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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 July 12, 1998
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)
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OHIO 31-1357862
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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700 WALNUT STREET, CINCINNATI, OH 45202
(Address of principal executive offices)
(513) 929-0700
(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 3,357,989 shares of Common Stock outstanding as of August 1,
1998.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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CIAO CUCINA CORPORATION
INDEX
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Part I Financial Information
Item 1. Condensed Financial Statements
Balance Sheets 3
July 13,1997 and July 12, 1998
Statements of Operations 4
Twelve weeks and twenty-eight weeks ended
July 13,1997 and July 12, 1998
Statements of Cash Flows 5
Twelve weeks and twenty-eight weeks ended
July 13,1997 and July 12, 1998
Notes to Financial Statements 6
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 15
Item 6 Exhibits and Reports on Form 8-K 15
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CIAO CUCINA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 13,1997 July 12,1998
ASSETS (Unaudited) Unaudited)
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CURRENT ASSETS
Cash and Cash Equivalents $ 1,316,835 $ 55,175
Accounts Receivable 51,474 57,661
Inventories 85,663 51,883
Prepayments 259,126 132,208
--------------- ---------------
Total Current Assets 1,713,098 296,927
EQUIPMENT AND IMPROVEMENTS, net 4,892,509 6,087,535
INTANGIBLE ASSETS, net 96,607 0
SECURITY DEPOSITS AND OTHER 474,871 341,163
--------------- ---------------
TOTAL ASSETS $ 7,177,085 $ 6,725,625
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current Portion of Long-Term Debt $ 52,643 $ 70,756
Shareholder Demand Notes 0 600,000
Current Portion of Capital Lease Obligation 0 96,691
Accounts Payable 733,214 1,171,275
Accrued Expenses 205,517 486,125
--------------- ---------------
Total Current Liabilities 991,374 2,424,847
LONG-TERM LIABILITIES
Notes Payable 4,520 0
Capital Lease Obligation 0 92,753
Accrued Rentals 519,993 259,631
Deferred Lease Incentives 2,003,142 4,056,946
--------------- ---------------
Total Long-Term Liabilities 2,527,655 4,409,330
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock- no par value, 10,000,000 shares
authorized, 3,120,386 shares issued in 1997
and 3,357,989 in 1998, 9,229,195 9,276,937
Additional Paid-in Deficit (1,647,372) (1,647,372)
Accumulated Deficit (3,923,767) (7,738,117)
--------------- ---------------
Total Shareholders' Equity (Deficit) 3,658,056 (108,552)
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY (DEFICIT) $ 7,177,085 $ 6,725,625
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CIAO CUCINA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Twenty-Eight Weeks Ended For the Twelve Weeks Ended
July 13, July 12, July 13, July 12,
1997 1998 1997 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss ($ 821,336) ($ 1,037,922) ($ 429,856) ($ 332,335)
Depreciation 256,382 387,966 104,279 176,313
Amortization 73,172 80,948 1,235 0
Amortization of Lease Incentives (109,383) (185,563) (46,878) (93,211)
Loss on Disposal of Equipment 0 7,357 0 0
Changes in Operating Assets and Liabilities
Decrease (Increase) in -
Accounts Receivable (9,097) 107,621 (4,515) 50,894
Inventories 1,540 68,819 (4,749) 55,069
Prepayments (15,286) 43,485 (36,980) (2,950)
Pre-opening Costs (38,819) 0 (21,757) 0
Increase (Decrease) in -
Accounts Payable 188,798 (430,978) 95,057 71,350
Accrued Expenses (392,684) 34,310 35,450 (126,033)
Accrued Rentals 10,908 78,386 (8,348) 303
--------------- --------------- --------------- ---------------
Net Cash Used by Operating Activities (855,805) (845,571) (317,062) (200,600)
--------------- --------------- --------------- ---------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of Equipment and Improvements (620,960) (158,172) (259,078) 0
Proceeds from Sale of Assets 0 0 0 0
Cash Paid for Intangible Assets (4,884) 0 (150,326) 0
Cash Paid for Note Receivable (48,000) 0 0 0
Cash Paid for Security Deposits (25,427) (1,082) (1,301) 0
--------------- --------------- --------------- ---------------
Net Cash Used by Investing Activities (699,271) (159,274) (410,705) 0
--------------- --------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Short-Term Debt 0 601,423 0 201,423
Payments on Capital Leases 0 (27,477) 0 0
Repayment of Long-Term Debt (1,850) (831) (815) 0
--------------- --------------- --------------- ---------------
Net Cash Provided (Used) (1,850) 573,115 (815) 201,423
--------------- --------------- --------------- ---------------
by Financing Activities
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,556,926) (431,710) (728,582) 823
CASH AND CASH EQUIVALENTS -
beginning of period 2,873,761 486,885 2,045,417 54,352
--------------- --------------- --------------- ---------------
CASH AND CASH EQUIVALENTS -
end of period $ 1,316,835 $ 55,175 $ 1,316,835 $ 55,175
--------------- --------------- --------------- ---------------
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CIAO CUCINA CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Twenty-Eight Weeks Ended For the Twelve Weeks Ended
July 13, July 12, July 13, July 12,
1997 1998 1997 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash Paid for Interest $ 6,790 $ 19,901 $ 421 $ 9,782
--------------- --------------- --------------- ---------------
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING ACTIVITIES
Conversion of Participating Debenture to Common Stock $ 50,000 $ 0 $ 0 $ 0
--------------- --------------- --------------- ---------------
Issuance of Common Stock in Satisfaction of Accts Payable $ 0 $ 187,603 $ 0 $ 61,803
--------------- --------------- --------------- ---------------
Issuance of Common Stock in Satisfaction
of Employee Claims $ 0 $ 50,000 $ 0 $ 50,000
--------------- --------------- --------------- ---------------
Equipment and Improvements Paid by Landlord $ 0 $ 3,141,032 $ 0 $ 0
--------------- --------------- --------------- ---------------
---------------
Deferred Lease Incentives $ 0 $ 201,664 $ 0 $ 0
--------------- --------------- --------------- ---------------
Security Deposits Forfeited $ 0 $ 54,271 $ 0 $ 44,458
--------------- --------------- --------------- ---------------
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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
July 13, 1997 and July 12, 1998 and the results of operations and cash flows for
the twelve weeks and twenty-eight weeks ended July 13, 1997 and July 12, 1998.
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 28, 1997. See the Company's Annual Report on Form 10-KSB, File No.
000-21745.
2. COMMITMENTS
On July 1, 1998, the Company entered into a settlement agreement with Huntley
Financial Group ("Huntley"). Huntley had been engaged by the Company to
negotiate a termination of its lease for its Hackensack, New Jersey location.
Under the Settlement Agreement, the Company agreed to pay Huntley $35,000.00,
payable in eight monthly installments of $4,375.00.
On August 1, 1998, the Company closed its corporate office in Cincinnati,
Ohio. In connection therewith, the Company entered into the following agreements
dated August 3, 1998:
(a) Lease Termination Agreement, pursuant to which the office
lease was terminated effective August 1, 1998. Under this
Agreement, the Company agreed: (i) to pay the landlord
$25,789.69 for all the amounts due under the office lease
through August 1, 1998; (ii) to pay the landlord $5,703.01 on
each of August 1, 1998 and April 30, 1999; and (iii) to issue
to the landlord $100,000 of the Company's common stock. Valued
based on the closing price on the August 1 effective date.
