the Tenant's default hereunder, have such remedies as may be provided
by the laws of the State of Florida; the expression "entire rent for the
balance of the term" as used herein, shall mean all of the rent prescribed to
be paid by the Tenant unto the Landlord, at present value, for the full term of
the Lease, less, however, any payments that shall have been made on account of
any rent due pursuant to the terms of the Lease.
28. WAIVER: The failure of the Landlord in one or more instances to insist upon
strict performance or observance of one or more of the covenants or conditions
hereof or to exercise any remedy, privilege or option herein conferred upon or
reserved to the Landlord, shall not operate or be construed as a relinquishment
or waiver for the future of such covenant or condition or of the right to
enforce the same or to exercise such privilege, option, or remedy, but the same
shall continue in full force and effect. The receipt by the Landlord of rent,
or additional rent, or any other payment required to be made by the Tenant, or
any part thereof, shall not be a waiver of any other additional rent or payment
then due, nor shall such receipt, though with knowledge of the breach of any
covenant or condition hereof, operate as or be deemed to be a waiver of such
breach, and no waiver by the Landlord of any of the provisions hereof, or any
of the Landlord's rights, remedies, privileges or options hereunder shall be
deemed to have been made unless made by the Landlord in writing. If the
Landlord shall consent to the assignment of this Lease or to a subletting of
all or a part of the premises, no further assignment or subletting shall be
made without the written consent of the Landlord first obtained. No surrender
of the premises for the remainder of the term hereof shall be valid unless
accepted by the Landlord in writing.
29. TRIAL BY JURY: It is mutually agreed by and between Landlord and Tenant
that the respective parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters arising out of or in any way connected
with this Lease, the relationship of Landlord and Tenant, and Tenant's use or
occupancy of the Premises. Tenant further agrees that the provisions for
payment of Rent herein are independent covenants of Tenant and Tenant shall not
interpose any counterclaim or counterclaims in a summary proceeding or in any
action based upon non-payment of Rent or any other payment required of Tenant
hereunder.
30. SUBORDINATION: The Tenant agrees that this Lease shall be subject and
subordinate to any mortgage which may hereafter be made on account of any
proposed
17
<PAGE> 19
loan to be placed on the Premises by the Landlord to the full extent of all
debts and charges secured thereby, and to any renewals and extensions of all or
any part thereof, which the Landlord may hereafter at any time elect to place
on the Premises, and the Tenant agrees upon request to hereafter execute any
document which the Landlord may deem necessary to accomplish that end, and in
default of the Tenant's so doing, the Landlord is hereby empowered to execute
such document in the name of the Tenant and as the act and deed of the Tenant
and this authority is declared to be coupled with an interest and not
revocable. Landlord represents that the Premises is presently free and clear of
any mortgages. Landlord agrees that Landlord will use its best efforts to
obtain from any mortgagee who may hereafter hold a mortgage encumbering the
Premises, a non-disturbance agreement which in effect will provide that
Tenant's possession and rights hereunder will not be disturbed in the event of
a foreclosure of the mortgage so long as Tenant is not in default hereunder.
31. RELATIONSHIP OF PARTIES: Nothing herein contained to the contrary shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent or of partnership or of joint venture or of
any association whatsoever between Landlord and Tenant, it being expressly
understood and agreed that neither the computation of rent nor any other
provisions contained in this Lease nor any act or acts of the parties hereto
shall be deemed to create any relations between Landlord and Tenant other than
the relationship of landlord and tenant. Notwithstanding the fact that the City
of Coral Gables ("City") is the landlord under this Lease and that there exists
a landlord/tenant relationship between Landlord and Tenant, Tenant acknowledges
that this Lease does not grant Tenant any rights or create any exceptions to
its obligation to comply with and meet the requirements of all the City's
ordinances, resolutions and codes, and that the Landlord/Tenant relationship
shall have no effect upon the jurisdiction and governing rights of the City
over the Building and the Premises and Tenant shall be required to fulfill and
comply with all applicable laws, rules and regulations, ordinances and
resolutions of the City as though no such landlord/tenant relationship existed,
including, without limitation, all requirements of the City's Building and
Zoning Department.
32. BROKERAGE INDEMNITY: Tenant represents to Landlord that Tenant has no
knowledge of any real estate broker involved in this transaction who might be
entitled to a commission by reason hereof other than ESSLINGER, WOOTEN MAXWELL,
INC. ("Broker") and KONIVER STERN. Tenant agrees to indemnify Landlord and save
18
<PAGE> 20
Landlord harmless from any loss or damage in the event the foregoing
representation is untrue. Landlord agrees to pay any commissions due Broker
payment to a separate agreement between Landlord and Broker. Landlord
represents to Tenant that Landlord has no knowledge of any real estate broker
involved in this transaction who might be entitled to a commission by reason
hereof other than the Broker. Landlord agrees to indemnify Tenant and save
Tenant harmless from any loss or damage in the event the foregoing
representation is untrue.
