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Exhibit 4
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement"), dated as of May 21, 1998,
is between CIAO CUCINA CORPORATION, an Ohio corporation (the "Owner"), and THE
XXXXXXX GROUP, INC., a New York corporation (the "Manager").
RECITALS:
WHEREAS, Owner operates five restaurants known as "Ciao Cucina" in the
locations listed on Exhibit A hereto (the "Restaurants"); and
WHEREAS, Owner and an affiliate of Manager have entered into a Letter
of Intent dated May 20, 1998 (the "Letter of Intent") which contemplates that
Manager would merge with Owner (the "Merger"); and
WHEREAS, Owner desires to engage Manager to manage and operate the
Restaurants pending closing of the Merger on the terms set forth hereinafter,
and Manager desires to accept such engagement;
NOW, THEREFORE, the parties agree as follows:
1. Retention of Manager. Upon the terms and subject to the conditions
hereinafter set forth, Owner hereby retains Manager to manage and operate
Restaurants, and Manager hereby accepts such position.
2. Term and Early Termination. This Agreement shall commence as of the
date hereof, and shall continue until the first to occur of: (a) the closing of
the Merger; (b) the termination (without fault) of the Letter of Intent or any
Merger Agreement executed in connection therewith; or (c) December 31, 1999.
Notwithstanding the foregoing, either party may cancel this Agreement upon 30
days written notice to the other party at any time during the term of this
Agreement.
3. Duties and Authority of Manager as Manager. Manager shall manage and
operate Restaurants in a prudent and business like manner and shall devote such
part of its time and attention to the management and operation of Restaurants as
it shall deem necessary or appropriate to manage and operate Restaurants as
clean, well managed, first class restaurants. Manager shall manage and operate
the Restaurants in accordance with all applicable laws, rules, regulations and
requirements of all governmental authorities having jurisdiction over the
Restaurants. The duties of Manager hereunder shall include, without limitation,
those specific duties set forth below.
(a) Personnel. On behalf of, at the sole expense of Owner, Manager
shall hire, train, fix the compensation of, supervise and discharge all such
suitable employees, agents, independent contractors and custodians as Manager
shall deem necessary or
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appropriate to properly manage and operate the Restaurants as clean, well
managed, first class restaurants. All such persons shall be the employees or
independent contractors of Owner. Owner shall be responsible for withholding all
required taxes and other deductions from and paying before due all employer
taxes and contributions which respect to all such employees and independent
contractors of Manager in connection with Manager's operation of the
Restaurants.
(b) Advertising. In conjunction with the Owner, Manager shall
participate in the development of and placing of all advertising and promotional
materials for the Restaurants. Such advertising and promotional materials shall
be placed with such frequency and shall be in such form and content as Manager
and Owner shall deem necessary or appropriate to properly manage and operate the
Restaurants as clean, well managed, first class restaurants. Owner shall be
solely responsible for all such advertising and promotional costs and expenses.
(c) Financial Performance. Manager shall from time to time review
financial records of the Restaurants and take such measures which Manager
reasonably believes shall enhance the overall financial performance of the
Restaurants. Such measures shall be undertaken on behalf of and at the sole
expense of Owner. Manager shall provide Owner with a written management report
within 14 days after the end of each 4-week period, and within 30 days after the
end of each calendar quarter. This report shall include an income statement,
reconciled bank statements, aged accounts payable and a management assessment.
Manager shall further be available to consult with Owner regarding business
expansion, consolidation issues and financing.
(d) Maintenance of Restaurants. In conjunction with the Owner, Manager
shall maintain the Restaurants and make such ordinary repairs and capital
improvements to the Restaurants as Manager and Owner shall deem necessary or
appropriate to properly manage and operate the Restaurants as clean, well
managed, first class restaurants, including without limitation, those ordinary
repairs and capital improvements customarily done in the restaurant industry to
provide a well managed, first-class operation. Owner and not Manager shall be
responsible for the cost of any maintenance, repairs and/or improvements
performed or made hereunder.
(e) Contracts. With the approval of Owner, Manager is hereby granted
authority to administer and supervise existing contracts in the name and on
behalf of Owner and to make new contracts or additional contracts in the name
and on behalf of Owner for electricity, gas, water, sewer, telephone, cleaning,
trash disposal, and any other utilities or services which Manager shall deem
necessary or appropriate to properly manage and operate the Restaurants as
clean, well managed, first class restaurants. Any
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undertaking with respect to contracts under this Subsection 3(e) shall be on
behalf of and at the sole expense of Owner.
(f) Purchases. On behalf of and at the sole expense of Owner, Manager
shall purchase such inventory, foodstuffs, supplies and equipment in the name of
Owner as Manager shall deem necessary or appropriate to properly maintain and
operate the Restaurants as clean, well managed, first-class Restaurants.
(g) Menus. Manager shall implement and change the menus and offerings
for the Restaurants, and the menu design and lay-out, as it deems appropriate,
provided such menus and offerings are consistent with the theme and style of the
Restaurants. The cost of any menu changes shall be paid for by Owner.