(b) Third Amendment to Lease, pursuant to which the Company
provided the landlord of its Downtown, Cincinnati, Ohio
location an $80,613.62 promissory note to repay the landlord
for past due amounts under its lease for such location. The
principal of this note is to be paid in four installments: (i)
$11,406.02 on or before August 15, 1998; (ii) $25,000.00 on or
before November 15, 1998; (iii) $25,000.00 on or before
February 15, 1999; and (iv) $10,742.53 on or before June 15,
1999.
(c) Third Amendment to Sublease, pursuant to which the Company
provided the landlord of its Harpers Point, Cincinnati, Ohio
location a $20,541.43 promissory
<PAGE> 7
note to repay the landlord for past due amounts under its
lease for such location. The principal of this note is be paid
in two installments: (i) $14,674.84 on or before August 15,
1998; and (ii) $5,866.58 on or before June 15, 1999.
In August, 1998, the Company entered into a Settlement Agreement and Release
with Carroll Consulting, Inc., pursuant to which the Company agreed to pay
Carroll Consulting $4,750 on or before August 15, 1998, and $4,750 on or before
September 15, 1998. Carroll Consulting releases all claims it had against the
Company, its subsidiary Ciao Playhouse, Inc., and David Walker, its general
manager for its Cleveland, Ohio location.
<PAGE> 8
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 Cucina" and "Ciao Baby Cucina". Four
of the Company's five restaurants have been in operation for more than one year.
Its newest restaurant opened in January, 1998. Additionally, the Company closed
one mature restaurant in late 1997 and opened a restaurant in late 1997 that was
closed in early 1998. In June, 1998, the Company entered into a management
agreement with The Glazier Group, Inc., a New York-based restaurant company,
which has managed the operations of the Company since that time.
The Company does not have a long operating history and has recently made
significant changes to its management. Consequently, the Company believes that
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 1997 and 1998 second
quarters (twelve weeks) ended on July 13, 1997 and July 12, 1998, respectively.
RESULTS OF OPERATIONS
The following table sets forth, for the twelve weeks and the twenty-eight
weeks ended July 13, 1997 and July 12, 1998, certain items from the Company's
condensed consolidated Statement of Operations expressed as a percentage of net
revenues.
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Twelve Weeks Ended Twenty-eight Weeks Ended
Statement of Operations Data: July 13, 1997 July 12, 1998 July 13, 1997 July 12, 1998
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RESTAURANT REVENUES (1) 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES
Food and Beverage Cost 30.4 34.5 30.2 32.1
Restaurant Labor Costs (2) 36.5 38.0 34.7 38.4
Occupancy and Other Restaurant Expenses (3) 33.4 27.1 31.2 30.5
Depreciation and Amortization 7.0 11.5 8.9 13.3
RESTAURANT OPERATIONS (7.3) (11.0) (5.0) (14.4)
Interest (Income) Expense, net (1.3) 0.3 (1.2) 0.7
Other (Income) Expense, net 0.4 (0.5) 0.4 (0.1)
General and Administrative Expenses (4) 22.0 10.9 17.9 14.1
Restructuring Costs 0.0 0.0 0.0 0.3
NET LOSS (28.4)% (21.7)% (22.1)% (29.4)%
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(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.
<PAGE> 9
RESTAURANT REVENUES
Restaurant revenues for the second quarter of fiscal 1998 increased from
$1,511,675 in 1997 to $1,532,668 in 1998, an increase of $20,993 or a percentage
increase of 1.4%. Restaurant revenues year to date 1998 have decreased from
$3,720,550 in 1997 to $3,529,995 in 1998, a decrease of $190,555 or a percentage
decrease of 5.1%. The modest increase for the quarter was due to an increase in
sales in one restaurant unit. The year to date decrease was due to a variety of
factors, including lower foot traffic in areas where restaurants are located
inside or adjacent to entertainment areas which had slower theatre schedules
than year ago.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the second quarter of 1998 increased from $459,407
in 1997 to $528,088 in 1998, an increase of $68,681 or a percentage increase of
15.0%. As a percentage of sales, food and beverage costs increased for the
quarter from 30.4% to 34.5%, a percentage increase of 4.1%.
On a year to date basis, food and beverage costs increased $1,124,459 in 1997 to
$1,133,807 in 1998, an increase of $9,348 or a percentage increase of .8%. As a
percentage of sales, food and beverage costs year to date increased from 30.2%
to 32.1%, a percentage increase of 1.9%. The dollar increases in the food and
beverage costs are attributable in part to inventory adjustments.
RESTAURANT LABOR
Restaurant labor for the second quarter of 1998 increased from $551,958 in
l997 to $582,065 in 1998, an increase of $30,107 or a percentage increase of
5.5%. As a percentage of revenues, restaurant labor costs for the second quarter
1998 versus 1997 increased from 36.5% to 38.0%, an increase of 1.5%. Year to
date 1998, restaurant labor costs increased from $1,291,052 in 1997 to
$1,357,229, an increase of $66,177 or a percentage increase of 5.1%. As a
percentage of sales, restaurant labor costs year to date increased from 34.7% to
38.4%, an increase of 3.7%.
The increase in restaurant labor costs for the quarter and year to date are
attributable to a combination of higher costs associated with The Glazier Group,
Inc. as a management company, which the Company believes will be offset by lower
corporate expenses within reasonable time.
OCCUPANCY AND OTHER RESTAURANT EXPENSES
Occupancy and other restaurant expenses for the second quarter of 1998
decreased from $504,966 in 1997 to $414,736 in 1998, a decrease of $90,230 or a
percentage decrease of 17.9%. As a percentage of sales, occupancy and other
restaurant expenses decreased to 27.1% for the
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second quarter of 1998 from 33.4% for the second quarter of 1997 or a decrease
of 6.3%. Year to date, occupancy and other restaurant expenses decreased from
$1,160,115 in 1997 to $1,076,680 in 1998, a decrease of $83,435 or a percentage
decrease of 7.2%. As a percentage of sales, occupancy and other restaurant
expenses decreased from 31.2% to 30.5%, a percentage decrease of .7%.
The decreases for quarter and year to date were both attributable to the mix of
restaurant units in operation, reflecting in large part the closing during the
1st Quarter of 1998 of one mature unit included in the year ago results.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased from $105,514 in 1997 to $176,313 in
1998, an increase of $70,799 or a percentage increase of 67.1%. This increase is
due to the opening of the Company's Cleveland restaurant and the depreciation
schedule of assets previously placed in service.
Year to date, depreciation and amortization increased from $329,554 to
$468,914, an increase of $139,360 or a percentage increase of 42.3%. This
increase was also due to the opening of the Company's Cleveland restaurant and
the depreciation schedule of assets previously placed in service.
As a percentage of sales, depreciation and amortization increased for the
second quarter of 1998 to 11.5% from 7.0% for the second quarter of 1997, an
increase of 4.5%. Year to date, as a percentage of sales, depreciation and
amortization increased 8.9% to 13.3%, an increase of 4.4%.