33. FORCE MAJEURE: Whenever a period of time is herein prescribed for action to
be taken by either party, such party shall not be liable or responsible for and
there shall be excluded from computation of any such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental laws, regulations or restrictions, or any causes of any kind which
are beyond the reasonable control of the party required to take action.
34. ESTOPPEL CERTIFICATE: Tenant agrees at any time within ten days of
Landlord's written request, to execute, acknowledge and deliver to Landlord a
written statement certifying that this lease is unmodified and in full force
and effect for, if there have been modifications, that the same is in full
force and effect as modified and stating the modifications, and the dates to
which the minimum rent and other charges have been paid in advance, if any, if
being intended that any such statement delivered pursuant to this paragraph may
be relied upon by any prospective purchaser or mortgagee of the Building.
35. RADON DISCLOSURE: In accordance with the requirements of Florida Statues
the following notice is hereby give to Tenant:
RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS
ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT
EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN
FLORIDA. ADDITIONAL INFORMATION REGARDING RADON AND RADON TESTING MAY BE
OBTAINED FROM YOUR COUNTY PUBLIC HEALTH UNIT.
36. NOTICE: Notice shall be deemed properly given hereunder when made in
writing and either delivered personally or deposited in the United States
certified or
19
<PAGE> 21
registered mails, with sufficient postage prepaid thereon to carry it to its
addressed destination; and the said notices shall be addressed as follows:
For the Landlord: H.C. Eads, Trustee City Manager
405 Biltmore Way
Coral Gables, FL 33134
With Copy to: Elizabeth Hernandez, Esquire City Attorney
405 Biltmore Way
Coral Gables, FL 33134
For the Tenant: Ciao Cucina Corp.
700 Walnut Street, Ste. 300
Cincinnati, Ohio 45202
Attn: Carl Bruggemeier
With a copy to: Katz Greenberger Norton
105 East 4th Street, 9th Floor
Cincinnati, Ohio 45202
Attn: Scott Kadish
or to such other address as shall from time to time be supplied in writing by
any party to the other. The effective date of such notice shall be the date of
delivery or refusal thereof.
37. ENTIRE AGREEMENT: This Lease contains the entire agreement between the
parties hereto and it may be modified only by an agreement in writing signed
and sealed by Landlord and tenant. No surrender of the Premises, or of the
remainder of the Term of this Lease, shall be valid unless accepted by Landlord
in writing. Tenant acknowledges and agrees that Tenant has not relied upon any
statement, representation, prior written or contemporaneous oral promises,
agreements or warranties except such as are expressed herein.
20
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered this
Lease in several counterparts each of which shall be deemed an original, but all
constituting a single agreement, at Dade County, Florida, as of the day and year
first above written.
CITY OF CORAL GABLES:
LANDLORD
By:____________________________
H.C. Eads, Jr., City Manager
ATTEST:
_____________________________
Virginia L. Paul, City Clerk
TENANT:
/S/ CARL A. BRUGGEMEIER
- --------------------------
President
CIAO Cucina, Inc.
Witnesses:
- ----------------------------
- ----------------------------
_______________________
City Attorney
21
<PAGE> 23
ADDENDUM 1
LANDLORDS'S TENANT IMPROVEMENT CONTRIBUTION
-------------------------------------------
The landlord shall contribute an amount of five hundred fifty eighty thousand
four hundred dollars ($558,400.00) towards tenant's buildout.
The tenant shall present to the landlord invoices of buildout costs for up to
five hundred fifty eighty thousand four hundred dollars ($558,400.00). Landlord
shall make payments on these invoices as the work is completed and landlord is
in receipt of said invoices.
Tenant will be investing an additional four hundred thousand dollars
($400,000.00) to five hundred thousand dollars ($500,000.00) in the building
improvements.
22
<PAGE> 24
ADDENDUM 2
PERCENTAGE RENT
---------------
The tenant shall pay as additional rent, four percent (4%) of their gross sales
as set forth below. Tenant shall pay landlord within sixty (60) days of each
year's end.
4% OF GROSS SALES OVER:
-----------------------
Years 1-5 $2.3 Million
Years 6-10 $2.6 Million
Years 11-15 $2.9 Million
Tenant shall provide landlord with quarterly or annual sales tax reports.
<PAGE> 25
ADDENDUM 3
OPTION TO RENEW
---------------
The landlord will grant two (2) five (5) year Options to Renew to begin
simultaneous with the expiration of the initial fifteen (15) years and six (6)
months term. Tenant must provide landlord with twelve (12) months written notice
of it's intent to exercise the Option to Renew. The Base Rent, at the time of
each renewal, will be based on an increase of three percent (3%) of the previous
year's base rent with annual increases of three percent (3%). The percentage
rent will continue throughout the renewals, based on the terms of Year 15. All
other terms and conditions remain the same.
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<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> APR-20-1997
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