(h) Insurance. Subject to Manager's review during the next 30 days,
Manager shall maintain, obtain and/or keep in effect such insurance policies for
the Restaurants as Manager deems to be prudent for the Restaurants under the
circumstances. All such policies shall be paid for by Owner.
(j) Management. Any salary or other amount due Xxxxx X. Xxxxxxx for
management services rendered to Owner shall be at Manager's sole cost and
expense.
(k) Other Acts. Manager shall take all such other steps as Manager
shall deem necessary or appropriate to properly manage and operate the
Restaurants as clean, well managed, first class restaurants. Any such acts of
Manager under this subsection (k) shall be undertaken on behalf of and at the
sole expense of Owner.
(l) Limitation of Authority. Notwithstanding anything herein contained,
Manager shall not, without the consent of Owner being first obtained, do,
perform or commit any of the following acts:
(i) Sell or encumber the Restaurants, or any of the
assets or liquor licenses used therein, except in the ordinary
course of business;
(ii) Amend or terminate any lease for the Restaurants in
any fashion whatsoever; or
(iii) Make any capital expenditure or financial commitment in
excess of $5,000.00, except in the case of emergency repair.
4. Compensation of Manager. Manager shall be paid during the term of
this Agreement a management fee (the "Management Fee") equal to: (a) 4% of food
and beverage revenues generated by the Restaurants; less (b) any consulting fees
paid or payable to Xxxx Xxxxxxxxxxx by Owner. The Management Fee shall be paid
monthly within 15 days after the end of each 4-week period to the extent of Net
Cash Flow current and/or accumulated. If and to the extent
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that Net Cash Flow is insufficient to pay the Management Fee for any 4-week
period, the unpaid Management Fee shall be paid pursuant to a note bearing
interest at the rate of 8.5% per annum. Subsequent Management Fees shall be
applied first to the outstanding balance on the oldest note(s). All notes shall
be due in full upon the earlier of (i) the closing of the Secondary Offering,
and (b) one year from the termination of the Letter of Intent or any Merger
Agreement executed in connection therewith. "Net Cash Flow" means revenue from
the sale of food and beverage, without deduction for depreciation, but after all
other expenses other than the Management Fee.
5. Outside Ventures. Owner expressly acknowledges and agrees that
Manager may engage in or possess an interest in any other business venture of
any type and description, independently or with others, including without
limitation, ventures involving the development of concepts for and/or management
and operation of restaurants (whether or not the same may be competitive with
the Restaurants) and that its engagement in any possession of such interests in
any such venture are expressly permitted under this Agreement.
6. Indemnification. Owner shall indemnify and save harmless Manager
against and from any personal loss, liability or damage incurred by it as a
result of any act or omission in connection with the performance of obligations
hereunder, except to the extent caused by the negligence or misconduct of
Manager.
7. Independent Contractor. The parties agree and acknowledge that
Manager's relationship with Owner in the performance of obligations hereunder is
that of an independent contractor, and not that of an employee of Owner.
Accordingly, Owner shall neither exercise control over the activities of Manager
nor be obligated to make any payments, withhold any portion of fees payable to
Manager or take any other action pursuant to any federal, state or local law
dealing with income or social security tax withholding, or employment of
worker's compensation insurance, or any other law dealing with the obligations
of an employer to its employees. Manager shall report its income for tax
purposes and generally conduct itself in the performance of its obligations
hereunder in a manner consistent with such independent contractor status.
8. Disclaimer of Partnership Status. Nothing in this Agreement shall be
deemed in any way to create between the parties hereto any relationship of
partnership, joint venture or association, and the parties hereby disclaim the
existence thereof.
9. Notices. Any notice or other communication required or desired to be
given hereunder shall be in writing and shall be deemed sufficiently given when
personally delivered or when mailed by first class, certified mail, return
receipt requested and postage prepaid, addressed to the parties at their last
known
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addresses. Xxxxxxx Xxxx is hereby appointed as the representative of Owner, and
Manager shall be entitled to rely on any consent or authorization by him as
fully binding Owner, provided Owner may replace Kent as such representative with
any other person appointed by its Board of Directors and acceptable to Manager
upon prior notice to Manager.
10. Assignment. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the successors and assigns of
Owner and Manager. Neither this Agreement nor any rights or obligations
hereunder shall be assignable by Owner or Manager and any purported assignment
by either of them without the prior written consent of the other shall be void
and of no force of effect.
11. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio. Any note issued hereunder
shall be governed by and construed in accordance with the laws of New York.
12. Entire Agreement. This Agreement constitutes the entire Agreement
between Owner and Manager concerning the subject matter hereof and supersedes
any and all previous agreements between the parties concerning the subject
matter hereof. This Agreement cannot be amended or modified in any respect,
unless such amendment or modification is evidenced by a written instrument
executed by Owner and Manager.
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized
officer, have executed this Agreement as of the date first set forth at the
beginning hereof.
Manager:
THE XXXXXXX GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxx
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President
Its:
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Owner:
CIAO CUCINA CORPORATION
By: /s/ Xxxx X. Xxxxx
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Its:
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