RESTAURANT OPERATIONS
The Company's loss from restaurant operations of $110,170 in the second
quarter of 1997 increased to a loss of $168,534 in the second quarter of 1998,
or an increase of $58,364. Year to date, the loss from restaurant operations for
1997 of $184,630 increased to a loss of $506,635 an increase of $322,005. The
increase in loss for the quarter was largely attributable to increased
depreciation and amortization, as otherwise revenue gains were able to absorb
the increases in other operating expenses. The increase in the year to date loss
was also largely attributable to increases in depreciation and amortization,
although revenues for 1998 year to date were lower than 1997.
INTEREST (INCOME) EXPENSE
Interest expense exceeded interest income for the second quarter of 1998 by
$4,477, while interest income had exceeded interest expense for the second
quarter of 1997 by $19,652. This represented a change of $24,129 for the second
quarter 1998 compared with 1997. Year to date 1997, interest income exceeded
interest expense by $43,785. Year to date 1998, interest expense exceeded
interest income by $24,633, a change of $68,418.
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GENERAL ADMINISTRATIVE EXPENSES
General and administrative expenses for the second quarter of 1998 decreased
from $332,807 in 1997 to $167,155 in 1998, a decrease of $165,652 or a
percentage decrease of 49.8%. As a percentage of revenues, general and
administrative expenses decreased from 22.0% in 1997 to 10.9% in 1998, a
decrease of 11.1%. Year to date, general and administrative expenses decreased
from $665,469 in 1997 to $497,581 in 1998, a decrease of $167,888 or a
percentage decrease of 25.3%. As a percentage of sales, general and
administrative expenses decreased from 17.9% in 1997 to 14.1% in 1998, a
percentage decrease of 3.8%. The decrease during the quarter was primarily due
to the engagement of a management company, thereby replacing certain general and
administrative expenses at a percentage of revenues which translated to lower
costs. The lower expense year to date also reflects staff reductions which were
made gradually during the first quarter of the 1998 year.
NET LOSS
The net loss for the second quarter of 1998 decreased from $429,856 in 1997 to
$332,335 in 1998, a decrease of $97,521 or a percentage decrease of 22.7%. Year
to date, the net loss increased from $821,336 in 1997 to $1,037,922 in 1998, an
increase of $216,586, a percentage increase of 26.4%. The year to date increase
was due to the increased loss for the first quarter.
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. 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 were used for the
development and opening of new restaurants and working capital.
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.
Due to continuing operating losses and depletion of working capital, the
Company borrowed an additional $600,000 during the period January through May of
1998. The proceeds from these borrowings were used to fund operations and
settlements with certain creditors in association with closing non-performing
restaurants.
<PAGE> 12
The Company historically had working capital deficiencies, which it believes
are typical in the restaurant industry. As of July 12, 1998, the Company's
current liabilities of $2,424,847 exceeded its current assets of $296,927,
resulting in negative working capital of $2,127,920. The negative working
capital is due largely to Accounts Payable of $1,171,275 and Accrued Expenses of
$486,125 which include certain costs associated with lease termination
agreements entered into in connection with the closing of non-performing units
and the cancellation of certain new restaurant plans. Additional Short Term Debt
of $600,000 raised to fund operating losses and payments required for lease
termination settlements also had impact on working capital.
Net cash used by operating activities decreased $116,462 for the second
quarter of 1998 as compared to the second quarter of 1997. Year to date, net
cash used by operating activities decreased $10,234 from $855,805 in 1997 to
$845,571 in 1998.
Cash used in investing activities decreased from $410,705 for the second
quarter of 1997 to $0 for the second quarter of 1998. Year to date, cash used in
investing activities decreased from $699,271 in 1997 to $159,254 in 1998. The
year to date decrease in cash used by investing activities reflects the
suspension of new restaurant development and the resulting elimination of needs
to purchase equipment and other fixed assets beyond those expenditures required
for exiting units.
Net cash provided by financing activities increased for the first quarter of
1998 as compared to 1997 from $815 used to net cash provided of $201,423, an
increase of $202,238. The cash provided by financing activities for the second
quarter of 1998 consisted of borrowings. Year to date, net cash provided by
financing activities increased from $1,850 used to $573,115 provided. This
increase of $574,965 reflects the short-term borrowings of $600,000 less
payments on capital leases of $27,477 and the $831 remainder of long-term debt.
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, exposure
to cost fluctuations, availability of labor, competition from other restaurants,
changing trends, and government regulation.
The Company has previously stated that, due to the lack of cash flow from
operations and the historical growth of its corporate structure, steps needed to
be taken to reduce overhead and close certain non-performing units. In
connection with this plan, the Company suspended its development activities for
new units and embarked on a program designed to stabilize operations and cash
flow.
In the spring of 1988, the Company entered negotiations with The Glazier
Group, Inc. ("Glazier"), a New York restaurant company, for the possible merger
of the Company with Glazier. Upon concluding that a merger with Glazier would be
in the best interests of shareholders, the Company entered into a letter of
intent ("LOI") to merge subject to various
<PAGE> 13
conditions. These conditions included but were not limited to the execution of a
definitive merger agreement and the receipt of a commitment for financing, to
Glazier's satisfaction, from an underwriter to raise additional financing for
the combined company.
Simultaneous with the execution of the LOI, the Company and Glazier entered
into a management agreement whereby Glazier would manage the Company's
operations in return for a management fee, thereby allowing the Company to
further reduce overhead. The Company believed that this arrangement would
produce net savings to the Company and serve to improve operations through the
oversight of Glazier.
Early results from this management arrangement are inconclusive. While certain
expenses have been reduced, others have increased and the Company has continued
to generate a loss from restaurant operations. Progress has been made through
changes in restaurant management and certain improvements to menus, and the
Company has been working with Glazier to develop presentations to possible
underwriters for financing of the business post-merger.
At this time, due to the conditions which are material to the possible merger,
the Company cannot be certain that the merger will occur. Consequently, the
Company continues to work with Glazier to improve results from operations under
the terms of the management agreement. Current emphasis is being placed on
reducing food, beverage and labor costs while implementing new menus. The
Company continues to believe that a merger will be in the best interest of
shareholders, and attention is being devoted to realizing that objective.
If the merger is not completed as planned, the Company intends to resume
management control of the restaurant operations through the recruitment and
hiring of operations management to replace the services which have been provided
by Glazier. Relatedly, the Company would still require additional financing,
although no commitments have yet been obtained.
