According to the docket, on June 29, 1998, a settlement conference was held before U.S. District Judge D. B. Smith. That day, the Court entered the Order and Final Judgment approving the settlement and awarding fees and expenses. The case is closed.
Earlier, on October 25, 1996, Italian Oven, Inc., filed a Suggestion of Bankruptcy. On November 20, 2997, the Court entered the Certified Copy of the Order dated 10/24/97 from Bankruptcy Judge Fitzgerald. By that Order, the automatic stay imposed upon the suit was lifted for the limited purpose of allowing Judge Smith to consider and approve a settlement proposal.
According to the complaint, on November 21, 1995, the Company participated in an initial public offering of 2,700,000 shares of its common stock at a price of $8.00 per share. Defendants Wheat First Butcher Singer and Wheat, First Securities, Inc. were lead underwriters of the offering. According to plaintiffs, the offering prospectus portrayed the Company as a rapidly expanding restaurant chain with a profitable strategy. This strategy included plans to open 372 additional restaurants in the United States and Canada, half of those within the next five years. Plaintiffs dismiss language warning that there could be no assurance of the success of the Company's projections as a boilerplate disclaimer. On the contrary, plaintiffs assert that the Company was already aware of specific circumstances which would prevent such expansion. These circumstances included: (i) a severe liquidity crisis being experienced by Sizzler, the Company's wholly owned subsidiary and partner; (ii) difficulties experienced by other developers in obtaining requisite financing and termination of some development agreements; and (iii) the Company's own liquidity crisis, exacerbated by personal loans uncollectible from its CEO and pressure from its creditor bank, PNC Bank. Plaintiffs claim that the prospectus revealed none of these circumstances. In addition, plaintiffs claim that the public offering was necessitated by the refusal of PNC Bank to extend additional credit, that previous private placements of Company common stock were fraudulent, and that the prospectus revealed neither of these facts.