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about June 22, 1998, Carroll Consulting, Inc., filed suit against
the Company, its subsidiary Ciao Playhouse, Inc. and David Walker, its
general manager at its Cleveland, Ohio location alleging a breach of
certain non-competition and related agreements entered into between
Walker and Carroll Consulting. This lawsuit was settled on August 16,
1998. See the discussion contained under "Commitments" on page 7.
ITEM 2. CHANGES IN SECURITES
The Company is obligated to issue $100,000 of common stock (valued
based on the closing price as of the August 1 effective date) to its landlord
for its Downtown, Cincinnati, Ohio location. See the discussion contained in the
"Commitments: on page 6. These shares will be issued pursuant to Regulation D
and/or Rule 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on May
26, 1998, for the purpose of electing its board of directors and voting on a
proposed stock option plan. The result of the matters voted on was as follows:
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For Against or Withheld
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Election of Directors:
Roger Lipton 2,588,657 16,900
Marvin Rosenberg 2,588,557 17,000
Jack Wyant 2,588,407 17,150
Stock Option Plan 1,235,780 1,369,777
</TABLE>
ITEM 5. OTHER INFORMATION
N/A
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EX-99.1. Settlement Agreement dated July 9, 1998, between
Company and Huntley Financial Group.
EX-99.2. Settlement Agreement and Release among the Company,
Ciao Playhouse, Inc., David Walker and Carroll
Consulting.
EX-99.3. Lease Termination Agreement dated August 13, 1998,
between the Company and Hibben Building, Ltd.
EX-99.4. Third Amendment to Lease dated August 3, 1998,
between the Company and Hibben Building, Ltd.
EX-99.5. Promissory Note in the principal amount of $80,613.62
dated July 31, 1998, from the Company to Hibben
Building, Ltd.
EX-99.6. Third Amendment to Sublease dated August 3, 1998,
between the Company and Towne Investment Co.
EX-99.7. Promissory Note in the principal amount of $20,541.42
dated July 31, 1998, from the Company to Towne
Investment Co.
(b) Reports on Form 8-K:
1. Current Report (May 26, 1998) attaching the Company's
press release dated May 21, 1998. No financial
statements were required or filed.
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: September 4, 1998 By: /s/ Stephen J. Kent
-------------------
Stephen J. Kent
President
<PAGE> 1
Exhibit 99.1
Conformed Copy
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (the "Settlement Agreement"), dated July 6,
1998, is between CIAO CUCINA CORPORATION ("Ciao") and HUNTLEY FINANCIAL GROUP
("Huntley").
RECITALS:
WHEREAS, Ciao and Huntley entered into an Agreement dated April 1, 1997
(collectively, the "Agreement"); and
WHEREAS, certain disputes, controversies and disagreements have arisen
between the parties hereto related to the Agreement; and
WHEREAS, Huntley has asserted a claim against Ciao in the
amount of $54,637 (the "Claim"); and
WHEREAS, the parties have negotiated a resolution and settlement of
their differences on the terms hereinafter set forth, pursuant to which they
desire to settle and compromise all disputes, controversies and disagreements
among them which exist as of the date hereof;
NOW, THEREFORE, the parties hereto agree as follows:
1. This Settlement Agreement is entered into as a compromise and
settlement of disputed claims and without any admission by any party of any
liability or wrongdoing.
2. Ciao hereby releases and forever discharges Huntley and its members,
partners, shareholders, officers, directors, employees, agents, successors and
assigns, from any and all claims, causes of action, demands, debts, suits,
contracts, agreements, promissory notes, mortgages, leases, duties, costs,
liabilities, damages and/or expenses (collectively, "Damages") arising under or
in any way related to the Agreement, or arising prior to the date hereof,
including without limitation such Damages as may be known or unknown, contingent
or otherwise, and as may now or hereafter exist. Ciao acknowledges that the
foregoing provision constitutes a general release which is not subject to any
condition or future event.
3. Huntley hereby releases and forever discharge Ciao, and its
shareholders, officers, directors, employees, agents,
1
<PAGE> 2
successors and assigns, from any and all Damages arising under or in any way
related to the Agreement, or arising prior to the date hereof, including without
limitation such Damages as may be known or unknown, contingent or otherwise, and
as may now or hereafter exist. Huntley acknowledges that the foregoing provision
constitutes a general release which is not subject to any condition or future
event.
4. In consideration for the agreements contained herein, Ciao hereby
agrees to pay Huntley $35,000.00 (the "Settlement Amount"). $4,375.00 of the
Settlement Amount has been delivered to Huntley simultaneously with the
execution of this Agreement. The balance of the Settlement Amount shall be paid
in Seven equal monthly installments due on the first day of July, August,
September, October, November and December, 1998 and January, 1999.
5. Ciao hereby irrevocably authorizes and empowers any attorney-at-law
to appear for it in any action upon or in connection with this Agreement at any
time after any amount due under Paragraph 4 above becomes past due as therein
provided in any Court in or of the state of Ohio, and waives the issuance and
service of process with respect thereto, and irrevocably authorizes and empowers
any such attorney-at-law to confess judgment in favor of Huntley against Ciao,
in an amount equal to the Claim, less any amounts paid pursuant to this
Settlement Agreement, plus all costs of collection, and waives and releases all
errors in any said proceedings and judgments and all rights of appeal from the
judgment rendered. CIAO AGREES THAT AN ATTORNEY WHO IS COUNSEL TO HUNTLEY OR ANY
OTHER HOLDER OF THIS OBLIGATION MAY ALSO ACT AS ATTORNEY OF RECORD FOR CIAO WHEN
TAKING THE ACTIONS DESCRIBED ABOVE IN THIS PARAGRAPH. CIAO AGREES THAT ANY
ATTORNEY TAKING SUCH ACTIONS MAY BE PAID FOR THOSE SERVICES BY HUNTLEY OR THE
HOLDER OF THIS OBLIGATION. CIAO WAIVES ANY CONFLICT OF INTEREST THAT MAY BE
CREATED BECAUSE THE ATTORNEY WHO ACTS FOR CIAO PURSUANT TO THIS PARAGRAPH IS
ALSO REPRESENTING HUNTLEY OR THE HOLDER OF THIS OBLIGATION, OR BECAUSE SUCH
ATTORNEY IS BEING PAID BY HUNTLEY OR THE HOLDER OF THIS OBLIGATION.
6. Each party hereto expressly warrants and represents to each other
that before executing this Settlement Agreement, said party has fully informed
itself of the terms, contents, conditions, and facts of this Settlement
Agreement, that it has relied solely and completely upon its own judgment in
executing this Settlement Agreement, that said party has had the opportunity to
seek and has in fact obtained the advice of counsel before executing this
Settlement Agreement and has acted voluntarily and of its own free will in
executing this Settlement Agreement.
2
<PAGE> 3
7. Each party hereto expressly warrants and represents that none of the
claims, causes of action, suits, demands, losses or damages, which are the
subject matter hereof have been assigned or transferred to any other person or
entity and, accordingly, each party hereto agrees to indemnify and hold each
other party hereto harmless from any such claims of third parties claiming by,
through or under the indemnifying party.
8. This Settlement Agreement, together with the documents and
agreements executed in connection herewith, represents the entire agreement
among the parties related to the subject matter hereof and supersedes all prior
or contemporaneous agreements.
9. This Settlement Agreement may not be changed, modified, discharged
or abandoned, in whole or in part, except pursuant to the expressed written
consents of all parties hereto.
10. Neither this Settlement Agreement, nor the subject matter, terms or
any part hereof, nor the negotiations leading hereto nor discussions or
communications, written or oral relating hereto or any part thereof, shall: (a)
at any time for any reason be considered as an admission by any party that any
other party has any valid claim, right, cause of action or demand against such
party or had any loss, damage or injury as a result of any act of or omission by
such party of any kind or nature, or that any of the subsequent claims or
allegations of any party at any time had any validity or that any party at any
time had any liability to any other party of any kind whatsoever; (b) be
admissible as evidence in any arbitration, lawsuit or other proceeding involving
any of the parties hereto (except for the provisions of Paragraph 5 which may be
used by Huntley as applicable); or (c) be disclosed to any other party except to
comply with applicable legal requirements or the terms hereof, and then only
after securing the agreement of such other party to keep such matters strictly
confidential.
11. This Settlement Agreement shall be construed under and in
accordance with the laws of the State of Ohio.
12. Each party, and each person executing this Settlement Agreement on
behalf of a party, represents that the person signing this Settlement Agreement
on behalf of the party has been duly authorized to do so by all necessary
corporate action so that this Settlement Agreement represents the valid and
binding agreement of the party.
13. This Settlement Agreement may be executed in counterparts which
taken together shall constitute one binding agreement, not
3
<PAGE> 4
withstanding the fact that all parties have not signed the same copy.
14. This Settlement Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective heirs, successors
and assigns.
IN WITNESS WHEREOF, the parties have caused this Settlement Agreement
to be executed and witnessed as of the date and year first set forth above.
Witnessed by: CIAO CUCINA CORPORATION
Scott P. Kadish By: /s/ Stephen J. Kent
- -------------------------------- ------------------------
Jeanette M. Ashley Title: President
- -------------------------------- ---------------------
HUNTLEY FINANCIAL GROUP
Nora L. Washburn By: /s/ David A. Spargo
- -------------------------------- ------------------------
Dwayne A. Shackelford Title: Partner
- -------------------------------- ---------------------
4
<PAGE> 1
Exhibit 99.2
Conformed Copy
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release is entered into by and among
Carroll Consulting, Inc. ("Carroll") and Ciao Cucina Corporation ("CCC") and
Ciao Playhouse, inc. ("CPI") and David W. Walker ("Walker") this 16th day of
August, 1998.
WHEREAS, prior to December 9, 1997, Walker was employed as an
independent contractor by Carroll; and
WHEREAS, in that capacity Walker executed an Employment Agreement,
Independent Contractor Agreement and Confidentiality and Non Competition
Agreement; and
WHEREAS, subsequent to December 9, 1997, Walker became employed by CPI
and referred certain management candidates to CPI and CCC; and
WHEREAS, a distpute has arisen among the parties with respect to the
propriety of Walker's actions and the nature of CCC's and CPI's financial
obligation to Carroll; and
WHEREAS, Carroll filed suit in the Cuyahoga County Court of Common
Pleas, which suit was assigned to Judge Kenneth R. Callahan and designated as
Case Number 357786 (the "subject Litigation"); and
WHEREAS, it is the desire of the parties to clarify the rights and
obligations of the parties and to resolve all disputes among them without resort
to further litigation:
NOW THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Walker, CCC and/or CPI pay to Carroll, the sum of Nine Thousand Five
Hundred Dollars ($9,500.00)(the "Settlement Amount") as follows: (a) Four
Thousand Seven Hundred Fifty Dollars ($4,750.00) on or before August 15, 1998
and (b) Four Thousand Seven Hundred Fifty Dollars ($4,750.00) on or before
September 15, 1998.
<PAGE> 2
2. Upon payment of the last installment of the Settlement Amount,
Carroll shall dismiss, with prejudice, the Subject Litigation.
3. Walker shall return to Carroll any files, documents, and/or
information he has relating to management candidates whom Carroll has or does
represent as well as any other files, documents or information relating to the
business of Carroll. Further, Walker agrees to abide by the terms of the
Confidentiality and Non Competition Agreement into which he entered with
Carroll.
4. Carroll releases and forever discharges for itself and each of its
respective principals, agents, affiliates, subsidiaries, administrators, heirs,
successors and assigns, Walker, CCC and CPI and their respective principals,
agents, affiliates, subsidiaries, administrators, heirs, successors and assigns,
from any and all claims and demands, actions and causes of action, damages,
either direct or consequential, costs, expenses and compensation on account of,
or in any way growing out of any loss or damage sustained by it, in person or in
property, at any time, from any other matter which was, or could have been
raised, which it now has or might have, or which it may hereafter have from
anything which has heretofore happened and specifically arising from their
employment of Walker and Walker's placement of management candidates with CCC
and/or CPI.
5. Walker CCC and CPI release and forever discharge for themselves and
each of their respective principals, agents, affiliates, subsidiaries,
administrators, heirs, successors and assigns, Carroll and each of its
respective principals, agents, affiliates, subsidiaries, administrators, heirs,
successors and assigns, from any and all claims and demands, actions and causes
of action, damages, either direct or consequential, costs, expenses and
compensation on account of, or in any way growing out of any loss or damage
sustained by them, in person or in property, at any time, from any other matter
which was, or could have been raised, which they now have or might have, or
which they may hereafter have from anything which has heretofore happened and
specifically arising from their business relationship with Carroll.
<PAGE> 3
6. Carroll, Walker, CCC and CPI agree to maintain the absolute
confidentiality of the existence and details of this Settlement Agreement and
further agree to refrain from disclosing the existence and terms of the
Settlement Agreement to any individual, person, or entity, except with respect
to matters related to a breach of this Agreement.
7. Carroll, Walker, CCC and CPI agree that the entry into this
Settlement Agreement does not constitute an admission of any of the claims in
the Subject Litigation but is rather a method to resolve disputed matters among
them.
8. Carroll, Walker, CCC and CPI agree that this Settlement Agreement
cannot be changed, modified or superseded except by another written document
which has been executed by the parties.
9. Any term or provision of this Settlement Agreement which is held
invalid or unenforceable, shall be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement.
10. This Settlement Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
WHEREFORE, having first read this Settlement Agreement, Carroll,
Walker, CCC and CPI hereby acknowledge the same.
By: /s/ Rose Carroll
---------------------------------
CARROLL CONSULTING, INC.
By: /s/ Stephen J. Kent, President
---------------------------------
CIAO CUCINA CORPORATION
By: /s/ Stephen J. Kent, President
---------------------------------
CIAO PLAYHOUSE, INC.
<PAGE> 4
By: /s/ David W. Walker
---------------------------------
DAVID WALKER
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing Settlement Agreement and Release was acknowledged before
me this 16th day of August, 1998 by Rose Carroll of Carroll Consulting, Inc.
/s/ Fred N. Carmen
------------------------------------
NOTARY PUBLIC
My Commission Expires: Never
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing Settlement Agreement and Release was acknowledged before
me this 12th day of August, 1998 by Stephen J. Kent of Ciao Cucina Corporation.
/s/ Barbara Klus
------------------------------------
NOTARY PUBLIC
My Commission Expires: April 20, 1999
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing Settlement Agreement and Release was acknowledged before
me this 12th day of August, 1998 by Stephen J. Kent of Ciao Playhouse, Inc.
/s/ Barbara Klus
------------------------------------
NOTARY PUBLIC
My Commission Expires: April 20, 1999
<PAGE> 5
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing Settlement Agreement and Release was acknowledged before
me this 12th day of August, 1998 by David Walker.
/s/ Anita N. Edwards
------------------------------------
NOTARY PUBLIC
My Commission Expires: October 30,2001
<PAGE> 1
Exhibit 99.3
Conformed Copy
LEASE TERMINATION AGREEMENT
This Lease Termination Agreement made as of this 3rd day of August,
1998, by and between HIBBEN BUILDING, LTD., an Ohio limited liability company
("Landlord"), and CIAO CUCINA CORPORATION f/k/a CIAO LIMITED, INC., an Ohio
corporation, ("Tenant").
WITNESSETH:
WHEREAS, Landlord leased to Tenant by a certain "Lease for Office at
700 Walnut Building" dated April 29, 1996, hereinafter referred to as the
"Lease", the premises consisting of approximately five thousand three hundred
thirty-six (5,336) square feet, for a term of ten (10) years; and
WHEREAS, Landlord and Tenant desire to terminate said Lease prior to
its normal expiration date;
NOW, THEREFORE, in consideration of mutual promises, the parties hereto
mutually agree as follows:
l. Provided Tenant shall perform its obligations hereunder in a timely
manner, Landlord and Tenant agree that the Lease shall terminate and shall have
no further force or effect as of August 1, 1998 (the "Date of Termination").
Tenant, on behalf of itself and its officers, agents, servants, employees, and
invitees, hereby releases and forever discharges Landlord, its officers, agents,
servants, employees, successors and assigns from any and all liabilities, claims
and damages of any kind or nature which Tenant, its officers, agents, servants,
invitees and employees, and their respective successors or assigns now has or at
any time shall have against Landlord, its officers, agents, servants, employees,
successors and assigns as a result of any matter, cause or thing whatsoever
occurring on or prior to the date of this Lease Termination Agreement which
arise out of or in connection with Tenant's occupancy of the premises.
2. Tenant shall pay all base rentals, all common area maintenance
charges, all assessments due on account of increases in taxes and insurance
premiums, all utility charges and all personal property taxes up to and
including the Date of Termination, the total amount of which is agreed to be
$25,789.69. In addition, Tenant shall pay to Landlord the amount of $5,703.01 on
or before August 1, 1998, and the same amount on or before the first day of each
calendar month thereafter through April 30, 1999. Further, Tenant shall transfer
or issue to Landlord, on or before August 1, 1998, $100,000.00 worth of Ciao
Cucina Corporation common stock, such common stock to be valued based upon the
average closing price
<PAGE> 2
over the ten (10) day period from July 22, 1998, through July 31, 1998, upon
terms and conditions satisfactory to Landlord.
3. Tenant agrees to release and surrender to Landlord the premises
described in the Lease, together with all its right and interest in all
improvements, equipment and fixtures contained therein, except for the trade
fixtures, furniture and personal property which Tenant is authorized to remove
pursuant to the Lease. Tenant shall remove all such trade fixtures, furniture
and personal property before the Date of Termination and deliver up the premises
in a broom-clean condition. In the event Tenant fails to deliver up possession
as aforesaid, Landlord shall have the right to use any necessary action to
secure possession of the premises from Tenant and Tenant shall be liable for all
damages, consequential or otherwise, suffered by Landlord and for all sums
remaining due under the Lease as a result of Tenant's failure to so deliver
possession. Tenant shall not be required to repair, nail or screw holes in
walls, or other similar items of a minor nature.
4. Tenant warrants and represents that it is the sole owner of said
trade fixtures, furniture and personal property that it shall be removing from
the premises.
5. Except as hereinabove amended, all of the terms and conditions
contained in the Lease shall remain in full force and effect up to and including
the Date of Termination.
6. This Agreement is contingent upon Landlord entering into a
satisfactory lease agreement with Hogan, Nolan & Stites, Inc., an Ohio
corporation, for the premises. If Landlord is unable to enter into such lease
agreement on or before July 31, 1998, this Agreement shall be automatically null
and void and of no further force or effect.
7. This Agreement shall be binding on the parties hereto and their
respective successors, heirs and assigns.
2
<PAGE> 3
IN WITNESS WHEREOF, this Lease Termination Agreement has been duly
executed by Landlord and Tenant as shown hereinabove, on the 3rd day of August,
1998, as to Landlord, and on the 31st day of July, 1998, as to Tenant.
WITNESSES: Landlord:
HIBBEN BUILDING LTD.,
an Ohio limited
liability company
/s/ Joy Heekin BY: /s/ Neil Bortz
- -------------------------- -----------------------------------------
Name: Neil Bortz
---------------------------------------
Title: Partner
--------------------------------------
/s/ Janet E. Ziegler
- --------------------------
Tenant:
CIAO CUCINA CORPORATION,
an Ohio corporation
/s/ Scott P. Kadish BY: /s/ Stephen J. Kent
- -------------------------- -----------------------------------------
Name: Stephen J. Kent
----------------------------------------
Title: President
--------------------------------------
/s/ Tania H. Hugenberg
- --------------------------
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me on this 3rd day of
August, 1998, by Hibben Building, Ltd., an Ohio limited liability company, by
Neil Bortz, its Partner, acting for and on behalf of the company.
/s/ Janet E. Ziegler
--------------------------------------------
NOTARY PUBLIC
STATE OF OHIO )
) SS
COUNTY OF HAMILTON )
3
<PAGE> 4
The foregoing instrument was acknowledged before me on this 31st day of
July, 1998, by Ciao Cucina Corporation, an Ohio corporation, by Stephen J. Kent,
its President, acting for and on behalf of the corporation.
/s/ Scott P. Kadish
--------------------------------------------
NOTARY PUBLIC
4
<PAGE> 1
Exhibit 99.4
Conformed Copy
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease made as of this 3rd day of August, 1998,
by and between HIBBEN BUILDING, LTD., an Ohio limited liability company,
successor in interest to HIBBEN BUILDING ASSOCIATES, and Ohio general
partnership ("Landlord"), and CIAO CUCINA CORPORATION f/k/a CIAO LIMITED, INC.,
an Ohio corporation, ("Tenant").
WITNESSETH:
WHEREAS, Landlord leased certain retail premises in 700 Walnut
Building, Cincinnati, Ohio to Tenant by a certain "Lease" dated July 28, 1995,
as amended by a certain "Amendment to Sublease" dated November 6, 1995, and as
amended by a certain "Second Amendment to Sublease" dated September 1, 1996,
hereinafter collectively referred to as the "Lease"; and
WHEREAS, Tenant is currently in default for non-payment of certain rent
under the Lease; and
WHEREAS, Landlord and Tenant have agreed that Tenant shall provide to
Landlord a certain promissory note in the principal amount of Eighty Thousand
Six Hundred Thirteen Dollars and Sixty-Two Cents ($80,613.62) (the "Promissory
Note"); and
WHEREAS, the parties hereto are desirous of making certain
clarifications and/or additions regarding the Lease through this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements provided herein, the parties hereto agree as follows:
1. Article XVI of the Lease is hereby amended to add the word "or" at
the end of Section 16.1(g) and to delete the period at the end of said Section
and to add the following new Section 16.1(h):
(h) Tenant fails to make the payments as required in the
Promissory Note.
Except as expressly amended herein, all terms and conditions contained
in the Sublease shall remain in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, this Third Amendment to Lease has been duly
executed by Landlord and Tenant as shown hereinabove, on the 3rd day of August,
1998, as to Landlord, and on the 31st day of July, 1998, as to Tenant.
WITNESSES: Landlord:
HIBBEN BUILDING, LTD.,
an Ohio limited liability company
/s/ Joy Heekin BY: /s/ Neil Bortz
- ----------------------------- ------------------------------
Name: Neil Bortz
----------------------------
Title: Member
---------------------------
/s/ Janet E. Ziegler
- -----------------------------
Tenant:
CIAO CUCINA CORPORATION,
an Ohio corporation
/s/ Scott P. Kadish BY: /s/ Stephen J. Kent
- ----------------------------- -------------------------------
Name: Stephen J. Kent
----------------------------
Title: President
---------------------------
/s/ Tania H. Hugenberg
- -----------------------------
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me on this 3rd day of
August, 1998, by HIBBEN BUILDING, LTD., and Ohio limited liability company, by
Neil Bortz, its Member, acting for and on behalf of the company.
/s/ Janet E. Ziegler
---------------------------------
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me on this 31st day of
July, 1998, by Ciao Cucina Corporation, an Ohio corporation, by Stephen Kent,
its President, acting for and on behalf of the corporation.
/s/ Scott P. Kadish
---------------------------------
NOTARY PUBLIC
<PAGE> 1
Exhibit 99.5
Conformed Copy
PROMISSORY NOTE
$80,613.62 July 31, 1998
Cincinnati, Ohio
On or before June 15, 1999, for value received, CIAO CUCINA CORPORATION
f/k/a CIAO LIMITED, INC., an Ohio corporation, successor in interest to FIRE IN
THE KITCHEN, INC., an Ohio corporation ("Maker"), promises to pay to HIBBEN
BUILDING, LTD., an Ohio limited liability company, successor in interest to
HIBBEN BUILDING ASSOCIATES, an Ohio general partnership, or order, the sum of
Eighty Thousand Six Hundred Thirteen Dollars and Sixty-Two Cents ($80,613.62).
Said principal amount shall be paid in four (4) installments, the first
installment in the amount of Eleven Thousand Four Hundred Six Dollars and Two
Cents ($11,406.02) is to be paid on or before August 15, 1998, the second
installment in the amount of Twenty-Five Thousand Dollars ($25,000.00) is to be
paid on or before November 15, 1998, the third installment in the amount of
Twenty-Five Thousand Dollars ($25,000.00) is to be paid on or before February
15, 1999, and the fourth installment in the amount of Ten Thousand Seven Hundred
Forty-Two Dollars and Fifty-Three Cents ($10,742.53) is to be paid on or before
June 15, 1999.
This note may be prepaid at any time without penalty.
In the event Maker remains current on all rent payments and performs
all of its other obligations required of Maker under a certain "Lease" dated
July 28, 1995, as amended by a certain "Amendment to Lease" dated November 6,
1995, and as amended by a certain "Second Amendment to Lease" dated September 1,
1996, hereinafter collectively referred to as the "Lease", the premises
consisting of approximately seven thousand nine hundred twenty-five (7,925)
square feet, located in the 700 Walnut Building, Cincinnati, Hamilton County,
Ohio, the above-said fourth installment shall be reduced to Two Thousand Two
Hundred Seventy-Eight Dollars and Six Cents ($2,278.06) and the balance of Eight
Thousand Four Hundred Sixty-Four Dollars and Seventy-Seven Cents ($8,464.77)
shall be forgiven. In the event Maker fails to remain current on all rent
payments and perform all of its other obligations required of Maker under the
Lease, the above-said second, third, and fourth installments shall become
immediately due and payable on demand.
Upon failure to pay the balance of principal at maturity, or upon the
appointment of a receiver for Maker, or the making by Maker of any assignment
for the benefit of creditors, or upon the commencement of bankruptcy or
insolvency proceedings by or against Maker, or upon the placement or issuance of
any levy, lien, writ of
<PAGE> 2
attachment, writ of garnishment, writ of execution, or similar process against
Maker, or any property of Maker, or upon default in the payment of any other
liability of Maker, to holder in accordance with the terms thereof, or in the
observance or performance of any term, condition, or agreement in any document
given by Maker to holder, with respect to this obligation, then, upon the
occurrence of any one or more of such events, unless holder shall otherwise
elect, the full amount of indebtedness evidenced hereby to holder shall become
immediately due and payable on demand.
Upon failure to pay the balance at maturity or upon failure to pay any
installment of interest or principal when due, the entire principal with accrued
interest thereon shall become immediately due and payable on demand.
Upon default, Maker agrees to pay all costs of collection, including
reasonable attorneys= fees and from and after default of this Note interest
thereon at the rate of five percent (5%) per annum in excess of the prime
commercial rate then in effect for Key Bank Corp.
No delay or failure on the part of the holder hereof to exercise any of
its rights hereunder shall be deemed a waiver of such rights or any other right
of such holder nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future occasion.
Maker and every endorser or guarantor of this Note waives presentment, demand,
protest, and notices of every kind and assents to all extension(s) or
postponement(s) of the time of payment or any other indulgences by holder, and
to additions or releases of any other parties or persons primarily or
secondarily liable hereon, if any.
In the event of a conflict between the terms of this Note and any other
agreement, the terms of this Note shall control.
Maker hereby authorizes any attorney at law to appear before any court
of record, state or federal, in the United States of America (other than any
court in which utilization of this warrant of attorney would be contrary to law)
after the indebtedness evidenced by this Note becomes due, whether by demand, by
lapse of time or by acceleration of maturity, by operation of law or otherwise
to waive the issuance and service of process, to admit the maturity and
nonpayment of this Note, to confess judgment against Maker in favor of the
holder of this Note for the amount then appearing due, together with interest
and costs of suit, and thereupon to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
2
<PAGE> 3
the judgment. Should any judgment be vacated for any reason, the foregoing
warrant of attorney nevertheless may thereafter be utilized for obtaining
additional judgment or judgments against Maker.
This Note is being executed and delivered in Cincinnati, Ohio, and all
rights and obligations hereunder shall be governed by the laws of the State of
Ohio.
WARNING - - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST
YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
CIAO CUCINA CORPORATION,
an Ohio corporation
BY: /s/ Stephen J. Kent
----------------------------------
President
----------------------------------
Due:
-----------------------
3
<PAGE> 1
Exhibit 99.6
Conformed Copy
THIRD AMENDMENT TO SUBLEASE
This Third Amendment to Sublease made as of this 3rd day of August,
1998, by and between TOWNE INVESTMENT CO., an Ohio partnership ("Landlord"), and
CIAO CUCINA CORPORATION f/k/a CIAO LIMITED, INC., an Ohio corporation, successor
in interest to FIRE IN THE KITCHEN, INC., an Ohio corporation, ("Tenant").
WITNESSETH:
WHEREAS, Landlord leased certain premises in The Shops at Harper's
Point shopping center, Symmes Township, Hamilton County, Ohio, to Tenant by a
certain "Sublease" dated November 14, 1990, as amended by a certain "Amendment
to Sublease" dated June 11, 1991, and as further amended by a certain "Second
Amendment to Sublease" dated April 11, 1997, hereinafter collectively referred
to as the "Sublease"; and
WHEREAS, Tenant is currently in default for non-payment of certain rent
under the Sublease; and
WHEREAS, Landlord and Tenant have agreed that Tenant shall provide to
Landlord a certain promissory note in the principal amount of Twenty Thousand
Five Hundred Forty-One Dollars and Forty-Two Cents ($20,541.42) (the "Promissory
Note"); and
WHEREAS, the parties hereto are desirous of making certain
clarifications and/or additions regarding the Sublease through this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements provided herein, the parties hereto agree as follows:
1. Article XVII of the Sublease is hereby amended to add the word "or"
at the end of Section 17.1(g) and to delete the period at the end of said
Section and to add the following new Section 17.1(h):
(h) Tenant fails to make the payments as required in the
Promissory Note.
Except as expressly amended herein, all terms and conditions contained
in the Sublease shall remain in full force and effect.
IN WITNESS WHEREOF, this Third Amendment to Sublease has been duly
executed by Landlord and Tenant as shown hereinabove, on the 3rd day of August,
1998, as to Landlord, and on the 31st day of July, 1998, as to Tenant.
WITNESSES: Landlord:
TOWNE INVESTMENT CO.,
an Ohio partnership
/s/ Joy Heekin BY: /s/ Neil Bortz
- ---------------------------- ------------------------------
<PAGE> 2
Name: Neil Bortz
------------------------
Title: Partner
/s/ Janet E. Ziegler -----------------------
- ----------------------------
Tenant:
CIAO CUCINA CORPORATION,
an Ohio corporation
/s/ Scott P. Kadish BY: /s/ Stephen J. Kent
- ---------------------------- -------------------------------
Name: Stephen J. Kent
-----------------------------
Title: President
----------------------------
/s/ Tania H. Hugenberg
- ----------------------------
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me on this 3rd day of
August, 1998, by Towne Investment Co., and Ohio partnership, by Neil Bortz, its
Partner, acting for and on behalf of the partnership.
/s/ Janet E. Ziegler
----------------------------------
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF HAMILTON )
The foregoing instrument was acknowledged before me on this 31st day of
July, 1998, by Ciao Cucina Corporation, an Ohio corporation, by Stephen Kent,
its President, acting for and on behalf of the corporation.
/s/ Scott P. Kadish
----------------------------------
NOTARY PUBLIC
<PAGE> 1
Exhibit 99.7
Conformed Copy
PROMISSORY NOTE
$20,541.42 July 31, 1998
Cincinnati, Ohio
On or before June 15, 1999, for value received, CIAO CUCINA CORPORATION
f/k/a CIAO LIMITED, INC., an Ohio corporation, successor in interest to FIRE IN
THE KITCHEN, INC., an Ohio corporation ("Maker"), promises to pay to TOWNE
INVESTMENT CO., an Ohio partnership, or order, the sum of Twenty Thousand Five
Hundred Forty-One Dollars and Forty-Two Cents ($20,541.42). Said principal
amount shall be paid in two (2) installments, the first installment in the
amount of Fourteen Thousand Six Hundred Seventy-Four Dollars and Eighty-Four
Cents ($14,674.84) is to be paid on or before August 15, 1998, and the second
installment in the amount of Five Thousand Eight Hundred Sixty-Six Dollars and
Fifty-Eight Cents ($5,866.58) is to be paid on or before June 15, 1999.
This note may be prepaid at any time without penalty.
In the event Maker remains current on all rent payments and performs
all of its other obligations required of Maker under a certain "Sublease" dated
November 14, 1990, as amended by a certain "Amendment to Sublease" dated June
11, 1991, and as further amended by a certain "Second Amendment to Sublease"
dated April 11, 1997, hereinafter collectively referred to as the "Sublease",
for premises consisting of approximately two thousand eight hundred twenty
(2,820) square feet, located in the Shopping Center known as The Shops at
Harper's Point, Symmes Township, Hamilton County, Ohio, the above-said second
installment shall be forgiven. In the event Maker fails to remain current on all
rent payments and perform all of its other obligations required of Maker under
the Sublease, the above-said second installment shall become immediately due and
payable on demand.
Upon failure to pay the balance of principal at maturity, or upon the
appointment of a receiver for Maker, or the making by Maker of any assignment
for the benefit of creditors, or upon the commencement of bankruptcy or
insolvency proceedings by or against Maker, or upon the placement or issuance of
any levy, lien, writ of attachment, writ of garnishment, writ of execution, or
similar process against Maker, or any property of Maker, or upon default in the
payment of any other liability of Maker, to holder in accordance with the terms
thereof, or in the observance or performance of any term, condition, or
agreement in any document given by Maker to holder, with respect to this
obligation, then, upon the occurrence of any one or more of such events, unless
holder shall otherwise elect, the full amount of indebtedness
<PAGE> 2
evidenced hereby to holder shall become immediately due and payable on demand.
Upon failure to pay the balance at maturity or upon failure to pay any
installment of interest or principal when due, the entire principal with accrued
interest thereon shall become immediately due and payable on demand.
Upon default, Maker agrees to pay all costs of collection, including
reasonable attorneys' fees and from and after default of this Note interest
thereon at the rate of five percent (5%) per annum in excess of the prime
commercial rate then in effect for Key Bank Corp.
No delay or failure on the part of the holder hereof to exercise any of
its rights hereunder shall be deemed a waiver of such rights or any other right
of such holder nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future occasion.
Maker and every endorser or guarantor of this Note waives presentment, demand,
protest, and notices of every kind and assents to all extension(s) or
postponement(s) of the time of payment or any other indulgences by holder, and
to additions or releases of any other parties or persons primarily or
secondarily liable hereon, if any.
In the event of a conflict between the terms of this Note and any other
agreement, the terms of this Note shall control.
Maker hereby authorizes any attorney at law to appear before any court
of record, state or federal, in the United States of America (other than any
court in which utilization of this warrant of attorney would be contrary to law)
after the indebtedness evidenced by this Note becomes due, whether by demand, by
lapse of time or by acceleration of maturity, by operation of law or otherwise
to waive the issuance and service of process, to admit the maturity and
nonpayment of this Note, to confess judgment against Maker in favor of the
holder of this Note for the amount then appearing due, together with interest
and costs of suit, and thereupon to release all errors and waive all rights of
appeal and stay of execution. The foregoing warrant of attorney shall survive
the judgment. Should any judgment be vacated for any reason, the foregoing
warrant of attorney nevertheless may thereafter be utilized for obtaining
additional judgment or judgments against Maker.
This Note is being executed and delivered in Cincinnati, Ohio, and all
rights and obligations hereunder shall be governed by the laws of the State of
Ohio.
2
<PAGE> 3
WARNING - - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND
COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST
YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO
COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR
WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
CIAO CUCINA CORPORATION,
an Ohio corporation
BY: /s/ Stephen J. Kent
------------------------------
President
------------------------------
Due:
---------------------
3
